Building Information Modeling: A Supplemental Tool for Presenting Construction Claims
BIM has significant potential to increase productivity in building design and construction, with contractors likely to experience the most dramatic benefits. The models allow for the integration and coordination of the structural steel, HVAC and MEP designs to reduce the types of conflicts that typically erode budgets and blow schedules. Effective coordination is key to a successful construction project, thus contractors will more likely realize the benefits of BIM as the level of complexity of a project increases. Notably, some proponents of BIM have boasted that BIM reduces RFIs by more than 70%. With greater confidence in the coordination process, many contractors can now choose to use prefabricated systems and other building elements to help control the costs of a project.
While it is easy to sing the praises of BIM, it is still in its infancy, evident by the lack of published decisions on the subject matter. One obvious concern is the allocation of risk on a BIM project since a number of disciplines will have access to the model in order to input their specific data.
Nonetheless, BIM is an excellent visualization tool with a number of potential uses, including in litigation and alternative dispute resolution. BIM is an exciting option to supplement the traditional means of measuring and presenting construction damage claims. Unlike the cost method and/or modified total cost method which can be difficult for a lay person to grasp, BIM can be used as a means to better communicate and identify points of dispute. Moreover, effective communication of the technical design, constructability and scheduling issues to litigants and attorneys, is essential to evaluating a suit and could lead to a faster resolution of the dispute.
4-D models, which include the element of time, can help one visualize the project effectively by considering the time frame involved as well as any design or constructability issues. 4D models are also useful to present the as-planned v. as-built sequencing, as well as highlight the significance of specific tasks on the critical path for the project.
Ultimately, attorneys and litigants are no longer limited to 2-D drawings and bar charts. Accordingly, where appropriate, BIM should be considered as a means of effectively presenting construction damage claims.
[1] McGraw Hill Construction, Smart Market Report, The Business Value of BIM Getting Building Information Modeling to the Bottom Line (2008).
Revival of Judgments in New Jersey
Christine Shaw and Christopher Midura
It is no secret that all too often, the highest hurdle in litigation is the final hurdle. That is, collecting on a validly obtained judgment lien. Notably, New Jersey law gives litigants a couple of decades in which to clear that hurdle. See Adamar of New Jersey v. Mason, 399 N.J. Super. 63 (App Div. 2008). New Jersey’s statute of limitations governing judgments allows a judgment obtained in the State of New Jersey to be revived within 20 years after the judgment is obtained. However, litigants should be mindful that for the revival of judgments obtained in a foreign state, that foreign state’s statute of limitations for judgments must be taken into account. See Philadelphia Reserve Supply Co. v. Zarelli, et al., Dkt. No. 3:90-mc-0070 (D.N.J. June 25, 2010).
N.J.S.A. 2A:14-5 provides:
A judgment in any court of record in this state may be revived by proper proceedings or an action at law may be commenced thereon within 20 years next after the date thereof, but not thereafter. An action may be commenced on a judgment obtained in any other state or country within 20 years next after the date thereof or within the period in which a like action might be brought thereon in that state or country, whichever period is shorter, but not thereafter. (emphasis added).
The language used in N.J.S.A. 2A:14-5 suggests that the New Jersey Legislature has made a distinction between domestic judgments and judgments obtained in a foreign state. The plain wording of the statute appears to require a review of the foreign state’s law pertaining to the revival of judgments and provides that if the period for bringing a revival action in that foreign state is less than 20 years, then an action to revive the foreign judgment in New Jersey must be brought within that shorter period.
The practical impact of the foregoing approach is that a litigant must be aware of the law in the state in which the judgment is obtained in order to successfully revive that judgment in New Jersey. Once consideration has been given to the time limitations provided for in N.J.S.A. 2A:14-5, a litigant can successfully revive a judgment obtained in New Jersey provided that they can satisfy the three elements that must be established in order to revive a judgment. In the case of Kronstadt v. Kronstadt the Court stated that in order to successfully revive a judgment, a litigant must prove that: “(1) the judgment [must be] valid and subsisting; (2) it [must] remain unpaid in full, or, if in part, the unpaid balance; and (3) there [must be] no outstanding impediment to its judicial enforcement, e.g., a stay, a pending bankruptcy proceeding, an outstanding injunctive order, or the like.” 238 N.J. Super. 614, 618 (App. Div. 1990).
