Rogers & Tartaro Business Litigation Blog

A Perspective on Reasonable Accommodation

angelo@brogers.cc (Beverley Rogers) — Tue, 07 Jul 2009 19:20:26 -0500

A story about the reasonable accommodation for a dog was brought to my attention by the New Jersey Employment Law Blog.

The employer accommodated the disabled employee with the service dog, but did not accommodate the dog with non-skip strips on the floor. A court disagreed with the employer. NJELB rightly points out that this is new: an accommodation for an accommodation.

But here’s my perspective: was the dog serving the role of the “canary in the coal mine”? Apart from any accommodation, was it in the employer’s own self interest to eliminate the condition that was probably also unsafe for humans?

The case is from Montana, far from our usual coverage area. But employers everywhere should be cautious about overlooking their own self-interests and look for the win-win.

Image: Suzi Q, a certified service dog, working in snow in Finland - - also far from our usual coverage area, but it’s a nice photo. Courtesy Wikimedia

We Know Not What Tomorrow Will Bring: Estate Planning

angelo@brogers.cc (Beverley Rogers) — Mon, 06 Jul 2009 22:23:25 -0500

The ubiquitous media coverage of Michael Jackson’s death last week mentioned the plight of his children and the state of his financial assets and woes. This unfortunate situation should serve as a reminder that careful estate planning is not just for the wealthy or Hollywood Elite. Taking care of your affairs now ensures that your loved ones are cared for in the manner you wish once you pass.

Many people believe their estate automatically passes onto the spouse, when in fact the spouse may actually receive less than intended. In Connecticut and New York, the laws of "intestacy" (estates without a will) provide for fractional shares for the spouse if there are children. By contrast, many married couples who write wills give all to the other and only at the death of both do assets pass to the children. Without legal planning, how an estate will be distributed or who the administrator will be is determined by impersonal laws without considering individual circumstances..

Although there are no laws that require the assistance of an attorney in estate planning, we highly recommended it. A "do-it-yourself" will or generic trust may actually be more expensive than consulting a lawyer. Generic forms often do not address the legal requirements of New York or Connecticut. They also will not take into account individual wishes. And then, of course, there may be tax issues that will need to be resolved.

The death of a loved one is always difficult, but with no estate plan, the loss can be compounded by family squabbles and feelings of betrayal -- not to mention an overwhelming amount of paperwork.

Visit some of our archived blog entries for more information.

Image: Last will & testament of Alfred Nobels, dated November 27th, 1895. Courtesy Wikimedia

HAPPY INDEPENDENCE DAY

angelo@brogers.cc (Angelo Tartaro) — Sat, 04 Jul 2009 10:18:53 -0500

Image: Fireworks over the East Village of New York City; David Shankbone, Wikimedia Commons.

Do You Download Music? Willing to Pay the $1.92 Million Penalty?

angelo@brogers.cc (Beverley Rogers) — Tue, 30 Jun 2009 21:30:12 -0500

Intellectual property law is usually not on our beat. But counseling clients who don’t want to settle their litigation is definitely up our alley.

The Wall Street Journal Law Blog featured the Minnesota woman who was ordered by a jury to pay $1.92 million for the music that she downloaded.

In pursuit of our mission to translate legal issues for a non-legal readership, here are the highlights:

• This is the only case of this kind to go to trial – all the others settled;
• This was the second trial; the verdict from the first was vacated on a technical issue;
• The verdict from the first trial had been $220,000;
• The judge from the first trial thought $220,000 was excessive;
• Despite losing to the tune (excuse the pun) of $220,000, the defendant didn’t settle and opted to re-try the case;
• The damages are “statutory damages,” meaning that they are not based on actual loss to the plaintiff, but on the provisions of a statute;
• The range of statutory damages and, therefore, the stakes in the case, were known to the defendant and her lawyers throughout.

We tend to have difficulty convincing clients that litigation is inherently uncertain and that settlement at some point is usually the best option. Here is a good horror story to illustrate our point.

