ParadigmInternational Society of Primerus Law Firms WINTER 2013

Assuring You We’re the World’s Finest

A Quality Lawyer is Hard to Find: Primerus is Here to Help

Current Legal Topics: North America • Europe, Middle East & Africa Latin America & Caribbean • Asia Pacific The Primerus Paradigm – Winter 2013

President’s Podium – Every lawyer in Primerus shares Assuring You We’re the a commitment to a set of common values World’s Finest known as the Six Pillars: Integrity page 4 Excellent Work Product Reasonable Fees Continuing Legal Education Civility Community Service For a full description of these values, please visit www.primerus.com. A Quality Lawyer is Hard to Find: Primerus is Here to Help

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PaINTERNATIONAL SOCIETY raOF PRIMERUS LAW FIRMSdigmWINTER 2013

Assuring You We’re the World’s Finest

A Quality Lawyer is Hard to Find: Primerus is Here to Help

Current Legal Topics: North America • Europe, Middle East & Africa Latin America & Caribbean • Asia Pacifi c Primerus Member Firm Directories – North America, page 30 Europe, Middle East & Africa, page 50 About our cover Latin America & Caribbean, page 58 Primerus and all of its attorneys are under the page 64 magnifying glass to ensure they’re providing Asia Pacific, nothing but the highest quality service and most reasonable fees – all the time, everywhere Primerus Member Firm Locations around the world. Thanks to our ongoing quality assurance efforts, Primerus can say with page 65 confidence, we are the world’s finest.

Scan this with your smartphone Primerus Community Service – to learn more about Primerus. 2012 Winner and Finalists Collins & Lacy Kubasiak, Fylstra, Thorpe & Rotunno and Lewis Johs Avallone Aviles

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Publisher & Editor in Chief: John C. Buchanan Managing Editor: Chad Sluss

© 2013 International Society of Primerus Law Firms

2 THE PRIMERUS PARADIGM The Primerus Paradigm – Winter 2013

North America, pages 8-41 Europe, Middle East & Africa, pages 42-51 Legal Traps for Unwary College Students Social Media: and their Parents What Corporate Counsel Must Know Jim Rudolph, page 8 Reinier W.L. Russell & Michele Stutz, page 42

New York’s Expedited Procedure for Collecting on The German Green Card Is Blue a Note or Default Judgment Thomas Schwab, page 46 Harry Beatty & Joshua Katz, page 10

Strategic Considerations Relating to Effective Enforcement The Finnish Regulatory Framework for Foreign Insurers in the United States of Commercial Money Judgments Tiina Ashorn, page 48 Imposed by Courts in Other Countries Stephen D. R. Taylor, page 12

Limiting Your Exposure to Winter – Latin America & Caribbean, pages 52-59 Avoid the Liabilities Inherent with Snow and Ice The Brazilian Civil Code and The Bona Fides Principle Todd Zimmerman, page 14 Eduardo Montenegro Serur, page 52

Crowdfunding: What You Need to Know Melissa Demorest, page 16 The History of Franchising in Panama Ileana Cespedes, page 54

The Rising Tide of Obesity: Managing Your Risk as an Employer The Supreme Courts of Justice in Mexico and the United Sarah Scott, page 18 States Mario Melgar-Adalid, page 56

A Business’ Obligations Under the Identity Theft Protection Act Asia Pacific, pages 60-64 Richard Simon, page 20 Hiring and Firing Local and Foreign Employees in China Caroline Berube & Deborah Loedt, page 60 Oppression of Shareholders, Good Faith and the Duty of Loyalty Richard Rosen & Tim Muller, page 22 Repatriating Dividends from China-based Investments Edward Sun, page 62 Agricultural Contract Clauses for Supplying Energy Crops to the Biofuels Industry William Mason & Brittany Brent Smith, page 24

An Offer You Can’t Refuse? DOs and DON’Ts of Selling or Buying a Business Michael Henry, page 27

WINTER 2013 3 President’s Podium John C. Buchanan

Assuring You We’re the World’s Finest

As I write to you, we are closing the want to talk with you about just one of world. Not only are we out working for books on 2012, a very successful year for those safeguards: our newly established you by searching for the best law firms Primerus, and looking ahead to 2013, a Quality Assurance Board. The board in the world, we vet them using a strict year which promises even more growth has the important role of further admission procedure, and then audit for us within the United States and defining the high standards embodied them annually (more often if needed) to around the world. With 200 law firms in the Six Pillars and translating them ensure they’re still meeting the highest in 44 countries, we are larger now than across cultures around the world. The quality standards. ever before. I expect early in 2013, we Six Pillars (Integrity, Excellent Work I’m proud of the systems Primerus will be in 50 countries. Primerus truly is Product, Reasonable Fees, Continuing has in place to ensure that every If one of our member firms has a client needing the resources of another member firm, they simply pick up the phone and call. Because we have so stringently screened and monitored our member firms, they can have complete confidence in the quality of fellow member firms. revolutionizing the law firm of the future, Legal Education, Civility and Community interaction you have with one of our offering very high quality legal services Service) form the bedrock of Primerus. law firms is a positive one. When we at reasonable fees around the world. Any Primerus law firm has a longstanding say we have the world’s finest law firms, But as many of you know from record of commitment to these values, we mean it. But perhaps it means even experience, with growth comes new and now we’re doing the important work more to hear our clients talk about their challenges. How do we ensure that of making sure they mean the same thing experiences with us. Starting on page every lawyer in every one of our law to every member around the world. 5, you’ll hear from just a few of many firms around the world is meeting the The Quality Assurance Board, clients who say Primerus is the first quality and ethical standards that form working together with our well place they come when they’re looking the foundation of Primerus? After just established Accreditation Board, will for a good lawyer, because they know returning from our first Primerus Global review the performance of all member that the next Primerus firm they hire is Conference in Scottsdale, Arizona, I firms, facilitate client matter referrals certain to be as good as the last one they can assure you our quality standards and identify best practice standards. As worked with. stand strong, and we are indeed the one part of their duties, expect to see If you haven’t yet discovered exactly world’s finest law firms. I know this is a after-matter client surveys when you who the world’s finest law firms are, I bold claim. And as an attorney myself, I work with a Primerus firm. I’m a firm invite you to do so in 2013. I know it know you cannot make a claim like that believer in the J.D. Power and Associates will be worth it. without the evidence to prove it. approach to customer (or client, if you You’ll read more on page 5 about will) satisfaction. This board, working the systems we have in place to ensure as one piece of our larger approach to quality throughout our ranks, but I quality assurance, will help us use the proven J.D. Power system in the legal

4 THE PRIMERUS PARADIGM A Quality Lawyer is Hard to Find: Primerus is Here to Help

A recent study revealed how difficult it Dependable Quality and conducting ongoing quality reviews is for corporate counsel to find a good of member firms. “The selection of Time and time again, clients report that international law firm – and how often competent and trusted counsel is the Primerus is the first place they look for they’ve ultimately regretted their choice. most important task, and Primerus has a quality, reasonably priced law firm, The study found 45 percent of already done that in many international whether for work in the United States North and Latin American companies locations,” he said. “But expanding and or abroad. fired the international law firms they deepening the mutual understanding Matthew Morrison, Vice President of hired, most often due to poor service of our individual business and cultural Claims Legal for QBE North America, and communication problems. The customs is another essential way that all said many Primerus firms are on his study, “The Selection and Retention of Primerus attorneys ensure their clients company’s panel of approved counsel, International Law Firms,” conducted will continue to be well served.” and he calls on them routinely for by LexisNexis and Martindale-Hubbell, According to Buchanan, the Quality litigation needs throughout the United asked 157 in-house counsel in Canada, Assurance Board is just one aspect of States. Consistent quality from one the U.S. and Latin America about their Primerus’ larger coordinated effort to Primerus firm to another gives him the hiring of foreign law firms (meaning those make sure that every one of its lawyers is confidence he needs to hire them. operating outside their domestic market). the “world’s finest.” “If a firm is a member of Primerus, “This statistic is very unfortunate “Everything Primerus does comes we can make the analogy that it must and shows exactly why Primerus is the together in the big picture,” Buchanan be just as good as the Primerus firm we answer for corporate counsel around the said. “And that big picture is to bring just worked with in Texas, or anywhere world,” said Primerus President and the world’s finest law firms together with else,” Morrison said. “We have a comfort Founder John C. (Jack) Buchanan. “Very great clients in the delivery of fine legal level that we have the right attorneys high quality and reasonably priced law services for reasonable fees.” for the case.” firms is an invaluable service Primerus Other ways Primerus assures the can provide to clients. We do the hard Quality Assurance quality of its members include: work of selecting and screening the best Ensuring there are no lags in quality in • The Six Pillars – Buchanan created law firms and then we work every day to any Primerus firm is just one reason why Primerus in 1992 because he saw ensure they’re meeting clients’ needs at Primerus recently established a Quality a pressing need for an organization the highest standard.” Assurance Board. The board’s role is to that would help restore honor and Buchanan said Primerus has a broad ensure high quality service is provided dignity to the legal profession and strategy to ensure that their law firms to all Primerus clients by reviewing the rebuild the eroding trust in lawyers worldwide are of the highest quality, performance of member firms, facilitating and the judicial system. In order so clients don’t experience the trend client matter referrals and identifying to help accomplish that, Primerus reflected in this survey – problems best practice standards. established the Six Pillars to convey with poor quality work and service According to Quality Assurance the core values of every member law from law firms. “We call ourselves the Board chairman David Villadolid, the firm and lawyer. Primerus lawyers world’s finest law firms and we mean it,” board is an important part of Primerus’ are committed to living by these Buchanan said. larger efforts of selecting, screening

WINTER 2013 5 common values: Integrity, Excellent of every potential member firm, universally to all members. Every Work Product, Reasonable Fees, gathering information about the firm’s year in July, Primerus audits every Continuing Legal Education, Civility, policies and practices related to the member firm to determine whether and Community Service. Before Six Pillars, as well as references it is qualified to retain membership. becoming a member of Primerus, including clients, lawyers and judges. Firms must complete a form every law firm must have a reputation The firm also must sign a release of indicating any change in status which of following these standards, and information request to be submitted could reflect a lack of continued once they are admitted to Primerus, to the firm’s malpractice insurance commitment to the Six Pillars. The every lawyer commits to following carrier. Primerus also conducts an Accreditation Board reviews every them in every interaction. internal review, including sending a audit and further investigates all “In the twenty years since we letter or email to all current member irregular audits. established the Six Pillars, we have firms requesting any information never wavered from them, and they may have about a prospective Primerus Does the Hard Work we never will. Primerus attorneys member firm. For Clients are united in our commitment to • The Accreditation Board – “The Quality Assurance Board, the them, and clients immediately The final decision about a firm’s Accreditation Board, the Six Pillars and know what we are all about simply membership falls to the Accreditation a stringent application and retention by considering the Six Pillars,” Board. The board functions as an policy all work together to ensure that Buchanan said. independent body with final authority Primerus firms are the world’s finest,” • Application Process – Primerus on the application of the rules of Buchanan said. “We do the hard work of seeks out, accepts and retains only admission of firms and retention finding, screening and auditing law firms the best firms for membership. After of membership. This removes any so that clients don’t have to.” a firm completes a basic membership politics and personal preferences That’s a service that has proven valu- application form, Primerus conducts from the process of attracting and able to one high level risk management a more extensive investigation retaining members, resulting in a executive of a large global company. high quality standard that’s applied

6 THE PRIMERUS PARADIGM He learned about Primerus from a col- partners appropriately depending on the have a vested interest in taking care lege classmate whose firm joined about level of skill and experience required of my file.” five years ago. He has attended several by a case. Thanks to the work of the Quality events of the Primerus Defense Institute He said that when he recommends Assurance Board, and other parts and has been hiring Primerus law firms a Primerus firm to his general counsel, of Primerus’ broader screening and consistently ever since. he’s always pleased. “He is routinely monitoring process, that assurance of “It saves me a tremendous amount impressed with the rate that we get for great client service, excellent work and of time in that I know Jack [Buchanan] working with a partner, and when I show reasonable fees will only strengthen in and Ruth [Martin] are probably a lot him the partner’s bio, he’s even more the future. tougher in the vetting process than I impressed,” he said. “We use the word ‘society’ to refer to am,” he said. “I have a certain level of Finally, he likes that Primerus firms Primerus,” Villadolid said. “By signing comfort knowing that if a law firm has are small or medium-sized firms. “I like on to the Six Pillars, we have all agreed made it through the gauntlet that is Jack that we’re not a number to them,” he said. to certain self-evident truths, to the and Ruth, then they will be acceptable Since he typically hires law firms for principals we all believe in. The Six to me.” (Ruth Martin is General Counsel one case rather than a larger volume of Pillars are the measures of quality we and Senior Vice President of the work, he also likes the advantages that provide to clients and other members. Corporate Client Division for Primerus.) come from working within the larger The Quality Assurance Board will help The executive said the Primerus Primerus society. “They know that if I communicate and translate what ‘quality’ firms he has worked with have met his don’t get the service I am accustomed means in different cultures so that we all top criteria for quality: first, having to receiving from a Primerus law firm, share the same common understanding.” capability and prior experience in the then they could be totally cut off from And that, Buchanan said, will allow same area of law that he is hiring them Primerus. Even though I may be a small Primerus to continue to serve clients as for and second, what he calls “bench client, I think the Primerus brand gives a society of the world’s finest law firms, strength,” or using associates and senior me bigger weight,” he said. “Bad news every time and everywhere. travels faster than good news, so they

WINTER 2013 7 North America

Jim Rudolph

Legal Traps for Unwary College Students and their Parents

Whatever our areas of expertise, as consent to enter and search a dorm room. Fake IDs attorneys we are often asked to advise a It goes without saying that no student Students have always made and parent on a college student in trouble. should ever drink and drive, but if your utilized fake indentifications, but Whether a child is a freshman going child’s had a drink and is pulled over, it’s they’ve never been as legally dangerous away to college for the first time, a senior best not to submit to a breathalyzer test. as they are today. While using someone returning for their last respite from the Most states will automatically suspend else’s real identification may only real world, or somewhere in between, each their license for a period of months for be a misdemeanor, it may also be semester comes with its own bumps in the the refusal, but it becomes much more punishable under laws applied to road and potential pitfalls. Here are some difficult for the State to prove its case at identity theft. Conversely, using a fake of the legal issues to be aware of: trial. ID with a picture of yourself is more often going to be a felony offense. Alcohol Parties Most serious of all is making fake IDs, While laws and codes of conduct vary, Any party-thrower must be aware of punishable by harsh laws directed underage drinking is almost always social host liability, both criminally and at preventing identity theft, illegal an arrestable offense and will likely civilly. Criminally, a host can be charged immigration and terrorism. be punished by the school as well. for throwing a party where an underage For students who are 21 and over, individual is served or allowed to possess Credit Massachusetts and many other states alcohol. Civilly, a host can be liable for At almost every sporting, recruiting have very strict open-container and damages caused by a person they’ve or other campus event you see the public intoxication laws which students provided alcohol to after they leave tables handing out cheap school- often violate. Many schools also have the party. So if you’re hosting a party, branded swag in exchange for credit severe consequences for keeping alcohol you must make sure not only that you card applications. Credit markets have in dorms, underage drinking or binge keep the noise down, but that there’s no tightened, but it’s still dangerously drinking, so students should be familiar underage drinking occurring, and that if easy for students to get credit and wind with their student handbook and know you’re providing the alcohol, no one is up under a mountain of debt. That whether campus safety officers need over-served. debt can follow them for years, as can any consequences of late or missed payments.

Jim Rudolph is the managing partner of Rudolph Friedmann LLP. Rudolph Friedmann LLP Pranks and Hazing In addition to advising businesses on partnership and corporate 92 State Street More than ever colleges and states law issues, he has an expertise in real estate, construction law and Boston, Massachusetts 02109 617.723.7700 Phone alike are rightly recognizing much of stockholder disputes. 617.227.0313 Fax what were once considered pranks [email protected] (for example, taking items from a www.rflawyers.com

8 THE PRIMERUS PARADIGM fraternity, sorority or rival school) and Date Rape Harassment and accepted rights of passage as criminal Date rape is a serious issue that has been Discrimination hazing. For its part, Massachusetts reported with more frequency in recent Colleges and universities are supposed for example, defines hazing as, “any years. The term can include forced to be academic havens for young people, conduct or method of initiation into any sexual intercourse with an individual, but unfortunately both sexual harassment student organization, whether on public intercourse with an individual who is too and discrimination by university officials or private property, which willfully or intoxicated to consent, or purposefully still takes place. Both may give rise to recklessly endangers the physical or drugging someone for the purpose of administrative and civil claims, are dealt mental health of any student or other getting them to submit to intercourse. with in the student handbook, and run person,” and specifically eliminates For students that have been victims of afoul of State law. In Massachusetts, consent as a defense. date rape, it’s important to remember a public institution cannot treat one that resources exist both on their campus Social Networking individual differently based upon their and in their community, and they should race, color, religion, national origin, and Defamation immediately report the crime to law ancestry, sex, age, disability, sexual Cyber-bullying is receiving more enforcement. If a student has been orientation, marital status or status as attention from law enforcement officials accused of date rape, it’s important to a recipient of public assistance. If your than ever before. Schools, too, have been immediately seek legal counsel. student has been sexually harassed or quick in many instances to sanction discriminated against, report it to law students even for entirely online Copyright Infringement enforcement, administration, and your conduct. While schools have the right to Ever since Napster, file-sharing has been state agency overseeing discrimination monitor a student’s online activity and unquestionably illegal and punishable claims as soon as possible. act accordingly, it’s also important to both civilly and criminally. Today, remember that everything put online is BitTorrent remains a ready source of What If Your Student Gets out there forever, and students certainly pirated content, the Motion Picture in Trouble? don’t want to be answering questions Association of America and individual There are three important rules students about abusive or irresponsible social movie studios continue to file actions need to keep in mind if they get in media use at future job interviews. against college students, and civil trouble: be respectful, don’t go it alone, penalties for downloading even a single and deal with it sooner rather than later. Gambling file can range well over $100,000. Not Being respectful, asking for help (from Despite their wide acceptance, remember only should students avoid any illegal an attorney if necessary), and being that poker games, sports pools, friendly downloading, they need to password proactive will ensure that a bad situation wagers, and any other game of chance protect their wireless router to make sure is not made worse. Students and parents with money on the line is illegal in most that no one else is using their connection are well advised to consult an attorney states. Such activities open students up for it either. (often a local one) immediately if there to the possibility of legal consequences, could be consequences to a student’s and perhaps more likely, university Landlord/Tenant Issues actions. sanctions. There’s nothing more exciting for a student than his or her first apartment, Legal Emancipation Cheating/Plagiarism and there’s nothing more frustrating Last but not least, it’s important to Every student has been warned about than issues with that apartment. One remember that as of the time your child the dangers of cheating and of plagiarism issue that students face frequently is the turns 18, they are legally an adult. Since and yet it continues apace. Today, in mishandling of a security deposit, the you’re no longer their legal guardian addition to everything students have ever deposit paid up-front to ensure that if the you can no longer access their health been told, it’s especially important to be tenant causes damage to the apartment, information or make legal, medical, or aware of the dangers of internet plagia- the landlord has the money to fix it. In financial decisions for them if they’re rism (purchasing papers from internet many states, there are very strict rules for incapable. So like any responsible adult, databases or individual paper writers) how a landlord must handle that deposit it’s time for them to go see an attorney which can have legal consequences for and landlords very rarely follow them. to discuss getting a healthcare proxy, both the student and the paper source When landlords don’t follow the law, they HIPAA authorization, and a durable and which will certainly have academic may lose their right to hold the deposit power of attorney. consequences for the student. or withhold for damages. If they don’t return the full deposit, they could be on the hook for substantial liability and will have to pay the tenants’ attorney’s fees.

