Category: Uncategorized

What happens when an attorney represents a corporate entity in the formation of that entity and then represents one of the shareholders in a corporate dissolution proceeding?  Should the attorney be disqualified because of the knowledge he/she obtained while forming the corporation?  Will that attorney be considered a necessary witness?  The Commercial Division in Suffolk County recently ruled on these issues deciding that, at least in this instance, the attorney should not be disqualified and would not be a witness.

In Altungeyik v. Ayknat, et al. (J. Pines), Plaintiff shareholder commenced a shareholder’s derivative action/dissolution proceeding against the other shareholder of the corporation and the corporation.  The matter proceeded to trial for the sole purpose of determining the value of the corporation – Euro Planet, Inc. (“Euro Planet”).  Once the matter had been set for trial, Plaintiff obtained new counsel who then sought to have Defendant’s counsel, Walter Drobenko, Esq., (“Drobenko”) disqualified on a number of grounds, specifically: (a) Drobenko previously represented the Plaintiff in the preparation of the shareholder’s agreement for Euro Planet; (b) Drobenko previously represented the Plaintiff in the preparation of a pre-nuptial agreement and an immigration application; and (c) Plaintiff and Drobenko negotiated to be partners in a new restaurant venture together.  Plaintiff claimed that Drobenko obtained personal and private information about Plaintiff while representing him and that the Drobenko would be a necessary witness in determining the value of Euro Planet because he drafted the shareholder’s agreement and determined the value of the shares.

In opposition to the disqualification motion, Drobenko stated that he only represented Euro Planet, not the Plaintiff or Defendant when the corporation was formed.  Additionally, although he acknowledged assisting the Plaintiff with a pre-nuptial agreement and immigration application, he argued that neither of those matters are substantially similar to the determining the valuation of Euro Planet. He also stated that he never discussed partnering with the Plaintiff in the purchase of a restaurant.  Drobenko further argued that he had no personal knowledge of the value of Euro Planet and would not be a necessary witness.  Lastly, Drobenko argued that Plaintiff’s disqualification motion was untimely because it was made after the commencement of trial.

In its decision, the Court noted that the party seeking to disqualify an attorney carries a heavy burden because every party has the right to be represented “by counsel of its own choosing” which is “a valued right which should not be abridged absent a clear showing that disqualification is warranted.”  Mediaceja v. Davidov, 119 A.D.3d 911 (2d Dep’t 2014).  To obtain disqualification of an adversary’s attorney, the moving party must prove: “(1) the existence of a prior attorney-client relationship between the moving party and opposing counsel, (2) that the matters involved in both representations are substantially related, and (3) that the interests of the present client and former client are materially adverse.”  Tekni-Plex, Inc. v. Meyer & Landis, 89 N.Y.2d 123, 131 (1996).  Rule 1.18(c) of the Rules of Professional Conduct also prohibits a lawyer from representing “a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in that matter.”

Ultimately, the Court here decided that Drobenko should not be disqualified from representing the Defendant.  With respect to his prior representation of Euro Planet in the formation of the corporation, the Court noted that the Second Department has rejected Plaintiff’s exact argument and that Drobenko should not be disqualified in a valuation proceeding simply because of his prior representation.  The Court also noted that Plaintiff failed to show that Drobenko’s prior representation of the corporation concerned any confidential information regarding the value of the corporation.

The Court also held that Drobenko’s prior representation of Plaintiff with a pre-nuptial agreement and immigration application, as well as discussions about partnering in the purchase of a restaurant (if it was true), had no relation to the corporate valuation of Euro Planet. The Court also took issue with Plaintiff waiting as long as he did to make the disqualification motion which delayed the trial of what was intended to be an expedited matter.  Lastly, the Court found that Drobenko’s testimony would not be necessary as a witness because there was no evidence that he had any first-hand knowledge of the value of Euro Planet.

It is important to note that a Court’s analysis of whether to disqualify a particular adversary’s attorney will be a very fact-specific inquiry.  However, it appears, based on this decision at least, that the Courts are not going to disqualify an attorney unless the moving party can truly show that the matter is substantially related to prior representation and that the attorney learned information that could be harmful to the prior client.  Here, the Court agreed with Drobenko that he only represented the corporation, not the individual shareholders, when he assisted with the formation of the company and he is neither a witness nor should he be disqualified based upon such representation.

