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The Madman Theory of Negotiations

Posted: May 27th, 2014

Decades ago, Richard Nixon popularized the “madman theory” of negotiations. It suggested that demonstrating a willingness to consider “madness”in action would provide you with negotiating leverage. If your adversary believed that you really might do something extreme or even self-destructive, then you held more of the negotiating power, even if you were too rational ever to actually carry out the threat.

Consider tryingthis madman approach when you negotiate your next business deal: start by being nice and cheerful, then flash some anger. Repeat as often as necessary, but always in that order. Never start with anger. It will throw your opponents off balance, making them think you’re unpredictable, if not a bit unbalanced, and they may be more willing to make concessions because of the uncertainty that a deal will get done.

According to research published in the Journal of Experimental Social Psychology by Marwan Sinaceur, an assistant professor of organizational behavior at INSEAD, “usually people don’t like uncertainty, so when the recipient sees that you are behaving in an unpredictable way, they feel that they’re not in control of what is happening in the negotiation.” Being “unpredictable” or “emotionally inconsistent” in business negotiations can give you an edge. But it’s all in how you begin.

It’s important that you don’t start with anger, Sinaceur’s research discovered. “There is a difference between expressing anger, then happiness then anger then happiness versus expressing happiness then anger, then happiness then anger,” writes Sinaceur in an article on the INSEAD website. “We found that the latter strategy is more effective in making others comply. Clearly, if you express happiness and positiveness at the beginning of a negotiation people are going to feel less threatened and, eventually, they’ll disclose more information to you. Start nice, make people trust you first, make people talk and confide in you before you get tougher.”

What should you do when you’re facing a “madman” across the table? Sinaceur offers three tips to protect yourself from the advances of a “madman.” The first tip is to take a break from the negotiation so you’re not facing or talking with your partner. This will help you literally cool down and step back from the situation. Second, he advises you think back to your original objectives and targets of the negotiation. Finally, always keep in mind that your opponent could be putting on a show with his or her emotions to leverage concessions.

But distinguishing between real and phony anger can be tough, so Sinaceur advises defusing the situation by “non-verbally acting in a way that shows (e.g., keeping silent, smiling) that you’re not impressed.” Of course, your opponent may just think you’re crazy.

Read more at http://knowledge.insead.edu

New Bill May Change Nation’s Trade Secret Laws

Posted: May 27th, 2014

Tags: intellectual property

A new bill has been introduced in Congress seeking to add a federal civil cause of action for trade secret theft.

The “Defense of Trade Secrets Act of 2014″ would permit a trade secret owner to bring a civil action for a violation of the Economic Espionage Act, which makes the theft or misappropriation of a trade secret a federal crime.

Unlike patents, copyrights, and trademarks, there is no federal civil cause of action for trade secret misappropriation. Today, trade secrets are protected only under state law, common law or contracts. However, with the increase in companies relying on trade secret protection and the international economy, companies are lobbying Congress to provide access to the federal courts to protect trade secrets and to place trade secret assets on the same playing field as patents, copyrights and trademarks.

Plaintiffs under the proposed legislation would be allowed to bring a civil cause of action for violation of sections 1831(a) and 1832(a) of the Economic Espionage Act, giving them access to the federal courts and various other remedies.

Section 1831(a) of the Act (Economic Espionage) criminalizes the misappropriation of trade secrets with knowledge or intent that the theft will benefit a foreign government. Penalties under section 1831 are fines up to $5 million per offense and up to $10 million for organizations, or three times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has avoided (18 U.S.C. § 1831(a)).

Section 1832(a) of the Act (Theft of Trade Secrets) criminalizes the misappropriation of trade secrets related to a product or service used in or intended to be used in interstate or foreign commerce with knowledge or intent that the misappropriation will injure the owner of the trade secret. Penalties under 1832 are fines up to $5 million for organizations (18 U.S.C. § 1832(a)).

