Dangers of Lending Money to Your Business

            

Owners of small businesses continually fail to realize that their corporation or LLC is a separate legal entity that owes certain duties to its creditors. While it is tempting to lend money to your company in times of hardship and to pay yourself back once some money comes in, there is a very good chance you will have to eventually turn the money over to the company’s judgment creditors.

Both New York and New Jersey have Debtor and Creditor Laws, which protects creditors from fraudulent actions of their debtors. The laws have their own definitions that are different from what might be commonly believed. If a judgment creditor sues an owner of a company for taking money out of a failing business in fraud of creditors, the usual defense is that it was just a repayment of an existing loan and so there was fair consideration for the payment. In New York that defense will usually fail. First, most owners will fail to document the loan by a promissory note or by some other document. Failure to provide documentary evidence of the loan is fatal to the defense in both New York and New Jersey.

SEXUAL HARRASSMENT SETTLEMENTS NON-DEDUCTABLE IF THERE IS A NON-DISCLOSURE AGREEMENT

This past year has shown that many famous men had covered up their predatory sexual abuse of women (and sometimes other men) by non-disclosure agreements. $45 million dollars were paid by or on behalf of Fox News host Bill O’Reilly to settle sexual harassment claims, almost none of which was publicly revealed due to confidentiality agreements.

Congress has sought to do something about this in the new tax law but, in most cases, it will have little or no effect on big businesses, religious organizations or Congressmen who abuse. It will harm little businessmen who care about their reputations and it will even harm victims of abuse. The Internal Revenue Code was amended to read that no tax deduction will be allowed for any settlement or payment made related to sexual harassment or abuse if such settlement is subject to a non-disclosure agreement. It also forbids anyone from deducting attorney’s fees arising from such a settlement. 

NJSLAW CLE: Mortgage Contingency Clause and Ethical Issues in NJ Real Estate Contracts

Live Webinar on April 3, 2017 @ 3:00 PM. Register Here!

The mortgage contingency clause is one of the most important clauses in real estate contracts. However, many attorneys don’t bother to read it. This is a mistake since the terms of the clause, which may differ from contract to contract, can have an immense impact on your client.  

In this program, Alexander Novak and Kim Juhase, will provide an overview of this clause and will discuss the problems that could arise if the wrong language is used. In the second half of the program, they will discuss possible ethical problems that might arise in real estate transactions. They will also provide a brief overview of NY law for those who are dually admitted.

By the program’s end, Juhase and Novak will aim to answer the following questions:

• What are the best terms for the Buyer or the Seller?
• To whom must the Buyer apply for a mortgage loan and in what time period?
• Do conditional commitments satisfy the contract?
• What happens when a mortgage commitment is revoked by the lender?
• How can one avoid malpractice or a grievance complaint in real estate transactions?

Learning Objectives:

1. Understand how different terms on a mortgage contingency clause affect your client
2. Learn how to avoid ethical problems in real estate transactions

Click here to register!

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Freelance Isn't Free Act

New Protections for Freelance Workers 

Many employers that do not want to commit to hiring a permanent employee with the accompanying expenses such as medical benefits, often hire freelancers for such things as public relations, computer programming, care-giving and housekeeping. Many times the employment relationship is informal, based on nothing more than an oral understanding and many times the freelancer is not paid. A brand new, New York City, law tries to put this to an end.

The law, called the Freelance Isn’t Free Act, L. 2016/140, now requires, that upon demand, an employer of a freelance worker must provide a written contract and the freelancer must be paid pursuant to it, or the employer will suffer dire consequences. 

What Type of Apartment Do You Own?

      How you hold your residential apartment will have enormous legal consequences.  The three major ways of doing so is renting, as a co-op, or a condominium.  However, many people do not realize the differences between them.

            The most familiar one is renting.  A landlord rents one of his apartments to you pursuant to a written lease which sets forth the details of the landlord-tenant relationship. The tenant has no interest in or responsibilities for the common areas. In a multiple dwelling, the landlord is required to maintain not only the common areas by also the tenant’s apartment under a warranty of habitability and quiet enjoyment.  A landlord may be held liable even for damage caused to your apartment by another tenant.

Your Private Emails Can Be Read By Your Employer

Many people, like our former Secretary of State, consider their work e-mail as their own private lifeline to the outside world.  Crude jokes, funny stories about your bosses or put-downs of minorities are exchanged.  However, doing so can get you fired because your emails are not private. Your employer can read them and use them against you in any disciplinary proceedings.

