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How M&A Deals Are Like Dating

Posted: November 12th, 2024

By: Vincent Costa, Esq. email

As a business owner, the concept of buying or selling a company can seem complicated and unfamiliar. When clients come to me feeling apprehensive, I let them know that in a lot of ways, these transactions are similar to something we’ve all been through: the process of dating and building a relationship. 

Finding a Match: A Suitable Partner

In dating, individuals look for compatibility in personality, long-term goals, and values before committing. In mergers and acquisitions (M&A), business owners search for suitable partners that align with their strategic goals. While the seller is looking for a purchase price that meets their expectations, the buyer is seeking a business that has prospects for sustainable growth and synergies with their current model. 

Dating: Due Diligence

When you’re dating, it is never too early to ask your best friend for their opinion. Your attorney serves this purpose during the M&A process. There may be red flags that you don’t notice, but are recognized by an outsider.  

The next step in dating is the “getting to know you” phase, where both partners learn about each other’s habits, quirks, and background. It’s about figuring out if there are any issues before taking things to the next level. This is similar to companies conducting due diligence to evaluate the financials, risks, and benefits of the other party. They want to ensure the partnership is a good fit.  

Getting Serious: Negotiation

Then you enter into negotiation. Terms of the deal are negotiated, including how control will be shared, financial arrangements, and how the two entities will integrate. At this point in your relationship, you are going “steady.”  Here, you negotiate boundaries and set expectations about how you want the partnership to function—whether it’s about communication styles, future plans, or shared responsibilities as you begin to solidify your commitment to one another.  

Engagement: A Non-Binding Agreement

Once the terms of an M&A deal are agreed upon, the buyer and seller typically enter into a non-binding agreement called by a number of different names (letter of intent (LOI), memorandum of understanding (MOU), indication of interest (IOI), etc.) where the basic terms of agreement are memorialized.  This is the engagement.  As the parties continue to analyze the prospective business transaction, the attorneys for both sides will prepare and negotiate the deal documents necessary to consummate the transaction. 

Marriage: Closing

The M&A team typically includes attorneys, accountants, and financial advisors just as a florist, caterer, and photographer would coordinate a wedding ceremony.  Once the transaction documents are negotiated and agreed upon, the closing of the transaction occurs, marking the start of a formal partnership. Think of this like getting married, where both parties decide to fully commit to the relationship and take steps to integrate their lives.  

A New Life: Integration

After the deal, companies must integrate operations, cultures, and people.  This mirrors the adjustment period in a relationship where both individuals start merging aspects of their lives, like living arrangements or handling finances.  The goal here is to enjoy the honeymoon period where both parties realize the benefit of their bargain.  Your professional advisors play an integral role along the way in making sure the marriage remains harmonious.

 For more input and guidance on M&A transactions, reach out to Vincent Costa at 631-738-9100. 

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Christine Malafi quoted in Long Island Business News on new employee screening

Posted: November 4th, 2024

By Ed Moltzen, Contributing Writer, LIBN

Pressure to bring new employees on board in a tight labor market might lead a business to take shortcuts in the vetting process. However, that can create even bigger problems: tarred reputation, money loss, or legal liability if the wrong employee gets in the door.

Some Long Island legal experts say that while they understand the imperative to hire quickly, vetting is often needed to protect all parties—customers, employees and the business itself.

In its most recent report for the Long Island region, the New York State Department of Labor estimated that unemployment here has hovered at around 3.8 percent—well below the national levels. In critical sectors such as healthcare, education and construction, the pressure to hire has increased against the necessity of vetting.

“It has to be part of your normal onboarding process to decide as to whether a specific position warrants what type of criminal or other background check,” said Christine Malafi, senior partner at Campolo, Middleton & McCormick in Ronkonkoma.

Malafi said that thorough background checks and robust HR procedures are essential to prevent potential liabilities. She stresses that businesses, especially those handling sensitive information, must have clear, consistent hiring and onboarding practices.

This helps ensure all employees are vetted appropriately for their roles and minimizes risks related to safety and security.

In one recent case, Malafi said a company hired an employee without conducting a full background check, only to find out a week later, after she visited clients’ homes, that the new member of the team actually had prior convictions for identity theft.

“They literally had to shut their computer system off, shut their bank accounts down, everything down, because she went into a place she shouldn’t have been in their computer,” Malafi said.

Malafi offers this advice to employers: “Preparation is key to avoiding potentially huge liabilities and losses down the road. In law, we say preparation, preparation, preparation.”

Read the full article here.

