News (All) - Page 136 of 164 - Campolo, Middleton & McCormick, LLP

GM Ignition Switch Investigation Shows Value of Competent Internal Investigation

Posted: March 18th, 2015

General Motors (“GM”), who faced a very public scandal in 2014 over ignition switch defects, now faces a large class-action multi-district lawsuit on behalf of individuals who suffered injury due to the alleged defect.

When the scandal broke, GM hired outside counsel to investigate the ignition switch defect and GM’s delays in recalling vehicles. The investigation, completed in 70 days, featured 41 million documents and more than 350 interviews with 230 witnesses. The report containing the investigation’s conclusions has been named the Valukas Report, after the attorney leading the team that conducted the investigation. The final Valukas Report and the documents cited in it are currently available to Plaintiffs’ lawyers in the class action litigation In Re: General Motors LLC Ignition Switch Litigation, 14-MD-02543.

Plaintiffs’ counsel moved in the Southern District of New York to obtain the notes, summaries and memoranda prepared by the attorneys who conducted the internal investigation for GM. Judge Jesse Furman denied the request on the grounds that the requested material constituted privileged attorney-client communications and privileged attorney work product.

Citing Upjohn v. United States, 449 U.S. 383 (1981), the “foundational case on attorney client privilege in the corporate environment,” Judge Furman upheld the tenets that the attorney client privilege in internal investigations exists to protect professional advice from an attorney to those who can act on it, as well as the information conveyed to the attorney that enables her to provide advice. In the GM case, Judge Furman noted that Upjohn “applies squarely” to the materials requested, noting that the Valukas Report was prepared to give advice on how to handle criminal investigations and civil litigation, the employees were explicitly told the interviews were confidential and conducted to provide legal advice, and the communications between the attorneys and the client were not shared with outside parties.

Judge Furman also cited to last year’s seminal case addressing privilege in internal investigations, In re Kellogg Brown & Root Inc., 756 F.3d 754 (D.C. Cir. 2014). Under the Kellogg case, the D.C. Circuit articulated a “primary purpose test” to evaluate privilege. That test held that if the “primary purpose” for an investigation involved providing legal advice to prepare for litigation, then the attorney-client and attorney work product privileges protected attorney notes, memoranda and the like created during the investigation.

Judge Furman’s affirmance of the “primary purpose test” underscores the importance of having experienced counsel conduct confidential internal investigations. If privilege is breached, as could have occurred in the GM investigation, one can only imagine the damaging information that Plaintiffs’ lawyers could have obtained. Thus, for GM, experienced white-collar counsel potentially saved the company substantial money by preserving privilege over the investigation.

Cyber Liability Insurance: What it Protects Against

Posted: March 18th, 2015

By Christine Malafi

Cyber liability insurance is a risk management tool and a form of protection that a business can purchase to limit economic losses from damages and for liability from a potential hacking. Most industries in today’s world conduct a lot of business through computers and the internet. While modern technology helps to promote efficiency and organization throughout businesses, the misuse of the technology poses a threat to private information, which may be seen or used by third parties who should not have access to it resulting in potential liability to the business. On a daily basis, businesses must deal with data security threats, remote and not, of cyber-attacks and potential costs, expenses, and liability stemming from a security breach.

Commercial businesses which primarily publish and collect information via a website may have a higher risk of various legal risk exposures, including from defamation, copyright infringement, and release of confidential information. Cyber liability insurance is important for certain businesses to consider because of the sensitivity of the information stored and transmitted through the internet. For example, businesses that collect customer credit card information and/or store confidential information (i.e. financial, medical, or education materials) have risk. Businesses can choose from different types of policies. For example, breach-notice coverage, privacy liability coverage, and security breach liability coverage. Breach-notice insurance protects from liability exposures and costs associated with a violation of privacy laws and provide fraud monitoring for customers and clients when confidential information has been compromised. Privacy liability insurance protects from losses incurred when the personal information of third parties (i.e. customers, clients, vendors) is compromised. Security breach liability insurance covers expenses and losses arising from liability due to viruses and hackings that damage third parties.

In the complicated world we live in, it is essential to protect not only your business, but also all personal information relating to a customer, client, as well as your business and employees. Even though computer software systems and intelligent IT employees can help thwart an attack, breaches occur to the best of systems. Cyber liability insurance can help salvage the cost of the damage and liability after an attack has occurred.