The WSJ Blog post also discusses some of the avenues of appeal, mostly on constitutional grounds, and the possibility that the case may yet settle.

Incidentally, the defendant was accused not just of downloading but putting music in shared folders for others to access without charge. If you download from iTunes (or a similar service), always pay, and never, never put the music in a shared folder. You never know who’s watching!

Images: Ipod Shuffle (above); Wildwood Flower LP, from the days before downloading. Both images courtesy of Wikimedia.

When MYOB becomes NIMBY

angelo@brogers.cc (Beverley Rogers) — Wed, 17 Jun 2009 11:30:00 -0500

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.

Measure Carefully

angelo@brogers.cc (Angelo Tartaro) — Wed, 17 Jun 2009 07:53:01 -0500

Within the “Musings” category of our Blog, I am allowed, on occasion, to go completely off-topic. It’s our way of providing the seasoning that makes for a tastier soup.

An unfortunate report of telephone troubles at the Ridgefield Library severe enough to be covered by RidgefieldPress.com reminded me of my recent adventure with a service provider that shall remain nameless. The adventure involved a much less severe problem, to be sure, but the story is amusing.

We had a technical issue. The way you resolve a technical issue is to open a “trouble ticket” with the service provider’s customer support department. Trouble tickets, I was assured, would be closed within one business day.

After the first trouble ticket, I received no feedback but my own testing told me the problem persisted.

After the second trouble ticket, I received a robotic telephone message that the ticket had been closed. But, my testing revealed the problem still persisted.

After the third trouble ticket, I talked to a human who assured me that the problem could not be solved and that we would have to live with the situation.

A few weeks later, while ruminating on my own, it occurred to me that the manipulation of a parameter that we (the customers) control (a suggestion never made by the service provider) might solve the problem. And, it did.

The measure of customer service according to the service provider (closed trouble tickets within one business day): 100%. Customer service according to the customer (me): 0%.

Image: Wikimedia Commons: “At the Telephone” 1906 sheet music cover of “Blanche Ring’s Telephone Song.”

Use It, Move It, or Lose It: Protecting Your Property Line

angelo@brogers.cc (Beverley Rogers) — Thu, 11 Jun 2009 07:00:00 -0500

The Ridgefield Press recently reported about the Land Conservancy of Ridgefield’s new “Good Neighbor” policy. In general, the program asks neighbors who abut preserved lands to keep track of encroachments, such as dumping leaves or paving driveways. Encroachments hinder the Conservancy’s mission to keep land in its natural state.

This gives me the opportunity to discuss one of my favorite topics, adverse possession.

Many of our clients have mistakenly believed that adverse possession is an ancient and arcane concept, when in fact it comes up all the time, both in Connecticut and New York. Town governments using land for governmental purposes are basically immune but private landowners are not. For private landowners, encroachments could mean the risk of losing part of their land through adverse possession. Over time, 15 years in Connecticut (10 in New York), encroachments can ripen into ownership rights and the original private landowner can lose a portion (or all) of his land.

All landowners should take a tip from the Conservancy and follow their own good neighbor policy: be aware of property lines, observe any encroachments, and deal with them appropriately but promptly.

We would like to express our thanks to the Conservancy for performing an important, valuable and essential service. We all benefit from the preservation of land in its natural state.

Need more information about adverse possession? Click here:

Image: Pierrepont Pond, Ridgefield, CT..

A New Lease on (Your Business) Life

angelo@brogers.cc (Beverley Rogers) — Wed, 27 May 2009 13:52:33 -0500

According to a recent Wall Street Journal blog, vacancy rates at malls and shopping centers in the top U.S. markets have climbed to their highest rates of this decade: 7.9% for malls and 9.5% for smaller, open-air shopping centers.

In today’s challenging economy, many struggling retailers – and residents – are approaching their landlords and asking for financial assistance or a reduction in their monthly rental payments. This practice, once considered a drastic measure, has actually become very commonplace.

