As you probably heard, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on December 3, 2024 to stop the Federal government from enforcing the Corporate Transparency Act (the “CTA”) and the regulations implemented under the CTA. The case is called Texas Top Cop Shop, Inc. et al. v. Garland, et al. The court referred to the CTA as “quasi-Orwellian” and decided that it was “likely unconstitutional.”

It took just two days for the U.S. Department of Justice to appeal this ruling to the United States Court of Appeals for the Fifth Circuit. The Financial Crimes Enforcement Network (FinCEN), the agency charged with enforcing the CTA, issued a press release reassuring reporting companies that no action will be taken against them for failing to file their beneficial ownership information while the Texas court’s order remains in place. FinCEN did not, however, indicate whether it would provide a grace period for filing should the injunction be lifted. It noted that reporting companies may continue to voluntarily file those reports during the period that the stay is in effect. Yesterday, the Department of Justice filed a motion with the District Court to lift the injunction while the Fifth Circuit considers the appeal. If this motion is granted, reporting companies (other than the plaintiffs named in the Texas Top Cop Shop case) would be required to file their beneficial ownership reports as if the District Court injunction had never been entered.

Reprinted with permission from the October 14th edition of The Legal Intelligencer. (c) 2024 ALM Media Properties. Further duplication without permission is prohibited.

On October 4, 2024, the United States Supreme Court granted certiorari to hear Ames v. Ohio Department of Youth Services, a case from the United States Court of Appeals for the Sixth Circuit. The Plaintiff in Ames alleged discrimination on the basis of her membership in a majority group – that is, Ames is what has come to be known as a “reverse discrimination” case. The case will resolve a split in the circumstances regarding the evidence required for an employee to make a prima facie case of “reverse discrimination”, and could require employers to reevaluate their diversity, equity and inclusion programs.

Mariam Ames is a straight woman, who was employed by the Ohio Department of Youth Services as an administrator. Ms. Ames applied for a promotion and was told during her interview process that she should retire. After the interview, Ms. Ames was demoted, and a gay male was hired to fill her administrator position. A gay woman was hired to the position for which Ms. Ames sought a promotion. Ms. Ames claimed that the Ohio Department of Youth Services discriminated against her on the basis of her sexual orientation. The United States District Court for the Southern District of Ohio granted the employer’s motion for summary judgment, finding that Ames had not shown the “background circumstances” necessary to support a prima facie case that the employer discriminated against a member of the majority group. The court applied the burden-shifting analysis in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), as courts do in all discrimination cases. The Sixth Circuit affirmed, citing its previous holdings that require reverse discrimination plaintiffs to make an additional showing to the McDonnell Douglas prima facie case. Not only was Ames required to show the “usual” prima facie elements, she must also show “background circumstances” to support a reverse discrimination claim. The Sixth Circuit noted that Ms. Ames easily made a prima facie case: her claim was based on sexual orientation, a protected class under Title VII; she was demoted from a position for which she was qualified; and she was replaced by a gay man. But, according to the Sixth Circuit, the case “foundered” on Ms. Ames’ failure to show the required “background circumstances”. The Sixth Circuit noted that reverse discrimination plaintiffs generally meet this “additional” burden, in the absence of direct evidence, by presenting evidence that a member of the relevant minority group made the decision at issue, or that there is statistical evidence of a pattern of discrimination by the employer against members of the majority group. The Supreme Court granted certiorari, and the case will be heard in the upcoming term.

Attention owners of closely held businesses! A recent decision by the Supreme Court could impact the amount of taxes owed by your estate at death. In Connelly v. United States, the Supreme Court held that the value of life insurance proceeds received by a closely held corporation upon the death of an owner increases the fair market value of the corporation for estate tax purposes. Connelly overturns a previous understanding that a company’s contractual obligation to redeem (purchase) a deceased owner’s shares in the business offsets the value of life insurance proceeds earmarked for that redemption. Since there was no offset, the taxpayer in Connelly owed additional federal estate tax reflecting the (post-death) increased value of his shares in the corporation. Thus, because redemption obligations no longer offset the value of life insurance proceeds, closely held businesses will need to reassess insurance funded redemption arrangements to avoid adverse federal estate tax consequences for their owners.

