New Jersey Lawyers Blog

Published on: July 26, 2013

New Jersey Home Improvement Contractors That Violate The Consumer Fraud Act May Still Recover For The Value Of The Services Rendered

In New Jersey home improvement contractors are heavily regulated by the Consumer Fraud Act (the “CFA”). The CFA and administrative regulations require strict compliance which cannot be ignored. Failure to follow these requirements can result in the home improvement contract to be found invalid and a homeowner’s a ascertainable lose can result in the home improvement contractor paying triple that amount and attorneys fees to the home owner.

However, recently the New Jersey Appellate Division held that a home improvement contractor can recover the value of the services rendered even if the contract violated the CFA.

In Gemini a dispute arose between a homeowner and his contractor with regards to home improvement renovations. The homeowner hired a contractor and an architect, who was his friend, to perform renovations on the home. The architect was the intermediary between the homeowner and the contractor. The architect made all the decisions for the homeowner and worked directly with the home improvement contractor.

The contractor initially began the work for the homeowner pursuant to a written contract. After the work began, however, the homeowner sought various changes which the contractor orally agreed to perform and, subsequently, would forward his bills to the architect. A subsequent contract for the additional work was never prepared.
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Published on: July 22, 2013

Those Involved in New Jersey Real Estate Need to Know About Procuring Cause

by McLaughlin & Nardi, LLC

If you are in the market for a new home, you may not be aware of the legal principle of “procuring cause,” but many New Jersey realtors are painfully aware of the ramifications of it. In the swirl of open houses and realtors involved in finally deciding upon a home, procuring cause helps determine which realtor is entitled to profit from the sale.

New Jersey law acknowledges that more than one real estate broker may be involved in developing the interest of a potential buyer in a home, and that often “one reaps what another sows.” Ordinary services that do not result in a home sale are considered the cost of doing business. Procuring cause enters in when the broker brings together a buyer and an owner with “no substantial break in the ensuing negotiations,” at which time the broker is considered to be the “efficient cause of the sale” and entitled to a commission. Further, New Jersey courts have found that negotiations do not need to be uninterrupted if the broker can establish his or her continuity in bringing the transaction to a conclusion. But a broker may be denied commission if negotiations break off and the broker abandons his or her efforts or if there is a “substantial break” in the negotiations and the broker does not help conclude the transaction.

Understandably, what counts as a “substantial break” can be the source of controversy and even litigation. Courts have found that a potential buyer’s passivity does not necessarily equal purposeful abandonment. Also, a seller’s acceptance of different terms than those in the listing agreement does not interrupt procuring cause. Further complicating the issue are sales occurring after expiration of an extension period in an exclusive listing agreement. Some courts look for evidence of “meeting of the minds” between seller and buyer or otherwise evidence of bad faith in deciding whether to apply the procuring cause doctrine. The area can be thorny, and all sides need effective legal representation.

Procuring cause finds its roots in contract law and the equitable principle that a person should not be allowed to enrich himself unjustly at the expense of another. Courts look for evidence of notice that a real estate broker expected payment when performing services and have allowed brokers to recover for services even though a contract may prove unenforceable because of lack of agreement on essential terms such as the amount of the broker’s commission. Courts rely heavily on terms of contracts drafted between buyers and sellers and will try to enforce them first before looking to other legal principles.
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Published on: July 19, 2013

Special Considerations when Purchasing New Jersey Real Estate from an Estate

by Jennifer C. Meusel

In addition to the usual issues which come up when you are purchasing real estate, such as the contract review, home inspections, negotiations, and applying for a mortgage if necessary, when you purchase real estate from an estate there are some additional concerns.

When the owner of the property has died prior to entering into a contract of sale, and the property is being sold by an estate, the first question is: Who has the power to sell the property?

The person who has the power to enter into a contract for sale is usually the executor. If the deceased owner had a will and the property is passing with the residuary estate, (the residuary estate is what is left after specific bequests), the executor can do everything needed to effectuate the sale. It will be necessary during the contract period to obtain the death certificate, a copy of the will and the letters testamentary (the document from the surrogate’s court appointing the executor). The buyer’s attorney should insist that these documents are provided within a short time period after the contract is finalized.

