New Jersey Law Blog

Stark & Stark Shareholder Barbara Strapp Nelson Published in US1 Article

Stark & Stark — Tue, 18 Jun 2013 08:34:08 -0500

Barbara Strapp Nelson, Shareholder and member of Stark & Stark's Real Estate Group, authored the article "When Is a Real Estate Contract Binding?" published on June 12, 2013 in U.S.1.

The article discusses when a signed contract is not a binding contract in New Jersey. M. Nelson talks about the "Attorney Review Period," which delays contracts from being binding until three days after the contract is signed. This review period commences with the day following delivery of the fully signed contract to the buyer and seller, not including weekends or legal holidays.

Ms. Nelson explains, "The three-day attorney review period also applies to realtor-prepared amendments that materially modify a contract subject to the review period."

To read the full article, click here.

Notice Requirements for Open Board Meetings

Mary W. Barrett — Tue, 18 Jun 2013 08:10:23 -0500

The board of directors of a community association may have multiple meetings throughout the year. When these board meetings are "open" the members of the association are entitled to attend and observe. Having the right to attend a meeting is meaningless unless a member knows when and where the meeting will be held. Therefore, in accordance with N.J.A.C. 5:20-1.1, et seq., a board must ensure that proper notice requirements are followed.

Adequate Notice. Members of an association must be given adequate notice of open board meetings. In New Jersey adequate notice is defined as "written notice, at least 48 hours in advance, giving the time, date, location and, to the extent known, the agenda of any regular, special or rescheduled meeting, other than a conference or working session at which no binding votes are to be taken. . .." This written notice must be:

posted prominently in at least one place on the property that is accessible at all times to all unit owners, such as a clubhouse bulletin board;
mailed, telephoned, telegrammed, or hand delivered to at least two newspapers designated by the board or association to receive such notices because they have the greatest likelihood of informing the greatest number of unit owners; and
filed with the business office of the association.

Annual Notice Requirement. There is also an annual notice requirement. At least once each year, within 7 days following the annual meeting, the board must notify the association members of a schedule of the regular meetings of the board to be held during the year. That schedule shall include the location, if known, and the time and date of each meeting. This notice to the members is satisfied by posting on the property, delivering to newspapers and filing a copy with the association's business office (see above for more information on each of these methods). For example, if the board determines it will meet on the first Monday of each month, it must post (and maintain) this schedule on the clubhouse bulletin board, deliver it to two newspapers and file it with the management office. If the annual schedule is later revised, within 7 days following the revision, the new schedule must be posted, delivered and filed again.

If the annual notice schedule is posted, delivered and filed as required, and the location, time and date of the meetings are in the notice, the additional 48 hours advance notice is not required. Homeowner involvement is important to a community association, however, and boards should act transparently in conducting association business so giving the additional notice is advisable.

In fact, these are the minimum requirements for giving notice; a board that wants to give extra notice by an email blast to members or by posting a sign on the clubhouse lawn the day of the meeting may certainly do.

Emergency Meetings. On occasion a board must call an emergency meeting and does not have time to give 48 hours notice. If waiting 48 hours for the purpose of providing notice would likely result in substantial harm to the interests of the association, notice is adequate if it is provided as soon as possible following the calling of the meeting by posting, delivering, and filing the notice. In this case, the meeting must be limited to the emergent matter.

Other Types of Meetings. For meetings other than open board meetings, these notice requirements may not apply. Members of the association are not entitled to attend executive session or working session meetings of the board and, therefore, no notice is required to be given to them for such meetings. Meetings of the members, such as an annual meeting, are not the same as open board meetings and these notice provisions do not apply. The notice requirements for the annual meeting and other meetings of the members can usually be found in the association's by-laws.

Giving proper notice for an open board meeting is important and associations are well advised to strictly follow these requirements as well as additional requirements set forth in its governing documents.

