News (All) - Page 142 of 166 - Campolo, Middleton & McCormick, LLP

Affordable Care Act

Posted: December 9th, 2014

Affordable Care Act (“ACA”) compliance remains a complicated process for most employers. Starting January 1, 2015, Applicable Large Employers (“ALEs”) become subject to the Employer Shared Responsibility Provisions of the ACA, codified in Internal Revenue Code Section 4980H. ALEs must offer their full-time employees the opportunity to enroll in affordable health coverage providing minimum essential benefits under an eligible employer sponsored plan (as defined in 26 U.S.C. § 5000A(f)(2)) for any month.

Three may have been the magic number back on Schoolhouse Rock, but under the ACA, 50 is the magic number. An ALE is defined under Section 4980H(c)(2)(A) as an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year. For employers who rely upon seasonal help, Section 4980H(c)(2)(B) exempts an employer from ALE classification if an employer’s workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and the employees in excess of 50 during those 120 days were seasonal workers.

Compliance with these requirements requires a complicated calculus to define full time equivalent employees, hours worked, and the definition of “affordable” health coverage. The increased costs of compliance, in addition to the projected costs to provide employee coverage, have impacted hiring in New York.

According to a recent poll conducted by the Federal Reserve Bank of New York, fourteen percent of services firms and factories in New York reported hiring fewer full-time workers and more part-timers or contract employees in response to the ACA. The Fed did not ask employers if they cut jobs as a result of the ACA. The survey also revealed that seven percent of plans reported using more contract workers, while one percent of service firms did. Part-time hires rose five percent at factories and thirteen percent at service companies. Surprisingly, only one percent of factories and six percent of service firms reported cutting employees’ work hours.

Firms seeking to navigate the ACA’s murky waters should contact health care counsel with any questions.

Do Your Debts Vanish with Your Death?

Posted: December 9th, 2014

By: Martin Glass, Esq. email

Tags: elder law, estate planning

Are your heirs, family or friends responsible for your debts after you die? I’d like to say no, but the answer really depends on a number of factors.

When you take out a credit card in your name, you’re agreeing to repay whatever you borrow. Whether you’re alive or dead, that obligation doesn’t normally extend to your family, friends or, in most cases, even your spouse. The one big difference is with medical expenses. If the debt occurred during the marriage, the surviving spouse does become responsible.

In short, while your heirs can inherit your assets, they don’t normally inherit your credit card balances and they don’t have to pay them. The exception is if someone else was jointly liable on the debt with you. Joint account holders are generally fully responsible for the entire debt, even if all the charges were made by only one of them.

The fact that your heirs aren’t responsible for your debts, however, doesn’t mean your creditors won’t try to collect from them. Even though your heirs or family typically aren’t responsible for your debts when you die, the debt doesn’t just go away. Instead, the obligation transfers from you to your estate.

When a person dies, often times an estate is created. That estate will have someone, known as the executor or administrator, who will be appointed by the Surrogate’s Court to handle all financial issues of the deceased, including their debts.

One of the jobs of the executor is to notify creditors as soon as possible of the death. They should also notify the big three credit reporting agencies (Experian, Equifax and TransUnion) and request the account be flagged with the statement “Deceased: Do not issue credit.” This will help prevent identity theft of the deceased person. Make sure you send each of them a certified copy of the death certificate. Try to remember to send certified letters when corresponding with credit bureaus or individual companies and keep copies as these companies sometimes lose the paperwork.

As mentioned above, people who request credit together are equally responsible for the entire debt. The same is true with a co‑signer, such as on a car or school loan. They are essentially guaranteeing the debt of the borrower. If the borrower dies, the co‑signer becomes liable. Authorized signers or additional cardholders on credit card accounts, however, are not liable. They didn’t originally apply for the credit. They were just allowed by the cardholder to use the card. If the cardholder dies, the authorized signers are generally not on the hook for the debt.

But consider this a warning. If you are an authorized user on a credit card account, you need to stop using the card after the main cardholder dies. If you don’t, since you’re not liable for the debt, this could be considered fraud. The authorized signer would have to ask for a card to be issued in his or her own name. That will most likely be a new card application, based on that person’s credit history, income, etc.

