Business Law Archives

Mark Fischer | September 5, 2018

Small business owners: Beware these recent developments in PA law!

For small business owners, the growth of a startup business can cause you to overlook the legal minutiae that come along the way. It is not unusual to see small businesses that started out using form contracts or invoices that may have done the trick at the time, but ten or more years later they remain unchanged, without any new terms or conditions to accommodate the growth of the business. The business may have started selling goods or services in a relatively small, local area, then before they know it, especially in the digital age, they are selling goods or services across State borders. But have they considered whether those initial contract forms sufficiently address the needs of the expanded business? Or whether the contracts and business practices comply with the laws of the jurisdiction in which they are selling? As an example of unexpected issues that may arise, below are summaries of two interesting decisions that the Pennsylvania Courts have issued this year.

In February, the Pennsylvania Supreme Court issued a decision in Danganan v. Guardian Protection Services,[1] in which a customer (Danganan) purchased a home security system and services from Guardian Protection Services, a Pennsylvania business, for his residence in Washington, D.C. The service contract had an initial term of three years. Before the three years expired, Danganan moved and sold his residence in D.C., but Guardian continued to bill him and collect for the remainder due under the contract. Danganan sued Guardian in Pennsylvania and asserted a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), which allows consumers to pursue triple damages and attorney’s fees for deceptive business practices. Guardian tried to get the UTPCPL claim dismissed, arguing that the law did not apply to non-Pennsylvania residents or transactions outside of Pennsylvania. Ultimately the case was submitted to the Pennsylvania Supreme Court, which determined that a non-Pennsylvania resident may bring suit under the UTPCPL against a Pennsylvania business based on transactions that occurred out-of-state.

This decision should remind Pennsylvania business owners to confirm that its consumer contracts for transactions both inside and outside of Pennsylvania are compliant with the provisions of the UTPCPL and any regulations emanating from that law. For those newer businesses still filling out those initial forms from the startup days, it is time to have a qualified attorney take a look and make any necessary revisions to properly protect the business.

In addition, in June the Pennsylvania Superior Court issued a decision in Webb-Benjamin, LLC v. International Rug Group, LLC,[2] which involved a dispute over a commission payment. Webb-Benjamin, a Pennsylvania company, entered into a contract with International Rug Group, a Connecticut company, to provide services for a furniture sale in Canada. Before the furniture sale ended, the two parties decided to terminate their contract but agreed that Webb-Benjamin would be paid its final commission at the end of the Canadian furniture sale. Shortly after the termination, but before the end of the sale, International Rug registered to do business in Pennsylvania. When International Rug failed to pay the commission, Webb-Benjamin sued in Pennsylvania to collect. International Rug attempted to get the case dismissed on the grounds that the Pennsylvania Courts had no jurisdiction over the Connecticut company. The Pennsylvania Superior Court disagreed and ruled that when an out-of-state company registers to do business in Pennsylvania, it consents to the jurisdiction of the Pennsylvania Courts, even for disputes that arose before the company’s registration.

This decision is pertinent to both Pennsylvania businesses and out-of-state companies that do business in Pennsylvania. For Pennsylvania companies, the case may provide a basis to sue in Pennsylvania for disputes with out-of-state companies. For non-Pennsylvania companies, the case points out another factor to consider when deciding to register to do business in Pennsylvania.

For all companies, these cases are a reminder to: (1) research the legal requirements for expanding the company’s business into other States, and (2) always have an attorney review the company’s contracts and transaction documents to assure that they include provisions that will best allow the company to grow and avoid undesired consequences.

Decisions made and actions taken during the process of business formation will have a significant effect on the owner’s exposure to personal and professional liability and the company’s profitability. At High Swartz LLP our attorneys have extensive experience in a wide range of industries, and provide investors, entrepreneurs and businesses in transition with sophisticated legal counsel designed to protect and promote the new and restructured businesses. As your counsel, we will help you make the right decisions and will implement necessary legal measures on your behalf, allowing you to focus on business management. For more information or if you have any questions, please contact Mark R. Fischer, Jr. at 610-275-0700 or mfischer@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

[1] 179 A.3d 9 (Pa. 2018).

[2] 2018 WL 3153602 (2018 PA Super 187).

High Swartz | June 7, 2018

Joel D. Rosen Appointed to the Montgomery Bar Foundation Board of Trustees

High Swartz managing partner, Joel D. Rosen has been appointed to the Board of the Trustees for the Montgomery Bar Foundation. Mr. Rosen has been reappointed for a 3-year term.

