Rogers & Tartaro Business Litigation Blog : New York and Connecticut Business Litigation Lawyer & Attorney : Rogers & Tartaro Law Firm : Commercial Litigation : Westchester County NY, Fairfield County CT

On the Friday before the holiday weekend I believe a change of pace is in order. Lawjobs.com recently carried an amusing and interesting article by Michael P. Maslanka (“Shakespeare’s Lesson for Lawyers: How to Access Empathy”) about lessons that lawyers can learn from Shakespeare. The article is an analysis of “Measure for Measure” and I will not spoil any of it by trying to summarize it but simply recommend it.  Just click on the title.

This is somewhat off-topic for us but not so much so since it does involve litigation and what we can learn from it.

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Legal Blog Watch explored an interesting question recently about how law firms are seeking to strike an appropriate balance in the use of technology in the discovery process (“Will Technology Displace Lawyers in e-Discovery”). LBW made very interesting use of the American mythical character, John Henry to make its point; I recommend their post. 

Law firms have a conflict on this issue. The automation in question would replace billable hours. However, since our clients tend to be below the size threshold for “Big Business,” we normally work in a world where the client has the right to expect that control of litigation costs will be a major value-added contribution by their attorneys. The real issue is how much testing and research needs to be done first to ensure that the technology can effectively deliver on its promise.

And, if the discovery is so extensive that it has to be automated, the parties should probably try really hard to settle.

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In an earlier post, we commented on a Law.com story about a discrimination suit based on pregnancy that went to trial. Now, the verdict is in and it is for the plaintiffs. The Law.com report on the verdict (“Ex-Associate, Paralegal Win Damages From Former Firm”) is again by Vesselin Mitev of the New YorkLaw Journal.

The jury actually found against the associates’ claim based on pregnancy but awarded her $16,000-plus in damages based on unequal pay. The other plaintiff, a paralegal, was awarded $700,00-plus, including $500,000 in punitive damages. The defense attorney – no surprise – is quoted as stating that the punitive damages were in excess of damages allowed by federal statute and that the verdict was inconsistent. In other words, the appeal is already being outlined.

Coincidentally, Law.com also reports that the American Bar Association (“ABA”) has issued guidelines on gender bias in law firms. That story (“ABA Releases Guide on Gender Bias in Firms”) is by Maris McQuilken of the Legal Times. Lest we be misled by a grammatical quirk in the title of the story, the guidelines released by the ABA are not about how to be biased but on how to eliminate bias.

According to the Law.com post, one of many tips in the guide is the following:

be as specific as possible during performance reviews by focusing on certain skills and results as opposed to relying on broad generalizations.

That seems to be good advice and not just for law firms but for any organization.   We look forward to reviewing the entire guide. We’ve noted before, for example here, that performance reviews can be problematic avoidance of discrimination lawsuits.

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The Delaware Business Litigation Report reported an interesting construction contract case with the following introduction:

This case will give pause to contracting parties who consider taking on responsibilities beyond the written terms of the contract.

The post (“Superior Court: Implied Contract Created When Party Accepts Responsibilities Beyond Written Terms”) was by R. Christian Walker of DBLR and the case was Gay v. Delmarva Pole Bldg. Supply, Inc., 2008 WL 2943400 (Del. Super. Ct.).

The title of the DBLR post and the introduction provide a pretty good capsule description of the case; we refer you to their post and the case link for factual details.

We don’t normally cover Delaware law but the result in this case, on similar facts, might very well be the same in states other than Delaware - - for example, Connecticut or New York. The case reflects basic contract law but an aspect of it that might be overlooked by busy managers who are not lawyers. 

The actual case was complex because there were twists and turns as the story unfolded. But, the principles are basic. Despite the written contract, the Court ruled that the actions of the parties, once the Court unraveled and understood them, created an implied contract and that one of the parties breached the implied contract.

Independent business owners and managers may balk at the suggestion that they should establish strict procedures requiring written approval from customers for changes in the scope of work. It may seem too bureaucratic for an entrepreneurial business. And, some changes may be too trivial to go to the trouble.