Contrary to appearances, the parties are not on opposing sides. Both have the same goal: to keep the renter in business so he can continue to pay the rent. Facing a potentially long recession, it benefits both parties to come to an understanding in these situations.

Retail vacancies are on the rise, even in our own town of Ridgefield. If landlords and tenants come to an agreement, the lessee can continue to run his business, and the landlord continues to have a paying tenant. Of course, the terms of the negotiations should be agreed upon beforehand and clearly spelled out. It is also beneficial to have an attorney present to mediate or help resolve any potential conflicts.

Retail property owners that consent to abatement are putting their own financial future at risk. They also need to thoroughly analyze which of their tenants is deserving of the break; in other words, who is likely to succeed?

Tenants and renters cannot take a “hardball” approach to the situation, despite its frequency in these economic times. They should be willing to make concessions, put limits on the agreements and fully cooperate with the landlord.

Image: New co-working reception area, Executive Pavilion, Ridgefield

Welcome

angelo@brogers.cc (Beverley Rogers) — Fri, 08 May 2009 10:35:33 -0500

Welcome to the new Rogers & Tartaro blog. Our blog has been evolving into this final new site that we’re excited to unveil.

In addition to traditional business and employment law issues, we’ll be focusing on several other subjects, including issues and regulations that affect our own town of Ridgefield and beyond.

Below is an explanation of our revised name, along with a brief summary of the types of posts you might find here.

Main Street – (1) in contemporary usage, “Main Street” has come to mean “not Wall Street.” (2) “Main Street” is associated with small towns, and Ridgefield, the location of our main office, deals with small town issues. (3) Our office is actually located on Main Street.

“And Beyond” –While we are focused locally, issues of interest in any community always include broader subjects along with the local ones. In addition to Connecticut, our practice has represented clients in the courts of New York, Arizona, Maryland, New Jersey Massachusetts, Georgia, Texas and even South America and Europe.

Law and Business –As attorneys, our blog is a legal blog, but we are also small business owners. Our posts will address issues relevant to local businesses, small to mid-sized organizations, and not-for-profits.

Litigation/Disputes –Our posts will comment and educate about interesting litigation issues, but also reflect the broader mandate of our practice: a reasonable, economical resolution of a dispute.

Economics 101 – “I am not an Economist but I play one on my blog.” Along with my law degree, I have a graduate degree in business, so we will comment on economic issues.

We look forward to your comments and input.

Images: Top left, Cass Gilbert Fountain, a Ridgefield, Ct landmark. Side, right, Downtown White Plains, NY. Both images from City-data.com. Images on this post were modified after first published. Our offices are in Ridgefield and White Plains.

Order In The Court Rules

angelo@brogers.cc (Beverley Rogers) — Thu, 30 Apr 2009 20:55:23 -0500

There is no lack of dizzying rules in our court system. Of course, these time-honored regulations serve a great and effective purpose, but nevertheless, sometimes it’s fun to point some of them out.

Today, we will pick on the Connecticut Superior Court and discuss its rules about “venue” for civil cases. Venue refers to the specific court location where your case is to be heard. Civil means “not criminal.”

Suppose you are sued and your adversary selected the wrong location (i.e., they are making you go to Stamford but the correct location is Danbury). A rule says that you have a limited period of time to make a motion to dismiss. The rule seems drastic since “dismissed” seems pretty final. Actually, court decisions have firmly established that the case is never to be dismissed; it is simply moved to the correct venue. Got that? You make a motion to dismiss but never expect the case to be dismissed.

And, what if you don’t make your motion in time? No problem. A different rule gives the court discretion to move the case anyway. So, just ask. However, when you ask, refer to a different rule and don’t make a motion to dismiss. Got that? A motion to dismiss is required… but not really.

Oh and by the way, “dismissed” may not be all that final. Some dismissals are “without prejudice” which means you can take another shot.