By Scott Middleton

Many of our clients own commercial buildings or multifamily residential buildings and may not be aware of their legal exposure when having construction, renovation, or repair work performed on these buildings.

Labor Law sections 240 and 241 apply to these types of buildings and can be devastating to the unknowing owner. If any worker falls from height, or has an accident involving a gravity-related risk while the work is being performed, the owner and general contractor are absolutely liable.

To adequately protect owners, first and foremost, only reputable contractors should be hired. In the contract between the owner and contractor, the parties must agree that the contractor and any subcontractor will indemnify and hold the owner harmless for all losses arising out of the work to be performed. It is imperative that the owner be named as an additional insured on all policies of insurance and that the policies be reviewed to ensure they contain the proper language.

Assuming all of the foregoing is done and an accident occurs, what happens immediately after the accident is very important. Do not rely upon the contractor or subcontractor to do what is right. As the owner, get involved or have your attorney or other representative become involved in the investigation immediately. This initial investigation is of paramount importance in terms of preparing a defense.

The steps to take immediately are: prepare an accident report, secure and preserve any equipment involved, photograph the area, obtain statements from all involved parties and witnesses, make copies of all contracts and insurance policies (as well as certificates of insurance), and notify all primary and excess insurance carriers.

For large projects, the burden of the investigation is usually shifted to a general contractor or construction manager. For small projects, the owner should have a simple and clear policy for doing its own initial investigation. Of course, our office can always assist in this process.

All incidents involving gravity-related risks or industrial code violations resulting in injuries to construction workers must be considered serious. This is true no matter how minor or inconsequential an accident seems. Even minor injuries can develop into career-ending injuries, thereby exposing property owners to astronomical damages.

February 10, 2016

Labor & Employment Update for 2016
Our next East End Executive Breakfast event will feature an interactive panel of Long Island professionals discussing important legal and practical updates on a wide range of Labor and Employment topics for business owners, CEOs, managers, in-house counsel, and human resources professionals. Join us as we host Irv Miljoner, Director of the Long Island District Office, U.S. Department of Labor’s Wage & Hour Division, together with Markowitz, Fenelon & Bank as we address employment law issues that impact our business community.

February 10, 2016
8:00 am to 10:00 am

Sea Star Ballroom
431 East Main Street, Riverhead, NY 11901

CMM Managing Partner, Joe Campolo
will moderate our panelists as they discuss:

• Independent Contractor Classification
• Overtime Exemptions
• Differences between Federal and NY State Labor Law
• Shared Work Program
• Individual Liability
• Private Lawsuits

The event is complimentary but reservations are required.

PANELISTS:

Arthur Yermash advises business owners, executives, and general counsel on legal and business strategies in his role as Senior Associate at Campolo, Middleton & McCormick, LLP. He has drafted and negotiated hundreds of contracts for various business-related matters including employment, non-competition, non-disclosure, licensing, supply, and distribution agreements.

Arthur’s practice also includes the representation of clients in investigations by regulatory and government agencies including the New York State Department of Labor, the United States Department of Labor, the New York State Attorney General’s Office, and the Equal Employment Opportunity Commission. 

MODERATOR:
Joe Campolo, Esq.
Managing Partner, Campolo, Middleton & McCormick, LLP

Joseph N. Campolo is the Managing Partner of Campolo, Middleton & McCormick, LLP.  With broad experience in both commercial litigation and transactions, Joe advises business owners, executives, and Board members on legal and business strategies.

By Christine Malafi

It’s that time of the year again! Many employers are hosting holiday parties, where employees, and sometimes clients and customers as well, get a chance to relax, socialize, and take a break from the work to celebrate the holiday season. Raising employee morale during the holiday season is a good way to say thank you for their work all year, but despite the fun of a party, there are potential legal issues which could quickly make you forget the fun. To avoid problems from arising, it is advisable to act before the party to minimize potential headaches after the party.

