Litigation Insights

While the pandemic continues to impact individuals and businesses, efforts to bring a sense normalcy back to daily life are apparent across the state.  One such effort is the reopening of New Jersey Courts.  While this is happening, the reopening is occurring  slowly.

Back in June, 2020 a three phase plan was instituted by the Administrative Office of the courts. Phase One was to have fully remote operations. While Phases Two and Three had gradual increase in the number of judges and staff who would be permitted on site. Phase Two was capped at 10 – 15% while Phase Three permitted 50-75 % of judges and staff to return. However, the judiciary found it necessary to amend their original plan and institute Phase 2.5 which permitted a maximum of 25% of judges and staff to return.  We currently remain in Phase 2.5 and there is no set date for Phase Three to take effect.

Phases 1 through 2.5 have seen matters such as simple matrimonial trials, chancery and probate matters be conducted by zoom or similar virtual platforms. A handful of civil jury trials have also been able to have been conducted statewide.  A new directive allows for criminal and civil jury selection and trials on site while allowing judges to use their discretion to bring in matters into their courtrooms.

On June 24, 2021, the New Jersey General Assembly unanimously passed bipartisan legislation to limit liability for planned real estate developments due to the spread of COVID-19, should they decide to reopen amenities like pools and fitness centers, as long as sign requirements at the entrances to the common areas are observed.

“This is a win for those homeowners associations that chose to keep communal areas closed in 2020 due to liability concerns relating to Covid-19,” said Assemblyman Brian Bergen, R-Morris, a sponsor of the Assembly version of the bill.

“My bill will allow them to open those areas at their discretion while protecting them from lawsuits should any residents or guests be exposed to or come down with the disease,” Bergen said. “Condominium and townhome residents can get back into their shared pools and gyms.”

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In the latest article for WealthManagement.com, the Honorable Judge Katherine Dupuis, (Ret.) of Lindabury’s Alternative Dispute Resolution Practice Group offers insight on how mediation can be a viable way to achieve cost savings and justice during estate-planning disputes. This write-up addresses both what can go wrong and how to move forward through the process. To read it in its entirety, click here.

We are pleased to announce the Honorable Judge Katherine Dupuis (Ret.) of Lindabury’s Alternative Dispute Resolution practice group has been named been as the 2020 Professional Lawyer of the Year by the Union County Bar Association. This award is presented to lawyers who are honored by colleagues for their exemplary conduct, competence, diligence, and demeanor.

Judge Dupuis (Ret.) concentrates her practice on mediation and arbitration in the areas of commercial disputes, probate mediation, and divorce mediation. To contact Judge Dupuis (Ret.) or to learn more about the services she offers, please click here.

ALTERNATE Dispute Resolution of Business Claims

Business conflicts arise in a myriad of different situations, such as:  minority shareholder claims, dissolution, allegations of  self dealing, breach of fiduciary duty, and violations of restrictive covenants. Additionally, minority partners may allege they have been shutout of the business, or a stockholder may seek greater access to internal investigations. Individuals may also seek to have their interests bought out. Even where there is a governing document dealing with dissolution, there is frequently a dispute as to how it applies in a given situation. Any of these claims expose the business entity to damages and the high cost of litigation. Beyond that, there is the concern that corporate secrets or methods of doing business will be exposed to competitors. There may be concern that questionable tax practices may come to the attention of the court.  Even if there is a confidentially order in effect, it is likely that the competitor will learn of the dispute and take advantage of the turmoil within the company. Similarly, an individual suing a business entity risks being labeled a trouble maker and having their business reputation compromised.

Mediation presents a more efficient, less expensive, and confidential method to resolve these disputes. The parties can agree on the ground rules for the mediation. Mediation can be undertaken immediately with the mediator permitting some discovery, or it can be started after the parties have already commenced litigation. The mediator can work with accountants, as necessary. Mediation is a viable solution when dealing with a problem of a small business and also when dealing with more complex issue such as interlocking corporations and closely held family businesses.

We are proud to announce 11 of our attorneys have been named to the 2021 Best Lawyers® list, two of which were named “Lawyer of the Year.” This recognition in The Best Lawyers in America© 2021, identifies each for their leading legal talent in their corresponding practice areas.