The Economic Loss Doctrine

Paul W. Norris — Mon, 17 Jun 2013 09:44:20 -0500

Although firmly established within New Jersey Jurisprudence, the “Economic Loss Doctrine” is often overlooked by overzealous Plaintiffs who attempt to file Tort Claims in simple Breach of Contract cases. The “Economic Loss Doctrine” provides that if the factual foundation for the Cause of Action is contractual in nature, than in that event, the Parties are foreclosed from pursuing Tort Claims which are based upon the same facts. The reason the “Economic Loss Doctrine” was enacted was to prevent creative pleading which only prolongs simple Breach of Contract cases where Parties have attempted to plead claims founded in Tort. Pursuant to the “Economic Loss Doctrine” doctrine, the Courts have held that a Party cannot pursue a claim for Fraud in the performance of a Contract. Instead, when the damages which are sought arise from a Breach of Contract and do not involve personal injury suffered aside from contractual damages, a Parties claims are limited to Contractual ones.

In certain circumstances, a Party may be able to bring Claims for both a Breach of Contract and Tort Claims provided, however, the Claims are against an individual who owes both a fiduciary duty as well as Contractual duty. Such Claims are typically limited to claims against professionals such as Attorneys, Accountants, or other learned professionals who are retained by a Party pursuant to a Contract. The “Economic Loss Doctrine” provides that unless there is an independent duty owed at Law outside of the express terms of the Contract, the Party’s remedy lies in a Breach of Contract claim only. As to professionals such as Lawyers and Accountants, however, if an independent fiduciary duty lies outside of a Contract, Tort Claims may be prosecuted against these individuals as well.

When filing a Pleading for a Breach of Contract it is always important that a Party consider the application of the “Economic Loss Doctrine”. Should a party overzealously plead Tort causes of Action even though the underlying basis is Contractual in nature, the Party may subject itself to counsel fees and sanctions should a defendant obtain a Dismissal of the improperly plead Tort claims. As a defendant, it is always important to consider the “Economic Loss Doctrine” in order to prevent frivolous Claims from being plead which will only increase the cost of Litigation for all Parties. As such, it is important for all Parties to remember the application of the “Economic Loss Doctrine”.

Stark & Stark Shareholder Scott I. Unger Published in U.S.1

Stark & Stark — Mon, 17 Jun 2013 08:12:07 -0500

Scott I. Unger, Shareholder in Stark & Stark’s Litigation and Shareholder & Partner Disputes Groups, authored the article, “What is Minority Oppression?” published in U.S. 1 Newspaper on June 5^th, 2013.

The article discusses the real meaning behind minority oppression and how companies go about trying to terminate shareholders who have the smallest amount of share in the company. Mr. Unger discusses the techniques involved during termination of the minority shareholder's employment, excessive compensation and withholding distributions. Additionally, Mr. Unger describes the different obstacles that a minority shareholder may face when challenging the majority's failure to issue dividends.

To read the full article, click here.

Stark & Stark Attorney Brittney S. Blakeney Published in New Jersey Law Journal

Stark & Stark — Fri, 14 Jun 2013 15:04:41 -0500

Stark & Stark attorney Brittney S. Blakeney in the firm's Employment Group authored the article “Social Media Policies: Gift or Curse," published on June 3, 2013 in the New Jersey Law Journal.

Ms. Blakeney touched upon the issues of employees and the use of social media such as Facebook and Twitter. In her article, she talks about how employers push for a potential employee’s passwords and usernames to gain access to their accounts before hiring them. Ms. Blakeney said, “However, employers’ use of social media policies as a tool in hiring and firing has come under strict scrutiny after raising several public policy concerns.”

To read the full article, click here.

Landlords and Storm Damage Insurance Claims

Jerry A. Nelson — Fri, 14 Jun 2013 10:07:32 -0500

Landlords and others have suffered from heavy rains, high winds and flooding. And experts predict that severe storms will become more common due to global climate change. Although you can’t stop storms, you can reduce risks.

One important way landlords can reduce risks is by reviewing their insurance coverage. When was the last time you reviewed and updated your insurance coverage and inquired as to the insurance coverage of your tenants? It is vitally important to know and understand what risks your property is protected from. Commercial landlords must be sure their certificates of insurance are up to date, accessible and provide adequate coverage for the most likely damage due to storm damage.

Another important way to reduce risks is to review your leases, contracts, and documented procedures. Will storms obligate you for unexpected repairs, liabilities and costs?

These are just a few of the issues that all landlords face as they encounter damage from storms. Evaluating these and other legal questions requires careful review on an individual basis with experienced counsel. Stark and Stark’s Commercial Real Estate Group assists landlords in evaluating their risk and work with the firm’s Insurance Coverage Group to be sure that landlords are protected with the proper amount of insurance coverage.