Serving alcohol is always a risk–the potential for accidents and injuries, as well as inappropriate behavior, and lawsuits. Risk can be reduced by advanced planning. While liability generally does not attach to “social hosts” for accidents or injuries suffered off-premises by third parties as a result of alcohol served by the host, at least in New York, if an employee leaves a holiday party, and travels directly to another state, New York law may not prevent liability. Additionally, no one under the age of 21 years may be served alcohol at a holiday party, or liability will result if someone is injured by that underage holiday party drinker. The safest way to prevent potential liability relative to physical injuries involving alcohol use at a holiday party is to hire bartenders to serve the alcohol and make sure alcohol is not served to underage party guests.

Another risk associated with alcohol consumption is the level of “celebration.” As an employer, you do not want managers and/or supervisors acting inappropriately or provocatively, or flirting, with your staff. Some people tend to exude an excessive amount of cheer during the holiday season. The same workplace standards of a non-hostile work environment and non-harassing conduct apply to and should be enforced at holiday parties.

If the party will have music, employers should check the song list, and gift-giving should have limits. Joking and teasing, while permissible, should be without the bounds of a work setting. You don’t want to start the New Year with a humiliated employee commencing a hostile work environment or discrimination lawsuit.

Additionally, it is probable that a court will find that employees’ attendance at a holiday party relates to their employment, even if attendance is voluntary, potentially triggering workers’ compensation benefits for injuries sustained during the party (and potentially afterwards). Employers must take reasonable steps to protect their employees (and guests) from injury, whether at the workplace or an off-site location where the holiday party is held.

Finally, to avoid potential wage claims, if attendance at the party is required, the party should be held during normal work hours.

To help set your mind at ease before your holiday party, consider doing the following:

• Have transportation to and from the party available;
• Hire a professional bartender or caterer with sufficient liability insurance;
• Provide non-alcoholic drinks;
• Serve food, not only snacks;
• Have management/supervisors at the party on the lookout for excessive drinking and/or inappropriate behavior;
• Have a holiday lunch instead of a dinner;
• Invite employees’ family members to participate in the party;
• Make sure employees know that they do not have to attend the party if they chose not to; and
• Do not focus on one religion or holiday to the exclusion of any employee’s beliefs or observances.

A little advance planning can go a long way to help the success of your holiday party!

If you have any questions about your holiday party, please feel free to contact us.

Happy Holidays!

On November 19, 2015, in Sierra Cub v. Village of Painted Post, New York’s highest court, the Court of Appeals, reversed a decision by the Appellate Division, Fourth Department, which had found that an individual petitioner lacked standing to challenge actions of the Village of Painted Post on State Environmental Quality Review Act (“SEQRA”) grounds.  In so doing, the Court continued a trend towards loosening restrictions on people to gain relief from the courts based on claims of environmental harm.  The question of standing when it comes to SEQRA challenges asks whether the petitioner has a sufficient interest in the environmental issues to be permitted to ask the court for help.

In 1991, the Court of Appeals decided Society of Plastics Industries v. County of Suffolk.  A trade organization sought to challenge a Suffolk County ban on plastic bags on the ground that the County failed to comply with SEQRA.  The Court of Appeals dismissed the challenge, stating, in part, that “[i]n land use matters … the plaintiff, for standing purposes, must show that it would suffer direct harm, injury that is in some way different from that of the public at large.”  Because there was no showing of direct environmental (as opposed to economic) harm to the members of the trade organization, the Court of Appeals found they lacked standing to challenge the County law.

In 2009, in Matter of Save the Pine Bush Inc. v. Common Council of City of Albany, the Court of Appeals took up the standing question again, exploring whether members of an environmental group concerned with protecting the Pine Barrens in Albany County had a sufficient interest different from the public at large to claim they were directly injured by the challenged municipal actions.  The Court of Appeals agreed the petitioners had standing because they alleged “repeated, not rare or isolated use” of the pine barrens recreational area, so they suffered harm different that “the public at large.”

