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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…

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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).

By Marc Alessi

As a self-proclaimed serial entrepreneur, I find myself immersed in the startup entrepreneurial ecosystem, specifically here on Long Island. I thrive on the process of taking an idea, helping to make it a product, and helping to build a business around it.  To have the power to take something from “all talk” to “all action” and to build wealth from it is incredibly empowering. I’d like to use this blog platform as a resource to anyone looking to take a leap into entrepreneurship and bring their business startup dreams to life. I believe anyone can make this transition.  No matter what your background, you can become an entrepreneur, and you can learn the formula to take your ideas and make them a profitable reality.

True entrepreneurs continually seek out information and advice to grow their businesses and assist them in various aspects of business management, from marketing to sales, human resources, and more. There are countless resources out there to find relevant content, one of my favorite being Entrepreneur Magazine and Entrepreneur.com, which has evolved into one of the most widely used website by entrepreneurs and leaders in business worldwide.

Carol Roth, contributor to Entrepreneur.com and entrepreneur herself, recently published a piece called, “9 Steps That Will Help Your Chances of Starting a Successful Business,” an adaption from her bestselling book, The Entrepreneur Equation. It offers some great points on preparation before you start your own business.

9 Steps That Will Help Your Chances of Starting a Successful Business

By Carol Roth

If you are unemployed, underemployed or unhappily employed, the idea of taking control and becoming your own boss might be sounding pretty sexy right about now. Plus, the past decade has shown us that jobs aren’t quite as dependable as perhaps we previously thought.

However, the success rates for new business are quite scary too, with the majority of all new businesses failing in just a few years’ time. While there is never going to be a “sure thing,” if you are thinking of leaving your job to hang out your own shingle, there are significant benefits to preparing before you take the leap.

Here are nine ways to make sure that you are prepared before you start your own business, so that you can give yourself the best chances to succeed. These are adapted from my bestselling book, The Entrepreneur Equation.

1. Define and evaluate your goals.

You can’t figure out a path to get somewhere if you don’t know where it is you want to get to. Plus, once you have that goal, you need to know if your path is the most direct route to achieving what you want.

Ask yourself tough questions about why you really want to start a business. Are you looking to get rich quick? Do you want to showcase your talent, new product idea or service? Are you tired of your boss taking credit for what you do?

These kinds of goals might lead you down the wrong path. On the other hand, if you love the idea of running an entity, if you like creating systems and procedures, adore servicing customers and if you thrive on wearing many different hats and balancing responsibilities, then entrepreneurship could be the perfect path for you.

2. Stash some cash.

The cost of starting a business in many industries has come down substantially. However, that is only part of the story. Businesses often take a few years to gain a solid foundation, so you need to have enough money to start the business, operate it while it stabilizes and also be able to live.

If you don’t have the money yourself, identify whether you have credible access to capital. The downturn has made it more difficult to secure financing and you don’t want to be three months into a business and have to decide whether to keep the business open or pay your rent or mortgage — that’s a losing proposition.

3. Get relevant experience.

Being able to manage employees and vendors is the type of skill you’ll need to acquire before starting your own business. You’ll also need to know your industry inside and out, including aspects that you may not be familiar with or even like, including marketing, accounting and more.

Don’t have the experience? Spend time working in a similar company, shadow a business owner in your industry or take a job on nights and weekends in a comparable business. Test the waters first with a trial run before you start your own company.

4. Build your network.

Business sometimes comes down to not what you know, but whom you know. If you don’t know many people or if you just haven’t warmed up your contacts in a while, now is the time to focus on building a solid network.

Strong connections can provide valuable business advice and provide introductions to get you more favorable financing, prices, terms and conditions from business suppliers and professional services. Connections are your best source of marketing and customer referrals, which is critical for a new business.

5. Know yourself.

Do you prefer the “status quo” and like to avoid the unexpected? Can you handle a life of highs and lows — including financial highs and lows? Could your savings and bank account handle financial lows as well?

If you are a person who likes stability and control, or if you prefer when things go as planned, the roller-coaster ride of a new business may not be right for you. Be honest about your personality before you take the leap.

6. Visit your lawyer.

If you are going to go into a business that competes (directly or even indirectly) with your current employer or if you plan to call on prior customers or contacts, you may find yourself in a legal bind, depending on the paperwork that you have signed with you current (or previous) employer.

Check with your lawyer to make sure that you are in the clear or to find out what you need to do to avoid any sticky legal situations.

7. Stalk the competition.

Before you leap into entrepreneurship, take a hard look at the marketplace and your competition. Is your market saturated with successful businesses? Is your industry littered with so many bad businesses that it’s developed a bad reputation?

Both good and bad competitors will influence just how successful your business will be. You will need to market and brand your business to shine above the good competitors and to make up for the bad ones.