WINTER 2013 9 North America

Harry Beatty Joshua Katz

New York’s Expedited Procedure for Collecting on a Note or Default Judgment

It is common commercial practice on the defendant, which can be difficult may commence the action by immediately to draft a separate promissory note if the defendant chooses to be evasive. moving for summary judgment on the evidencing the debt created in a After service is effected, the defendant instrument or judgment. Thus, instead of transaction. New York State offers an typically has between 20 and 60 days preparing a formal complaint, the plaintiff attractive expedited procedure for to respond to the complaint. The initial files and serves a summons and motion collecting on such a note, and also response may be a dilatory tactic, such for summary judgment. The defendant for domesticating and collecting on a as a request for more time to respond, then is required to submit opposition to foreign default judgment, that could or a meritless motion to dismiss that the motion as his initial response. The be of interest to attorneys from other nevertheless delays matters while the judges who sit in New York’s commercial jurisdictions. court sorts out the issues raised in the parts are familiar with this procedure, In many jurisdictions, collecting on motion. And although many jurisdictions, and generally will not permit a defendant an instrument for money owed, such in theory, permit the plaintiff to move to delay judgment by raising spurious as a promissory note, can be a lengthy for summary judgment at any time, defenses in opposition. Furthermore, even process. In addition to the delays and the reality is that many judges are if the court does deny the motion, the inefficiencies inherent in all litigation, loath to entertain summary judgment moving and answering papers generally when a defendant indisputably owes motions before the defendant has had an are treated as the complaint and answer, money on an unambiguous note, his only opportunity to conduct discovery, even if so the case can proceed as an ordinary “defense” may be to delay collection his defenses are highly dubious. action even if the motion fails. in hopes that the creditor will grow New York provides an attractive This procedure can be particularly frustrated and agree to compromise on alternative to this morass. Briefly stated, useful if you wish to domesticate a default the amount owed or, worse, so that he pursuant to Section 3213 of New York’s judgment against a debtor that has a bank can secrete assets. Civil Practice Law and Rules (“CPLR account or other attachable assets in Typically, the first step in collecting 3213”), if an action is based upon an New York, as many commercial firms do. on a note is to prepare a summons and “instrument for the payment of money Saving time in those circumstances can complaint and attempt to effect service only” or upon a judgment, the plaintiff be the difference between collecting on a judgment, and having a defendant who A founding partner of Kent, Beatty & Gordon, Harry Beatty has been Kent, Beatty & Gordon, LLP has rendered himself judgment proof. practicing law for more than 30 years. His practice today includes 425 Park Avenue If you will be suing on an instrument, the structure, negotiation and closing of sophisticated transactions, New York, New York 10022 the question of whether the action is 212.421.4300 Phone including acquisitions, divestitures and ventures both international and 212.421.4303 Fax based upon an instrument for the payment national in scope. He has represented clients on diverse transactional [email protected] of money only is crucial. The plaintiff matters in Central and South America, Europe and Asia. [email protected] must be able to establish the elements www.kbg-law.com Joshua Katz is an associate at Kent, Beatty & Gordon. His practice of its case by proving only, first, the focuses on commercial litigation and arbitration as well as existence of the instrument and, second, employment law. the amount of money owed. If anything

10 THE PRIMERUS PARADIGM needs to be proven beyond the existence of the instrument and a failure to make the payments called for by its terms, the procedure might lead into objections and detours about the propriety of invoking CPLR 3213, and end up creating delay instead of expediting recovery. The rule thus should be used only in clear cut cases. There is much case law debating what qualifies as an instrument for the payment of money only, but courts generally agree that the two quintessential examples are promissory notes and dishonored checks. Happily, it is possible to structure transactions to maximize the availability of this procedure. In an acquisition, for example, an instrument for deferred purchase price can be drafted to be uncluttered with reference to extraneous documents or other factors. Indeed, an express statement might be added to the effect that the instrument is one for the payment of money only within the meaning of CPLR 3213. And New York is very liberal in enforcing a forum selection clause in commercial contracts, so a provision can be inserted into the instrument, and the other transactional documents, choosing New York law and submitting to jurisdiction in appropriate New York courts, to ensure that the expedited procedure is available.

WINTER 2013 11 North America

Stephen D. R. Taylor Strategic Considerations Relating to Effective Enforcement in the United States of Commercial Money Judgments Imposed by Courts in Other Countries

In the United States, efficient conversion The U.S. is a single market with “foreign judgment,” which signifies a of a foreign-country judgment into unparalleled mobility of people and judgment from another U.S. jurisdiction. realized receipts requires several assets encompassing over 50 legal Additionally, for reasons of space, this strategic decisions as a direct result systems. Since, in contrast to arbitration, article addresses only enforcement of the distinctive characteristics of the U.S. has not entered into any treaty of court judgments arising out of the U.S. legal structure. The speed, relating to enforcement of foreign- commercial contracts. Different rules cost and amount of recovery can be country judgments, under the U.S. exist for arbitral awards, non-monetary heavily dependent upon making correct (Federal) Constitution, contract law awards and for monetary judgments strategic choices. Critically, the optimal remains primarily a matter for the states, arising out of other causes. time for these decisions is as early as each of which has developed distinctive The first stage in enforcing a possible. The strategy for enforcement substantive and procedural law. This foreign-country judgment is an action to is best addressed before attempting gives rise to potentially significant domesticate it in a U.S. court. This is a domestication. In some circumstances, strategic considerations for anyone litigation proceeding where the judgment it may be better to instigate proceedings considering enforcing contractual rights holder petitions the court to, in effect, in the U.S., without recourse to domestic against parties based, or with significant convert the foreign court’s judgment courts, if assets are located in the U.S. assets, in the U.S. into a judgment of the U.S. court. The Such advance analysis is typically It may be helpful to clarify from other party has the right to contest the relatively inexpensive and can save the outset that the correct U.S. legal judgment and the court must satisfy time, money, and frustration, as well as terminology for judgments and orders itself (in very general terms) that the significantly improving the chances, and (“judgments”) issued by courts or original court had a reasonable basis for the completeness, of recovery. tribunals (“courts”) in a different country asserting jurisdiction over the defendant, is “foreign-country judgment,” not

Stephen D. R. Taylor is a British national and attorney who was a Kohner, Mann & Kailas, S.C. business consultant and venture capitalist focused on business and Barnabas Business Center financial management, including establishing operations, markets and Washington Building 4650 N. Port Washington Rd. revenues in the U.S. for non-U.S. based businesses, for over 15 years. Milwaukee, Wisconsin 53212-1059 Since joining Kohner, Mann & Kailas, S.C., he has worked closely 414.962.5110 Phone with the dedicated business litigation and commercial debt recovery 414.962.8725 Fax practices and provides strategic support to businesses involved in [email protected] international transactions and dispute resolution. www.kmksc.com

12 THE PRIMERUS PARADIGM and that the defendant had sufficient must also exceed $75,000. However, As an illustration, targeting a bank connections with that country to justify counterintuitively, non-U.S. parties may account requires enforcement in the being required to defend itself there. In be deemed citizens of all states or to state in which the account is held at the addition, courts will seek to confirm that share citizenship with another party to time enforcement is attempted. If assets the defendant was given adequate notice the contract. Since diversity must be are in different states, the judgment of the allegations against it and afforded complete, any party that shares state must be re-domesticated (in as many a fair opportunity to defend itself against citizenship with an opposing party states as effective enforcement requires). those allegations before a reasonably precludes diversity federal jurisdiction. Unfortunately, while judgments of a court impartial court. Critically, the standard Opponents may also be able to “destroy” in one state are constitutionally accorded differs from jurisdiction to jurisdiction – diversity by naming additional parties. great deference by courts in another, sometimes considerably – most notably In short, one cannot rely on federal court in practice, variations in public policy, in the minority of states that require or jurisdiction being available. The great law and local interpretation mean that permit courts to consider reciprocity. majority of contract-related matters are enforcement of a judgment from a court In essence, this is an inquiry into heard in state courts. in one state is neither automatic nor whether the issuing court would (or has) Consequently, the selection of the guaranteed. In the majority of states, this domesticated similar judgments from jurisdiction in which to commence a secondary process is more streamlined. U.S. courts. In practice, reciprocity domestication action can have significant However, a defendant can also elect to can encompass a very broad and highly ramifications. (This is a separate challenge the propriety of the original subjective analysis, with the inevitable question from choice of law; courts in the judgment at this stage. unpredictability implied. A number of U.S. regularly apply the law of another Enforcement is also a state law states will not domesticate a default state or country if contractual language matter and varies by state. Different judgment (where the party subject clearly calls for it, whereas contractual states offer different post-judgment to the order did not appear). In such specifications of jurisdiction are subject collection remedies. For example, some circumstances, the only option may to wider legal and policy considerations.) do not allow bank or wage garnishments, be to start a completely new action for For a state court to accept jurisdiction, it while others do. Some states have contractual remedies in the U.S. must find that that state has a sufficient procedural hurdles (such as requiring a A common misconception of non-U.S. interest in, or connection to, the matter creditor to post monetary bonds before parties is that they will be permitted and that it is fair to the defending party enforcement procedures commence) that to remove proceedings into a federal that jurisdiction be exercised over make collection actions burdensome or court. In fact, this is much less likely in that party. Since the party instigating risky. Enforcement is a different area contract matters than it would be for a an action has the burden of providing of expertise from litigation (such as U.S. party in a similar dispute. Unless a plausible basis for jurisdiction, it securing domestication) that is founded the party from which recovery is sought is not an unfettered choice – only a on securing accurate information on the is a unit of the federal government, state small number of jurisdictions may be location of assets and the enforcement court jurisdiction is the default rule. available, and a mistake can be costly. laws of the relevant state(s). In the The most commonly used exception to Jurisdictional determinations can be real world, there are not always this default position in contract matters complex, requiring a skill set unique sufficient identified assets to satisfy the is through “diversity jurisdiction.” to U.S. legal practice. Not only can judgment in full immediately. In such Intended to preclude local bias in the right choice of jurisdiction greatly circumstances, your counsel’s ability to disputes across state lines, this can only impact the outcome of proceedings, leverage available information to secure be invoked if all entities on one side but a poor choice can spur expensive legally enforceable concessions from the of a dispute are citizens of states and secondary litigation. debtor (in the form of additional security no adverse party is a citizen of any of Once a judgment is domesticated, or liability for interest and costs) may be those states (corporations and organs it can be enforced in that state. critical to securing recovery. of government have citizenship for However, with the mobility of assets such purposes). The amount in dispute that characterizes the U.S. economy, adequate assets may not be in that state.

WINTER 2013 13 North America

Todd Zimmerman

Limiting Your Exposure to Winter – Avoid the Liabilities Inherent with Snow and Ice

A large portion of the United States is of snow and ice. The first approach gener- was a natural accumulation has clearly dealing with another winter and the snow ally holds that a business or property become an unnatural accumulation. Simi- and ice that come with it. Though most owner is not liable to business invitees for larly, where a downspout dumps water people think of snow as pretty at first, injuries arising out of the natural accu- in front of a store’s door, what is natural followed by the realization that it can be mulation of snow and ice (open and obvi- water could potentially become unnatural a hassle, business owners are always left ous states). The second approach places a ice. Thus, merely because a business is with another thought: Is the snow and responsibility on the business or premises located in an open and obvious state does ice yet another liability I need to worry owner to take reasonable steps to remove not mean there is no cause for concern. about? While it is certainly impossible snow and ice in a timely manner (affirma- to address the specifics of liability for all tive duty states). Know Your Property states (and one has to question if Hawaii While obviously a business owner After determining the laws of the state(s) ever needs to concern itself), thinking would prefer the first approach, even that a business has facilities in, the next through the issues below will allow any businesses in open and obvious states step is to actually evaluate the property. small business owner, risk or property still have potential liability. The term The purpose of this step is to ascertain manager to assess potential liabilities natural accumulations of snow and ice, everywhere that snow accumulates in and protect against them. leaves lurking in the shadows the evil light of where people walk/operate. step-brother “unnatural accumulations of Perhaps more important in either type Know Your State (and its Law) snow and ice” for which there may still of state however, is to observe where The first step to any evaluation of po- be liability. While snow and ice that falls natural accumulations are becoming un- tential liability is to know the general to the ground, warms, melts and reforms natural and dangerous accumulations. If approach your state takes toward liability. is not generally unnatural snow and ice, the property manager always walks in the There are two primary approaches to there are times when natural can be made back door every day, he or she may not liability for snow and ice, but the trend into unnatural accumulations. One ex- realize that the front downspout empties seems to be toward putting some respon- ample is where a shopping plaza or plant water right into the parking lot in front sibility on the customer or “business plows all of the snow to the exterior of a of the main customer doorway, where an invitee” to protect themselves against parking lot and creates large mountains of unnatural depression exists. Similarly, open and obvious natural accumulations snow using a front end loader. What once without an inspection of the premises, what may seem like a clean parking lot, may in actuality have become a huge Todd Zimmerman is a shareholder with Rohrbachers, Cron, Rohrbachers Cron Manahan Trimble & snow mountain (i.e. liability) next to Manahan, Trimble & Zimmerman Co., LPA, where his practice Zimmerman Co., LPA the crosswalk the public uses. Thus an is focused on business and insurance litigation and coverage 8th Floor, 405 Madison Avenue actual walk across the property will allow Toledo, Ohio 43604 matters, including premises liability and special investigations, 419.248.2600 Phone a business to better identify its actual arson and fraud. 419.248.2614 Fax potential liabilities. [email protected] www.rcmtz.com

14 THE PRIMERUS PARADIGM Know Your Procedures can be read as “someone not as helpful also provide the business a defense and All businesses do not necessarily have as me is going to fall and sue you”) are indemnification for costs associated with procedures for when it snows or freezes, not met with responses such as, “Yea, the defending a claim. but they should. In large retail settings weather sure is getting crazy out there.” Yet a third way to limit liability con- someone should be tasked with making Instead, businesses should have a chain tractually is to shift such responsibility certain that if it snows or freezes outside of reporting for snow and ice problems. in the terms of a lease. Whether it be a of business hours the customary snow/ice More important than having procedures single store in a shopping plaza includ- removal steps are started. For front of the for winter is to make sure they are re- ing terms in a lease, or the shopping house or store employees, have a proce- peatedly communicated to your employ- plaza requiring the individual store to dure on what to do if a customer reports ees both prior to and during the winters. be responsible for the area around the an issue or hazard. Assess whether there particular store, liability to third persons are areas that are off limits or restricted Limit Your Risks Contractually for snow and ice related injuries is often when icy and if so designate a person to The ability to limit your risks contractu- addressed in leases. make such a determination and cordon ally will vary greatly depending on size off the area. Perhaps most important, and negotiating status of different busi- Get a Second Set of Eyes have a procedure requiring whomever nesses, but all businesses can generally to Look at Your Property removes snow or ice to log the date, time get some protection through the purchase As any business owner knows, the mere and nature of their activity. While these of a commercial general liability policy fact that a state is an open and obvious are but a few of the common procedures, or business insurance policy. state versus an affirmative duty state, it is critical that appropriate manage- A second way liability can be limited, will not prevent the business from getting ment have a meeting and determine what is to hire a snow removal company and sued. As I tell my clients, anyone can procedures should be best practices for shift the responsibility by contract. sue you for anything – but that doesn’t your particular business. While small businesses may generally mean they’ll be successful. That said, it operate under an informal relation- never hurts to have your defense attorney Educate Your Staff ship wherein the “lawn guy” plows the come out and provide a second “fresh” Clearly all staff are not going to be re- parking lot for a hundred bucks when it set of eyes regarding potential hazards sponsible for removing snow and ice from snows, the prudent business will reduce and liabilities. the property – but they can certainly all its snow removal contract to writing and By implementing the steps set forth be responsible for removing liability from limit its liability. Thus, a strong snow re- above, a business can affirmatively defend the business. Make certain that your staff moval agreement will spell out when and itself by demonstrating it took more than is aware that comments from customers how snow is to be removed, require the the minimal steps, and in turn avoid or business invitees such as, “Wow your contractor to be insured and bear respon- making an ordinary winter a costly one. front walk is a solid sheet of ice” (which sibility for injury/damage claims made against the business for snow and ice and

WINTER 2013 15 North America

Melissa Demorest

Crowdfunding: What You Need to Know

In April 2012, President Obama signed • Crowdfunding issuers will be permitted – Description of intended use of the JOBS Act into law.1 Title III of the to issue up to $1 million in securities proceeds 2 JOBS Act, the “CROWDFUND Act,” per year, with different requirements at – Target offering amount and permits crowdfunding, which allows a different investment thresholds. deadline to reach it small business to raise up to $1 million – There are net worth limits on how – in a year by issuing stock to many small- Price, or method for determining much a particular investor can the price scale investors, without going through invest. For example, if an investor – an initial public offering (“IPO”). The earns less than $100,000 annually, Description of ownership and United States Securities and Exchange he can invest up to 5 percent of capital structure of issuer Commission (“SEC”) will regulate annual income or $2,000 (whichever – Description of issuer’s financial crowdfunding. Before businesses can is less). An investor whose net condition, including specific begin crowdfunding, the SEC must issue worth or annual income is more financial statement requirements regulations on how it will be done. The than $100,000 can invest up to 10 for target offering level regulations should be issued around the percent of her annual income or 3 • Over $100,000, the issuer’s financial end of 2012. Nothing can be done to ac- net worth, not to exceed $100,000 statements must be reviewed by an tually issue crowdfunding securities until annually. after the SEC issues its rules. Here is a independent CPA • Crowdfunding issuers will not be summary of how crowdfunding will work: • Over $500,000, the issuer’s financial required to make all of the disclosures statements must be audited How it Works required in a public offering, but will • Issuer will be required to provide The basic structure of crowdfunding have to make certain disclosures in a investors and the SEC with financial requires a crowdfunding issuer to work crowdfunding offering memorandum, reports at least annually. with a crowdfunding intermediary including: to issue securities to investors. The – Name, address, and legal status of • The SEC rules will require that crowdfunding intermediary will handle the entity crowdfunding issuers use the services the investor transactions and may not of a crowdfunding intermediary, such – Issuer’s business plan issue the funds to the issuer until the as a “funding portal” or a broker target offering amount (up to $1 million) – Names of issuer’s officers and registered with the SEC, to issue is reached. directors, and anyone holding the securities. more than 20 percent of the equity – The crowdfunding intermediaries in issuer will be strictly regulated and cannot give investment advice. Melissa Demorest is an associate with Demorest Law Firm, where Demorest Law Firm Their primary role will be she focuses her practice on business law and business transactions, 322 W. Lincoln to provide information and and primarily represents start-ups, small businesses and family Royal Oak, Michigan 48067 248.723.5500 Phone disclosures to investors, and to businesses. 248.723.5588 Fax reduce the risk of fraud. [email protected] www.demolaw.com

16 THE PRIMERUS PARADIGM – It is likely that FINRA (Financial or business can be funded until they lowering the disclosure requirements Industry Regulatory Authority) have reached their target funding or increases the potential for fraud by will be appointed to oversee the offering amount. fake companies. crowdfunding intermediaries, who Crowdfunding is also an inherently would also have to register with Benefits of Crowdfunding risky investment. Many startup business- FINRA. The crowdfunding concept fills a funding es fail, and many crowdfunding inves- gap for many entrepreneurs and small – Issuers may not directly sell tors may lose their entire investment, businesses, who may have a great idea, securities, and must direct or at least are unlikely to earn much of but no way to obtain traditional financ- potential investors to the a return on investment. Crowdfunding ing. Banks are still hesitant to lend in crowdfunding intermediary with investors will need to be well apprised of this economy, particularly to start-up whom they are working. the risks involved. businesses. Venture capital is also dif- Another concern is how to walk the How Crowdfunding is ficult to obtain. Crowdfunding gets the fine line between advertisement of a Different from Kickstarter community at large involved in support- crowdfunding opportunity and giving ing the venture or idea, and provides financial advice. Crowdfunding interme- Crowdfunding will allow businesses to a great alternative to borrowing money diaries cannot give financial advice, issue securities to investors, and the from family and friends. but will have to make people aware of investors may earn a return on their Crowdfunding also allows individuals the opportunities available without investment. Conversely, Kickstarter to invest in their community and keep even appearing to recommend certain (www.kickstarter.com) and similar their investment local, where they can opportunities over others. websites allow small businesses to raise see the results. Even if they don’t get funds, but do not allow the businesses a direct return on their investment, What Can You Do Now? to issue securities to their investors. they still benefit from helping develop If you are interested in crowdfunding, Rather, Kickstarter investors receive their community. here are some things you can do now incentives to invest, such as a product or to prepare: an experience (e.g., a cool product that Concerns about Crowdfunding • Invest in your online presence and the company produces or tickets to a The biggest concern about crowdfunding be as visible as possible to potential launch party). is the potential for fraud. In an IPO, the investors. Another difference is that Kickstarter issuer is required to provide significant is typically used to launch a product, or financial information, in order to protect • Keep in mind that the terms of the to release an independent film, or help the investor. A crowdfunding issuer will offering may only be disclosed by the a band to tour. Crowdfunding will apply be required to provide much less infor- crowdfunding intermediary. the same concept to starting or growing mation, which could be a double-edged • Develop a plan for how much capital a business, such as a tech startup or a sword. On the one hand, a small business you need and what you will use it for. local bagel shop. may not have the resources to complete • Prepare your pitch and plan for One similarity between Kickstarter an IPO, and crowdfunding provides lower investor questions. Begin to work on and crowdfunding is that no project barriers to entry. On the other hand, the crowdfunding disclosure. • Determine the rights of the crowd- funding shareholders (voting, etc.). • There will be a cost to use the crowd- funding intermediaries, although those costs are not yet known. • Investigate crowdfunding intermediaries. Expect lots of attention around crowdfunding in early 2013, after the SEC has issued its rules.

1 Jumpstart Our Business Startups Act, Pub. L. No. 112-106 2 “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012” or the “CROWDFUND Act” 3 This article was submitted for publication on October 25, 2012. As of that date, the SEC had not yet issued preliminary rules for crowdfunding.