In the Village of Painted Post case, the Village entered into a lease to permit a railroad company to construct a water transloading facility on an 11.8 acre parcel of land.  It also entered into an agreement with a subsidiary of Shell Oil to sell it up to 1.5 million gallons of water per day, which would be loaded onto trains at the new transloading facility.   A number of environmental groups and individuals who resided along the railroad tracks challenged the lease and bulk water sales agreement on the ground that the Village failed to comply with SEQRA’s strict procedural requirements.  The lower court found that none of the environmental groups had standing, in part, because none of the individual petitioners claimed to be members and the organizational interest was too generalized to establish standing.  Further, the lower court found that all but one of the individual petitioners lacked standing because the noise they encountered from trains on the tracks and their concern about water quality from the sale of water was general harm of concern to the public at large.  One petitioner, however, Marvin, was found to have standing.  Marvin alleged he could see the loading facility from his house, and that noise from the trains kept him up at night.  The Appellate Division disagreed, finding that Marvin’s concern about the noise of the trains was no different from those of all the residents of the Village who resided near the tracks.

The Court of Appeals addressed only Marvin’s standing.  It found that it does not matter that more than one person is directly impacted by the noise created from increased train traffic.  It quoted with approval a 1973 US Supreme Court case [United States v. Students Challenging Regulatory Agency Procedures (SCRAP)], where the Supreme Court said:

“[W]e have … made it clear that standing is not to be denied simply because many people suffer the same injury … To deny standing to persons who are in fact injured simply because many others are also injured, would mean that the most injurious and widespread Government actions could be questioned by nobody.” )

The Court of Appeals thus rejected the reasoning of the Appellate Division that, “because there are multiple residents who are directly impacted, no resident of the Village would have standing to challenge the actions of the Village”.  Because Marvin alleged that increased train traffic kept him awake at night, even without differentiating between train traffic on the tracks and noise form the loading facility, he had standing to challenge the actions of the Village pursuant to SEQRA.

It thus appears that, as long as an individual can assert direct harm from the challenged municipal action of the type that falls within the interests that SEQRA is intended to protect, he or she will be found to have standing, even though many others suffer the same direct harm.

The result will be that more challenges to municipal actions will be decided on their merits.

By Patrick McCormick

Can an e-mail exchange create a binding contract?

The short answer is yes!

With the proliferation of electronic communications, it is not surprising that courts are increasingly called upon to address claims alleging the creation of a binding contract based upon an exchange of e-mails.

The Appellate Division, Second Department recently held that e-mail communications between parties were sufficient to create a binding contract.  Law Offs. of Ira H. Leibowitz v. Landmark Ventures, Inc., 131 A.D.3d 583, 15 N.Y.S.3d 814 (2d Dep’t 2015) involved breach of contract claims related to services provided by the plaintiff.  In examining e-mail communications between the parties, the Court found “[b]y the plain language employed” by the parties in e-mail communications, it was clear that the plaintiff made an offer to provide services for a certain fee and that the defendant accepted the offer, creating a binding contract.

The Appellate Division, Third Department addressed a similar situation in the recent case In re Estate of Wyman, 128 A.D.3d 1157, 8 N.Y.S.3d 493 (3d Dep’t 2015).  The decedent and the respondent purchased an improved parcel of real property.  After the decedent’s death, her executor commenced a proceeding against the respondent to turn over ownership of the entire parcel to the estate, claiming that a series of e-mails between the decedent and respondent had created an enforceable contract to transfer sole ownership of the property to decedent.  Upon examining the e-mails, the Appellate Division found that there was no contract because the e-mails did not establish a necessary term of the claimed contract: the price to be paid for the transfer of the property.  It appears from this decision that if the e-mails in question contained evidence of an agreement on price, the Court would have found a binding and enforceable contract in the e-mail exchange.

While communicating by e-mail may seem informal, these cases make clear that parties to an e-mail exchange must exercise care to avoid unintentionally creating a binding contract.  An otherwise valid contract cannot be undone simply by concluding with “Sent from my iPhone.”

October 1, 2015

The Long Island Press Bethpage Best of Long Island Awards nomination period is over, the voting is OPEN, and we’re on the ballot again!

As the winners of 2 “Bethpage Best of Long Island 2015” awards, for CMM and Joe Campolo, we’re honored to be in the running again. Please take a moment to vote for us, to help us maintain our title.

VOTE HERE!

In last month’s blog article, I shared my enthusiasm for the “startup entrepreneurial ecosystem,” specifically here on Long Island, and offered tips for starting your own successful business.  One of the most satisfying feelings in the world is making it official by forming an LLC or incorporating.  But then what?  To keep that excitement growing as you focus on building your business, it’s important to take steps early in the process to help your new venture start off strong.

