By: John J. Eagan and L. Stephen Bowers
The Tax Cuts and Jobs Act (2017 Tax Act) limited the deduction of state and local taxes to $10,000 for individuals. Several states, including Connecticut, New Jersey and Maryland, have passed legislation that imposed income tax on a pass-through entity (PTE) such as on an S corporation, a partnership or a limited liability company taxed as a partnership. The PTE deducts the income tax, which then reduces the taxable income allocable to the PTE shareholders and partners. The PTE shareholders and partners then typically receive a credit on their state income tax returns for their share of the taxes paid by the PTE. (more…)
By: Carl Koerner
My colleague, John McCarrick, an expert on director and officer responsibility, recently gave a talk about emerging issues in D&O liability and discussed the impact of the ESG movement. ESG is an acronym for Environmental, Social and (Corporate) Governance. The movement asks business enterprises to extend their purview beyond financial success to address issues of public concern, such as global warming or racial injustice. John was asked by a program participant whether the ESG movement might force more companies to reorganize as public benefit corporations (PBCs). (more…)
By: L. Stephen Bowers
On Monday, August 31, 2020, the Employee Benefits Security Administration of the United States Department of Labor (DOL) released a proposed regulation governing the conduct of employee benefit plan fiduciaries (the “Regulation”). Specifically, the Regulation restricts the manner in which fiduciaries of employee benefit plans governed by ERISA exercise shareholder voting rights, including proxy voting power, on securities owned by such plans. (more…)
By: Thomas B. Fiddler and Morgan S. Birch
If the 2008 recession gives us the ability to predict anything about upcoming trends in commercial litigation, it is that healthy companies, which normally would not be targeted as defendants, will be sued because the primary wrongdoers are judgment proof. Businesses that are owed money from defunct companies are unlikely to accept substantial losses without exploring ways to collect their debt from third parties, whose liability may not be readily apparent. Under the law of most states, there are a variety of legal theories that can be used to potentially recover from third parties. Successor liability is one such theory. (more…)
By: John K. Baker
American business has been preparing to return to normal operations, with some tweaking due to COVID-19-related governmental guidelines, for weeks. Owners, managers and supervisors are being (or should be) trained about enforcing social distancing and the wearing of masks. As we return to the workplace, businesses should also focus on creating a safe and socially-conscious workplace for all employees. The failure to do so puts an employer at risk in the long term. The combination of savvy union organizers and the Black Lives Matter movement is putting the spotlight on injustice and can endanger the viability of an employer who chooses not to strike the proper balance. (more…)
By: Lori S. Smith
A little over a year ago, I wrote a blog post about the danger of relying on precedent. Now, more than ever, clients and their advisors need to revisit contract forms on which they may have been relying for years. While many of us have lived through times that required certain adjustments in how we viewed contractual obligations — recessions, wars, oil embargoes, natural disasters, 9/11 — none of these events had the widespread and long-lasting impact that the current COVID-19 pandemic is having. None of these events shut down the U.S. economy and impacted global supply chains across every industry in the manner we are now experiencing. (more…)
By: Alexandria E. Kane
On May 22, 2020, Judge Paul G. Gardephe of the Southern District of New York, in Kirschner v. JPMorgan Chase, reaffirmed that syndicated bank loans are not securities. In Kirschner, the plaintiff alleged that a $1.77 billion syndicated bank loan made to Millennium Laboratories LLC (Millennium), a California-based urine testing company and subsequently sold to 70 institutional investors was, in fact, a security — affording it additional protections under the certain state “blue sky” securities laws. The plaintiff alleged that defendants J.P. Morgan Chase Bank, N.A., J.P. Morgan Securities LLC, Citibank, N.A., Citigroup Global Markets, Inc., Bank of Montreal, BMO Capital Markets Corp., SunTrust Bank and SunTrust Robinson Humphrey, Inc., sold debt obligations to the investors but “misrepresented or omitted…material facts in the offering materials they provided and communications they made to Investors regarding the legality of [Millennium’s] sales, marketing, and billing practices” and “the known risks posed by a pending government investigation into the illegality of such practices.” Shortly after the closing of the loan transaction, Millennium lost an important litigation matter that resulted in a $500 million decrease to its valuation and, in addition, entered into a $256 million settlement with the Department of Justice (DOJ) over claims related to alleged healthcare law violations. Within a month of finalizing the DOJ settlement, Millennium defaulted on the loan and filed for bankruptcy. (more…)