Beware of What You Post Online- Especially If You Are Involved In Litigation

Corrine Evanochko Cooke — Fri, 14 Jun 2013 08:53:36 -0500

In a recent family law case of Fitzgerald v. Duff (A-0177-12T4), the Appellate Division reversed a Trial Court decision to impute $100,000 to the father of the child for failure to make the requisite findings of fact and conclusions of law and make credibility findings to include a Plenary Hearing, if necessary.

In defending against a motion to reduce child support in light of a 2011 tax return showing that the payor's income was $21,000 that year, the Plaintiff did her research. She provided printed copies of a website describing the Defendant as the owner of "Mr. Tatoo" which operated two New Jersey locations in addition to a Wilmington, Delaware, shop and advertised that a "Philly Shop [was] coming soon." The Plaintiff also attached photographs taken from Defendant's facebook page of Defendant's brand new boat and a 2011 Chevy Camaro. In addition, she alleged that the Defendant also had a Lincoln Navigator.

To further illustrate her point, the Plaintiff also attached pictures of his elaborate, tropical wedding, diamond engagement and wedding bands, and pictures of Defendant throwing $100 bills. Perhaps most damaging, the Plaintiff also supplied a copy of the Plaintiff's MySpace page, which stated that the Defendant earned over $250,000 per year from a business of which he is the sole owner.

The Trial Court was persuaded by the Plaintiff's evidence, and imputed an income of $100,000 to the Defendant, and calculated child support on that income instead of the $21,000 the Defendant claimed he earned.

Although the Trial Court was ultimately reversed for failure to make the requisite fact-finding and credibility determinations, this case illustrates the important lesson that any pictures and/or statements made on the internet, via social media or otherwise, are commonly used in litigation to discredit a party or witness. Therefore, if you are currently involved in any court proceeding or anticipate that you may become involved in litigation in the very near future, please be very careful about what you post online and on social medial sites. If you are unsure whether something may be damaging, it is advisable to err on the side of caution and refrain from posting the questionable material, or consult an attorney.

Stark & Stark Shareholder Craig S. Hilliard Published in New Jersey Law Journal

Stark & Stark — Wed, 12 Jun 2013 10:49:55 -0500

Stark & Stark Shareholder Craig S. Hilliard authored the article "What To Do When Your Case Is 'Removed' to Federal Court," published in the New Jersey Law Journal on May 27, 2013.

The article discusses the steps necessary to take following the removal of a case to a federal district court. Mr. Hilliard addresses the following questions:

Does the federal district court have jurisdiction?
What about motions or other applications which were pending in the Superior Court at the time of removal?
What if a defendant has not been served at the time of removal?
When must the defendant respond to the complaint?
When must the demand for a jury be made?
Do the Superior Court's orders issued before removal continue in effect after removal?
Can the plaintiff recover fees and costs if a defendant filed an improper removal petition?

Mr. Hilliard explains, "The need for a prompt and accurate assessment of options following the filing of a removal petition should be apparent. There is no real shortcut around a review of the removal statutes, to determine initially if the district court has jurisdiction. Even if that determination does not lead to a remand to Superior Court, it is equally important for even veteran state court litigators to examine and understand the significant, and sometimes subtle, differences between state and federal practice, to effectively represent a client in the district court."

To read the full article, click here.

Stark & Stark Shareholder Steven L. Friedman Featured in Article About Sen. Frank Lautenberg

Stark & Stark — Tue, 11 Jun 2013 07:46:09 -0500

Stark & Stark Shareholder Steven L. Friedman, Shareholder and Chair of the Trusts & Estates Group, was featured in the article "Before closing up shop, Lautenberg campaign committee has a debt to pay," published by the Sunlight Foundation on June 6, 2013.

The article discusses the recent passing of New Jersey Senator Frank Lautenberg, who died Monday, June 3, 2013 at age 89, and left behind a campaign committee with nearly $1.1 million in debt. The Lautenberg for Senate committee's debts must be settled before the committee closes, and because the debt was caused by loans made by Lautenberg himself, the right to collect the campaign debt would now fall to his estate.