Nellie Akalp, an Entrepreneur.com contributor and entrepreneur and CEO herself, recently published an article on Entrepreneur.com called “7 Actions to Take After Incorporating Your Business.”  The article raises important topics to consider and delve into more deeply with the advice of your attorney and advisors.

7 Actions to Take After Incorporating Your Business

By Nellie Akalp

October 16, 2015

Much has been written about incorporating a new business, including advice on how to incorporate and what business structure to pick. However, I have found that new business owners can have just as many questions after incorporating or forming a limited liability company (LLC).

As you can imagine, there are some essential differences between running a corporation and running a sole proprietorship, and it’s important to get all your legal ducks in a row as early as possible.

If you have recently incorporated or formed an LLC, here are seven items to check off your list.

1. Get an Employer Identification Number (EIN) from the IRS.

A corporation or LLC is a separate entity and needs its own EIN from the IRS. This is true whether you plan on hiring any employees or not. The EIN, much like a Social Security Number for individuals, is how the IRS tracks your business’s activities. This should be one of your first steps after forming an LLC. Without an EIN, you won’t be able to open a bank account for your business or file your business’s tax returns.

Tip: If you already had an EIN for your business when it was operating as a sole proprietorship or partnership, you’ll need to get a new ID number for your corporation. You can’t transfer the number from one business entity to another.

2. Apply for your business licenses. 

Forming a corporation or LLC forms the legal foundation for your business — it’s what turns your business into a legal entity. But you still need to get a business license in order to legally operate your business. Contact your local county office or city hall to find out what kinds of permits and licenses are necessary for your business type. Failure to do so can result in fines or you can even be forced to shut down your business altogether.

3. Meet with a tax adviser.

While this step isn’t mandatory, it’s a good idea. A brief meeting with a tax adviser can give you valuable insight into how you should file your taxes as a corporation or LLC. You can discuss whether you should elect S Corporation tax treatment from the IRS as well as what additional deductions are now available to you.

4. Open a business bank account.

After you have an EIN, you can open a bank account for your business. This allows you to accept checks and payments in your business’s name. In addition, you’re legally required to keep your personal and business finances separated once you incorporate or form an LLC. If you already had a business bank account for your sole proprietorship, you will need to close that account and open a new bank account under the new corporation.

At this point, it may also be a good idea to open a credit card for your business. This helps streamline your record keeping for business expenses, as well as helps start building credit history for your business.

5. File a Doing Business As (DBA).

Most businesses operate under several variations of their official company name. In order to legally do this, you need to file a DBA to notify the public that you’re operating under these names. For example, let’s say your official company name is “Example Company, Inc.” but you usually use a less formal name like “Example Company.” You’ll need to file a DBA for “Example Company.” One tip: Don’t file for a DBA until you have formed your corporation or LLC so the DBAs are under the corporation.

6. Protect your name with a trademark.

When you create a corporation or LLC, your name is protected in your state (or more specifically, no other business can file as a corporation or LLC in the same state). For some businesses, this is enough brand protection. Others choose to register a trademark for their company name in order to legally protect it in all 50 states.

7. Understand what you need to do to stay compliant.

One of the chief reasons to incorporate or form an LLC is to limit your personal liability. However, if you fail to keep your business in good standing, then you can lose this liability protection. Make sure you understand exactly what’s needed to keep your business compliant each year. Typically, this involves filing an annual report with your state each year, keeping up with your business federal and state taxes, and keeping your personal and business finances separate. Corporations will also need to hold an annual shareholder’s meeting.

Forming an LLC or corporation is the important first step to formalizing your new business. Best wishes on your new venture, and don’t forget to follow up with your other legal obligations. They’re simple steps and will keep your business legal and protected for years to come.

http://www.entrepreneur.com/article/251730

Owners and would-be developers of property that contains environmental contamination face some tough choices: leave the contamination in place and hope that there is no government enforcement action or third party damage claim, clean it up on your own, or clean it up with government oversight.  For many years, the State of New York has had a program to encourage the latter course of action.  The incentive for those who participate in the State’s Brownfield Cleanup Program (“BCP”) is threefold.  First, at the end of the remediation, the applicant receives a Certificate of Completion, which indicates that the cleanup has been done to the satisfaction of the New York State Department of Environmental Conservation (“DEC”), thus opening the way to financing and redevelopment.  Second, the law grants certain limited liability protections so that the owner will not be sued by the State or private parties. Third, tax credits are available for some of the cleanup expenses.