In conclusion, notwithstanding the fact that New Jersey courts have consistently provided full faith and credit to foreign judgments, in drafting N.J.S.A. 2A:14-5, it appears the New Jersey Legislature intended that the revival of foreign judgments be limited by the laws of the foreign state and that the New Jersey 20 year statute of limitations only apply where the foreign state's limitations period is also 20 years or longer. Accordingly, a litigant with a valid New Jersey or foreign judgment lien that satisfies all elements of the Kronstadt test must take care to comply with the time limitations as set forth in N.J.S.A. 2A:14-5. Doing so will place a litigant in the best possible position for a smooth end to the litigation process.
Preference Defense
Often, a company’s first exposure to the Federal Bankruptcy system is the receipt of a preference demand letter. It is advisable to contact counsel immediately to defend against a preference demand. However, it is also helpful to understand both the reason for the demand and possible defenses to the same.
Section 547 of the U.S. Bankruptcy Code provides for the recovery of any interest of the Debtor that has been transferred (i) to or for the benefit of a creditor; (ii) for or on account of antecedent debt; (iii) made while the debtor was insolvent; (iv) within either ninety (90) days of the date of filing of the bankruptcy petition, or, within one (1) year of the petition if the recipient of the transfer is considered an insider of the Debtor. The purpose behind this section is to ensure that no one creditor of the Debtor is ‘preferred’ over the others – that the allocation of the Debtor’s available funds are distributed among all creditors as fairly as possible. The ninety (90) day look back period is completely arbitrary, but reflects Congress’s view that the Debtor knew of its impending failure during this time.
If you receive a preference demand letter, you may have some defenses that prohibit or limit the recovery of the funds that were paid to you by the Debtor during the ninety (90) day or one (1) year period prior to the date of petition. Compiling some or all of the following documents may assist your counsel in developing a defense to the preference demand:
- A history of all invoices, payments and contracts between your company and the Debtor. If possible, this should go back at least one year from the date of petition. These documents may provide an ordinary course defense to the preference demand, i.e. that you were paid on a regular schedule that did not vary as the Debtor started to falter.
- Any evidence of work that was performed for the Debtor after the Debtor made the payment. This can include time sheets, work orders or unpaid invoices for services provided after the payment. These documents may provide a new value defense to the preference demand. It is important to note that just because you may have outstanding invoices at the time that the Debtor filed for bankruptcy, it does not guarantee that you will have a defense to the preference demand.
- Any documents that demonstrate the Debtor’s payment was a result of a ‘contemporaneous exchange of value.’ An example of this type of transaction is where the payment is made at approximately the same time for the release of goods to the Debtor, like in a cash-on-delivery situation.
- If the preference demand indicates that the Trustee believes you are an “insider” of the Debtor, any evidence that disproves a personal or close relationship with the Debtor. If you can compile some or all of these documents, your attorney may be able to present a complete or at least partial defense to the preference demand, and lower or eliminate your obligation to repay the funds transferred by the Debtor to you.
The attorneys in the Bankruptcy and Creditors’ Rights Department of Sterns & Weinroth, P.C. are experienced in handling all kinds of claims of this type. Please contact us if you require assistance.
New Jersey 2012 Legislative Election and Leadership Update
Administrative/Governmental Practice Update
Legislative Update
Fall 2011 Legislative Outlook
This November, all 120 seats of the New Jersey Legislature are up for election marking Governor Chris Christie's first mid-term election. We anticipate a busy lame duck session as the current session concludes in January, 2012.
The Democrats continue to control the Senate with a 24-16 majority led by South Jersey Senator Stephen Sweeney as Senate President, Senator Barbara Buono as Majority Leader and Senator Paul Sarlo as Chairman of the powerful Senate Budget Committee. Republican Senator Thomas Kean, Jr. remains the minority leader for the Senate Republicans.
The Assembly Democrats also maintain a sizeable 47-33 majority where Sheila Oliver presides as Speaker and Joseph Cryan serves as Assembly Majority Leader. Assemblyman Alex DeCroce continues to serve as the Republican leader.
New Jersey recently completed its legislative redistricting process that occurs every ten years. The new map is viewed as a victory for Democrats as it significantly maintains the status quo. Click here to see the newly adopted New Jersey legislative districts map.
Underground Storage Tank Insurance Coverage Legislation
A hot topic in Trenton concerns the Petroleum Underground Storage Tank Remediation, Upgrade and Closure Fund, known as the UST Fund. The Fund was created in 1997 to provide assistance to businesses, private individuals, and municipal and county governmental entities for remediation related to leaking of underground storage tanks.