Mr. Friedman, who was interviewed for the article, stated that Mr. Lautenberg's beneficiaries have the right to decide whether to forgive the debt if the senator did not specify in his will whether the loans should be turned into contributions, which Mr. Friedman believes is likely the case.

To read the full article, click here.

The New Jersey Adult Guardianship and Protective Proceedings Jurisdiction Act

Paul W. Norris — Mon, 10 Jun 2013 12:45:48 -0500

In December of 2012, the State of New Jersey adopted the New Jersey Adult Guardianship and Protective Proceedings Jurisdiction Act. This same Act has been adopted by a majority of U.S. States. The purpose of this Act is to insure uniformity concerning potential Jurisdiction issues which may arise between the U.S. States with regard to guardianship and other protective proceedings initiated in either the State of New Jersey or any other State. Often referred to as a “Granny Snatching Statute”, this Act has certain safeguards which prohibit a family member from quickly removing an elderly relative from this person’s domicile, and thereafter, initiating Guardianship Proceedings or other proceedings within a different State. As mentioned above, the majority of U.S. States have adopted this Act to insure that their respective Courts treat any alleged “Granny Snatching” issues uniformly.

The Statute contains numerous Sections which define when a State may exercise Jurisdiction over a Guardianship or other Protective proceeding. One of the important definitions in the Act the definition for “Home State”. The Act requires that a person reside in a State for at least six (6) months immediately before the filing of a Petition for the appointment of a Guardian or a Protective Order, or if none, a State will have Jurisdiction if the Respondent was physically present including any period of temporary absence for at least six (6) months ending within the six (6) months prior to filing the Petition. Another important definition of the Act is the definition of a “Significant Connection State”. Under the Act this means a State, other than the Home State, in which Respondent has a significant connection other than mere physical presence and in which significant potential evidence concerning the Respondent is available.

Section 9 of the Act is the primary Section which the Courts must review for the purpose of determining whether they have Jurisdiction to Appoint a Guardian or issue a Protective Order.

A State may have Jurisdiction if it is the Respondent’s Home State, as defined above, or if it is a Significant Connection State as defined above, and other conditions are met. If the Respondent does not have a Home State, or the Respondent does have a Home State, however, no Petition for Appointment is pending; a Party may seek to commence protective proceedings if the State in which the Court is hearing the matter is a Significant Connection State.

Another important Section of the Act is Sub-Section 12. This Section provides that if a Court has appointed a Guardian or Issued a Protective Order that it has exclusive and continuing Jurisdiction over the proceeding until such time as it is terminated by the Court or the Order expires by its own terms. This Section is important, as it prevents other Courts from attempting to exercise Jurisdiction once an Order is in place. Provided the Order is issued appropriately and involves the Respondent’s Home State or a Significant Connection State, any action brought in any other State would be barred.

The Act also contains numerous other Sections which delineate how the Courts are to cooperate regarding any Inter-State Jurisdictional issues, and also provide a means for taking Discovery if there is an Inter-State Jurisdictional issue which merits consideration. Finally, the Act has a Section which addresses Emergency Jurisdiction under circumstances which the Court deems are an Emergency even in the absence of a Significant Connection State or Home State, provided the Respondent is physically present in that State’s Court system. This Act also has other Sections which define how the Courts are to interact if more than one action is proceeding in more than one State.

The main purpose of the Act, however, is to insure uniformity and to prevent “Granny Snatching” from taking place. The time periods set forth under the “Home State” definition, as well as the Section which defines a Significant Connection State, allow the Courts to void attempted “Granny Snatching” should an action not be properly filed. It is for these reasons that the Uniform Adult Guardianship and Protective Proceeding Jurisdiction Act is a positive step forward for the State of New Jersey and other member States.

Stark & Stark Shareholders Attended ICSC "Trenton Day" at State House

Stark & Stark — Fri, 07 Jun 2013 11:21:18 -0500

New Jersey ICSC Government Relations Committee held its “Trenton Day” at the New Jersey State Capitol. Attending this program were Stark & Stark Shareholders Thomas S. Onder and Jerry A. Nelson of the firm's Commercial Real Estate Group. Tom, Jerry and the other members of Committee in attendance were provided the unique opportunity to meet with state legislators and their staff to discuss key issues impacting retail real estate ownership and development in New Jersey. Specifically, topics discussed included extension of the COAH Moratorium for commercial developers, Economic Opportunity Act of 2013, and storm water issues in light of Hurricane Sandy.

