Appealing Arbitration Awards: You Get What You Bargain For

When can a litigant appeal an arbitration award? In the recent decision of K.V.H. v. W.S.H., the New Jersey Appellate Division clarified the procedures by which a party, dissatisfied by the decisions rendered by an arbitrator, can challenge those awards.

In this matter, the defendant appealed from certain provisions of a series of arbitration awards which were incorporated into a dual final judgment of divorce.  After over two years of contentious divorce litigation, the parties entered into an arbitration agreement and mediation agreement to try to more efficiently resolve the issues in their divorce. The arbitration agreement specifically provided that it was governed by the New Jersey Arbitration Act, N.J.S.A. 2A23B-1 to -32.

The parties selected a retired Superior Court judge to serve in the dual role as mediator/arbitrator.  After resolving certain issues through mediation, the parties executed a binding mediation agreement and proceeded to arbitration. Two arbitration awards, addressing substantive issues and fees as well as a resolution of disposition of personal property, were memorialized in writing by the arbitrator.  One week following the last arbitration award, the parties appeared in Court to obtain a judgment of divorce.

At that appearance, the mediation agreement, both arbitration awards and the resolution of personal property, were all incorporated into the dual final judgment of divorce.  Both parties were questioned about the fairness of the agreements and their decision to proceed with a divorce on that day.

Specifically, the defendant was questioned about whether he freely and voluntarily entered into the arbitration agreement, whether he agreed to incorporate the mediation agreement, arbitration awards and resolution  (collectively referred to as the “agreements” during questioning) into the judgment of divorce, and whether he believed the agreements to be fair and equitable.  The defendant answered in the affirmative to all of those questions.

Further, the defendant was asked to confirm that he understood and was not waiving any rights and remedies under the New Jersey Arbitration Act.  The defendant likewise answered “yes”.

The Court ultimately found the parties entered into the arbitration agreement freely and voluntarily, and entered a judgment of divorce incorporating the agreements. Importantly, at no point during this proceeding did either party raise any objection to the arbitration awards or ask the Court to vacate, modify or correct same.

Days later, the plaintiff filed a motion to enforce the fee award.  The defendant then filed his notice of appeal.  Subsequently, the defendant filed a notice of cross motion (to plaintiff’s motion) to vacate the fee award. The trial court refused to rule on the cross-motion because of the pending appeal, and entered an order directing enforcement of the fee award.

The Appellate Division dismissed the appeal for lack of jurisdiction pursuant to the New Jersey Arbitration Act.  Specifically, the Court found that the Act limits judicial review of arbitration awards to three distinct scenarios: confirmation, vacation and modification/correction.  Under the Act, there is no direct right to appeal, but a litigant can appeal the trial court’s order on a summary action to confirm, vacate or modify/correct. Accordingly, the trial court must review the arbitration award in a summary action to confirm, vacate or modify/correct and enter an order before a litigant can file an appeal.

The manner by which the defendant challenged the arbitration award in K.V.H. v. W.S.H. was procedurally deficient in several ways.  First, by incorporating the arbitration awards in an uncontested hearing, the Court took no testimony on the substance of the agreements. There was no summary action to confirm, vacate or modify/correct the agreements.  Though the parties agreed to “confirm” the awards and incorporate same into their judgment of divorce, no such order “confirming” the awards was entered by the Court.

Second, the defendant filed his appeal before filing a motion to vacate the award. Accordingly, at the time he filed his appeal, there was no trial court order from which he could appeal.  In so holding, the Court relied upon the plain language of the Act itself as well as the case of Hogoboom v. Hogoboom, which provides that parties are not “entitled to create an avenue of direct appeal to this court”.  Had he filed his cross-motion to vacate and appealed from a subsequent order, the end result in this matter may have been different.

On appeal, the defendant argued that all parties and the trial court understood he was agreeing to entry of a judgment of divorce with the express intention to immediately appeal the arbitration award.  The Appellate Division’s categorical rejection of this argument, and the lesson therefrom, is quite clear.   Strict construction of the Act is required.  Absent a trial court order which expressly confirms, vacates, modifies or correct an arbitration award, a party to an arbitration award has no direct right to appeal.

Arbitration can be an attractive option for litigants for a number of reasons, including the ability to select an arbitrator of your choosing and greater flexibility in controlling the calendar and timing of your case.  However, litigants who seek arbitration as a means of limiting judicial involvement with their case must accept the other side of the coin, and recognize that limited judicial review is one of the tradeoffs for taking your matter out of the court system. This case serves as a reminder for that concession.  That said, parties can also negotiate appellate arbitration if they want to preserve the right of appeal, albeit not to the Court.

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Katherine A. Nunziata is an associate in the firm’s Family Law practice, based in the Morristown, NJ office. You can reach Katherine at (973-548-3324) or at knunziata@foxrothschild.com.

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How Not to Settle Your Case

Several years ago I did a post on this blog of the same name and then updated it some time later. The list then, as re-compiled below, are things to do if you really don’t want to settle your case.  As I said before, everybody is entitled to their day in court if they want it, but what if there is nothing that can be gained from it?  What if you can’t win?  What if forcing the matter to trial will create other legal issues? What if trial will cost tens of thousand of dollars or more?  Here is the list:

22. Your new significant other is a lawyer, they know better than your lawyer.  Of course they know better, you have been completely honest with them.  Of course they aren’t telling you what you want to hear – why would they do that?  And when they are speaking to their matrimonial partner about your case, they are giving them all of the facts, context and subtext of the case.

21. Every case is the same, so make sure that you demand the same deal that your hairdresser, or cousin’s friend, heard that that their cousin’s friend got.  While this information, if true, may be food for thought or points of discussion, ignore the potential differences inherent to each matter and demand that you get the same, even if it bears no relation to the appropriate resolution of the case.

20.  Pretend that you are Bill Murray in Groundhog Day, and keep having the same conversation over and over, hoping that the answer will be different.  And don’t just do that with your spouse, do it with your lawyer too.

19.  Hold grudges and let anger blind you from coming to a resolution that lets you move on with your life.  They are your feelings, don’t only embrace them but let them control all.  And don’t get therapy to deal with the real hurt, betrayal, rejection, depression, mourning, etc. that you are feeling.

18.  Allow emotions to impair your judgment on financial issues.  I know that you can’t imagine your spouse living in your home with someone new, but it’s a good idea to take less for the house by selling it rather than allowing your spouse to buy you out.

17.  Create a ruse that an emotional issue is really a financial one.  There will be a lot of nasty letters and everyone will be confused because you are not even arguing about the same thing, but at least one of you and his/her lawyer won’t know it.