Selecting Witnesses for Depositions

Posted: March 18th, 2015

By Scott Middleton

In litigation, when deciding which employee a corporation should make available for the opposing party to depose, the “corporate entity has the right to designate, in the first instance, the employee who shall be examined.” Schiavone v. Keyspan Energy Delivery NYC, 89 A.D.3d 916, 917 (2d Dep’t 2011). The corporation and counsel must decide, based on the totality of the circumstances in the specific case, which employee will testify best. Remember, opposing counsel will evaluate the likability and credibility of a witness as well as determine how the witness will present to the finder of fact at trial. The corporation must be consciously aware that producing an employee who does not provide adequate information or who does not have the requisite knowledge may result in the need to produce an additional witness. In that case, the opposing party must show “(1) the employee already deposed had insufficient knowledge, or was otherwise inadequate, and (2) the employee proposed to be deposed can offer information that is material and necessary to the prosecution of the case.” Id.

For example, in Sladowski-Casolaro v. World Championship Wrestling, Inc., the court held that the Nassau Veterans Memorial Coliseum was not required to produce additional witnesses for deposition in an action for personal injuries. 47 A.D.3d 803, 803-04 (2d Dep’t 2008). The Court reasoned that “[t]he plaintiff failed to sustain her burden that the Coliseum representative who had already been disposed had insufficient knowledge, or was otherwise inadequate, and that there was a substantial likelihood that the persons sought by the plaintiff for additional depositions possessed information which was material and necessary to the prosecution of the case.” Id.

It is imperative that a corporation, working with counsel, carefully decide which employee to select for a deposition. Producing the wrong employee may subject the corporation to additional legal fees and wasted time. Therefore, the corporation must discuss with counsel which potential witness has the degree of knowledge required for a meaningful deposition and assess how the witness will present at the deposition. By collaborating with counsel, the client can avoid the unnecessary cost and expense of producing multiple witnesses for depositions and the possibility of engaging in otherwise unnecessary motion practice.

Communicating with Parents Is Not Easy

Posted: March 18th, 2015

By: Martin Glass, Esq. email

Tags: elder law

Our parents have survived a lot. In addition to raising us, they’ve gone through great depressions, great recessions, and numerous wars. Now, as they enter their golden years, many of us are being confronted with an uncomfortable role reversal as Mom and Dad become the ones who need care.

Just as kids are eager to prove their independence from their parents, parents want to prove to their adult children that they can keep their independence. More often than not, though, things like paying bills in a timely manner get forgotten. This becomes a problem when insurance policies get canceled or utilities start to get shut off.

It’s at this point that a wide range of assistance should start to come into play. It may be as simple as automating all their bills, or as complex (and difficult) as looking into home care or assisted living facilities. Hopefully the difficulties are spotted early and the assistance can be a gradual progression. Just like when dealing with children, parents can usually handle a small amount of assistance in the beginning, such as bill paying or grocery shopping. Then, over time, the assistance can increase without them feeling like they’ve all of a sudden given up all of their control and independence.

But, at some point in time, the children are going to realize that Mom and/or Dad cannot live without continuous assistance. So how do we get them to start thinking about someone coming in or moving to an assisted living? One of the big things is that you need to pick a time and place without distractions to bring up your concerns.

I don’t like to keep making the comparisons between seniors and children, but these types of conversations are very similar. You need to get the other person to come to the conclusion that they need some type of assistance, either at home or at moving to a facility. You just telling them your reasons and conclusions will never work. If they come to the conclusion on their own, then they feel like they’re still in charge.

In speaking with them, you should try to speak only for yourself. Telling them how friends, neighbors, or other family members feel will just make them think you’re ganging up on them. The only other opinion I would suggest bringing into the conversation would be their physician’s. If the doctor said they need assistance, that’s a person of authority speaking. And then ask the parent how they feel about it or what could we do about it.

Unfortunately, their processing power may have diminished, so keep it slow and talk about one issue at a time. And, at all costs, keep your own emotions and reactions in check. It’s not about you, it’s about them. So just try to listen and remember that they are still your parents. Hopefully, they’ll understand your concerns and come to the decision by themselves that something needs to be done.