The Economic Development Authority (EDA), which administers the Fund, has characterized the UST Fund as a victim of its own success as it is nearly depleted. The EDA continues to accept new applications for assistance with unregulated petroleum underground storage tanks, which includes home heating oil tanks; however, they will not review or process new applications at this time due to insufficient funds.
The UST Fund was the subject of several Budget and Senate Environment Committee hearings this Spring. During the hearings there was some discussion of possible solutions for expired and leaking tanks requiring removal.
As a result, Senator Jennifer Beck (R-12) is working on draft legislation that would require insurers writing homeowners insurance policies in the State to offer certain coverage for heating oil tanks. The Senator is seeking input from all stakeholders, including the insurance industry, in crafting a solution to the need for assistance with removing underground storage tanks.
Private Cause of Action for Bad Faith Legislation
Legislation providing a private cause of action for bad faith in settlement of insurance claims has been reintroduced in the Senate this session by Senator Nick Scutari (D-22), Chair of the Senate Judiciary Committee.
During the previous legislative session the bill’s scope was narrowed and applied only to first party bad faith claims. The trial bar continues to advocate for the bill, which may be heard in the Senate Commerce Committee during the lame duck session following the Fall legislative election.
Regulatory Update
PIP Regulations
On August 1, 2011, the New Jersey Department of Banking and Insurance (DOBI) proposed new Personal Injury Protection (PIP) regulations. According to DOBI, the continually rising cost of providing PIP coverage has led to a spike in private passenger automobile (PPA) insurance rate increase requests. In fact, the Department has stated that PIP expenses accounted for 97% of all rate increase requests in the last year.
Despite several legislative and regulatory changes over the last few years, including the implementation of rules governing PIP protocols and diagnostic tests, an updated PIP medical fee schedule and creation of the basic automobile insurance policy, the Department believes more comprehensive reform is necessary and that the proposed regulations will help contain rising costs.
The regulations will add about 3,000 more codes to the PIP medical fee schedule and should help make the system more cost-effective. The regulations also make changes to the existing arbitration process, which insurers and health care providers utilize when disputing fees for medical services. The proposed rules would require insurers to follow an internal appeals process before going to arbitration in an effort to minimize costs, including attorneys' fees, etc.
Interested parties may submit comments to the Department by September 30, 2011.
Sterns & Weinroth Supports Green Initiative
Vincent J. Paluzzi recently assisted Peddie School, a long-standing client of the Firm, in procuring and financing the installation and operation of a 1.0 megawatt (MW) solar photovoltaic electric energy generating system. The system, which is expected to generate more than 20% of the electric energy consumed by Peddie each year, was installed by Pro-Tech Energy Solutions, LLC and will be owned and operated by Evolution Energies, LLC, a renewable energy development company in Spring Lake, New Jersey, that is affiliated with the private equity firm Angelo Gordon & Company, LP, headquartered in New York. Due to Peddie’s tax exempt status under Section 501(c)(3) of the Internal Revenue Code, Peddie could not take advantage of the significant tax advantages associated with ownership of the system, including the investment tax credit and accelerated depreciation. The use of a Power Purchase Agreement enabled Peddie to avoid the capital costs of acquiring, installing, operating and maintaining the system while locking in significant electric energy cost savings over the next 20 years and significantly reducing its carbon footprint. Peddie’s system is believed to be one of the first, if not the first, in New Jersey that involves installation of a substantial solar panel array over an existing on-site storm water detention/recharge basin, in addition to traditional rooftop mounted solar panels. Mr. Paluzzi’s involvement included the formulation of a Request for Proposals used to initiate a competitive procurement process, the evaluation of proposals from prospective vendors and the negotiation and documentation of the Power Purchase Agreement and related Site Lease with the successful vendor.
Mr. Paluzzi also recently assisted another long-standing Firm client, Sharbell Development Corp., in facilitating the use of a portion of its Town Center development, located in Robbinsville, New Jersey, as an open-air Farmers’ Market. The Market is open 3 to 7 pm on Mondays from June through September, and offers a variety of local produce, herbs, eggs, cheeses, meats, honey, baked goods, ice cream, plants, flowers, soaps and more. Mr. Paluzzi prepared the contract setting forth the duties and obligations of the Market’s Manager, as well as the specimen contract to be entered into between the Manager and each Vendor.
