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Taxes and M&A with Alan Sasserath of Sasserath & Zoraian, LLP and Gregg Schor of Protegrity Advisors, LLC

Posted: July 27th, 2018

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Long Island is home to trendsetting M&A transactions and a vibrant international business community. In this episode of CMM Live, Joe Campolo welcomed Alan Sasserath, CPA, Partner at Sasserath & Zoraian, LLP, to discuss hedge funds, forging positive relationships with clients, tax issues, and how to delve into international business. Next, Gregg Schor, CEO of Protegrity Advisors, LLC, talked about becoming the “single point of contact” for local and international firms looking to expand or sell, why preparation is key before beginning any transaction, and closing the market gap for small to mid-size businesses who are shaking up the M&A world.

August 7 – CMM Cares: United Veterans Beacon House

Posted: July 23rd, 2018

Event Date: August 7th, 2018

CMM Cares logoIn honor of the firm’s 10th anniversary, Campolo, Middleton & McCormick has launched CMM Cares, a new volunteer initiative to benefit the community with donations of time, dollars, and support.

CMM has chosen to support veterans for the inaugural CMM Cares initiative on August 7. CMM volunteers will help garden, plant, mulch, trim bushes, and build newly purchased outdoor patio sets at two homes on the South Shore of Long Island owned by United Veterans Beacon House, an organization that provides temporary and permanent residence for U.S. military veterans and their families. Teaming up with Gary Bercarich and Gary B. Home Improvements, CMM will also rebuild, sand, and paint the porches, giving residents a tranquil outdoor space to enjoy. The afternoon will culminate with a catered lunch for all volunteers, UVBH staff, and residents. Learn more about how you can support UVBH here.

CMM’s Litigation Team Successfully Moves to Dismiss All Counterclaims in Unfair Competition Case

Posted: July 17th, 2018

When a successful tire distribution company learned that one of its employees had been secretly operating a competing business for over four years while still working for the company and that key client files had gone missing and accounts stolen, they engaged Campolo, Middleton & McCormick to bring a lawsuit against the employee alleging misappropriation, unfair competition, and related claims. In response, the (now former) employee asserted numerous counterclaims against the tire company, including slander and defamation. Recognizing that the counterclaims were the employee’s attempt to distract the court from the damages  our client seeks in the lawsuit, CMM’s litigation team swiftly moved to dismiss the counterclaims, highlighting the former employee’s contradictory statements and failure to plead the “bare minimum” of facts necessary to maintain the counterclaims.

The Supreme Court – Suffolk County, Commercial Division (J. Emerson) agreed with CMM’s arguments and granted our motion to dismiss the counterclaims against our client in their entirety. CMM’s Jeff Basso noted, “This decision paves the way for our client to pursue the real issues in this case and start to recover from the tremendous harm this employee has done to their business.”

Learn more about our litigation practice.

CMM Secures Dismissal of Case in a Victory for Limo Company and Insurance Carrier

Posted: July 17th, 2018

stack of coins with pens over documentCMM’s Litigation team successfully moved for dismissal of a lawsuit filed in Queens County against our client, a limousine company whose vehicle was involved in a motor vehicle accident with another driver. When that driver served our client with a personal injury lawsuit, CMM immediately moved to dismiss. At oral argument, CMM attorney Richard DeMaio persuasively argued that because the statute of limitations had expired and no exceptions applied, the lawsuit was time-barred. The Court agreed and dismissed the case. This result was a victory for the limousine company and its insurance carrier, both of whom will save significant time, court costs, and legal fees.

Under the leadership of partner Scott Middleton, CMM has successfully defended a variety of clients insured by numerous insurance companies across the country in virtually all areas of insurance coverage and defense. Learn more about our Liability Insurance & Insurance Coverage practice area here.

New York Court Issues Minority Shareholder-Friendly Decision in Controlling Stockholder Merger

Posted: July 17th, 2018

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In a decision that could make New York a more attractive venue for shareholders of Delaware-incorporated companies, a New York trial court recently permitted a class action suit challenging a corporation’s acquisition by its controlling stockholder to proceed. The decision signals to Delaware entities that New York courts may be less likely to defer to controlling stockholders than Delaware courts, potentially paving the way for an influx of New York lawsuits involving Delaware corporations.