The following Lindabury attorneys were named as Best Lawyers honorees:

In April 2019 Litigation Practice Chairperson Jay Lavroff participated as a panelist on a webinar hosted by AMBest which discussed the ways in which social media is changing insurance claims.  In the hour long discussion, Jay addressed issues surrounding social media’s use in litigating insurance claims including how social media data for trial is obtained, issues concerning admissibility in court and how the rules of professional conduct address social media.

You can watch the AMBest webinar here.

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Years of experience in administering estates have taught us that the best way to avoid litigation after death is to plan during life. We have come to identify several “red flags” that, when not addressed during estate planning, are more often than not resolved in a courtroom. Not only does this mean that a judge, rather than the client, is ultimately deciding how the client’s property is disposed of, but the process can be lengthy, emotional, and expensive. With the possibility that attorney’s fees will be paid before any property is distributed to the family members, the lawyers may become beneficiaries of the estate when it is contested.

Unequal distribution of assets amongst children.

Clients who want to distribute their property to their children unequally are almost always asking for a fight. They may want to do this because they are estranged from a child or because they believe that one child “needs” more than another. The slighted child, however, may not agree with mom or dad’s decision. When this comes as a surprise to a child after the client’s death – and the parent is no longer here to explain the thought process and to act as mediator amongst the children – the slighted child feels like his or her only recourse is to hire an attorney.

The New Jersey Appellate Division’s decision in Greenbriar Oceanaire Community Association, Inc. v. U.S. Home Corporation, issued on November 16, 2017, determined that a Homeowners Association was not required to arbitrate any disputes with a developer, and, when faced with a motion to compel arbitration, was permitted to file an amended complaint separating out those claims that are not subject to the arbitration agreement.

The association involved in the dispute is responsible for the common areas, administration, and management of a 1425-unit residential community in Waretown, New Jersey. The defendant, U.S. Home Corporation d/b/a Lennar Corporation, was the sponsor and developer of the project, who ultimately transferred management to the association. In its June 2015 complaint, which was twice amended, the association, on behalf of itself and its members, being the homeowners bound to arbitration clauses, asserted numerous causes of action, including: design and manufacturing defects that the association claims constituted violations of applicable building codes and warranties, as well as various violations of the Planned Real Estate Development Full Disclosure Act (PREDFDA), and the developer’s breach of its fiduciary duties.

In light of the arbitration agreement contained in the developer’s contracts with the association’s homeowners, the developer moved to compel arbitration. By the time the motion was considered, the parties settled the design and construction claims. As a result, the question for the motion judge was whether the remaining claims, including those arising under the PREDFDA, and the fiduciary duty claims, were asserted on behalf of the homeowners and therefore subject to the homeowners’ promise to arbitrate with the developer, or whether the claims should be viewed as belonging only to the association, which never agreed to arbitrate any disputes with the developer. By way of his oral decision, the motion judge agreed with the developer’s view and entered an order compelling arbitration, and later denied a motion to vacate the order compelling arbitration.

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Corporate deadlock is often cited as a reason why the court should invoke its powers and order the sale of one shareholder’s stock in minority shareholder litigation. While deadlock is a legitimate reason to bring a lawsuit seeking the court’s intervention, it is not a magic bullet that will automatically lead to the court ordering a buyout of one or more shareholders.

Deadlock is defined under the New Jersey Business Corporations Act and can be found under one of two circumstances. Deadlock can be found to exist when “the shareholders are so divided that they have not been able, for two consecutive meetings, to elect successors to directors whose terms have expired or would have expired if successors had been elected and qualified.” N.J.S.A. 14(a):12-7(1). The second manner in which deadlock may exist is if “the directors or other persons having management authority are unable to effect action on one or more substantial matters respecting the management of the company’s business.” N.J.S.A. 14(A):12-7(1).

The first deadlock provision may seem like an easy one to satisfy in closely held companies since many small companies do not hold formal shareholder meetings as required under the statute. The owners of small closely held companies are so focused on running the business that they forget about the formal requirements. Instead, since the shareholders in such companies generally work together closely and see each other practically every day, they make management decisions informally as necessary to operate the business and without formal meetings or corporate resolutions.

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