Mr. Paluzzi also was recently designated as special intellectual property counsel to the New Jersey Department of Agriculture. In his capacity as such, Mr. Paluzzi will handle the filing and renewal of the Department’s certification marks, including, but not limited to, marks “JERSEY FRESH” and “JERSEY FRESH FROM THE GARDEN STATE”. Mr. Paluzzi also will be responsible for protecting these marks from infringement, dilution, disparagement and unfair competition.
If you have any questions or comments on this article, or if you would like to learn more about the Firm’s experience with renewable energy and other green initiatives, please contact Vincent Paluzzi at (609) 989-5033 or e-mail vpaluzzi@sternslaw.com.
Workplace Policies May Not Convert An Employee's Personal E-mail Communications Sent And/or Received On Company Issued Computers Into Company Property
The New Jersey Supreme Court has decided employees’ conduct and electronic communications in the workplace through lawful electronic communications policies, an employer may not access or read employees’ private, privileged communications with their attorneys, in order to enforce those policies. The Court’s decision represents a significant departure from prior case law that permitted an employer virtually unfettered access to information that was stored or accessed on a company-issued computer, and the employer had an electronic communications policy putting its employees on notice that such information was considered the employer’s property.
To read this Alert in its entirety, please click here. For more information, contact Karen A. Confoy at 609.989.5012 or kconfoy@sternslaw.com or Erica S. Helms at 609.989.5062 or ehelms@sternslaw.com
In These Difficult Economic Times, a Timely Filed Construction or Municipal Mechanics’ Lien can Spell the Difference Between Getting Paid or Not
The New Jersey Construction Lien Law (the “NJCLL”) is intended to provide effective payment security (a construction lien filed against the owner’s property) to certain eligible lien claimants on private sector construction projects for the value of the labor, materials, equipment or services performed or furnished for the improvement of the owner’s property. The security of such a lien is available to second and third tier subcontractors and materialmen notwithstanding their lack of privity of contract with the owner. Absent the security of a timely filed construction lien, an unpaid party who otherwise is an eligible claimant may be limited to an unsecured claim for damages for breach of contract. A timely construction lien, if reduced to judgment, can be foreclosed, thus forcing a sale of the owner’s property to satisfy the judgment rendered on the lien. The mere filing of a construction lien encumbers the owner’s title and typically triggers a default under pre-existing mortgages and/or prohibits the owner from securing new mortgage-backed financing. Thus, a timely filed construction lien is generally viewed as having more “teeth” than other available remedies, and, all things being equal, may spell the difference between getting paid sooner rather than later, if at all. In order to be timely, a construction lien claim generally must be filed within a statutorily fixed period of time after the date on which the last work, services, material or equipment was performed or furnished for which payment is claimed. In addition, special timing rules apply when the private sector owner becomes a debtor in bankruptcy, an all too frequent occurrence in these difficult economic times. The Bankruptcy Code draws a distinction between the post-petition perfection of a lien that attached to the debtor’s property pre-petition, which is permitted, and the post-petition creation or attachment of a lien, which is not permitted. As the adage goes, “if you snooze, you lose.”
The New Jersey Municipal Mechanics’ Lien Law (the “NJMMLL”) also is intended to provide effective payment security (in addition to that offered by any payment bond) to certain eligible claimants who provide labor, materials, equipment or services on public projects other than State projects. However, since public property cannot be liened, the security of the municipal mechanics’ lien generally attaches to the amount of money that is due, or to grow due, under the contract and in the control of the public agency. Since the lien generally attaches to monies “due or to grow due”, a timely filed municipal mechanics’ lien claim can provide payment security to an unpaid third tier claimant (eg., a sub-subcontractor or a materialman to a subcontractor) even if the second tier party with whom it has a contract (the subcontractor) has been paid in full. In order to be timely and effective, a municipal mechanics’ lien claim generally must be filed within a statutorily fixed period of time after the whole work to be performed by the contractor is completed or formally accepted by the public agency. Moreover, in the case of third tier claimants, an early, special notice must be filed with the public agency in advance of a lien claim. This early notice is important because the security of a subsequently filed lien claim is limited to any monies owing from the contractor to the subcontractor at the time the lien claim is filed, if no such notice is given, or the value of any labor or materials provided on or after the date that late notice is given. Here too, “if you snooze, you lose.”
