Published on:

ETK-full-body-200x300In the November 9, 2017 edition of The Legal Intelligencer, Edward T. Kang, managing member of the firm, writes on limited partnerships and the rights afforded to the limited partners when the general partner deviates from its duty of care.

Limited partnerships offer an attractive option over the general partnership form–namely, the benefits of a partnership arrangement, but with limited liability like that enjoyed by the owners of a corporation or limited liability company. With that limited liability, however, also comes limited input into the management and operation of the company. The general partner(s) manage the company, while limited partners typically have no right to manage or otherwise direct the affairs of the partnership. That means, absent a specific agreement between the partners and the partnership, a limited partner is treated like a shareholder of a public corporation–that is, a limited partner’s right is limited to voting and distribution and must trust that the general partner will manage and operate the partnership in the best interest of the partnership.

But what rights do limited partners have, especially when the general partner deviates from its duty of care or duty of loyalty owed to the partnership? Does a limited partner have the right to bring a direct action against another partner or the partnership itself? In a corporation setting, typically, a corporate officer/director owes fiduciary duties not to shareholders/owners, but to the entity itself. And if a dispute occurs with officers or directors, a shareholder must usually file a derivative action on behalf of the company to address a breach of fiduciary duty by its officers and directors.

Published on:

ETK-2017-Head-Shot-200x300In the November 2, 2017 edition of The Legal Intelligencer, Edward T. Kang, managing member of the firm, writes on the liability attorneys face in regards to nonclients.

In Pennsylvania, traditionally, if lawyers or other professionals, such as accountants, performed their professional duties negligently, they could only be held liable to those with whom they were in direct contractual privity—in other words, their clients. Others who may have suffered damage because of that negligence—for example, a party to a transaction relying on the other party’s lawyer’s faulty opinion letter, or a bank relying on an opinion letter prepared by a borrower’s lawyer while extending credit to the borrower—would be without a claim in tort.

In much of the country, however, courts will extend the liability of professionals to cover nonclient third parties injured by the negligence of professionals in certain situations. This liability is typically found under a theory of negligent misrepresentation, adopted from Section 522 of the Restatement (Second) of Torts. Section 522(1) provides: “One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.”

Published on:

ETK-full-body-200x300In the October 19, 2017 edition of The Legal Intelligencer, Edward T. Kang, managing member of the firm, writes on the significant impact interpreters can have on a case.

The jury was thoroughly confused when a witness testified through an interpreter that he paid hundreds of thousands of dollars for a ladder in a construction case I tried a few years ago.  What reasonable person would pay hundreds of thousands of dollars for a ladder? The “ladder,” however, was really a staircase—a distinction that was obviously important to the case. The delineation between interpreting and translating—in other words, between explaining the meaning and translating words verbatim—is vital when it comes to the use of interpreters during witness examinations.

The American legal system is wrought with a specialized lexicon and complexities that do not exist in the English language. Though an interpreter is not allowed to explain the legal procedure or give advice to a witness, they are your conduit to the witness and the mouthpiece of the witness for the judge or jury. An interpreter has the power, whether consciously or unknowingly, to skew the words of the witness as they choose your words. One question or answer, rephrased improperly, can completely change the outcome of a case.

Published on:

JG-full-body-200x300What is a bulk sale clearance certificate, and how is a bulk sale clearance certificate related to a Pennsylvania real estate transaction?  In Pennsylvania, a bulk sale clearance certificate must be obtained in all transactions involving the sale of fifty-one or more percent of the assets of a business, including real estate.  Because it is common for property owners to create single purpose entities to own the real estate, bulk sale clearance certificates are required in many real estate transactions, since the real estate represents the sole asset (i.e., 100%) of the assets owned by such SPE.  A bulk sale clearance certificate from the Pennsylvania Department of Revenue verifies that a particular entity satisfied all tax obligations due to the Commonwealth of Pennsylvania, including taxes, interest, penalties, fees, charges and any other liabilities up to and including the date of transfer.

Moreover, under 69 P.S. § 529, every corporation, joint-stock association, limited partnership or company organized under the Commonwealth of Pennsylvania or any other state that engages in business in the Commonwealth of Pennsylvania which sells in bulk fifty-one percent or more of any stock of goods, wares or merchandise of any kind, fixtures, machinery, equipment, buildings, or real estate, shall give the Department of Revenue ten days’ notice of the sale, prior to the completion of the transfer of such property.