16.  Profess a desire to settle but then never compromise on any issue.  Also, don’t let your experts compromise either, even in the face of an error in their report.  And if they do have to concede the error, make sure that they change something else so that their final number never actually changes.

15.  Hire a new lawyer on the eve of mediation or trial, and let that person enter the case like a bull in a china shop, as if the case just started, and there was no prior history.  Ignore the fact that both sides were making concessions and working towards and amicable resolution, and just blow things up and start from scratch, without any basis for doing so.  I am not saying that people cannot and should not change lawyers.  Sometimes it is necessary.  Sometimes the concessions being made are too much, for a variety of reasons.  But in cases where the negotiations and concessions are appropriate on both sides, if you don’t want to settle, pull the rug out from under the negotiations.

14.  Hire a second, then third, then fourth, then fifth attorney every time something doesn’t go your way.

13.  In alternating conversations with your lawyer, tell them that you need to settle immediately, then tell her that you want her to litigate aggressively, then settle, then litigate, and so on.  Follow that up by being angry with your lawyer because they were trying to settle when you were back to aggressively litigating, and vice versa.

12.  Believe your spouse when they are pressuring you to settle for a lot less than your attorney tells you would be a reasonable settlement.  While perhaps this doesn’t belong on this list, because it is a “how not to settle” list, maybe it belongs on a new list regarding regrets people have after taking a bad deal for the wrong reason.

11.  Let your spouse convince you that they you don’t need all of the discovery because “you can trust me”, when all other evidence indicates that you can’t.  Perhaps this belongs with the prior thought.

10.  Ignore your expert’s advice.  What do they really know about the value of your business or how a judge will likely assess your total income/cash flow?  What does an accountant know about taxes, or more importantly, how the IRS may address the creative accounting practices that you or your business have employed?  What does the custody expert really know?

9.  Ignore your lawyer’s advice.  What do they know anyway?  If your lawyer is telling you that you should jump at the deal on the table because it looks like a huge win, disregard it.  If they tell you that you have real exposure on certain issues or may be forced to pay your spouses legal fees, roll the dice. If your attorney tells you that they are willing to try your case, but that you should consider settlement because the cost of the settlement will be less than the cost of the trial plus the absolute minimum you have to pay, don’t believe it.  And what does your lawyer know about the law or the judge anyway?

8.  Ignore the facts of your case.  Trust your ability to spin the facts in a way that doesn’t make sense.  Plus, how can they prove if you’re lying.

7.   Ignore what the neutrals are saying.  What do the Early Settlement Panelists know?  What does the mediator know?  When the judge has a settlement conference and gives directions, what does she/he know?  Assume that the people that have no “horse in the race” are aligned with your spouse or their attorney, have been bought off, or are just plain ignorant.  Really, it has nothing to do with the facts of your case or the reasonableness of your position.

6.  Ignore the law.  It doesn’t apply to you anyway.

5.  Continue to misrepresent things, even when the other side has documents to disprove virtually everything you are saying.  Assume that you will be deemed more credible than the documents.

4.   Believe that the imbalance of power that existed during the marriage will allow you to bully your spouse into an unfair settlement.  Assume that your spouse’s attorney wont try protect her/him.  All lawyers roll over on their clients, right?

3.   Take the position that you would rather pay your lawyer than your spouse. Ignore that fact that this tactic usually ends with your doing both, and maybe your spouse’s lawyer too.

2.  Pretend as if your spouse never spent a second with the kids in the past and has no right to do so in the future.  Make false allegations of neglect or abuse.  Ignore the social science research that says that it is typically in the children’s best interests to spend as much time as possible with each parent.  What do the experts know about your kids anyway?  And while you are at it, bad mouth your spouse to or in front of the kids. Better yet, alienate them.  Then fight attempts to fix the relationship.

1.   Take totally unreasonable positions implementing any or all of above and on top of that, negotiate backwards.  Ignore the maxim “Pigs get fat, hogs get slaughtered.”  Put deals on the table and then reduce what you are offering.  Negotiate in bad faith.  Negotiate backwards.  Don’t worry that this conduct may set your case back.

The above was and is clearly facetious and tongue in cheek. I do not recommend this behavior.  It is usually self destructive and short sighted.  But, believe it or not, these things happen all of the time.  While I am not saying that no case should ever be tried, because sometimes trials are necessary, if you want to ensure a costly trial that may not go well for you, try the things on this list.  And if it is your day in court that you want, be careful you wish for.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

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The First Two Supreme Court Grants of Review of the New Term

The Supreme Court announced that it has granted certification in two cases.  These are the first grants (Nos. A-1 and A-2) of the current Term. The first appeal is Garden State Check Cashing Service, Inc. v. New Jersey Dep’t of Banking & Insurance.  The question presented there, as phrased by the Supreme Court Clerk’s Office, […]

The post The First Two Supreme Court Grants of Review of the New Term appeared first on Appellate Law NJ Blog.

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Beware The Client That Tells the Lawyer How to Try the Case

Most clients hire their lawyers for the lawyers expertise and experience.  There is an expectation that the lawyer will guide the client through the process, given them the strategic options, and counsel them regarding settlement positions and opportunities.  Sometimes, client’s hire lawyers that they think they can control, who will do their bidding whether or not the strategy is sound or the legal position meritorious.  Others still, hire their attorneys because of their expertise and experience, yet cannot help themselves and seek to control every detail.

While often, collaboration with a client can create excellent results – after all, who knows the details of their life better then the client.  That said, there is a difference between collaboration, and the client imposing her or her will on the aspects of the case that should be the domain of the attorney.  Even when the client is an attorney, it is dangerous if they think that they know better then their attorney how to present their case.

Several years ago, I represented the wife of an attorney in particular – a litigator.  At a very early mediation, he came into the room boasting, if not threatening that he has tried more cases than anyone in the room.  Throughout the case, he made his lawyer take legally unsupportable positions, played games with discovery, tried to hide assets, failed to provide full information to his own forensic accountant and then, at trial, clearly directed his attorney’s questioning of the witnesses.  Needless to say, after an 11 day trial, he was crushed on every issue.  Moreover, his conduct both before and after the trial caused him to pay a substantial amount of his wife’s legal and expert fees.  His attorney was made to look bad and his forensic accountant was essentially called a liar – albeit in nicer terms – all because of the husband thinking he knew better than anyone else.

I am presently involved in another long trial where it is clear that the opposing litigant is running the show.  His direct examination was unusually long and contained numerous self created exhibits that were testified about in unnecessary detail.  Moreover, the same was true for the expert testimony, both direct, and more importantly on cross examination.  The client created questions at best, unduly lengthened the process, and at worst, could arguably hurt both his own credibility and credibility of his own expert.  Aside from causing the cost of the matter to increase exponentially, the insistence on controlling the questioning could actually negatively impact his case.