A federal law, the Electronic Communications Privacy Act of 1986, prohibits the interception of email communications and accessing stored emails without authorization.  Unfortunately, these apparent protections are illusory for employees.  The courts have very narrowly interpreted the statute.  In the first instance, they have interpreted “interception” as being the simultaneous reading of an e-mail as it is being sent.  Reading an email already transmitted does not qualify.   As for stored emails, the law allows for searches by communication service providers.   If your email is stored on your employer’s email server, you are out of luck.  Generally, the courts have also held that employees have no reasonable expectation of privacy in their work computers.

Do not use your work computers for private communications.  Gmail and other servers are free and most of us have smart phone where we can read our emails and texts.  Don’t be another Hilary Clinton. 

Kim Steven Juhase, ESQ.
Partner, Novak Juhase & Stern

Check us out on Facebook, LinkedIn, and at njslaw.com  

Grandparents Have No Automatic Rights To Visitation

      In many of our families, grandparents play a special role in the lives of our children.  They are the source of free babysitting and frequently they are intimately involved in our children’s lives.  But what happens when there is discord between grandparents and their children and they are prevented from seeing their grandchildren?  Do they automatically have a right of visitation. The answer in New York is no.  If the parents refuse visitation, a grandparent must go to court and he may not win.

      Under N.Y. law, a grandparent’s right to petition for visitation is restricted to only two circumstances. When either parent of the grandchild has died, a grandparent has an absolute right to petition.  If both parents are living, a grandparent has standing to request visitation rights only if he can establish circumstances in which equity would see fit to intervene.  This means that the grandparent has to show that he has maintained a close and long term existing relationship with the child or tried to do so and was prevented by the parent.  Where contact has been sporadic or just involved sending birthday and holiday cards, the court will not grant the petition.  Allegations of love and affection are not enough.

     Even if a grandparent has standing to petition for visitation, he still has to show that visitation is in the best interests of the child.  Where both parents who are still married to each other strongly object to the grandparent’s visitation, it will probably be denied.  The N.Y. Court of Appeals (Article by the New York Sun) has held that there is a strong presumption that the parents’ wishes governs regarding the best interests of the child and this creates a high hurdle for petitioning grandparents to overcome.

      If, as a grandparent, you foresee possible visitation problems in the future, you should try to be involved in your grandchild’s life as much as is reasonable.  If the parents try to restrict your contact, you should document you attempts to do so.

Kim Steven Juhase, ESQ.

Partner, Novak Juhase & Stern

Check us out on Facebook, LinkedIn, and at njslaw.com       

Your Housekeeper May Sue You

          Do you employ a nanny for your children, a housekeeper or a companion for your sick or elderly parents, pay them in cash and fail to keep records of their employment? If so, you are leaving yourself open to a costly lawsuit.  Since 2010, household workers in New York are covered by the Labor Law’s minimum wage and overtime laws. Currently, the minimum wage is $8.75 an hour.  Their workweek is 40 hours (44 if residing with her employer).  Anything over that must be paid time and a half.  They must have one day off a week. You must obtain coverage for disability benefits and if they work at least 40 hours a week, you must obtain Worker’s Compensation coverage.

Baseball: Suing For Getting Hit by a Foul Ball

            Spring is here bringing with it the thoughts of another baseball season.  It can also bring with it thoughts of death and severe injuries. While there have been only two fans so far killed at professional league ballparks, at least 49 fans have died at amateur games and countless others have been severely injured in the stands by foul balls. Strangely enough, if you are injured or killed in the stands by a foul ball, you generally have no legal remedy.

           

Almost all states, including New York and New Jersey follow what is called the limited liability rule.  This is set forth in the 1981 New York Court of Appeals case of Akins v. Glens Falls City School District.  In that case, plaintiff attended a high school baseball game. The field was equipped with a 24-foot tall and 50-foot wide backstop behind home plate but only a three-foot high fence along the baselines.  She decided to watch the game standing behind the three-foot fence and was struck in the eye by a sharply hit foul ball, causing her serious and permanent injury.  The plaintiff sued the school district.

International Sale Of Goods Not Governed by the UCC

   Robert in New York receives a telephone call requesting he deliver a container of his pickles to Toronto from a buyer he never dealt with. Robert agrees and delivers the pickles. Shortly thereafter, the customer complains that the type of pickles he ordered was not delivered.  Robert wants to sue.  What law governs?

   

   While many businessmen (and a lot of lawyers) would say New York’s Uniform Commercial Code (UCC) governs, but they would be wrong.  Since 1988, sale of goods between the U.S. and most other countries have been governed by a treaty called the United Nations Convention on Contracts for the International Sale of Goods. Since it is a treaty, it overrides the law of all 50 states including the UCC. It has been acceded to by 83 countries including Canada, Mexico, Israel and most of Europe except for the United Kingdom.