Believe it or not, one way to get a senior thinking about moving is by talking to them about the family heirlooms. Sometimes part of the anxiety someone feels when leaving their house behind comes from a sense of not being in charge of all the mementos. If the parents have some say in where things go, they may feel that they are still in control and that all their past will not be lost.

Just keep in mind that the consequences of saying and doing nothing can be tragic, from missed doses of important medication to major injuries. If a parent falls and is out of reach of a phone, he or she could lay there for days until you or a neighbor get there.

Stories like these are what keep adult children up at night, but they can also serve as motivation. It’s never too early to start taking baby steps today with your favorite senior. Try perusing incoming mail or checking their medications. A month of pills should last a month, not two weeks or two months. Even going through old photos together is a great way to start a conversation about what they used to do for you. Now you may need to start doing those things for them.

Delaware Chancery Court Determines it has Broad Discretion to Retroactively Ratify Defective Corporate Acts

Posted: March 18th, 2015

Tags: commercial litigation, corporate

On January 30, 2015, the Delaware Chancery Court decided its first case involving Delaware General Corporate Law (DGCL) Sections 204 & 205 (In re Numoda Corp. S’holders Litig., C.A. No. 9163–VCN, 2015 WL 402265 (Del. Ch. Jan. 30, 2015)) (“Nomuda“). DGCL Sections 204 and 205 permit a corporation or the Court of Chancery to ratify defective corporate acts. Those sections of the law became effective on April 1, 2014, and provide in part:

“(a) …no defective corporate act or putative stock shall be void or voidable solely as a result of a failure of authorization if ratified as provided in this section or validated by the Court of Chancery in a proceeding brought under Section 205 of this title.

(b) In order to ratify a defective corporate act pursuant to this section, the board of directors of the corporation shall adopt a resolution stating:

(1) The defective corporate act to be ratified;

(2) The time of the defective corporate act;

(3) If such defective corporate act involved the issuance of shares of putative stock, the number and type of shares of putative stock issued and the date or dates upon which such putative shares were purported to have been issued;

(4) The nature of the failure of authorization in respect of the defective corporate act to be ratified; and

(5) That the board of directors approves the ratification of the defective corporate act…

(Full statutory language of DGCL Section 204 available here: http://delcode.delaware.gov/title8/c001/sc06/)

Scope of the Court’s Power to Ratify Past Acts

In the Nomuda decision, the Chancery Court was presented the issue of whether to it could retroactively validate certain issuances of stock which were disputed by the shareholders. In doing so, it made the first determination of the scope of the Court’s power to retroactively validate a purported corporate action. The Chancery Court noted:

No fixed outer limit to court’s discretion: DGCL Section 205 grants the court broad discretion with “no rigid outer boundary.”

Corporate acts may be ratified even if corporate formalities are almost nonexistent: The Delaware legislature’s intent in adopting Section 204 and 205 was to permit the court to fashion an equitable remedy, even when “corporate formalities were barely recognizable.”

Court may only ratify acts which failed on a technicality: The Court’s power to retroactively ratify a corporate action is limited to curing technical defects only, without:

a. Authorizing a corporate act that the corporation wishes it took, but did not actually take in the past.

b. Changing the date that a valid act was taken.

There must have been a past underlying act, not a current wish that action had been taken: In order to avoid exceeding its power to retroactively authorize a defective act, the Court must first find that there was an actual underlying act that was taken, rather than a current wish that the action had been taken in the past.

The statute tells you how to plead for ratification by the chancery court: Parties requesting that the Chancery Court retroactively ratify a corporate act no longer need to plead general equitable theories.

How the Court Decides a Corporate Act may be Retroactively Ratified:

DGCL Section 205(d) contains factors that the Chancery Court may consider in determining whether a past corporate act actually took place which it may ratify. The factors below are listed in DGCL 205(d), together with a “catch-all” provision that allows the Court to consider “any other factors or considerations the Court deems just and equitable”:

(1) Whether the defective corporate act was originally approved or effectuated with the belief that the approval or effectuation was in compliance with the provisions of this title, the certificate of incorporation or bylaws of the corporation;

(2) Whether the corporation and board of directors has treated the defective corporate act as a valid act or transaction and whether any person has acted in reliance on the public record that such defective corporate act was valid;