The BCP law was amended this past summer.  The changes, which took effect on July 1, 2015, include new eligibility criteria, revised tax credits, and a streamlined program for lightly contaminated sites. To enter the program, the site must have contamination “at levels exceeding the soil cleanup objectives or other health-based or environmental standards, criteria or guidance adopted by DEC that are applicable based on the reasonably anticipated use of the property, in accordance with applicable regulations.”  Essentially, this means that some environmental testing has to be done in advance of the application and the data must indicate that contamination levels exceed DEC standards, which are different for residential, commercial, and industrial use.

Applicants to the BCP are separated into two categories – Participants and Volunteers. A Participant is one who was an owner or operator of the site at the time of disposal of hazardous waste or the discharge of petroleum or who otherwise failed to take reasonable care to stop continuing releases or prevent further releases. Participants are responsible for the cleanup under various environmental statutes and the DEC can require them to remediate the contamination, even if it has traveled off-site.  A Volunteer, on the other hand, is an applicant who is not liable for the contamination.  This could be a contract vendee or, under some circumstances, a new owner of the property who was not involved with the property at the time of the discharge. Usually, Volunteers are not required to clean up contamination off-site, which greatly reduces the remediation costs.  In addition, the new amendments to the BCP eliminate the Volunteer’s responsibility to reimburse the State for its oversight costs, another significant savings.

Those who successfully complete their cleanup obligations under the BCP within the applicable deadlines are eligible for tax credits.  The types and amounts of the credits vary greatly depending on the location of the property and the work completed.  On the other hand, there is now the option of entering the newly minted BCP-EZ program, which does not include tax credits but does provide a liability release after a successful cleanup.  This program is intended for lightly contaminated sites and is supposed to include streamlined public notice and oversight procedures to allow for faster turnaround times. The DEC is currently drafting regulations and estimates that the BCP-EZ track will be available by the summer of 2016.

With some exceptions, sites that are already subject to environmental enforcement actions are not eligible for entry into the BCP.  Thus, a property owner or buyer who is considering conducting a cleanup would have to apply for the program before notices of violation and other government enforcement actions preclude this option.  The advantages of the voluntary cleanup are not only the tax credits, but also the eventual liability release and the cooperative, rather than punitive, framework for the remediation process.

What if the owner of the contaminated site is a municipality?  The 2015 amendments to the BCP have injected new funding into the Environmental Restoration Program (“ERP”).  The ERP provides State subsidies for the investigation and cleanup of municipally owned brownfields. Upon request, the DEC can undertake the project on behalf of the local government. However, since funds are limited, it is advisable to act quickly.

The decision of whether to apply for and participate in the BCP depends on many variables.  It should be made after consultation with qualified environmental remediation professionals, including specially trained environmental attorneys and accountants.

The Commercial Division in Monroe County, New York recently decided an interesting case, Kellman v. Document Security Systems, Inc. (Rosenbaum, J.), that dealt with a topic familiar to many employers: vesting of stock options to a terminated employee under an employment agreement.

Defendant Document Security Systems, Inc. (“DSS”) develops, licenses, manufactures and sells anti-counterfeiting technology and products. Co-Defendant Secuprint, Inc. (“Secuprint”) is a subsidiary of DSS which was created to acquire assets of another company, DPI of Rochester LLC (“DPI”), a printing company owned by Plaintiff, Matthew Kellman, and another individual.  When DPI’s assets were acquired, Kellman was hired by DSS as Vice President of Sales.  In that role, Kellman received a salary as well as a grant of stock options for 50,000 restricted shares in DSS pursuant to an employment agreement (the “Employment Agreement”).  Pursuant to the Employment Agreement, the restricted shares “shall vest” in equal yearly installments over a five-year period as long as Kellman was still an employee of DSS on each anniversary date.