Under the MFW test, established by the Supreme Court of Delaware in its seminal decision Kahn v. M&F Worldwide Corp., 88 A.3d 635 (2013), controlling stockholders are entitled to deference and protection under the business judgment rule if the merger is “conditioned ab initio upon both the approval of an independent, adequately-empowered Special Committee that fulfills its duty of care; and the uncoerced, informed vote of a majority of the minority stockholders.” M&F Worldwide Corp., 88 A.3d at 642, 644. In other words, controlling stockholders could escape the burden of the more exacting entire fairness standard of review and avoid protracted litigation by structuring transactions with those dual protections so as to mimic an arm’s-length process.

However, in a recent case, In re Handy & Harman Ltd. Stockholder Litigation, 2018 N.Y. Slip Op. 30894(U), 2018 WL 2163593 (N.Y.Sup.), the New York Supreme Court held that a controlling stockholder merger transaction that seemingly met the two procedural conditions still failed the MFW test. For the merger in the case, (i) the corporate board formed and empowered a three-director special committee to negotiate the merger, (ii) the committee hired its own legal and financial advisors, (iii) the financial advisors provided a fairness opinion, and (iv) the merger was approved by the committee and the board, subject to a majority of the minority ratification. But, the Court reasoned that the special committee was not independent because its chair was a college roommate and former business partner of the controller’s CEO and that the minority shareholders were not fully informed as to all material facts because that personal relationship was never disclosed. Those facts were sufficient, the Court noted, to call into question the independence of the special committee and the fairness of the entire process. The upshot? The class action lawsuit survived dismissal on the pleadings, and if triable issues of fact remain after discovery, the Court will conduct an entire fairness review.

With this decision, the Court indicated its willingness to more closely scrutinize deals suspected of conflicts of interest, putting emphasis on not just the form but also the substance of the procedural protections under the MFW test. The increased litigation risk that this ruling entails may also dissuade transactional lawyers at the margin from employing the dual-protection structure.

An interesting question, and one on which we can only speculate, is how this case would have turned out had it been brought in Delaware Chancery Court. Given Delaware’s tradition of deferring to the decisions of corporate boards, it is quite conceivable that the Chancery Court might well have applied the business judgment rule and granted the controller’s pre-answer motion to dismiss under the same set of facts. If this actually happens in the future, we may see a trend in which shareholders of Delaware-incorporated companies who suspect deals were tainted by conflicts try to find a way to bring their cases in New York.

It is too early to predict whether courts, both in New York and Delaware, will follow suit, or if not, how they will apply the MFW test. Indeed, the judge in the case cautioned the minority shareholders that they still have “a heavy burden to establish any actionable wrongdoing.” But, at least, they have a chance to try in New York.

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.

The Nonprofit Sector with Amanda Talty of Tourette Association of America and Karen Boorshtein of Family Service League

Posted: July 17th, 2018

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Visibility is key for the nonprofit sector on Long Island. This episode of CMM Live features two amazing women in nonprofit leadership to discuss mental healthcare, shutting down bullying, teaming up with the business community, and fighting for funding in the nonprofit sector. We first welcomed Amanda Talty, President & CEO of Tourette Association of America (TAA) who discussed destigmatizing Tourette and Tic disorders and how the “visibility factor” affects everything from diagnosis to education. Next, we have Karen Boorshtein, President & CEO of Family Service League (FSL), who discussed FSL’s commitment to being “Long Island’s Safety Net” and building on integrated healthcare to bring services and programs for our communities in need.

CMM Spotlight: Bob Giglione Photography

Posted: July 16th, 2018

Bob Giglione Photography logo“Good photography is critical to business. If you want to portray yourself as a professional, you need a professional photo.” That’s where Bob Giglione comes in, having spent the last two decades photographing nearly every major corporate event and business leader on Long Island. Making his way from film to digital technology, from joining the then-fledgling Long Island Business News as its primary photographer in 1997 to operating his own successful photography business today, Giglione’s vision has remained the same: showcase Long Island success stories, and make the people behind those stories look good, portraying them as happy, successful, and seen. By spotlighting the best of Long Island business for so many years, the man behind the camera became the most important person in the room. And as he went from boardroom to ballroom and back over the decades, he observed: “There are a lot of great leaders on Long Island – more than people realize.”

An insurance executive for 20 years in his “first life,” Giglione always enjoyed photography, but it wasn’t until his wife gave him a book about becoming a professional photographer that he considered making a career change. He stopped by local photography studios and started getting work shooting weddings on weekends in the early ‘80s. By 1987, he had left the insurance industry and was photographing 100 to 150 weddings a year, but still felt that he wasn’t getting in on the goings-on on Long Island.