(3) Whether any person will be or was harmed by the ratification or validation of the defective corporate act, excluding any harm that would have resulted if the defective corporate act had been valid when approved or effectuated;

(4) Whether any person will be harmed by the failure to ratify or validate the defective corporate act…

(Full statutory language of DGCL Section 205 available here: http://delcode.delaware.gov/title8/c001/sc06/)

The Court’s Determination in Nomuda:

Ultimately, the Nomuda Court ratified certain issuances of stock in question, but declared other issuances invalid, using the criteria set forth above. In particular the court answered the following questions:

Did a past corporate action take place? Yes, a past corporate action had taken place for some stock issuances, but not others. The corporate attempts to issue stock that had taken place were defective upon a technicality: the Court ratified certain issuance of stock based on its findings that Nomuda Corporation’s board of directors took certain affirmative acts to issue the stock, including:

a. Attempting to issue stock certificates for these stock issuances, even though the stock certificates had not been properly completed or issued.

b. Minutes had been taken of a board meeting in which the stock issuance took place, even though those minutes were never signed or approved by the board.

c. The Board later passed a resolution in which it ratified these issuances of stock.

Should the court validate the defective issuances of stock which had taken place? Yes, the court can validate some of the stock issuances because:

a. All parties had acted as if these stock issuances had taken place.

b. An independent shareholder would be harmed if the court were to validate these stock issuances.

c. The Board’s ratification of these stock issuances was effective.

However, the court invalidated other claimed issuances of stock because:

a. The Party asserting that the stock had been issued could not point to any board meeting, resolution or other determination regarding that party’s claimed issuance of the shares. Since there was past no corporate act, the Court would not ratify the claimed issuance of shares.

b. There was conflicting evidence about the timing of the issuance of stock.

c. No harm would come to other shareholders because of the invalidation of these claimed issuances of stock.

The Take Away:

Corporate formalities are must be followed, but technical defects in these formalities can be ratified by a Company’s board by following the steps outlined in DGCL Section 204. If there is disagreement about whether a defective action may be ratified, the Chancery Court may hear the dispute under DGCL 205. In making its decision to retroactively ratify a corporate act, the Delaware Chancery Court has broad discretion, but it must first find that an actual act took place in the past, and then must find that the act was the true intention of the Company, taking into account whether other parties would be harmed and whether other parties had relied on the ratification.

The full Nomuda decision can be found here: http://courts.delaware.gov/opinions/download.aspx?ID=218990

Negotiation Tips: Who Should Make the First Offer?

Posted: March 18th, 2015

By: Joe Campolo, Esq. email

Tags: negotiation

A fundamental issue in any negotiation is who should make the first offer. What does the psychological research and negotiation theory say?

According to Professor Leigh Thompson Northwestern University Kellogg School of Management, “there is a widespread, almost unquestionable, assumption that it is wise and strategic to let the other person talk first—and that it is suicidal to make the first offer.”

In his article, “Negotiation Tips: Who’s on first?,” he goes on to discuss that there is virtually no research that supports the claim that letting the other party open first is advantageous. In fact, it he claims it can backfire—and lead to a worse outcome than imagined.

Thus, contrary to the commonly held wisdom, people who make the opening offer in a negotiation tend to have the upper hand.

The advantage is owed to something psychologists call “the anchoring principle.” An initial offer is an anchor around which the subsequent negotiations pivot. The other party responds to the anchor by suggesting an adjustment to it, thereby giving the anchor credibility. The tendency is to insufficiently adjust away from the anchor set by the opening offer.

Drake Baer reporter and author on strategy, leadership, and organizational psychology at Business Insider, discusses this topic in his article, “Here’s Why You Should Always Make The First Offer In A Negotiation.”

In a salary negotiation, for example, whoever makes the first offer establishes the range of possible variation from that anchor. If you start high, the hiring manager may adjust the figure down slightly. But that’s typically a stronger position than starting low and trying to negotiate up.

“Most people come with the very strong belief they should never make an opening offer,” says Leigh Thompson, a professor at Northwestern University’s Kellogg School of Management. “Our research and lots of corroborating research shows that’s completely backwards. The guy or gal who makes a first offer is better off.”

Marketers use the anchoring principle to trick you into thinking something is cheaper than it actually is. A “discount” tag that still shows the original price on a pair of pants is a prime example, since you tend to focus on the deal you’re getting rather than the price you’re paying.