However, if you obtain a copy of the will and see that the property passes by specific bequest to specific named beneficiaries, then not only does the executor need to be involved in the sale, but also under the New Jersey Real Estate law the beneficiaries must join in the sale. This can only be determined by seeing a copy of the probated will. When real estate is devised by specific bequest, it can create significant delays as the beneficiaries may be scattered throughout country, or even out of the country. In this case, the beneficiaries must all agree to sell real property on the terms and conditions in the contract, they must all agree to the resolution of any issues throughout the contract period, including home inspection negotiations. The seller’s attorney will need to seek the consent of each beneficiary for attorney review changes, home inspection repairs requests, etc. Each of the specific bequest beneficiaries must also execute the closing documents. Clearly, a purchase is more difficult if there is a specific bequest of real estate. However, if the buyer is represented by an attorney who understands the issues involved, these issues can be effectively managed.
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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 16, 2013

The Importance For New Jersey Business Owners To Pay Employment Tax

by Frank P. Nardi

New Jersey business owners should be aware that there are strict regulations which allows the Internal Revenue Service (“IRS”) to collect employment taxes from a business or its owners and potentially senior employees, who are not owners, if a business fails to pay employment withholding tax to the IRS.

Federal employment tax require employers to withhold money, for Social Security and Medicare, and pay it to the IRS on a quarterly basis (also known as a “941 payment”). These payments are known as “trust fund taxes” because the withholding amounts are held in “trust” by the employer for the IRS.

Failure to pay employment taxes is therefore viewed as theft because the owner is using money that belongs to the employee. The IRS therefore has strict regulations which allow it to recover trust fund taxes directly from owners and senior employees if the business fails to pay the tax.

In a typical case the IRS will assess personal liability against individuals it alleges were responsible to pay this tax on behalf of the business. The IRS will also assess penalties and interest. The penalty (also known as a “jeopardy assessment”) is equal to the amount of the unpaid trust fund tax. Responsible individuals will personally be required to pay the tax, penalty, and interest.
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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: June 25, 2013

New Jersey Employers Need To Be Aware of Discrimination Dangers in Using Background Checks for Hiring Decisions

by McLaughlin & Nardi, LLC

What does an employer’s use of criminal history information in hiring decisions have to do with employment discrimination? The U.S. Equal Employment Opportunity Commission (EEOC) has determined that an employer’s use of an individual’s criminal history in making employment decisions could violate the prohibition against employment discrimination.

The situation has attracted attention from lawsuits involving an automobile manufacturer and a discount retailer who are alleged to have inappropriately used criminal background checks to deny employment to workers, resulting in discriminatory treatment. The lawsuits were brought under Title VII of the Civil Rights Act of 1964. Title VII is enforced by the EEOC and prohibits employment discrimination based on race, color, religion, sex and national origin.

The EEOC issued updated employment guidance to address findings that the application of criminal background checks for employment decisions results in a disparate impact based on race and national origin. African Americans and Hispanics are incarcerated at rates disproportionate to their numbers in the general population, indicating an increased potential for disparate impact, but employers can show in an EEOC investigation that their particular employment policy or practice does not cause a disparate impact on the protected group.

Courts look to the following types of evidence to determine whether an employer was motivated by race, national origin, or other protected characteristics when using criminal records in a selection decision:

statements that are derogatory concerning the charging party’s protected group;
evidence that the employer requested criminal history information more often for individuals certain racial or ethnic backgrounds or did not give equal opportunity to explain criminal history to all groups;
treating a charging party differently from others not in the same protected group;
results of matched-pair testing that show different treatment because of a protected status; and
results of statistical analysis of applicant data, workforce data, or third party criminal background history data.

Published on: May 21, 2013

Elder Care Planning

by Jennifer C. Meusel

There are many things mature persons need to plan for. An often overlooked area which requires careful planning is potential long-term care. More than half of people sixty five and over will require some form of long-term care. The Medicare office estimates that by the year 2020 approximately twelve million people will need long-term care. The cost of health care continues to increase and government support programs are being cut. The median cost of a one year stay in a nursing home in New Jersey is approximately one hundred thousand dollars per year.

The five possible sources for payment for long term care are private payment, long term care insurance, Medicaid, Medicare and the Veterans Administration. If you are a veteran entitled to those VA benefits, if you are eligible for long term care insurance and able to afford it , or if you are able and willing to pay privately for long-term care, then perhaps you do not need to plan. However, most people do not fit into any of those three categories. The two remaining options are Medicare and Medicaid.

Medicare has specific rules and will only provide coverage up to one hundred days. The patient must be eligible for Medicare, have spent three days in a hospital and enter long term care within thirty days of the hospital stay. Medicare will cover the first twenty days of the stay, then for the next eighty days Medicare may require the patient to pay up to $144.50 per day and Medicare will cover the balance. After the first one hundred days, Medicare will stop providing coverage. Moreover, the care must qualify as “medically necessary”. Medicare will not pay for what is classified as “custodial care,” that is it will not pay the cost of general assistance with daily activities, i.e. eating, dressing, bathing, etc. The patient must require skilled nursing care. Thus, this is a very limited payment option.
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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.