Are Beth Din Arbitration Clauses Invalid?

      Under Orthodox Jewish practice, a Jew is not supposed to sue another Jew in secular courts. Instead, they are to arbitrate their disputes before a Beth Din, which is an arbitration panel of rabbis. In order ensure that the parties will follow this rule an arbitration clause is included in a contract. Most of these are extremely basic. The Beth Din of America, in its sample arbitration provision simply states that any controversy arising out of the contract shall be settled before the Beth Din of America in accordance with their rules and that any award may be entered in any court having jurisdiction. Apparently the assumption is that anyone entering into this agreement knows what a Beth Din is. At least in New Jersey, this clause and others like it is invalid and unenforceable.

I Want My Ring Back! Who Keeps The Ring In A Broken Engagement?

       

     Paul and Janet had been dating for about two years when Paul proposed marriage. Janet agreed and a wedding date was set. As a sign of their engagement, Paul gave her a family heirloom, an 8-carat pure white diamond on a white gold band. Three months later, Paul thought better of it and broke the engagement. He then requested the return of the ring. Janet refused, claiming it was Paul fault for breaking off the engagement and she had a right to keep it. Who wins?

      Paul does. Our firm won the lead case on this issue, Gagliardo v. Clemente, a New York Appellate Division, 1st Department case from 1992. The court held that giving an engagement ring is only a conditional gift given in contemplation of marriage. If the marriage does not go through, the gift is not completed and the ring must be returned. It is wholly irrelevant as to who caused the breakup. Just as New York has a no-fault divorce law, there is a no-fault engagement ring rule. The rule is the same in New Jersey according to Aronow v. Silver, a 1987 NJ Superior Court case.

       What if the man is already married and gave the engagement ring upon her promise to marry him when and if he got a divorce from his current marriage?

Do I Have to Testify Against My Child?

A parent’s worse nightmare. Your child comes home, all disheveled, and tell you he thinks he is in trouble. He had been at a party and may have drunk too much. On the way home, he believes he may have run someone over. He gives you all the details of what happened. He is shortly arrested and under the advise of the attorney you immediately retained for him, he refuses to speak to the police. The District Attorney figures that you must have spoken to your child about the crime and subpoenas you to testify as to what he told you before a Grand Jury. Can you be forced to reveal your child’s confidences?

The answer, at least in New York, is probably no. There is no statutory parent-child privilege, like that of attorney-client or priest-penitent privilege in New York or New Jersey. However, there is case law in New York that has arguably created such a privilege. In a case called Application of A & M, the N.Y. 4th Department Appellate Division ruled in 1978 that

Automatic Renewal Contract: There is a Way Out!

AUTOMATIC RENEWAL CONTRACTS

Don’t be misled by automatic renewal provision in your contract. In some cases, they may be invalid under New York law. Lets say that you have a 5 year contract with a computer maintenance company. The contract is about to expire and now you found a cheaper and more reliable company. You let the contract lapse and you sign with the new company. However, your old company continues to send you bills. When you contact them to complain, they tell you "sorry, but you did not read the fine print": If you did not notify them 6 months before the expiration date that you did not wish to renew, it was automatically renewed for another 5 years.

Do you have any remedy? In this case, and in many like them, you do. New York’s General Obligation Law sections 5-901 and 5-903 provides that no matter what is stated in your contract, if it is for a lease of personal property or is a contract for services, maintenance or repair to or for any real or personal property, the one providing the service must serve on you a writing, calling to your attention the renewal provisions in the contract. It must be served on you either personally or by certified mail at least 15 days and not more than 30 days prior to the time the contract calls for you to give notice whether you will renew or not. If such notice is not given, you may cancel the contract at any time, just paying for the service provided up to the time of the cancellation. However, if you do receive the notice and do nothing, you will be stuck with the renewed contract.

The courts have been very liberal in expanding the meaning of personal property. The statutes have been applied to include intellectual property, servicing MRIs, leases of vending machines, and answering services. It does not apply to personal services contracts such as providing legal services or other type of advisory services. These provisions were specifically designed to protect small businessmen who unwittingly find themselves stuck with a contract they did not want.

If you continue to receive bills from a supplier,  or a vendor claims that you are still stuck in a contract you thought had expired, don’t just assume they are right because the contract says that you did not give the proper notice. Immediately contact a lawyer. Most likely, they are wrong.

Kim Juhase, ESQ.

Partner, Novak Juhase & Stern, LLP

Check us out on Facebook, LinkedIn, and at njslaw.com