This new bill provides for remedies, which include injunctive relief, damages, unjust enrichment, a reasonable royalty in certain instances, and exemplary damages in an amount not more than three times actual damages. Further, the bill authorizes the court to issue an order seizing any property used to commit or facilitate the commission of the trade secret theft.

Lastly, this bill does not preempt other common law, the Uniform Trade Secrets Act or contractual causes of action.

This bill is a much needed mechanism for companies to protect their trade secret assets, but it still faces its challenges. Progress of this bill through Congress will be closely monitored and followed.

June 28 – Campolo to Present CLE on Negotiation Strategies and Ethics

Posted: May 26th, 2014

Some people believe that effective negotiators are born, not made, but this presentation will prove them wrong. Join Joe Campolo as he shares the alternative negotiation strategies he relies on as a law firm managing partner and business owner to solve problems and get deals done. The CLE course will take place on Tuesday, June 28 at the Hofstra University Club, 225 Hofstra Boulevard in Hempstead, from 8:30 a.m. to 10:10 a.m. (registration from 8:00 a.m.). The seminar has been approved for both newly admitted and experienced attorneys for 2 New York CLE credits (1.5 Skills, 0.5 Ethics). This course is free but registration is required. To register, please email events@ultimateabstract.com. Learn more.

June 29 – Secured Transactions CLE

Posted: May 25th, 2014

Please join us on Wednesday, June 29 for a complimentary CLE 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 approved for 2.0 CLE credits (1.5 Professional Practice, 0.5 Skills) and is appropriate for both newly admitted and experienced attorneys.

Wednesday, June 29, 2016
8:30 a.m. – 10:30 a.m.

Campolo, Middleton & McCormick, LLP
4175 Veterans Memorial Highway, Suite 400
Ronkonkoma, NY 11779

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

Protecting Your Assets

Posted: May 9th, 2014

By: Martin Glass, Esq. email

Tags: elder law, estate planning

Over the course of my career, I’ve found that there are really two parts to being an estate planning attorney. The first part is to actually create and execute a plan for my clients. The plan usually consists of a Will or a trust, along with a Power of Attorney, Health Care Proxy and Living Will. This is to ensure that whatever is in your estate gets to pass to who you want, when you want and who gets to control this passing of assets.

The second part is what’s commonly referred to as asset protection. This simply means making sure that your estate plan actually has assets to pass. Otherwise it’s an exercise in futility.

But who are we protecting our assets from? There are two main entities that are trying to greatly reduce our estate. The first is the government in the form of taxes. The other is the cost of long term care. The latter, in New York, can cost anywhere from $6,000 per month for home care to $15,000 per month for nursing care.

This month I’m going to concentrate on discussing (and ways of reducing) various taxes and next month I’ll discuss how to protect at least some of our assets from the high cost of care.

The potentially biggest type of tax on our assets is estate tax. There is both federal and New York estate tax. With the federal tax, it’s actually what they call a uniform gift and estate tax and currently has a $5,340,000 exemption. The exemption amount goes up every year as it is indexed for inflation. This means that there is no tax for the first $5 million, whether you give it away over the course of your lifetime or upon your death. But the tax cranks to 40% very quickly after that. There is also this thing that has been dubbed “portability” between spouses. Simply put, whatever the first spouse hasn’t used of his or her exemption can be “ported” over to the surviving spouse. So the surviving spouse could therefore, potentially have up to a $10 million exemption.

Prior to April 1, 2014, New York had a $1 million dollar exemption before any estate tax kicked in. As I’m sure many of you have heard, Governor Cuomo has changed all of that. Now, if you died after that date, your exemption doubled to $2,062,500 and an additional $1,062,500 is being added each year until 2017 when it gets to $5,025,000. After that New York should then match the federal exemption. This is great news if you are only “upper middle class” as you should now be exempt.