Post-Sandy "Bad Faith" Bill Targets Insurers

Tara A. Speer — Thu, 06 Jun 2013 08:45:36 -0500

While Superstorm Sandy brought with it destructive winds and tidal surges, it also ushered in tides of change for New Jersey’s insurance market and regulatory scheme. Now that insurance company coverage decisions are starting to emerge, the New Jersey Unfair Claims Settlement Practices Act, codified as N.J.A.C. 11:2-17.1, et al., is in the spotlight. The Act is currently only enforceable by the New Jersey Department of Banking and Insurance and action is typically only taken if a pattern of abuse is evident. Accordingly, individual insureds essentially have little to no recourse against insurance companies that overshoot the regulatory time frames for issuing coverage decisions and/or payments, or companies who make claim decisions without a proper investigation. A new bill, S2460, introduced in January 2013, seeks to change that by giving insureds a private cause of action against their insurance companies for “bad faith.”

The bill has been tabled for the time being while amendments are made. The bill, as it stands now, would provide insureds with several benefits, including prejudgment interest, the right to recover the full amount of damages as set forth in a final judgment awarded to them regardless of the policy limits and in some cases, punitive damages. Of particular importance, the bill would also provide for fee shifting which would entitle successful insureds to collect reimbursement for their legal fees and costs. Additionally, the bill would be effective retroactively to October 2012, to encompass all Sandy claims.

Whereas the bill would include various types of insurance, federal flood policies will likely be excluded. The National Flood Insurance Program is administered by FEMA and is governed by federal law. Because S2460 would call for a change in State law, not Federal law, there would be no impact to flood policies. However, for insureds who have sustained wind damage or other losses not covered by their property policies and have taken issue with the claims handling practices of their insurers post-Sandy, the bill would certainly provide them with important options.

Bad faith claims in New Jersey, while not currently permitted by statute, are permitted by case law. See Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474 (1974); Pickett v Lloyd’s, 131 N.J. 457 (1993). However, the burden that an insured must meet is high and the success rate of these cases is limited. S2460 would be a welcome change for policyholders by providing them with a fighting chance against insurers who are employing bad faith claims practices. We will continue to monitor the progress of this bill in the months ahead in the hope that it will be enacted with all of the proposed protections intact.

Building Owner Not Liable for Worker's Death from Water Contamination

Jerry A. Nelson — Wed, 05 Jun 2013 08:39:45 -0500

A building owner recently prevailed in a wrongful death and survivorship action involving Legionnaires’ disease caused by contamination in an office building’s water supply system. On May 28, 2013, the Appellate Division upheld the trial court’s ruling granting the owner summary judgment in Anthony Vellucci, Etc. vs. Allstate Insurance Company, Et Al., App. Div. Docket # A-2905-10. It is an important decision for property owners, managers, employers, brokers, and others in New Jersey because it involved deadly contamination and shows that you can avoid liability by taking appropriate measures.

The decedent was employed by Allstate in an office in the commercial building. The trial court had dismissed Allstate from the case and then granted the building owner summary judgment, stating: “The plaintiff offers that the building owner has an obligation to provide safeguards necessary to make its premises reasonably safe for the uses [it] has invited others to make, but the Court finds that Mack-Cali did so and that [Legionella] infection is a rare occurrence and that Mack-Cali owed no duty to take special precautions against [Legionella] bacteria.”

The Appellate Division concluded that summary judgment was properly granted, stating: “The prevailing industry and regulatory standards do not impose a duty on Mack-Cali to take proactive measures to ensure that a commercial office building’s water supply is not contaminated by the Legionella bacteria. Absent evidence that Mack-Cali actually knew or should have known, through the exercise of reasonable maintenance measures, that the building’s water supply had been contaminated with the Legionella bacteria, Mack-Cali is not liable for decedent’s demise.”