In a negotiation, you can use that bias to your advantage. “Whoever makes the first offer essentially drops an anchor on the table,” Thompson says. “I might say that your opening offer is ridiculous, but nevertheless, unconsciously, I’ve been anchored.”

What’s more, the opening offer helps orient the other person’s perception of the value of what’s being negotiated for. An aggressive opening offer makes people consider the positive qualities of an object, since it forces them to decide whether it’s worth the cost, says Columbia Business School professor Adam Galinsky. On the other hand, a low opening offer makes people stingily consider what might go wrong, since lower prices are associated with negative qualities.

“My own research suggests that first offers should be quite aggressive but not absurdly so,” Galinsky says. “Many negotiators fear that an aggressive first offer will scare or annoy the other side and perhaps even cause him to walk away in disgust. However, research shows that this fear is typically exaggerated. In fact, most negotiators make first offers that are not aggressive enough.”

To start with a high but not overly aggressive offer, you could just introduce a number — rather than explicitly ask for it.

Harvard Law School’s Program on Negotiation details why:

“The most effective anchors further reduce risk because, rather than placing firm offers on the table, they merely introduce relevant numbers. A job applicant may state his belief that people with his qualifications tend to be paid between $85,000 and $95,000 annually, or he might mention that a former colleague just received an offer of $92,000. This assertion is not an offer; it’s an anchor that affects the other side’s perceptions of the zone of possible agreement.”

The next time you enter a negotiation, don’t play coy. Put your offer on the table first.

http://www.businessinsider.com/how-to-negotiate-make-first-offer-2014-5#ixzz3UfNsaXOX

http://www.kellogg.northwestern.edu/news_articles/2014/04022014-negotiate_first_offer.aspx

http://www.pon.harvard.edu/daily/negotiation-skills-daily/effective-anchors-as-first-offers/

Can an At-Will Employee Be Bound by a Pre-Dispute Resolution Agreement Contained Within a Non-Binding Employee Handbook?

Posted: March 18th, 2015

Based on a recent decision from the Commercial Division in Westchester County (J. Scheinkman), the answer is yes. The case of Graham, et al. v. Command Security Corporation was commenced as a class action by Richard Graham (“Graham”) on behalf of himself and all other security guards similarly situated against his former employer Command Security Corporation (“Command”). Graham’s claims related to the alleged failure of Command to, inter alia, pay Graham and other security guards prevailing wages under New York Labor Law and other wage and hour law violations. After Graham commenced the lawsuit in Supreme Court, Command filed a motion to stay the action in Supreme Court and compel arbitration based on Graham’s prior agreement to resolve any employment disputes by arbitration.

In support of its motion, Command argued that Graham was provided with an Employee Handbook at the time of hire and as part of the job offer. The Employee Handbook contained, among other things, Command’s personnel policies. Upon accepting the position with Command, Graham executed and acknowledged a Receipt of Personnel Policies in the Employee Handbook, including the Pre-Dispute Resolution Agreement, and returned the signed acknowledgment to Command. The Pre-Dispute Resolution Agreement covered all matters directly or indirectly related to an employee’s recruitment, hire, employment or separation. Importantly, the Pre-Dispute Resolution Agreement also provided Command with the option to require any dispute brought by an employee in Court to be heard through arbitration instead. To exercise the option, Command was required to notify Graham within sixty (60) days of service of the complaint, which it did.

The issue to be decided by the Court was whether the parties actually entered into a valid agreement to arbitrate. In opposition to the motion, Graham contended that there was no agreement because the Employee Handbook contained language stating that “employment is at will” and the “[Employee Handbook] does not create a contract with the Company for any purpose and the provisions of this Manual may be modified or eliminated at any time.” Graham also argued that the agreement to arbitrate was unilaterally in favor of Command and not a reciprocal obligation. Command, on the other hand, argued that, despite the non-binding nature of the Employee Handbook, the Pre-Dispute Resolution Agreement was enforceable because the language is distinct and mandatory and Graham’s executed acknowledgement confirmed his agreement.

