[iframe src=”http://conta.cc/1RZQWY0″ height=”4600″ width=”100%”]
February 2016 CMM Newsletter: Campolo Voted Best Lawyer, Payroll Loopholes Eliminated, Estate Plans and More
Posted: February 25th, 2016
News (All)
Long Island High Technology Incubator (LIHTI) Welcomes Campolo to Board of Directors
Posted: February 25th, 2016
Campolo, Middleton & McCormick, LLP is pleased to announce that the Long Island High Technology Incubator (LIHTI) has welcomed managing partner Joe Campolo to its Board of Directors. Affiliated with Stony Brook University, the nonprofit is dedicated to providing support, resources, and services to new technologically innovative companies.
“As an active Stony Brook alum and supporter, I have long admired LIHTI’s track record of serving startup companies in the technology sector,” Joe said. “LIHTI’s goal is to help businesses grow, which aligns exactly with our mission at CMM. I’m really excited to share what I’ve learned from working with our tech entrepreneur clients, and I look forward to learning a lot from LIHTI.”
Since opening in 1992, LIHTI has worked with more than 70 businesses. The 44 companies that have completed the LIHTI program have contributed over $2.5 billion to the economy and created over 500 jobs. LIHTI’s affiliation with Stony Brook University has bolstered the organization’s success, transferring cutting edge research, development, ideas, and technology from the university to the private sector. Learn more at www.lihti.org.
Little-Known Payroll Avoidance Loopholes Eliminated in New York
Posted: February 22nd, 2016
New York business owners, take note: loopholes offering the potential to avoid personal liability for unpaid wages to employees have been recently eliminated. Prior to these changes, owners of New York limited liability companies, as well as owners of LLCs and corporations created outside of New York (for example, Delaware), were not personally liable for paying wages to their New York employees. Now, owners of New York corporations and LLCs, as well as owners of corporations and LLCs created outside of New York, could be personally liable for failure to pay wages.
An amendment to the law on limited liability companies (Limited Liability Company law) was modified, effective February 15, 2015, so that the 10 LLC members with the largest percentage ownership interest are personally liable, jointly and severally, “for all debts, wages or salaries due and owing to any of its laborers, servants or employees, for services performed by them for such limited liability company.” This imposition of liability on the 10 largest LLC members creates an exception to the general shielding of an LLC member for claims made against the LLC. The definition of “wages or salaries” includes all compensation and benefits payable by an employer to an employee, such as overtime, vacation, holiday and severance pay, employer contributions to pension funds, and insurance payments. To hold the 10 largest LLC members personally liable for non-payment of such benefits, an employee must notify the member(s) in writing within 180 days of termination of employment of his or her intention to do so.
This amendment closely mirrors an already existing provision of New York’s law on corporations (Business Corporation Law) that holds the 10 largest shareholders of a corporation jointly and severally liable “for all debts, wages or salaries due and owing to any of its laborers, servants or employees…for services performed by them for such corporation” and also requires notice to such shareholders. BCL § 630. Therefore, by expanding personal liability for LLC members, the amendment removes one of the distinctions between corporations and LLCs in New York. (There remain other differences, such as the relative flexibility of LLC governance and structure, that may still make the LLC an attractive option to business owners.)
Effective January 19, 2016, New York further expanded unpaid wage liability when Governor Cuomo signed an amendment to the BCL expanding this liability to foreign corporations that operate and have employees in New York State. In removing the domestic incorporation limitation on personal shareholder liability for unpaid wages, the law allows employees of out-of-state corporations to seek payment of wages from the 10 largest shareholders.
These pro-employee amendments push New York further from the mainstream view in other states that a corporate owner is typically personally liable for the debts of his or her entity only in cases of the shareholder’s wrongdoing. Importantly, the BCL and LLC Law do not distinguish among owners by any basis other than percentage of ownership, such as responsibility for incurring the debt in the first place. The changes therefore underscore the importance for business owners to review their wage and hour payment practices and ensure compliance with these policies.
Abracadabra! Delaware Court Does Away with “Magic Words” for Valid Anti-Reliance Provisions
Posted: February 19th, 2016
Tags: commercial litigation, M&A
Integration clauses typically state that an agreement is the entire and only agreement between parties, superseding any prior written or oral agreements. Similarly, “anti-reliance” language provides that the only representations on which the parties relied in deciding to enter the contract are those within the contract itself. Integration and anti-reliance clauses are commonly found in M&A agreements and contracts for other complicated transactions. The rationale behind such language is to limit a party’s recourse for misrepresentations made outside the agreement. The enforceability of such clauses varies by jurisdiction. As a recent Delaware Court of Chancery decision indicates, the law is constantly evolving even within jurisdictions.