However, there is a serious underlying policy behind these rules. Our courts (and this applies to just about any jurisdiction, not just Connecticut) prefer to resolve cases on their merits, whenever possible, and not on procedural issues, like the choice of location. For example, in Connecticut, the stated policy is that the rules of venue for civil cases are intended to provide convenience to the parties

For the lawyers who may want to check me out, send an e-mail or use the Comments facility of this blog and I’ll provide a few citations.

Image: From Wikipedia Commons, State Superior Courthouse, built 1784, at head of State Street, New London, CT.

Severance Dispute? Have a Lawyer on Your Side

angelo@brogers.cc (Beverley Rogers) — Thu, 30 Apr 2009 20:51:11 -0500

The Ridgefield area has unfortunately not been immune to the recession, and our office has seen an increase in requests for consultations from employees working in either Connecticut or New York who have been laid off and believe their employers did not appropriately respect their rights.

Fortunately, several of these disputes are successfully resolved with just a letter. It’s great for the employee and, actually, great for the employer too. Who needs protracted disputes while trying to survive in a tough economy?

But, to those who are thinking of dispensing with legal advice and writing your own letters, “Don’t try this at home.” When there is a potential dispute, it’s imperative to get both the content and tone right, and that takes expertise. Threats of legal action rarely intimidate a party who has access to competent counsel. What’s even worse is making empty or ill-informed threats about non-existent rights that go nowhere.

Really good “lawyer letters” do not threaten. A good letter educates the reader as to the specific nature of the rights being asserted on behalf of the client. The tone, whether conciliatory or firm, must always convey a professional respect for the other side and a willingness to work to resolve the issues.

Sometimes, it can be done with a short letter. Sometimes circumstances require a detailed description of the facts. And, sometimes it works… really well.

Cultural Initiatives Help Local Businesses

angelo@brogers.cc (Beverley Rogers) — Thu, 30 Apr 2009 20:46:07 -0500

For a small Connecticut town, Ridgefield has an impressive number of cultural resources. Unfortunately, however, the economic downturn is having an impact on our local arts. Sponsorship for non-profits like The Ridgefield Playhouse and CHIRP summer concerts has declined, and the future of many programs is at risk.

These organizations are not just sitting idly by, however. In addition to aggressively campaigning for sponsorships, groups are getting creative.

After receiving notice of a grant from the Connecticut Commission on Culture and Tourism, the Aldrich Museum has teamed up with the Ridgefield Playhouse to create the “Look. Listen. Stay.” campaign. The initiative will entice visitors to Ridgefield by offering discounts on special cultural programs, restaurants and stays at local inns. “Look. Listen. Stay.” will run four times, once per month, launching on May 15. The Chamber of Commerce is also participating in the campaign by soliciting its members to offer incentives as part of the package.

Many of these businesses compete against one another but recognize that cooperation is a stronger tool. Spirited competition and neighboring businesses working together both help vitalize a community.

Image: Crowd at dusk in front of Aldrich Museum of Contemporary Art.

CELB Points to Valuable COBRA & Other Employment Resources

angelo@brogers.cc (Angelo Tartaro) — Wed, 15 Apr 2009 16:01:01 -0500

The recession has understandably caused a significant increase in the number of people, in Ridgefield and beyond, seeking counsel about employment-related issues, especially severance agreements and COBRA.

COBRA, of course, is the program that mandates that certain discontinuing employees be offered the opportunity to continue health insurance coverage for a limited period of time. Recent changes in COBRA premium subsidies have been enacted as part of the federal economic stimulus program.

I’ve found some interesting information in the Connecticut Employment Law Blog (CELB), one of my favorite sites. Recent CELB posts offer valuable online resources, primarily for employers but also for employees and other lawyers (like us) who counsel individuals and smaller employers.