New York Employers Subject to Prenatal Leave Law §196-b

Posted: October 22nd, 2024

By: Christine Malafi, Esq. email

New York State is once again at the forefront of new progressive labor laws supporting women’s productive rights. Revisions to Section 196-b of the New York Labor Law were recently signed into law, mandating that as of Jan. 1, 2025, all employers are required to provide employees with up to 20 hours of paid prenatal personal leave each year.

“Paid Prenatal Personal Leave” means “leave taken for the health care services received by an employee during their pregnancy, . . .including physical examinations, medical procedures, monitoring and testing, and discussions with a health care provider related to the pregnancy.”1

All employees may take up to 20 hours of paid personal leave for prenatal medical care received in any 52-week calendar period. This leave may be taken in hourly increments, paid at the employee’s regular pay rate. Unused prenatal personal leave is not required to be paid upon an employee’s termination.

All employers within the state of New York, regardless of the size of the business or number of employees, must provide this leave. This applies even to those small employers required only to provide unpaid sick leave. Employers are also required to reinstate employees to their original position or an equivalent one upon their return from prenatal personal leave.

Employers are prohibited from requiring employee disclosure of confidential information to substantiate their request for paid prenatal personal leave. Employers may not request medical verification of any kind relative to this leave unless the leave is used for three or more consecutive days.2 Retaliating against employees who take prenatal leave is also prohibited.

As with any legal provisions, employers should stay informed about employee rights and employer responsibilities under the laws to ensure compliance and promote a healthy, productive work environment. We expect that the New York Department of Labor will publish regulations or FAQs to clarify our substantive concerns in the coming months.

For more guidance, please contact us at 631-738-9100.

Related Laws and Benefits

Section 196-b is separate and apart from existing state laws that protect the other rights of employees related to pregnancy. For example:


• New York Paid Sick Leave Law 3
• New York City Paid Safe and Sick Time Law 4
• Right of Nursing Employees to Express Breast Milk in the Workplace5
• Maternity Leave under NYS Paid Family Leave Law6
• Paternity Leave under NYS Paid Family Leave Law7
• Federal Family and Medical Leave Act (FMLA)8

  1. N.Y. Labor Law § 196-b (2020).
  2. N.Y. Comp. Codes, R. & Regs. tit. 12, § 196-1.3.
  3. N.Y. Comp. Codes, R. & Regs. tit. 12, § 196-1.3.
  4. N.Y. Comp. Codes R. & Regs. tit. 22, § 24.6, 22 NY ADC 24.6.
  5. N.Y. Labor Law § 206-c (McKinney).
  6. N.Y. Comp. Codes, R. & Regs. tit. 12, § 380.
  7. N.Y. Comp. Codes, R. & Regs. tit. 12, § 380.
  8. 29 U.S.C.A. § 2615.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Richard DeMaio Named Leadership in Law Award Honoree

Posted: October 8th, 2024

Campolo, Middleton & McCormick, LLP is pleased to announce Richard DeMaio has been selected by Long Island Business News to receive a 2024 Leadership in Law Award. This award recognizes dedicated individuals whose leadership, both in the legal profession and in the community, has had a positive impact on Long Island. Recipients of these awards demonstrate outstanding achievements, involvement in their profession and support of the community. DeMaio will accept his award at the Leadership in Law Awards Gala at the Crest Hollow Country Club on Nov. 12.

At CMM, DeMaio focuses on litigation in varied subject matter including contract issues, business disputes, environmental matters, and municipal matters in state and federal court. His municipal work includes Article 78 proceedings, zoning/land use matters, and defending municipalities. He also focuses on commercial landlord-tenant cases and a variety of appeals.

DeMaio has been actively involved in the Suffolk County Bar Association (SCBA). In addition to his new role as a Director, DeMaio currently serves as Treasurer and an officer of the Suffolk Academy of Law, the educational arm of the SCBA. 

Employers Beware of Liability Stemming from the Happy Hour

Posted: October 3rd, 2024

By: Christine Malafi, Esq. email

Recently, a New York appellate court found an employer liable for an employee’s injuries that arose from an off-site “happy hour” event.1

The injured employee,2 Bruce A. Matter, was an account executive for Google. He was struck by two motorized bicycles while crossing a street to get to a bus stop to go home after an “invitation-only”3 event, a “SADA & Google Cloud—Happy Hour,” at a local biergarten for the “Google Cloud NYC team.”

At the trial, Google’s representative explained that the purpose of such events is to develop and maintain business relationships between Google’s sales team and business partners, which, in turn, allows a better understanding of different strategies that may be pursued for sales purposes.