But, like so many other areas in New York, this is another buyer beware. The problem comes in when you exceed the exemption. After that you rapidly lose the exemption. And if you have over 105% of the exempted amount, you lose the entire exemption with a maximum tax rate of 16%. As an example, if you die this year with $2,062,500 you pay no New York estate tax. But if you die with $2,100,000, you will now pay over $49,000 in taxes. Under the old tax laws you would only pay about $18,000. As the exemption grows over the next few years, that loss of the exemption becomes even more Draconian.

So, how can we reduce this tax? Remember portability with the federal tax? Not so with New York estate tax. So, if you have a spouse, it becomes even more imperative to set up some type of credit shelter trust within your Wills or trusts. This will allow you to take advantage of both spouses’ exemptions. I prefer using disclaimers as this gives the surviving spouse the most flexibility.

Another way to reduce the taxes is by the use of gifting. Prior to April 2014, New York had no gift tax. So if you gave away assets prior to your death, you only had to worry about the federal estate tax. Technically New York still doesn’t. But now they have what they call an “add-back” provision. Between April 1, 2014 and January 1, 2019, any asset that you’ve gifted within three years of your death will be added back into your estate for tax purposes.

The options here are to either try to discount the gift or give the gift to charity. There are various ways of discounting a gift, depending on the type of asset. If you give away a $500,000 asset (say into a trust for your kids), there are ways of discounting the gift and making it look like a $200,000 gift for tax purposes. Gifting to charity may actually be less expensive than the tax. For example, as noted above, if you have $2,100,000 and die this year your estate will pay over $49,000 in taxes. But if you gift $40,000 to charity, you now are under the $2,062,500 and will have no estate tax. That’s a net savings of over $9,000.

My only advice with methods such as above is to be very careful when doing things like this. You don’t want to trade one type of tax for another. You may have just gotten rid of a 16% estate tax and now have a 20% capital gains tax. Or you may have triggered an income taxable event and all the gift may now be additional income to you or your children. I suggest that you speak to a professional when trying to protect your assets while setting up your estate plan.

Testing New York’s Long-Arm Statute to Obtain Personal Jurisdiction Over Out-of-State Defendants

Posted: May 9th, 2014

One of the fundamental issues that must be analyzed before commencing a lawsuit is whether you can obtain personal jurisdiction over the individual or entity you intend to sue.

When all of the parties reside or do business in the same state, or better yet the same county, personal jurisdiction becomes an afterthought. However, when the defendants reside and/or do business outside of New York, the question of whether you can obtain personal jurisdiction becomes critical. A recent decision in the Commercial Division, Suffolk County analyzed the key factors in determining whether personal jurisdiction exists and presents a cautionary tale for plaintiffs to consider when deciding on litigation against out-of-state defendants.

In Larsen v. Virtual Tech., Inc., 2014 NY Slip.Op. 50017(U) (Emerson, J.), the plaintiff, a New York resident, commenced a lawsuit against Virtual Technologies, Inc. (“Virtual”), a Delaware corporation whose principal place of business was in California. Plaintiff sought to recover $50,000 she loaned to Virtual based upon a default by Virtual under a promissory note. There was no dispute that the promissory note indicated that it was governed by the laws of the State of California and that it was executed in California. Virtual moved to dismiss the complaint on the basis that the court did not have personal jurisdiction over it under New York’s long-arm statute (CPLR 302(a)).

As noted by Justice Emerson in her decision in Larsen, CPLR 302(a)(1) allows New York courts to obtain personal jurisdiction over a non-domiciliary (out-of-state party) who transacts any business within the state if the plaintiff’s claim arises from the transaction of such business (citing Opticare Corp. v. Castillo, 25 A.D.3d 238, 243 (2d Dep’t 2005)). It is necessary to establish that the defendant’s activities within New York are purposeful and that there is a substantial relationship between the transaction of business and the claim asserted by plaintiff. Id.

