One challenge facing holders of judgments against a company that often arises is that of successor entities. Imagine holding a judgment against a company called “Bob’s Widgets” only to see that company dissolved with no assets remaining and then only to see a company called “Bobby’s Widgets” open in the same space, with the same equipment and owners, and selling the same goods to the same customers. The frustration caused by this ‘shell game’ can overwhelm litigants and attorneys alike.
A recent decision made clear that parties are allowed to seek recovery against a successor, alter-ego, or continuation of business entity either during or after judgment. Oceanside Plaza Condo. Ass'n v. Foam King Indus., No. 3D15-2449, 2016 Fla. App. LEXIS 16667, at *7 (3d DCA Nov. 9, 2016). The holding of this case and its predecessors allows claimants to pursue a company that is essentially a business entity continuing the same operations as either a successor or alter-ego as part of the first judgment or after that judgment is entered. Id.
This flexibility helps ensure the proper defendants are included in a case and also helps preserve both judicial economy (read: not wasting the court’s time) as well as the time and monetary resources of the aggrieved party.
If you have questions about your rights or you believe a company is playing a ‘shell game’ to avoid your valid claims, reach out to the litigation attorneys of Icard Merrill for a consultation.
A potentially landmark ruling was issued recently on the issue of the strictness of construction of offers of judgment and/or proposals for settlement under Florida Statutes § 768.79 and Florida Rule of Civil Procedure 1.442. Though, perhaps the ruling itself further makes murkier the already tricky offer of judgment waters.
Previous to the certified conflict between the First District in Borden Dairy Co. of Alabama, LLC v. Kuhajda, 171 So. 3d 242 (Fla. 1st DCA 2015) and the Fourth District in Bennett v. American Learning Systems of Boca Delray, Inc., 857 So. 2d 986 (Fla. 4th DCA 2003), as discussed in Kuhajda v. Borden Dairy Co., 41 Fla. L. Weekly S471 (Fla. October 20, 2016), the landscape was clear, if not laden with traps for prospective offerees.
The previous clarity was lent by the Supreme Court of Florida in Diamond Aircraft Industries, Inc. v. Horowitch, where the Court made it clear (seemingly) that any deficiency—even if only a technicality and even (again, seemingly) despite the relative irrelevance of the deficiency to the action—would render the offer invalid. 107 So. 3d 362 (Fla. 2013). For instance, under the holdings which were embossed by Horowitch, even the arguable deficiency of failure to mention attorneys’ fees in an offer where no attorneys’ fees have been sought in the case renders the offer invalid (e.g., Borden Dairy Co. of Alabama, LLC v. Kuhajda).
To show even more the “strictness” of interpretation afforded before Bennett, courts had invalidated offers on the basis of failure to state both whether attorneys’ fees were included in the offer and whether they were sought in the claim (i.e., simply stating one or the other would not suffice). Deer Valley Realty, Inc. v. SB Hotel Assocs. LLC, 190 So. 3d 203, 205 (Fla. 4th DCA 2016).
However, the Court recently held in Kuhajda v. Borden Dairy Co. that an offer is not invalid simply because it fails to address whether the proposal includes fees and whether the fees were sought in the action if the action did not, in fact, seek attorneys’ fees as part of the claims therein. 41 Fla. L. Weekly S471 (Fla. October 20, 2016). It would have been arguably a major departure and loosening of the “strict” standard for interpretation of the statute and rule to simply state that the offer in question need not address whether attorneys’ fees were included in the offer if it stated that fees were not sought in the case. However, to state that neither was required seems to fly fully and firmly in the face of the long-held (and what could fairly be described as ‘hyper-technical’) strict construction mantra used to strike down innumerable offers on what often amounted to insubstantial technical deficiencies.
It will be interesting to track how far district courts are willing to go in loosening standards under § 768.79 and Rule 1.442 following Kuhajda. Offers of judgment now potentially move from the realm of clear law with many known traps, to unclear law and unknown traps. Such rulings often keep litigators very busy in the time after reconsidering their position in cases where offers of judgment are in play and remind litigants that the expertise of an experienced litigation attorney is more valuable now than ever. If you have questions about your case or need help in a dispute, turn to the trusted litigation attorneys of Icard Merrill today.
In the United States District Court for the Eastern District of Texas (in Civil Action No. 4:16-CV-00731), twenty-one states recently brought a challenge and motion for temporary injuction seeking to prevent the implementation of a series of overtime law changes announced by the Department of Labor and which are set to go into effect on December 1, 2016.