In deciding in favor of the building owner, both the trial judge and Appellate Division relied on Carvalho v. Toll Brothers & Developers, 143 N.J. 565 (1996) and balanced “several factors -- the relationship of the parties, the nature of the attendant risk, the opportunity and ability to exercise care, and the public interest in the proposed solution.” The Appellate Division applied these legal principles, stating: “Plaintiff did not present any rational basis to impose a duty on Mack-Cali to forsee the advent of the Legionella bacteria in the building’s water system... Although tragic in its result, decedent’s case was an isolated one. Once relevant information concerning decedent’s illness was brought to its attention, Mack-Cali took appropriate measures to investigate the matter and ascertain what needed to be done to prevent a recurrence.”

The Court noted that Mack-Cali retained a certified industrial hygienist to investigate and take samples of the building’s water for testing and that the investigation was “extensive” and included a survey of the entire building, multiple water samples, testing, and a report. The Court also noted that Allstate retained its own occupational and environmental health consultant to test the building’s water system, and that Mack-Cali hired a water treatment provider to clean the building’s plumbing system as recommended and “after the remediation was completed, there was an extensive period of continued testing.”

This case is important because it emphasizes the defense of taking appropriate measures. Based on the “salient facts” of this “isolated” case of a “rare occurrence”, the Appellate Division found that appropriate measures were required after learning of the illness “to investigate the matter and ascertain what needed to be done to prevent a recurrence”. But other courts or circumstances could require additional proactive and other appropriate measures both before and after learning of an illness. The big question for you and your matters is what will be deemed “appropriate measures” to minimize risk?

Evaluating your legal issues requires careful review on an individual basis with experienced counsel.

Shareholder Maria P. Imbalzano Published in US1

Stark & Stark — Fri, 31 May 2013 08:13:06 -0500

Stark & Stark Shareholder Maria P. Imbalzano, member of the firm's Divorce Group, authored the article, "The Importance of a Savings Component in Alimony," published in U.S.1 on May 29, 2013.

The article discusses the importance of saving money after parties are no longer sharing expenses. The standard of living established during marriage is one of the major factors used to determine any award of alimony. Ms. Imbalzano explains, "If the recipient of alimony is a homemaker, or earns substantially less than the breadwinner of the family, he or she will need to factor in a savings component to their current budget so as to approximate the lifestyle during the marriage."

Ms. Imbalzano goes on to explain that "the facts of each case will help determine the needs of the recipient spouse for support and the ability of the payor spouse to pay alimony."

To read the full article, click here.

Two Stark & Stark Shareholders Named Franchise Times Legal Eagles

Stark & Stark — Thu, 30 May 2013 11:22:34 -0500

Stark & Stark Shareholders Rachel Lilienthal Stark and Adam J. Siegelheim have each been selected as Franchise Times Legal Eagles. The annual list of Legal Eagles identifies the best attorneys, as designated by their clients and peers, from all over the United States and Canada.

This year, over 775 nominations were submitted, and 154 were selected as Legal Eagles. Ms. Stark is a Shareholder in Stark & Stark's Business & Corporate Group. Mr. Siegelheim is a Shareholder and member of Stark & Stark's Business & Corporate and Franchise Groups.

For more information on the 2013 Franchise Times Legal Eagles, click here.

Thomas S. Onder is Panelist for Mercer County Bar Association CLE Seminar

Stark & Stark — Thu, 30 May 2013 08:17:52 -0500

Stark & Stark Shareholder Thomas S. Onder will be a panelist for the seminar "Family & Bankruptcy: Dinner CLE Seminar" held by the Mercer County Bar Association on Thursday, June 20, 2013. The seminar, being held at Rho Restaurant in Trenton, New Jersey will be held from 5:30-8:30pm, and attendees can earn up to 2.0 New Jersey, Pennsylvania and New York CLE credits.

Mr. Onder will be joined by Hon. Catherine M. Fitzpatrick, P.J.Fm. and Tentatively Selected Bankruptcy Judge Christine M. Gravelle, Esq., as well as fellow panelists Jennifer Zoschak, Esq. of Teich Groh and Rebecca Esmi, Esq. of the Esmi Law Firm. The seminar will discuss:

The Effect of a Bankruptcy Filing on Equitable Distribution
How Alimony, Child and Other Support Obligations are Treated in a Bankruptcy Proceeding
When and Where Relief from the Bankruptcy Code's Automatic Stay is Needed
Interplay of Bankruptcy and Family Proceedings on Assets, including IRA, Pension, 401k and Other Assets
Getting Paid Your Attorneys' Fees in a Bankruptcy Proceeding

For more information, click here.