Courts look at a variety of factors to determine whether an out-of-state defendant has actually “transacted” business in New York including, but not limited to: (i) whether the defendant has an on-going contractual relationship with a New York plaintiff; (ii) whether the contract at issue was negotiated or executed in New York and whether, after executing the contract, the defendant visited New York for the purpose of meeting the parties to the contract regarding the relationship; (iii) the choice-of-law clause in the contract; (iv) whether the contract required the defendant to send notices and payments into the forum state or subjected them to supervision by a corporation in the forum state. Patel v. Patel, 497 F.Supp 2d 419, 428 (E.D.N.Y. 2007).

In the Larsen case, even though plaintiff had an ongoing relationship with Virtual (and the subsequent entity Virtual formed), the Court noted that the promissory note at issue was only negotiated by telephone and mail and the defendants never actually came to New York either during the negotiation of the promissory note or after the note was executed to meet with the plaintiff. Also, the defendant never sent any payments under the note to New York and correspondence with the plaintiff was limited to a few letters and e-mails. Based on these facts and circumstances, coupled with the fact that the note was governed by the laws of the State of California, Justice Emerson held that the defendants’ contacts with New York were insufficient to establish that the defendants “intended to project themselves into ongoing New York commerce or that they purposefully availed themselves of the New York forum.”

Plaintiff also attempted to argue that the defendant transacted business in New York because it sold products in New York through its distributor and by selling products directly to national chain restaurants such as Dave and Busters and Chuck E. Cheese. However, the Court noted that there needed to be a substantial nexus between the business transacted and the cause of action sued upon. Because plaintiff’s claim did not arise from the defendants’ sale of products in New York, the Court found that there was no nexus between the business transacted in New York and the plaintiff’s claim. As a result, the defendants’ motion was granted and the case was dismissed due to lack of jurisdiction.

The Larsen case provides an important lesson for potential litigants who are dealing with potential out-of-state defendants. It is critical under such circumstances to review all of the party’s relevant New York contacts and the factors noted above before commencing litigation to ensure that jurisdiction over that party can be obtained.

April 2014 Legal Brief – Firm Newsletter

Posted: April 29th, 2014

Women in the Workforce: Lean In & Obama’s Executive Order

Posted: April 27th, 2014

By: Joe Campolo, Esq. email

Tags: negotiation

Earlier this month Facebook Chief Operating Officer Sheryl Sandberg released a new edition of Lean In, her 2013 best-selling book for working women, refocusing itfor college graduates entering the workforce. A central theme of the book is negotiation—in particular, negotiating salaries.

“It never even occurred to me to negotiate my first salary,” Sandberg writes in her book. “I waited for someone to tell me how much money I’d be earning so I could figure out where to live. I ended up supplementing my income by teaching aerobics classes on the weekend.”

Studies show that most women simply do not bother negotiating their salary. One study at Carnegie Mellon University found that “57 percent of male students negotiate but only 7 percent of females tried to negotiate for a higher offer,” according to Sandberg’s book.

Sandberg points to Professor Hannah Riley Bowles, who studies gender and negotiations at Harvard’s Kennedy School of Government who believes that, in order to walk away from the negotiation table successfully, women have to “come across as being nice, concerned about others and ‘appropriately’ female.”

Be “relentlessly pleasant,” Mary Sue Coleman, President of the University of Michigan says, according to Sandberg. Her advice:

Smile frequently
Express appreciation
Express concern
Invoke common interest
Emphasize larger goals
Approach negotiation as problem-solving rather than a critical stand
Sandberg’s disclaimer: it’s not exactly ideal to have to succumb to female stereotypes in order to earn what we deserve. But, hey, pragmatically, we can change leadership mindset after we play the game and position ourselves as leaders. It’s a means to an end, she says.