Looking to meet people and build his client base, Giglione got his feet wet covering ACIT (Advancement for Commerce, Industry, and Technology) events at the invitation of board member John Kominicki, who had taken the helm at Long Island Business News. Giglione’s artistic focus officially shifted to the business world when he joined LIBN as its primary photographer in 1997. For the next 20 years, Giglione used his art to bring a face to Kominicki’s vision for the paper: celebrate the innovation and accomplishments happening in Long Island’s office towers, research labs, farms, factories, wineries, and town halls. His mission is the same now that he’s out on his own: through his photography, Giglione seeks to expose Long Island as the untapped resource and hidden jewel it is.

While Giglione’s tenure at LIBN included photo shoots with major political figures (he covered presidential debates at Hofstra) and celebrities, the subjects he’s most enjoyed photographing are the businesses and leaders driving the Long Island economy. Tired of the constant cycle of negative news and focus on problems, Giglione used his camera to highlight the positive, business-oriented Long Island headlines that don’t get enough press. His photography focuses on high-profile networking events and business news, corporate movers and shakers, and what politicians are doing for you – not the scandals. Even his Hurricane Sandy work took a business angle, focusing on how businesses would recover from the devastating storm. His job at LIBN was to create images that would draw readers into these optimistic stories, catching key people in action and sharing their accomplishments. Now doing private business photography, Giglione’s goals have remained constant.

As a photographer, Giglione has adapted to rapidly changing technology: he started shooting film and switched to digital in 2006. He embraces new technology (“With digital, you can see your mistakes quicker, so you can make real-time modifications”; Instagram also serves as his current portfolio) but still respects the classic tools of the trade (“Pictures taken with a phone have their place, but professional photography requires the best equipment and lighting”). He also got an early taste of social media by posting event photos on the LIBN website the same night, upping the anticipation among attendees all vying for a shot. Through the years, he also learned to trust himself as the creative decision-maker (“A photo of a lawyer in front of the firm logo or a factory owner holding a widget don’t always make for the most exciting shots”).

Giglione, who recently chatted with CMM Managing Partner Joe Campolo about the parallels of their career paths (using different media in their own way, both seek to promote all that’s positive on Long Island), says he still enjoys the solitude of “imagining photos and seeing places.” When he’s not on assignment, he takes pictures walking around NYC. He’s passed down his love of the camera to his children, with two daughters who became photographers and a son who became a cameraman for CBS News (and another daughter who became an accountant!). The insurance executive-turned-photographer has no regrets about starting over in his career: “Photography isn’t what I do, it’s who I am.”

Learn more at https://www.bobgiglionephotography.com/.

Bob Giglione and Joe Campolo; Randi Shubin Dresner of Island Harvest.

Former Suffolk County Executive Steve Levy; Rep. Tom Suozzi.

 

John Kominicki; Rep. Peter King.

 

Left: news anchor Ernie Anastos.

Former Senator Al D’Amato; former Rep. Steve Israel.

Esther Fortunoff Judge Leonard Wexler

Esther Fortunoff; Judge Leonard Wexler.

dance studio 

Yermash shares insights in “Don’t Ask, Don’t Tell” LIBN article about NYC ban on salary history inquiries

Posted: July 6th, 2018

money in pocketBy Bernadette Starzee, Long Island Business News

Last October, a law prohibiting employers from asking about salary history at all stages of the hiring process took effect in New York City. The law’s primary aim was to close the gender pay gap, and Gov. Andrew Cuomo is pushing to pass a similar law statewide.

Laws similar to the New York City law are already in place or will be effective soon in several nearby jurisdictions, including Westchester County, Connecticut, Albany and Massachusetts.

The penalty for what is deemed an unintentional look into a person’s salary history can be as high as $125,000 for each violation, while it can reach $250,000 for a blatant violation, according to Arthur Yermash, a senior associate focusing on labor and employment law at Ronkonkoma-based Campolo, Middleton & McCormick, who noted it’s unclear if the penalties would be as stringent if a similar law were passed statewide.

The impetus behind the law is to create pay equality between men and women. Women earn 80.5 cents for every dollar earned by men, according to the U.S. Census Bureau.

In the months that the New York City law has been in place, “we haven’t seen tremendous impact” on salaries, Yermash said. “But if the law has accomplished anything so far, it is that it has raised awareness. Employers in New York City are hyper-focused on the issue of pay disparity between classes of employees. They’re looking at balancing out internal procedures and determining a better way to decide what to pay folks.”

Read the full article here.

