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

The New York Times recently ran an informative article about NBC’s late night television woes. Low ratings and pressure from affiliates have made NBC move Jay Leno from 10 pm to 11:35 pm, thereby bumping Conan O’Brien’s The Tonight Show to 12:05 am (actually, wouldn’t that be tomorrow?)

Mr. O’Brien issued a respectful but witty statement expressing his thoughts and disappointment. He also remarked on the speculation that a rival network is wooing him. But the Times suggests that O'Brien's contract with NBC includes a non-compete clause that could prevent him from jumping to another network.

Time to call in the lawyers.

As an attorney, I don’t practice in entertainment law but I find the story raises some interesting general contract issues. Of course, the terms of the contract are not public, so I can only draw some general inferences. Mr. O’Brien signed a contract with NBC to take over The Tonight Show. According to the Times, although the contract did not specifically state that the show will begin at 11:30 pm, for 60 years it has immediately followed the local nightly news. In order for O'Brien to extricate himself from the contract, he would have to show that the time change constitutes a breach. Or, he could leave and possibly breach the contract.

The article states that NBC executives are confident they have not breached Mr. O’Brien’s contract, since he still will be the host of The Tonight Show.

What does this story teach us about contracts? First, a decision to breach a contract is usually a business decision, not a moral one. But, if a contract is enforceable, the breach is going to cost. The question is whether the cost of the breach is greater than the cost of faithfully carrying out the contract.

Secondly, a contractual right provides certain protections. But, it doesn’t protect individuals or a management team from sabotaging their own interests. As I’ve told clients numerous times, it may seem attractive to play “hardball,” but it’s not always the best alternative.

A case in point is the subplot mentioned in the article concerning the Fox network. I’m curious as to whether Fox, which, according to the article, has the contractual right to impose a new late-night program on its affiliates, would actually enforce its contractual right if that action jeopardized its long-term relationship with the affiliates. Those "Seinfeld" re-runs are reportedly very lucrative.

Finally, aggrieved employees should follow Mr. O’Brien’s example and take the high road. Don’t burn any bridges or publicly lash out at those you believe wronged you.

Incidentally, another Celebrity vs. Network case was put to bed today. The AP reports that New York's top court rejected Dan Rather's bid to reinstate his $70 million breach-of-contract lawsuit against CBS. Apparently, the court ruled that since he was paid, there was no breach of contract.

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As of January 1, the federal estate tax went away for a year. Under current law, it’s scheduled to return at a higher rate next year. Personally, I’m surprised that Congress allowed the estate tax law to lapse, and I'm curious to see the ramifications.

According to the Wall Street Journal, families facing end-of-life decisions in the immediate future are finding that the change is making one of life's most trying episodes only more complex. Beneficiaries stand to inherit a lot more for a death this year than a death after December 31, 2010. The ethical dilemma is clearly significant.

Of course, what Congress giveth, Congress can taketh away. As discussed in the Journal article, the repeal of the federal estate tax is accompanied by reinstatement of the capital gains tax on property passing to beneficiaries.  Previously, when property passed to beneficiaries, the property received a “step up” in basis, wiping out the capital gains tax. The net result is that many estates, including smaller estates, will be taxed anyway but it just won’t be called an estate tax.

The Journal says that the uncertainties of the new tax law (will it be changed? will it be retroactive?) are “forcing family legal advisers to craft various provisional financial-planning strategies that can be undone later if the rules do change.” According to the article, at least one person has added the prospect of euthanasia to his estate-planning mix.  That might be a little extreme.

For a more conventional planning environment, we look forward to some kind of retroactive resolution.
                                                                

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Recently, the Wall Street Journal Law Blog, applying yet another sports and law analogy, asked: Why aren’t instant replays reviewed de novo? That is, why is “conclusive” or “indisputable” proof required to reverse a call on the field? Why not take a fresh new look at the play when reviewing video?

I’m probably in a very small minority, but I think the question answers itself: because sports plays need to be called 100% impartially, not necessarily 100% accurately. The officials on the field are human. Absent bias (say, towards the home team) or outright corruption, a call should not be reversed unless the video evidence is “conclusive.”

So, to some extent, I take issue with the analogy applied in the WSJ article. However, the post is actually quite educational and presents the subject matter in a clever way.  I’d also consider it helpful, since the role of the appellate courts is not well-understood among non-lawyers.

I just wouldn’t take any similarity between the courts and football - - or any sport - - too far.

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As I’ve said before, I am not an economist but occasionally play one on this blog (though I’m always conscious of my amateur status in the field).

Imagine my pleasure, therefore, of attending the informal “seminar” conducted by a REAL economist, Nicholas Perna, at the Ridgefield Chamber’s “Rise & Shine” breakfast earlier this week. Dr. Perna was able to side-step ideology and talk “real” economics, not only in an understandable fashion, but also with humor.