Delaware courts have generally viewed integration clauses on their own as insufficient to preclude fraud claims stemming from representations or actions outside the contract at issue. Rather, courts looked for specificity as to what was being disclaimed and what had (or had not) been relied upon in entering the contract. Case law was unclear as to whether such provisions required specific language to be effective.
In the November 2015 decision Prairie Capital III, L.P. v. Double E Holding Corp., however, the Court of Chancery clarified that no “magic words” will render a provision enforceable; rather, an agreement “must contain language that, when read together, can be said to add up to a clear anti-reliance clause by which the plaintiff has contractually promised that it did not rely upon statements outside the contract’s four corners in deciding to sign the contract.” Prairie Capital III, L.P. v. Double E Holding Corp., 2015 WL 7461807 (2015), quoting Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004). Still, while particular words are not required, the court emphasized that Delaware law enforces only those provisions “that identify the specific information on which a party has relied and which foreclose reliance on other information.” Prairie Capital, citing RAA Mgmt., LLC v. Savage Sports Hldgs., Inc., 45 A.3d 107, 118-19 (Del. 2012). This approach is similar to New York’s policy to enforce only those provisions drafted with specificity rather than boilerplate disclaimers.
Coming from the highly respected Delaware Court of Chancery, Prairie Capital serves as an important reminder of the importance of drafting contracts carefully, intentionally, and specifically.
Want Your Startup to Succeed? Don’t Do This
Posted: February 19th, 2016
By Marc Alessi
Network. Find a mentor. Take risks. From bookstores to blogs, the market is saturated with advice and how-to books on how to achieve success with a new business venture. While those tips can be invaluable, I also think there’s something to be said for learning what not to do. From my own entrepreneurial endeavors to my work with the creative minds powering Long Island’s entrepreneurial ecosystem, I’ve made and seen mistakes that I now know belong in the “avoid” category.
Sageworks chairman and co-founder Brian Hamilton recently published his own “don’t do this” list on Entrepreneur.com, appropriately entitled “6 Ways to Kill Your Startup.” If you’re an entrepreneur, I share his advice with you here as a starting point for a conversation I’d love to have with you one-on-one as you navigate through the early stages of your startup.
6 Ways to Kill Your Startup
By Brian Hamilton
http://www.entrepreneur.com/article/269792
Sometimes the best way to learn how to do something is to understand how NOT to do something—to think of things in reverse. Ben Stein (of Ferris Bueller fame) achieved this with great effect with his book, How to Ruin Your Life. Buried in the book’s tongue-in-cheek humor and masked by its sardonic tone were some life lessons that I’ve actually found to be quite valuable.
In homage to Ben, I’m hoping to take a similar approach in my advice to entrepreneurs in the early stages of their businesses. Below is a list of seven ways to ruin your startup. I hope that, by doing the exact opposite of the points below, you’ll find some valuable lessons on running and starting a business effectively.
1. Borrow money early.
As an entrepreneur, one thing that you definitely want to have is structured payments that are due regularly stacked against cash flow that is unpredictable and unreliable. By the way, be sure to borrow money when a bank will lend it to you. If a banker is willing to make a loan, you should assume that you, by default, have the ability to pay it back. Borrow as much as you can and be sure to do it early in the business’ life.
2. Hire as many people as quickly as you can.
The key here is to have a very high overhead rate so that you have to keep making more and more sales. You also want to hire people when your business model is not truly proven so that you have fixed salaries to pay with uneven sales.
3. Focus on doing a business plan.
Now what you really want to do in the first few years in business is think globally. Focus your energy on creating a dynamic, MBA-style business plan; revenue and customers can wait. What you need is a fully-fleshed out plan of attack that would place highly in a competition held by Wharton. The most important thing you can do in a startup is plan heavily. Business is about planning, not execution. Operate under the assumption that a good plan will automatically lead to sales. On that note, be sure to have a good looking website and nice office space from day one.
4. Get a management team in place.
Be sure you have a CFO, COO, CTO, CIO and CMO from your company’s inception. It is important to have a full management team when you are starting and building a business. A full management team provides structure in the business and, more importantly, an impressive “Executives” page on your website. The added benefit of having C-level executives in a startup is that they’re very expensive, so you will ensure that your overhead costs are very high.
5. Focus on perception.
Spend a lot of resources on an accounting system, HR technology, office furniture, insurance and ping pong tables and games. What you want are the trappings of success, not tangible things like customers, revenue and profits. Image is important. Look at other companies like Apple and Google and compare yourself to those companies. Use them as benchmarks. You have to spend money to make money, so spend as much as you can. Customers and revenue can wait, but you only get one chance to make a first impression.
