Reprinted with permission from the August 19, 2016 issue of The Legal Intelligencer. (c) 2016 ALM Media Properties. Further duplication without permission is prohibited.

The rights of shareholders to dissent to corporate actions are set forth in PA C.S.A. §1571 et seq., the Pennsylvania Business Corporation Law. Dissenters who comply with the formalities of the statute have the right to demand payment for the fair value of their stock interest at the time of the corporate action giving rise to the right to dissent – provided the corporate goes through with that action. Since a shareholder in a publicly traded company can simply sell his shares if he disagrees with a proposed corporate action, dissenters’ rights do not apply to such corporations.

What triggers dissenters’ rights?
The corporate actions giving rise to dissenter’s rights are specified in the BCL and generally involve fundamental changes to the entity, such as a merger or a change in voting rights.   When the corporation proposes to undertake such a change, a specific procedure must be followed by the dissenting shareholder.

Dissenters need not necessarily assert their dissenters’ rights to all of their shares. They must, however, assert those rights as to “all the shares of the same class or series beneficially owned by any one person.” Beneficial owners of shares should have the written consent of the record holder of the shares.  15 PA C.S.A. §1573.

Dissenters must file their dissent with the corporation prior to the vote on the proposed corporate action. The dissent must be in writing and must include a demand for payment of the “fair value for his shares” if the corporation adopts the proposed action.  Merely abstaining or voting against the change is not sufficient to invoke dissenters’ rights. Once invoked, to preserve dissenters’ rights, the shareholder cannot change the beneficial ownership of the shares while the vote is pending, nor can he vote in favor of the proposed action.

Reprinted with permission from the June 24, 2016 issue of The Legal Intelligencer. (c) 2016 ALM Media Properties. Further duplication without permission is prohibited.

The digital age and pervasive use of email communication gives rise to an entirely new and complex set of issues pertaining to the application of the attorney client privilege and the potential claim for waiver of that privilege.  Many commentators have addressed the use of commercial email servers and the implications of the terms and conditions applicable to such email accounts citing the potential that emails transmitted through such accounts may not be secure or protected.  The commercial provider’s right to use, retain or review the information communicated may impact on the privilege.   Even more complex are the issues that arise when email communications pass between a lawyer and a client utilizing an email account provided to the employee by the employee’s employer, or using an employer provided computer. While the law on an employer’s right to review information passing through its computer systems is continuing to develop, the application of that law to potentially attorney client privileged communications is in its infancy.   Research regarding the application of attorney client privilege to email communications exchanged through an employer’s email server reveals no case directly on point where the advice of counsel is sought regarding matters involving the employer.   

Litigants seeking discovery of attorney client communications through an employer sponsored email account cite the principles developed in cases of inadvertent disclosure and the requirements for invoking the attorney client privilege.  Pennsylvania law permits the invocation of the privilege if the communication relates to a fact of which the attorney was informed by his client, without the presence of strangers, for the purpose of securing either an opinion of law, legal services or assistance in a legal matter.   Nationwide Mutual Ins. Co. v. Fleming, 924 A.2d 1259 (Pa.Super. 2007).  In Carbis Walker, LLPv. Hill Barth and King, LLP, 930 A.2d 573 (Pa.Super.2007), the Superior Court adopted the five factor test to determine whether inadvertent disclosure amounted to a waiver of the attorney client privilege; (1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production; (2) the number of inadvertent disclosures;(3) the extent of the disclosure;(4) the delay and measures taken to rectify the disclosure; and (5) whether the overriding interests of justice would or would not be served by relieving the party of its errors.

Few experiences in life are as emotionally challenging as divorce.  It is not surprising that clients may focus on the issuance of the Divorce Decree as the end of a very painful chapter in their lives. After all, as of the signing of the Divorce Decree, the parties are divorced, and the work is over.  Unfortunately, in most cases, there is still important work to be accomplished even after the judge signs the Divorce Decree.  Family law clients will have an easier time accepting this reality if they know in advance that the Divorce Decree is not the last step in their case.