The bottom line is that client’s should be careful to not insist that collaboration turn to actual control thereby negating their attorney’s experience and expertise.  While it is not unusual to want to maintain total control, the attorney usually knows the law better and can better implement the jointly agreed upon strategy. The attorney will have a better sense of the big picture and is better able to view things more objectively than the client.  Sometimes less is more.  Not every question needs to be ask.  Not every fact needs to be presented if it doesn’t help, or perhaps can hurt your case.  If one of the allegations is that the spouse is overly controlling, etc., the controlling conduct at trial can prove that point almost better than the other spouse’s testimony.  In short, a client should be careful when insisting on taking over a case from his lawyer.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

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4 Things to Consider When Wondering How Long is Your Divorce Going to Take

Clients often, if not always ask at the start of my representation how long the divorce process is going to take, and my answer is almost always the same – it depends.  No one wants to or enjoys going through a divorce, especially one that may last for months, if not longer than a year.  Having information as to when the divorce process will end or what may prolong its conclusion can be helpful to you in not only planning for the future (from both financial and child-related perspectives), but also in mentally preparing you for when you may be able to move on and move forward.

With that being said, here are four things that may impact upon the length (and cost) of your divorce proceeding:

1. The Other Party:  If you and your spouse are on the same page in trying to move towards an expedient, fair and cost effective conclusion, then work together in achieving that goal.  Consider suggesting a settlement conference, mediation or even offering a settlement process early on in the process.  While the matter may not immediately settle, it may crystallize what issues are really in dispute, and what can be quickly resolved.  If, however, your spouse does not want to get divorced, or is, perhaps, having a difficult time in moving forward (or allowing you to do so), then the process may take far longer.  In addition, if your spouse engages in some form of misconduct during the divorce, motions may have to be filed, emotions often escalate and the process will often take longer than previously thought.
2. The Other Attorney:  Who is the other lawyer?  Is he or she known for being reasonable and settlement minded, or aggressive at every turn?  Are there going to be genuine efforts to resolve the matter early on, or are you going to be litigating about every issue imaginable?  Unfortunately you cannot control who your spouse hires to act on his or her behalf, but the potential impact of who the other lawyer is on your case is oftentimes known and predictable at the outset of your matter.  At the very least, knowing who the other lawyer is and how he or she practices often allows you to set your expectations for how the entire matter may unfold.
3. The Issues:  The duration of your divorce proceeding will also be impacted by the issues in dispute.  If you have a straightforward matter, with easily understandable and resolvable custody and financial issues, the matter should resolve sooner rather than later (depending, of course, on the other party, the other lawyer, and the county where your case is held).  A more complicated case, however, may take longer simply so that certain issues can necessarily be examined in more detail.  Perhaps there is a business to value, or a custody dispute requiring experts.  Engaging in what may be necessary expert work will take time, but oftentimes has to be done.
4. The County:  Certain counties in New Jersey have more cases than others – it is as simple as that.  With a huge volume of matters and only so many judges working tirelessly to get through them, your case may not move as fast through the court system as you would like.  While the court system will ensure that you are moving forward and, at the very least, engaging in settlement efforts through mandated custody/parenting time mediation, the Early Settlement Panel, economic mediation and intensive settlement conferences, oftentimes the length of your proceeding can be impacted simply based on the volume of the court’s calendar.

The above considerations are all the more reason to consider alternative dispute resolution methods in an effort to get your matter resolved.  Settlement conferences, mediation, and even arbitration may expedite the conclusion of your matter in a more cost effective fashion.  Moving on and moving forward may take time, but knowing what may stand in your way is important to providing you with some sense of when it is going to end and, perhaps, some peace of mind.

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Robert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

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Matal and Brunetti: When Derogatory isn’t Derogatory

In 2017, two registration prohibiting provisions of the Trademark Act of 1946 (“The Lanham Act”) were found unconstitutional under the First Amendment. These decisions raise important considerations for persons and companies whose trademarks may have been previously denied registration on such grounds or those considering registration of plausibly disparaging or scandalous marks.

In Matal v. Tam, 137 S. Ct. 1744, 1765 (2017), the lead singer of the rock group “THE SLANTS” appealed The United States Patent and Trademark Office’s (USPTO) refusal to register his band name as a trademark on the principal register due to a Lanham Act provision which prohibits registration of marks that may “disparage . . . or bring . . . into contemp[t] or disrepute” any “persons, living or dead.” 15 U.S.C. §1052(a).

The band members sought to take control of an Asian ethnic stereotype commonly used to criticize them but were denied registration because “slants” is a derogatory remark used to disparage those of Asian descent.

The trademark examiner employed an established two-part test in determining whether the applied for mark was disparaging. First, he considered the likely meaning of the matter in question, and if that meaning referred to identifiable persons, institutions, beliefs, or national symbols, and second, he considered whether that meaning may be disparaging to a substantial composite of the referenced group. If both criteria were met, the mark was deemed disparaging and denied registration unless the applicant proved that the mark was not disparaging.

The examiner for the SLANTS mark, relying on reports of a past performance that was cancelled due to the band’s name and various online angry blog and article commentator posts, found that “THE SLANTS” was disparaging under the Lanham Act and refused registration.

After a series of appeals to various courts, the Supreme Court of the United States found the disparagement provision facially invalid under the First Amendment’s free speech clause. The Supreme Court rejected the three arguments advanced by the USPTO as to why the provision did not violate the Free Speech clause:

• Trademarks are government speech immune to First Amendment attacks;
• Trademarks are a form of government subsidy; and,
• The constitutionality of the disparagement clause should be tested under a new “government-program” doctrine.

Normally, the free speech clause does not regulate government speech, which means the government is exempt from First Amendment scrutiny, however, the Supreme Court concluded that trademark registration is private, not government, speech given that the government “does not open the principal register to any exchange of ideas”—it is merely ancillary to trademark registration. Thus, the government cannot escape the ambit of the Free Speech clause in deciding to grant or reject a trademark application.

Next, the government argued that trademark registration was a government subsidy, obligating the Court to uphold the constitutionality of government programs that subsidized speech expressing a particular viewpoint the way they had previously done in cases prior to Matal. But the Court distinguished Matal from prior government subsidy cases because those cases all involved cash subsidies or their equivalent.