Two recent posts on CELB discuss: (1) the penalties and other reasons why employers may want to get active in planning for changes to COBRA: Sounding the Alarm Bells: Three Reasons Why Most Employers Should Get Their Act Together on the COBRA Subsidy Provisions; and (2) resources to help employers meet the April 18, 2009, deadline to provide certain notices: COBRA Changes Are Here: Do You Have An Action Plan?

An earlier post pointed to online sites with general information about employment law, including sites featuring an “employee-oriented” perspective: Looking for Other Employment Law Resources? Look Up The "Top 100" Employment Law Blogs.

A still earlier post featured and pointed to resources available online from the Connecticut Department of Labor: Four for...General HR Knowledge for Employers from the Connecticut Department of Labor. These include discussions of federal and state Family Medical Leave Acts, an updated FAQ: site, a site to obtain posters and guide books and an “Employer’s Guide to Unemployment Compensation.”

Links available on the CELB posts take you right to the resources being discussed.

My thanks to Attorney Daniel Schwartz, author of CELB, for alerting us to these valuable resources.

Ridgefield Chamber Plans New Initiatives

angelo@brogers.cc (Angelo Tartaro) — Wed, 15 Apr 2009 15:42:03 -0500

At a recent meeting of the Ridgefield Rotary Club, I had the opportunity to hear Marion Roth, Executive director of the Chamber of Commerce, speak about some of the new initiatives she and the Chamber’s Board have been working on. Her general goal is to develop a sense of cooperation among the agencies and organizations concerned with economic development, including the Chamber, the Town’s Economic Development Commission and private groups like the Chamber itself and Downtown Ridgefield. One of the Chamber’s most interesting initiatives involves leveraging cultural resources to make Ridgefield a destination for the arts, theatre, restaurants and inns. The "Look. Listen. Stay." initiative will be inaugurated in May, and will coincide with several local events.

These are exciting plans. I regret that for now I can only touch the surface because there is much more to learn about these initiatives and the people, along with Marion, making things happen. Our firm is a member and we’ve supported its past activities (partner Bev, a long time resident, being actively involved). I hope to cover the progress of the new initiatives and report on future developments in greater depth.

Friends Going Into Business Together

angelo@brogers.cc (Angelo Tartaro) — Mon, 23 Mar 2009 08:59:28 -0500

A group of friends and I are considering going into business together. What kind of partnership agreements/incorporations would be best? What exactly is a “closely held business?”

We are often contacted by friends intending to go into business together. The first thing we tell them is that they are now negotiating among themselves so their interests are in conflict. They may each want to consult their own attorneys until the agreements that they need to form the business are put in place. They can waive the conflicts and consult an attorney together but should do so only if they fully understand the conflicts they are setting aside.

The term “closely held business” is generally used to distinguish the business from a publicly traded business. So, it is a business owned by a relatively small number of people. Obviously, there can be wide variations: from one owner to hundreds. And, in specific tax contexts, the definition can be more precise and technical.

Entire books have been written on selection of a form of ownership: sole proprietorship, “S” corporation, “C” corporation, limited liability company (LLC), partnership, limited liability partnership and so on. One of the first considerations should be to effectively limit the liability of the owners. Then, there are many tax and business considerations. The selection has to be based on considerations specific to each business and its principals but here is a general point to remember: after the selection of form of ownership is made, it is important to observe the formalities so that you do not lose any of its benefits.

What Should I Look for in a New Employment Contract? Do I Need an Attorney?

angelo@brogers.cc (Angelo Tartaro) — Mon, 23 Mar 2009 08:53:41 -0500

Most employees in Connecticut and New York are not offered contracts and are hired as “employees at will.” That means their employment can be terminated at any time, for any reason, provided that antidiscrimination statutes are not violated. However, even if hired as an employee at will, a new hire may be offered agreements that are legally binding, such as, non-compete agreements, confidentiality agreements, agreements as to ownership of intellectual property rights.