You also may think that you can immediately start giving Grandma’s antiques and jewelry away. But usually it’s a good idea to wait. Only after the estate has settled its debts should any of the assets be distributed. Distribute stuff beforehand, and should the estate not have enough to pay its debts, the heirs, or even the executor, could become personally responsible for the debt.

Sometimes the estate has more debts than assets to pay all the debts or there is no estate. This often happens when all the assets pass automatically either because the assets were joint with someone else or there were beneficiaries designated. If no one else can be found responsible for the debt, creditors will be forced to write it off.

If a surviving spouse is a joint account holder on the deceased’s credit card and is having trouble paying the bills, that person may be able to work something out with creditors. Ask for options, such as delaying the payment, a payment plan or even getting the creditor to take a lesser amount. The credit card company would much rather you pay something or pay over time than not pay at all.

Court Sides with Former Employer in Misappropriation of Confidential Information Case

Posted: December 9th, 2014

Considering the potential harm that could strike a business when a key employee leaves to work for a competitor, employers are often quick to pursue litigation against employees when they believe the employee may have taken confidential and/or proprietary information with him/her and is now using (or could use) that information to the benefit of a direct competitor (and to the harm of the employer).

Many times, an employer may assume or speculate that a former employee has taken confidential information and is using or will use it with a new employer. However, proving that the former employee stole confidential information and that the information was actually confidential in the first place is often difficult. Courts are generally not likely to take the extra step of imposing a preliminary injunction in these types of cases without solid proof that the former employee has engaged in misconduct. An interesting case out of the Suffolk County Commercial Division recently sided with the employer in this scenario and granted an injunction in its favor.

In First Manufacturing Co., Inc. v. Young, et al. (J. Whelan), plaintiff First Manufacturing Co., Inc. (“First Manufacturing”), a wholesale provider of leather goods and apparel, commenced a lawsuit against two former employees and the company they left to work for, Shaf International – a direct competitor of First Manufacturing. The claims against the defendants included breach of fiduciary duty, aiding and abetting breach of fiduciary duty, misappropriation of trade secrets, and unfair competition. Upon commencing the lawsuit, First Manufacturing also filed a motion seeking a preliminary injunction against the defendants to, among other things, enjoin and restrain them from divulging, disclosing, or reproducing to others any confidential information they obtained during their employment with First Manufacturing and from soliciting First Manufacturing’s customers or employees.

In reviewing the motion for an injunction, the Court referred to the traditional three-prong test for obtaining a preliminary injunction: (1) likelihood of success on the merits; (2) irreparable harm without the injunction; and (3) balance of the equities to favor the party seeking the injunction. Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839 (2008). Upon review of each of the elements, the Court found that First Manufacturing had met its burden of proof entitling it to a preliminary injunction.

The Court noted that First Manufacturing was likely to succeed on the merits of its fiduciary duty and unfair competition claims because there was uncontroverted proof that the defendants purposely and wrongfully copied and took trade secrets and/or confidential proprietary materials from First Manufacturing when they left their employment. The Court also noted that this information was used by the defendants for the purpose of “competing directly and unfairly with plaintiff following the termination of their employment” and obtaining monetary gains and benefits “through bad faith and tortious conduct.” According to the Court, Shaf International (the new employer) was also complicit in the acts of the former employees of First Manufacturing because it knowingly used the pirated confidential information, undercut First Manufacturing’s pricing, and solicited First Manufacturing’s customers.

The Court found that First Manufacturing established irreparable harm and the balance of the equities tipped in its favor because the evidence produced by First Manufacturing made it clear that the defendants were enjoying a competitive advantage to the detriment of First Manufacturing, which was causing direct harm to First Manufacturing’s good will and reputation.

As a result of the Court’s findings, the Court granted the preliminary injunction against the two former employees and current employer as requested, thus preventing the defendants from disclosing or using any confidential information of First Manufacturing (and requiring them to return any information taken) or soliciting any of its customers or employees. First Manufacturing was required to post an undertaking of $100,000 in order to maintain the injunction.