To provide proper notice and comport with Pennsylvania law, the seller must file form REV-181, the Application for Tax Clearance Certificate, with the Pennsylvania Department of Revenue and the Pennsylvania Department of Labor and Industry ten days before the closing of the sale. A copy of the agreement of sale and preliminary settlement statement should be included with the Application for Tax Clearance Certificate.  (Note, however, that the Department of Revenue often requests re-submission post-closing so that all closing information and interim tax returns through the date of closing may be submitted).  In addition, all such entities must file all state tax reports with the Department of Revenue to the date of the proposed closing on the transfer of property and pay all taxes and unemployment compensation contributions due to the Commonwealth of Pennsylvania through the date of closing. If all state tax reports have been filed and if all state taxes and unemployment compensation contributions are paid up to the date of the proposed transfer, the State issues a clearance certificate to the seller, which is then provided to the buyer.

Published on:

DRS-head-shot-200x300On September 1, 2017, a federal court issued an order permitting a putative class action lawsuit against Craft Brew Alliance, the owner of the Kona Brewing Company beer brand, to move forward.   The lawsuit, Broomfield v. Craft Brew Alliance, No. 17-cv-01027-BLF (N.D. Cal. Filed Feb. 28, 2017), alleges that Craft Brew Alliance engaged in unfair and deceptive trade practices by packaging beer sold under the Kona Brewing Company name in a manner that led the plaintiffs to believe they were purchasing beer brewed in Hawaii, when in actuality, the beer was brewed in the continental United States.  Broomfield v. Craft Brew Alliance, 2017 WL 383843 (N.D. Cal. 2017).  Specifically, the plaintiffs allege that the outer packaging of six and twelve packs of Kona beer, which includes Hawaiian imagery, the statement “Liquid Aloha,” a map of Hawaii with the location of the Kona brewery marked, the address of Kona’s Hawaii brewery, and the statement “visit our brewery and pubs whenever you are in Hawaii” can lead a reasonable consumer to believe that the beer was brewed in Hawaii.  Id. at *1.  While the address listed on the packaging is the address for Kona’s brewery, only the draft Kona beer sold in Hawaii is brewed there—all bottled and canned Kona beer is brewed in Oregon, Washington, New Hampshire, and Tennessee.  Id.  The plaintiffs allege that they paid a premium for Kona beer believing it to be Hawaiian and brought claims for violations of California’s consumer protections laws, breach of warranties, fraud, and misrepresentation.  Id. at *2.

Craft Beer Alliance filed a motion to dismiss the complaint arguing that the statements on the Kona packaging are at most “mere puffery” and that reasonable consumers cannot interpret the packaging to mean that the beer was brewed in Hawaii, as well as that the claims fail to state a sufficient claim upon which relief can be granted because the labels of the bottles and cans identify all five locations that Kona is brewed.  Id. at *6.  The court, however, found that the statements and imagery on the packaging, particularly the map of Hawaii identifying the Kona brewery, the Hawaii address of the brewery, and the invitation to visit the Hawaii brewery could possibly lead a reasonable consumer to believe that the beer was brewed in Hawaii.  Id. at 7.  The court also stated that the identification of all five breweries on the labels of the bottles and cans is insufficient to eliminate any potential confusion because consumers are not required to remove bottles and cans from their outer packaging to ascertain whether the representations on the packaging are misleading.  Id.  The court therefore denied Craft Beer Alliance’s motion to dismiss.

The court’s ruling differs from other recent rulings in lawsuits against the makers of Foster’s (Nelson v. MillerCoors, LLC, 2017 WL 1403343 (E.D.N.Y. 2017)), Red Stripe (Dumas v. Diageo PLC, 2016 WL 1367511 (S.D. Cal. 2016)), and Sapporo (Bowring v. Sapporo, 234 F.Supp.3d 386 (E.D.N.Y. 2017)), all of which dismissed similar putative class action claims because the labels identified that the beers were brewed in the United States, not in the foreign countries from which the plaintiffs contended they were lead to believe the beer was produced.  The ruling, however, is not unprecedented.  In Marty v. Anheuser-Busch Companies, LLC, 43 F.Supp.3d 1333 (S.D. Fla. 2014), a class action claim against the maker of Becks, Anheuser Busch, for marketing that allegedly deceived the plaintiffs into believing Becks was brewed in Germany, not the United States, was permitted to proceed despite the labels stating that the beer was brewed in the United States.  Anheuser Busch eventually settled the lawsuit for $20 million.