The services of a knowledgeable attorney are invaluable to ensure the timely filing and perfection of construction and municipal mechanics’ liens in to order benefit from the payment security that these liens provide. Vincent J. Paluzzi has almost 30 years experience in construction law. He has worked closely with the New Jersey Law Revision Commission to draft pending legislation substantially revising the New Jersey Construction Lien Law. Mr. Paluzzi also currently serves as Special Counsel to the New Jersey Schools Development Authority for school facilities projects and is a member of the Construction Codes Committee of the New Jersey Builders Association. If you have questions or require assistance with construction or municipal mechanics’ liens or any other construction related matters, please contact Mr. Paluzzi at vpaluzzi@sternslaw.com or (609) 989-5033.
Please click here for a printable version of this Alert.
New Jersey Stimulus Act Suspends Non-Residential Development Fees
On July 27, 2009, Governor Corzine signed into law the New Jersey Economic Stimulus Act of 2009 (the “Act”), which suspended the Non-Residential Development Fee Act that was signed into law on July 17, 2008. Consequently, payment of a non-residential development fee or proof of an exemption is no longer required to obtain a final certificate of occupancy.
Moreover, developers that have paid non-residential development fees since July 17, 2008 may file for a refund of “the difference between the monies committed prior to July 17, 2008 and the monies paid.”
To read this Alert in its entirety, please click here. For further information on this important legislation or to determine if you are eligible for a refund, contact Frank Petrino at 609.989.5029, or fpetrino@sternslaw.com. or Todd D. Greene at 609.989.5023 or tgreene@sternslaw.com
DEVELOPERS NOT REQUIRED TO CONTRIBUTE TO OPEN SPACE
On June 25, 2009, the New Jersey Supreme Court unanimously upheld the Appellate Division’s decision in New Jersey Shore Builders Association v. Township of Jackson and Builders League of South Jersey v. Egg Harbor Township, 401 N.J. Super. 152 (App. Div. 2008), which concluded that the Municipal Land Use Law (“MLUL”), N.J.S.A. 40:55D-1 to -163 does not empower municipal governments to require developers to set aside land for common open space or recreational areas and facilities, or to make payments in lieu of those set-asides, except with regard to applications for planned developments as defined in the MLUL. The Appellate Division’s decision considered ordinances enacted by Jackson Township and Egg Harbor Township, which required developers to set aside land for recreation or open space or to make a payment in lieu of a set-aside.
To read this Alert in its entirety, please click here. For more information, contact Frank Petrino at 609.989.5029, or fpetrino@sternslaw.com. or Todd D. Greene at 609.989.5023 or tgreene@sternslaw.com
How Will the Licensed Site Remediation Professional Program (LSRP)
On May 7, 2009, the landmark Licensed Site Remediation Professional (LSRP) Bill was signed into law by Governor Corzine. Under the new law, qualified LSRPs will be licensed to carry out site remediation at many sites from start to finish consistent with New Jersey Department of Environmental Protection (DEP) regulations and guidance. The LSRP program is expected to move the backlog of approximately 20,000 contaminated sites in New Jersey through the site remediation process more quickly. Executive Order #140 was issued in conjunction with the enactment and can be found online at http://www.state.nj.us/infobank/circular/eojsc140.htm.
On March 16, 2009, the Assembly version of the LSRP Bill, A-2962, was passed by both legislative houses with nearly unanimous support, culminating nearly three years of discussions among DEP, trade associations, environmental advocacy groups and other interested entities.
Under the LSRP program, private-sector LSRPs are given the authority to move forward without awaiting DEP’s approval on each phase of the cleanup. Temporary licenses for eligible site remediation professionals must be issued by DEP within 90 days of enactment. Permanent licenses will be issued in the future by a Site Remediation Professional Licensing Board consisting of 13 members that would oversee the licensing, continuing education, and professional conduct of LSRPs.
Within 180 days of enactment, a person initiating remediation at nearly all sites must hire an LSRP to conduct the remediation. In contrast to the current DEP Site Remediation Program process requiring DEP review and approval of submittals, the new LSRP approach is structured to require less involvement of DEP. However, for certain sites described in the law, DEP must undertake direct oversight, which will entail review and approval of submittals and provide for selection of the remedy by DEP. Sites that are not subject to DEP direct oversight are intended to move through remediation with minimal additional review following initial screening by DEP of submittals made by LSRP. Mandatory and expedited site specific timeframes for phases of remediation such as the preliminary assessment and site investigation will be established by DEP in connection with site remediation conducted under the LSRP program. At sites intended for residential, child care center, public or private school or charter school use , DEP will establish “presumptive remedies”. These are among the changes to site remediation which will be fleshed out through future DEP rules, regulations and guidance.