Unfortunately, the Court in First Manufacturing did not go into great detail with respect to what specific proof in the record demonstrated that the defendants had misappropriated confidential information, but the Court was clearly satisfied that sufficient evidence had been presented documenting the misconduct and that First Manufacturing was harmed as a result. It is very important as the former employer in these types of cases to perform a thorough internal investigation before commencing a lawsuit to determine exactly what information was or may have been taken by an employee who left the company and how it is or will be used so that the Court has the ability to review actual substantive proof as opposed to mere speculation by the employer.

Campolo quoted in “Keep It Down” article about legal fees

Posted: December 9th, 2014

By: Bernadette Starzee, Long Island Business News

When a homeowner hires a contractor to remodel his kitchen, he expects to be quoted a total price for the job. If, after ripping up the cabinets, the contractor discovers additional plumbing work needs to be done, he’ll run the cost by the homeowner and get his permission before revamping the pipes.

Attorneys traditionally have operated on a different plane, according to Joseph Campolo, managing partner of Ronkonkoma-based law firm Campolo, Middleton & McCormick.

“Lawyers were always open-ended, billing by the billable hour for as much time as something took, and the customer had to pay,” he said.

But since 2008, that has been changing, as cash-strapped consumers and businesses seeking law firm services have increasingly resisted open-ended billing. They’re demanding itemized budgets upfront, and Campolo says it’s healthy for the industry.

“Historically law firms have been challenged in trying to collect from clients, and clients have always complained that law firms are too expensive,” he said.

But if the scope of work and the cost are determined in advance, and clients are empowered to make a business decision – to say nay or yay – up-front, there will be fewer disputes about fees, Campolo said.

The wealth of legal information available on the Internet has led to a more educated legal services consumer, said Joseph Milizio, managing partner of Vishnick McGovern Milizio in Lake Success.

“As a result, clients are often not taking a back-seat approach to their legal representation,” he said, noting many of them see greater involvement as a cost-cutting opportunity – they figure if they can contribute to a part of the underlying work, their fees can be reduced.

As law firm customers have become savvier, certain legal services have evolved into commodities.

“During the economic downturn, many lawyers and law firms who could not differentiate the value of their services from their competitors discounted their rates and/or wrote off substantial portions of clients’ legal bills to maintain market share,” said Craig Olivo, co-managing member of Bond, Schoeneck & King’s Garden City office. “This resulted in what many refer to as the ‘commoditization’ of some legal services – generally those services that are considered routine in nature and for which the economic risks do not justify engaging outside counsel or an attorney with a higher rate over one with a lower rate.”

More than 2 million people have used the website LegalZoom for everything from incorporating a business to creating a will to transferring real estate deeds. In addition to sites like LegalZoom taking lower-level business away from law firms, consumers are turning to the Internet for free legal advice.

Even Fred Rooney, an attorney who directs the International Justice Center for Post-Graduate Development at Touro College Jacob D. Fuchsberg Law Center in Central Islip, sought free legal advice online after, shortly after moving to Long Island, he was ticketed for making a right-hand-turn at a red light.

“I didn’t understand for the life of me why I was getting ticketed for turning right on red,” he said, noting he received free advice online from a Long Island lawyer, who informed him a full stop was required by law.

People aren’t turning to do-it-yourself websites because it’s the best option, Rooney said, but because they can’t afford legal services. This has engendered a growing trend toward law firms unbundling their services, said Rooney, who until recently was a member of the American Bar Association’sstanding committee on the delivery of legal services, which analyzes the way people access the legal system.

In order to make sure clients can afford the law firm’s services, lawyers are increasingly empowering them to do more on their own, to reduce the overall cost of legal representation, Rooney said.

“We’ll tell clients, ‘If you want us to do this, it’s going to cost you X, and if you want us to do a piece of it, it will cost you Y,’” Campolo said. “It’s no different from a contractor who may charge you $5,000 to rip out the kitchen and put in new cabinets, but if you take them to the dump yourself, you don’t have to pay for that.”

For instance, in uncontested divorce cases, attorneys may instruct clients to secure a custody order and child support order on their own, while the attorneys handle the more complex equitable property distribution piece, Rooney said.

However, when consumers represent themselves – such as in divorce matters – they can make mistakes that wind up costing them more in the long run, said Jerome Wisselman, senior law partner at Wisselman, Harounian & Associates, a Great Neck law firm with a concentration in matrimonial and family law.