8. Test your idea’s scalability.

The most successful businesses rely on automation and delegation. Will other employees be able to do your work? If not, can you teach others what to do in an easy-to-follow format?

If your business relies on your skills, and your skills alone, you might have a successful job, but it may not be that business opportunity you are looking for.

9. Sell first!

Too many entrepreneurs spend time and money building out retail stores, manufacturing products or developing service offerings without truly assessing the viability of the market. See if you can garner interest (in the form of purchase orders, deposits, etc.) before you invest too much capital.

If you have a lot of interest in your offering, there will be less risk in pursuing it full time. If you don’t get any bites, you may want to rejigger your offering, pricing or business model before investing your full time and effort.

Putting in the time and effort up front to stack the odds in your favor will help you avoid having one of those businesses that ends up in that percentage of failures.

http://www.entrepreneur.com/article/250252

In litigation, it is one thing to obtain a judgment against an individual or entity, but it is another thing to actually collect on that judgment. One scenario that often plays out occurs when a plaintiff has obtained a judgment against a business entity only to find out that the company is out of business and/or has transferred its assets and popped up under a different name.  This strategy is undertaken for obvious reasons – to avoid collection efforts on the judgment while continuing to do business under a different identity.  However, if you are the judgment holder, all is not lost.  A recent decision from the Commercial Division in Suffolk County awarded a judgment holder with summary judgment against a successor corporation making it liable for the judgment of the defunct entity.

In All County Paving Corp. v. Darren Construction, Inc. (J. Emerson), plaintiff All County Paving Corp. (“All County”) had obtained a judgment against an entity known as Darren Construction Services, Ltd. (“Darren Construction Services”) back in 2011 in the sum of $82,275.74.  Darren Construction Services was owned by Michael Fusco (“Fusco”) who acted as the sole officer, director and shareholder of that entity. All County then commenced this action against Fusco and a different company, Darren Construction, Inc. (“Darren Construction”) alleging that Fusco created Darren Construction in an effort to avoid paying All County and other creditors.  The lawsuit alleged claims for fraudulent conveyances under the Debtor and Creditor Law and also sought personal liability against Fusco by piercing the corporate veil.  Both All County and the defendants ultimately moved for summary judgment with respect to plaintiff’s claims.

In deciding the respective motions, the Court noted that New York permits recovery of transfers when there has been a fraudulent conveyance that unfairly diminishes a debtor’s estate.  Under Debtor and Creditor Law § 273 and § 273-a, constructive fraud can be shown when the debtor transfers assets without fair consideration and the debtor is or becomes insolvent or the debtor has a judgment docketed against it that has not been satisfied.  Additionally, transfers to controlling shareholders, officers or directors of an insolvent corporation are presumed to be fraudulent and made in bad faith.  Matter of CIT Group/Commercial Servs. Inc. v. 160-09 Jamaica Ave. Ltd. Partnership, 25 A.D.3d 301, 303 (1^st Dep’t 2006).  Under Debtor and Creditor Law § 276, the creditor must show actual intent to defraud on the part of the transferor in order to set aside a transfer as fraudulent.

In its examination of the facts here, the Court found that Darren Construction (the successor company) was formed August 22, 2011.  Darren Construction Services then failed to appear at a Court conference in the prior litigation a mere two weeks later on October 4, 2011 and, as a result, a default judgment was entered against Darren Construction Services on October 11, 2011.  The Court further noted that Fusco is the sole owner, shareholder and director of Darren Construction (as he was with Darren Construction Services) and the two businesses are the same, use the same phone number, and operate out of the same address.  Even more telling was the fact that, as soon as Darren Construction was formed, Darren Construction Services went out of business.  While the defendants attempted to argue that there was no transfer of assets between the two companies, the Court held otherwise, noting that the “good will” of Darren Construction Services, a saleable asset, was transferred to Darren Construction without any consideration being exchanged for such good will.  Further, at the time of the transfer, Darren Construction Services was insolvent and the judgment was unsatisfied.

As a result the Court found the transfer to be in violation of both § 273 and § 273-a of the Debtor and Creditor Law.  The Court also found that, based on the circumstances of the transfer, there was an intent to defraud in violation of § 276 of the Debtor and Creditor Law which was further confirmed by Fusco’s deposition testimony.  As such, the Court held that All County was entitled to summary judgment against Darren Construction due to the fraudulent conveyance.  As an aside, the Court denied summary judgment against both sides as it pertained to the claims against Fusco individually under a corporate veil theory noting that neither side had met its burden to warrant summary judgment.

The important takeaway from this decision is that all is not lost if you have a judgment against what appears, on its face, to be a defunct entity.  It is vital to conduct the proper due diligence even before a judgment is obtained to determine if the entity is still doing business under a different name and whether the defunct entity fraudulently transferred assets to avoid collection efforts.  It is very possible, as was the case here, that a new door will open that will allow you to collect against an entity and/or individual with assets.