And, some employees, primarily executive, managerial and professional employees, are offered comprehensive employment contracts. These contracts vary so much it is difficult to identify “what you should look for.” Typically, the contract will have a definite term, provisions for terminating the contract for cause or not for cause, compensation, duties and responsibilities (by incorporating a position description) and provisions governing confidentiality and intellectual property rights. You may be asked to give up the right to sue and to submit any disputes to arbitration. The contract could include many, many other provisions covering specific jobs in specific industries.

So, the short answer to your questions is: if you sign any type of agreement relating to your employment, you are always better off reviewing it first with an attorney of your choice.

I've been laid off and offered a severance package that I think is unfair. What recourse do I have?

angelo@brogers.cc (Angelo Tartaro) — Mon, 23 Mar 2009 08:43:57 -0500

If you’ve been laid off and offered a severance package, you have probably also been given 21 or 45 days to consider the package. First, use the time well. Here are some general principles:

Severance packages are generally negotiable. But, the extent to which you can negotiate varies quite a bit. Employers are not required to offer the same package to everyone as long as they don’t violate federal, state or even local antidiscrimination laws.

Many employers will negotiate because they want something before you leave. They want you to give up your right to sue them for anything in the past or present. They may also want non-compete and confidentiality agreements if you are not covered by similar agreements signed at hiring.

If you ask for a better package, you are technically rejecting the offered package and the employer may withdraw it. Your severance package probably also advises that you have the option to review it with your own attorney. That’s good advice; take advantage of that option. If you try to improve on the package, you will probably be better off negotiating through an attorney who practices employment law.

Image: US Whig Poster showing unemployment during the Panic of 1837, Wikipedia Commons.

Are Arbitrations Fair?

angelo@brogers.cc (Angelo Tartaro) — Wed, 18 Mar 2009 07:00:00 -0500

A recent post on the Wall Street Journal Law Blog discussed a study that found that consumers come out better than expected when they go to arbitration to resolve disputes with businesses (“Consumers Rejoice: After All, Arbitration is Fair, Study Says”).

The Law Blog tone tended to reflect a characteristic degree of skepticism about the study, as did a quoted comment from a public interest lawyer. As pointed out by the post, in some industries, the securities industry among them, arbitration is mandated. Often, the consumer doesn’t realize that arbitration is mandatory for disputes.

So, what’s the story with arbitration? There is no doubt that arbitration resolves disputes more quickly and less expensively as compared to going through the litigation process. That is a key consideration if the amount at issue is relatively small and would be eaten up by the expense of litigation. Also, the process is less formal and more straightforward and understandable.

But, in general, arbitration decisions are almost impossible to appeal successfully, the arbitrator is not required to follow the letter of the law and the arbitrator is not required to give reasons to justify the decision. In other words, the decision is pretty much final and can appear (excuse the pun) arbitrary.

The biggest issue with arbitration is the perception that the arbitrators favor the business over the consumer. That is the issue discussed by the Law Blog post and addressed by the study. From the tone of the post, the writer does not find the study convincing.

Preferably, there would be a set of tools for settling disputes, a set that includes arbitration as well as mediation. Simple disputes with relatively modest amounts at issue should never go to litigation. But, there has to be a reasonable level of confidence in the fairness of the processes. Apparently, the study says we’re getting there but the contrary view is still prevalent.

What Does It Mean to Pre-qualify for a Mortgage ?

angelo@brogers.cc (Angelo Tartaro) — Wed, 25 Feb 2009 16:18:39 -0500

In Washington State, several real estate buyers have sued their bank because they “prequalified” for mortgage loans and later failed to qualify for the loans. Under the law and the customs and practices of Washington State, they buyers lost some $175,000 n earnest money. The story, by Martha Neil is on ABAjounal.com (“Buyers Sue Bank: Bad Prequalification Cost Them Money”). That was Washington State but prequalification can be a problem also in Connecticut and New York.