“We have seen cases where one spouse is seeking an order of protection, and the other spouse attempted to litigate the matter himself and ended up losing the case and being ordered to vacate his home,” he said. “When that happens, it sets up a difficult framework for the rest of the case.”

Wisselman has noted an increase in inquiries about mediation, and the firm has grown its emphasis on the less costly alternative to litigation.

While some divorces do not lend themselves to mediation – such as in cases of domestic violence or when there are disparate levels of sophistication about the issues among the two parties – it is an effective option in many instances, he said.

It isn’t just consumers that are looking to reduce legal costs.

Although the economy has improved slightly, “businesses have weathered the economic storm of the last several years by cutting costs across the board and reallocating their limited budgets to perceived priority areas, often at the expense of their budgets for legal services,” Olivo said. “So the pressure by general counsel to ‘stay within budget’ continues unabated.”

Like many firms, Bond, Schoeneck & King has begun “on a case-by-case basis to utilize a variety of alternative fee arrangements in an effort to make the cost of legal services for a particular project or matter more predictable for the client,” Olivo said.

The challenge with such arrangements, he noted, is that it is often difficult to accurately predict how much work will be needed to complete a given matter.

Many times, an attorney can break down a matter and fix a fee for part of it, said Lewis Meltzer, managing partner at Meltzer, Lippe, Goldstein & Breitstone in Mineola. In commercial litigation, for instance, “you ought to be able to fix a fee for the complaint, because it’s totally in a firm’s control how much time it spends on it,” he said. “But with depositions, the time spent is dictated by what somebody else does.”

While clients may choose the lowest bidder for low-order legal services, when the more complex, critical or financially imperative matters arise, most clients focus on a law firm’s ability to achieve the desired results, Olivo said.

In those cases, “clients determine value by the effectiveness of the work the lawyer does, not just the hours that are put in,” Meltzer said. “The lawyer has to accomplish something.”

Keep it down

Problems with Joint Bank Accounts

Posted: November 24th, 2014

By: Martin Glass, Esq. email

Tags: elder law, estate planning

Most of my senior clients want to be able to transfer their assets to their children in the simplest and quickest way possible. The way they usually want to do this is by adding their child’s name to one or more of their bank accounts.

If you don’t think about it too hard, the logic makes sense. Most parents want to assure that their bills, mortgages, insurances or even funerals get paid for should something happen to them. Yet most senior clients and children don’t realize the risk that this small change in their accounts creates.

Even though I think that this is stating the obvious, each person on a joint bank account is legally considered a full owner when it comes to withdrawing money from the account. Therefore, the risk of a child withdrawing money, borrowing money or accidentally losing the checkbook/debit card for their parent’s bank account opens the door to the possibility of losing the parent’s savings through theft, stolen identity or bank account access.

Once a child is added on a joint bank account, it becomes an asset for both parties. So if a situation arises where the child has a creditor problems, that creditor could garnish the entire bank account, regardless of the parent’s involvement in the creditor claim. This could result in the accounts being frozen or possibly in the loss of the account funds. Of course, most of my clients tell me that their children don’t have creditor problems. That is, until they get into a car accident or someone slips and falls on their property. Now that child has creditor problems. Any lawsuit claim or judgment settlement for money will include this account as part of the child’s assets.

As noted above, any assets in this assumed bank account are deemed as owned property by the parent and the child. What if the child’s spouse files for divorce? That divorcing spouse could be entitled to a portion of the joint bank account funds. Even if it turns out that the divorcing spouse is not entitled to any of the assets, that account could be frozen and tied up in the litigation until it’s all settled.

As you probably know, joint accounts or any asset registered jointly with rights of survivorship bypass the Will of a deceased person. So in this case, the Will does not impact the money in joint bank accounts. This might not be an issue if the child is the only beneficiary of the parent’s estate. If not, it can create a major feud among other beneficiaries, as the dividing process is not that easy after the fact. Furthermore, should the parent’s Will include specific trust provisions related to their estate planning goals, this change in ownership of the bank account could have drastic and irreversible effects on everything from inheritances, taxes or other estate expenses, since this account would bypass the Will’s provisions.