For more information please contact Frank Petrino at 609.989.5029, or fpetrino@sternslaw.com.
Here Comes the Sun: Developers Must Offer Solar Energy Systems in Certain New Construction
On March 31, 2009, Governor Jon Corzine signed into law Bill A-1558/S-2265, which requires, “when technically feasible,” any developer of “twenty five or more [single family, detached] dwelling units” to offer to install, or provide for the installation of, a solar energy system when the “prospective owner enters into negotiations with the developer to purchase the unit.” The law, known as the “Residential Development Solar Energy Systems Act”, was overwhelmingly approved by the New Jersey Legislature and is being touted as a means to reduce reliance on nonrenewable fuel sources, create jobs related to the manufacture, design and installation of renewable energy technology, and help achieve the stated goal requiring over twenty percent of the State’s electricity demand to be produced from renewable resources by the year 2020.
To read this Alert in its entirety, please click here.
For further information on the Residential Development Solar Energy Systems Act, or to discuss other environmental law related issues or matters concerns, please contact Vincent J. Paluzzi, Esq. at vpaluzzi@sternslaw.com or 609.989.5033.
Objecting to COAH third round Fair Share Plans:
By December 31, 2008, nearly every municipality within the State of New Jersey was obligated to submit a Housing Element and Fair Share Plan that complied with the Council of Affordable Housing’s (“COAH”) revised Third Round Rules. In the rush to comply the COAH’s submission deadline, many municipalities overlooked sites that are suitable for affordable housing or zoned sites for inclusionary developments that were unsuitable for affordable housing. In order to seek inclusion of these sites it is imperative that a timely objection to a municipality’s Fair Share Plan be filed with COAH.
To read this Alert in its entirety, please click here. For more information, contact Frank Petrino at 609.989.5029, or fpetrino@sternslaw.com. or Todd D. Greene at 609.989.5023 or tgreene@sternslaw.com
WINDOW OF OPPORTUNITY EXISTS TO OBTAIN SEWER EXTENSION APPROVALS FROM NJDEP BEFORE THE DEPARTMENT WITHDRAWS SEWER SERVICE AREA DESIGNATIONS.
To read this Alert in its entirety, please click here. For more information, contact Frank Petrino at 609.989.5029, or fpetrino@sternslaw.com.
PAID FAMILY LEAVE BILL SIGNED INTO LAW
On May 2, 2008, Governor Jon S. Corzine signed into law a bill which extends the State’s current temporary disability insurance program to provide up to six weeks of paid leave for employees to care for a newborn infant, newly adopted child, or seriously ill immediate family member. The program will be funded through employee payroll deductions and the benefits will be available starting July 2009. As a result, New Jersey has become the third state, behind California and Washington, to offer employees some form of paid family leave.
To read this Alert in its entirety, please click here. For more information, contact Karen A. Confoy at 609.989.5012 or kconfoy@sternslaw.com or Erica S. Helms at 609.989.5062 or ehelms@sternslaw.com.
Sealing Confidential Materials in the District of New Jersey
Until recently, when a federal practitioner in New Jersey wanted to file confidential documents or information under seal, she could properly rely on the procedures agreed upon and included in the case protective order. With the District's adoption of L.Civ.R. 5.3, however, the court clerk will no longer restrict public access to confidential materials unless a motion to seal is filed, and the court enters an order specifically finding ''good cause'' for granting that relief.
To read this Alert in its entirety, please click here. For more information, contact Karen A. Confoy at 609.989.5012 or kconfoy@sternslaw.com or Erica S. Helms at 609.989.5062 or ehelms@sternslaw.com.
Unemployment Compensation Benefits No Longer Available for Employees who Voluntarily Leave Their Employment to Participate in Buyout Plans
On August 1, 2007, the Superior Court of New Jersey, Appellate Division, invalidated a New Jersey Department of Labor regulation, which had provided that employees who voluntarily leave their employment to participate in ''a written voluntary layoff and/or early retirement incentive policy or program'' were also qualified to receive unemployment compensation benefits. The Appellate Division found that the regulation contravened legislative policies underlying the Unemployment Compensation Act (Act), and was inconsistent with the Supreme Court's interpretation of the Act.