Published on:

DPD-2017-head-shot-200x300
In an opinion handed down on August 22nd of this year, the Pennsylvania Supreme Court held that, unlike other contracts formed under Pennsylvania law, limited partnership agreements formed under the pre-Act 170 version of the Pennsylvania Revised Uniform Limited Partnership Act, do not contain the implied covenant of good faith and fair dealing.

The Pennsylvania legislature amended the state’s Revised Uniform Limited Partnership Act in late 2016 as a provision of Act 170, which altered the formation and operation of corporations, limited liability companies, limited partnerships, and other business forms.  As part of its revisions to the PRULPA, Act 170 provided that a limited partnership agreement could not change or do away with the contractual obligation of both limited and general partners to discharge their duties under the agreement in accordance with the contractual obligation of good faith and fair dealing.

The case, Hanaway v. The Parkesburg Group, LP, involved a dispute among members of a limited partnership (Parkesburg) that had been formed to invest in and develop several parcels of real estate. The plaintiffs, who were among Parkesburg’s limited partners, sued the corporation’s general partner, alleging that he sold Parkesburg’s assets to a new partnership he had formed, so that the new partnership could develop the real estate in question without the plaintiffs.

Published on:

By Jason Guss

JG-head-shot-200x300
Restrictive covenants are contractual clauses that limit an employee’s post-employment activities for a specified length of time and geographic area.  Their enforceability varies by state and by profession.  For example, restrictive covenants are unenforceable in the legal profession but are enforceable in the medical profession. The American Medical Association, however, discourages restrictive covenants between physicians. Yet it deems them ethical unless they are excessive in geographic scope or duration, or fail to reasonably accommodate patients’ choice of physician.

The determination of whether a restrictive covenant is reasonable is a factual one that is assessed on a case-by-case basis: courts weigh the competing interests of the employee versus the employer, and typically the burden is on the employer to demonstrate that the restrictive covenant protects the employer’s interests without posing an undue hardship on the employee.

Published on:

In the August 21, 2017 edition of The Legal Intelligencer, Henry Donner, Of Counsel at KHF, and David Dean, an associate of the firm, write on the Practitioners’ Guide to Navigating New Mechanics’ Lien Law Amendments.

By: Henry Donner and David DeanConstruction-300x180

Pennsylvania’s Mechanics Lien Law of 1963 was amended in late 2014 to require the commonwealth’s Department of General Services to create an internet-based State Construction Notices Directory. As required by the law, the directory went live on Dec. 31, 2016, providing a standardized, statewide, internet-based system for construction notices. This statutory scheme imposes new requirements on project owners, contractors, and subcontractors, compliance with which can drastically affect those parties’ rights under the Mechanics Lien Law. Practitioners representing any of the traditional parties in a construction matter should be sure to familiarize themselves with these new provisions, and advise their clients accordingly.

Published on:

Beer
In June, the New Jersey Attorney General’s Office announced the largest fine ever imposed upon a beer wholesaler by the Division of Alcoholic Beverage Control.[1]  The Hunterdon Brewing Company (“Hunterdon”) agreed to a fine of $2 million to avoid a suspension of its license in light of allegations that it committed trade practice violations.[2]  Beer wholesalers such as Hunterdon act as intermediaries between brewers and retailers by purchasing beer from craft breweries such as Dogfish Head, Weyerbacher, and Avery and reselling the beer to retailers such as bars and restaurants.  Chief among Hunterdon’s alleged trade practice violations was its alleged sale of draft beer tap systems at “below fair market prices” in violation of N.J.A.C. 13:2-24.1.[3]

The regulations Hunterdon is said to have violated are part of a three-tier distribution system that was established by most states in the aftermath of prohibition.[4]  The three-tier distribution system, which traces its origins to a study entitled Toward Liquor Control that was financed by John D. Rockerfeller, Jr., a noted teetotaler, creates a separation between alcohol manufacturers and retailers.[5]  As a result, wholesalers like Hunterdon exist to act as intermediaries between brewers and bars for the sale of beer.

Toward Liquor Control, in no hidden terms, made clear that its goal was to limit alcohol consumption by making the sale of alcohol difficult and expensive.[6]  As part of this scheme to increase the price of alcohol, three-tier distribution systems 1) prohibit direct sales from manufacturers to retailers, and 2) limit the ability of brewers and wholesalers to incentivize retailers to carry their products.[7]