The Justices found that trademark registration was not a subsidy because the USPTO does not pay money to people seeking trademark registration; rather applicants pay the government a filing fee. And finally, the Court refused to adopt the so-called government-program doctrine analysis, which is basically a merger of the government-speech and subsidy cases.

The two cases the government cited, which implemented the doctrine, were far removed from the registration of trademarks. Accordingly, the Court found that the government discriminated on the basis of viewpoint, i.e. whether the mark offends, which violates the principle that public idea expression could not be censored merely because its ideas are offensive to some listeners.

Because the disparagement clause did not fall into any of the above categories, the parties disputed what level of scrutiny applied to analyze the provision. Strict scrutiny is triggered when the government discriminates on the basis of viewpoint, while a more relaxed, intermediate scrutiny test applies for commercial speech.

The Court declined to resolve which test applied to trademark registration because it found that the disparagement clause could not withstand even the less-strict commercial speech test. Restrictions on commercial speech must serve a substantial interest and be narrowly drawn. Here, the USPTO could not assert a substantial interest in preventing speech that offends, and the subject provision was overly broad in that it applied to more than just discriminatory marks and encompassed dead persons and institutions.

Therefore, The Matal Court struck down the disparagement clause as violative of the First Amendment’s Free Speech clause.

After the Matal decision, many intent-to-use applications for disparaging marks were filed, such as “Young Niggah World” for multimedia entertainment and “Niggademus” for clothing. The USPTO has approved registration of “Dykes on Bikes” for a nonprofit lesbian motorcycle organization and has dropped an ongoing dispute with the Washington Redskins football team over the team’s trademark “Redskins,” which the USPTO viewed as disparaging toward Native Americans.

Several months after Matal, the Court of Appeals for the Federal Circuit in In re Brunetti, 877 F.3d 1330, 1357 (Fed. Cir. 2017), reversed the USPTO’s denial of the registration of the mark “FUCT,” finding the immoral or scandalous provision of the Lanham Act unconstitutional. In Brunetti, an applicant sought to register his trademark “FUCT” for a clothing brand, but the USPTO denied registration, finding the mark comprised immoral or scandalous matter in violation of §2(a) of the Lanham Act.

In determining which test applied to free speech challenges to the Lanham Act, the Court of Appeals found that trademarks are not commercial speech because they go beyond “propos[ing] a commercial transaction” and “often have an expressive content.” The court found that the immoral or scandalous provision of the Lanham Act was aimed primarily at the expressive, and not the product-identification, aspects of a trademark, thus subjecting the Lanham Act provision to strict scrutiny for its content-based restriction on speech. Citing Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015), the court followed the rule that strict scrutiny requires “the government to ‘prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest.’”

There was no dispute that the immoral or scandalous provision of the Lanham Act would fail the strict scrutiny speech restriction test, but the parties disputed whether the provision could satisfy intermediate scrutiny under the commercial speech test. Restrictions on commercial speech are subject to a four-part test that looks at whether

• The speech concerns lawful activity and is not misleading;
• The asserted government interest is substantial;
• The regulation directly advances that government interest; and
• The regulation is “not more extensive than necessary to serve that interest.”

With the first element undisputed, the court rejected the government’s purported substantial interests in promoting certain trademarks over others and/or protecting the general public or the government from marks that are off-putting or profane.

The court found that trademarks are not forced upon unsuspecting listeners, and registration of marks does not make them more accessible to children. Even if shielding the public from these types of marks was a substantial interest, the government could not satisfy the third element of the test—that “the regulation directly advances that government interest”—because the provision does not prevent applicants from using their marks on clothing, TV/radio advertisements, or billboards; it only prevents them from being registered.

Finally, the government could not prove that the regulation was “not more extensive than necessary” because the USPTO’s inconsistent application of the provision supported the inference that the provision had not been narrowly tailored. For example, the USPTO had approved of the mark “Fugly” for use on clothing yet refused registration for use on alcoholic beverages. Similarly, registration of “Turd Herders” was approved, while “Roll Turd” was rejected. With the scandalous or immoral provision unable to withstand even intermediate scrutiny, the Court of Appeals held the provision unconstitutional under First Amendment free speech principles.

Currently the period to file a petition for a writ of certiorari to the U.S. Supreme Court expires on July 11, 2018, unless extended. In the interim, the USPTO has released Examination Guidelines stating that it “will continue to examine applications for compliance with the scandalousness provision while the constitutionality of the provision remains subject to potential [] review.” Current or future suspensions of a trademark application based on violation of the scandalous or immoral provisions of the Lanham Act will remain in place until the period to petition ends, or if a petition is filed, the later of denial of certiorari or termination of Supreme Court proceedings in the case. Then the USPTO will decide whether continued suspension or new procedural guidance is necessary.

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In a New Post-Bisbing Decision, the Appellate Division Highlights the Significance of the Requirement to Show Cause for a Proposed Interstate Move

Just over a year after the New Jersey Supreme Court changed the standard to be applied in removal, or interstate relocation, cases, the Appellate Division in Dever v. Howell (an Appellate Division set to be published and, thus, will be precedential) is here to remind us that the burden to show cause for the proposed removal is not optional, cannot be an afterthought, and cannot be shifted to the party who opposes the move.

N.J.S.A. 9:2-2’s Cause Requirement and Bisbing

As a refresher, N.J.S.A. 9:2-2 is the New Jersey statute that addresses intrastate removal and provides as follows:

When the Superior Court has jurisdiction over the custody and maintenance of the minor children of parents divorced, separated, or living separate, and such children are natives of this State, or have resided five years within its limits, they shall not be removed out of its jurisdiction against their own consent, if of suitable age to signify the same, nor while under that age without the consent of both parents, unless the court, upon cause shown, shall otherwise order.  The court, upon application of any person on behalf of such minors, may require such security and issue such writs and processes as shall be deemed proper to effect the purposes of this section.

Put another way, if you wish to relocate out of New Jersey with your children, but the other parent does not agree, then the only way that you can engage in the desired removal is to file an application with the Court.  The Court may only grant the application if sufficient “cause” for the move is shown.  The purpose of the cause requirement is to preserve the rights of the other parent and the relationship between that parent and the children.

The definition of “cause” was the subject of the much-talked about August 2017 New Jersey Supreme Court decision, Bisbing v. Bisbing, 230 N.J. 309 (2017).  Prior to Bisbing, “cause” meant different things depending on whether the party who sought to remove the children out of state was the parent of primary residence for the children, or whether there was a truly shared parenting arrangement.  Under the now defunct Baures v. Lewis standard, the Parent of Primary Residence had a less onerous burden to show cause, and needed only prove that 1) the requested move was being sought in good faith; and 2) that the requested move would not be inimical to the child’s best interests.  In cases where there was truly a shared parenting arrangement (i.e. neither party was deemed the “parent of primary residence”), a request to relocate with the children was treated as an application to modify the existing custody arrangement, and the court was required to conduct a best interests analysis to determine if such a modification was appropriate; if so, then this would serve as sufficient “cause.”