Kellman’s first 10,000 shares vested after his first anniversary.  Kellman was subsequently terminated over performance issues before reaching the second vesting date.  DSS, however, elected not to deem his termination “for cause” so as to allow him to collect severance payments.  Interestingly, another provision of the Employment Agreement stated that, if Kellman was terminated “without good cause,” he would be entitled to, among other things, the immediate vesting of any unvested capital stock granted to him pursuant to an Incentive Plan (an agreement separate and apart from the Employment Agreement), “or otherwise.” DSS elected not to provide Kellman with the remaining 40,000 shares of restricted stock, claiming that the options had not vested pursuant to the Employment Agreement.  Kellman then commenced this lawsuit alleging that Defendants breached the Employment Agreement and seeking damages equal to the value of the 40,000 shares.  Kellman ultimately moved for summary judgment on his claims, and Defendants also cross-moved for summary judgment.

The Court, in deciding the summary judgment motions, noted that Defendants’ CFO mistakenly removed the restrictions at one point from the restricted shares to Kellman and even sought to have a new stock certificate issued to him for those remaining shares.  However, upon realizing his mistake of removing the restrictions even though the restricted shares had not vested pursuant to the Employment Agreement, he later canceled the new certificate and had the shares canceled as well.  Despite the CFO’s error, the Court interpreted the Employment Agreement to have clear and unambiguous terms with respect to the vesting schedule of the 50,000 shares, and the CFO’s error did not waive the terms of the Employment Agreement.

Furthermore, despite Kellman’s contention that the phrase “or otherwise” in the Employment Agreement encompassed the restricted stock and, as such, immediately vested upon termination, the Court disagreed.  The Court noted that this provision did not apply to the restricted stock, which was subject to the clear and definite vesting schedule set forth elsewhere in the Employment Agreement.  To hold otherwise would render the vesting schedule meaningless, according to the Court.  Based upon the Court’s interpretation of the Employment Agreement, summary judgment was granted in favor of the Defendants and Kellman’s Complaint was dismissed.

This case provides an excellent example of the importance of having a clearly drafted employment agreement that defines the parties’ rights and obligations.  Had this employment agreement been drafted with less clearly defined terms, the Court could have ruled against the employer and determined that Kellman was entitled to an additional 40,000 shares of stock in the company.  It cannot be stressed enough how vital it is to consult with counsel to either draft or assist with preparing agreements such as employment agreements to avoid possible pitfalls.

Please Join Us for the East End’s First Executive Business Breakfast
A forum for networking and learning.

Together with Markowitz, Fenelon & Bank, LLP, we recognize the need for East End businesses to have a platform to meet other East End businesses, build relationships, share referrals, and learn something new.

October 29th, 2015
8:00 am to 10:00 am

We Invite You to Join Us at the Sea Star in Riverhead as Rich Isaac of Sandler Training Presents…

LinkedIn – A Business Relationship Tool

Learn How To Use LinkedIn to Increase Sales and Grow Your Business

You’ll learn:
• Powerful, insider best practices for LinkedIn for effective social selling
• The value of using LinkedIn to grow your pipeline
• How to leverage LinkedIn to generate warm referrals from your existing contact network
• How to harness LinkedIn to create a powerful, self-updating contact list
________________________________________
The event is complimentary but reservations are required.

As published in the September issue of the Suffolk Lawyer

On August 27, 2015, Newsday reported that Baykeeper, an environmental group, intends to commence a lawsuit against the New York State Department of Environmental Conservation (“DEC”) and National Grid because the effluent from the Northport power plant is killing millions of fish each year.  The article notes that the DEC’s permit for the power plant expired in 2011, “but under state rules it can operate while its application is reviewed.”

The referenced “state rules” are the subject of this article, but the focus is on clients you may have who require permits from the DEC, not the potential lawsuit discussed in the Newsday article.  If your clients have such permits, they are issued for finite periods of time and require renewals, or they lapse.  Whether the renewal application is timely filed and sufficient may be of critical importance to your client.

Section 401(2) of the State Administrative Review Act (“SAPA”) states:

2. When a licensee has made timely and sufficient application

for the renewal of a license or a new license with reference

to any activity of a continuing nature, the existing license

does not expire until the application has been finally

determined by the agency, and, in case the application is

denied or the terms of the new license limited, until the

last day for seeking review of the agency order or a later

date fixed by order of the reviewing court, ….

