Business Law

Published on: February 10, 2014

Enforceability of Letters of Intent

A letter of intent is a document executed generally by businesses to outline the basic terms of a commercial transaction, whether that be a complicated sale of goods or services or a real estate transaction. A letter of intent is entered into in the early stages of negotiation, when major obligations and expectations have been agreed upon, but specific details have not yet been determined. Letters of intent are useful in negotiating complex commercial transactions since they can provide a basic foundation of the understandings between the parties prior to taking part in lengthy and expensive research, investigations, financial review, environmental inspections, or other due diligence that must be conducted prior to the execution of a formal contract.

Perhaps the most important concern in drafting a letter of intent is whether the parties intend for that letter, or any sections of it to be binding. If the letter of intent resembles a contract too closely, under New Jersey contract law it could be considered an enforceable contract when the parties have actually yet to finalize the details of their agreement. That result could potentially leave one party unable to avoid a transaction that, following further negotiations or due diligence, proves to be unexpectedly disadvantageous. However, if the parties want the letter of intent to be binding, it is important to ensure that this intent is clearly set forth and agreed upon in the language of the document.

In many cases, letters of intent include both non-binding and binding terms which should be clearly delineated in the document itself. Certain sections of a letter of intent, such as a confidentiality or non-disclosure clause, will generally be considered binding because they are immediately applicable at the start of the negotiations. For instance, if the parties need to exchange information during the negotiations which is private, includes trade secrets, or is otherwise confidential in nature, it only makes sense that the confidentiality clause in the letter of intent be immediately binding upon the parties. Likewise, provisions such as those which promise exclusive rights to negotiate are also more likely to be binding since they too are immediately applicable while negotiations are continuing.
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Published on: January 28, 2014

UCC Liens and Securing Creditors’ Rights

by Pauline M.K. Young

A lien is a legal claim on property based upon a debt owed to the lien holder or creditor. It allows a creditor to use the debtor’s property as security when a debtor fails to repay a debt. It provides excellent protection for collection of a bad debt. For instance, while a debt may be discharged in bankruptcy, a creditor can still seize and sell collateral secured by a UCC lien. There are many ways to create a lien. For example, tax liens are imposed when someone forgets to pay their taxes; mortgages create liens in real estate; a judgment in a lawsuit creates a lien for the judgment amount awarded.

A UCC lien is obtained when a debtor, such as a borrower, and a creditor, such as a bank agree to ensure the repayment of the debtor’s debt with the security interest of a lien on personal property under the Uniform Commercial Code . The debtor still owns the personal property and retains possession of it, but the creditor also has an interest in it as well.

The Uniform Commercial Code (“UCC”) is a group of laws created to standardize the laws across the United States related to commercial transaction. Most states have adopted a significant portion of, if not all of, the UCC’s proposed laws. A UCC lien is a lien which has been obtained through the execution and filing of a UCC-1 financing statement, generally with the state’s Secretary of State. In New Jersey, this UCC-1 form must be filed with the New Jersey Division of Revenue and Enterprise Services. UCC liens may generally be placed on any property that is agreed to, such as equipment or vehicles.
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Published on: December 5, 2013

Internet Gambling in New Jersey

by Pauline M.K. Young

Gambling is one of the many activities that are regulated primarily by state laws (as opposed to federal laws). On February 26, 2013, New Jersey Governor Christie signed into law legislation allowing internet gambling, making New Jersey only the third state to allow internet gambling (after Nevada and Delaware). While there is a federal law called the Unlawful Internet Gambling Enforcement Act, which does, to a certain extent, restrict online gambling, that law allows individual states to permit and regulate internet gambling if the state so desires.

Atlantic City, New Jersey has always been a hot spot for gamblers from all over the world since the late 1970s and early 1980s. However, over the past several years, Atlantic City has been struggling financially with the increase of gambling in neighboring states. Therefore, New Jersey decided to combat this struggle by allowing online gambling. Six already established brick and mortar casinos were able to obtain internet gaming permits: Borgata, Trump Plaza, Trump Taj Mahal, Bally’s, Caesars, and the Golden Nugget. The first five of these permit holders were given approval to participate in a five day test run or “soft” start, of the internet gaming beginning at 6 p.m. on Thursday, November 21, 2013 (the Golden Nugget had not met all requirements in time to receive approval), with 13 websites approved for the online gambling.
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Published on: October 28, 2013

New Jersey’s Administrative Law Courts

by Boris Peyner

As our society has grown more complex, the government has been forced to take on more responsibilities. It created administrative agencies in the executive department, including for example, the Department of Environmental Protection, the Board of Public Utilities, the Merit System Board, the Department of Community Affairs, the Casino Control Commission, and Health and Senior Services. These agencies regulate in their respective areas, investigate and prosecute violations, and make decisions and issue penalties. These agencies are known as the “fourth branch” because they combine the functions of all three government branches.