WINTER 2013 17 North America

Sarah Scott

The Rising Tide of Obesity: Managing Your Risk as an Employer

Recent Federal Court Decision In EEOC v. Resources for Human Although this case appears to buck Deems Obesity a Disability Development, Inc. (827 F.Supp.2d 688 the trend among courts up to this point, (E.D. La. 2011)), the employee at issue employers should consider the Louisiana Under the ADA supervised the employer’s day care decision a potential harbinger of a more Studies estimate the rate of obesity in program and weighed over 500 pounds. liberal approach to the issue going the United States to be at an all-time Although she had received exemplary forward, especially given the EEOC’s high – over one-third of adult Americans performance reviews, she was ultimately position. Employers who encounter obese are now considered clinically obese. As fired based on concerns over her “limited employees seeking accommodations this trend has risen over the years, many mobility” and difficulty performing under the ADA should consider seeking courts have grappled with the question CPR. The employee later died due to legal advice before dismissing such of whether obesity may be considered complications from her obesity, but requests outright. a disability under the Americans the EEOC brought suit on her behalf, with Disabilities Act (ADA) such that arguing that a person with “severe Employee Wellness Programs employers must offer accommodations to obesity” (which they defined as having Are Increasingly Popular, But their employees whose obesity interferes body weight in excess of 100 percent Not Without Risk with their job performance. A recent above normal) is disabled under the In an effort to confront the problem federal court decision in Louisiana ADA. The employer, on the other hand, of obesity in the workplace before it adopted the EEOC’s (U.S. Equal argued that there must be a showing of becomes an issue, many employers Employment Opportunity Commission) an underlying physiological disorder – are implementing wellness programs. liberal view on this issue, holding that such as a cardiovascular or respiratory Wellness programs encompass a broad obesity on its own may be considered a problem – in order to bring the condition array of approaches to incentivizing disability under the ADA, even absent a within the meaning of a “disability” healthier lifestyles and promoting health showing of an underlying physiological under the ADA. The employer’s position and wellness. Some offer rewards for disorder – something other courts have was supported by holdings in several adopting healthier habits such as losing required in the past. other federal court cases. The court, however, was not persuaded, and adopted the EEOC’s broader standard.

Sarah Scott practices health care law at Wilke, Fleury, Hoffelt, Gould Wilke, Fleury, Hoffelt, Gould & Birney, LLP & Birney, LLP in Sacramento, California. She earned her J.D. from 400 Capitol Mall, 22nd Floor the University of California, Davis School of Law, and her B.A. from Sacramento, California 95814 916.441.2430 Phone Occidental College. 916.442.6664 Fax [email protected] www.wilkefleury.com

18 THE PRIMERUS PARADIGM weight or quitting smoking, and some should avoid implementing wellness employers should take care not to allow simply encourage employees to have programs that are too aggressive, such as certain employee health information better nutrition or to be more active. requiring employees to undergo a health to fall into the hands of those making The most typical arrangement rewards risk assessment. The ADA states that employment decisions. A terminated participants in the program with reduced such assessments must be voluntary, so employee could easily allege that he was health plan premium costs (which are participation cannot be a standard for fired not based on his job performance, usually automatically deducted from employment. In addition, the recently but rather because of a health condition paychecks), but other common examples implemented Genetic Information that may be protected under the ADA. include gift cards or additional paid Nondiscrimination Act (GINA) prohibits The potential for liability should not time off as incentives for participation or employers from asking about employees’ dissuade employers from implementing reaching certain specified goals. Studies genetic information, so questions wellness programs at all. Such programs show that up to 60 percent of employers about family history may violate the have proven successful in improving now offer some type of wellness program law. Moreover, the Health Information employee health and morale and to their employees. Portability and Accountability Act reducing health care costs. If in doubt Implementing these programs can (HIPAA) forbids employer medical plans about the legality of such programs (or appear to be a win-win for employers, from charging higher rates based on certain provision in such programs), as they may result in workers losing health status – so a health assessment employers should seek legal advice. weight, becoming healthier, avoiding or wellness program designed to ferret costly medical issues, and missing work out smokers, for instance, may violate less frequently. However, employers HIPAA. (There are exceptions to should be aware of certain pitfalls that this provision for employer wellness may accompany workplace wellness programs that meet certain criteria, programs. For example, employers such as providing alternative rewards to employees who cannot or should not achieve a particular health goal.) Finally,

WINTER 2013 19 North America

Richard Simon

A Business’ Obligations Under the Identity Theft Protection Act

Federal and state governments have as Texas, may apply to the personal records, and (3) restrictions on public enacted laws imposing obligations on records of individuals residing outside agency and private entity use of an private business to take reasonable of its jurisdiction and others, like individual’s Social Security numbers. steps to protect unauthorized disclosure Massachusetts, apply to security Under ITPA, any business conducting of personally identifiable information breaches of personal information business in New Jersey that compiles or collected and maintained by them. This compiled and maintained by businesses maintains records that include personal ranges from implementation of written formed and operating outside of the information must disclose any breach information security programs geared jurisdiction so long as any of the of security of the personal information to reasonably prevent unauthorized personal records relate to residents records to all New Jersey customers disclosure, to imposing an obligation within its jurisdiction. whose personal information was, or on a business to notify the exposed Although the details of each law is reasonably believed to have been, individuals once a security breach regarding notification periods, methods accessed by an unauthorized person. occurs. This is in response to ever- of disclosure, consequences of failure to Businesses that compile or maintain increasing incidents of unauthorized comply with notification requirements, computerized personal information for access to millions of computerized and exceptions to the requirement for another business are required to notify records containing personal information notification may vary, New Jersey’s the other business that must, in turn, of individuals, including customers, Identify Theft Prevention Act (“ITPA”, notify the affected New Jersey customers. employees and others. Currently, 46 N.J.S.A 56:8-163 enacted in 2005) Unauthorized access includes access states and certain U.S. possessions echoes the general purpose and scope of to personal records by an authorized have adopted some form of data breach most state breach notification laws. ITPA employee that accesses the records for notification law. There also are presently remedially addresses three separate data an unauthorized purpose. numerous federal laws that focus on security concerns with businesses that Under ITPA, a business shall in the specific industries, such as health compile and maintain personal records; most expedient time possible and without and finance, and require notification namely (1) notification of a security unreasonable delay, disclose a breach of of a security breach of personal breach of records containing personal security of protected records to the state information. It is important to note that information, (2) destruction of both paper police and then to any customer who is the laws of certain jurisdictions, such and computerized personal information a New Jersey resident. However, if the business establishes and documents that misuse of the personal information is not Richard Simon is Counsel to Mandelbaum Salsburg and a member Mandelbaum Salsburg reasonably possible, notification is not of its Privacy Group. He has been practicing law for 36 years. Over 155 Prospect Avenue required. The written documentation of the years, Richard has successfully represented clients in complex West Orange, New Jersey 07052 973.736.4600 Phone the determination must be retained for commercial litigation, including shareholder disputes, real estate 973.325.7467 Fax five years. matters, construction claims, trade secrets, restrictive covenants, [email protected] general contract matters and matters seeking equitable relief. www.msgldlaw.com

20 THE PRIMERUS PARADIGM ITPA provides for the form and relevant records from unauthorized Security number. The statute prohibits transmission of the required notice, access. Although encryption of personal a private entity or public agency from which is dependent upon the costs information does not equal compliance posting or displaying an individual’s of notification and the number of and should not be presumed to do Social Security number, or any four or customers entitled to receive notice, so, unauthorized access to personal more consecutive numbers of the entire and can include written notification, information secured by encryption number. The provision also prohibits e-mail notification, conspicuous that does, in fact, render the personal use of the Social Security number on posting on the business’s webpage information unreadable or unusable may mailed materials unless required by and, in certain circumstances, through excuse a business from the notification state or federal law, printing the number notification to major statewide media. obligation. on a card required for an individual to ITPA also requires that a business access products or services provided by Company Violations Open that compiles or maintains customers’ a business, intentionally communicating Substantial Exposure personal records, or otherwise has such or making the number available to the records in its custody and control, must general public, requiring an individual The reporting requirements are central arrange for destruction of records that are to transmit the number over the Internet, to the ITPA. A business that violates no longer to be retained, by shredding, or requiring the number to access an the security breach notification erasing or otherwise modifying the Internet Website, unless a password, PIN obligations is exposed to substantial records so that they are unreadable, or other authentication device is also costs, fines and penalties, as well as undecipherable or nonreconstructable required. However, a business is entitled private actions by affected customers. through generally available means or to continue to use Social Security There are steps that can be taken technology. This provision addresses Numbers for internal verifications of an to minimize the likelihood of a data hard copy records, as well as electronic individual. security breach. First, a business data, and the hard drives and servers that Every business should re-evaluate its should evaluate the need to retain the data is stored on. Therefore, whether existing uses of Social Security numbers personal information and for how long. or not a business actually uses personal and determine if the use complies with Next, perform a survey and pinpoint information records in the course of its the provisions of ITPA, and, if it does sources of both electronic data and business, if it has custody and control of not, to modify the use accordingly. hard copy unsecure retention of data, such records, it must destroy the records We recommend that each of you including assessment of existing (1) as directed by the statute. familiarize yourself with your state’s administrative procedures and what For example, if a business that security breach notification or similar changes should be made to reasonably prepares mass personalized mailings law. A good beginning point is the prevent unauthorized access to records for other businesses is provided mailing website – www.ncsl.org/issues-research/ containing personal information (2) lists containing personal information, telecom/security-breach-notification- existing technology, such as firewalls, the business is required to destroy the laws.aspx and Congressional Research policies and procedures for use of records once the project is completed. Service Data Security Breach remote devices (e.g., laptops and In an effort to limit the use of Notification Laws – www.fas.org/sgp/crs/ employee-owned equipment) (3) Social Security numbers as a means misc/R42475.pdf. assessing updating hardware and of identifying an individual, ITPA software to reasonably secure the restricts the use of an individual’s Social

WINTER 2013 21 North America

Richard Rosen Tim Muller

Oppression of Shareholders, Good Faith and the Duty of Loyalty

Most business organization statutes be examined by the Courts using an ity has been the attitude of courts of including those for corporations, limited objective standard. These individuals equity when petitioned to undermine liability companies and limited partner- are often said to have fiduciary duties to the rule of undivided loyalty by the ships provide remedies for oppressed the corporation and the shareholders or ‘disintegrating erosion’ of particular shareholders or partners. members of the company. exceptions. Only thus has the level of Statutes generally are phrased in The most frequently cited description conduct for fiduciaries been kept at a terms of the power of the courts to dis- of the fiduciary duty of a partner is the level higher than that trodden by the solve a corporation or limited liability famous enunciation by Justice Cardozo crowd. It will not consciously be low- company when the Court finds that those while he was on the New York Supreme ered by any judgment of this court.1 in control of the corporation have acted Court. Subsequent statutory enactments illegally, fraudulently or in a manner . . .[C]opartners, owe to one another, including the Limited Liability Company which is oppressive to some share- while the enterprise continues, the Act did not go as far as Justice Cardozo holder, or members – or have engaged duty of the finest loyalty. Many forms did in 1928. The members of limited in conduct which is “unfairly prejudi- of conduct permissible in a worka- liability companies are by statute bound cial” either to the corporation or to any day world for those acting at arm’s to duties of loyalty and care. There is shareholder or member. These statutes length, are forbidden to those bound also a requirement of good faith and fair generally provide for some remedy short by fiduciary ties. A trustee is held to dealing. of dissolution, normally a buyout of the something stricter than the morals of Shareholders generally owe no duty minority interests. Some cases indicate the market place. Not honesty alone, to the corporations or to other sharehold- that in certain circumstances the minor- but the punctilio of an honor the most ers. They are passive investors. Rather, ity can be required to buy the interest of sensitive, is then the standard of be- directors and officers stand in a fiduciary the majority. havior. As to this there has developed relationship to the corporation and its The conduct of officers, managing a tradition that is unbending and shareholders. The standard they must members and directors will frequently inveterate. Uncompromising rigid- follow is “utmost good faith,” a strict rule of honesty and fair dealing. In Delaware, corporate officers owe fi- Richard Rosen is active in trial and appellate practice in the state and Rosen Hagood duciary duties that are identical to those federal courts. His practice focuses primarily on personal injury cases 151 Meeting Street owed by corporate directors. Fiduciary and business litigation. He is admitted to practice in the South Carolina Suite 400 Charleston South Carolina 29401 duties run to shareholders and corpora- Courts, in the Fourth Circuit Court of Appeals and the United States 843.577.6726 Phone tions not to fellow officers or directors. Supreme Court. 843.724.8036 Fax What is a fiduciary duty? It means [email protected] Tim Muller is active in trial and appellate practice in the state and [email protected] that directors and officers of corporations federal courts. His practice focuses primarily on business litigation, www.rrhlawfirm.com owe the corporation complete loyalty, construction litigation and local government law. He is admitted to honesty and good faith. A director or of- practice in the State of South Carolina.

22 THE PRIMERUS PARADIGM ficer’s first duty is to act in all things tors have acted with the impermissible of trust wholly for the benefit of the motive of favoring their colleague.9 corporation. It includes a duty to disclose Corporate directors and officers as the information to those who have a right well as majority members in limited to know the facts. liability companies are well advised to The duty of good faith is comprised conduct business with a keen awareness of: (1) a general baseline conception,2 of the threat of potential shareholder and (2) specific obligations that actions. Several steps are available to instantiate at conception. The baseline reduce or eliminate the possibility of a conception consists of four elements: shareholder suit or oppression action: (1) subjective honesty or sincerity; 1. Transparency: Corporate meetings (2) non-violation of generally accepted should be properly noticed with suf- standards of decency applicable to the ficient details about proposed actions conduct of business; (3) non-violation to allow for any owner or member to of generally accepted basic business participate and have a voice. norms; (4) and fidelity to office.3 Duty of care and the duty of loyalty 2. Proper documentation of corporate do not cover all types of improper mana- action should be routinely expected gerial conduct.4 The duty of care requires and required. the manager to perform his duties in a 3. Compensation details should be manner that he reasonably believes to made available to all owners together be in the best interest of the corporation, with the mechanism by which with a view towards maximizing corpo- compensation is determined. rate profit and shareholder gain.5 The 4. Perks or prerequisites including club duty of loyalty requires a manager to memberships, dues and travel should act fairly when he acts in his own be examined for appropriateness, self-interest or the self-interest of an reasonableness and allowability. associate or family member.6 The Model Business Corporation Act 5. Self-dealing by majority owners provided for good faith in the discharge and officers in a corporation or LLC of the duties of directors.7 Frequently should be disclosed, noticed for state corporation acts provide that under appropriate consideration by the certain conditions the corporation has managing members or the entire the power to indemnify the costs and membership, by the board of directors outcome to litigation and other proceed- or shareholders, and objectively ings, providing the manager acted in considered. good faith. Courts have been reluctant to 6. In certain circumstances, delegation allow corporations and managers to avoid of approval for transactions involving the duty of good faith even by agreement. corporate insiders and the potential Disinterested directors, for example, for self-dealing should be delegated are frequently involved in making cor- to third-party neutrals, frequently porate decisions involving the conduct lawyers retained by the corporation of other directors or officers. The duty or limited liability company for of loyalty is typically inapplicable to that purpose. these directors because by hypothesis they have no material, financial ties to 1 Meinhard v. Salmon, 249 N.Y. 458, 463, 164 N.E. 545, either the directors whose transaction or 546 (1928). 2 See Melvin A. Eisenberg, The Duty of Good Faith in conduct is at issue or to the transaction Corporate Law, 31 Del. J. Corp. L. 1, 21 (2006). or conduct itself. As a result of the busi- 3 Id. ness judgment rule, typically it is also 4 Id. very difficult to prove that the directors 5 Id. 6 Id. 8 have violated the duty of care. The solu- 7 Id. tion is to apply the duty of good faith to 8 Id. at 59. determine whether the approving direc- 9 Id.

WINTER 2013 23 North America

William Mason Brittany Brent Smith

Agricultural Contract Clauses for Supplying Energy Crops to the Biofuels Industry

As important as technology advancement • Bankers and investors providing forms of agricultural contracts, elements and biorefinery business formation are to biomass conversion project financing of each, varying responsibilities of the the future of the biofuels industry, success demand assurance of feedstock sup- parties, Uniform Commercial Code is also wholly dependent on enormous ply for the life of the project, and ag- (“UCC”) considerations, and other state quantities of biomass being produced by ricultural contract arrangements must statute considerations are summarized America’s farmers. The purpose of this ar- provide confidence in the availability below. ticle is to further thinking and discussion of feedstock over the long-term. Production Contracts on the essential terms of biomass supply • Mother Nature dictates require- Generally, a production contract is an arrangements among all parties – farmers, ments and introduces uncontrollable agreement by which a farmer agrees to biorefinery owners, seed suppliers, feed- variables into all parties’ contract sell or deliver a designated crop grown stock supply companies, bankers, lawyers expectations. Supply contracts will on identified acreage to a purchaser in a and public officials. Many interests must fail unless they: take account of specified manner. The contract speci- be balanced: drought, storm, or other acts of God; fies production conditions,1 quality of • Contracts for energy crop supply must are adapted to realistic agricultural, product, acceptable production inputs be competitive and fair to farmers in capital and labor input cycles, as and management requirements.2 More the short- and long-term to attract well as requirements for planting, specifically, production contracts contain the required quantities and quality cultivating, and harvesting; and fit provisions covering the crop’s entire of switchgrass, miscanthus, sorghum, the particulars of the specified crop, production process from beginning to agricultural residues and other for example, whether it is an annual end, often specifying planting periods, energy crops. or a perennial, or grows from a seed cultivation practices, and other matters or a rhizome. • Biomass conversion facilities are intended to ensure delivery of a certain dependent on reliable, uniform, and Traditional agricultural contracts quality and quantity of the crop to the economical feedstock, and energy include agreements between farmers purchaser.3 crop supply arrangements must and those that purchase or market the The farmer in a production contract address those requirements over the farmers’ crops, agreements between provides growing services and supplies a life of the facility. producers and suppliers, and agreements small part of the total production input. concerning land use. Some common He or she usually does not own the crop during production; in fact, under some William Mason and Brittany Brent Smith represent clients in a Kennerly, Montgomery & Finley, P.C. agricultural production contract models, range of legal matters, including contract drafting and negotiation, 550 Main Street, Fourth Floor title to the growing crop and to the har- technology transfer, business organizations, agriculture and Knoxville, Tennessee 37902 865.546.7311 Phone alternate energy supply. 865.524.1773 Fax [email protected] [email protected] www.kmfpc.com

24 THE PRIMERUS PARADIGM vested crop is never held by the farmer.4 Marketing Contracts be fixed, or could be set by a formula The farmer in a production contract has a Generally, a marketing contract is an that, for example, includes a factor based reduced production risk which may lead agreement by which a farmer agrees on the price of diesel fuel. Some cel- to lower compensation. to sell or deliver all of a specifically- lulosic technology conversion processes The purchaser in a production con- designated crop grown on identified are designed to handle biomass derived tract supplies and finances nearly all of acreage to a purchaser. The contract from a specific energy crop or with other the production input and usually owns usually specifies only the price for an specified delivery requirements. In the crop during production as well as established quality of crop and delivery that case, the marketing contract might after harvest and delivery. The purchaser procedures for the harvested crop.5 specify that crops must be grown from a makes all or most production decisions A farmer entering into a marketing specified seed, or that the biomass must and maintains a managerial position, contract obtains a buyer and a price be delivered to the supply contractor often including the right to make field for the crop before it is harvested. The with no more than a certain percentage visits. farmer supplies and finances nearly of moisture content, or that it must be Depending on the biorefinery’s all production input and owns the crop delivered in square bales. specifications for biomass feedstock, the during production. The farmer makes project owner might take on less overall production decisions and assumes Uniform Commercial Code vs. business risk if it specifies, or actually production-related risks. Because the Other State Law provides to the farmer, the high biomass farmer undertakes production risks, The UCC governs the sale of goods, sorghum seed to be used to establish the compensation is usually reflective of the including agricultural products.6 Both

crop, requires the farmer to follow speci- market value for the crop. production and marketing contracts are fied agricultural schedules and practices The purchaser in a marketing con- for the sale of agricultural products and in planting and cultivating the crop, tract buys a known quality and quantity are therefore governed by the UCC. State specifies the fertilizer to be applied and of a crop for a negotiated price. The pur- statues may also specifically govern its schedule, and provides a harvesting chaser does not own the crop until it is agricultural contracts, which provides for contractor to cut, weigh, and retrieve harvested and delivered and exerts little the possibility of conflicting laws. the biomass from the field. Due to the influence over production decisions. State statutes that are consistent with purchaser’s extensive control over the A biomass supply contractor for a the UCC may supplement, but ordinar- details of the farm operation, the farmer cellulosic ethanol plant might enter into ily do not supplant, its provisions. To be has reduced risk of production as well a marketing contract with area farmers. consistent with the UCC, a state statute as significantly less investment, and is A farmer would agree to sell the entire must be consistent with the text as well therefore less likely to be subject to loss crop on a particular 500 acres to the as the purposes and policies of the UCC, in the event of drought, flood or other supply contractor for three years for a which are: (1) to simplify, clarify and crop failure. specified price per ton. The price could

WINTER 2013 25 Photography for this article provided by Genera Energy Inc. modernize the law governing commercial by the Tennessee statute are neither that may apply to a contract for biomass transactions; (2) to permit the contin- modern nor uniform with other jurisdic- supply is an important consideration. ued expansion of commercial practices tions.10 There are advantages to farmers The discussion of appropriate terms through custom, usage and agreement of in longer-term contracts: establishment to include when contracting for biomass the parties; and (3) to make uniform the of a base farm income over a number of is one that must be continued among law among the various jurisdictions.7 years; the ability to amortize investment farmers, feedstock suppliers, bankers If a state statute conflicts with either in land, equipment or crop establish- and biomass conversion facility owners the UCC’s text or its purposes and poli- ment; some assurance that the contract as the industry progresses, to eventually cies, the UCC ordinarily supersedes the price would cover costs; and an opportu- find a middle ground on which all parties statute. However, if the state statute was nity to develop expertise in the manage- can agree. specifically enacted to provide “addi- ment of a particular crop. tional protection to a class of individuals A state statute that limits the dura- 1 Examples of production conditions include: require- engaging in transactions covered by the tion of agricultural contracts could be ments for type and condition of soil for successful production, a precise schedule for the use of acceptable UCC,” a court may allow the state statute problematic for the developing biomass inputs, and specific production practices to be used by to supersede the UCC.8 The question industry. A single season, or a two- or the farmer. 2 Agricultural production inputs refer to items such as of whether the UCC or the state statue three-year term, contract does not pro- seed, fertilizer, chemicals, pesticides, fuel, machinery, should apply is a question of law. vide a biorefinery owner with feedstock etc. 3 Christopher R. Kelley, Agricultural Production Con- For example, a Tennessee statute assurance. Because of the magnitude tracts: Drafting Considerations, 18 Hamline L. Rev. 397 limits the duration of certain agricultural of the investment, a biomass supply (1995). 4 Id. at 398. 9 contracts to three years. The statute was contractor will likely seek to contract for 5 Production Contracts, http://www.farmfoundation.org/ apparently enacted during the Great De- a significant percentage of the facility’s news/articlefiles/105-May2004ProductionContract.pdf (last visited Oct. 18, 2012). pression to protect farmers. However, the biomass feedstock requirements during 6 U.C.C. § 1-203(1)(k) (2004) and U.C.C. § 2-102 (2004). statute could be construed to be contrary the development phase of the facility. A 7 U.C.C. § 1-103(a) (2004). to the UCC’s text, purposes and policies: three-year contract term, even with the 8 U.C.C. § 1-103, cmt. 3 (2004). the UCC does not limit the duration of possibility for renewal, is probably not 9 Tenn. Code Ann. §43-15-101 (2012). 10 The Tennessee statute was enacted in 1932 and has contracts, and the limitations imposed sufficient. Balancing of the various laws not been cited in any case since its enactment; no other state has a similar statute limiting the duration of agricultural contracts.