Wayfair Decision Updates a 26-Year-Old Law for the Modern E-Commerce Marketplace

Posted: June 29th, 2018

By Christine Malafi

Laws constantly evolve to adapt to modern society. Situations that were once impossible to imagine (such as buying hand soap from a distant warehouse at the click of a button and having it appear on your doorstep the next day) are now routine. As such, it is impossible to craft legal rules to anticipate the future. The power of the internet has amplified this discrepancy, and its ever-growing presence has sent shockwaves through the legal system. In this altered landscape, many existing legal rules no longer achieve their intended purpose and must be adapted to address the rapid advancement of technology and the growing e-commerce world. Sometimes, this may require long-standing precedent to be discarded, as we saw in the recent United States Supreme Court decision South Dakota v. Wayfair, Inc.[1]

What Happened?

Prior to this Supreme Court decision, states were prohibited from collecting a sales tax unless the seller had a physical presence (e.g., an employee or a building) in the state where the item was sold.[2] In a 5-4 decision, the Supreme Court reversed its prior decision and overturned 26 years of precedent, holding that a state can require internet retailers to collect sales and use tax even without a “physical presence” in that state.  Through this decision, the Court leveled the playing field and decided the “physical presence” rule was no longer tenable in our technology-driven society. The result for in-state merchants (who had to compete with online retailers who didn’t have to charge sales tax) was a win.

How Did This Happen?

The case began in 2016 when South Dakota enacted a law that required out-of-state sellers to collect and remit sales tax “as if the seller had a physical presence in the state” if they sold more than $100,000 of goods or services in the state annually, or engaged in 200 or more separate transactions with in-state residents. Given that South Dakota does not have an income tax, it relies heavily on sales tax for revenue, which was eroding each day.

For decades, the “physical presence” rule has enabled online retailers to avoid charging sales tax, thereby depriving states of an estimated $8 to $33 billion each year in revenue. Not surprisingly, this rule has been adamantly criticized for providing out-of-state businesses an opportunity to exploit a tax loophole – colloquially called the 8% advantage as per the average sales tax rate across the country – and gain a competitive advantage over in-state merchants. Indeed, 41 states, two territories, and the District of Columbia have sought to overturn Quill. Ultimately, South Dakota initiated an action in state court to seek validation. Opposing South Dakota were online retailers with no physical presence in the state who, unsurprisingly, contended that South Dakota’s new law was unconstitutional.

These online retailers sought to uphold the “physical presence” rule articulated by the United States Supreme Court in 1992 to avoid having to charge the tax (and thus appeal to customers). The Supreme Court pointed out that internet sales giant Wayfair (the defendant in the case) actually flaunted its ability not to charge state sales tax in its advertising by stating, “One of the best things about buying through Wayfair is that we do not have to charge sales tax.” Wayfair’s principal argument was that small businesses, by not paying a sales tax, can leverage the internet to expand their small businesses nationwide. While the Court acknowledged that some small businesses may be adversely affected, its 2018 decision applies only to businesses that conduct a significant amount of business in the state—a larger business. The Supreme Court focused its analysis on the “physical presence” rule and highlighted the change of circumstances over time which led it to its new decision.

In 1992, when the Court’s decision was to not permit states to require collection of sales tax without a physical presence, less than two percent of Americans had internet access and Amazon and eBay did not exist. Fast-forward 25 years, and now 89 percent of Americans have internet access. The Court pointed out that in 1992 it did not “envision[] a world in which the world’s largest retailer would be a remote seller.” These days, consumers have little reason to leave the comfort of their home to go shopping, as they are “closer to major retailers” than ever before. Accordingly, the Court found no reason to continue to support the artificial distinction between being physically present in a state and conducting a significant amount of virtual business in a state.

How Does This Affect My Business?

With the “physical presence” rule now buried among other Supreme Court holdings that no longer fit in modern society, the shackles have been released for states to pass legislation mirroring that of South Dakota. States will now be able to require online retailers to collect sales tax from their customers and in turn, collect the millions of dollars in revenue that has eluded them for so long. Small businesses with limited multi-state sales could be burdened by state tax systems, but it remains to be seen how states will set the minimum requirements for sales tax collection. Only time will tell just how onerous such burdens will become. If you have questions regarding sales tax collection requirements for your business, please contact us.

[1] South Dakota v. Wayfair, Inc., No. 17-494, 2018 WL 3058015, at *12 (U.S. June 21, 2018) (“What may have seemed like a ‘clear,’ ‘bright-line tes[t]’ when Quill was written now threatens to compound the arbitrary consequences that should have been apparent from the outset.”).
[2] Quill Corp. v. N. Dakota By & Through Heitkamp, 504 U.S. 298 (1992).