To read this Alert in its entirety, please click here. For more information, contact Karen A. Confoy at 609.989.5012 or kconfoy@sternslaw.com or Erica S. Helms at 609.989.5062 or ehelms@sternslaw.com.
Minimum Retail Price Restraints No Longer Per Se Illegal
The United States Supreme Court recently granted manufacturers the ability to set and enforce minimum retail prices in order to take advantage of pro-competitive benefits that such vertical restraints may produce. On June 28, 2007, the Court decided Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S __ (2007), and overturned almost century-old precedent that agreements with retailers to set minimum retail prices are per se illegal under Section 1 of the Sherman Antitrust Act. The Court determined that hereafter such vertical price restraints will be judged by the "rule of reason," which requires a court to weigh all of the relevant circumstances, including specific information about the relevant business and the restraint's nature, history and effect, in order to distinguish between restraints with anticompetitive effects that are harmful to the consumer and restraints with procompetitive effects that are in the consumer's best interest.
To read this Alert in its entirety, please click here. For more information, contact Vincent J. Paluzzi at 609.989.5033, or vpaluzzi@sternslaw.com.
Appellate Division Holds That DEP is Entitled to Seek Damages for Loss of Use of Natural Resources Under the Spill Act
In New Jersey Department of Environmental Protection v. Exxon Mobil Corp., the Appellate Division recently considered whether an entity may be strictly liable under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq., for damages for the loss of use of natural resources affected by the entity's discharge of hazardous substances. In this case of first impression, the court ruled that the DEP's claim for ''compensatory restoration,'' or loss of use damages, is consistent with the Spill Act's express terms, is harmonious with legislative intent, and is in keeping with legislative directives articulated in recent amendments to the Spill Act.
To read this Alert in its entirety, please click here. For more information, contact Jennifer L. Cordes at 609.989.5027, or jcordes@sternslaw.com.
Recent Amendments to Federal Age Discrimination Regulations
On July 6, 2007, the Equal Employment Opportunity Commission (EEOC) published a final rule that amends the Age Discrimination in Employment Act (ADEA) regulations, in order to conform the regulations to the Supreme Court's decision in General Dynamics Land Systems, Inc. v. Cline, 540 U.S. 581 (2004). The amended regulations clarify that employers are not prohibited from making age-based employment decisions that favor older employees over younger employees, when both groups are protected under the ADEA.
The ADEA protects individuals who are 40 years of age or older from discrimination with respect to any term, condition or privilege of employment, based upon an individual's age. The ADEA applies to private employers with 20 or more employees, as well as state governments, employment agencies and labor organizations.
In Cline, a group of employees between the ages of 40 and 49 initiated a lawsuit against their employer under the ADEA, alleging that the employer's elimination of retiree health benefits for any employee under 50 years of age impermissibly discriminated against younger workers. The Supreme Court rejected the employees' claim, finding that the ADEA's prohibition against age discrimination only prevents discrimination that favors younger workers, not actions that effectively place older workers in a more favorable position. Thus, the Court held that ''reverse discrimination'' claims, of the type advanced by the employees, do not fall within the regulatory purview of the ADEA. Writing for the Court, Justice Souter reasoned, ''the 40-year threshold makes sense as identifying a class requiring protection against preference for their juniors, not as defining a class that might be threatened by favoritism toward seniors.''
Prior to the recent amendment, the regulations prohibited age-based discrimination against employees 40 years of age or older, regardless of whether the employment action favored older or younger employees within the protected group.
The revised regulations no longer proscribe workplace discrimination against relatively younger employees within the protected 40 years and older age group, and they expressly clarify that employers are not prohibited under the ADEA from favoring relatively older employees over younger ones, when both groups of employees are protected by the ADEA. Proponents of the revised regulations believe that employers confronted with an aging workforce now have greater flexibility and freedom to make employment-related decisions. The revised regulations can be found at the EEOC's website at: http://edocket.access.gpo.gov/2007/E7-13051.htm.
If you would like more information concerning the recent amendments to the Federal Age Discrimination Regulations, or have any other questions about this Employment Law Alert, please contact Karen A. Confoy at 609.989.5012 or kconfoy@sternslaw.com or Erica S. Helms at 609.989.5062 or ehelms@sternslaw.com.