26 THE PRIMERUS PARADIGM North America

Michael Henry

An Offer You Can’t Refuse? DOs and DON’Ts of Selling or Buying a Business

Selling or buying a business can be an He needs to prepare for life after the sale Sellers then need to tackle the weak- exciting and rewarding experience.1 of the business and visualize what he will nesses, such as improving profitability, While the sale of a business may take a do with his time. building a better repetition, diversifying year or less to achieve, planning should How will the seller’s financial situ- customers or products, building a man- begin well in advance, even before it’s ation be affected by the sale? Often a agement team, reducing debt or upgrad- a firm thought. Optimal results can seller’s wealth largely depends on the ing processes. Unfortunately, some sellers be achieved for both buyer and seller business, and he will need help with do not prepare their businesses for sale with flexibility and creativity, careful the transition from receiving an income and, should they be forced to sell during preparation and strategic planning. The stream from the business, to generating a a crisis, in these cases they inevitably following includes tips for both parties reliable income from investments. sell for less than the business could to ensure a successful transaction. be worth. How to Prepare the An owner can anticipate a buyer’s due Sellers: Think like a Buyer – Business for Sale diligence by performing searches against Maximize the Business Value Although business owners may have a both himself (as the seller) and the busi- price in mind, a business is really worth ness. The results can uncover issues What Should the Sale Achieve? whatever a buyer is willing to pay. Sellers which can be addressed early on in the A critical first step for sellers is determin- need to have a realistic value of their process, such as discharging any old se- ing what they want the sale of their busi- business at the outset. They should look curity registrations against the company’s ness to achieve. It is important to think at and evaluate their businesses as if they assets and settling outstanding litigation. through the implications for the seller were an outside buyer, and employ expert Dealing with these issues early paves the personally, for their family, their employ- help to determine the fair market value way for a smooth negotiation and closing. ees, their key customers and suppliers. of their businesses. A valuation should An owner often derives a great deal of highlight the strengths and weaknesses Seller’s To Do List self-worth and purpose from the business. of the business. To enhance the value of a business and facilitate a smooth sale, a seller and his advisory team should take several steps: Michael Henry is a partner at Houser, Henry & Syron and has been Houser, Henry & Syron LLP • Organize the financials: Aim to helping businesses grow and prosper for over 16 years. He works 2000 - 145 King Street West have a minimum five years’ worth of with Canadian and foreign mid-market companies on a wide range of Toronto, Canada M5H 2B6 416.362.3411 Phone complete financial statements for the business legal issues – from day-to-day commercial agreements and 416.362.3757 Fax business. Make sure all business tax employment contracts, to more sophisticated transactions including [email protected] returns have been properly prepared mergers and acquisitions, corporate financing and succession www.houserhenry.com planning. He also assists companies looking to do business in Canada, advising them in setting up their operations or buying a Canadian business.

WINTER 2013 27 and filed, including discretionary have signed employment agreements, transferred to the buyer or the buyer expenses and transactions. If there a buyer will need to know the terms will have to apply to obtain them. has been any financing obtained or of employment for each employee. • Identify inspection and mainte- security given by the company, plan to Severance needs to be assessed to nance records: Ensure any records disclose this information as well. determine if the seller or the buyer for critical equipment of the business • Organize incorporation documents: will be liable for employee turnover. are readily available. If a business A buyer will likely review the compa- Identify the employees who are owns real estate, a buyer will likely ny’s incorporation documents and its necessary for the company’s continued require an environmental inspection minute book, which should accurately success. of the property. reflect the company’s history, includ- • Review the company’s leases: If • Document receivables: Prepare ing its directors, officers, shareholders the company operates out of leased information regarding receivables, and any significant transactions. For premises, a buyer will need to know including their aging. a share sale, one should ensure the the terms of the lease and whether history of the shareholders has been it is assignable. The same applies to • Consider tax planning opportuni- recorded correctly. Mistakes or miss- leases of equipment. ties: Discuss with the advisory team how best to take advantage of any ing records will alarm the buyer and • Review supplier and customer delay the sale. tax planning opportunities such as contracts: If the business doesn’t estate freezes, family trusts and • Resolve any litigation or other have written contracts, document the holding companies, which can lead claims: If possible, obtain a release key terms of its relationships. The to tax savings. from the other party. A buyer will not buyer will need this information to want to assume these liabilities. Out- understand the business and assess • Evaluate the potential buyer: standing claims will likely discount its value. Potential buyers may come from the purchase price. several sources. Examples include • Identify special licenses or permits: family members or key employees, • Employee records need to be Any of these items required to run competitors or suppliers, as well as accurate: If the business doesn’t the business will either need to be companies who already serve the

28 THE PRIMERUS PARADIGM same customers. A seller should find company or a completely separate The buyer may not want to employ out why the buyer is interested in the entity? Consultation with its team some or all of the seller’s employees. business, and his future plans for it of advisors will help answer this If this is the case, this will need to be (i.e., how it will be integrated into question. negotiated with the seller. Employee the buyer’s life/business activities). • Financing: A buyer must consider terminations can be costly, espe- What price range is the buyer willing how he intends to finance the pur- cially for long term employees, and to pay? Does the buyer have the chase. Is he purchasing it alone or the seller will want the buyer to be financial ability to complete the deal? with other investors? If the buyer responsible for these costs. Buyers: Investigation is Key: intends to obtain traditional bank • Non-competition and non-solicitation: financing, he should discuss this Buyers should discuss the future Evaluate, Evaluate, Evaluate aspect with his financial advisors well plans of the seller to ensure that the Buyers interested in acquiring a business in advance. A buyer will also need seller and its principals are restricted will need to do their homework. This not to determine how he will finance the from competing with the business or only means completing due diligence operations of the business. Will he be soliciting employees or customers on the potential acquisition, but also re- funding the operations directly or will of the business after the sale. These searching other businesses on the market he require access to an operating line restrictions can be included in the versus the kind of business they are look- of credit? Agreement of Purchase and Sale. ing for, what financing will be required • Promise of exclusivity: A buyer’s to complete a sale, and an analysis of Be Prepared to Walk Away due diligence is one of the most how the business will integrate with the If a buyer’s due diligence reveals serious important steps in the acquisition buyer’s other assets. problems with the target business or risks process. Completing due diligence For each available option, a buyer’s that the buyer is unwilling to assume, on a prospective company, takes team of advisors can assist with evaluat- or if the seller is less than trustworthy, a time and money. To protect this ing the advantages and disadvantages. buyer should be prepared to walk away investment, a buyer should ask the from the deal. Because due diligence can seller for a promise that the seller will Buyer’s Investigation List be a lengthy and expensive process, it deal exclusively with the buyer for a Here is a list of issues to consider when can be tempting to push forward because certain period of time. This needs to contemplating the purchase of a business: of the time and money already spent. be agreed at the outset. • What are you buying? Assets or Keep a clear head. Consult with your shares? To take advantage of capital • Due diligence: Buying a business advisors and if you don’t feel comfortable gains treatment and exemptions, if involves risk. The goal of a buyer’s proceeding, don’t move forward. available, a seller will usually want to due diligence is to determine the The key to a successful purchase or sell the shares of the business. If buy- extent of the risks involved and to sale is to start the planning process early, ing shares, buyers need to understand decide whether to accept those risks even if there are no current plans in place that they are assuming the liabilities and proceed with the purchase. for either. Regular maintenance of com- of the business, including existing Certain risks can be minimized by the pany records and operations can ensure contracts and employees as well as seller’s representations and warranties the business is in a strong position for the corporate history. To minimize in the Agreement of Purchase and whatever future plans are implemented. the risk, buyers will need to focus on Sale. A buyer’s team of advisors can Both parties should invest in a trusted actual or potential liabilities as part help him understand and, where advisory team to work with them through of the due diligence. If buying assets, possible, minimize the risks involved. the process, to a successful completion buyers need to determine which • Employees: A change of ownership of the deal. assets they need to run the business can cause the seller’s employees successfully. unease and uncertainty. After the 1 Please note that while much of this discussion can acquisition, key employees may be a apply to any business purchase or sale, this article’s • Who is the buyer? A buyer needs to content pertains to buying and selling a business in Ontario, Canada. determine the best way to structure necessary and valuable resource for the purchase. Should this business the buyer. It is important for buyers be merged with an existing business? to put a plan in place to deal with this Will it be a subsidiary of an existing transition and to be aware that the relationship between the buyer and the seller’s employees may or may not be successful.

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WINTER 2013 33 Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Degan, Blanchard & Nash, PLC Zizik, Powers, O’Connell, Spaulding & Lamontagne, P.C. 6421 Perkins Road Contact: Sidney W. Degan, III 690 Canton Street Contact: David W. Zizik Building C, Suite B Phone: 225.610.1110 Suite 306 Phone: 781.320.5400 Baton Rouge, Louisiana (LA) 70808 Fax: 225.610.1220 Westwood /Boston, Massachusetts (MA) Fax: 781.320.5444 www.degan.com 02090 www.zizikpowers.com L ouisiana PDI M assachusetts PDI

Degan, Blanchard & Nash, PLC Bos & Glazier, P.L.C. Texaco Center Contact: Sidney W. Degan, III 990 Monroe Avenue NW Contact: Carole D. Bos Suite 2600 Phone: 504.529.3333 Grand Rapids, Michigan (MI) Phone: 616.458.6814 400 Poydras Street Fax: 504.529.3337 49503-1423 Fax: 616.459.8614 New Orleans, Louisiana (LA) 70130 www.degan.com www.bosglazier.com L ouisiana PDI M ichigan PDI

Montgomery Barnett, L.L.P. Buchanan & Buchanan, PLC One American Place Contact: John Y. Pearce 171 Monroe Avenue NW Contact: Robert J. Buchanan 301 Main Street Phone: 225.329.2800 Suite 750 Phone: 616.458.2464 Suite 1170 Fax: 225.329.2850 Grand Rapids, Michigan (MI) 49503 Fax: 616.458.0608 Baton Rouge, Louisiana (LA) 70825 www.monbar.com www.buchananfirm.com L ouisiana PB L I M ichigan P CL I

Montgomery Barnett, L.L.P. Calcutt Rogers & Boynton, PLLC 3300 Energy Centre Contact: John Y. Pearce 109 East Front Street Contact: William B. Calcutt 1100 Poydras Street Phone: 504.585.3200 Suite 300 Phone: 231.947.4000 Suite 3300 Fax: 504.585.7688 Traverse City, Michigan (MI) 49684 Fax: 231.947.4341 New Orleans, Louisiana (LA) 70163 www.monbar.com www.crblawfirm.com L ouisiana PB L I M ichigan PB L I

The Bennett Law Firm, P.A. Cardelli, Lanfear & Buikema, P.C. 121 Middle Street Contact: Peter Bennett 322 West Lincoln Contact: Thomas G. Cardelli PDI Suite 300 Phone: 207.773.4775 Royal Oak, Michigan (MI) 48067 Phone: 248.544.1100 P.O. Box 7799 Fax: 207.774.2366 Fax: 248.544.1191 Portland, Maine (ME) 04101 www.thebennettlawfirm.com www.cardellilaw.com M aine PB L I M ichigan PDI

Dugan, Babij & Tolley, LLC Demorest Law Firm, PLLC 1966 Greenspring Drive Contact: Henry E. Dugan, Jr. 1537 Monroe Street Contact: Mark S. Demorest Suite 500 Phone: 410.308.1600 Suite 300 Phone: 248.723.5500 Timonium, Maryland (MD) 21093-4119 Fax: 410.308.1742 Dearborn, Michigan (MI) 48124 Fax: 248.723.5588 www.medicalneg.com www.demolaw.com M aryland P CL I M ichigan PB L I

Rudolph Friedmann LLP Demorest Law Firm, PLLC 92 State Street Contact: James L. Rudolph 322 West Lincoln Avenue Contact: Mark S. Demorest Boston, Massachusetts (MA) 02109 Phone: 617.723.7700 Suite 300 Phone: 248.723.5500 Fax: 617.227.0313 Royal Oak, Michigan (MI) 48067 Fax: 248.723.5588 www.rflawyers.com www.demolaw.com M assachusetts PB L I M ichigan PB L I

34 THE PRIMERUS PARADIGM Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

The Gallagher Law Firm, PLC Foland, Wickens, Eisfelder, Roper & Hofer, P.C. 2408 Lake Lansing Road Contact: Byron ‘‘Pat’’ Gallagher, Jr. 911 Main Street Contacts: PDI Lansing, Michigan (MI) 48912 Phone: 517.853.1500 Commerce Tower Clay Crawford & Scott Hofer Fax: 517.853.1501 30th Floor Phone: 816.472.7474 www.thegallagherlawfirm.com Kansas City, Missouri (MO) 64105 Fax: 816.472.6262 www.fwpclaw.com M ichigan PB L I M issouri PDI

McKeen & Associates, P.C. The McCallister Law Firm, P.C. 645 Griswold Street Contact: Brian J. McKeen 917 West 43rd Street Contact: Brian F. McCallister 42nd Floor Phone: 313.447.0634 Kansas City, Missouri (MO) 64111 Phone: 816.931.2229 Detroit, Michigan (MI) 48226 Fax: 313.961.5985 Fax: 816.756.1181 www.mckeenassociates.com www.mccallisterlawfirm.com M ichigan P CL I M issouri P CL I

Johnson & Condon, P.A. Rosenblum, Goldenhersh, Silverstein & Zafft, P.C. 7401 Metro Boulevard Contact: Dale O. Thornsjo 7733 Forsyth Boulevard Contact: Carl C. Lang Suite 600 Phone: 952.831.6544 Fourth Floor Phone: 314.726.6868 Minneapolis, Minnesota (MN) Fax: 952.831.1869 St. Louis, Missouri (MO) 63105 Fax: 314.726.6786 55439-3034 www.Johnson-Condon.com www.rgsz.com M innesota PDI M issouri PB L I

Monroe Moxness Berg PA Wuestling & James, L.C. 8000 Norman Center Drive Contact: John E. Berg The Laclede Gas Building Contact: Richard C. Wuestling Suite 1000 Phone: 952.885.5999 720 Olive Street Phone: 314.421.6500 Minneapolis, Minnesota (MN) 55437 Fax: 952.885.5969 Suite 2020 Fax: 314.421.5556 www.mmblawfirm.com St. Louis, Missouri (MO) 63101 www.wuestlingandjames.com innesota M innesota PB L I M issouri PDI

Robert P. Christensen, P.A. William E. Gast, PC, LLO 5775 Wayzata Boulevard Contact: Robert P. Christensen 503 South 36th Street Contact: William E. Gast Suite 670 Phone: 612.333.7733 Historic Reed Residence Phone: 402.343.1300 Minneapolis (St. Louis Park), Fax: 952.767.6846 Omaha, Nebraska (NE) 68105-1201 Fax: 402.343.1313 Minnesota (MN) 55416 www.mnadvocatesforjustice.com www.gastlawfirm.com Nebraska Nebraska P CL I innesota M innesota P CL I

Merkel & Cocke Barron & Pruitt, LLP 30 Delta Avenue Contact: Ted Connell 3890 West Ann Road Contact: David L. Barron Clarksdale, Mississippi (MS) Phone: 662.627.9641 North Las Vegas, Nevada (NV) 89031 Phone: 702.870.3940 38614-2718 Fax: 662.627.3592 Fax: 702.870.3950 www.merkel-cocke.com www.barronpruitt.com Nevada Nevada PDI ississippi M ississippi P CL I

Watson & Jones, P.A. Laxalt & Nomura, LTD. 2829 Lakeland Drive Contact: J. Kevin Watson 9600 Gateway Drive Contact: Robert A. Dotson PDI Mirror Lake Plaza Phone: 601.939.8900 Reno, Nevada (NV) 89521 Phone: 775.322.1170 Suite 1502 Fax: 601.932.4400 Fax: 775.322.1865 Jackson, Mississippi (MS) 39232 www.watsonjoneslaw.com www.laxalt-nomura.com M ississippi PB L I Nevada PDI

WINTER 2013 35 Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Earp Cohn, P.C. Ganfer & Shore, LLP 20 Brace Road Contacts: Richard B. Cohn 360 Lexington Avenue Contact: Mark A. Berman 4th Floor Phone: 856.354.7700 14th Floor Phone: 212.922.9250 Cherry Hill, New Jersey (NJ) 08034 Fax: 856.354.0766 New York, New York (NY) 10017 Fax: 212.922.9335

www.earpcohn.com ork www.ganfershore.com New Jersey New Jersey PB L I New Y PB L I

Lesnevich & Marzano-Lesnevich, LLC Iseman, Cunningham, Riester & Hyde, LLP 21 Main Street, #250 Contact: Walter A. Lesnevich 9 Thurlow Terrace Contact: James P. Lagios Hackensack, New Jersey (NJ) 07601 Phone: 201.488.1161 PDI Albany, New York (NY) 12203 Phone: 518.462.3000 Fax: 201.488.1162 Fax: 518.462.4199

www.lmllawyers.com ork www.icrh.com New Jersey P CL I New Y PB L I

Mandelbaum Salsburg Iseman, Cunningham, Riester & Hyde, LLP 155 Prospect Avenue Contacts: 2649 South Road Contact: James P. Lagios West Orange, New Jersey (NJ) 07052 Stuart Gold & Robin Lewis PDI Poughkeepsie, New York (NY) 12601 Phone: 845.473.8100 Phone: 973.736.4600 Fax: 845.473.8777

Fax: 973.325.7467 ork www.icrh.com www.mandelbaumsalsburg.com New Jersey New Jersey PB L I New Y PB L I