In Bisbing, the Court did away with these distinctions and essentially leveled the “cause” playing field.  Now, regardless of the type of parenting arrangement in place, “cause” is demonstrated by showing that the proposed move is in the best interests of the child.  In making this determination, the Court is to be guided by the statutory factors outlined in N.J.S.A. 9:2-4 which are the lodestar of every custody determination; however, the court is not limited to these factors in its analysis.  Indeed, the Bisbing Court specified that “[a] number of the statutory best interests factors will be directly relevant in typical relocation decisions and additional factors not set forth in the statute may also be considered in a given case.”  Any “additional” factors would be specific to the circumstances of the individual case.

Dever v. Howell and the Cause Requirement in Action

In a newly published (i.e. precedential) decision, the Appellate Division examined the cause requirement.  In this case, Mr. Dever and Ms. Howell had two children together.  Although Mr. Dever was the parent of primary residence, the parties shared joint legal custody.  In 2015, Mr. Dever considered relocating to Florida with the children, and the parties engaged in negotiations around that proposed move, including a parenting time schedule for Ms. Howell.  Although they were able to enter into an agreement in May 2015 regarding Mr. Dever’s proposed move to Florida with the children, ultimately he chose not to go, and he and the children remained in New Jersey.

In November 2016, Ms. Howell filed an application with the Court seeking overnight parenting time with the children.  The parties began to negotiate, and agreed to ask the Court to wait to hear Ms. Howell’s application in the hopes that they could resolve the issues amicably.  However, three days before the judge was to hear the motion, Mr. Dever told Ms. Howell that he and the children would be moving to South Carolina the next morning.  He offered Ms. Howell ten minutes to say goodbye to the children.  Despite Ms. Howell vehemently objecting, he moved the children to South Carolina without her consent, and without a court order permitting him to do so.

Ms. Howell ultimately filed an Order to Show Cause (an application seeking emergent, or immediate, relief from the Court) seeking the return of the children to New Jersey.  After a trial, the Superior Court judge found that Mr. Dever had intentionally removed the children from New Jersey without Ms. Howell’s consent and without filing an application so that the Court could determine whether there was cause for the move, in violation of N.J.S.A. 9:2-2.  The Court (correctly, in this writer’s opinion) found that the May 2015 agreement that the parties entered into for the removal of the children to Florida did not signify an agreement for them to be removed to South Carolina, as Mr. Dever claimed.  The judge ordered Mr. Dever to return the children to New Jersey.

Mr. Dever asked the Superior Court to reconsider his decision and, when that was unsuccessful, Mr. Dever appealed.  In both cases, he argued that the judge could not compel him to return the children to New Jersey from South Carolina without requiring Ms. Howell to show cause for him to do so.  In other words, he argued that – now that the children had been living in South Carolina for some time – the burden to show cause should shift to Ms. Howell to show that it was in the children’s best interests to return to New Jersey.  On appeal, Mr. Dever argued that N.J.S.A. 9:2-2 did not require him to obtain an order before moving.

The Appellate Division, rightfully, shot down Mr. Dever’s claim that he could remove the children without consent or a court order, and then force the other parent to demonstrate that it is in the children’s best interests to return to New Jersey:

According to plaintiff’s logic, defendant would need to file a motion to return the children, who he had removed in violation of N.J.S.A. 9:2-2, and as part of that motion, assume the burden.  Such an approach would encourage individuals to first remove children from this jurisdiction, then later seek court approval.  When the other parent objects beforehand, the process envisioned by N.J.S.A. 9:2-2 is for the parent seeking to relocate to first apply for an order permitting relocation, establish “cause,” then relocate only if permitted by the court.  The process does not permit a parent to show on an application to return the children that it would be in their best interests to do so.

When the other parent objects, the parent seeking removal of the children has the ultimate burden of proof by the preponderance of the evidence.  Requiring the burden of proof to shift to defendant to show that it would be in the children’s best interests, as a condition precedent to returning them to New Jersey, ignores the Legislature’s reason for requiring a preliminary determination of “cause” under N.J.S.A. 9:2-2 before the actual removal.  It is to “preserve the rights of the noncustodial parent and the child to maintain and develop their familial relationship.”  Bisbing, 230 N.J. at 323 (citations and internal quotation marks omitted).  Under the facts of this case, preserving defendant’s rights to maintain and develop her familial relationship with the children required – by the plain text of N.J.S.A. 9:2-2 – that plaintiff first obtain an order, before removing the children, by showing “cause” existed for the relocation to South Carolina.

The Appellate Division made clear here that the old adage, “act now, and ask forgiveness later” does not apply in removal cases.  In order to carry out the intent of the statute – to preserve the relationship between the non-custodial parent and the child – one has to either obtain consent, or show cause before a court before the move occurs, not after.

Parents considering an interstate relocation with their children from New Jersey should take heed.  If you move with your children out of New Jersey without obtaining consent or a court order, you will very likely be required to return the children.  But even worse, when the Court ultimately does decide the issue of whether the move is in the children’s best interests, it may ding you for having taken matters into your own hands and moved without going through the proper channels.  Arguably, a failure to do so is a good indicator to the Court that you are not willing to co-parent or consider the child’s relationship with the other parent, and that will undoubtedly cause the Court to hesitate to allow the move.

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Jessica C. Diamond is an associate in the firm’s Family Law Practice, resident in the Morristown, NJ, office. You can reach Jessica at (973) 994.7517 or jdiamond@foxrothschild.com.

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A Checklist for Your Custody and Parenting Time Wish List

A judge’s favorite line when custody is an issue is some variation of the following: No one is better equipped to make decisions about your children than their two parents, and certainly not the judge who does not know your family from the next family in line.  They are not wrong, and they will do whatever they can to have parents even in the most acrimonious of cases resolve custody issues to avoid tens of thousands of dollars, and months upon months, on custody evaluations and a custody trial.  Of course this is not always possible, but the requirements for alternative dispute resolution start almost at day one after filing the divorce complaint.

