Philadelphia Business Lawyer Blog

Just this spring, what is usually seen as a pro-business Supreme Court issued a ruling clearly on the side of workers. The case, Kasten v Saint-Gobain Performance Plastics Corp., addressed the question of protection for workers who file complaints against their employers. Smart business owners, with the right policies, will be able to turn this case to their advantage in keeping government investigators out.

The general rule has historically been that workers who report the illegal activities or illegal working conditions of their employers are protected from retaliation. This makes sense, we want those with inside knowledge of their employers fraud or illegal activities to feel they can come forward without risking their livelihood. But if the employee reported the problem internally, to an owner or supervisor instead of the government, there was always a question of whether protection applied. In other words, by trying to get the company to fix the problem in house, quietly and without a governmental investigation, did the employee lose the protections of the anti-retaliatory laws? The Court said no, employees who try to solve problems in house are still protected by the law (in this case, it was the Fair Labor Standards Act), even though the government was not involved. To qualify for protection against retaliation, the complaint can even be as simple as a verbal statement to a supervisor, it doesn't have to be in writing.

Since it's not unusual for less then stellar employees to have complained to a supervisor about working conditions or practices, this certainly creates an additional burden for the employer to comply with prior to terminating these under performing workers. It's not hard to image a scenario in which a company's failure to plan appropriately creates retaliation liability even when there was no provable case of an underlying violation. Of course, it also presents a huge opportunity for a proactive company to encourage internal self-reporting. As an owner, it's always preferable to learn about potential problems directly from your employees, rather then after they've reported your business to the governmental authorities.

Continue reading "Protections for Employees Reporting Illegal Activity" »

Confidentiality terms in settlement agreements are fairly commonplace, but most people do not know that until recently the courts would often ignore them. Historically, the public's "right of access" to judicial records outweighed a party's desire to keep their settlement confidential. This makes sense when the issues involve public interests or safety concerns. But when the settlement involves trade secrets or other proprietary information, businesses have long argued the public's right of access should be more limited. In many cases, especially with regard to hi-tech and growth companies, the desire for confidentiality is the prime motivation for settling the case.

In a recent 3rd Circuit ruling, LEAP Systems Inc. v. MoneyTrax, the court shifted away from previous decisions to allow business's a better chance at maintaining the confidentiality of settlement agreements. In the LEAP case, the settlement was based on assurances from the court that the agreement would remain confidential. The district court's assurances of confidentiality were clearly a pervasive factor for the 3rd Circuit, and not something every trial judge is going to agree to put on the record. But counsel certainly should ask for a statement on the record that confidentiality is a key term of the settlement. Also, in most cases the business will want to justify the reasons for the confidentiality on the record, since the importance of trade secrets may not be as apparent to courts reviewing the matter in the future as it is to the trial judge overseeing the settlement discussions. These were both factors considered by the 3rd Circuit in finding in favor of LEAP on the confidentiality issue.

One way around this privacy risk has always been to keep the terms of your settlement agreements away from the courthouse. But in many cases, especially in certain federal courts or business law courts like Philadelphia's Commerce Program, judges may be highly involved in facilitating the settlement process. When that happens, the settlement agreements or even the oral transcripts of the proceeding may be considered judicial records subject to public access. Even if the parties reach a settlement on their own, the court often becomes involved with motions to enforce down the line. The LEAP case begins an outline of how to maintain the confidentiality of these records.

Continue reading "Confidential Settlement Agreements and the Public's Right of Access" »

The Pennsylvania Supreme Court in a recent decision stated that residential and commercial property owners who hire contractors are not responsible for personal injuries happening during construction on their property. Previously, plaintiffs had argued for a "retained control" exception where property owners could be held responsible for injuries to workers if the owner was present at the job site and exercised control over the construction project. The theory was if the owner was present at the job site, then the owner bore a responsibility to recognize any unsafe condition and do something about it. This recent decision by the court ends this avenue of attack created by the plaintiff's bar, which had put owners in the uncomfortable position of weighing liability burdens against the need to supervise their own projects. Now the law is clear that property owners are not liable for the injuries to the contractors and their subs so long as the owners did not control the "means and methods" of how the work was performed. In other words, did the owner actually tell the injured party how to ply his trade?