6. Spend a lot of time seeking venture capital and private equity money.
VC firms fund about one percent of the deals that they look at, which represents a good risk vs. return ratio for you. Don’t worry about the quality of the product/service you offer. Assume that will take care of itself. Because the market is efficient and customers tend to make intelligent choices, you don’t need to worry about the quality of your product or service when you are growing your company. Customers should be honored that you are willing to provide them with your product or service. Your time is better spent on planning and thinking and having a lot of meetings with your employees. Preferably, link venture capital money with a poor product and service, and assume that lots of capital and a bad product will really escalate your results.
This is (hopefully) the worst advice you’ll ever receive on starting and running a business. For guidance that you actually should follow, see The 5 Best Pieces of Advice I’ve Ever Received.
I Need an Estate Plan – Part Two
Posted: February 19th, 2016
Tags: elder law, estate planning
Last month I discussed the ins and outs of a Health Care Proxy. This month I’d like to discuss its sister document, a Living Will. This is not to be confused with a Last Will and Testament (commonly known as “the Will”). The Will does not become effective until after you die, whereas the Living Will is effective prior to death.
In its simplest terms, a Living Will states your end-of-life decisions so people (doctors, hospital staff, family) will know how you want to be treated and what you do (and do not) want. If you are capable of making those decisions at that time, you are always able to do so.
You are always allowed to make your own decisions about your medical care, even if that decision is to refuse medical treatment, and even if that refusal will lead to your death. If you are capable of making that decision, then medical providers must abide by it.
The problem comes in when you are not capable of making that type of a decision. This can be because of a permanent mental impairment such as dementia or a temporary one such as being on large amounts of pain medication or if you are under general anesthesia during an operation.
If this is the case, the doctor now must try to find out what kind of a decision you would have made if you could have. If he or she cannot find that out, the course of action is fairly straightforward: keep the patient alive. That is what they get paid to do. That is what they were trained to do. That is what they even took an oath to do. What they’re looking for at this point is some evidence of what you would have wanted to do.
If your spouse tells the medical staff that you would not have wanted “heroic means” to keep you alive, i.e. artificial nutrition, artificial hydration, artificial respiration, etc., that’s some evidence. Would it be enough for them? Maybe, maybe not. It depends of the totality of the situation. What is your disease, what is your age, what is your total, overall health?
If your spouse and all your children tell the medical staff that you would not want to be kept alive in this situation, that is more evidence of your wishes. Again, it may or may not be enough. But, if one of your children tells the doctor that he wasn’t sure about your wishes, all bets are off. They will then use all means available to them to keep you alive. Let the hospital administration and the courts figure it out. The doctors understand that once they “pull the plug,” they can’t put it back in. We’re talking about your life, not a set of Lionel trains.
A Living Will is a written document, read and signed by you in front of two witnesses. This is a tremendous amount of evidence to the medical staff of what your wishes truly are. Is it a guarantee? No. The Living Will is not a statutory document and the medical staff is not, by New York law, obligated to follow it. But it will go a long way if they know what your true wishes are.
Lastly, try to remember that signing a Living Will does not mean that they’re immediately going to cease all life-sustaining treatment. If the medical staff can maintain or give you back some quality of life, they will do so. It is only when giving such treatment would serve only to prolong the dying process that they would consider withholding or withdrawing such treatment.
Wood Laminate Flooring Designs are Original Enough for Copyright Protection
Posted: February 19th, 2016
Tags: intellectual property
Generally, the Copyright Office will not register works by nature, animals or plants. However, are the designs of wood floors original enough to warrant copyright protection? One Circuit Court said yes, and found that found that a design for laminate flooring was sufficiently creative to merit copyright protection.
Mannington Mills, Inc. and Home Legend LLC are competitors both selling laminate wood flooring. Mannington created a floor design called “Glazed Maple” that depicted what a wood floor might look like after decades of age and wear and registered the design with the U.S. Copyright Office in 2010.
In 2012, Mannington discovered that Home Legend was selling flooring that was identical to the “Glazed Maple” design. After Mannington sent a cease and desist letter, Home Legend filed suit seeking a declaratory judgment that the copyright was invalid. Mannington counterclaimed for copyright infringement.
Originally, the District Court agreed with Home Legend and found that the “Glazed Maple” design lacked sufficient originality to be an “original work of authorship” under copyright law. It found that the design was merely “a design depicting or copying elements found in nature — the look of a rustic, aged wooden floor.”
However, the 11th Circuit disagreed. The Circuit Court found that the design was “the product of creativity, not a slavish copy of nature” and met the low bar for creativity, requiring only “some creative spark, no matter how crude, humble or obvious.” In particular, the Circuit court held that
they imagined what a deeply stained maple floor might look like after years of wear, and then they used stain, paint, hand tools, and digital photo retouching to express their concept first on wood and then as digital images. Ideas alone are not protectable… But if the expression of an idea is sufficiently creative, that expression is protectable.