Whether you are married and commencing the divorce process (dissolution docket), share a child in common but have never been married, or are simply seeking to enter a custody arrangement but not get divorced (non-dissolution docket), the Court Rules require that parents attend Custody and Parenting Time Mediation at the outset of litigation.  This is a free session held at the courthouse, without attorneys present, during which a courthouse mediator assists parents in reaching an agreed upon custody arrangement and parenting time schedule.  If successful, the mediator will draft an order for review.  Even when the court is not involved, counsel will often attempt to resolve custody and parenting time issues prior to finances. This prioritization is designed to ensure that your children are not stuck wondering which parent they will be with at what time, and the parents are not incentivized to get a child on his/her side.  The schedule also helps the parents understand what free time they have and/or how they may be able to manage their work schedule.

The agreement, order or judgment fixing custody and parenting time is generally the most important document entered in your matter – it provides guidelines to live by for years until the emancipation of your children, absent any substantial change in circumstances along the way.  Given its importance, the agreement, order or judgment should hit all the points that are essential to you… this can save you future head and heartaches for having to return to court or other forms of dispute resolution over aspects that may be missed.   They say that when an agreement is reached, each party will be a little happy and a little sad – that’s the nature of compromise – but the feeling you want to avoid is “oops… forgot about that” (especially when you do not have a co-parent who will readily amend the agreement)!

When our clients are preparing to resolve custody, whether in private or court ordered mediation, we prepare them with a Custody and Parenting Time Plan – essentially their wish lists.  This plan is designed to remind clients what they want to address, rather than have a cookie cutter agreement or order prepared.  Some courts require the submission of this plan prior to the mandatory mediation session, but not all do.

Whether you are attempting to resolve these issues in the above-described mediation session, or simply with your co-parent via discussion, with attorneys, in private mediation, etc., or even as part of a global divorce resolution, here is a checklist that we recommend you review before creating your wish list:

• Legal custody with time periods for joint decisions. Legal custody is decision making authority about your child(ren)’s education, health, safety and general welfare.  In most cases, this is a joint decision making authority.  Consider including the requirement to discuss such issues with each other and even a time period by which the parents have to advise each other of new developments, and when responses are due for certain requests, i.e.: making a medical appointment or enrollment in a desired activity.  The sharing of such expenses are generally dealt with in the final divorce agreement or judgment.  Always consider adding into the agreement requirements for mutual respect, cooperation with facilitating the schedule and the child(ren)’s love for the other parent, and restraints on involving your child(ren) in the litigation.
• Commencement date for the parenting time schedule selected. Here, consider being clear as to the commencement date depending on the case.  If the schedule is, for example, alternating weekends and then each parent has two days during the week, consider not just adding the date of the first weekend.  This can lead to confusion as to when the weekdays start if the agreement is reached mid-week.  If you are silent on when the schedule commences, then the default will be the date of the agreement.
• Location for pick up and drop off. This will also help define who does the driving – an important issue in recent a blog post by Sandra C. Fava, Esq., just last week.  More and more we are seeing and creating schedules with pick up and drop off at the child’s school, camp and/or extracurricular activity.  This will not always be the case as some alternating weekend schedules end on Sunday instead of Monday, some parents do not have any weeknight overnights, etc.  This leads to the next point…
• …Alternate location when the initial location is not available. For example, if pick up is at school, camp and/or extracurricular activity, build in the location for when such events are not in session.
• Time for pick up and drop off… In some cases, consider being specific on what time the other parent is expected to arrive and/or drop off your child(ren). You can even build in a provision about being late if you are dealing with a co-parent who often is, such as a required text message when either parent is going to be more than X minutes late.
• …You guessed it – add in the alternate time if the event is not in session (i.e.: pick up after school or 3 p.m. when school is not in session). Seems simple but the alternates are easy to forget and can lead to stressful situations!
• Driving to activities and appointments. Consider including a provision indicating that the parent exercising parenting time is required to drive the child(ren) to/from any and all activities and appointments held during such time.  It doesn’t hurt to consider including that each parent can attend such appointments and activities regardless of the parenting time schedule.  This may differ in certain circumstances and acrimony level.  You can even build in who sits on home/away bleachers.
• Right of first refusal, meaning when the parent scheduled to exercise parenting time is not available for a defined period (i.e.: certain number of hours or overnight), then the other parent has the “first right” to have that time with their child. A third party cannot be contacted to “babysit” unless the other parent does not elect to use such right to the time.  Here, consider building in time periods required for the parent to offer this right, and the other parent to respond.
• Holiday schedule. Sometimes this schedule will be an addendum added at a later date if you cannot agree at the time that you agree upon the regular schedule.  However, if you can make the first agreement all-inclusive, you will not have to revisit the issue.  You want to include the location and times for pick up and drop off here, as well.
• Defined amount of vacation parenting time. The amount of time usually depends upon the child(ren)’s age(s), but also consider including whether the weeks can be consecutive.  Other options include adding a time period under which you have to provide notice to the other parent of your desired weeks for vacation time, priority on who selects the time first each year, language regarding taking the children out of the state or country, passport-related cooperation, and even whether vacation has to even include one parent traveling for it to actually be considered vacation parenting time.
• Alternate arrangements when the schedule results in one parent having three consecutive weekends. Typically, holiday and vacation parenting time will trump regular parenting time, but it is something to discuss if it is what you want.  If it’s on your wish list, include a provision indicating that neither parent shall have three consecutive weekends and, if the holiday/vacation time would result in such a schedule, then the first or last weekend of the block will be switched so that each parent has two weekends in a row.  This avoids having to “re-alternate” weekends thereafter.
• Amount of contact that each parent has with the child(ren) when the other parent is exercising parenting time (i.e.: telephone, Skype, FaceTime, etc.). Depending upon your child(ren)’s age, this may just be reasonable time as desired.   However, if you are concerned about having your time usurped by the other parent continually contacting your child(ren) during your time, you may want to include a once or twice per day allotment.  If your child is too young to use the device alone and you need to coordinate the contact, then you should consider building in a time, such as morning and evening if that works for everyone’s schedule… Again, build in what happens when the agreed upon time is unavailable on a given day.
• Radius clause. This can be a tricky one. Custody and parenting time in New Jersey is always modifiable because it is based upon the best interests of your children and that may differ over time with a substantial change in circumstances.   Often, these schedules are reached when everyone is still local to each other or even under the same roof, but that may not always be the case.  It’s important to consider how moving a certain distance away from the other parent may impact your child(ren)’s best interests. In other words, how far is too far?  That’s a personal question, considering many factors, including the age of the child(ren) and frequency of parenting time transfers.  For example, if you share equal parenting time with pick up and drop off at school, then what is the maximum commute your child(ren) should have on a school day?  How will this impact activities after school or even a job?

In the recent unpublished decision of B.G. v. E.G., the Appellate Division vacated a provision within the trial court’s Order requiring the parents to live within fifteen miles of each other.  The case was unique case in that one parent was designated as the parent of primary residence (“PPR”) for two children and the other parent was designated as PPR for their third child.