Identity Theft Prevention Regulations
New Jersey's Identity Theft Prevention Act (ITPA) was signed into law on September 22, 2005. The law is an important tool to give consumers better protections against identity theft and establish stronger safeguards for personal data. Despite the comprehensive nature of the ITPA, the Division of Consumer Affairs proposed regulations on April 16, 2007, purportedly to flesh out certain provisions of the act. See 39 N.J.R. 1397. However, the new regulations go well beyond the legislative intent and create an invasive and unworkable regulatory framework. Unlike the ITPA, the Division's regulations were developed without consultation with the business community and, as a result, vary greatly with what the Legislature intended.
The ITPA applies to all New Jersey businesses and public entities that possess records with New Jersey residents' personal information. Insurance companies, administrative services providers, insurance producers, banks, lenders, mortgage companies and brokers, and hospitals are among the businesses likely to be most affected by the law and the proposed implementing regulations. The regulations will also impose significant costs on state and local governments.
The regulations deviate from the Act in a number of important ways:
Security Breach Disclosure: Within six hours of a breach, the regulations require every business and public entity to disclose to the Division of State Police any breach of security to computerized records. The six hour limitation is inconsistent with the ITPA's requirement that gives the business or public entity a reasonable amount of time, depending on the circumstances, to investigate the nature and extent of the breach and to determine, before reporting to the State Police, whether there is a potential for misuse of the information once a breach of security has been detected.
The regulations also require every business or public entity to notify consumers of a breach within 24 hours of notice by the Division of State Police that the notification will not hamper an investigation. This time limitation also exceeds the Act's legislative intent, which requires an entity to notify its customer of a breach in the most expedient time possible and without unreasonable delay. This time frame is unnecessarily restrictive, as a flexible timeframe is crucial depending on the extent of the breach. Further, the law already provides penalties for entities that fail to notify affected customers at the earliest possible time.
In addition, after a security breach a business or public entity that finds there is the potential for the misuse of personal information must give notice to affected individuals both by written notice and posting on the entity's website. The dual notification requirement goes beyond the scope of the statute, which provides that written notice is sufficient. Requiring entities to notify customers when there is only a chance that a security breach has occurred may also result in unnecessary panic, which will lead countless consumers to needlessly freeze their credit.
Computer Security Systems: Businesses should be most concerned that the proposed regulations contain specific and highly technical computer security system requirements that would impose a one-size fits all security scheme with which compliance would be virtually impossible for any business or government entity, large or small. In fact, the requirements are so detailed that they provide a virtual roadmap for hackers to invade computer systems, resulting in exactly the opposite as what was intended. With ever-changing standards for computer security, it is likely these regulations will be outdated before they are even adopted. Further, there is absolutely no statutory support for requiring businesses and public entities to comply with these requirements, and the provision is beyond the scope of the authorizing legislation.
Retaining Records of Document Destruction: The regulations require a business or public entity to maintain a written record of all documents containing personal information that have been destroyed, including the types of records destroyed and the manner of destruction, and make such information available for inspection by the Division for a period of at least five years. While the ITPA requires destruction of such documents, it does not contain a time limitation, let alone a five year retention requirement, for information regarding the destruction.
Punishment Under Consumer Fraud Act: The regulations go beyond the legislative intent by also establishing that certain acts are deemed to be knowing, willful or reckless so as to subject a business or public entity to punishment under the Consumer Fraud Act. For instance, an entity would be subject to punishment under the Act for "wrongful use of social security numbers," despite the fact that this phrase is vague and undefined and never mentioned in the enabling ITPA.
On Thursday, May 31, a number of concerned groups met with the Governor's Office to discuss the regulations andthese concerns. Written comments on the regulations must be submitted to the Division of Consumer Affairs by June 15, 2007. Once the comment period is over, the Division will review and respond to comments.
While these regulations may be well intentioned, they go far beyond the scope of the Identity Theft Prevention Act and will increase, rather than lessen, the risk of a security breach. If the regulations are not withdrawn or allowed to expire, pursuing legal action to challenge the Division's authority may be necessary.
As a result, it is important for businesses to voice their objections to these rules during the comment period. It is our hope such comments will provide important information for the Division to consider, and influence the Division to rethink the prudence of the regulations. If you are interested in receiving more information about how these regulations could impact your business or how to provide written comments to the Division, please contact Richard J. VanWagner at 609.989.5042 or rvanwagner@sternslaw.com.