Home Legend, LLC v. Mannington Mills, Inc., Case No. 14-13440 (11th Cir., Apr. 29, 2015) (Carnes, J.)
Although the Circuit Court held that the copyright was valid, it noted that the copyright was not particularly strong and protected only the original elements. Accordingly, the copyright would only extend to identical or near-identical copies of the design.
In sum, this case demonstrates the fairly low bar for copyright protection. Creativity in fashioning a design, even if it appears natural, can be protectable under copyright law. With this low bar, and the fairly simple and inexpensive process of registering a copyright with the Copyright Office, designers and companies should consider copyright registration to protect their designs and prevent their competitors from creating similar designs.
Defeating Deception in Negotiations
Posted: February 19th, 2016
Tags: negotiation
Deception has long had a place at the negotiating table. Used appropriately, it can be an effective tool for getting what you want. But how can you be sure it isn’t being used on you? As with any negotiation, preparation is key. If you are familiar with the most common types of deception a negotiator might face, you’ll be in a better position to avoid falling into those traps and, even better, flip the situation to your advantage.
The Harvard Law School Program on Negotiation blog recently featured an article highlighting the most common types of deception that arise in negotiations, including lies about bottom lines, offers that seem too good to be true, proposals that take advantage of the fact that you’ve already made a significant investment, lack of concessions from the other side, and last-minute efforts to swing the negotiation. Here, the bloggers share their insights on how to recognize and address these tactics.
Negotiation Skills Tips: Dealing with Deception at the Bargaining Table
Program on Negotiation – Harvard Law School
In his book Bargaining for Advantage: Negotiation Strategies for Reasonable People (Penguin, 2006), G. Richard Shell analyzes this story from Nancy Griffin and Kim Masters’s book Hit & Run: How Jon Peters and Peter Guber Took Sony for a Ride in Hollywood (Simon & Schuster, 1996) as an example of the deceptive tactics negotiators sometimes use to get what they want.
Here are five other common types of deception you may come across in negotiation, according to Richard Shell:
1. Lies about bottom lines and alternatives.
A counterpart’s statements about just how low (or high) she’ll go should be taken with a grain of salt, writes Shell. Avoid being had by researching the other side’s claims and reputation, and by exploring your alternatives to the current deal.
2. “Too good to be true” offers.
Beware an offer that’s much better than you expected, especially from a counterpart you don’t know well. After you commit to a lowball price, the other party might try to tack on less-desirable deal terms. One tip-off that you could be getting a raw deal, according to Shell, are questions that are hypothetically phrased, such as “Would you buy this today for $X?” If an offer is framed in the abstract, ask for more concrete wording—such as, “I am offering this to you today for $X”—and insist on seeing the fine print.
3. Escalation of commitment.
You may find you’ve made a significant investment, such as considerable time or an up-front payment, before you’ve agreed on a deal. The other party may be aware that you (like most people) will be less willing to walk away and admit defeat after sinking resources into the negotiation. At such times, remember that such “sunk costs” are gone forever — and that there’s no shame in walking away from a shady deal.
4. Lack of reciprocity.
According to the widely accepted norm of reciprocity, each concession in a negotiation should be rewarded with a roughly equal concession from the other side. If a counterpart fails to match your concessions or only pays lip service to the process of exchanging offers and commitments, don’t negotiate any further; confront him about it, and walk away if he won’t cooperate.
5. Last-minute nibbling.
Have you ever had a counterpart make a modest request just before you’re about to ink the deal? By preying on your desire to wrap up a hard-won negotiation quickly, the “nibbler” may succeed in gobbling up several more percentage points of value, cautions Shell. His advice: Shun the request unless the nibbler agrees to a matching concession.
CMM Expands Ronkonkoma Headquarters
Posted: January 28th, 2016
Ronkonkoma, NY, January 2016– Campolo, Middleton & McCormick, LLP, Suffolk County’s premier full service business law firm, is pleased to announce the addition of 4,000 square feet of space to its Ronkonkoma headquarters. The firm has acquired half of the space on the third floor at 4175 Veterans Memorial Highway, connecting it to the existing fourth floor office by an internal staircase. The new space features conference rooms, a suite of offices and workstations, as well as a new kitchen for use for special events and by employees. The existing space on the fourth floor has been reconfigured to encompass additional offices, a library, and expanded meeting spaces.
“Our expansion reflects our continuing commitment to our clients and the surrounding community,” said Joe Campolo, managing partner of the firm. “We needed additional space to meet the demands of our growing client base, and we chose to do that right here in Ronkonkoma.”
This expansion is the latest of many for the firm, which grew out of its Bohemia office space two years ago and has continued to grow. The new space at CMM’s Ronkonkoma office, located at the entrance to Long Island MacArthur Airport, also follows the firm’s creation of its Bridgehampton office last year.