The radius clause was entered following a divorce trial during which a custody expert testified that the parties should live within thirty minutes of each other because “it would be ‘optimal if the children did not change their friends, their locations, their habits.’”  Pursuant to the decision, the court also considered their children’s testimony,  daily exposure to both parents and extensive time the parents spent with their children.  In vacating the radius clause, the Appellate Division opined that the geographic location was not supported by substantial credible evidence.  Specifically, it was based only on the expert’s subjective opinion – no testimony was offered about geographic location, there was no finding that such limitation was in the children’s best interests, and other methods of maintaining contact were not explored.  Notably, the Appellate Division specifically opined that a radius clause did not restrict the objecting parent’s “right to travel” by way of a constitutional law argument.  Given that the objecting parent did not present other constitutional arguments, the Appellate Division did not further delve into the constitutionality of the radius clause.

Thus, the decision infers that although the radius clause here was not supported by enough evidence presented at trial, a radius clause in another matter can be upheld as constitutionally valid if the constitutional argument presented is a restriction on the right to travel.  However, perhaps another constitutional argument may prevail.  I would not be surprised if this issue arises again with more and more shared parenting time arrangements that require a closer geographic proximity… keep an eye out!

So, what is the takeaway?  Keep this checklist for your wish list… from decision making authority to the location that works best for the schedule, there is a lot to think about.  It is natural to forget a few things when you are in a mediation session, having a conversation or even preparing for litigation.  Make your wish list.  Save your wish list.  Craft your wish list to fit your family if the cookie cutter case is not for you.  After all, you are creating this guideline to save yourself time, money and stress in the future… why not ask for what you want?

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Lindsay A. Heller is an associate in the firm’s Family Law practice, based in its Morristown, NJ office. You can reach Lindsay at 973.548.3318 or lheller@foxrothschild.com.

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Tax Sale Certificate Antitrust Class Action Litigation Settlement is Affirmed, and Decision Permitting Appeal Bond to Include Administrative Expenses is Upheld

In re New Jersey Tax Sales Certificates Antitrust Litigation, ___ Fed. Appx. ___ (3d Cir. Sept. 6, 2018).  [Disclosure:  I am among the plaintiffs’ leadership team in this matter].  In this hotly-contested class action case, which began in 2012, plaintiffs alleged that the numerous defendants participated in a scheme to rig municipal auctions of tax […]

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“Deemed Adopted” Administrative Law Judge Disciplinary Decision Gets the Same Deference on Appeal as Agency’s Imposition of Discipline or Trial Court’s Sentencing Decision

In re Hendrickson, ___ N.J. ___ (2018).  This first Supreme Court opinion of the current Term is by Justice Albin.  The opening paragraphs of his ruling concisely and completely describe what the case is about, what the result is, and why (though the rest is worth reading as well).  Here are Justice Albin’s words:  “Under […]

The post “Deemed Adopted” Administrative Law Judge Disciplinary Decision Gets the Same Deference on Appeal as Agency’s Imposition of Discipline or Trial Court’s Sentencing Decision appeared first on Appellate Law NJ Blog.

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Don’t Bank on it Just Yet: Financial Services Uncertainty in the Cannabis Industry

As of September 2018, nine states, including the District of Columbia, allow adult-use (recreational) marijuana and thirty-one states have adopted laws legalizing the sale and use of medical marijuana. The possession and sale of marijuana, however, remains illegal at the federal level due to the Controlled Substances Act’s classification of marijuana as a Schedule I narcotic alongside heroin, LSD, and ecstasy.

For a cannabis business operating within the bounds of state law seeking to enter the marijuana industry, the juxtaposition of marijuana’s quasi-legality raises important legal and practical concerns, one of the most pressing being access to banking. The Federal Bank Secrecy Act (the “BSA”), 31 U.S.C 5311 et seq, prohibits national financial and banking institutions from accepting money generated from the sale of cannabis, often forcing marijuana companies to operate on a cash-only basis and putting them at risk of criminal activity. The cannabis industry’s bout with banking has somewhat of a rocky history.

From 2011 to 2014, former Deputy Attorney General James Cole issued a trio of memos (“Cole Memos”), setting forth the federal government’s laissez-faire policy against enforcing federal marijuana laws in states that have legalized the drug in some way. The Cole Memos emphasized the federal government’s focus on preventing marijuana distribution to: minors or gangs; entry into states where marijuana remains illegal; using the drug as pretext to traffic other illegal drugs; driving under the influence; and growing on public lands or federal property. Cannabis companies who did not run afoul of the government’s concerns reasonably perceived themselves as being safe from federal prosecution.

Reassurances also stemmed from the Rohrabacher-Blumenauer Amendment (RBA), an amendment to the annual prohibitions bill that forbids the U.S. Department of Justice (DOJ) from using federal funds to go after state-approved medical marijuana operators, and the Financial Crimes Enforcement Network (FinCEN)’s 2014 guidelines for banks who conduct business with cannabis companies, which permits banks to do business with cannabis companies without violating federal regulations so long as the banks agree to certain procedures, such as ensuring that the business is duly licensed and registered and continuously monitored by the bank. Despite the FinCEN guidelines, most national banks continued to decline services to cannabis businesses because the time and cost of complying with the oversight and compliance procedures outweighed any fiscal benefit the bank would receive from the cannabis clients.

Nevertheless, marijuana businesses were getting by until the current Attorney General of the United States, Jeff Sessions, rescinded the Cole Memos earlier this year. Sessions issued new guidance giving individual U.S. Attorneys the discretion to decide if a marijuana company was aiding and abetting in criminal activity and should be prosecuted. Confusion ensued and the new directive chilled any headway cannabis clients were making with national banks who were now even more hesitant about touching marijuana money.

Presently, banks who wish to do business with marijuana companies face a lot of regulation and uncertainty. Cannabis businesses that have managed to obtain banking services need to understand that their banks are required to comply with anti-money laundering laws, which require national banks and credit unions to file Suspicious Activity Reports (“SARs”) with FinCEN if they suspect any of their account holders are engaged in or trying to cover up illegal activity. There are several types of SARs relevant to cannabis touching businesses: (1) marijuana limited SARs where the company is not violating state law or a Cole Memo priority; (2) marijuana priority SARs where the bank believes the company is violating state law or a Cole Memo priority; and (3) marijuana-termination SARs, where the bank believes the company is a threat to anti-money laundering systems under the Bank Secrecy Act (BSA) and ceases to do business with the company. After the rescission of the Cole Memo, FinCEN, the Federal Deposit Insurance Corporation, and the National Credit Union Administration stated that the FinCEN marijuana guidance continues to control and is not dependent on the Cole Memos being legally enforceable. Even though the SARs are sent to the federal government, they are not being used to prosecute cannabis operators, but rather to keep tabs on who is engaging in a marijuana related business.

