Business Law

Published on: October 14, 2013

Alternative Dispute Resolution

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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Published on: July 15, 2013

Requirements Before Settlement Funds May Be Disbursed

by Pauline M.K. Young

Litigation can often be a long and painstaking process resulting in two parties who ultimately just want to see the dispute come to an end, and hopefully with a resolution that they are satisfied with. Indeed, perhaps as high as 97 percent of cases are resolved before trial. However, once a case is settled, the time between an initial agreement to settle and an injured party receiving money is almost never instantaneous.

First the attorneys must draft settlement documents. Depending on the complexity of the case, this can be anywhere from a page long to over thirty pages, and the exact language is important. While a plaintiff may not understand why her attorney is fighting with the defense attorney over what she may think trivial, the settlement agreement becomes a contract that will ultimately decide the entire resolution of the case and, in many cases, direct the parties’ actions in the future. Failure to adhere to the settlement agreement’s terms could lead to the case being reopened, a new action being brought, or a forfeiture of everything gained in the settlement. Therefore the specific language is essential to the parties’ security and the integrity and power of the settlement agreement itself.

Once the language of the settlement agreement is finalized and the parties all sign off on their agreement, assuming that the settlement results in one party paying money to another, there will likely be a waiting period for the funds to be delivered. However, even if the money is delivered to the injured party’s attorney immediately, the attorney cannot immediately release the money. The attorney must first ensure that the amount being forwarded to the client is correct and is being legally distributed.
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Published on: May 16, 2013

The Value of a Buy-Sell Agreement

by Jennifer C. Meusel

Every owner of a closely held small business should have an up to date buy-sell agreement.

A buy-sell agreement is a written agreement between business owners. The purpose of the agreement is to ensure that the current owners are protected from ending up owning a business with an unwanted partner (or shareholder). It restricts the owners’ rights to sell or transfer their interest in the business to a third party. The agreement dictates what will happen in the event of the death of an owner, the disability of an owner, the retirement of an owner, the withdrawal of an owner, the bankruptcy of an owner, the divorce of an owner, or one owner’s desire to sell her share of the business.

A buy-sell agreement is the most effective mechanism to ensure for: the smooth transfer of ownership of the business in the event of death, divorce, bankruptcy or retirement of one of its owners; or an agreed upon method for valuation of the business; payment terms and method of funding the payment for the business interest of one of the owners for the buyout of a departing owner; eliminating or minimizing disputes between owners who are retaining ownership and those leaving the business, or between owners and heirs of a deceased owner or other possible unwanted business partners; ensuring that the remaining owners retain control over who their future partners may be; and ensuring that upon the death or disability of an owner, their family is financially secure.

It is crucial that each year after a buy-sell agreement has been finalized and signed that the owners review certain key provisions of the agreement to ensure they still reflect their wishes and changed circumstances:

The valuation formula – the owners should ensure that it continues to reflect the value of the business and their own intent;
The effect of any changes in tax laws upon the terms of the agreement;
The funding mechanisms of the agreement – regardless of the funding scheme contemplated, be it through insurance maintained by the business on the lives of the owners, or through payments over time from the earnings of the business, it is crucial to review and ensure that the funding will be available to effectuate the terms of the agreement;
The structure of the agreement – a redemption agreement, a cross purchase or a hybrid; and
The triggering event – while buy-sell agreements typically include various potential scenarios including death, divorce, disability, voluntary termination, involuntary termination or bankruptcy of an owner, it is important to consider the specific circumstances of the owners of the closely held business and ensure that each triggering event is addressed in a way that is satisfactory to all owner’s actual needs.

Published on: March 25, 2013

Mediation, Arbitration, Litigation: What is Best?

by Boris Peyner

There are three forms of formal dispute resolution to resolve a legal dispute which informal negotiations have fulfilled: mediation, arbitration, or litigation. Understanding the benefits and drawbacks of each is important to decide which method is best to resolve a dispute.

Mediation.

Mediation is a process where a neutral third party assists in resolving the dispute. Mediators are typically lawyers or retired judges who have extensive experience in the field in which parties have a dispute. The decision to settle is always up to the parties. Mediators do not have the power to issue a binding decision. Instead, mediators can often provide their opinion on how they believe matters will be resolved through a litigation or an arbitration and lead the parties to agree by explaining the strengths and weaknesses of each others’ case.

Mediators will often ask the parties to submit confidential written statements and documents that support the parties position to the mediator before the mediation. On the day of the mediation, the parties will meet at a pre-arranged location with the mediator. The process typically involves the parties providing a short explanation of their side of the case to the mediator. The parties will then break into separate rooms and the mediator will shuttle between rooms to discuss the dispute and a resolution.

Mediation is typically confidential. Mediations resolve disputes quickly and are far less expensive than arbitration or litigation, and allow the parties to control the outcome.
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Published on: February 11, 2013

Considerations Before Filing Collection Suit In New Jersey Filing

by Boris Peyner

People or businesses seeking to collect money in New Jersey can file a suit in the Superior Court to obtain a judgment. An experienced New Jersey litigation attorney should be consulted before suing, however,because there are many factors that should be considered. For example, a decision needs to be made about which division of the court to file in and what county the suit can and should be filed in. In addition, the suing party must decide which parties should be named as defendants. Finally the suing party must also decide the type of relief sought and properly request it (i.e., compensatory, attorneys’ fees, prejudgment interest, etc.)

A lawsuit is started with the filing of a complaint. A complaint is the legal document that sets forth the facts and legal reasons why the suing party should recover the requested relief. Complaints must correctly identify the parties being sued. The party filing suit, otherwise known as the plaintiff, is legally responsible to accurately and properly name the correct defendants. Failure to properly name a defendant can later preclude post-judgment collection efforts. Failure to include all responsible parties in one suit can later preclude collecting from parties that were not initially named.

After deciding which parties to name, the plaintiff should decide which county the suit should be brought in. New Jersey Court Rules require a complaint to be filed in the county where the cause of action arose or the county in which any party to the action resides. Corporations are considered to reside in any county in which the corporation either does business or its registered office is located. A plaintiff can hire private investigators to perform a search to identify the address where a potential defendant resides; a good lawyer can often do this also. A plaintiff can also search the New Jersey Department of the Treasury website to determine where a corporation is registered or does business. It is critical to file the complaint in the proper county. Failing to file to file the complaint in the proper county can lead to a dismissal of the lawsuit.

After picking the county in which suit will be filed, the moving party must decide which division of the court to file in. If a matter involves an amount in controversy of $15,000 or less than it may be brought in the Special Civil Division of the Superior Court. If the amount in controversy is greater than $15,000 then it must be brought in the Law Division because Special Civil Part monetary recovery is capped at $15,000, exclusive of court costs and attorneys fee (if allowed by law). There are advantages to filing suit in either the Law Division or the Special Civil Part.
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