The impact of this decision is clear. With a little proper drafting, both residential and commercial property owners can greatly reduce their risks from personal injury claims of workers injured on their property. Commercial property owners should seek legal advice to have their contracts reviewed to insure they have language in place that require a safe and organized work site. From the contractor and subcontractor perspective, the gun has clearly been leveled in your direction and care needs to be taken to make sure you have the proper insurance in place in light of your increased singular exposure; as well as to make sure your contracts have the appropriate contractual protections as well. Contractor's agreements also now need to be especially careful not to take on unnecessary liability in those situations where the owner is dictating the work or acting as their own GC.

Continue reading "Pennsylvania Property Owners Not Always Liable for Contractor's Injuries" »

Many clients have often been surprised to learn that the attorney client privilege in Pennsylvania did not necessarily apply to advice their attorney's gave them. Previously, the Pennsylvania Superior Court had held that only communications made from the client to the lawyer were privileged, not those flowing from the attorney to the client. That holding, which is in conflict with the approach taken by most other states, was recently overturn on February 23, 2011 by the Pennsylvania Supreme Court. The Supreme Court held that the attorney client privilege now operates to protect confidential client to attorney and attorney to client communications made for the purpose of obtaining or providing legal advice. This decision is extremely important to both Pennsylvania lawyers and clients alike because it allows for a much more open flow of information between client's and their attorney advisors.

The benefits afforded to clients as a result of this broader interpretation of the Pennsylvania privilege statute is that counsel may now, for example, proactively advise clients about a compliance issue without the attendant privilege concern that existed under prior law. Attorneys will be able to guide their clients through the process of curing ongoing legal problems without the fear that their advice could be discoverable in court. Not only will this benefit the client, as it will certainly facilitate a more open dialogue, but the benefits will also hopefully trickle down to benefit society as a whole.

Continue reading "Attorney Client Privilege is now a Two-Way Street in Pennsylvania" »

Many corporations, LLC's, LP's, and other businesses registered to operate in Pennsylvania must take action this year to avoid losing the ownership of their name. Pennsylvania law requires something called a "Decennial Report" to be filed every 10 years with the Department of State. The report is filed in every year ending with the number "1", so you've got until December 31, 2011 to get this year's report in. A similar law also applies to registered marks and insignias so be sure to act to protect your logos as well.

Any business that fails to file a required decennial report loses the exclusive right to the ownership of its corporate name. In the case of a registered mark, when a business fails to file the mark becomes unregistered. Every January of a year ending in "2" we see poachers trying to appropriate the names of ongoing businesses to sell them as back. Make sure your business is not one of the unlucky ones by acting early and getting your filing done soon this year.

There are exemptions to this law, the biggest of which applies to businesses who have filed new or amended registrations with the Department of State since January 1, 2002.

Continue reading "Could Your Business Lose Its Name in Pennsylvania?" »

Mistakes made during deposition testimony by corporate officers recently became harder to correct in the Third Circuit (the 3rd Circuit covers federal courts in Pennsylvania, New Jersey, Delaware & the Virgin Islands). In the past, attorneys often had their clients complete errata sheets after a deposition to correct harmful testimony. However, in EBC, Inc. v. Clark Bldg. Systems, Inc., the Third Circuit stated that use of errata sheets pursuant to Federal Rule of Procedure 30(e) to create issues of fact to defeat summary judgment motions will be disregarded in most circumstances. The limited exception to this rule is where sufficient justification exists for changing the deposition testimony that exists on the deposition record itself. The Court noted that errata sheets used to create genuine issues of fact are fundamentally indistinguishable from self serving affidavits.

The practical impact of this cautionary footnote is that more time must be given to preparing the witness for what questions might be asked during her deposition. Perhaps just as important is to take the time to impress upon your witness the inherent dangers in the deposition process itself. If not properly prepared, your witness may destroy your case without realizing it.

Continue reading "It's Now Tougher To Change Deposition Testimony in Pennsylvania, New Jersey and Delaware" »

Hidden well over a 1,000 pages into President Obama's health care bill that was passed earlier this year is a provision that all working mother's can appreciate. Employers are now required to provide "a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, which may be used by an employee to express breast milk." Businesses with less than 50 employees can claim it's an undue hardship if they can prove it truly is, but larger companies will have to comply. Mother's can take time to express milk as often as they like, but they don't have to be paid for that time.