The New Jersey Office of Administrative Law (“OAL”) is an independent state agency that provides independent and neutral hearings over these agency’s actions and rulemaking procedures. Administrative Law Judges (“ALJs”) hold trials to determine facts and make recommended decisions when individuals dispute agency actions. The agency itself then makes final decisions based on the ALJ’s opinion, which can be appealed to the Appellate Division of New Jersey’s Superior Court, and then to the New Jersey Supreme Court.

What To Expect At An OAL Hearing

A request for a hearing should be sent to the appropriate state agency making a decision. That agency will then send the case to the OAL for a hearing. In “contested cases” an ALJ will be assigned, and hold a trial. The ALJ makes a recommended decision which it sends to the agency that sent the case to the OAL. The head of that agency will review the opinion and has the right to adopt, reject, or modify the opinion. That agency’s head is the final decision maker. An appeal of the final decision is available to the Appellate Division of the Superior Court within forty-five days of the date of the final decision.

Notice of Filing

When a case is sent to the OAL a Notice of Filing or a Notice of Filing and Hearing is mailed to all the parties. The notice will identify the agency that sent the request and will generally contain information that can help a party prepare for a hearing, including the issues that will be discussed at the hearing.
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Published on: October 14, 2013

Alternative Dispute Resolution

by Pauline M.K. Young

In years past, when parties had a dispute, they resolved it by filing a lawsuit. In the last decade, however, parties – and New Jersey’s courts – have increasingly resorted to alternative dispute resolution (often called “ADR”) instead of lawsuits. There are two main types of ADR, arbitration and mediation.

In arbitration, the parties agree that one or more neutral persons, known as “arbitrators,” will hear testimony, review evidence, and make a final decision which the courts will enforce as binding upon the parties. There is a limited amount of discovery of evidence in arbitrations, so the process is faster and generally less complex.

With limited exceptions, there is no opportunity for appeal and the arbitrator’s decision is final. Parties to arbitration give up certain rights, such as the right to a jury trial or to appeal the arbitrator’s decision. Because arbitration is faster, less complex, and results in a final decision, it can be significantly less expensive in the long run. However, that is not to say that arbitration is necessarily a “cheap” process.
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Published on: September 24, 2013

Fair Credit Reporting Act

by Boris Peyner

The health, stability, and strength of a nation’s economy is directly linked to its banking system. The health, stability, and strength of a nation’s banking system is directly related to a fair and accurate credit reporting system. Congress realized how damaging inaccurate credit reports can directly impair the efficiency of the banking system and therefore passed the Fair Credit Reporting Act (“FCRA”) in 1970. This provides strong protection for New Jersey residents in financial difficulty.

The Fair Credit Reporting Act was enacted to eliminate abusive debt collection practices that contributed to personal bankruptcies, martial instability, loss of jobs, and invasions of an individual’s privacy. The Act’s purpose is to ensure fair debt collection.

The Fair Credit Reporting Act prohibits debt collectors from communicating with a debtor, in connection with a debt, if the debt collector knows the consumer is represented by an attorney. The FDCPA specifically prohibits debt collectors from engaging in any harassing, oppressive, or abuse conduct in connection with debt collection. For example, repeatedly calling a person with the intent to annoy, abuse, or harass that person has been found to violate the act.

The act also prohibits debt collectors from using any false, deceptive, or misleading representation to collect a debt. For example, a misrepresentation of the legal status of the debt or use of any false representation to collect the debt is a violation of the FDCPA.
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Published on: August 28, 2013

Drafting New Jersey Arbitration Agreements is Important if at a Later Date a Dispute Arises

by Boris Peyner

In New Jersey nobody can be forced to arbitrate a dispute unless there is an agreement to do so beforehand. Arbitration agreements are controlled by the Federal Arbitration Act and the New Jersey Arbitration Act.

Arbitration is a process that utilizes a neutral third party to decide a dispute. Disputes are submitted to an arbitrator who makes a binding decision. An arbitrator will review the evidence and then render a binding decision. The decision can then be entered as a judgment by a court and enforced by the Sheriff.

Parties can agree to arbitrate a dispute even after litigation is filed. Arbitration is typically less expensive and faster than litigation. Discovery of information between the parties, however, is greatly reduced, typically limited to the exchange of relevant documents, thereby further reducing costs. Arbitrations themselves are conducted like trials, but are less formal and in private. Arbitrators are then compensated for their time by the parties. Unfortunately, arbitration rulings, generally, cannot be appealed, but that finality can make arbitration less expensive.

Parties to a dispute have considerable discretion about the terms and conditions of arbitration in their Agreement to arbitrate. For example, the parties can decide if the dispute will be submitted to one arbitrator or multiple. The parties can also decide to select a particular arbitrator, or have a neutral third-party select the arbitrator.