But, as implied by DBLR’s introduction, this case is a cautionary example of the possible result if a contractor undertakes work beyond the scope of a project established in a written agreement.

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The Philadelphia Immigration Lawyer Blog  in a recent post (U.S. Passport Card Now an Accepted List A I-9 Document"), brought to our attention  a USCIS announcement that the U.S. Passport Card is now a “List A” document that can be used to verify identity and authorization to work for I-9 purposes . Think of the Passport Card as a short-form passport for travel in North America, the Caribbean and Bermuda.

We have commented on the I-9 process in a prior post since there should be an interest in staying out of one of the most unpleasant forms of business litigation: compliance litigation with the U.S. government. We made and reiterate the short and simple suggestion that employers should take care to comply with I-9 rules and also, to avoid charges of discrimination, take care not to go beyond them. Staying up to speed on changes such as this is one small way to help ensure compliance.

Image from Wikipedia Commons.

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Late last week, Law.com reported that a trial had begun in the case of a former law firm associate and a former legal assistant who claim a law firm discriminated against them because they were pregnant. The story (“At trial, Lawyer Claims Former Firm Cut Her Salary Over Pregnancy”) was by Vesselin Mitev of the New York Law Journal. The case is Todaro v. Siegel Fenchel & Peddy, CV-04-2939 (E.D.N.Y.).

The Law.com post provides a good summary of the opening stages of the trial. We note several interesting aspects to this story. 

First, it is interesting that we often see stories of law firms getting themselves into discrimination suits. One reason, of course, could be that the plaintiffs are themselves lawyers and prone to sue. Another is that law firm managers typically are too busy being successful as lawyers to be conscious of (or to give priority to) their roles as managers. It would probably be wise not to use the partial validity of the first reason as an excuse to dismiss the second.

Second, the story serves as a reminder to all types of businesses that pregnancy can be the basis of a discrimination suit. As they used to say in the military: be guided accordingly.

Third, although it would be naïve to believe all civil cases should settle bfore trial, when another case goes to trial, we are reminded of the advantages of settlements over litigated resolution of disputes. That point was discussed recently ("Another Reason to Settle") and more extensively in the Connecticut Employment Law Blog in a post by Daniel Schwartz (“Estimating the Costs of Litigation; Parallel Stories Illustrate Difficulty of Predicting Costs and Outcome of Litigation”). I may not be long before our litigation practice is re-designated “Dispute Resolution” because that’s what’s important: resolving the dispute.

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This is the second installment of our comments generated by  Collins v. Cohen Pontani Lieberman & Pavane, S.D.N.Y.,  04 CV 8983(KMW)(MHD, a decision of the Southern District of New York, and the Law.com article that brought it to our attention. In the first installment, we commented on one of the legal issues that caught our attention. We now offer comments on some of the facts, as presented in the Court’s opinion.

First, please note that the decision was on a motion for summary judgment and, therefore, the alleged facts have not been proven. The Court merely determined whether the factual allegations were sufficient to present issues for trial. Here are a few of those allegations.

• Plaintiff was informed at the employment interview that lack of technical background would not bar promotion to partner but lack of technical degree was later cited as a reason for not promoting plaintiff;

• Plaintiff was informed at the employment interview that business origination affects compensation but not eligibility for promotion to partner - - insufficient business origination was cited as a reason for not promoting plaintiff;

• Defendant did not investigate plaintiff’s sex discrimination complaint;

• A partner’s e-mail notes a disconnect between a favorable performance review and the lack of increased compensation;

I acknowledge that the risks of litigation and the managerial issues that we identify on this blog may not be very important to organizations large enough and with sufficient resources to be successful despite them. Organizations whose resources are more limited and that may be looking for an edge may have more to consider. Also, although this case involved a law firm, I think the principles are general and I will discuss them as such, not in relation to the one firm with the misfortune to be the defendant in this case.

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Plaintiffs that turn down a settlement tend to win less at trial than if they’d settled. This, is the conclusion of a recent study according to a post (“Go for That Settlement Study Says”) by Robert J. Ambroji on Legal Blog Watch, citing a story in the New York Times.