The Court reasoned that in order for an injury to be compensable under the New York Workers’ Compensation Law, the injury “must arise both out of and in the course of employment,” which means that injuries sustained during work must be related to the performance of one’s job duties. While “[g]enerally, accidents that occur outside of work hours and in public areas away from the workplace are not compensable,” if “there is a causal nexus between the accident and employment,” those injuries will be compensable under the law.

The Court found that a link between the accident and Matter’s employment was supported by substantial evidence, acknowledging the informal nature of the happy hour, but finding that Google clearly derived a benefit from its employee’s participation in the event by the development and maintenance of business relationships that generated increased sales and revenue. The Court also found that the employee’s attendance at the happy hour “altered the usual geographical or temporal scheme of travel, thereby altering the risks to which [he was] usually exposed.”

Employers should be aware that any events (including happy hours) that benefit them, where employees are encouraged to attend, may lead to not only workers’ compensation claims by injured employees, but also may lead to claims by third parties that have been injured by employees attending such events.

For labor and employment guidance, call us at 631-738-9100.

  1. Matter v. Google Inc., No. CV-23-0719, 2024 N.Y. App. Div. LEXIS 4814 (3d Dept. 2024). ↩︎
  2. The injuries were reported to be “traumatic brain injury, was diagnosed with vertigo, and injured in his left shoulder, left knee, right elbow, left lung, four ribs, and both eyes.” ↩︎
  3. Matter, 2024 N.Y. App. Div. LEXIS 4814, at *1. ↩︎

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Malafi Presents at CLE: The Future of Non-Compete Agreements in New York

Posted: October 1st, 2024

Event Date: October 16th, 2024

This program will examine recent government attempts to ban most types of non-compete agreements, including the Federal Trade Commission’s recently stricken Non-Compete Clause Rule (“Final Rule”) and potential future New York State legislation. Join CMM Senior Partner Christine Malafi to discuss the challenges and objections made to the ban, potential exceptions to the ban, and alternatives to non-compete agreements. 

Details

Date: Wednesday, October 16, 2024

Time: 12 PM – 1 PM

Where: Zoom

The program will provide you with 1.0 CLE credits in Professional Practice.

Register Now

6 CMM Attorneys Recognized as 2024 Super Lawyers® and 4 Named Rising Stars

Posted: September 25th, 2024

Campolo, Middleton & McCormick, LLP is proud to announce that ten attorneys at the firm, in multiple practice areas, have been named to the 2024 Super Lawyers® list, four of them as a Rising Star. The CMM attorneys recognized this year, in practice areas including Business and Corporate, Personal Injury, Real Estate, Business Litigation, Mergers & Acquisitions, Construction Litigation, Employment Litigation, and Appeals, are:

The rigorous Super Lawyers selection process is based on peer evaluations, independent research, and professional achievement in legal practice. The Rising Stars recognition denotes superior professional achievement by attorneys who have been in practice for under 10 years or are under age 40. No more than 2.5 percent of lawyers in New York State are named to the Rising Stars list.

Learn more about CMM’s outstanding legal professionals here.

Ethics and AI: What Lawyers Need to Know

Posted: September 16th, 2024

By: Richard DeMaio, Esq. email

Published In: The Legal Brief

Since the emergence of Artificial Intelligence (“Al”), many industries have grappled with whether and how to use this technology. AI is such a powerful tool because it learns from questions that people ask it. While AI poses many advantages when it comes to efficiency, it can be risky when it comes to accuracy. In the legal field specifically, the use of AI can present ethical issues that lawyers must consider both prior to and while using Al in their practice. Several of those issues are discussed here. Through careful use of AI, lawyers can ensure they are upholding both their duties to their clients, and their professional obligations. Reference to a Rule or the Rules refers to the New York Rules of Professional Conduct.

I. Confidentiality

Under Rule 1.6, subject to certain exceptions, a lawyer cannot knowingly reveal confidential information, or use confidential information to the disadvantage of the client, or to the advantage of the lawyer or a third person.1 Confidential information includes information learned during, or relating to, the representation of the client that is protected by attorney-client privilege, likely to be embarrassing or detrimental to the client if revealed, or information that the client has asked remain confidential.2 Al models first require the user to input information into the AI database, then formulate a query.3 The AI engine then provides the user with an answer or feedback based on this query. When an attorney inputs confidential client information into publicfacing AI database, however, the AI may use this information to answer other people’s questions because, as stated earlier, AI learns from questions that people ask it.4 Regardless of whether the AI engine reveals it, an attorney still breaches their ethical duties if this information is at risk of being disclosed to the public, in this case inputted into AI.5 This can very easily put confidential information in the hands of third parties which, by extension, can hurt the client’s case.