Stark & Stark Shareholder Brian A. Carlis Featured in Wall Street Journal Article on Finra

Stark & Stark — Wed, 29 May 2013 13:39:55 -0500

Brian A. Carlis, Shareholder and member of Stark & Stark’s Securities Arbitration Group, was featured in the article, “Few RIAs Accept Finra Invitation,” published in the Wall Street Journal on May 29, 2013.

The article discusses the meager RIA response to Financial Industry Regulatory Authority (“Finra”) expanding its arbitration forum to include registered investment advisors. Traditionally the Finra arbitration process was used solely by broker-dealers. This attempt to take over the role of overseer from the Securities and Exchange Commission (SEC) would mean lower arbitration fees for brokerages who would otherwise turn to the American Arbitration Association (“AAA”) to resolve issues with customers or employees.

Mr. Carlis, who represents RIAs in securities arbitration proceedings, explains that the higher AAA fees deter investors with small financial claims who are seeking a quick or cheap settlement. However, Finra is better equipped to handle securities disputes and ultimately clients would save money in the long run, even if it meant having to amend pre-dispute agreements in their contracts with clients to reflect this change in plan.

Mr. Carlis believes that many RIAs are reluctant to commit to Finra’s system until they see how others fare in the program. He said that as the first few cases are handled by Finra, he expects the number of RIAs who switch over to Finra to grow. Mr. Carlis “routinely discusses the pros and cons of both forums with his RIA clients, who might have to foot a hefty bill for an AAA hearing.”

Landlords Buy, Finance, Improve, and Sell Properties Now

Jerry A. Nelson — Wed, 29 May 2013 09:09:52 -0500

Would you like to buy, finance, improve, or sell properties? Landlords are taking advantage of these opportunities now, according to two recent articles in The Wall Street Journal.

The May 22, 2013 article entitled “Starwood Capital Goes Shopping for Malls”, reveals that landlords are buying and financing retail properties. Other landlords are selling in all categories of commercial real estate and one the largest real estate IPOs since the financial crises is being prepared. And other landlords are upgrading properties to attract tenants and increase rents. Landlords are acting now to take advantage of low interest rates, available financing, increased rents and rising values.

Landlords are also improving properties now by transforming vacant and aging office parks into new uses, according to the May 22, 2013 article entitled “Office Parks Get a Makeover". New uses include apartments, stores, movie theaters, restaurants and hotels. Some landlords have made these changes due to high vacancy rates, including vacancy rates of 17% or more in suburban markets, where some vacant office complexes may have become obsolete. And local officials in many communities have approved plans for such changes.

Before you buy, finance, improve, or sell properties, careful planning is required. For example, governmental, construction, operation, tax, and other requirements and restrictions need to be evaluated and addressed. And it is important to develop a strategy to quickly achieve your goals.

Evaluating legal issues with your properties requires careful review on an individual basis with experienced counsel. The attorneys in Stark & Stark’s Commercial Real Estate Group can help you minimize risks, maximize opportunities, and meet your commercial real estate needs.

Homeowners Insurance Policy Summary Will Be Required Post-Sandy

Tara A. Speer — Wed, 29 May 2013 08:18:50 -0500

It is no surprise that legislation mandating changes to homeowners insurance in New Jersey has begun to make its way through Trenton following Superstorm Sandy. Most recently, a bill was signed into law which adds information to be included in the required Homeowners Insurance Consumer Information Brochure which accompanies new and renewal policies. The new law will require the inclusion of a one-page summary of the policy including “notable” coverages and exclusions, as determined by the Commissioner of Banking and Insurance.

Lawmakers have made clear attempts to insulate insurance companies from liability as it relates to this new requirement. For starters, the law expressly states that the coverage summary shall not be considered a replacement for the terms outlined in the policy, that it will not alter coverage and that it will not confer new or additional rights beyond those contained in the policy. In addition, the summary will specifically state that it is provided as “guidance” only. Essentially, the summary will be akin to a Certificate of Insurance, which provides policyholders and/or certificate holders with policy data which they expect to be able to rely upon (what’s the purpose of having them if you aren’t supposed to rely upon the information contained in them) but which is provided for “information only” and is not a substitute for the policy language itself.