Here at home, clients often expect a “speedy’ closing because they have “prequalified” for a loan. We have to explain that prequalification often means you have passed a quick credit check based on limited information. What gets you a mortgage loan is a “commitment” letter from the lender and that is based on a complete loan application, an appraisal of the property and other documentation. The delay for clients who expected a quick approval from their lender can be frustrating.

Even more frustrating, often the commitment contains “conditions.” In New York and Connecticut, the conditions can put buyers in a precarious legal position. The contract of sale usually includes a “mortgage commitment date.” On that date, if the buyer, in good faith, is unable to produce a mortgage commitment, the buyer can back out of the contract. If that date passes by and the buyer does not have a commitment, the buyer cannot back out of the contract and must either buy the property (with what funds?) or lose the contract deposit, usually 10% of the purchase price.

Now, what happens if the buyer has a commitment with conditions and let’s the date pass and then can’t meet the conditions? Technically, the buyer can lose the contract deposit. Most cases, in my experience, work out in the end. But, it in the interim there can be quite a bit of tension.

If you understand the limitations of “prequalification” and that there is still quite a bit of homework to do in order to get that loan, the entire process becomes more manageable.

When Does a Real Estate Broker Earn Commissions?

angelo@brogers.cc (Angelo Tartaro) — Fri, 20 Feb 2009 07:00:00 -0500

(Our announced once-per week posting schedule was meant to be flexible and when inspired, like this week, we will post more frequently).

A recent appellate case provides a practical reminder for individuals selling real estate properties. As a bonus, it involves a favorite New York procedural rule, the CPLR 3211(a)(7) motion to dismiss. The case is Steve Elliot, LLC v. Teplitsky, 2009 Slip. Op. 01104 (2d Dep’t).

The court’s decision is short and to the point; this post will exceed it in length but the court does not digress to explain its reasoning to non-lawyers.

The Brokerage Agreement and Commission

A real estate broker sued for a commission although the closing on the sale apparently never took place. The court points out that the usual brokerage contract provides that a commission is earned when “he or she has produced a buyer ready, willing and able to purchase the property upon terms that are acceptable to the seller.” However, the court also points out that the parties are free to add whatever conditions they wish to their agreement.

In this case, the defendant alleged that the agreement unambiguously provided that a commission would not be earned until after the closing had taken place. On that basis, the defendant asked the court to dismiss the complaint. The court declined to dismiss it because, to the court, the agreement was not all that unambiguous (or, cutting out the double negative, it was ambiguous). Thus, there was a question of fact as to when the parties intended the commission to be earned. That, in turn, means no dismissal. The case moves forward, ultimately to trial if it doesn’t settle first.

The reminder: both brokers and clients need to be aware of the contract language and if they intend to deviate from the standard language, they should do so in writing and unambiguously.

The Procedural Issue

As for the procedural issue, this case involved a New York CPLR 3211(a)(7) motion to dismiss, a favorite because of the subtle nuances on which a case can turn. Superficially, this is a motion, like the Connecticut motion to strike, that “tests the sufficiency of the pleadings.” That means if the facts alleged in the complaint do not add up to a legal claim, the case is dismissed at the outset. Whether or not the facts can be proven is not an issue because even if prove, they do not amount to a legal claim.

In Connecticut, on a motion to strike, the test is whether the facts alleged in the complaint state a claim and submission of evidence is not allowed; the complaint is evaluated on its own merits. In New York (at least in the Second Judicial Department), evidence is allowed and the test is whether the plaintiff has a claim.

The distinction, although it may seem to be “inside baseball” to the non-lawyer, is an important one. In this case, submitted evidence, probably the actual agreement, showed that the agreement was ambiguous and that was sufficient to defeat the motion to dismiss.

The motion to dismiss and the motion to strike are, each in its own jurisdiction, important procedural options to short-circuit and end a lawsuit before it gets really expensive. But, the rule can work either way. In this case worked for the plaintiff by showing that the claim was viable.