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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.

Matter v. Google Inc., No. CV-23-0719, 2024 N.Y. App. Div. LEXIS 4814 (3d Dept. 2024). ↩︎
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.” ↩︎
Matter, 2024 N.Y. App. Div. LEXIS 4814, at *1. ↩︎

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.⁷For 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.¹⁶Under 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

Campolo, Middleton & McCormick Closes F-Reorganization Deal for Food Service Company

Posted: September 9th, 2024

Campolo, Middleton & McCormick (CMM) has successfully closed another M&A transaction, this time for a long-standing client. Our journey with this client began over a decade ago when we assisted them in purchasing a company that provides nutritional meals to schools, daycare centers, and summer camps across New York and the surrounding areas.

Throughout this period, we have remained fully engaged with the client, supporting the purchase and subsequent growth of their business. When the client recently decided to sell, we were ready to step in and handle the sale.

The deal involved a stock sale to a private equity firm with established investments in the food service space. Additionally, the deal included an F-reorganization; a tax-free corporate restructuring that alters the corporation’s identity or form.

The deal team led by Vincent Costa, was thrilled to guide the client through every stage of the process, from the initial steps to the successful closing.

The client praised CMM’s dedication, stating, “I really appreciate all the hard work and flexibility. Excellent job in pushing this through!”

Following the sale, our client will continue to oversee operations, ensuring a smooth transition.

This transaction highlights CMM’s experience in M&A transactions and our commitment to our clients. For more information about our mergers and acquisitions practice, please contact us at 631-738-9100.

CMM’s Meagan Nolan Highlighted in LIBN Who’s Who 2024: Women in Professional Services

Posted: August 30th, 2024

Meagan Nolan is a member of Campolo, Middleton & McCormick’s Litigation Department. She works closely with the litigation team to handle an array of business disputes, including contract issues and employment matters. She also handles construction, personal injury, and insurance defense matters.

A skilled researcher, Nolan plays a critical role in matters from the start, researching and assessing claims and drafting pleadings and motions. She is also hands-on in discovery and has conducted a number of depositions in various construction and personal injury matters. In addition, she assists in trial preparation, and has conducted research to help prepare for cross-examination in connection with trials where CMM ultimately prevailed.

Nolan joined the CMM team as a Summer Associate in 2021, and returned after graduating from the Maurice A. Deane School of Law at Hofstra University in 2022.

She is an active member of the Suffolk County Bar Association, serving as a Committee Chair for their Newly Admitted Attorneys Committee.

View the full Who’s Who book here.

How to Disclose the Sale of Your Business Without Losing Employees

By: Christine Malafi, Esq. email

In the process of selling your business, it is important to consider your existing employees and how and when you will inform them of the sale. Employees contribute to the company’s culture, its values, and its processes; and their expertise can prove instrumental in ensuring the business continues operating efficiently. Here are some tips for disclosing the news while retaining key employees, bridging the gap between old and new ownership, and facilitating a smooth transition.

Consider the Size of Your Company
The size of your company can affect whether you employ a strategy to disclose prior to or after the sale. Despite the risks and benefits of either strategy, transparency is optimal to prevent employees learning about the sale from third parties.

If your staff is large, then waiting until after the sale may achieve the best result. In this case, disclose early information about the sale only to those employees that will play a significant role in the sale process, such as the controller or CFO. These employees should sign a non-disclosure agreement to ensure information is kept confidential.