However, one thing that is clear in New Jersey is that once the parties agree to arbitrate a dispute, they must do so. In Petersburg Regency, LLC v. Selective Way Insurance Company, the litigants were three years into a civil litigation. The litigants then decided to arbitrate the dispute but did not prepare a written agreement that dictated the specific terms and conditions of the arbitration. When the arbitration was about to proceed the parties had a disagreement to some key terms and conditions and demanded that the arbitration be remanded back to the trial court. Initially the trial court determined that there was “no meeting of the minds” and the parties were required to litigate. On appeal, however, the Appellate Division of New Jersey’s Superior Court ordered the case back to arbitration.
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Published on: August 19, 2013

Mediation – An Alternative Option for Dispute Resolution

by Pauline M.K. Young

While many lawsuits settle prior to trial, many cases may proceed to the eleventh hour of litigation, just prior to trial, to settle. Though litigation may involve years of depositions, written discovery (questions and sworn answers regarding claims), and motion practice, the parties rarely, if ever, have a chance to sit down face-to-face with their opponents and try to resolve their case. Yet often this can be the best way for the parties to come to a resolution. This is why New Jersey courts have been so supportive of mediations.

Indeed, in many cases, the Court will require the parties to attempt to settle their dispute through mediation. When requiring the parties to attend court-ordered mediation, the court will initially assign the parties a mediator who has been approved by the court – meaning he or she has received the requisite mediation training.

However, the parties may also agree to select their own, mutually agreed upon mediator. This may occur if the parties believe that certain legal issues exist that the assigned mediator has insufficient knowledge of or experience with, or if there is some conflict or other relationship between the mediator and a party that makes it inappropriate for the mediator to be involved in the matter. If the court does not order the parties to mediate, the parties may still agree on their own to mediate the matter and may ask the court for a referral to mediation or simply have their own mediator.
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Published on: July 18, 2013

New Jersey Companies Must Develop Procedures to Mitigate The Threat of Trade Secrets Misappropriation

by McLaughlin & Nardi, LLC

It isn’t every day that the activity of your business catches the attention of the White House. In February 2013, the Executive Office issued its Administration Strategy on Mitigating the Theft of U.S. Trade Secrets, the result of the collaboration of different departments to develop a strategy to protect the innovation that drives the American economy. Trade secret theft is bad for businesses, and it is bad for the United States, with results that could be detrimental to our economy and American jobs. Efforts to steal American trade secrets are on the rise, but your corporation can act to protect itself.

The Administration proposed voluntary “best practices” for private industry to implement to protect its trade secrets, which are geared toward identifying the threat to targeted technologies and examining corporate procedures in light of the threat and potential impact. Businesses are responsible for making sure they have information and reporting systems and for monitoring those systems to avoid illegal conduct by the businesses employees as well as to protect against outside threats. The following are some of the steps to take in developing company procedures:

Determine the specific information to be regarded as a trade secret.
Take reasonable measures to protect the secrecy of the information.
Identify potential risks and threats to identified trade secrets.
Take additional measures to protect trade secret information where appropriate.
Examine internal operations and policies to determine whether current approaches are mitigating the risks and factors associated with trade secret misappropriation, considering the following areas:

research and development compartmentalization
information security policies,
physical security policies, and
human resource policies.

Periodically reevaluate procedures to determine the adequacy of mitigating threats to the trade secrets.

Published on: July 17, 2013

Litigation Implications of Social Media

by Boris Peyner

The impact of social media continues to grow in litigation. Social media is becoming increasingly more popular in society. Social media is important for companies to utilize for advertising and marketing to allow businesses to stay competitive. Various sites like Facebook, Google Plus, Twitter, Instagram, Flicker, LinkedIn, YouTube and the like provide companies the opportunity to connect with millions of people. However, they simultaneously create legal risks that can range from bad public relations to brand confusion. Social media is also used by many people during their free time to make various posting about all aspects of life.

In litigation, lawyers are using social media to screen jurors, jurors use social media to post about cases they are sitting in, judges are using social media to make sure jurors are not using it, people use social media in general to offer legal advice on matters in which they have no experience, and jury consultants are following social media to give advice on trial strategy. Social media is paving the way to new litigation strategy.

Social media implicates considerable privacy concerns, allowing people to learn the most intimate information about one another. Posted content may be available to family, potential employers, school admission officers, romantic contacts, and others. Even if the content is removed from the social media site it may still continue in cyberspace. Further, once litigation is pending or reasonably foreseeable, there is a duty to preserve evidence. The material can be taken down off the social media website, but must be preserved. This means that even if a post is removed, it still must be maintained and produced if requested in discovery.
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