The Court ultimately sided with Command. The Court, citing Thomson-CSF, S.A. v. American Arbitration Assn. 64 F.3d 773 (2d Cir 1995), noted that “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” The movant attempting to compel arbitration has the burden to show a “clear and unequivocal” agreement to arbitrate the claim. Fiveco, Inc. v. Haber, 11 N.Y.3d 140, 144 (2008).

Here, the Court held that it could not be disputed that Graham signed the Pre-Dispute Resolution Procedure Employee Acknowledgement Form and, with no claim of fraud or other wrongful conduct, Graham is bound by what he signed. The Court noted that language in the Pre-Dispute Resolution Procedure section of the Employee Handbook specifically states: “In consideration of the Company’s offering and providing you with employment…[y]ou agree that the Company’s option to require arbitration is governed by the Federal Arbitration Act and is fully enforceable.” Although the separate “Personnel Policies” Acknowledgement states that the Employee Handbook is not a contract, the Court held that the agreement to arbitrate became an enforceable agreement as soon as Graham signed the Pre-Dispute Resolution Procedure Acknowledgement Form. Also, there was nothing in the “Personnel Policies” Acknowledgement that expressly or impliedly rescinded the agreement to arbitrate.

The Court also shot down Graham’s argument that the agreement to arbitrate was unenforceable because it was one-sided in that Graham would be required to arbitrate if a claim was brought by Command, but Command had the option to elect arbitration if Graham attempted to sue in Court. The Court held that the mutuality of remedies is not a requirement in an arbitration agreement and, as long as there is sufficient consideration, the agreement is valid. The Court held that agreeing to arbitrate as a condition for hire constitutes sufficient consideration to render the arbitration agreement binding.

Overall, this case highlights some important issues that are showing up more frequently regarding terms and conditions that can be binding between employers and at-will employees. Of course, how these documents/handbooks are drafted is vital. For instance, the Court referred to another case cited by Graham, U.S. ex rel Harris v. EPS , Inc. 2006 WL 1348173 (D.Vt. 2006), in which the acknowledgment form signed by the employee contained stronger language and multiple disclaimers making it clear that the employee handbook at issue was not even “a legal document.” Thus, in Harris, the Court found that neither the employee nor the employer had rights against the other with respect to the handbook.

It is always recommended to consult with an attorney either for drafting purposes or simply to review these documents, whether you are an employer providing a handbook to employees or an employee being asked to sign a particular document as a condition of new employment or continuing employment.

July 27: Joe Campolo Honoree at the 2015 Suffolk County Girl Scouts Golf Classic

Posted: March 18th, 2015

CMM is proud to share that Joe Campolo has been chosen as the honoree for the 2015 Suffolk County Girl Scouts Golf Classic & Grand Cocktail Reception on July 27. 2015 at the Nissequogue Golf Club. We invite you to join us for a day on the greens. Proceeds from the Girl Scouts’ Golf Classic will provide scholarships for children for STEM programs.

Yvonne Grant, President/CEO of the organization shared that they are “delighted to honor Joseph, as his impressive tenure of community service and giving back to others aligns with our mission of building the strong, confident leaders of tomorrow.”

Schedule
10:30AM: Registration &
Continental Breakfast
12PM: Shotgun Start
12:30-4PM: Barbecue Lunch
5:30PM: Grand Cocktail Reception

Learn More.

March 31 – Secured Transactions Survey CLE

Posted: March 17th, 2015

Please join us on Thursday, March 31 for a complimentary seminar on Secured Transactions, presented by managing partner Joe Campolo. This survey on the ins and outs of security interests will cover attachment, perfection, default, remedies, and tips for drafting security agreements. Attendees will receive crucial guidance on the role of Article 9 of the Uniform Commercial Code in corporate transactions.

The course has been submitted for credit approval (1.5 Professional Practice, 0.5 Skills) in accordance with the requirements of the New York State Continuing Legal Education Board. Approval is pending. This course is appropriate for both newly admitted and experienced attorneys.

A light dinner will be served.

Thursday, March 31, 2016
5:00 – 7:00 p.m.
Campolo, Middleton & McCormick, LLP
4175 Veterans Memorial Highway, Suite 400
Ronkonkoma, NY 11779

This seminar is free but registration is required. Please RSVP to Lauren Kanter-Lawrence, Esq., Director of Communications, at Lkanter@cmmllp.com or (631) 738-9100, extension 322.