Attorney-Client Privilege

Under CPLR § 4503, confidential communications between an attorney and a client are privileged, and therefore cannot be disclosed to any third parties.6 Attorney-client privilege is waived when information otherwise protected by the privilege is revealed to a third-party. Therefore, attorney-client privilege presents many of the same issues as confidentiality when it comes to the use of Al. Even private, or AI software that is walled-off to anyone outside of a firm, however, can pose a risk to attorney-client privilege.7 For example, if a law firm were to use an AI model that uses only data generated by the firm, and an attorney inputs privileged information into this model, anyone else in the law firm using this model could potentially access this information, which could be a breach of the attorney-client privilege.8

II. Conflict of Interest

Pursuant to Rule l.8(b), a lawyer shall not use information relating to the representation of the client to detriment of the client unless the client gives informed consent.9 With the use of public-facing AI, there is a possibility that information relating to a client or a case entered into AI can be stored and repeated in another user’s query.10 In this situation, the hypothetical “other user” could very well be opposing counsel.11 Thus, any strategy or analysis of an issue in a specific case could inadvertently fall into the wrong hands to the detriment of the client and their case, creating a conflict of interest and violating this rule.

III. Attorney Oversight of AI

Attorneys have fiduciary duties to their clients to provide both competent and diligent representation. Rule 1.1 states that competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for representation.12 Additionally, under Rule 1.3, a lawyer shall act with reasonable diligence and promptness when representing a client.13 A lawyer should also not neglect a legal matter entrusted to a lawyer.14 To uphold their ethical duties under these rules, it is important for lawyers to oversee any work done by Al.15 When a client retains a lawyer, they are paying for the lawyer’s expertise and knowledge about a specific matter. If a lawyer is using AI, and not reviewing for accuracy the information AI is generating is ultimately serving as a replacement for the lawyer’s own judgment andknowledge. Thus, the lawyer’s representation would not be diligent or competent. 

Another issue is presented when associates or other non-lawyer employees at a firm, including paralegals, interns, and support staff, are using AI to work on client matters. Under Rule 5.1, a lawyer with direct supervisory authority in a law firm is required to make reasonable efforts to make sure that the supervised lawyer is conforming with the Rules of Professional Conduct.16 Under Rule 5.3, a law firm must ensure that the work of non-lawyers in a firm is adequately supervised.17 If an associate or nonlawyer employee is using AI for client work, whether a supervisory lawyer is aware of this use or not, there is a risk that without proper oversight, inaccurate AI-generated information could be utilized on these client matters and violate numerous ethical rules relating to confidentiality, privilege, competence, and diligence, among others.

IV. Duty of Candor

Under Rule 3.3, a lawyer should not make a false statement of fact or law to a tribunal.18 This rule raises questions as to whether a lawyer should have to disclose to a court when they have used AI. For example, if an attorney uses AI to find cases supporting his/her argument in a brief or has AI re-word his/her writing to make it flow better, the attorney may be ethically required to disclose this to the court. Some Judges have even ordered that lawyers who use AI to create legal documents both disclose this to the court and certify that they took precautions to protect confidential information.19

V. Duty to Communicate

A lawyer is obligated not only to communicate with the court, but also with their client. Under Rule 1.4, a lawyer is obligated to consult with a client regarding the means that will be utilized to meet a client’s objectives.20 This duty could include consulting with a client to see if they are comfortable with the use of AI for matters relating to their case.21 A lawyer should explain to the client both how the AI will be used, and how the client’s confidential information will be protected, so that the client can give informed consent to the use of Al.

VI. AI as Giving Legal Advice

Another issue can occur where AI is giving legal advice. Under Rule 5.5, a lawyer shall not aid a nonlawyer in the unauthorized practice of law.22 The developers of AI are likely not lawyers licensed to give legal advice, and AI itself, regardless of how advanced it is, is also not a lawyer. If a lawyer is using AI for specific legal advice, they are aiding AI in the unauthorized practice of law and violating this rule.

VII. AI is not Always Accurate/Reliable

AI is still a relatively recent development, and it will continue to develop and grow in time. However, because it is still new, lawyers should be wary of its reliability and accuracy, especially when deciding what kind of AI to use. For example, AI developed by legal research providers like Lexis and Westlaw may be more accurate than ChatGPT. In order to provide competent and diligent representation to their clients23, lawyers must be aware of this by using reliable AI and checking its accuracy.