Despite the lawmakers’ best efforts, the summary will likely spawn litigation nonetheless. First and foremost, there will undoubtably be debate over the use of the term “notable.” It is impossible to predict what portions of a policy may or may not become important following a particular loss. What may not appear “notable” today may become central to a loss next week. “Notable” is a subjective term, open to interpretation, and that’s what insurance coverage litigation is all about. Policyholders with uncovered losses that involve exclusions that were not identified in the summary as "notable” may argue that they were mislead, etc. This will surely be an issue that will arise, however, since the Commissioner will have the final say on what is or is not “notable” it is unclear at this stage how much responsibility and/or liability the carriers will have for the contents of the notification.

Secondly, there are bound to be disputes over semantics. Despite the “guidance” only disclaimer, there will likely be situations where a Court could determine that reasonable minds could disagree over how the wording used to describe the coverage in the summary can or should be interpreted. In New Jersey, policy ambiguities have traditionally been decided in favor of the insured. Although the summary will not be part of the policy, it is intended to provide guidance and if the wording used can be viewed as misleading, litigation will follow.

Third, it is unclear what will happen in the event of policy endorsements. The law requires the notification to be given “annually at the time of renewal, or as otherwise ordered by the Commissioner.” As it stands now, the law is silent as to whether a revised summary will be issued if mid-term changes are made to a “notable” coverage provision in the policy. Unless the Commissioner later decides to address this issue, there will undoubtably be disputes if a loss occurs and the policy and the summary are at odds.

Overall, providing policyholders with more information is a step in the right direction, so long as it explains often confusing insurance policy terms and coverages in plain, simple wording, without muddying the already hard to navigate waters of insurance policy interpretation. Hopefully regulations will be promulgated which clarify some of these issues. Otherwise litigation will be inevitable.

It should be noted that the effective date for the change has yet to be determined. The law requires that the Department of Banking and Insurance create a time line for implementation. Whether it will be required in policies issued before this year’s hurricane season remains to be seen.

Documenting Change Orders in Construction Projects

Paul W. Norris — Tue, 28 May 2013 08:57:09 -0500

During any construction project, whether a simple residential project or a complex commercial one, there are often changes to the scope of work which differ from that originally set forth within the architectural plans. These changes to the plans, whether they increase the cost or reduce the costs of the project are called Change Orders. Virtually every Construction Contract has clauses which address the proper way to document Change Orders for both the benefit of the Contractor as well as the project owner. Problems typically arise in the performance of Contracts when either one or both of the parties fail to properly document change orders. As a General Contractor or Sub-Contractor, it is crucial that you carefully and fastidiously follow the format as to what is required under the Construction Agreement for change orders. Virtually every Construction Agreement requires that Change Orders be in writing and that they be signed by all parties prior to the performance of any additional work. This is particularly important in the renovation of existing residences, as the New Jersey Consumer Fraud Act can expose a Contractor or Sub-Contractor to great harm should the change order not be properly documented. The issue, however, is equally important in the context of a commercial project, as the Sub-Contractor or General Contractor may have a difficult time in obtaining payment from the project owner if the Change Order is not properly documented.

In these tight economic times, it is important that every Contractor or General Contractor maximize their profits on a project. One way to ensure this takes place is to properly prepare the Change Order requests in accordance with the Contract and to submit them for the owner’s approval prior to performing work. This also gives all parties a fair opportunity to discuss any additional work prior to performance. As such it is suggested that a Contractor or Sub-Contractor develop an internal form that it utilizes on every project with regard to Change Orders.

Provided the form is properly drafted, it should suffice with regard to any contractual relationship; however, some slight modifications may be necessary under certain circumstances. Although time is money, it is important that the Sub-Contractor or General Contractor take the necessary additional time to secure the owner’s written approval prior to performing any additional work. This short period of inactivity will ensure full payment at the end of a project without any dispute as to the work that was performed. Clearly, the last thing a Contractor needs is a dispute with regard to costly extras.

Should a Contractor have questions with regard to the proper format of a Change Order and should a Contractor need help in litigating the validity of a Change Order, it is strongly suggested that they consult with an attorney. Stark & Stark has attorneys with experience in this precise area of law.