Mattleman, Weinroth & Miller, P.C. Kent, Beatty & Gordon, LLP 401 Route 70 East Contact: John C. Miller, III 425 Park Avenue Contact: Jack A. Gordon Suite 100 Phone: 856.429.5507 New York, New York (NY) 10022 Phone: 212.421.4300 Cherry Hill, New Jersey (NJ) 08034 Fax: 856.429.9036 Fax: 212.421.4303

www.mwm-law.com ork www.kbg-law.com New Jersey New Jersey PB L I New Y PB L I

Thomas Paschos & Associates, P.C. Lewis Johs Avallone Aviles L.L.P. 30 North Haddon Avenue Contact: Thomas Paschos One CA Plaza Contacts: Robert J. Avallone Suite 200 Phone: 856.354.1900 Suite 225 Phone: 631.755.0101 Haddonfield, New Jersey (NJ) 08033 Fax: 856.354.6040 Islandia, New York (NY) 11749 Fax: 631.755.0117

www.paschoslaw.com ork www.lewisjohs.com New Jersey New Jersey PDI New Y PDI

Coughlin & Gerhart, LLP Lewis Johs Avallone Aviles L.L.P. PDI 19 Chenango Street Contact: James P. O’Brien 61 Broadway Contacts: Robert J. Avallone P.O. Box 2039 Phone: 607.723.9511 Suite 2000 Phone: 212.233.7195

P CL I Binghamton, New York (NY) Fax: 607.723.1530 New York, New York (NY) 10006 Fax: 212.233.7196

ork ork 13902-2039 www.cglawoffices.com ork www.lewisjohs.com New Y PB L I New Y PDI

Ernstrom & Dreste, LLP Schatz Brown Glassman Kossow LLP 180 Canal View Boulevard Contacts: 250 Mill Street Contact: Robert E. Brown Suite 600 Todd Braggins & John Dreste Suite 309-311 Phone: 585.512.3414 Rochester, New York (NY) 14623 Phone: 585.473.3100 Rochester, New York (NY) 14614 Fax: 585.270.3760

ork ork Fax: 585.473.3113 ork www.esopplus.com www.ernstromdreste.com New Y PDI New Y PB L I

36 THE PRIMERUS PARADIGM Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Charles G. Monnett III & Associates Lane, Alton & Horst LLC 200 Queens Road Contact: Charles Monnett Two Miranova Place Contact: Timothy J. Owens Suite 300 Phone: 704.376.1911 Suite 500 Phone: 614.228.6885 P.O. Box 37206 Fax: 704.376.1921 Columbus, Ohio (OH) 43215-7052 Fax: 614.228.0146 Charlotte, North Carolina (NC) 28237 www.carolinalaw.com www.lanealton.com arolina North C arolina P CL I O hio PB L I

Horack, Talley, Pharr & Lowndes, P.A. Mellino Robenalt LLC 2600 One Wells Fargo Center Contact: Smithy Curry 19704 Center Ridge Road Contact: Christopher M. Mellino 301 South College Street Phone: 704.377.2500 Cleveland, Ohio (OH) 44116 Phone: 440.333.3800 Charlotte, North Carolina (NC) Fax: 704.372.2619 Fax: 440.333.1452 28202-6038 www.horacktalley.com www.mellinorobenalt.com arolina North C arolina PB L I O hio P CL I

Smith Debnam Narron Drake Saintsing & Myers, LLP Norchi Forbes, LLC 4601 Six Forks Road Contact: Byron Saintsing Commerce Park IV Contact: Kevin Norchi Suite 400 Phone: 919.250.2000 23240 Chagrin Boulevard Phone: 216.514.9500 Raleigh, North Carolina (NC) 27609 Fax: 919.250.2211 Suite 600 Fax: 216.514.4304 www.smithdebnamlaw.com Cleveland, Ohio (OH) 44122 www.norchilaw.com arolina North C arolina PB L I O hio PDI

Teague Campbell Dennis & Gorham, L.L.P. Rohrbachers Cron Manahan Trimble & Zimmerman Co., LPA 4800 Six Forks Road Contact: George Dennis 405 Madison Avenue Contact: Nick Cron Suite 300 Phone: 919.873.0166 PDI 8th Floor Phone: 419.248.2600 Raleigh, North Carolina (NC) 27609 Fax: 919.873.1814 Toledo, Ohio (OH) 43604 Fax: 419.248.2614 www.tcdg.com www.rcmtz.com arolina North C arolina PDI O hio PB L I

Wall Esleeck Babcock LLP Schneider, Smeltz, Ranney & LaFond P.L.L. 1076 West Fourth Street Contact: Robert E. Esleeck 1111 Superior Avenue Contact: James D. Vail Suite 100 Phone: 336.722.6300 Suite 1000 Phone: 216.696.4200 Winston-Salem, North Carolina (NC) Fax: 336.722.2906 Cleveland, Ohio (OH) 44114 Fax: 216.696.7303 27101 www.webllp.com www.ssrl.com arolina North C arolina PB L I O hio PB L I

Freund, Freeze & Arnold Dunlap Codding Fourth & Walnut Centre Contact: Jennifer K. Nordstrom 1000 The Tower Contacts: 105 East Fourth Street Phone: 513.665.3500 1601 NW Expressway Doug Sorocco & Linda Hazelton Suite 1400 Fax: 513.665.3503 Suite 1000 Phone: 405.607.8600 Cincinnati, Ohio (OH) 45202 www.ffalaw.com Oklahoma City, Oklahoma (OK) 73118 Fax: 405.607.8686 www.dunlapcodding.com O hio PDI O klahoma PB L I

Freund, Freeze & Arnold Fogg Law Firm Fifth Third Center Contact: Kevin C. Connell 421 S. Rock Island Contact: Richard M. Fogg 1 South Main Street Phone: 937.222.2424 P CL I El Reno, Oklahoma (OK) 73036 Phone: 405.262.3502 Suite 1800 Fax: 937.222.5369 Fax: 405.295.1536 Dayton, Ohio (OH) 45402 www.ffalaw.com www.fogglawfirm.com O hio PDI O klahoma PB L I

WINTER 2013 37 Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Foliart Huff Ottaway & Bottom Mattleman, Weinroth & Miller, P.C. 201 Robert S. Kerr Avenue Contact: Larry Ottaway Land Title Building Contact: John C. Miller, III Suite 1200 Phone: 405.232.4633 100 S. Broad Street Phone: 215.923.2225 Oklahoma City, Oklahoma (OK) 73102 Fax: 405.232.3462 Philadelphia, Pennsylvania (PA) 19110 Fax: 215.567.4151 www.oklahomacounsel.com www.mwm-law.com O klahoma PDI Pennsylvania PB L I

The Handley Law Center Rothman Gordon 111 South Rock Island Contact: Fletcher D. Handley Jr. Third Floor, Grant Building Contacts: P.O. Box 310 Phone: 405.295.1924 310 Grant Street William Lestitian & Anne Parys El Reno, Oklahoma (OK) 73036 Fax: 405.262.3531 Pittsburgh, Pennsylvania (PA) 15219 Phone: 412.338.1100 www.handleylaw.com Fax: 412.281.7304 www.rothmangordon.com O klahoma P CL I Pennsylvania PB L I

James, Potts & Wulfers, Inc. Law Offices of Thomas J. Wagner, LLC 2600 Mid-Continent Tower Contact: David W. Wulfers 8 Penn Center Contact: Tom Wagner 401 South Boston Avenue Phone: 918.584.0881 6th Floor Phone: 215.790.0761 Tulsa, Oklahoma (OK) 74103-4015 Fax: 918.584.4521 1628 John F. Kennedy Boulevard Fax: 215.790.0762 www.jpwlaw.com Philadelphia, Pennsylvania (PA) 19103 www.wagnerlaw.net O klahoma PB L I Pennsylvania PDI

Smiling & Miller, P.A. Barnes, Alford, Stork & Johnson, L.L.P. Bradford Place Contact: A. Mark Smiling 1613 Main Street Contact: David G. Wolff 9175 South Yale Avenue Phone: 918.477.7500 Columbia, South Carolina (SC) 29201 Phone: 803.799.1111 Suite 300 Fax: 918.477.7510 Fax: 803.254.1335 Tulsa, Oklahoma (OK) 74137 www.smilinglaw.com www.basjlaw.com klahoma O klahoma PDI South C arolina PB L I

Haglund Kelley Jones & Wilder, LLP Collins & Lacy, P.C. 200 SW Market Street Contact: Michael E. Haglund 1330 Lady Street Contacts: Suite 1777 Phone: 503.225.0777 Suite 601 J. Collins & C. Stegmaier Portland, Oregon (OR) 97201 Fax: 503.225.1257 Columbia, South Carolina (SC) 29201 Phone: 803.256.2660 www.hk-law.com Fax: 803.771.4484 www.collinsandlacy.com O regon PB L I arolina South C arolina PDI

Mitchell, Lang & Smith, LLP Hull Barrett, PC 101 Southwest Main Street Contact: Lowell McKelvey 111 Park Avenue SW Contact: George R. Hall 2000 One Main Place Phone: 503.221.1011 PDI Aiken, South Carolina (SC) 29801 Phone: 803.648.4213 Portland, Oregon (OR) 97204 Fax: 503.248.0732 Fax: 803.648.2601 www.mls-law.com www.hullbarrett.com O regon PDI arolina South C arolina PB L I

Earp Cohn P.C. Roe Cassidy Coates & Price, P.A. 1725 Spruce Street Contact: Richard B. Cohn 1052 North Church Street Contact: Pete Roe Philadelphia, Pennsylvania (PA) Phone: 215.963.9520 PDI P.O. Box 10529 Phone: 864.349.2600 19103-6149 Fax: 215.963.9620 Greenville, South Carolina (SC) 29603 Fax: 864.349.0303 www.earpcohn.com www.roecassidy.com Pennsylvania PB L I South C arolina PB L I

38 THE PRIMERUS PARADIGM Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Rosen Hagood Donato, Minx, Brown & Pool, P.C. PDI 151 Meeting Street Contact: Alice F. Paylor 3200 Southwest Freeway Contact: Robert D. Brown Suite 400 Phone: 843.628.7556 Suite 2300 Phone: 713.877.1112

P CL I P.O. Box 893 Fax: 843.724.8036 Houston, Texas (TX) 77027-7525 Fax: 713.877.1138 Charleston, South Carolina (SC) 29401 www.rrhlawfirm.com www.donatominxbrown.com arolina South C arolina PB L I Texas PDI

Kennerly, Montgomery & Finley, P.C. Downs • Stanford, P.C. Bank of America Center Contact: Jack M. Tallent, II 2001 Bryan Street Contact: Jay R. Downs PDI Fourth Floor Phone: 865.546.7311 Suite 4000 Phone: 214.748.7900 550 Main Street Fax: 865.524.1773 Dallas, Texas (TX) 75201 Fax: 214.748.4530 Knoxville, Tennessee (TN) 37902 www.kmfpc.com www.downsstanford.com Tennessee Tennessee PB L I Texas PDI

Spicer Rudstrom, PLLC Downs • Stanford, P.C. 414 Union Street Contact: Marc Dedman 115 Wild Basin Road Contact: Jay R. Downs Bank of America Tower Phone: 615.259.9080 Suite 207 Phone: 512.891.7771 Suite 1700 Fax: 615.259.1522 West Lake Hills, Texas (TX) 78746 Fax: 512.891.7772 Nashville, Tennessee (TN) 37219 www.spicerfirm.com www.downsstanford.com Tennessee Tennessee PDI Texas Texas PDI

Trauger & Tuke Moses, Palmer & Howell, L.L.P. 222 Fourth Avenue North Contact: Robert D. Tuke 309 West 7th Street Contact: Dave Palmer Nashville, Tennessee (TN) 37219 Phone: 615.256.8585 Suite 815 Phone: 817.255.9100 Fax: 615.256.7444 Fort Worth, Texas (TX) 76102 Fax: 817.255.9199 www.tntlaw.net www.mph-law.com Tennessee Tennessee PB L I Texas PB L I

Atchley, Russell, Waldrop & Hlavinka, L.L.P. Peterson Farris Byrd & Parker, A Professional Corporation 1710 Moores Lane Contact: Alan Harrel 600 S. Tyler Contact: Barry D. Peterson PDI P.O. Box 5517 Phone: 903.792.8246 PDI Suite 1600 Phone: 806.374.5317 Texarkana, Texas (TX) 75505 Fax: 903.792.5801 Amarillo, Texas (TX) 79101 Fax: 806.374.9755 www.arwhlaw.com www.pf-lawfirm.com Texas Texas PB L I Texas PB L I

Branscomb, PC The Talaska Law Firm, PLLC 114 West 7th Street Contact: James T. Clancy 1415 North Loop West Contact: Robert J. Talaska Suite 725 Phone: 512.735.7801 Suite 200 Phone: 713.869.1240 Austin, Texas (TX) 78701 Fax: 512.735.7805 Houston, Texas (TX) 77008 Fax: 713.869.1465 www.branscombpc.com www.talaskalawfirm.com Texas Texas PB L I Texas P CL I

Branscomb, PC Thornton, Biechlin, Segrato, Reynolds & Guerra, L.C. 802 North Carancahua Contact: Jim Robichaux 418 East Dove Avenue Contact: Tim K. Singley Suite 1900 Phone: 361.886.3800 McAllen, Texas (TX) 78504-2240 Phone: 956.630.3080 Corpus Christi, Texas (TX) 78401 Fax: 361.888.8504 Fax: 956.630.0189 www.branscombpc.com www.thorntonfirm.com Texas Texas PB L I Texas PDI

WINTER 2013 39 Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Thornton, Biechlin, Segrato, Reynolds & Guerra, L.C. Johnson, Graffe, Keay, Moniz & Wick, LLP 100 Northeast Loop, 410 Contact: Richard J. Reynolds, III 2115 North 30th Street Contact: A. Clarke Johnson Fifth Floor Phone: 210.342.5555 Suite 101 Phone: 253.572.5323 San Antonio, Texas (TX) 78216 Fax: 210.525.0666 Tacoma, Washington (WA) 98403-3318 Fax: 253.572.5413 www.thorntonfirm.com www.jgkmw.com Texas Texas PDI Washington PDI

Prince Yeates Johnson, Graffe, Keay, Moniz & Wick, LLP 15 West South Temple Contact: James McConkie 925 Fourth Avenue Contact: John Graffe Suite 1700 Phone: 801.524.1000 Suite 2300 Phone: 206.223.4770 Salt Lake City, Utah (UT) 84101 Fax: 801.524.1098 Seattle, Washington (WA) 98104 Fax: 206.386.7344 www.princeyeates.com www.jgkmw.com tah U tah PB L I Washington PDI

Winder & Counsel, P.C. The Masters Law Firm L.C. 460 South 400 East Contact: Donald J. Winder 181 Summers Street Contact: Marvin W. Masters

PDI Salt Lake City, Utah (UT) 84111 Phone: 801.322.2222 Charleston, West Virginia (WV) 25301 Phone: 800.342.3106 Fax: 801.322.2282 Fax: 304.342.3189 www.winderfirm.com www.themasterslawfirm.com U tah P CL I Virginia West P CL I

Goodman Allen & Filetti, PLLC Shaffer & Shaffer PLLC 4501 Highwoods Parkway Contact: 2116 Kanawha Boulevard East Contact: Anthony Cicconi PDI Suite 210 Kathryn Freeman-Jones Charleston, West Virginia (WV) 25339 Phone: 304.344.8716 Richmond (Glen Allen), Virginia (VA) Phone: 804.346.0600 Fax: 304.344.1481 23060 Fax: 804.346.5954 www.shafferlaw.com www.goodmanallen.com Virginia Virginia PB L I Virginia West PB L I

Shapiro, Lewis & Appleton, P.C. Aiken & Scoptur, S.C. 1294 Diamond Springs Road Contact: Jim Lewis 2600 North Mayfair Road Contact: Paul J. Scoptur Virginia Beach, Virginia (VA) 23455 Phone: 757.460.7776 Milwaukee, Wisconsin (WI) 53226 Phone: 414.326.4979 Fax: 757.460.3428 Fax: 414.225.9666 www.HSinjurylaw.com www.plaintiffslaw.com Virginia P CL I Wisconsin P CL I

Beresford Booth PLLC Kohner, Mann & Kailas, S.C. 145 3rd Avenue South Contact: David Tingstad Washington Building Contacts: Suite 200 Phone: 425.776.4100 Barnabas Business Center S. Kailas & Stephen D.R. Taylor Edmonds, Washington (WA) 98020 Fax: 425.776.1700 4650 N. Port Washington Road Phone: 414.962.5110 www.beresfordlaw.com Milwaukee, Wisconsin (WI) 53212 Fax: 414.962.8725 www.kmksc.com Washington Washington PB L I Wisconsin PB L I

Beresford Booth PLLC 1420 5th Avenue Contact: Richard Beresford Suite 2200 Phone: 425.776.4100 Seattle, Washington (WA) 98101 Fax: 425.776.1700 www.beresfordlaw.com Washington Washington PB L I

40 THE PRIMERUS PARADIGM Primerus Business Law Institute (PBLI) 2013 Member Listing – North America Primerus Consumer Law Institute (PCLI) Primerus Defense Institute (PDI)

Toronto, the provincial capital of Ontario – Toronto, Ontario, Canada

Houser, Henry & Syron LLP Ferraiuoli LLC 2000 – 145 King Street West Contact: Michael R. Henry 221 Ponce de Leon Avenue, Contact: Toronto, Ontario M5H 2B6 Phone: 416.362.3411 4th Floor Eugenio J. Torres-Oyola Canada Fax: 416.362.3757 Hato Rey, PR 00917 Phone: 787.766.7000 www.houserhenry.com Puerto Rico Fax: 787.766.7001 www.ferraiuoli.com C anada PB L I Puerto Rico PB L I

Cacheaux Cavazos & Newton Avenida Tecamachalco No. 14-502 Contact: Felipe Chapula Colonia Lomas de Chapultepec Phone: 011 52 55 5093 9700 Mexico City, C.P. 11010 Fax: 011 52 55 5093 9701 Mexico www.ccn-law.com with offices also in Ciudad Juarez, Matamoros,

M exico PB L I Monterrey, Queretaro and Reynosa

WINTER 2013 41 Europe, Middle East & Africa

Reinier W.L. Russell Michèle Stutz

Social Media: What Corporate Counsel Must Know

There has been a huge increase in the play an important role in employment and selection stage, during employment popularity of social media like Facebook, relationships. As a Corporate Counsel, and after the termination of employment. Twitter and LinkedIn. Social media has you are likely to be faced with questions transcended languages, borders and such as: “Are employers allowed to Recruitment and Selection cultures; through social media a vast monitor what information (future) Employers wish to gather information amount of information is exchanged employees exchange and who they on future employees to get an overall daily and globally. People often post exchange it with?” and “How should picture of a person. But to what extent personal and professional information. I deal with employees who are telling are employers allowed to review social This information can be viewed not company secrets or are openly bad- media profiles and to what extent can only by friends and relatives but also mouthing their employer or their and may that influence the employer’s by colleagues, clients and employers. colleagues?” decision-making process? When hiring a Consequently, as a Corporate Counsel, Privacy legislation, which can vary sales professional, it is good to know who you cannot ignore social media in a from jurisdiction to jurisdiction, often he is networking with. On the other hand, corporate environment. Social media plays an important role in employer- social networking with competitors can can be a powerful tool you can use to employee relationships. However, the have a negative effect. Information on a your advantage. On the other hand, key issues and pressure points are person’s situation at home or in private inappropriate use of social media can similar worldwide. More specifically, activities can be more important than influence the (online) reputation of regarding employers, problems can arise expected. Think, for instance, of difficult the company in an unwanted way. But throughout all stages of the employment care situations at home or of “dangerous” that is not all: social media can also relationship: that is, at the recruitment hobbies. But how does this relate to, for instance, data privacy laws and anti- Reinier W.L. Russell is managing partner of Russell Advocaten Russell Advocaten B.V. B.V.. He assists domestic and foreign businesses in the Netherlands Reimersbeek 2 discrimination laws? In the U.S., job with corporate and commercial matters including litigation such 1082 AG Amsterdam candidates need to provide the employer The Netherlands as business formation and reorganization, corporate governance, with a written authorization prior to +31 20 301 55 55 Phone insolvency law, employment issues, real estate issues and all +31 20 301 56 78 Fax a background check, whereas job aspects of liability and contract law. He is the chair of the Primerus [email protected] candidates in the United Kingdom must International Outside Corporate Counsel Practice Group. www.russell.nl be given the opportunity to first check the accuracy of the online data collected about them. Michèle Stutz is a partner with MME Partners. She focuses on MME Partners litigation and is a Certified Specialist SBA Employment Law. Also, Kreuzstrasse 42 Zurich, Switzerland CH-8008 she has profound experience in commercial and immigration law. +41 44 254 99 66 Phone She is the vice chair of the Primerus International Outside Corporate +41 44 254 99 60 Fax Counsel Practice Group. [email protected] www.mmepartners.ch