The Montgomery Bar Foundation is the charitable affiliate of the Montgomery Bar Association. Since 1987, the Bar Foundation has supported law-related educational, charitable, and humanitarian projects throughout Montgomery County. Grants awarded by the Foundation have been used to help the elderly, homeless, victims of domestic violence, troubled and underprivileged youth, and many other individuals and families in need. Visit their website at http://www.montgomerybarfoundation.org/index.html.

Joel D. Rosen is Managing Partner of High Swartz LLP. With more than 30 years of legal experience, his areas of practice include franchise law, business and commercial law, employment law, trademark/copyright law and commercial leasing. Mr. Rosen has counseled numerous businesses with regard to general corporate and commercial transactions, including, formation, mergers & acquisitions, licensing, sales, and financing projects. Mr. Rosen’s corporate client base spans a broad spectrum of industries, including: biotechnology, franchise, weight loss, food and restaurant, consumer products, media and entertainment, software and technology and nonprofit organizations.

About High Swartz LLP: High Swartz LLP is a full-service law firm serving clients in the Delaware Valley and throughout Pennsylvania from offices in Norristown and Doylestown. Established in 1914, High Swartz serves the needs of businesses, municipalities, government entities, nonprofits and individuals. With offices in Bucks County and Montgomery County, the full-service law firm provides comprehensive counsel and legal support to individuals and business entities of all sizes across a broad spectrum of industries throughout Pennsylvania and New Jersey. For more information, go to www.highswartz.com.

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Rich Sokorai | May 9, 2018

Be Wary of “Binding Mediation”

Over the last 100 years, High Swartz attorneys have engaged in countless cases involving alternative dispute resolution, representing litigants in arbitrations and mediations and serving as arbitrators and mediators. Recently however, I have noticed a newer concept being incorporated into contractual provisions and settlement discussions: “binding mediation”. Such a provision raises immediate questions. What is binding mediation? Is this something that a party should agree to?

While not widely used, or even widely known about, binding mediation is a form of alternative dispute resolution. Alternate dispute resolution is, generally speaking, a collection of methods of resolving disputes outside of court. In the arbitration method of alternate dispute resolution, the parties conduct a evidentiary hearing before a neutral arbitrator, or panel of arbitrators, that decides the case as would a judge and jury. Except in very limited circumstances, and unless the parties expressly agree otherwise, the parties are bound by the arbitrator’s decision, and there are very limited rights of appeal. The arbitrator’s decision can be entered as a judgment in court, the judgment can be enforced, and assets of the losing party can be seized to satisfy the judgment In a mediation, there is no evidentiary hearing. A neutral mediator listens to the various positions of the parties and facilitates their settlement discussions. In mediation, there is no “decision” to be binding. The culmination of the mediation is either a settlement acceptable to both parties, a partial settlement acceptable to both parties, or the parties leave without their dispute resolved.

“Binding mediation” therefore would seem to be a contradiction in terms, and is often discarded as a viable option. There is no statutory definition or even universal understanding of what binding mediation even means. Some consider it to be a traditional mediation, except that the parties are expressly bound by any agreement they reach. Others consider it to be a traditional mediation, but if the parties do not settle, the mediator determines the final settlement somewhere at or between the final positions of the parties. Still others believe it is simply another term for arbitration.

Case law highlights that the term is vague. In Pennsylvania, the Superior Court addressed binding mediation in its unreported decision Miller v. Miller, 2016 WL 6301602 (Pa.Super. 2016), when it found that because the parties used the word “binding” it meant that they were agreeing to an arbitration, despite the use of the word “mediation.” In Connecticut, the Appellate Court found in the case of Tirreno v. The Hartford, 129 A.3d 735 (Conn.App.Ct. 2015) that binding mediation was not an arbitration, and thus not subject to that state’s Arbitration Statute, particularly since there was no hearing. However, the mediation decision in Tirreno was nonetheless found binding in the context of a petition to enforce a settlement that was pending was before the court.

While there is no clear accepted definition, what is clear is that if you are going to enter into a binding mediation agreement, simply referencing the process by name is not sufficient to protect your rights. You must clearly set forth how the process will be conducted, how the decision will be treated, and how the decision will be enforced.