Our law practice, like any small business, is directly impacted by key economic trends. We also have to manage our practice around those trends. For example, last year, there was a drop in real estate transactions, while there was an increase in employees contacting us to review severance agreements. In Big Law, outright layoffs and the rescinding of job offers to graduates were even better evidence.

So, in addition to being informative and entertaining, the Rise and Shine breakfast was directly on point. My thanks to Dr. Perna and the Chamber.
 

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A healthy business requires appropriate and effective attention to the process of staying in business. A law practice is no exception. Keeping up with developments in the law is a “given,” but with respect to our business processes, we share many of the concerns, issues and shortcomings of any business, including the current pressures of the economy.

(For me, interest in business processes comes naturally. I became a lawyer in mid-career; my pre-law credentials include an MBA and project management experience developing business software and “back office” procedures for insurance and financial organizations.)

Last week I attended the Sixth Annual Law Practice Management Symposium of the New York City Bar.

Don’t stop reading. This is not “inside baseball” for lawyers.

So, very briefly, here are my highlights of the symposium:

Cash Flow – Considering the economic environment, what business is not interested in improving cash flow? Merchant banking (credit card processing) services for our business have become really sophisticated and not only improve cash flow, but also automate some of the strict controls over attorney escrow accounts that we otherwise handle manually. For example, clients can now pay by credit card via e-mail and the terminals are “virtual,” that is, online.

Financial Services – A few banks have focused on attorneys as a market niche and have developed expertise on how to handle escrow accounts (such as organizing statements to facilitate reconciliation). Generalizing to other businesses, why not work with a financial institution that actually understands your business?

Marketing – All the buzz in marketing was about social networking sites on the internet. Here, my “take-away” was pick and choose carefully. However, two important points were raised, applicable to any business: (1) a down economy is not the time to save on marketing, and (2) businesses that don’t cut back on marketing tend to increase market share in a down economy.

Information Management – Practice management systems for lawyers have evolved and are now truly impressive. They tend to be sold on the promise of capturing more billable time and increasing revenue for lawyers. That’s not good news if you’re a client. Take heart. My “take-away” is that they are not likely to increase revenue significantly but they are likely to organize information so as to save lawyers from loads of “administrativia” and free up lots of time for real work or for (is it possible?) leisure.

And, incidentally, it’s a myth that lawyers gain by wasting time on clients’ work to boost billable hours - - actually, getting the work out efficiently and effectively leads to a more profitable practice and is a win-win with clients.

Balance of Work and Leisure – This is as much an issue for lawyers as it is for other professions and occupations. My take-away is that if you organize your practice (or business) so that it functions effectively, life balance becomes a more manageable issue.

And, as a parting point, my primary criterion when evaluating business processes is effectiveness rather than efficiency. I think that applies to any business and more specifically to law practice management.

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Connecticut has eliminated the “cliff” from its estate tax. The Danbury News-Times, along with other media and legal blogs, reports that this change to Connecticut’s estate tax law, along with other significant changes, will go into effect for decedents who die on January 1, 2010 or later.

The aforementioned “cliff” refers to the fact that under prior tax law, an estate of $2,000,000 was exempt from taxation. However, add one more dollar to that, and the entire $2,000,001 was taxed, resulting in a tax liability of $101,700. With the new law, estates of $3,500,000 or less will not be taxed. This is similar to the federal estate tax threshold (or at least this year it is).

Under current law, the federal estate tax will be abolished next year, only to come back in 2011 with a threshold of only $1,000,000. The expectation is that the federal estate tax will be modified. On the other hand, that expectation has existed for some 8-10 years.  A clear explanation of the status of the federal estate tax is provided by this recent Wall Street Journal article.

In New York, the state estate tax threshold is a mere $1,000,000. But, in either Connecticut or New York, the federal tax takes a far bigger bite, with a marginal rate up to 45%. That’s right, 45%.

Here’s some good more news for Connecticut: estate tax rates are now being reduced by 25 percent, with a new maximum rate of 12%. But the estate tax and a return will be due six months after date of death instead of the current nine months.

In all three jurisdictions, (federal, Connecticut and New York), your “estate” for tax purposes includes almost everything you own: property, IRA’s, 401(k)’s, pension plans, the proceeds of life insurance and “In Trust For” accounts.

And one more point of potential confusion, specifically with respect to life insurance: the fact that beneficiaries do not pay income tax on the proceeds does not mean that the estate won’t pay estate tax.  A substantial life insurance policy can be enough to "tip: an estate into a taxable bracket.

A final piece of advice: take care of yourself and your loved ones.

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Good news, bad news.

Bad news first:  Health officials are warning there will be another H1N1 virus outbreak this fall, potentially worse than last year’s.