42 THE PRIMERUS PARADIGM In addition to privacy laws, anti- different question, however, whether an allowed. Furthermore, the European discrimination laws, and codes of employer is allowed to use information Court of Human Rights has determined conduct as implemented, for example, available through social media on the that, for example, monitoring telephone in France, user conditions of social employee’s private life. Can a Tweet conversations and emails should be networking sites themselves can also (such as “Relaxing on the beach”) announced beforehand. contain restrictions. User conditions by an employee on sick leave to his Of course, if the employer has a (general terms and conditions) of social Twitter followers be used in a dismissal specific and good reason to suspect media or platforms may restrict the procedure? Is an employer allowed to violations of company policies, it will, use of information for professional monitor what an employee posts on in general, be allowed to investigate that or recruitment purposes. In some Facebook about his manager or about specific situation. However, monitoring jurisdictions, there is a difference the company? Is an employer allowed to internet use as a general policy is only between the types of social media. check who an employee is linked with on allowed under certain conditions, or in Employers in Germany and France LinkedIn? The answer to these questions some cases not at all. may use information collected from depends on data privacy laws that vary In general, privacy rights of the professional social networks only (such from country to country. employees must be balanced against the as LinkedIn), but they are not allowed employer’s legitimate interests to protect Monitoring Of Employee’s Usage to use information from general social its business or IT. Some jurisdictions Of Social Media networking sites, such as Facebook. have established guidelines about Whether or not employers are permitted appropriate monitoring in the workplace During Employment to monitor the social network use (e.g., UK and Switzerland). In others, it An employee must observe the rules of their employees and if so, what is important to have a consistent policy and regulations of the organization he considerations and limitations apply, about monitoring that has to be made works for, and he must act as a good are additional questions to be answered known to all employees beforehand, employee. Employees are expected to act by the different legislations. In most either via a works council or individually professionally and to behave like good jurisdictions, employers are permitted (Germany, the Netherlands, France). colleagues, especially when it comes to monitor social media use on work- In Spain, monitoring is only permitted to the use of social media. Information provided devices on condition that the with the consent of the employee, and revealed on the internet is hard to employee’s privacy is respected. The Switzerland does not allow preventive remove and spreads fast. This can European Court of Justice has ruled that monitoring at all. have negative effects for both employer in Europe employees enjoy their right and employee. It is a completely to privacy and private life in their work environment as well, therefore, a limited amount of private internet use must be

WINTER 2013 43 Dismissals Due to Inappropriate could be terminated for fault and also Usage of Social Media fined for the offense of public insult. To what extent employees can be It was held that comments posted on a dismissed based on inappropriate social media site could not be considered use of social media depends on the private, since the postings were not set to national legislation. When it comes to be displayed only to friends. inappropriate use of social media, in This is not only an issue in France the U.S., the focus will be on whether but also in Switzerland where employees or not it is related to “concerted must check the relevant privacy settings activity.” In Canada and in most before posting derogatory comments. European countries, the reason given In France it was held that employees for dismissal will be checked. In must be made aware about the possible Canada the criteria for inappropriate sanctions and the consequences of use of social media are (1) breach of the inappropriate postings in advance. On company policy, for instance, regarding the contrary, in the UK, an Employment confidentiality, computer use or anti- Tribunal held that the employee’s harassment and (2) damage to the comments on Facebook were not in company. Other considerations taken private even though the employee had into account are whether it is a matter of set his privacy settings so that only frequent inappropriate use or one time his Facebook friends could see them. inappropriate use only, and whether the The Dutch court had the same line of employee has been warned. reasoning about an employee posting A court in Australia considered an an insulting remark about his employer employee’s 3,000 chat sessions in three to his friends on Facebook. According years sufficient for the termination of the to the Dutch court, the term “friends” employment. In two recent decisions in is a very relative notion on the internet France, the courts ruled that employees because these friends can, and in this posting insulting comments about their case they did, forward the message very employers on a social media website easily. The employer’s need to protect its

44 THE PRIMERUS PARADIGM reputation was weighted more important. worth considering setting up employees’ may be kept. You can include these In the U.S., a report was issued about the business accounts according to the guidelines, for instance, in a competition protection of disparaging comments on company guidelines. It can also be clause or a business relations clause. social media about employers. included whether, and if so, which social That way you can control that no media can be used during work hours business relations will be accepted as Clear Rules Required and to what extent they may be used. Facebook friends, or that the employer Therefore, it is important to lay down This will often depend on the position of has a say in the management of a rules on the use of social media and the employee and the type of company. A LinkedIn account. Arrangements like on the employees’ online activities sales manager of a software company will this can even be made if the above regarding revealing information on the be allowed more social media activity mentioned clauses have not been agreed company they work for, as well as the than an accountant of a food wholesaler. upon, for instance in a special clause of sanctions for non-compliance. In the In this regard, it may be also taken into the employment agreement or they can best case, employees expressly consent consideration how often and to what be included in the staff regulations. to such rules, implemented either as extent emails and telephone calls are policies or contractual provisions. permitted for private purposes. Conclusion Such rules not only facilitate proving There is not just one uniform way to whether or not an employee has broken After Employment deal with social media. After all, every company rules, but are also valuable in After the termination of employment, country, every company and every human the event the employer intends to hold employer and employee are most being is different from one another. A the employee responsible for damages likely to still be active on the Internet. social media policy has to be tailored to the company or clients suffered due to At this stage, issues such as duty of fit the country, the company culture, the information spread via social media. confidentiality and competition clauses image of a company, the sensitivity level These rules may include, for example, if are very important. It must be clear of information and safety aspects so that and to what extent employees are allowed whether or not contacts with business all employees know the company’s rules to befriend business relations and relations and business-related social and you can enforce them. It is advisable whether employees will have to create media and accounts will have to be to include such a policy as standard in separate accounts for business relations cancelled. It is also advisable to make the staff regulations. and for solely personal contacts. It is arrangements on whether LinkedIn contacts will have to be deleted or

WINTER 2013 45 Europe, Middle East & Africa

Thomas Schwab

The German Green Card Is Blue

Highly skilled employees now are a lot Germany, he not only must register with employed – comparable with a U.S. E-2 more likely to obtain residence titles the registration office, but also must investor visa – may apply for a permanent for Germany. On August 1, 2012, the apply for the corresponding residence residence permit after three years. German law implementing Council permit with the local foreigners’ office. Directive 2009/50/EC of May 25, 2009, U.S. citizens and citizens of a few New: EU Blue Card on the conditions of entry and residence other countries do not require a visa, The EU Blue Card is a residence title for of third-country nationals for the neither for a short trip nor in case they highly qualified foreigners, particularly purposes of highly qualified employment, intend to work or study in Germany. If for those who graduated from university. came into force. they wish to stay in Germany for more In contrast to several other residence In the course of this implementation, than three months or to work, they may titles, foreigners who meet the precondi- the legislator not only inserted Sec. 19a directly apply for the residence permit tions are entitled to be granted the Blue in the German Residence Act, but also with the local office after having entered Card. The authorities involved have no used this as an opportunity to amend the the country. However, most other third- further discretion. preconditions for the granting of other country nationals will have to apply for a residence titles. visa in order to enter Germany and then Requirements apply for a residence permit. Provided that the applicant complies General: Visa and Residence with the general requirements for the Permit Temporary and Permanent granting of a residence title, an EU Blue German law of residence differentiates Residence Permit Card will be issued if the applicant can between a Schengen visa, a national visa German Right of Residence makes show that he is highly qualified, i.e., and a residence permit. another distinction: It differentiates he has a German university degree, A Schengen visa entitles its holder between a temporary and a permanent one which was awarded by a foreign to stay within the Schengen countries residence permit. However, contrary to the university and is accepted in Germany or up to three months within a period of six U.S. green card, a permanent residence a university degree which is comparable months. Longer stays (e.g., in order to permit only may be applied for directly to a German degree. In certain cases, work or to study) require a national visa. in a few cases. The main requirement is it might suffice to show professional Such a visa will be applied for with a that the applicant has lived in Germany experience of at least five years. German consulate in the foreign coun- for several years on a temporary residence In addition, the applicant must try. The national visa is valid for three permit. For example, a foreigner who submit an employment contract or a months. After the foreigner has entered holds a residence permit as being self- binding employment offer in which a

Thomas Schwab practices corporate law and immigration law. WINHELLER Attorneys at Law In immigration law, he focuses on German and U.S. immigration Corneliusstr. 34 and visa law issues. He advises individuals who intend to travel or 60325 Frankfurt am Main Germany immigrate to Germany or to the U.S. for personal or business reasons +49 6976757780 Phone on all applicable visa requirements. He also makes sure they are +49 69767577810 Fax well represented before the authorities involved during the entire [email protected] application process. www.winheller.com/en

46 THE PRIMERUS PARADIGM gross annual compensation of at least Validity until he might be granted an EB-3 green EUR 44,800 (for 2012) is agreed upon. When granted for the first time, the EU card for the U.S. In contrast to this, an Certain other professions (scientists, Blue Card generally is valid for a maxi- EU Blue Card applicant may not only mathematicians, engineers, doctors mum of four years. If the employment come to Europe and be able to work and and IT specialists) require only a contract is temporary, the EU Blue Card earn a living within just a few weeks compensation of EUR 34,944 (gross, will be issued for the duration of the or months. He may also be granted for 2012). contract plus three months. permanent residency before he would be As a rule and comparable to Labor allowed to enter the U.S. on a green card. Certification in connection with a Permanent Residence Permit – Of course, and particularly with U.S. H-2B visa, the German Federal “German Green Card” for highly qualified persons, getting a job Employment Agency is involved EU Blue Card Holders is rarely the only reason for aspiring to and must check whether there are legal permanent residency in the U.S. After 33 months, the holder of an EU German or privileged foreign workers Time will tell whether the European Blue Card may be granted a permanent available. However, in case the annual regulations really are in direct residence, i.e. settlement permit, if he compensation amounts to at least EUR competition with the U.S. immigration complies with the general preconditions 44,800, Labor Certification is waived. law, whether the EU Blue Card reduces for it being granted – e.g. adequate knowl- The same is true if the compensation is labor deficit in Europe and, perhaps, edge of the German language, a basic between EUR 34,944 and EUR 44,800, also the time applicants for U.S. green knowledge of the legal and social system provided the applicant graduated from cards have to wait until the cards and the way of life in the Federal terri- a German university. become available. tory of Germany. The qualifying period By the way, foreigners who have is reduced to 21 months if the foreigner Family Members legally lived in Germany for eight years can prove German language proficiency Regarding right of residence, the spouse may apply for German citizenship. level B1. With other employment based of an EU Blue Card holder is allowed to However, as a rule with exceptions, they temporary residence permits, the period is immediately work in Germany without will have to abandon other citizenships – five years. As mentioned above, it is three having to prove knowledge of the German which is another matter altogether. language, requiring the consent of the years for self-employed persons. Department of Labor or being restricted An applicant with a university degree to certain professions. but no exceptional skills will need Labor Certification and will have to wait years

WINTER 2013 47 Europe, Middle East & Africa

Tiina Ashorn

The Finnish Regulatory Framework for Foreign Insurers

From 2002 to 2011, the number of based on whether their home is in the relating to minimum amounts of assets foreign insurance companies in Finland European Economic Area (foreign EEA in Finland. has grown every year. According to the insurance companies) or outside that In addition to insurance companies, Federation of Finnish Financial Services, area (third country insurance compa- insurance agents and insurance brokers there were 39 domestic companies and nies). An insurance company registered also can offer insurance. Insurance 29 branch offices of foreign insurance in an EEA state (EU, Iceland, Norway agents and insurance brokers have companies in Finland at the end of 2011. and Lichtenstein) can establish a branch been clearly separated from each other. When planning its operation, a for- in Finland or notify that it carries on Agents operate for and on behalf of an eign insurer operating in Finland should insurance business on the freedom of insurance company and receive commis- become familiar with local legislation services basis cross-border without sion from the company. Brokers, on the and local business conduct. The central having a branch in Finland. Insurance other hand, operate for and on behalf of Finnish law is the Finnish Insurance companies other than those established a client and receive commission from the Companies Act, which requires incorpo- in one of the EEA states must have a policyholder. In Finland, an insurance ration and licensing in Finland in order license in Finland and the company must company cannot pay the broker’s fee. to conduct insurance activities here. The establish a branch in Finland. The activities of an insurance intermedi- Insurance Contracts Act regulates the The financial standing of a foreign ary are governed by the Finnish Act on relationship between the insurer and the EEA insurance company is overseen Insurance Mediation. The Act contains policyholder. by the supervisory authority of its home provisions relating to registering and In addition to Finnish insurance state, also with respect to its branch in reporting with the FIN-FSA and to the companies, foreign insurance companies another EEA state. The Finnish Finan- disclosure obligations of the intermedi- also can carry on insurance business in cial Supervisory Authority (FIN-FSA) ary. The insurer is bound by the advice Finland. The Act on Foreign Insurance only has limited authority in supervising and information provided to the policy- Companies (398/1995) is applicable to the operations of a foreign EEA insur- holder by its agent. An independent in- all foreign insurance companies con- ance company operating in Finland. In surance broker is not a representative of ducting insurance business in Finland. order to operate in Finland, a branch an insurer under the Insurance Contracts According to the Act, foreign insurance of a third country has to fulfill certain Act and the insurer is not responsible companies are divided into two groups statutory basic capital requirements for information given by the broker. If

Tiina Ashorn is managing partner of Procope & Hornborg, which has Procopé & Hornborg a comprehensive insurance practice. The firm serves foreign clients to Keskuskatu 8 launch insurance products in Finland and assists them in regulatory P.O. Box 1077 Helsinki, Finland 00101 matters with the authorities. She had a long history in the insurance +358 10 3090 300 Phone business before starting her career as an attorney. +358 10 3090 333 Fax [email protected] www.procope.fi

48 THE PRIMERUS PARADIGM the broker gives incorrect information The Finnish Consumer Protection proposal for a Regulation of the Euro- to the policyholder, the broker may Act is applicable to insurance contracts pean Parliament and of the Council on become liable for damages. The broker with consumers concerning the general the protection of individuals with regard must have liability insurance. fairness of marketing, distance marketing to the processing of personal data and on The Act on the Law to be Applied to and minimum requirements for policy the free movement of such data (General Certain Insurance Contracts of Inter- terms. The distance marketing provisions Data Protection Regulation) is pending. national Nature (91/1993) contains are based on the Directive on Distance The proposed regulation may result in provisions on the applicable law, e.g., Marketing of Financial Services. new obligations and responsibilities in regarding policies where the insured The main principles of protection of respect of data privacy issues (e.g., the risk is based in Finland and the insurer privacy in Finland are set out in the Per- right to data portability). is a foreign company. sonal Data Act which accommodates the Another new interesting pending Application of a law other than EU Data Protection Directive (Directive regulation concerns the ban on gender Finnish law shall not diminish the 95/46/EC). There are special regulations based calculations. The proposed legisla- rights of a consumer living in Finland, concerning the processing of personal tion will significantly change the risk which he has under mandatory data in other laws and acts as well. and premium calculations conducted by Finnish laws if the insurance has been The Personal Data Act applies to insurers. Application of gender-based marketed in Finland by the insurance processing of personal data in cases calculation in order to determine risks company or its representative. The FIN- where the controller is established in the and the subsequent premiums is no FSA has issued guidelines regarding territory of Finland or otherwise subject longer allowed as of December 21, 2012. this. According to the guidelines, the to Finnish law. According to the general Currently, the different treatment of insurance terms and conditions and good requirements, the Personal Data genders is allowed. other information should be given to the Act shall be applied to insurers conduct- policyholder in his mother tongue if it is ing insurance activities in Finland on Finnish or Swedish. freedom of services basis. Currently, a 2013 Member Listing – Europe, Middle East & Africa Primerus Business Law Institute (PBLI)

Galleria Vittorio Emanuele II – Milano, Italy

Frieders, Tassul & Partner Procope & Hornborg Stadiongasse 6-8 Contact: Dr. Christian Tassul Keskuskatu 8 Contact: Tiina Ashorn Vienna, 1010 Phone: +43 1 401 84 0 P.O. Box 1077 Phone: +358 10 3090 300 Austria Fax: +43 1 408 64 85 Helsinki, 00101 Fax: +358 10 3090 333 www.ftp-lawfirm.at Finland www.procope.fi

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Bernard Spinoit Vatier & Associés Boulevard Dewandre 13 Contact: Bernard Spinoit 12, rue d’Astorg Contact: Cecile Gilliet Charleroi, 6000 Phone: +3271325131 Paris F 75008 Phone: +33 1 53 43 15 55 Belgium Fax: +3271323526 France Fax: +33 1 53 43 15 78 www.vatier-associes.com Belgium PB L I F rance PB L I

Kinanis LLC Broedermann Jahn 12 Egypt Street Contact: Neuer Wall 71 Contact: 1097 Nicosia C. Kinanis & N. Fournia Hamburg, 20354 Prof. Dr. Eckart Broedermann Cyprus Phone: +357 22 55 88 88 Germany Phone: +49 40 37 09 05 0 Fax: +357 22 66 25 00 Fax: +49 40 37 09 05 55 www.kinanis.com www.german-law.com

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Tahoun Law Office & Consultations WINHELLER Attorneys at Law 23 Syria St Contact: Nermine Tahoun Corneliusstr. 34 Contact: Stefan Winheller El Mohandessin Phone: +2.02.37483564 Frankfurt, D-60325 Phone: +49 69 76 75 77 80 Cairo www.tahoun.com Germany Fax: +49 69 76 75 77 810 Egypt www.winheller.com Egypt PB L I Germany PB L I

50 THE PRIMERUS PARADIGM 2013 Member Listing – Europe, Middle East & Africa Primerus Business Law Institute (PBLI)

Karagounis & Partners Athayde de Tavares, Pereira da Rosa & Associados 18, Valaoritou Street Contact: Rua Joaquim António de Aguiar, Contact: Athens, 10671 Constantinos Karagounis 66, 5º José de Athayde de Tavares Greece Phone: +30 21 30 390 000 Lisbon, 1070-153 Phone: +351 21 3827580 Fax: +30 21 30 390 088 Portugal Fax: +351 21 3827589 www.karagounislawfirm.gr www.atpr.eu Greece PB L I Portugal PDI PB L I

Fusthy & Manyai Law Office Agha & Co. Lajos u. 74-76 Contact: Dr. Zsolt Fusthy Kingdom of Saudi Arabia Contact: Oliver Agha Budapest, H-1036 Phone: +36 1 454 1766 Send mail to: Phone: +971 4 447 8989 Hungary Fax: +36 1 454 1777 P.O. Box 390104 Fax: +971 4 447 3996 www.fusthylawoffice.hu Suite 101 www.aghaandco.com Al Barsha Boutique Bldg, Al Barsha 1

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Salinger & Co Advocates 1961, abogados y economistas asociados 11 Menachem Begin Street Contacts: Hanan Salinger Av. Diagonal, 612, 1º Contact: Carlos Jiménez Tel Aviv (Ramat Gan), 52681 Phone: +972 3 612 2030 Barcelona, 08021 Phone: + 34 93 366 39 90 Israel Fax: +972 3 612 2031 Spain Fax: + 34 93 200 74 48 www.salingerlaw.co.il www.1961bcn.com Israel PB L I Spain P CL I PB L I

Studio Legale F. De Luca MME Partners Piazza Borromeo, 12 Contact: Giuseppe Cattani Kreuzstrasse 42 Contact: Dr. Balz Hoesly Milan, 20123 Phone: +39 02 721 4921 Zürich CH-8008 Phone: +41 44 254 99 66 Italy Fax: +39 02 805 2565 Switzerland Fax: +41 44 254 99 60 www.deluca1974.it www.mmepartners.ch Italy PB L I PB L I Switzerland PDI PB L I

Kleyr Grasso Associes Russell Advocaten B.V. Avocats à la Cour 31-33, Contact: Marc Kleyr Reimersbeek 2 Contact: Reinier Russell rue Ste Zithe, B.P. 559 Phone: +352 22 73 30 1 Amsterdam, 1082 AG Phone: +31 20 301 55 55 Luxembourg, L-2015 Fax: +352 22 73 32 The Netherlands Fax: +31 20 301 56 78 Luxembourg www.kckg.com www.russell.nl L uxembourg PDI PB L I The Netherlands P CL I PB L I

Refalo & Zammit Pace Advocates Serap Zuvin Law Offices 54, St. Christopher Street Contact: John Refalo Beybi Giz Plaza, Maslak Mahallesi, Contact: Melis Öget Koç Valletta, VLT1462 Phone: +356 2122 3515 Meydan Sokak No: 1 Phone: 90 212 2807433 Malta Fax: +356 2124 1170 Kat: 31 Daire: 121 Fax: 90 212 2781911 www.bar.com.mt Maslak Sisli/Istanbul, 34398 www.zuvinlaw.com.tr Turkey M alta PDI PB L I Turkey PB L I PB L I

Giwa-Osagie & Company Agha & Co. 4, Lalupon Close, Off Keffi Street Contact: Osayaba Giwa-Osagie P.O. Box 390104 Contact: Oliver Agha S.W. Ikoyi P.O. Box 51057 Phone: +234 1 2707433 Suite 101, Sl Barsha Boutique Bldg, Phone: +971 4 447 8989 Ikoyi, Lagos, Fax: +234 1 2703849 Al Barsha 1 Fax: +971 4 447 3996 Nigeria www.giwa-osagie.com Dubai, www.aghaandco.com United Arab Emirates Nigeria PDI PB L I U nited A rab Emirates PB L I PB L I