Is it a good idea to enter into a binding mediation agreement? Since you are potentially giving up your rights to a hearing, to examine and challenge evidence and the ability to cross examine witnesses, it would seem that it is rarely a good choice, particularly in an agreement addressing prospective disputes. However, binding mediation may be appropriate in some circumstances, such as when a dispute has arisen, there are relatively few material facts in dispute, there is a clear mutual understanding of each party’s positions and the scope of the mediator’s authority (such as monetary limits) is clearly defined.

If you have any questions about binding mediation, please contact Richard C. Sokorai at 610-275-0700 or rsokorai@highswartz.com. Our Bucks County and Montgomery County Litigation attorneys have knowledge and experience in all facets of arbitration and mediation.

Jim Shrimp | January 16, 2018

Franchisees – Things to Watch Out for in 2018

Increased ICE Enforcement

As many of you have probably read about already, on January 10, 2018, Immigration and Customs Enforcement (“ICE”) performed raids at over 100 7-Eleven convenience stores checking on the immigration status of those stores’ employees. After the raids, Acting ICE Director Thomas Homan cautioned employers that “today’s actions send a strong message to U.S. businesses that hire and employ an illegal work force - ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable.” He continued - “businesses that hire illegal workers are a pull factor for illegal immigration and we are working hard to remove this magnet. ICE will continue its efforts to protect jobs for American workers by eliminating unfair competitive advantages for companies that exploit illegal immigration.”

If you are a franchisee that relies on minimum wage labor, make sure you obtain proof of legal immigration status and have a copy of the I-9 in all employees’ files. Importantly, a violation of Federal regulation/statute is a default pursuant to most franchise agreements. Therefore, not only are you as the franchisee going to be dealing with fines and legal action with respect to your employment of undocumented workers, you may also be dealing with the loss of your business.

In short, any savings you might be realizing by hiring undocumented workers is not worth the risk, especially in this environment.

Browning-Ferris Overruled by NLRB - Franchisors Will Reassert Control Over Branding

In late December 2017, the National Labor Relations Board (“NLRB”) overruled the Browning-Ferris decision of two years ago regarding joint employer. You may remember that the Browning-Ferris decision caused franchisors concern, because over-asserting control over the brand, in relation to employment standards, policy standards, etc… might lead to liability on the franchisor for the acts of the franchisee. Thus, franchisors seemingly had to choose between tight brand control, with potential liability for the acts of the franchisee, or loose brand control, but no risk of liability for the acts of the franchisee.

In December’s Hy-Brand ruling, the NLRB restored the traditional joint employer standard, requiring proof that the alleged joint employer actually “exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control) and that “the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

As a result, franchisees will likely see franchisors reasserting control over the brand – meaning more inspections, more policies and more training. In addition, for new franchisees you will also likely see more control of the brand/business set forth in the franchise agreement.

If you have questions about franchise law, please contact James B. Shrimp at (610) 275-0700 or jshrimp@highswartz.com

Our attorneys in Bucks County and Montgomery County are here to assist you.

Mark Fischer | December 20, 2017

What the heck is a Confession of Judgment?

A Confession of Judgement is one of those terms you may have heard of if you have ever obtained a business loan or signed a commercial lease. Even if you have heard that phrase, chances are you have no idea what it means. And chances are you signed those loan or lease documents anyway. This is a fact of life for seasoned business professionals down to new start-up owners. Consider this a quick and dirty explanation of one of the most archaic legal mechanisms faced by business owners.

A confession of judgment is a legal process by which one party to a contract (most times a borrower or tenant) agrees to allow the other party (the lender or landlord) to enter a judgment against them if they default under the contract. The contractual provision will state that the lender/landlord can go to the court and enter a judgment without any notice and without doing any of the hard work typically required to obtain a judgment (e.g. filing and serving a complaint, taking discovery, going to trial, etc.). Confession of judgment provisions allow the lender/landlord to enter a judgment for money or to regain possession of the property, or both. Some States have abolished the use of confessions of judgment because they are so oppressive and eliminate the due process protections required in a typical lawsuit. Pennsylvania has abolished confessions of judgment in consumer transactions, but still allows them in commercial transactions, subject to certain protective requirements found enacted by the legislature or imposed by the courts. For example the contractual provision allowing the confession of judgment must be clear and conspicuous (perhaps separated from the other text or in bold or CAPS), not hidden in the contract or difficult to notice. The courts strictly scrutinize confession of judgment provisions and the court filings relating thereto for any defects under the law.