Good news: The Center for Disease Control (CDC) anticipates that an H1N1 vaccine will be ready for distribution by mid-fall of 2009. Connecticut Governor Jodi Rell announced that she will be making the flu vaccines free for all Connecticut residents. (The Ridgefield VNA is already planning flu and pneumonia clinics).

If there is flu pandemic, big business will likely go on as usual. However, according to a national survey recently conducted by the Harvard School of Public Health, only one-third of businesses believe they can sustain operations without severe problems, if half their workforce were on sick leave for two weeks due to swine flu. Those in a smaller workplace should take precautions now.

Business Week suggests that employers update employee contact information and develop a “pandemic preparedness plan.” The Connecticut Employment Law Blog (CELB) offers specific steps from the CDC’s website, including encouraging sick workers to stay home, and providing flexible leave policies.

Employers should consider consulting an attorney for potential issues that may arise: what are the confidentiality guidelines for disclosing information about an employee’s health? How much sick leave do you have to provide?  We hope it would not be often needed but, in case of complications triggered by the flu, the Family and Medical Leave Act provides eligible employees with certain provisions of unpaid leave. CELB discusses other legal issues that may be of interest to employers.

According to the CDC, the best advice regarding H1N1 is relatively simple: cover your mouth when sneezing or coughing, wash hands well, and stay home when sick.
 

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Recently, the NY Labor and Employment Blog offered a description of changes to New York’s “mini-COBRA” law, along with other recently-passed employment legislation. The Governor’s Office notes that the legislation was passed so that New Yorkers can access the subsidy available under the Federal Stimulus Program.

We practice in New York, and health insurance coverage laws can be very confusing, so we offer a few comments that might be particularly helpful to both employers and employees.

First, a little background: Since the federal COBRA law covers only employers with 20 or more employees, some states have enacted similar laws to cover employers with 2-19 employees. By “cover” we mean, of course, that terminated employees (and some others) must be offered the opportunity to continue their health insurance coverage for a limited period, albeit without the employer subsidy (but now, for some, with a temporary federal “Stimulus” subsidy). Usually, the state laws mirror the federal law, although each state may have enacted one or two variations.

The New York amendment to its “mini-COBRA” law is one such variation. The amendment extends coverage from 18 months to 36 months following termination of employment. On the surface, this new extension to 36 months seems to cover all New York employers (and, thus, all terminated employees in New York). It does not.

As mentioned by The New York Labor and Employment Blog, New York’s law applies only to insured plans. Thus, New York’s law would not apply to the largest, self-insured employers. They continue to be covered only by the federal law, even in New York.

Although well-intended and undoubtedly of benefit to some individuals and their families, the New York provision may become a source of further confusion. Employers are required to provide notice to terminated employees in a detailed COBRA letter and with all the recent changes to COBRA, state and federal, it pays to review the letter carefully and to ask appropriate questions. 
 

The NY Labor and Employment Blog offers a detailed description of these changes, along with other recently passed legislation. 
 

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Blogs are buzzing about a lawsuit brought by a 27-year-old woman against Monroe College to get her $70,000 tuition payment back because she claims the school hasn’t done enough to help get her a job.

Through this lawsuit, she and her legal advisors have raised the question: to what degree (yes, the pun is intended) is an educational institution responsible for a student’s post-academic success?

Not surprisingly, Monroe College spokesman Gary Axelbank claims the lawsuit is without merit.

News accounts, although numerous, tell us very little about the specific facts or the legal theories behind the lawsuit. We are not in the business of trying to handicap pending cases, especially based on pure speculation. However, we are curious, so we checked out the Monroe website for background. Here’s a sampling:

According to Monroe College’s Mission Statement, the school provides “caring and effective teaching and sustain faculty who…are dedicated to student success. We build on these strengths to prepare graduates for successful careers.” The College’s Office of Career Advancement helps with career assessment, resume writing, job search and strategy, employer recruitment and placement, interviewing skills, and other job search guidance. Monroe provides every student with a Career Advisor and offers access to online and web-based career resources.

We will continue to follow this case as it develops in the judicial system. In the meantime, the court of public opinion, despite not having all the facts, seems to be readily in session.
 

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There’s been a lot of chatter around Ridgefield lately regarding the possibility of “light and blight” ordinances. The sides of the issue seem to be split between those who believe that the government has no right to interfere with one’s private property, and those who argue that neighbors are obliged to keep their residences and outdoor lighting in respectable condition.

The catalyst for the potential blight law seems to derive from two recent cases. One involves recent reports of property owners who were ordered to serve 100 hours of community service for violation of zoning and health codes. The second case involves a reported dispute between neighbors over whether one intentionally points lights directly into the windows of the other.