Most clients are not aware of the gift and estate tax issue, as the laws are pretty complex. As far as the IRS is concerned, adding a child to a parent’s bank account is indirectly making a gift, which may or may not be subject to gift tax for the parents. Furthermore, the amount of money in the account and how many children are added as owners all plays into the gift tax issue. While most of my senior clients do not need to concern themselves with gift and estate tax as the NY exemption is over $2 million, it is still important to note that a possible gift or estate tax issue could be a problem for some parents.

There are many more issues of concern in this area, such as their effect on long‑term care or Medicaid‑related issues, but, outside of a small checking or savings account, putting a child’s name on a bank account, or any asset for that matter, is probably not a good idea.

November 2014 Legal Brief – Firm Newsletter

Posted: November 24th, 2014

Tips for Protecting Trade Secrets

Posted: November 24th, 2014

Tags: intellectual property

Any information that is unique to your company but isn’t public knowledge can be considered a trade secret and, in many cases, can be protected under both state and federal law.

As your company grows in the competitive marketplace, it becomes even more important to identify the company’s most important information, then build trade secret protection into the company’s employment policies and technology systems.

The key question to trade secret law is whether your company has taken reasonable measures to protect the secret. Companies have to be proactive and think ahead. Trade secrets, unlike other forms of intellectual property, can be easily lost and difficult to recover once they’ve slipped out the door.

Generally, any company hoping to shelter information as trade secrets should consider the following tips:

Identify Your Company’s Trade Secrets. The first step is knowing what information in your company is the most critical. Create an inventory of trade secrets and classify them by the level of importance. Then identify what is already being done to keep the information protected. The inventory provides a baseline to ensure appropriate measures are taken to secure the information. Update this inventory periodically. The protective measures should also be revised if needed to ensure the trade secret is sufficiently protected.

Educate Employees of the Need to Protect the Company’s Trade Secrets. Clearing polices upfront and educating employees about company rules can help avoid any unintentional leakage of trade secrets. One concrete measure is to create a comprehensive employee handbook that spells out the company’s policies. When employees understand company policies and procedures, they are less likely to unintentionally divulge trade secrets.

Stick to a “Need-to-Know” System. In most cases, it is unnecessary for every employee of a company to know all of the company’s trade secrets. Identify those people who absolutely need to have access to the trade secret to perform his/her duties, and limit access to only those key employees. This limits exposure to a possible theft of trade secrets. In addition, other mechanisms such as non-disclosure agreements and confidentiality agreements can be used with the key employees which would require him/her to acknowledge what information is confidential and how that information may be used and disseminated.

Implement Procedures for Incoming and Outgoing Employees. Trade secret protection should begin with any new hire. Non-disclosure and non-compete agreements are a way to protect the company’s position if a trade secret is lost or stolen. Further, it is just as important for a company to screen outgoing employees to make sure there are no trade secret leaks. Exit interviews are the standard way to figure out any physical or electronic information he/she has currently, whether there are any non-competes that will continue past his/her employment, and where the employee is going. Having this inventory will help prevent a former employee from taking trade secrets out of the company.

Employ Effective Security Practices. For those trade secrets that take on a physical form, locked rooms or cabinets may be important. Limiting the printability of certain documents or even identifying certain documents as using restrictive legends (e.g., “Confidential”) should also be considered. For electronic information, firewalls, authentication procedures, and limited access should be employed to properly protect trade secrets.

In sum, there are a number of strategies that a company should keep in mind when protecting its trade secrets. It begins with identifying the company’s most important information and then building trade secret protection around it. The above list is a starting point, and it is not intended to be comprehensive. The practices necessary to protect trade secrets vary in complexity based on specific circumstances.

Aereo Update: Case Volleys Back to Trial Court

Posted: November 24th, 2014

This blog has previously reported on American Broadcasting Co. v. Aereo, a dispute between television broadcasters and a start-up that distributed broadcast signals through a network of small antennas in a “cloud.”