Continue reading "Businesses Required to Accomodate Nursing Mothers" »

Beginning April 22, 2010 all home improvement contractors are required to comply with the EPA's new rules to prevent lead poisoning. The new rules, which have actually been public for 2 years, mandate that all contractors and sub's working on homes built prior to 1978 (with a few exceptions) be certified by the EPA. Contractors will have to take a training course and submit an application to the EPA to become certified. Since the EPA could take as long as 3 months to issue the certification, we're anticipating potential complaints this summer becoming an issue.

The fines for non-certified contractors doing renovation work are substantial, running up to tens of thousands of dollars a day. From the contractor's perspective, not following the rules could lead to homeowners refusing to pay for renovation projects or even lawsuits down the road, in addition to the fines. From the homeowner's perspective, these rules will provide a degree of comfort that lead poisoning risks are being mitigated, although it will also most likely add to the total costs of renovations.

In Pennsylvania, we're still dealing with the effects of the relatively recent Home Improvement consumer Protection Act. At Danziger Shapiro & Leavitt, PC we have guided numerous clients through the new licensing requirements imposed on the renovation industry, and we've collectively learned that while there are a few hiccups, the process is not as difficult as everyone feared it would be at the start. Even more important to homeowners, we're also starting to see the effects of the new laws on lawsuits brought against unlicensed and unqualified developers and scam artists within the industry. Our firm has helped numerous homeowners over the years prosecuting these claims, and these new regulations will add more teeth to their cases.

Continue reading "New Lead Paint Rules for Contractors" »

Companies fail, as the news reminds us everyday now. But if you're an entrepreneur sued in commercial litigation, are you personally responsible for your company's debts? There's no shortage of business lawyers in Philadelphia writing about this issue, but we often hear that most of the articles are difficult for the average business owner to understand, because the answer unfortunately really rests on the facts of your case.

The general rule is that Pennsylvania courts are hesitant to hold owners responsible for something the company does, called piercing the corporate veil in legalese. The main exceptions are:

(1) when an owner doesn't treat the company as a separate entity, doing things like making random withdraws from the business account instead of taking a salary;
(2) when the company is used in a fraud, such as for an investment scam or contractors who take deposits but never intend to do the work;
(3) when the company doesn't follow the corporate formalities, such as forgetting to maintain the minute books every year, even if there is only one shareholder; or
(4) when the company is undercapitalized from the start.

To some degree, with the exception of the fraud rule, probably every small business in America is guilty of violating these rules. We get distracted running our businesses, serving customers, and forget to sign the form waiving the annual shareholder meeting or we never raise the initial capital we needed to get the business on the right track from the start. Does this mean you're automatically liable if someone sues your company?

Fortunately, the answer is no. It means you need to speak with a business lawyer soon, someone who understands the rules for the states where you do business. Ideally, you're making that call before you get sued, because its much easier and cheaper to have a business lawyer help you follow the rules correctly in the first place, rather than defend you after something has gone wrong.

If you're at that point where something has already gone wrong, and your being sued personally, you need to get help quickly. The right commercial lawyer might be able to explain to a judge why your circumstances make your case different from the general rules.

Continue reading "Owner Liability for Corporate Acts, or Piercing the Corporate Veil" »

I thought it made sense to start off this blog with a post about the risks of blogging itself. More and more businesses are using both blogs and social media (such as Facebook, Twitter and others) to expand their brand visibility and attract new customers. While there are numerous seminars to teach you how to use all this stuff to your advantage, there are a few legal points you need to keep in mind.

The 3rd Circuit (the appellate court for PA, NJ, DE, and the Virgin Islands) held a few years ago in Dimeo v Max that bloggers are not liable for comments other people post on their sites. Like everything in the law, there are exceptions, but the general rule is that unless you wrote it or had someone else write it on your behalf you're not responsible.

So the next question is, what about the stuff you write yourself? Blogs are supposed to be open exchanges of information, and the best of them often break news quickly. Does this mean as a blogger you are now a full fledged member of the media, entitled to source protection and back stage passes? Not according to a recent case in New Jersey. In Too Much Media v Hale, the defendant in a defamation case argued that she could protect her sources under NJ's press shield law. In a decision that relied more on an analysis of the facts of Ms. Hale's actions rather than a verdict against bloggers as a whole, the court found a distinction between her posts and those of someone in the business of disseminating news for the general public. While this is good news for companies who are the target of online smear campaigns, it raises some real questions about liability for those bloggers who regularly intersperse news with commentary.