If your staff is small, then letting employees know prior to the sale may prove beneficial. Early disclosure to staff provides early awareness and an opportunity for mental preparation. This fosters a sense of transparency and trust, allowing employees to engage in the process and offer valuable input. Moreover, this provides the new buyer with ample time to meet with your key employees to ensure they remain onboard post-sale.
Consider a Two-Tiered Approach
In a two-tiered approach, you first tell your key employees about the sale, either individually or collectively, then disclose to lower-level employees. This additional preparation time provided to key employees allows them to formulate favorable responses to questions and concerns about the news of the sale from lower-level employees.
Consider the Benefits of Post-Sale Disclosure
If the sale prematurely dissolves, the decision to disclose post-sale avoids anxiety about job insecurity, which can result in unnecessary employee flight. Additionally, the ability of the business to manage its day-to-day operations remains intact, and damage to relationships with clients, customers, or employees is prevented. It also avoids the perception that your business is failing amongst customers, clients, and suppliers, which protects your ability to obtain extensions of credit. In addition, if competitors do learn of the sale, they may attempt to poach your employees and/or customers.
Have a Team Meeting
Team meetings allow the time for employees to understand the sale and ask any questions. Often, employees are apprehensive of job instability as a result of the sale, so it may be beneficial to invite the new owner(s) to the meeting to discuss their plans upon completion of the sale. It may be beneficial to structure the discussion by emphasizing the positive features the sale has for your employees. For example, a new buyer may invest heavily in the company, increase salaries, and make other improvements to the business. If you position the transition correctly, employees will view this as an opportunity rather than a threat. Moreover, it is optimal to take the time to assure employees that their jobs are secure. Your employees will be comforted by this information, and that aids the transition.
Approach the Announcement with Compassion
It is likely optimal to approach the announcement with the utmost compassion, recognizing the diverse emotional responses that each employee may have to the news. This will demonstrate an understanding of the feelings associated with this significant change. Encourage employees to continue their professional development and growth, emphasizing the ongoing opportunities for their careers at the company. Instill confidence in your employees by assuring them that the new owner will take care of their well-being, fostering stability within the company and enabling the pursuit of growth strategies.
Consider Stay or Retention Bonuses
Retention bonuses are paid to long-term and loyal employees that stayed with the business for the entire time that it took to grow and make it prosper, while stay bonuses are paid to employees who stay with the company until the closing date or some period in the future when the transition work is expected to be complete.

Stay bonuses serve as powerful tools to incentivize key personnel to remain committed and engaged throughout the transition process and beyond. They help in retaining crucial talent during the sale and ensure the continuity of essential skills and knowledge for the buyer. They also provide motivation to actively contribute to a successful transition, and act as a strategic investment to preserve stability.

Keep any bonuses realistic. If bonuses are too high, it can cause financial strain, unrealistic expectations, and potential morale issues. Disproportionate bonuses may lead to resentment among employees, create perceptions of unfairness, and pose challenges to long-term sustainability. A realistic bonus avoids disincentivizing employees that remain at the business.

Typically, bonuses are negotiated between the buyer and the seller during a business sale. Most of the time, the seller fulfills existing or created bonus obligations agreed upon. Buyers may agree to take on some bonus obligations, recognizing the value of retaining key employees and aligning with strategic goals. Details of bonus payments should be specified in the sale agreement.

For guidance on managing employees during the process of selling your business, call us at 631-738-9100.

What Business Owners Need to Know about the Recent Non-Compete Agreement Ruling

Posted: August 22nd, 2024

By: Christine Malafi, Esq. email

This past spring, the Federal Trade Commission (FTC) proposed a rule that would have banned non-compete agreements nationwide. However, this week, a federal court in Texas ruled that the FTC lacked statutory authority to implement the rule,[1] which was set to go into effect on Sept. 4, 2024.

Judge Ada Brown ruled not only that the FTC did not have the authority to impose such a ban, but also that the rule was arbitrary and capricious, in that there was insufficient evidence produced to support a complete ban on non-competes, rather than a targeting of solely those non-competes which could be considered “harmful.”

Non-competes are meant to prevent employees from leaving one company to join a competitor or start their own competing business. They are also a way for employers to protect their company’s important and private information. While the FTC asserted that non-competes are an “exploitive practice” that violate workers’ “fundamental freedom” to change jobs or start their own business, business owners argued that non-competes protect their confidential information that is essential to their continued operation.

The Texas court’s ruling applies nationwide, and the FTC is reportedly considering an appeal.

If you use non-compete agreements and you have questions on how this affects your
business, please contact Christine Malafi at 631-738-9100.

https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

https://www.wsj.com/us-news/law/judge-tosses-ftc-ban-on-noncompete-agreements-ae517b48

https://www.cnn.com/2024/08/20/business/us-judge-strikes-down-noncompete-agreements/index.html

[1] Ryan LLC, et. al. v. Federal Trade Commission, (USDC Northern District 8/20/2024).