WINTER 2013 51 Latin America & Caribbean

Eduardo Montenegro Serur

The Brazilian Civil Code and The Bona Fides Principle

A major change in Brazil’s legal struc- that radical change made possible by the yers and Professors of Commercial Law ture took place 10 years ago: a new Civil new Brazilian Civil Code, it is undeni- currently need to look into Common Law Code was issued to replace the one until able that the experience with corpora- to better understand the very essence of then enforceable, promulgated in 1916. tions throughout American history will that principle and comprehend its vari- With that new legislation, civil and com- strongly benefit any lawyer who wishes ous facets, or at least establish guide- mercial obligations were unified and the to undertake a professional experience lines to answer the following questions: legal statutes concerning companies and in Brazil. Moreover, one must consider 1) Must good faith orient the actions 1 corporations were inserted therein. that the two models – Roman and Com- of a major shareholder in a limited The Code also made the bona fides mon Law – have become intertwined, company, or those of the minority? principle enforceable in private rela- especially in the U.S., where there is a tionships and especially those between growing number of legislated and written 2) How does one balance that principle shareholders and quota holders.2 How- law in spite of the case law tradition.5 with the power of control? ever welcome and necessary, the legal One has then to study good faith as a 3) Can a decision be considered legiti- concept brought to the Brazilian Civil dogmatic factor and therefore capable of mate use of the power of control and Code demands that judges apply the providing solutions to conflicts between at the same time not be an act of good good faith principle taking into account shareholders, bearing in mind that faith? 3 its cultural nature, and considering it as Brazilian legislators were not able to 4) Can commercial relationships man- human creation. In other words, judges define the precise frames of the so called age to maintain their competitive 6 and lawyers alike are now requested to ‘objective’ good faith they had idealized, nature and still be guided by such a 4 use equity , a principle our Roman tradi- thus imposing the understanding of the moral concept? tion (on which Brazilian Law is based) principle upon analysis and comparison has neglected throughout centuries of of concrete cases7. Literature to provide answers to these legislated and written law. Although one may say that to some questions is very limited in Brazil though 9 Despite the ancient differences extent the Roman bona fides has been abundant in the U.S. and England. As between Roman and Common Law, after mythified,8 it is clear that Brazilian Law- stated before, Brazilian judges have not yet been able to combine good faith and company law in their sentences, always prevailing the idea that a free economy Eduardo Montenegro Serur is the chairman of partners and founder Serur & Neuenschwander Advogados could allow a certain laissez faire to be at Serur & Neuenschwander, and heads the business, commercial Rua Senador José Henrique, the compass of the relationship between and corporate team of the firm. nº 224, 11º andar Emp. Alfred Nobel, Ilha do Leite Recife-PE, Brazil 50070-460 +55 (81) 2119 0010 Phone +55 (81) 2119 0011 Fax [email protected] www.snadvogados.adv.br

52 THE PRIMERUS PARADIGM major and minor shareholders. For that The tu quoque, on the other hand, im- 1 Unlike American companies Brazilian companies are governed either by the Civil Code or by a specific statute reason, conflicts between those parties plies the idea of “equity must come with for public companies (Lei 6.404/76). Two basic types of corporations come out of the Brazilian legislation: the have been resolved by direct, non-criti- clean hands.” Should Brutus be given limited corporations with quotas (which were influenced cal and formal application of the binary power after having committed murder by the German GmBH) and the anonymous corporations. code “legal/illegal.” and treason? Had Shakespeare taken Ju- 2 The quota holder is the equivalent to the shareholder. 3 Menezes Cordeiro, Antonio Manuel da Rocha, ‘Da Boa But the main hypothesis is clear: the lius Caesar’s point of view history would Fé no Direito Civil’, Almedina (1984), page 18 above mentioned relationships between have provided us with another interpreta- 4 According to Esser, Josef, ‘Grundsatz und Norm in der richterlichen Fortbildung des Privatrechts’, Tübingen, shareholders must be judged and inter- tion of that event. (1956), page 150-151: ‘The comments are true: the rule preted by using the classic notions of Amongst shareholders sophisticated is not found after interpretation of the principle, but obtained from a judge’s decision.’ (unofficial translation non-permitted behaviors extracted from operations (mergers, takeovers and many by applicant). the bona fides tradition, because this is other agreements) are often used as a 5 This is also noticeable on an international level, as one can see from the European experience. what the Brazilian Civil Code says, at preliminary strategy to sell a company’s 6 Jurisprudence assumes there are two sub-concepts least in three different articles. control and increase the advantages of with regard to the principle of good faith. One could be defined as ‘subjective’ good faith, which takes into ac- That very tradition has been able to the major shareholder. Minor sharehold- count the individual and their actions having their inner qualities as a parameter. The other is called ‘objective’ define some kinds of actions one should ers often see their “tag along” advantages good faith and is defined by a set of allowed and not al- not consider legal, and two of them seem vanish and their investment diminish lowed codes of conduct. According to Menezes Cordeiro, the objective good faith is dictated by judges and not by to belong to Company Law: the venire con- when a public offer is made. Are those a formal statute. tra factum proprium and the tu quoque.10 “lawful” operations to be held as such in 7 Larenz, Karl, ‘Entwicklungstendenzen der heutigen Zivilrechtsdogmatik’, JZ, (1962), page 106 The venire contra factum proprium a scenario where the bona fides principle 8 Menezes Cordeiro, Antonio Manuel da Rocha, ‘Da Boa (or “the undoing of one’s own action” or is enforceable?11 Fé no Direito Civil’, Almedina (1984), page 41 simply “contradictory behavior”) can American Law has historically proven 9 The subject never seems to lose its importance in the academic media (a new book called ‘Good Faith in be described as a series of two or more capable of understanding the importance the Jurisprudence of the WTO’, by Marion Panizzon, events in which the active party acts in a and weight of the various principles that published in August 2006). 10 The other types of non-admitted behaviors are the abuse certain legal way at first and afterwards, a commercial relationship involves. The of power, the excepti doli, the suppressio and the sur- without any reasonable explanation and ancient studies on the separate legal rectio. 11 Because of our Civil Law tradition Judges and Lawyers external factor to support his behav- personality of a company are an eloquent alike are often reluctant to use only the bona fides 12 principle to determine the case solution, Brazilian ior, changes his mind and undoes the evidence of that capability and a signif- Legislators have throughout the years legislated to turn original action. It is important to point icant motive for more interaction between that principle into concrete acts, such as in the case of minority protection, tag along etc. out that both actions – the first and the Brazilian and American Lawyers. 12 Pennington, Robert, ‘Company Law’, Butterworths, one that denies it – are legal if observed Therefore, the Brazilian Civil Code, eighth edition, (2001), page 36, a clear example of that is the case of Salomon v. A Salomon & Co. Ltd. separately. However, when seen as a perhaps even more than diplomatic and series of events, the second action is political efforts, can approach Brazil considered unlawful. and the United States by allowing a full cooperation between American and Brazilian judges and lawyers.

WINTER 2013 53 Latin America & Caribbean

Ileana Cespedes

The History of Franchising in Panama

The franchise in Panama is regulated by Property of the Ministry of Commerce establish their rights and obligations, as means of Law 35 of 1996. A franchise and Industries, known as “DIGERPI” well as the jurisdiction to which they will is an arrangement in which the owner in Spanish, for its registration. Under submit in the event of a conflict arising or user license of a trademark agrees Article 122, the following requirements from the franchise contract concerning a to transmit technical know-how or have to be fulfilled in order to obtain the specific activity. technical assistance in a manner that registration of a user license: In order to establish a franchise allows the person to whom the franchise 1. Personal or corporate name, in Panama, it only has to comply with is granted to produce or sell goods or nationality, place of organization, the existing legislation concerning provide services in the same manner and number of identity certificate or industrial property and the other with the operational, commercial and personal identity of the parties. conditions required for a corporation to administrative methods established by operate, such as the Notice of Operation the owner of the trademark in order to 2. Denomination and/or description (commercial license), and in the case maintain the quality, the prestige and the of the trademark, together with an of franchises of food, it must have the image, which the trademark represents. indication of the number and date respective health permits. Panamanian legislation does not deal of registration. The first franchise to be established with the basic requirements of a user 3. Specifications of the products or in Panama was in 1957 concerning the license contract by which a franchise is services covered by the authority vehicles of frozen products of Tastee established. It only indicates that it is to to use the trademark. Freeze, and two years later, the Dairy Queen franchise opened, which still be considered a franchise when technical 4. Type and term of the user license. know-how is transmitted or when remains in the market. The franchises technical assistance is provided in order For a user license to be registered that have more extensively developed in to develop the business in the Republic with the DIGERPI, the trademark must Panama are McDonalds, Kentucky Fried of Panama while complying with certain be already registered, otherwise the Chicken, Pizza Hut and Burger King. quality standards. application will not be processed until There are also national franchises This means that under Panamanian the Certificate of Registration of the such as Pio Pio and Don Lee. The legislation, both the franchiser and the owner of the trademark has been issued. Authority of the Micro, Small and franchisee shall only have the obligations The franchise contract in Panama Medium Enterprises, known as and the rights contained in the user is governed by the principle of the “AMPYME” in Spanish, is now license contract, which is submitted to autonomy of the will of the parties as developing models of franchises for such the Directorate General of Industrial provided by the Civil Code, since the smaller enterprises in the Republic franchiser and the franchisee may freely of Panama, and its main goal is the development of the methods of a system Ileana Cespedes is an associate with Quijano & Associates, where Quijano & Associates of franchises in four stages: she specializes in immigration, labor, intellectual property and civil Salduba Building, 3rd Floor rights law for local, foreign and multinational companies. East 53rd Street, Urbanizacion Marbella Panama City, Panama 507.269.2641 Phone 507.263.8079 Fax [email protected] www.quijano.com

54 THE PRIMERUS PARADIGM 1. Knowledge Stage: during which the • Increase in the quality and investor shall have the opportunity to productivity of commerce and learn every detail of what should be services understood as a franchise. • Increase in the GIP 2. Planning Stage: reviewing and • Increase of consumption establishing the strategy to adopt in the development of the franchise and • Development of the investment the guidelines to follow. • Receipt of foreign currency due 3. Execution Stage: all of the manuals to export of franchises discussed in the planning stage are • More offers of products and services executed and developed. in distant zones 4. Establishment Stage: advisory • Regional development services are provided concerning the Due to the construction of new establishment and actual operation of commercial centers, there are now the franchise system in real time. more than 200 franchises in Panama, AMPYME is, with its model, including both local and international mainly seeking to create a document ones. The international ones are for investors involved in the franchise prevailing in the market, and this is system to use as an instrument for one of the reasons why AMPYME has planning, induction and consultation, chosen 10 concepts to develop for the in order to achieve knowledge of the creation of franchises, such as beauty franchise in its strategic, commercial and salons, ceviche sales, ice cream, roast operational aspects, while at the same meat restaurants, laundries, shoemakers time identifying the expectations of the and tailor shops, popular drugstores, franchiser and the objectives to achieve child care centers, bakeries and sweets in the development of the project. producers. AMPYME has identified the Finally, the success of franchises in following advantages or contributions of Panama is based on the trust and smooth franchises to the national government: communication of the parties and the • Fostering the development of “micro, enterprise will of the franchisee, as well small and medium” enterprises as the professional administration of the franchiser. • Creating jobs • Fostering self-employment

WINTER 2013 55 Latin America & Caribbean

Mario Melgar-Adalid

The Supreme Courts of Justice in Mexico and the United States

Mexico stands with one foot in the legal The Supreme Court of the United reputation and the individual must not tradition of Spain and the other in States is a constitutional court that is a have any criminal convictions that warrant American institutions. Among American paradigmatic example of a constitutionally a prison sentence of more than one year institutions, the Supreme Court of the diffused power system of checks and for crimes such as robbery, fraud, breach United States has had the most influence balances. The Supreme Court of Justice of trust or others that seriously affect his/ on the shape of the Mexican Supreme of Mexico has been moving towards a her good reputation. Furthermore, it is Court of Justice. semi-centralized constitutional court required for justices to have served with The influence of the Supreme Court model similar to that of the U.S. as efficiency, competence and integrity of the United States can be seen in opposed to the centralized power models in the administration of justice, and the structure and organization of the in European courts. those with no judicial experience must Mexican Court. From a semantic point of While there are similarities between be distinguished and honorable legal view, only Mexico, Uruguay and Brazil the two court systems in the U.S. and professionals. In Mexico, the requirement (Federal Supreme Court) have adopted Mexico, there are also substantial that one must be an attorney to serve the term “Supreme Court” (Suprema differences, including the composition on the Supreme Court has not always Corte). Other Spanish speaking nations of the courts, the requirements to be been a conspicuous one, given that the use the terms corte suprema or tribunal appointed, the role of the president in Constitution of 1857 did not provide supremo. Argentina calls its court appointing the members of the court and such requirement (the Constitution of the Corte Suprema de Justicia de la the leadership of the courts. For example, 1917 is currently in effect). In the past, Nación and Peru, Costa Rica, Bolivia, in Mexico, the Constitution establishes the justices were elected through a popular Chile, Colombia, Ecuador, El Salvador, following requirements for justices of the vote, and voters based their decision on Guatemala and Honduras have named Court: of Mexican nationality, at least 35 the personal attributes of the candidates their highest court the Corte Suprema years of age, must be a licensed attorney for the Supreme Court rather than their de Justicia. with 10 years of practice, of a good training or academic merits. Upon concluding their term, Mexi- can justices, like associate justices in Dr. Mario Melgar-Adalid is an of-counsel attorney at Cacheaux, Cacheaux Cavazos & Newton the U.S., receive a retirement pension; Cavazos & Newton since 2008. He has served in important public Torre Metrocorp, Avenida Tecamachalco however, upon conclusion of their term, posts in the Mexican public and academic sector including the No. 14-502 Colonia Lomas de Chapultepec Mexican justices are barred from rep- appointments by Mexico’s President Ernesto Zedillo as Administrative Mexico City, Mexico C.P. 11010 resenting any causes before the federal Under-Secretary of the Health Department and by Mexico’s Senate to 011 52 55 5093 9700 Phone courts, a prohibition that does not exist serve on the first Mexican Federal Judicial Council (Consejero de la 011 52 55 5093 9701 Fax Judicatura Federal). He has published eight books and written more [email protected] in the U.S. Another restriction imposed than 100 articles on topics such as public administration, education www.ccn-law.com in Mexico that is not imposed in the U.S. and law. His most recent book, “The Supreme Court of Justice of the is that those individuals who served as United States,” is one of the first books on the U.S. Supreme Court written by a native Spanish speaker and published in Spanish.

56 THE PRIMERUS PARADIGM Supreme Court only resolves close to 70 cases each year. The very nature of these two courts is also different. The Supreme Court of Justice is up to date on what takes place throughout the entire judicial branch in the country and effectively carries out its role as head of the Judicial Power of the Federation. On the other hand, the Supreme Court of the U.S. does not hear administrative or governmental matters. A decentralized and efficient or- ganization is in charge of matters outside the jurisdiction of the Supreme Court of the U.S. in order to allow it to perform its paramount judicial role. Professional training is not an ob- stacle to serving on the Supreme Court of the U.S. Unlike the majority of countries, the U.S. does not require its justices to be licensed attorneys; however, it is only Secretary of State, Attorney General for The composition of both courts has logical for the majority of the associate the Mexican Republic or the Federal had parallel historical developments. In justices to be licensed attorneys, even District, or Governor or Head of Govern- the U.S., the Supreme Court has nine though this is not mandated by law. Su- ment for the Federal District are barred members, while the Mexican court has preme Court justices typically hail from from serving as justices for one year after 11. In Mexico, this number was once 26 the most prestigious schools in the U.S.. the conclusion of their respective terms. members. The number of Supreme Court In particular, Harvard University is the This restriction does not exist for public justices in the U.S. has changed between academic institution that has contributed officials in the U.S. six, seven and nine members, as it stands the most associate justices, 20 to be ex- The procedure by which justices are today. Former U.S. President Franklin act. Throughout the history of this court, appointed to the Supreme Court allows D. Roosevelt unsuccessfully attempted only five justices have been self-taught for discussion in both the U.S. and to change the composition of the court given that they did not have a formal Mexico and does not leave the power to despite his influence during a time in legal education. appoint solely in the hands of the ex- which he had great political control. His In Mexico, out of 11 justices, the ecutive power. In Mexico, the president attempt at restructuring was futile and president of the Supreme Court, Juan sends a slate of three candidates to the merely led to a serious confrontation be- Silva Meza, along with Luis María Agui- Senate so that they can decide on who tween the executive and judicial powers. lar, Olga Sánchez Cordero, Margarita will be appointed. In the U.S., the presi- As far as leadership of the supreme Luna Ramos and Sergio Valls studied at dent nominates the justices, and such courts, both countries have different the UNAM School of Law, and Fernando nomination is ratified by the Senate. approaches. In Mexico, the president Franco, Jorge Mario Pardo Rebolledo In the U.S., once the appointment of the court is designated by the associ- and Arturo Zaldívar studied at the is approved by the Senate, associate ated justices to serve a four year term, Escuela Libre de Derecho. Two justices justices have life tenure, subject to good while in the U.S., the chief justice is studied at public state universities – behavior. In Mexico, Supreme Court nominated by the president, subject to José Ramón Cossío at the Universidad de justices serve a 15-year term, which is ratification by the Senate. In Mexico, it’s Colima and Guillermo Ortiz Mayagoitia an approach that seems more adequate, a requirement that the president of the at the Universidad Veracruzana. Sergio as it allows the renewal of the court upon court be a current justice of the Supreme Salvador Aguirre studied at a private the expiration of each justice’s term. Court, while in the U.S., the chief justice univeristy, the Universidad Autónoma Mexico has adopted the same approach does not have to be chosen from existing de Guadalajara. The last two justices as the U.S. as far as not imposing a members of the Supreme Court. mentioned above finished out their terms maximum age limit to serve as a justice; There are differences between the on the last day of November 2012; there- however, Mexico does have a minimum jurisdictions of the two courts given the fore, the Senate will determine who will age requirement set at 35 years of age. power with which each is vested. While fill these vacancies on the court based on the Mexican Supreme Court is over- two slates sent by the President. whelmed by numerous matters, the U.S.