Many times commercial borrowers and tenants are not aware of these requirements, or the effect of such provisions, until after a confession of judgment has been entered, leaving them fighting an uphill battle to vacate the judgment and avoid collection or loss of their property. Therefore, it is extremely important for business professionals to have an attorney review any loan documents or leases for these provisions before completing the transaction and explain the potential consequences. If you find yourself served with a confession of judgment, it is imperative to act swiftly and contact an attorney to determine whether there are legal grounds to challenge the judgment.

For commercial lenders and landlords confession of judgment provisions can be very beneficial, saving significant legal fees and time to recover possession of a rented property or obtain judgment on a large commercial loan. However, it important to have legal counsel draft these provisions so that they comply with the strict requirements imposed by the courts and do not fall victim to any technical challenges raised by a saavy borrower/tenant seeking to avoid the judgment.

If you have questions about a confession of judgement, please contact Mark R. Fischer, Jr. at (610) 275-0700 or mfischer@highswartz.com

Our attorneys in Bucks County and Montgomery County are here to assist you.

High Swartz | February 14, 2017

Breaking Down “BYOD” Policies

February 14, 2017

The explosion of smartphones, tablets and technology generally, has inevitably resulted in employees performing work tasks on their personal devices. In the age of the ever present smartphone, and for many, the accompanying compulsion to stay constantly connected, employers and employees find themselves balancing the benefits and pitfalls of employees using their personal phones to conduct their employer’s business. This has resulted in increased productivity and flexibility and oftentimes resulted in lowering a companies technology costs. With these benefits, however, come certain risks that a prudent employer should consider and provide for. The most popular means of addressing these issues is in the implementation of a Bring Your Own Device (“BYOD”) Policy.

While there are many concerns an employer must consider in crafting the most appropriate BYOD policy, some of the most common include: data security, employee privacy, theft or loss of device, non-exempt employee usage, and employer liability for employee misconduct.

Data Security

Data security is a huge concern for employers and as such this element is crucial to alleviate company concerns that an employee could potentially compromise company data through lax or nonexistent device security. Similarly, employers justifiably have concerns regarding employees connecting to unsecured Wi-FI hotspots or sharing their devices with other individuals leading to compromised data. Accordingly, employers should consider requiring password protection, automatic locking after a certain period of inactivity, mandating regular backups, restricting access to especially sensitive company information or even using software to create a virtual partition in devices to keep personal data separate from work data.

Employee Privacy

A good BYOD policy will clearly set forth the employees expectation of privacy on their personal device that is being used for business purposes. It is important that after signing the agreement the employee understands what their rights are as to the device and information thereon.

Theft/Loss

Because phones are lost or stolen with unfortunate frequency, it is important that there be a policy in place that requires employees to immediately report a lost or stolen device. This section of the agreement may also contain a provision regarding the company’s decision to install software that would allow the company to remotely wipe the device in the event it is lost or stolen. Ultimately, all parties should be aware of what will happen to the device in the event it is lost or stolen.

Non-exempt employees

Because the Fair Labor Standards Act requires that non exempt employees be paid for all hours worked, a comprehensive BYOD policy will include a prohibition against off-the-clock email access/work by non exempt employees unless specifically authorized This ensures that all work performed on the company’s behalf is compensated. Accordingly, deciding what classifications of employees will be able to use their personal devices for business is crucial. A company must proactively determine how it will handle such situations to avoid exposure under federal and state labor laws.

Employee misconduct

Finally, an employer wants to consider its potential liability if an employee uses his or her personal device to send harassing emails, even outside of work hours. Because the device is the employee’s personal property, employees may feel more comfortable engaging in inappropriate conduct than they would on company owned property. This could potentially lead to an employee using social media, texting, or phone calls to defame, harass or otherwise inappropriately treat the company, co-workers, or other related parties. To address such concerns a policy should reaffirm that the company’s policies prohibiting such conduct apply with equal force to all devices covered under the BYOD policy.

There is no one size fits all BYOD policy. What a Company needs by way of a BYOD policy will be controlled by the type of business, type of information contained on employee’s device and the availability of IT support to the employer. Additionally, due to the number of laws that intersect and impact BYOD policies, consulting an attorney to draft such a policy is crucial to the its success.

If you have any questions about BYOD policies, please contact us at 610-275-0700 or via email at main@highswartz.com.