VIII. AI may be Inherently Biased

AI is developed by humans who have their own individual biases and prejudices that could be transferred over to the AI they create. Additionally, AI tools require training, and if the data used in this training is biased, the AI may then use this data to produce bias results.24 Further, since AI builds upon historical data, the very nature of that data could be biased, thereby giving a biased underpinning to the analysis of the current data. Under Rule 8.4, a lawyer shall not engage in any conduct that he/she knows or should reasonably know is discrimination or harassment.25 Therefore, lawyers must be aware that the AI they are using could have preconceived biases based on its history, development and training, and must ensure that this does not violate any duty or affect their ability to adequately represent their clients.

IX. Refusal to use AI

A lawyer’s refusal to use AI can present ethical issues in and of itself. For example, under Rule 1.5, a lawyer may not charge an excessive fee or expense to a client.26 If using AI can save a lawyer time and money, this can cut down on costs charged to the client. If a lawyer refuses to be more efficient by using AI, he/she can potentially be violating this rule by charging the client more for their time than they would need to if they had used Al. Additionally, if a lawyer is not availing him or herself of technology that is available to them and that can make their practice more efficient, he or she may not be providing competent representation to their client.27 

Conclusion

AI can be a great tool for lawyers who are trying to be more efficient and to stay current with new legal technology as it develops. Though there are mixed views on its use in legal settings, it is likely that its use will become even more prevalent in the future. With litigation over the use of AI likely looming28, the implications of AI on the legal field are yet to be fully realized. In the meantime, it is important to consider the ethical implications of its use while we await further guidance.

1. NY Cl.S Rules Prof Conduct R 1.6(a).

2. Id.

3. See Isabel Gottlieb, Generative AI Use Poses Threats to Attorney-Client Privilege, BLOOMBERG (Jan. 24, 2024), https:/ /news.bloomberglaw.com/business-and-practice/generative-ai-use-poses-threats-to-attorney-client-privilege

4.Id.

5. Id.

6. CPLR § 4503.

7. See Isabel Gottlieb, Generative AI Use Poses Threats to Attorney-Client Privilege, BLOOMBERG (Jan. 24, 2024), https://news.bloomberglaw.com/business-and-practice/generative-ai-use-poses-threats-to-attorney-client-privilege

8 Id.

9. NY Cl.S Rules Prof Conduct R 1.8(b).

10. See Isabel Gottlieb, Generative AI Use Poses Threats to Attorney-Client Privilege, BLOOMBERG (Jan. 24, 2024), https://news.bloomberglaw.com/ business-andpractice/generative-ai-use-poses-threats-to-attorney-client-privilege

11. Id.

12. NY CLS Rules Prof Conduct R l.l(a).

13. NY CLS Rules Prof Conduct R 1.3(a).

14. Id. at 1.(b ).

15. Tracy Duplantier, AI and Ethical Concerns for Legal Practitioners, LEXIS NEXIS (Jan. 8, 2024), https://www.lexisnexis.com/community/insights/legal/b/thought-leadership/posts/ai-and-ethical-concerns-for-legal-practitioners

16. NY CLS Rules Prof Conduct R 5.l(a)(2).

17. NY CLS Rules Prof Conduct R 5.3(a).

18. NY CLS Rules Prof Conduct R 3.3(a)(l).

19. See Sara Merken, Another US judge says lawyers must disclose AI use, THOMAS REUTERS (Jun. 8 2023), https://www.reuters.com/legal/transactional/another-us-judge-says-lawyers-must-disclose-ai-use-2023-06-08/

20. NY CLS Rules Prof Conduct R l.4(a)(2).

21. See Janine Cerny, Steve Delchin, & Huu Nguyen, Legal Ethics in the Use of Artificial Intelligence (Feb. 2019).

22. NY CLS Rules Prof Conduct R 5.5(b).

23. See NY CLS Rules Prof Conduct R l.l (a), R 1.3(a).

24. See Janine Cerny, Steve Delchin, & Huu Nguyen, Legal Ethics in the Use of Artificial Intelligence (Feb. 2019).

25. NY CLS Rules Prof Conduct R 8.4(g).

26. NY CLS Rules Prof Conduct R 1.5(a).

27. See NY CLS Rules Prof Conduct R 1.l(a),

28. See Isabel Gottlieb, Generative AI Use Poses Threats to Attorney-Client Privilege, BLOOMBERG (Jan. 24, 2024), https://news.bloomberglaw.com/business-and-practice/generative-ai-use-poses-threats-to-attorney-client-privilege

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

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