There are many important matters that may remain outstanding when a Divorce Decree is issued, and some of the key factors are discussed here.   Most divorce clients resolve the division of their assets by entering into a settlement agreement, or a judge issues an order resolving all claims related to the marriage.  Those assets are then typically divided after the Divorce Decree is issued.  Bank accounts are divided and closed.  If there are retirement accounts to be transferred, there are very specific and time consuming rules to follow to transfer the retirement assets from one spouse or ex-spouse to the other.  The retirement assets can take many months to divide which is understandably frustrating for clients.  Mortgages on real estate may have to be refinanced and deeds transferred.  While these procedures can be time consuming and frustrating to complete, clearly, they are critical to the future financial well-being of the parties involved, so perseverance and patience will pay off in the long run.

After those issues relating to marital property, claims and assets are resolved, there are still some items that we suggest clients accomplish after the Divorce Decree to ensure that they have all the legal documentation completed to address their needs post-divorce.  A spouse may want to retake her maiden name.  Also, we suggest that Wills and Powers of Attorney be updated so that the ex-spouse is no longer included in the Will or has Power of Attorney.  Beneficiary designations should be updated for life insurance policies, retirement accounts and other assets as well.  These are merely some of the items that may have to be accomplished post-Divorce Decree.

In order to have realistic expectations of the divorce process, it is important to understand from the start that everything is not finished when the judge signs the Divorce Decree.  There is usually more work to be accomplished before the case is completed.

Pennsylvania has adopted specific provisions relating to a shareholder’s right to inspect the books and records of a corporation duly organized under the laws of the Commonwealth.  The Business & Corporations Law clearly provides for a shareholder’s inspection of corporate records, including the share registry, books of account and records of proceedings upon written notice stating a proper purpose.  However, when the legislature adopted the Limited Liability Company Law of 1994 (the “LLC law”) no similar provision was made relating to a member’s right to review company books and records, and no reference was made to the right of inspection applicable to corporations.

The absence of a specific reference in the LLC law does not mean that a member in a Limited Liability Company does not have the right to inspect business records.  The statute approaches that right from a different direction through the application and incorporation of partnership law.  Section 8904 of the LLC law incorporates by reference provisions relating to general partnerships in the case of a member managed LLC and additional provisions related to limited partnerships in the case of a manager managed LLC.  In either case, the provisions of Chapter 83 relating to general partnerships are rendered applicable.

Section 8332 provides that “the partnership books shall be kept, subject to agreement between the partners, at the principal place of business of the partnership, and every partner shall at all times have access to and may inspect and copy any of them”.  While partnership law does not define the types of records which are to be maintained in the same manner as the provisions relating to corporations, the statutory intent appears to be the same and thus the types of records subject to inspection are arguably similar in scope.           

There are material differences between the right applicable to corporations and partnerships/ LLC’s.  One major difference is that the partnership/LLC provision does not reference a requirement that the partner seeking an inspection state a “proper purpose” for the inspection.  The right as stated appears to be absolute as to partnerships/LLCs whereas in a corporate setting the shareholder must identify and communicate the purpose.  In addition, the provisions relating to corporations specifically provide for a cause of action for review of corporate records and for the recovery of attorney fees associated with the enforcement of that right.  No provision in the partnership law applicable to LLCs provides a specific similar right, nor the recovery of attorney fees.  A practitioner is left to argue the applicability of the provisions relating to corporations and the similarity of purposes served by the two statutory provisions.  

By Patricia C. Collins, Esquire Reprinted with permission from the April 24, 2016 issue of The Legal Intelligencer. (c) 2016 ALM Media Properties. Further duplication without permission is prohibited

The Federal Rules of Civil Procedure regarding electronically stored information present challenging procedural and substantive issues for parties to litigation.  More practically, and, in most cases as a threshold issue, they present cost challenges for litigants.  The United States Court of Appeals for the Third Circuit recently reviewed whether the costs related to electronic discovery are taxable to the losing party under 28 U.S.C. § 1920(4) in Camesi v. University of Pittsburgh Medical Center, United States Court of Appeals for the Third Circuit No. 15-1865 (March 21, 2016). 

28 U.S.C. § 1920(4) (“Section 1920”) permits a judge or clerk of court to tax as costs the fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case.    The prevailing party would include those costs in a bill of costs and the amount would be included in the judgment or decree.  This provision is at the heart of the dispute in Camesi.    In that case, the University of Pittsburgh Medical Center (“UPMC”) prevailed in a claim under the Fair Labor Standards Act (“FLSA”).  The case involved extensive discovery after the grant of conditional certification under the FLSA.  That discovery included the conditional class’s request for electronically stored information (“ESI”).  There were multiple motions to compel and for protective orders, resulting in the entry of a consent order that stayed further discovery of ESI until the Court ruled on competing motions to certify or decertify the conditional class.