For around $10 a month, subscribers could record shows and watch live and recorded programming from their mobile devices. In June, finding that Aereo’s resemblance to traditional cable companies was “overwhelming,” the Supreme Court determined that Aereo’s service conflicted with copyright law requiring the copyright owner’s permission for a public performance of the protected work. “Performance” includes retransmission to the public, and the Court was not swayed by Aereo’s argument that its retransmission was private due to the nature of the technology. Due to the service’s “overwhelming likeness” to a cable company, the Court found that any technological differences were inconsequential.

But Aereo refused to see the Supreme Court decision as the end of the line; the seemingly never-ending case then returned to the Southern District of New York. In an order dated October 23, 2014, U.S. District Judge Alison J. Nathan granted a preliminary injunction against Aereo, enjoining the company from “streaming, transmitting, retransmitting, or otherwise publicly performing any Copyrighted Programming1 over the Internet (through websites such as aereo.com), or by means of any device or process throughout the United States of America, while the Copyrighted Programming is still being broadcast.” For the time being, the judge rejected the broadcasters’ request for a more expansive order that would have also prohibited the copying and storing of copyrighted matter for later viewing, but this limitation was hardly a victory for Aereo considering the nationwide ban on a significant aspect of its service offerings.

Because the Supreme Court decision addressed only the narrow issue of whether Aereo’s retransmission constituted a “performance” as defined in the Copyright Act—and not whether Aereo had actually infringed on the broadcasters’ copyrights—it remains to be seen precisely what services Aereo can and cannot offer its customers. Perhaps this case will make it back to the Supreme Court before long.

Deal Protection: An M&A Negotiation Lesson

Posted: November 12th, 2014

By: Joe Campolo, Esq. email

Tags: M&A, negotiation

Protegrity Advisors recently published a Long Island M&A Report, highlighting the strong M&A activity on Long Island, even as the country navigates what might be best described as a modest economic recovery. The full report can be read here.

As the report dives into the statistics and metrics, it’s important to remember the very foundation of these transactions – negotiations. The world of M&A is all about negotiations and there’s a lot to me learned from these sometimes complex business transactions.

Published previously in the Harvard Law School Program on Negotiation Daily Blog on September 19, 2011, is an article entitled “Negotiation lessons from the M&A World.” The full article can be read here.

For many years, Harvard Business School professors James Sebenius and Guhan Subramanian have studied real-world mergers-and-acquisitions (M&A) deals, which tend to involve experienced lawyers, bankers, and businesspeople, and many millions, even billions, of dollars. Some of these deals prove successful; others are well-known disasters.

Sebenius and Subramanian have begun to apply their observations about these agreements to other multiparty contexts. One lesson you may be able to adapt to the complex negotiations that crop up in your business and personal life is deal protection, or the extent to which the parties are bound to each other between signing and closing a deal. A heavily negotiated issue in M&A transactions, deal protection is rarely negotiated outside the M&A context, say Sebenius and Subramanian, even when it could create significant value.

Take the typical residential real-estate deal. In the time between the purchase-and-sale agreement and the closing, the seller is bound irrevocably to the transaction. This clause protects the buyer, but it means that the seller can’t accept a higher offer—a condition that can be inefficient for both the seller and the buyer.

Imagine you’re selling your home. A prospective buyer falls in love with your house and (unbeknown to you) one other house. After much debate, he makes a successful bid on your house.

Soon after you’re under contract, you receive a blockbuster offer from another party. It’s too late to back out, right? Not if you had negotiated deal protection. For example, you might have proposed a clause that would allow you to withdraw between signing and closing by paying the buyer a breakup fee of perhaps $25,000. For a buyer who is virtually indifferent between your house and another house, this should be an attractive alternative.

Buyers can make similar moves. Suppose parties are at an impasse, with the seller asking $500,000 and the buyer offering $450,000. The buyer might offer a “loose” $450,000 deal that allows the seller to accept a better offer between signing and closing by paying a modest breakup fee, such as the buyer’s out-of-pocket costs.

Sophisticated deal structures create value by capitalizing on differing beliefs about the likelihood of higher offers. Such terms could be useful in home-buying transactions, where the stakes can feel just as high to the players involved as if they were hammering out a billion-dollar merger.

http://www.pon.harvard.edu/daily/business-negotiations/negotiation-lessons-from-the-ma-world