So how are banks reacting to the ever-changing legal climate? Many of the major national banks take the position that following the FinCEN guidelines would constitute an open violation of the Bank Secrecy Act, which is why they consistently refused to open their coffers to cannabis clients. FinCEN, however, urges that its guidelines are meant to “enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.” Conservative banks have stopped providing banking services to cannabis customers, as some unhappy clients experienced in Massachusetts, as a result of Sessions’ actions. Other banks who have yet to start doing business with cannabis companies are likely to hold off from doing so until they see how U.S. Attorneys handle their new “discretion.”

Many local, community, and credit union banks, however, who are already dealing with cannabis participants will likely stay in the market unless they see enforcement and prosecutorial activity from the U.S. Attorneys’ offices or new guidance from FinCEN. The state of affairs, however, is headed towards legalization, regulation, and taxation, and many U.S. Attorneys, especially in those states that have legalized or decriminalized marijuana in some way, have disclosed their intention not to prosecute compliant cannabis companies opting instead to focus on more-important priorities at hand, such as the opioid crisis. Additionally, advocates, participants, and politicians are currently discussing various proposals to aid the cannabis banking bar such as the pioneering of state-owned banks, closed-loop payment processing systems functioning like prepaid debit cards, and privately-funded banks for the marijuana industry.

For marijuana businesses and operators looking to avoid pitfalls and to find a solution to the banking crisis, it is important to understand that banks are wary of doing business with cannabis companies having short or non-existent operating histories, limited financial information, and uncertain licensure statuses. The best approach with banks is transparency, honesty, and collateral. The more a bank understands your cannabis business, structure, and operation, the easier it will be for it to comply with the burdensome FinCEN guidelines. Expect a diligent and thorough investigation by the bank into the ownership and management team, the company’s business affairs, financials, and regulatory compliance history. Be discreet and establish personal relationships with key bank personnel who will be responsible for overseeing your banking needs. Do not get discouraged and be prepared to get turned down several times before finding a suitable banking partner.

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Construction Liens Against a Leased Premises

In the course of providing construction services for commercial properties, a contractor often performs jobs where they are providing materials and services to a commercial tenant at a leased property. What contractors need to be aware, however, of their rights to file a construction lien concerning work performed for a tenant on a leased property. The pivotal fact in this analysis is whether the owner of the property consented to the improvements that were performed. As discussed below, this ultimately determines whether the lien possesses any true value.

There are two ways that a construction lien by a contractor will attach to a commercial property when a contractor is performing services for a tenant of the property. The first way would be if the contractor entered into a direct contract with the owner of the property and performed the improvements. Under those circumstances, the filed construction lien would attach directly to the property. The other way the construction lien would attach directly to the property is if the tenant contracted for the improvement of the property and a contract for improvement was expressly authorized in writing by the owner of the property. The contract must be expressly authorized in writing, as a verbal confirmation is insufficient. Under these circumstances, the construction lien would attach to the property.

In the absence of a direct contract with the owner to improve the property, or a written authorization of the owner to improve the property, the lien claim would not attach directly to the real property itself. Instead, under these circumstances, the lien claim would only attach to the lease hold interest of the property. This is extremely significant, as the lease hold interest may hold very little value as compared to the value of the lien claim should the contractor attempt to collect. Further, without a lien against the property itself, the contractor is unable to assert intense pressure upon the owner of the property to collect payment with regard to materials and services that were provided. On the other hand, there are instances where a lien against the lease hold interest of the tenant could be substantially valuable. For instance, if the lease hold interest dealt with a successful business, whether it is a restaurant or any other business, the lien claim against the lease hold interest may possess significant value. It is indisputable; however, that the best way would if the contract was approved by the owner or issued directly by the owner which would thereby enable the lien to attach to the real property itself.

In light of the above, it is suggested that if contractors are performing work for a tenant of a leased property, that they either have the contract expressly approved in writing by the owner of the property, or that they have the owner of the property execute the construction contract as a party in interest for whom the contractor is working. This would be the best way to protect the contractor in the event of non-payment and the filing of a construction lien. If a contractor needs help in filing of a construction lien under these circumstances, it is suggested that they consult with counsel who is experienced in this area. The attorneys at Stark & Stark can assist you in this regard.

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Franchisors Face Class Action Lawsuits & Government Enforcement over “No-Poach” Agreements

Eight national restaurant chains have agreed to drop provisions in their franchise agreements that prohibit franchisees from hiring fellow franchisees’ employees. The removal of the “no-poach” hiring stipulation will be effective at all of their locations nationwide.

This move comes at the heels of announcements from Attorneys General from 10 states and the District of Columbia to investigate these “no-poaching” agreements. In addition to criminal and civil enforcement by both the state and federal governments, several franchisors are also facing federal class action lawsuits from employees alleging they were adversely affected by “no-poach” agreements.

In 2016, the U.S. Department of Justice (DOJ) first announced its Guidance to Human Resource Professionals, and informed employers that “going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements,” due to antitrust concerns.

More recently, the DOJ reported in its Antitrust Division’s Spring 2018 Update that it intends to aggressively pursue “no poach” and wage fixing agreements. The DOJ Antitrust Division specifically warned: “Market participants are on notice the Division intends to zealously enforce the antitrust laws in labor markets and aggressively pursue information on additional violations to identify and end anticompetitive no-poach agreements that harm employees and the economy.”

“No-poach” restrictions are typically laid out in company-franchise contracts, which often leaves employees unaware of their existence. However, workers have argued that the end result is that they are unable to move from one franchise-owned location to another, where they might be offered a better salary or position.

Applebee’s, Church’s Chicken, Five Guys, IHOP, Jamba Juice, Little Caesars, Panera, and Sonic are the companies that recently agreed to end their “no-poach” agreements in order to avoid lawsuits over the practice.

This comes after seven other restaurant chains earlier agreed to end the same practice—Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s, and McDonald’s—after the threat of a lawsuit from the Washington state’s Attorney General.

Franchisors who have reached “no-poach” agreements, whether formally or informally, should consult with experienced Franchise and Antitrust counsel to determine how best to mitigate risk and discuss proactive solutions for their business.

For any franchisors or businesses interested in franchising, we encourage you to contact Stark & Stark’s experienced Franchise attorneys.

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