According to the Ridgefield Press, Ridgefield Selectwoman Di Masters says a blight ordinance could be a trigger to get people the help they need if they are struggling to maintain their property. Also according to the Press, Town Selectman Rudy Marconi, after receiving numerous calls from residents, said the town “may need to consider a blight ordinance with very strict, specific language that would stop a homeowner from bringing down the property value of other homes.”

A Ridgefield Press editorial suggests these provocative issues, which presumably face every town, are no more than heated disputes between neighbors and can be resolved with existing legal remedies. Since this is not a political blog, we do not take positions on pending legislation. We can comment, however, on the neighborly dispute aspect - - what remedies are there for neighbors involved in disputes of this general type?

First, there is a specific statute in Connecticut which permits a land owner to sue the owner of adjacent property who “maliciously” erects a structure to annoy or injure. This statute, obviously, may apply to some types of annoyances but not to others - - for example, a vicious dog is not a structure.

Then, there is the law of private nuisance which also permits a landowner to sue a neighbor and may, in some circumstances, take into account a decline in property value when calculating damages. Despite the frequent appearance of private nuisance actions in court, the law does not uniformly describe the elements of a “nuisance.” Furthermore, the law is not one-sided. Consideration must be given to the rights of both parties in the dispute. The law recognizes that in modern society some level of neighborly “interference” is inherent.

Of course, before resorting to private lawsuits, neighbors will want to take into account the expense  of private litigation, not to mention the lingering animosity that often results. Town legislators will generally consider whether or not the public interest is involved, in which case they may determine that private remedies are not enough and government enforcement powers must be invoked.
 

I’m sure this is a discussion that will be around for some time.

Image: From Wikimedia Commons: The Hatfeld Clan of the Hatfield-McCoy Feud; taken in 1897.

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Partner Beverley Rogers led a lively discussion of Employment Law, primarily hiring practices, at the “Brown Bag Lunch” sponsored by the Ridgefield, CT Chamber of Commerce on Thursday, February 21. Our other partner, Angelo Tartaro, also attended and provided light assistance. The questions raised by attendees highlight issues of concern to the Ridgefield business organizations.

Our goal is to keep our clients and readers out of litigation, if possible. With that in mind, in leading the discussion Beverley did not dwell on technical distinctions and defenses such as the varying definitions of “employer” and “employee” under federal and state statutes and caselaw. Rather, the focus, as in this Blog, was on “best or at least better” practices of good management to avoid tangles of a legal dispute over hiring and other employment practices.

With that in mind, Beverley presented and discussed a series of questions that may and may not be asked at an employment interview. For example, an interviewer is asking for trouble when questions involve childcare arrangements but not whether a frequent travel schedule will be acceptable to the applicant. An interviewer should never ask whether an applicant has ever been arrested but it is perfectly acceptable to ask whether the applicant was ever convicted of a crime. Questions relating to sexual preference, religious practices, national origin (such as the derivation of your last name) have not place. Questions relating to whether the applicant can perform the essential functions of the position, with or without a reasonable accommodation, are acceptable. Of course, the interviewer should not suggest that a reasonable accommodation might be necessary; the applicant must request it. The examples discussed are too numerous to review here in detail; to download her handout, click here.

The attendees were very interested in how to handle a situation where the applicant volunteers information about a “forbidden subject.” The interviewer should state that the information is not appropriate to discuss any further and return the discussion to the essential functions of the position. And, the interviewer’s notes should not reflect any information about the inappropriate subject matter.

Beverley advised that notes of the interview should be kept separate from the job application. An attendee volunteered a humorous anecdote that reinforced the point. It seems the organization’s Human Resources auditors wanted to know why a notation of “W” was made an a job application. The implication was that the notation meant “White” or “Woman.” In fact, it denoted the “Western” division of the hiring organization. The better practice is not to have any notations that could be misinterpreted for a discriminatory purpose. Beverley presented and discussed a sample employment application from ____________________, which can be downloaded by clicking here.

Moving on from employment to other practices, Beverley explained that Connecticut and New York are still “employment at will” states in which an employee can be terminated for any reason but that protected classes of employees cannot be terminated for a discriminatory reason or under other circumstances covered by specific statutes or for specific conduct that is actionable under federal or state common law. An example of the latter was illustrated by one of our firm’s recent cases in which a client received a favorable settlement after suing an employer for defamation because he was wrongfully accused of stealing without an investigation.

In that case, an investigation was promised by the Employee Manual but the management largely ignored its manual. Attendees were very interested in Employee Manuals and the nuances of what they should or should not include as policies. That discussion was too extensive for this article but two general points stand out: (1) the better practice is to issue a manual and obtained a signed receipt when first issued and when updated; and (2) the manual does not do much good if actual practices deviate from those promised in the manual.

We may not be the most objective observers but we came away with the impression that the attendees found the event to be enjoyable, informative and topical.

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