We tend to believe the conclusions despite our skepticism regarding most conclusions based on a single study. Why, do we give this particular study credibility? We concur with the LBW post:

Because a settlement is a product of mutual agreement. Both sides walk away from the table having made a bargain they both agree they can live with. By contrast, litigation is a crap shoot. Let someone else decide your fate, and more often than not you'll be unhappy with the outcome -- even if you "prevail."

Thus, even if the study statistically is wrong, there are other good reasons to reach a settlement. And, if the study, in fact, reflects the statistical reality, there is a substantial risk of ending up with less by going to trial.

The Times article is slanted so as to blame bad advice by lawyers for the study results. In my experience, the problem is much more often an emotional attachment to “the fight” by the clients. After all, even the Times notes that 80 to 92 percent of cases actually settle. Within the small minority of cases that go to trial, there are additional plaintiffs who should have settled. 

As the LBW post says: Go for it.

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A recent federal court decision in a sex discrimination lawsuit was a partial victory for each of the two parties but a great opportunity for those of us who wish to learn from it.

Actually, a partial victory in a discrimination case is often a better outcome for the plaintiff than for the defendant because at least some claims go forward. And, that’s the reality reflected in the headline of the story in Law.com reporting on the case: “Associate’s Sex Discrimination Claims Proceed Against Law Firm” by Anthony Lin of the National Law Journal. The case is Collins v. Cohen Pontani Lieberman & Pavane, S.D.N.Y.,  04 CV 8983(KMW)(MHD).  The story was also mentioned on the Sui Generis- a New York Blog.

The 53-page decision by Hon. Kimba M. Wood, Chief U.S. District Judge for the Southern District of New York, systematically analyzed the defendant’s summary judgment motion and granted it in part but denied it in part. In the process, the decision provides so much material for comment that we will cover it in two installments and even then we will just touch on a few interesting points. This first installment will discuss one of the legal issues presented and a future second installment will have a few comments about the facts presented in the decision.

One of the more interesting legal issues presented in this case involved the “continuing violation doctrine.” That doctrine applies to “a series of separate acts that collectively constitute one ‘unlawful practice’” (Page 53 of the Decision.)  By contrast, discrete discriminatory acts, even if related, are not covered by the doctrine. The distinction is important because the appropriate statute of limitations will apply separately to each discrete act. The Court did note that time-barred discrete acts or incidents can be admissible as circumstantial evidence of the intent to discriminate but they cannot be independent bases for liability. (Page 18 of the Decision) 

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A taxpayer both won and lost against the IRS in a case involving a Family Limited Partnership (FLP). The case, Holman v. Commissioner is reported and very-well summarized in a post (“Another FLP Fact Pattern: Holman v. Commissioner”) by Kimberly Martinez Lajarza in the Florida Estate Planning Blog. 

We sometimes comment on estate planning issues in this blog because of our broad interpretation of “business litigation.” Our business clients and readers have a very strong and personal interest in transferring the fruits of a lifetime of hard work to their chosen beneficiaries.   

Lifetime gifts are commonly used to reduce the size and tax liability of an estate large enough to be taxable. But, gifts are subject to the gift tax.

FLP’s provide a way to discount the value of the gifts made in one’s lifetime for gift tax purposes. The discount is important because it allows the taxpayer to take greater advantage of the annual exclusion (now $12,000) and the lifetime exemption (now $1,000,000) from the gift tax. For example, a 20% discount allows assets to be nominally worth $15,000 within the $12,000 annual exemption.

We have not seen the Holman case and rely on the FEPB post for the facts. Apparently, the mainstream elements of the plan (marketability and control discounts) survived the litigation but, the transfer restrictions pushed the envelope a little and did not. Another key element, in favor of the taxpayer, was that the assets were transferred to the limited partnership before gifts were made, even if only by a matter of days. 

General lessons to derive better practices: (1) leading-edge planning techniques will be scrutinized and may involve litigation so the potential returns (even larger tax savings) should justify the added risk, (2) careful planning is always in order – - consider how important the timing of the gifts was in this case.

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In a prior post, we reviewed news reports that New York had revised its adverse possession law and asked readers to stay tuned because we had not seen the law or any analyses of it by legal commentators.