To limit warranties or disclaim liability for products sold in online commerce or advertised online, most businesses create a Terms and Conditions or a Rules of Use page on their business website.  A significant uptick in cases filed in New Jersey, however, cite these common broad warranty limitations and disclaimers posted on a business’ website as violations of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). 

The TCCWNA gives standing to consumers who have suffered no financial loss or injury against sellers who, with no intent to mislead, have provided a consumer with, or even shown, a warranty, contract, sign or notice of any sort relating to personal, family or household merchandise that includes text that violates New Jersey (or federal) law. Using software to find Terms and Conditions or Rules of Use and other web-based advertising and social media campaigns that include the offensive text, the organized plaintiffs’ bar has increasingly relied on TCCWNA to bring class actions to generate huge fees for the attorneys and $100 to each consumer in the class under the statute’s automatic damages provision.

What is the TCCWNA ?

The TCCWNA can be found in N.J.S.A. 56:12-14, et seq. The law, which became effective over 30 years ago, is a broad consumer protection law that requires that a plaintiff/consumer only show:
1.  the consumer or potential consumer was given or shown a warranty, notice, contract, or sign by the seller;
2. the product offered was consumer related – used primarily for  personal, family, or households purposes; and
3. the document or notice included some language that breaches New Jersey or Federal law in some manner.
According to the TCCWNA, N.J.S.A. 56:12-15:

No seller, lessor, creditor, lender  or bailee shall in the course of his business offer to any consumer or prospective consumer….or give or display any written consumer warranty, notice or sign…which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor ,creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed.

Why are the TCCWNA lawsuits being brought?

TCCWNA lawsuits are being brought for a variety of reasons. The core reasons are:

• Most business websites include warranty waivers or indemnity provisions that try to limit a consumer’s legal right.
• The consumer does not have to show any specific injury or any loss.
• Good faith of the business is not a defense. The plaintiff does not need to prove an unconscionable act.
• There is no privity requirement; i.e., the plaintiff does not have to prove that he/she actually bought our used the product.
• Damages include attorney’s fees and court costs.
• There is an automatic $100 damages per plaintiff provision within TCCWNA so actual damages need not be proven. Just a thousand member class means $100,000 in damages.

How does TCCWNA affect a business website?

Business webpages are “notices” under the TCCWNA even if they are not intended by the business to mislead a consumer about the applicable law or to form a contract. This includes the Terms and Conditions, Menus, Disclaimers, and almost any page of the website. Any type of advertisement or print material may be considered a “notice” to consumers and the great variety of state laws and complexity of the Federal Magnuson-Moss Warranty Act make it easy to inadvertently include an impermissible warranty or disclaimer provision. Examples of text that can trigger problems include:

• disclaiming implied warranties (of merchantability or fitness for a particular purpose) on any consumer product if you offer a written warranty for that product or sell a service contract on it. 
• requiring a purchaser of a warranted product to buy an item or service from a particular company to use with the warranted product in order to be eligible to receive a remedy under the warranty.
• requiring customers to return a registration card when stating that the business is providing a “full” warranty.
• offering a warranty that appears to provide coverage but in fact provides none (like a warranty covering only moving parts on an electronic product that has no moving parts).
• excluding or imposing limitations on incidental or consequential damages or on how long an implied warranty last in some states.
• including a provision that requires customers to try to resolve warranty disputes by means of an informal dispute resolution mechanism before going to court that does not meet the requirements stated in the FTC’s Rule on Informal Dispute Settlement Procedures.

Caveat

You should always have a lawyer review the Terms and Conditions and Rules of Use pages (and perhaps all the pages) of your website before you publish to see what clauses or statements may be in violation of New Jersey or Federal law. Prohibited limitations on the legal rights of a consumer under implied or express warranties should be edited or deleted.  No business that is acting in good faith should face huge litigation costs and a stiff statutory penalty in a class action lawsuit brought by plaintiffs who suffer no actual harm.