“License” includes permits.[1]

Why is it important that your client’s DEC permit continue until a determination is made?  First, of course, is the obvious reason that the permit will lapse upon the expiration date of the permit if renewal has not been granted.  If DEC does not promptly make a determination, the old permit will continue to authorize the permit holder to operate if a timely and sufficient renewal application was filed.[2]  More importantly, however, is that the DEC’s Uniform Procedures permit the Department to suspend permit review if there is an outstanding enforcement action.  See 6 NYCRR §621.3(e).  Thus, if your client has made “timely and sufficient” application for renewal of the DEC permit, the expiring permit will continue in effect even if the enforcement action is not resolved until after the expiration date of the permit.[3]

An enforcement hearing is commenced by service of a Notice of Hearing and Complaint.  6 NYCRR §622.3.  For a period of years, Region 1 of the DEC took the position that service of a Notice of Violation commenced an enforcement action for purposes of invoking its right to suspend permit review.  This position left permit holders in an impossible negotiating position when they tried to resolve DEC’s alleged violations.  Without a Notice of Violation and Complaint, they had no administrative vehicle to challenge the validity of the violations alleged in the Notice of Violation, and their permit would expire unless they had filed a timely and sufficient renewal application.[4]

“Timely renewal” turns on the type of DEC permit in question.  Permits for Hazardous Waste Management Facilities, Solid Waste Management Facilities, Air Permits, and Remedial Action Plans require that the renewal application be submitted 180 days before permit expiration in order to be timely.  All other permit renewals must be submitted at least 30 days before expiration.[5]

The protection of SAPA §401(2) also requires that the application be “sufficient.”  DEC defines a “sufficient application for renewal” to mean “properly completed application forms, supplemental information and plans required by specific program regulations for renewing permits, and identification of any material changes in regulated operations or environmental conditions at the permitted facility or site.”  6 NYCRR §621.2(ad).  Requirements for specific DEC permit applications can be found at 6 NYCRR §621.4.

Failure to provide all required information does not necessarily deprive the applicant of the protection against the permit lapsing while renewal applications are being considered.  The DEC is required to notify the applicant whether the application is complete or incomplete within 60 days for permits delegated by the Federal Government (generally, RCRA, Clean Water Act, and certain Clean Air Permits),[6] and within 15 days for all other permits.[7]  If DEC fails to meet these deadlines, the application is deemed to be complete.[8]  While DEC may still require additional information from the applicant,[9] SAPA §401(2) will preclude the permit for which renewal is sought from expiring prior to DEC’s determination.[10]

The moral is: call your clients, find out if they have DEC permits, and make sure they file timely and sufficient applications for renewal.

[1]SAPA §102(4):  “‘License’ includes the whole or part of any agency permit, certificate, approval, registration charter, or similar form of permission required by law.”

[2] See, e.g., Riverkeeper Inc. v. Crotty, 28 A.D.3d 957 (3^rd Dep’t 2006) (Timely application by power plant for SPDES permit renewal; DEC did not make a determination.  Permit good for five years.  Riverkeeper challenged the DEC’s failure to make a determination ten years after the original application expired.  Court ruled SAPA §401(2) authorized the power plant to continue operating lawfully, and Riverkeeper’s claim that the DEC’s failure to make a determination five years after the original renewal would have expired provided a basis to compel DEC to act was dismissed on statute of limitations grounds).

[3] One exception to this is SAPA§401(3), which authorizes the agency to immediately suspend a permit if it finds that “public health, safety, or welfare imperatively requires emergency action” and the agency provides a prompt hearing to determine the propriety of the suspension.

[4] Although beyond the scope of this article, treating a Notice of Violation as commencement of an enforcement action for purposes of suspending permit review should be considered an unconstitutional deprivation of the permittee’s right to Due Process.

[5] 6 NYCRR §622.11(a)(1).

[6] 6 NYCRR §621.2(g).

[7] 6 NYCRR §621.6(c)(1 and 2).

[8] 6 NYCRR §621.6(h).

[9] 6 NYCRR §621.6(h) goes on to state:  “Nothing in this Section …precludes the department from requesting additional information in accordance with section 621.14(b) of this Part.”

[10] See, e.g., Jamaica Recycling Inc. v. New York State Department of Environmental Conservation, 308 A.D.2d 538 (2d Dep’t 2003).