On April 8, 2014, President Obama took two actions intended to promote pay equity for women and minorities. First, the President signed an Executive Order that prohibits federal contractors with contracts exceeding $10,000 from prohibiting or retaliating against employees who choose to discuss their compensation with one another. In issuing the Order, the President observed that as a policy, “pay secrecy fosters discrimination.” If women don’t know they are underpaid, they are less likely to ask for more money. The Executive Order aims to help them discover and expose pay discrimination.

Next, the President issued a Memorandum directing the U.S. Department of Labor (DOL) to issue regulations that would require federal contractors and subcontractors to report summary employee compensation data, including by race and sex. The DOL has been given 120 days to develop the regulations. The purpose of reporting information is “so pay discrimination can be spotted more easily” and corrected.

For both men and women in the business world, learning to aptly negotiate is a crucial aspect of long-term professional success. In today’s world, the ability to successfully negotiate is a necessity. These recent actions should help close the pay gap by empowering women to negotiate for equal pay.

http://www.businessweek.com/articles/2014-04-11/sheryl-sandbergs-refocused-lean-in-helps-women-negotiate-salary

http://www.whitehouse.gov/the-press-office/2014/04/08/executive-order-non-retaliation-disclosure-compensation-information

Everyone Needs a Will, But No One Wants to Do It

Posted: April 27th, 2014

By: Martin Glass, Esq. email

Tags: elder law, estate planning

I think this is something that I’ve known even before I started practicing as an Estate Planning attorney. Matter of fact, it probably predates my practice by decades, if not centuries. What am I talking about? I’m talking about the tendency to hesitate (if not complete avoid) writing a Will. Both in my practice and my everyday life, I hear from people who recognize and admit that they should put a Will in place, but despite their best intentions, they simply don’t do it. Why is that? What keeps us from doing what we know we should do?

In my experience, a major driving factor which deters many people from preparing a Will is that they don’t want to face their own mortality. Or worse yet, I hear them say, “If I write a Will, I’m going to die.” Many people feel that if and when they do memorialize their last wishes, they’ll be tempting fate or inviting something terrible to happen. Personally, I believe that the day you’re going to die is already written somewhere. And whether you write a Will or not, that date is not going to change. While this tempting of fate is intellectually an irrational and unfounded fear, it’s hard to minimize the psychological effect it has on people and stops them cold from even pondering writing their Will.

To people with this mindset, there is no easy answer. Without diminishing the very real distress that many people face when forced to think about their last wishes, I would offer this bit of advice: Get over it. I hate saying that, and I certainly don’t intend to be rude, but you have no choice. You need only consider what’s at stake after you die to truly understand that reality. Do you really want the court to make decisions for you as far as who raises your children or where your assets go or even who gets to control them? Most likely the answer is no. I’m not saying it will be a comfortable conversation, and you might even disagree with your spouse (or children) about your final plans. But given the alternatives, a little bit of discomfort is really worth the potential chaos that you could leave your family in should you choose not to have that conversation and take action.

Another reason I hear when people avoid preparing a Will is that they don’t think they need one. If truth be told, there are some instances when a person truly doesn’t need one. That, however, is the exception to the rule. Everyone needs to understand one very simple thing. If you die without a Will, it falls on the court to decide not only how your assets are distributed, but who gets to distribute them, when they get distributed and who will be responsible for raising your minor children after you die. If you want to have control of all that, you need to prepare and complete a Will.

While no two estates are alike, it’s typically not that expensive to have at least a basic Will prepared, especially considering how expensive it can become if one wasn’t done. The reality is that not everyone requires a complicated estate plan or some type of trust. For the average person, it’s not that expensive and will be money well spent. If nothing else, it will provide you (and the rest of your family) with peace of mind knowing that everything has been set in place and done properly.

Although no one can force anyone to write a Will, I believe each of us has an obligation to those we love to do everything we can to make our final wishes known. If you haven’t already done so, I would urge you to write one for not only your own sake, but, more importantly, for the sake of those you leave behind. They are the ones who will be left to pick up the pieces.