As a comment to that post, Kathleen Walling, apparently a party in the Court of Appeals Walling v. Przybylo case, provided the text of the bill signed by the governor and comments to the bill by the New York State Bar Association. Some technical glitches garbled a few worDs in the comment but the context makes the Bar's general meaning clear. According to news media, the new law was  intended to reverse the holding in the Przybylo case. Apparently, the Bar Association did not like the bill because they recommended a veto. 

The issue was whether an adverse possessor should have a reasonable basis to believe the adverse possessor owns the property being claimed. The Bar Association did not believe the bill (now law) would accomplish its purpose.

I have a lot of respect for the Bar Association’s analyses of legislation, especially when it concerns how a law may be interpreted and applied. However, once a bill becomes law, what counts is how the courts will interpret it. For that, we will have to wait.

For this blog, our perspective is to review developments in litigation and try to derive better management practices. We cover real estate cases as “business litigation” because the business of some of our clients is real estate investment (albeit not in a Donald Trump scale) and for others the home is one of their biggest investments. We draw insights from business litigation not juston how to prevent litigation or win but also to promote productive business practices.

From that perspective, our view of adverse possession remains the same. It is not going to be abolished because it does serve a positive purpose in certain situations to resolve boundary and title issues. 

However, both title owner and potential adverse possessor benefit form simple practices:  obtain and learn to read a survey, walk the property lines and address encroachments well before adverse possession becomes an issue (10 years in New York, 15 years in Connecticut). There is almost no downside to these procedures for either party. We are not suggesting that every boundary dispute can be prevented. But then, we are identifying better practices, not trying to find guarantees.

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Our previous posts on subprime lending and foreclosures have highlighted defenses that turned the tables on the lenders and how courts around the country are scrutinizing foreclosure filings and, if defective, not allowing the proceedings to go forward. Our most recent posts on this subject, with links to others, are available here and here. 

Now, the New York Times has published an article illustrating how the packaging and transfer of mortgage loans created a new opportunity for a homeowner to keep her home. The Times article, “How One Borrower Beat the Foreclosure Machine,” by Gretchen Morgenson was on page 1 of its July 27, 2008 Sunday Business edition (we did not locate an online version to link). 

The article was about how a 74 year old former housekeeper saved her house from foreclosure.  While the story took place outside the jurisdictions in which we practice, it involves general principles of law and nationwide business pratices.

With our economy continuing to decline, more and more homeowners are faced with the very real prospect of losing their homes to banks and other lenders in foreclosure proceedings. In today’s mortgage market, most banks and lenders “repackage” mortgage loans and sell or assign the mortgages in a “secondary mortgage market.” This means that, more often than not, the bank which originally loaned the money is not the bank which winds up owning the note and, therefore, has the legal ability to collect on that debt. The legal ability to collect on the debt depends on who owns the note at the time a foreclosure proceeding is initiated.

In the case of the 74 year old former housekeeper, according to the Times, her ordeal unfolded and ended with a favorable settlement as follows: She filed for bankruptcy protection to save her house and made mortgage payments to the bankruptcy trustee (the person who oversees the bankruptcy proceeding). The Bank of New York sued to foreclose on the mortgage – but the bank sued before it legally owned the note. The “package” of loans had not yet been transferred to the bank, as trustee. The bank, therefore, had no “standing” or legal authority to sue. It took five years of litigation before the Bank of New York finally settled the matter – by reducing the principal loan balance and paying the homeowner’s attorney’s fees.

Most homeowners facing foreclosure don’t have the financial resources to fight banks for five years, but there are steps that homeowners can take before foreclosure proceedings begin.   Preferably with the assistance of an attorney, the homeowner can negotiate with the banks’ attorneys to restructure mortgages and find other viable solutions to help homeowners keep their houses. Ultimately, banks are in the business of making loans, not owning houses as a result of foreclosure proceedings.   

Image: From Wikipedia Commons: Margaret Sadler and her attorneys Michael A. Robinson and William L. Henry. Ms. Sadler is holding the original promissory note and altered promissory note in her foreclosure. Colorado District Court Judge Vincent White dismissed the foreclosure when the Bank of New York was unable to show that they were the real party in interest.

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