WINTER 2013 57 2013 Member Listing – Latin America & Caribbean Primerus Business Law Institute (PBLI)

Puerto Rico 2013 Member Listing – Latin America & Caribbean Primerus Business Law Institute (PBLI)

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WINTER 2013 59 Asia Pacific

Caroline Berube Deborah Loedt

Hiring and Firing Local and Foreign Employees in China

This article aims to provide current and Guangzhou and Shenzhen) allow the for- An employer is required to com- prospective employers in China with an eign language version of a labor contract pensate a former employee in order to overview of the legal issues related to to prevail. enforce the non-compete clause. Upon hiring local and foreign employees. An employer must execute a written termination, the employer must pay labor contract with an employee within compensation to the former employee Entering into a Chinese Labor one month from the date the employment on a monthly basis throughout the Contract commences. If not, then beginning on the course of the non-compete period. second month the employer will be liable The amount of the compensation A. Requirements for Labor Contract to pay double salary each month during generally falls between 20 percent and The Labor Contract Law of the PRC the first year of employment until a writ- 60 percent of the former employee’s (“LCL”) sets the provisions that govern ten contract is executed, after which this average salary over the previous year. all labor contracts entered into in China. is treated as a de facto labor contract The employer does not have to pay any A valid labor contract must expressly with no fixed term. social charges on this compensation state certain terms, including the name In addition to the above, foreign and any income tax due must be paid of the parties, term of employment, remu- employees are required to obtain their by the employee. neration, position, duties, location and work and residence permits before they working hours. commence work. Termination by There are no national requirements the Employer that labor contracts be executed in B. Non-Competition Clause Chinese or, if executed in multiple lan- In China, non-compete clauses are A. Requirements for Termination guages, that the Chinese version prevail. limited in time (two years maximum) and An employer may terminate an em- However, local authorities in many cities scope (geographic/industry restrictions). ployee immediately without prior no- (such as Shanghai and Changzhou) do Also, non-compete clauses only apply to tice for serious violations of the labor require that the Chinese version prevail, senior managers, technicians and related contract. In the event of termination while authorities in other cities (such as senior employees who are privy to confi- without notice, the employer must pro- dential information. vide the employee with written notice stating the reasons for termination with supporting elements, as necessary. No Caroline Berube’s practice focuses on Chinese corporate law and HJM Asia Law & Co LLC additional compensation is required. commercial practice. She is especially well-regarded for advising B-1002, R&F Full Square Plaza No. 16, clients on the Asian legal structure of their companies, based on her Ma Chang Road ZhuJiang New City Tianhe District sound understanding of the pitfalls and advantages of most Asian Guangzhou, China 510623 jurisdictions. She has advised clients in various industries such as +8620 8121 6605 Phone manufacturing, energy (oil, gas and mining), technology and services. +8620 8121 6505 Fax [email protected] Deborah Loedt advises clients on various matters related to foreign [email protected] direct investments, trademarks, distribution and labor law. www.hjmasialaw.com

60 THE PRIMERUS PARADIGM Alternatively, an employer may leave, and the lactation period (one year agreement is governed by the Contract terminate an employee by providing the from the delivery date). An employer Law of the PRC (“Contract Law”) as employee with 30 days’ written notice must also pay double compensation if opposed to the LCL, and thereby gives if the employee is or becomes unfit for it terminates an employee that is within the foreign company more latitude in the the position and no suitable alternative five years of retirement and has worked terms of the agreement. This also allows position is available, or if the purpose for the same employer for at least 15 the foreign company to engage an indi- for the position changes and parties are consecutive years. vidual in China without having a legal unable to amend the labor contract. Note entity in China. that the employer will also be required Hiring Individuals in China Generally the independent contrac- to pay a termination fee described in without a China Entity tor is responsible for his/her own income section B below. Although companies must have a Chi- tax on fees paid (which are not a salary Finally, the employer and employee nese entity to directly hire employees on a tax perspective) and social insur- may terminate the labor contract by in China, there are options by which a ance payments. It is important that these mutual agreement in which case they foreign company without a Chinese entity be clearly structured as an independent generally agree on the termination can hire individuals in China. contractor agreement, as the foreign com- amount to be paid to the employee. pany may be liable for fines for illegal An employer must provide the former A. Third Party Employer Agency employment and similar violations if a employee with a certificate of termination One option for a foreign company to court determines that it is a labor con- that states the effective date of termina- engage an individual in China is through tract instead of an independent contrac- tion, position held at termination, and a third party employer agency (the tor agreement. duration of employment. An employer “Agency”). This arrangement is only Note that a Chinese individual can must also notify the relevant labor union, permitted through qualified companies only convert the equivalent of USD if any, in the event of any unilateral (i.e., FESCO). 50,000 into local currency per year, termination of an employee. In this arrangement, the foreign com- which may limit the payment of services The termination requirements pany enters into a service contract with fees. However, there is no limit on the apply equally to both foreign and local the Agency and the Agency then enters amount of foreign funds a Chinese indi- employees. However, an employer should into a contract with the individual. Ac- vidual may receive, so there would be no also terminate a foreign employee’s work cordingly, the Agency is the employee’s limit in the event the receiver does not permit and residence permit. legal employer in China, and therefore is need to convert the funds. responsible for the work conditions, sal- B. compensation for Termination ary payment, social charges and termina- Conclusion Any employee fired unilaterally by the tion compensation, if any. Much of the legal framework regarding employer with 30 days’ written notice is Consequently, the Agency’s interests hiring and firing employees, whether entitled to compensation. The amount may conflict with those of the foreign local or foreign, is similar to that in of compensation due is equal to one company, especially regarding termina- other jurisdictions. Furthermore, the month’s salary per year of service. tion compensation, as the Agency will differences between local and foreign The monthly salary amount is the want to provide a higher compensation employees are being reduced, making average salary earned over the previous package to avoid any claims by the it easier for foreign companies to year, inclusive of any bonuses or other former employee. The Agency often understand their requirements as monetary compensation, but is capped requires that the foreign company enters employers in China. As long as a foreign at three times the average local salary into a third party settlement agreement company is aware of its responsibilities, during the previous year. and will not return any deposit paid until it should not encounter any difficulties Note that an employer will be all applicable termination payments have in hiring or firing either local or foreign liable to pay double compensation if been made. employees in China. he terminates the employee during any of the following periods: work-related B. Independent Contractor Agreement disease/disability, pregnancy, maternity Another alternative is to hire a local individual through an independent contractor agreement. This type of

WINTER 2013 61 Asia Pacific

Edward Sun

Repatriating Dividends from China-based Investments

Legal Grounds earlier regulations, Circular 29 increased Outward Remittance of Profits, Chinese law allows for the repatriation the documentary requirements necessary Stock Dividends and Stock Bonuses of cash dividends to an investor’s before the remittance of dividends Processed by Designated Foreign home country provided that the proper was permissible. Further laws and Exchange Banks in 1999 protocol is followed. However the web regulations have been promulgated since 5. Administration of Foreign Exchange of regulations pertaining to repatriating the late 1990s, however the process and Accounts inside China Provisions dividends may appear to be unclear, documentation required by Circular in 1997 confusing and even contradictory to 29 have remained effective until now, 6. Notice of the Ministry of Finance the average investor. This is where and are detailed on the following pages. and State Administration of Taxation many individuals become hesitant or Additional publications are as follows, on Several Preferential Policies in apprehensive about involving themselves and it may behoove the investor to Response of Enterprise Income Tax with foreign investment enterprises obtain English language copies of the in 2008 (“FIE” or “FIEs”) in China. The ability proceeding documents: to remit liquid dividend-based capital 1. Circular on Issues concerning Taxation of Dividends is of paramount importance. This Outward Remittance of Profits, The State Administration of Taxation article serves to allay fears related to Stock Dividends and Stock Bonuses issued the Notice of the Ministry of the repatriation of cash dividends, and Processed by Designated Foreign Finance and State Administration of inform the investor about the current Exchange Banks in 1998 Taxation on Several Preferential Policies state of dividend taxation in China. 2. Enterprise Income Tax Law of the in Response of Enterprise Income Tax in In 1998, the State Administration of People’s Republic of China in 2008 2008, a 10 percent withholding tax on Foreign Exchange (“SAFE”) published dividends paid to nonresident compa- the Relevant Questions Concerning 3. Implementation Regulations of the nies and their individual shareholders the Remittance of Profits, Dividends, Corporate Income Tax Law of the was introduced, it should be noted that and Bonuses Out of China Through People’s Republic of China in 2008 dividends paid out of pre-2008 earnings Designated Foreign Exchange Banks 4. Circular of the State Administration continue to be exempt from withhold- Circular (No. 29 of 1998; hereinafter of Foreign exchange on Amending ing tax. The 10 percent withholding tax “Circular 29”). Compared with the “Circular on Issues concerning may be reduced under an applicable tax treaty, depending on any trade agree-

JiaFeng (Edward) Sun, Ph.D., is the managing partner of Hengtai Hengtai Law Offices Law Offices. He has practiced law for 20 years, with extensive Suites 2301-2302, Summit Center experience in foreign investment, banking and finance, mergers & 1088 YanAn Xilu 200052, Shanghai, P.R.C. 86 21 62262625 Phone acquisitions, real estate and commercial litigation and arbitration. 86 21 32200273 Fax [email protected] www.hengtai-law.com

62 THE PRIMERUS PARADIGM Tax Rate on Dividends from Current Tax Treaties List of Anti-double Taxation Treaties issued by State Administration of Taxation, http://www.chinatax.gov.cn

TAX RATE COUNTRY/REGION

0% Georgia (If the beneficial owner holds directly or indirectly at least 50% of the capital of the company paying the dividends and the total investment is no less than € 2 million)

5% Kuwait, Mongolia, Mauritius, Slovenia, Jamaica, Sudan, Laos, South Africa, Croatia, Macedonia, Seychelles, Serbia, Barbados, Oman, Bahrain, Saudi Arabia, Brunei, Mexico

5% Venezuela, Georgia (Investment in the company paying the (Holds directly 10% of the capital of dividends is no less than € 100,000; 10% of gross dividends the company paying the dividends) if the beneficial owner holds directly less than 10% of the capital of the country paying the dividends)

5% Algeria, Luxemburg, Korea, Ukraine, Armenia, Iceland, (Holds directly 25% of the capital of Lithuania, Latvia, Estonia Ireland, Moldova, Cuba, Trinidad and the company paying the dividends) Tobago, Hong Kong, Greece, Singapore (10% of gross dividends if the beneficial holder owns less than 25% of the capital of 6. Other materials or documents that the company paying the dividend) may be required by SAFE on a case- by-case basis. 7% United Arab Emirates (UAE) As a note, and codified in the 7% Austria (10% of gross dividends if the beneficial holder Circular of the State Administration (Holds directly 25% of the capital of owns less than 25% of the capital of the company paying of Foreign Exchange on Amending the company paying the dividends) the dividend) “Circular on Issues concerning Outward 8% Egypt, Tunisia Remittance of Profits, Stock Dividends

10% United States of America and all other countries or and Stock Bonuses Processed by regions not listed above Designated Foreign Exchange Banks,” no enterprise with foreign investment whose registered capital has not been fully paid as provided by the articles of contract ments that the investor’s home country enjoying reduced tax treatment is allowed to remit foreign exchange has with China. The possible reductions or tax exemption should provide profits or stock bonuses abroad. If the can be seen in the table above. the documents issued by the local delay in fully paying in registered capital tax administration departments as provided by the articles of contract Procedures and Documents evidencing this); is caused by special reasons, approval Required for Remittance 2. An auditor’s report issued by an of the former inspection and approval According to the various aforementioned accountancy firm relating to the institutions will be requested. Profits and SAFE publications, the designated annual profit or dividend for the stock bonuses distributed in accordance foreign exchange bank must be provided relevant years; with the proportion of paid-in registered with the following materials by all capital can be remitted abroad based 3. Decision of the board of directions on foreign investors in FIEs before giving on the approval documents issued by the distribution of profits, dividends, its approval to remit annual profits or the former inspection and approval and bonuses; dividends abroad: institutions and other documents 4. The Foreign Exchange Registration 1. Tax payment certificate and tax specified in the Circular. Certificate of the particular FIE; declaration form (those enterprises 5. The capital verification report in relation to the FIE issued by an accountancy firm; and

WINTER 2013 63 2013 Member Listing – Asia Pacific Primerus Business Law Institute (PBLI)

Kells The Lawyers Hayabusa Asuka Law Offices Level 15, 9 Castlereagh Street Contact: Roger Downs 4th Floor, Kasumigaseki Building Contact: Kaoru Takamatsu Sydney, NSW 2000 Phone: +61 2 9233 7411 3-2-5 Kasumigaseki Chiyoda-ku Phone: +81 3 3595 7070 Australia Fax: +61 2 9233 7422 Tokyo, 100-6004 Fax: +81 3 3595 7105 www.kells.com.au Japan www.halaw.jp A ustralia PB L I Japan PB L I

Hengtai Law Offices HJM Asia Law & Co LLC 23/F, 1088 West Yan’an Road Contact: Edward Sun 49, Kim Yam Road Contact: Caroline Berube Shanghai, 200052 Phone: +86 21 62262625 Singapore, 239353 Phone: +65 6755 9019 China Fax: +86 21 32200273 Singapore Fax: +65 6755 9017 www.hengtai-law.com www.hjmasialaw.com

C hina PB L I Singapore PB L I

HJM Asia Law & Co LLC Hanol Law Offices B-1002, R&F Full Square Plaza No. 16 Contact: Caroline Berube 17th and 19th Floor, City Air Tower Contact: Yun-Jae Baek Ma Chang Road ZhuJiang New City Phone: +8620 8121 6605 159-9 Samsung-Dong, Kangnam-Ku Phone: 82 2 6004 2500 Tianhe District Fax: +8620 8121 6505 Seoul, 135-973 Fax: 82 2 6203 2500 Guangzhou, Guangdong 510623 www.hjmasialaw.com South Korea www.hanollaw.com China C hina PB L I South Korea PB L I

Advani & Co. Formosan Brothers 10, Thakur Niwas, Level 2 173, Contact: Hiroo Advani 8F, No. 376 Section 4, Contact: Li-Pu Lee Jamshedji Tata Road Phone: +91 22 22818380 Jen-Ai Road Phone: 886 2 2705 8086 Mumbai, 400020 Fax: +91 22 22865040 Taipei, 10693 Fax: 886 2 2701 4705 India www.advaniandco.com Taiwan www.fblaw.com.tw India PB L I Taiwan PB L I

Gateway of India overlooking the Arabian Sea. – Mumbai, India 2013 Member Locations – International Society of Primerus Law Firms

May 2011 June 2011 June 2011 September 2011 November 2011 July 2012 November 2012

Argentina Caymen Islands Belize Costa Rica Egypt Israel Malta Australia Chile British Virgin Islands Italy Singepore Finland

Austria Ecuador Mauritus United Arab Emirates Colombia Brazil Guatemala Nigeria Canada Ireland Portugal December 2012 China South Korea Belgium Cyprus Taiwan Luxembourg England Turkey Saudi Arabia France United States Germany Canada China Greece Cyprus ? Hong Kong England France Hungary Germany Greece India Hungary Japan India Mexico Mexico United States Argentina Israel Puerto Rico Alabama Kentucky Oklahoma Australia Italy Switzerland Poland The Netherlands Arizona Louisiana Oregon Austria Japan Puerto Rico Arkansas Maine Pennsylvania Spain Belgium Luxembourg Japan California Maryland South Carolina Republic of Panama Belize Malta Austria Colorado Massachusetts Tennessee Brazil Mexico Ireland Romania Connecticut Michigan Texas Russian Federation British Virgin Islands Nigeria Russian Federation District of Columbia Minnesota Utah Romania Canada Panama Florida Mississippi Virginia Poland Spain Chile Portugal Georgia Missouri Washington Australia Taiwan Switzerland Hawaii Nebraska West Virginia China Puerto Rico Illinois Nevada Wisconsin Colombia Saudi Arabia The Netherlands Indiana Cyprus Singapore New Jersey United States Iowa New York Egypt South Korea Kansas North Carolina Finland Spain Ohio France Switzerland Germany Taiwan Greece The Netherlands Guatemala Turkey Hungary United Arab Emirates India

WINTER 2013 65 Primerus Community Service

One doesn’t need to look too far to find the commitment to community service at Collins & Lacy, P.C. It starts at the top and trickles down to each individual attorney devoting time to the causes they love. Because of this wide-reaching “Collins & Lacy has always placed Resources/Meals on Wheels, Muscular effort, Collins & Lacy, of Columbia, a premium on contributing to and Dystrophy Association, Habitat For South Carolina, won the 2012 connecting with our community. We find Humanity and Jamil Shrine Cripples Primerus Community Service Award, this creates a workforce of committed Hospital. The project has raised over as announced at the Primerus Global citizens who carry over good stewardship $1,100 to date. Conference in November. Primerus and dedication into the practice of law In August 2012, the firm conducted names two finalists in addition to for the benefit of our clients,” said the the first “Biggest Giver” food drive the winner. This year’s finalists are firm’s founding partner, Joel Collins. to benefit Harvest Hope Food Bank Kubasiak, Fylstra, Thorpe & Rotunno Collins also received the Primerus and Crisis Ministries, creating a fun of Chicago, Illinois, and Lewis Johs Lifetime Achievement Award at the competition between office locations. The Avallone Aviles L.L.P. of New York, Global Conference. The award is given firm delivered a total of 223 food items to New York. to members who have helped build these organizations in each of the cities their individual institutes, as well as the where it’s located. Collins & Lacy Primerus organization as a whole, since Here are just a few examples of This year, Collins & Lacy made its the establishment of Primerus in 1992. individual attorneys’ volunteer efforts: commitment to community service even “Incorporating the Primerus • The firm’s Workers’ Compensation more official by developing a new core Community Service Pillar into our firm’s team is dedicated to supporting values statement, which says, “We are core mission and values has allowed Kids’ Chance of South Carolina devoted to our communities through our our entire team of attorneys and staff with attorney Rebecca Halberg support and involvement.” to see the importance of our Primerus currently serving as the president At the beginning of this year, the membership in a very real and relevant of this organization. Kids’ Chance firm’s managing partner, Ellen Adams, way for the communities in which we live is a nonprofit corporation developed challenged all employees to identify and work, and to carry on this ethic in in 1992 by the S.C. Workers’ their “passion” in pursuit of excellence every area possible,” Collins said. Compensation Educational in both their professional and personal As a firm-wide community service Association, and is committed to lives. She encouraged firm employees to project, Collins & Lacy implemented the providing financial scholarships for pursue their passion by identifying one 2012 Denim Days project. Employees children of South Carolinians killed goal and outlining the steps to achieve were invited to wear jeans on the last or seriously injured in work-related that goal. Many attorneys and staff have Friday of each month in exchange for a accidents. incorporated community service into $5 donation to a local charity. The firm their overall passion for excellence then identified the top charities it would • Jack Griffeth is the current president by renewing their commitment to like to support: Kids’ Chance of S.C., and a longtime member of the helping others and their communities. Sexual Trauma Services of the Midlands, South Carolina Bar Foundation As a result, working together and Harvest Hope of S.C., American Red which promotes legal aid and the individually, the firm has served about Cross, S.C. Bar Foundation, American advancement of justice in South 50 organizations in the four cities where Cancer Society, Alzheimer’s Association Carolina through grants to related the firm is located. of S.C., National Alliance on Mental Illness, Special Olympics, Senior

66 THE PRIMERUS PARADIGM Collins & Lacy made its commitment to community service even more official by developing a new core values statement, “We are devoted to our communities through our support and involvement.”

community organizations throughout time president of the Mercy Home for program without performing the needed the state. Jack also is the past Boys & Girls. He did the legal work evaluations and testing that would justify president of the Greenville Bar for free to establish the Father Close this change. Association, wrapping up his term in Fund, Inc., as an Illinois not-for-profit His mom came to the firm for help, December 2011. corporation. The film, tentatively even though she couldn’t afford to pay • Charles Appleby is dedicated to titled “Father Jim: In His Own any legal costs whatsoever. The firm enriching the Columbia community. Words,” will be used to memorialize decided to take on this case involving the In addition to his role as vice and preserve his charitable work and Individuals with Disabilities Education president of the contemporaries of the to promote his beliefs and values. Improvement Act without fees. They Columbia Museum of Art, Charles co- drafted the demand for due process chaired the city’s first ever New Year’s Lewis Johs Avallone Aviles which initiates the suit and hoped to Celebration, drawing thousands of Over the years, the law firm of Lewis convince the public school that this boy residents and visitors to Columbia’s Johs has worked to support its local was entitled to a free and appropriate Main Street. families, schools, charities, and military public education in an effort to settle troops overseas. But in the past year, the the case, or find a more appropriate Kubasiak, Fylstra, firm’s community service work took on a placement for the boy. Thorpe & Rotunno special mission. The school district, aware of the As last year’s winner of this award, During the 2011-2012 school financial constraints of the family, Kubasiak, Fylstra, Thorpe & Rotunno year, the firm was approached by an declined to offer a different program or continues its commitment to community impoverished single mother who had a any additional services. After nine full service. Their efforts include: child with special needs. This 9-year- days of hearing, including opening old boy had a diagnosis of autism and statements, direct and cross examination • Daniel J. Kubasiak is a member Fragile X, a genetic condition which of over nine witnesses, the firm obtained of the board for Catholic Charities causes changes in the X chromosome a favorable decision allowing the boy Housing Development Corporation as resulting in intellectual disabilities. The to attend an appropriate school to meet well as the Poshard Foundation for boy has significant speech delays and his educational needs. The decisions Abused Children. has difficulty sitting for even a very short also allowed him to continue with his • In addition to donating time on period. His sensory needs require almost much needed and appropriate after- pro bono cases and active church constant motion, including swaying, school services. involvement, Bernard Peter serves walking, jumping and swinging. He has “Getting to know this mom and on the Illinois State Bar Association a number of perseverative behaviors working with her, fighting alongside her, Corporate Law Department and including flapping his hands and was so rewarding,” the firm’s application Employee Benefits Section Councils, rocking. said. “Using our legal skills for a family for which he works on preparing This boy, after receiving appropriate that needed it, and a family that was newsletters and holding seminars for educational services in school with a turned away by other counsel, was truly the entire section. full complement of after-school services extraordinary. Since that experience, we to meet his intellectual, sensory and have made it part of our mission to help • David Schaffer has volunteered his physical needs, was being stripped of families in need as much as possible.” time to raise funds to create and his after-school services and switched exhibit a film about the life and work into a public school and classroom that of the late Rev. James J. Close, a was completely inappropriate to meet Roman Catholic priest and the long- his educational needs. The public school was changing his educational service

WINTER 2013 67 2013 Calendar of Events

Scan this with your smartphone to learn more about Primerus.

March 21-22, 2013 – Primerus Defense Institute Transportation Seminar Nashville, Tennessee April 17-21, 2013 – Primerus Consumer Law Institute Spring Conference Las Vegas, Nevada April 25-28, 2013 – Primerus Defense Institute Convocation Boca Raton, Florida May 16-18, 2013 – Primerus Young Lawyers Section Boot Camp: Trial Skills Nashville, Tennessee May 31-June 2, 2013 – Primerus International Conference Barcelona, Spain – Hosted by the Primerus Europe, Middle East & Africa Institute October 24-27, 2013 – Primerus Global Conference Asheville, North Carolina October 27-30, 2013 – Association of Corporate Counsel Annual Meeting Los Angeles, California – Primerus will be a corporate sponsor

Many additional conferences and events are being planned for 2013. Please visit the Primerus events calendar at www.primerus.com/events.

For additional information, please contact Chad Sluss, Senior Vice President of Services, at 800.968.2211 or [email protected].

International Society of Primerus Law Firms

171 Monroe Avenue NW, Suite 750 Grand Rapids, Michigan 49503

800.968.2211 Toll-free Phone 616.458.7099 Fax www.primerus.com