Additionally, Connelly illustrates the importance of defensible valuation methods under buy-sell agreements. For estate tax purposes, the law disregards the value set by buy-sell agreements unless the agreement sets the fair market value of the business. The requirements to determine fair market value of a closely held business are set forth in Section 2703 of the Internal Revenue Code. In Connelly, the buy-sell agreement ultimately did not control the value of the closely held corporation for estate tax purposes. While the Supreme Court did not specifically address whether the agreement could have withstood Section 2703, Connelly demonstrates what not to do when determining the value of closely held businesses under buy-sell agreements. Failure to properly value the business, as was the case in Connelly, could lead to higher valuations for estate tax purposes. As such, Connelly demonstrates the importance of defensible valuation methods to avoid unintended estate tax consequences.

As of August 13, 2024, a number of changes have been made to the custody statute in Pennsylvania, which may impact your current or future child custody matter. The custody statute has always emphasized the physical safety of children, however, now there are further requirements on the court and the parties to best eliminate any true concerns.

If physical abuse is raised as an issue in a custody matter, the burden is on the parent making the allegation to provide evidence to the court. In the event the court finds that abuse has occurred and there is an ongoing risk to the child, the court must order supervised physical custody by a professional or non-professional supervisor. There is a further requirement that the proposed supervisor must be present in the courtroom and execute documentation acknowledging their role and responsibilities.

In addition, the court is required to hold hearings as to the child’s physical safety if a parent or any household member has certain criminal convictions, pending charges, prior interactions with Children and Youth or domestic violence orders. As noted, this applies not only to the parents, but any member of their household. Therefore, it is important to know the background, especially criminal background, of anyone residing with you, even on a temporary basis.

If you are currently engaged in custody litigation or soon will be, please contact the AMM Family Law Department for more information.

Reprinted with permission from the June 8th edition of The Legal Intelligencer. (c) 2024 ALM Media Properties. Further duplication without permission is prohibited.

On April 23, 2023, the Federal Trade Commission (“FTC”) issued a final rule imposing a broad restrictions on non-competition agreements (“Final Rule”). The Final Rule requires employers to rescind existing non-compete agreements, and preempts conflicting state laws. The Final Rule is effective on September 4, 2024. In the meantime, there were three cases filed (one of which has been dismissed) that may result in a stay of implementation of the rule. This creates uncertainty for employers and employees in preparing for the effective date of the Final Rule. The Final Rule dramatically impacts both employers and employees. Employees subject to these agreements, and contemplating a move, may be waiting for September 4, 2024 to make decisions. Employers must prepare to determine to whom they will send rescission notices, and what steps they will take to ensure protection of trade secrets and customer relationships.

The Final Rule defines “non-compete clauses” as follows: any agreement that prevents a worker from, or penalizes a worker for, seeking or attempting to seek employment with any employer after the termination of their current employment. The Final Rule mandates that it is a prohibited unfair method of competition to enter into or “attempt to enter into” a non-compete clause with an employee, or to enforce an existing non-compete agreement, or to represent to an employee that they are subject to a non-compete without a good faith basis to believe they are.

On April 23, 2023, the Federal Trade Commission (“FTC”) issued a final rule imposing a broad restriction on non-competition agreements (“Final Rule”). The Final Rule requires employers to rescind existing non-compete agreements and would preempt conflicting state laws. The Final Rule is effective 120 days from its publication in the Final Register.

The Final Rule defines “non-compete clauses” as follows: any agreement that prevents a worker from, or penalizes a worker for, seeking or attempting to seek employment with any employer after the termination of their current employment.

The Final Rule mandates that it is a prohibited unfair method of competition to enter into or “attempt to enter into” a non-compete clause with an employee, or to enforce an existing non-compete agreement, or to represent to an employee that they are subject to a non-compete without a good faith basis to believe they are.

Accordingly, the Final Rule not only requires employers not to enter into or “attempt to enter into” employee non-compete agreements, it also requires employers to rescind their existing non-compete agreements, and then notify the current and former employees that the non-compete is rescinded within forty-five days of the rescission. The Final Rule provides a form for the notice of rescission. The obligation to rescind existing non-compete clauses does not apply to where a cause of action related to a non-compete clause accrued prior to the effective date.