In this case, Federal District Judge Mazzant is being asked by the states to forestall that implementation pending further challenge of a provision of the Department of Labor’s Final Rule that provides for an automatic updating adjustment mechanism whereby the minimum salary for executives to continue to be qualified for overtime exemption increases every three years (the first of which is set to take place January 1, 2020.
The States argument, in essense, is that the DOL’s policy changes attempt to unlawfully coerce the states and the businesses in those states to adopt certain wage and hour policies and to make certain choices in that regard that will disrupt (and interfere with) the States’ right to set their own policies in employee wage and hour law.
This case figures to be only one step in what is likely to be a broad salvo by states pushing back against the federal government attempting to set national wage and hour policies (and, some may argue, widespread social engineering).
UPDATE: The Texas District Court Judge issued on November 22, 2016 an order granting the states’ Emergency Injunction against the Department of Labor overtime changes, likely triggering increased and more heated litigation on the issue in the coming months. http://www.txed.uscourts.gov/d/26042
I recently watched the movie “Margin Call” starring Kevin Spacey and Jeremy Irons among others. The movie takes place over a 24-hour period on Wall Street in 2008 and focuses on the beginning of the financial crisis caused by mortgage back securities. The storyline follows what happens after a junior member of a fictitious brokerage firm in the risk analysis department realizes that the mortgage-backed securities they have been selling for the last two years are now only worth pennies on the dollar and, if called in, the firm would be shut down. The movie then follows the next 24 hours and takes you through the decision making process that took place and how the firm acted in an attempt to limit its losses and survive the crisis.
Over the last eight years as a bankruptcy and foreclosure defense attorney, I have seen the aftermath of Wall Street’s greed on hard-working Americans who simply were pursuing what they believed to be the American Dream of homeownership. However, the movie depicts callous Wall Street brokers who viewed the circumstances that they created as simply a means of making money as if it were a game. While nothing can be done to rewrite history and rapidly increase the values of property, Congress in the past has approved legislation that would relieve some of the burden of conducting a short sale.
Whenever debt is forgiven, generally it is treated as income. For example if you settle a credit card dispute and the credit card company forgives $2,000 of the debt that you owed to it, you will receive a 1099 for that debt forgiveness which is reported as income. Therefore, you are taxed at your taxable rate for that $2,000. The same is true for mortgages. I have had clients with properties that are over $300,000 upside down in that what they owe (i.e. exceeds the value of the property by $300,000.) In such a case even if that $300,000 is forgiven by the lender and the lender agrees not to pursue the borrower for that deficiency, it is treated as $300,000 of income for which a borrower would have to pay tax on as income.
A few years ago, Congress decided to create an exception to the debt forgiveness as being treated as taxable income for someone who’s selling their primary residence and was residing in the residence at the time of the sale. In that case, that debt that was forgiven was not taxable. However, the law creating this exception expired in 2013. Congress waited until the end of December 2014 to extend it through the 2014 calendar year for any short sales that closed in the year 2014. However, again, it had not extended the law for 2015. Fortunately, Congress not only recently extended it for 2015 but also for 2016 as well. Therefore, if you are upside down on a house that is your primary residence and are attempting a short sale, if you close before December 31, 2016, you can avoid any taxable consequences for any debt forgiven by your lender.
However, keep in mind that this is only applicable to your primary residence. If it is commercial property or vacant land, you are not able to claim this exception and should consult your accountant for other possible ways to avoid the full taxable impact, such as, if you are partially insolvent.
The other way to avoid any taxable consequences for debt forgiveness, whether it is through the forgiveness of a credit card debt or a mortgage loan, is by filing for bankruptcy. Pursuant to the Bankruptcy Code, any debt forgiven by way of a bankruptcy Discharge is non-taxable. This is another benefit of the Bankruptcy Code. However, it is very important to realize that once a tax accrues, you may not be able to discharge that tax in a bankruptcy filing. What this means is that if you short sale a property that s not your primary residence where there is debt forgiven, the taxable event has occurred and it may not be dischargeable in bankruptcy. Therefore, the timing of a short sale of a nonresidential property is crucial if you are also considering bankruptcy.
Another benefit for some homeowners which was extended by Congress relates to mortgage insurance premiums. Specifically, Congress extended the deduction for premiums paid for qualified mortgage insurance through 2016.
On the education front, if you are a teacher, the $250 above the line deduction that was provided in 2014 has been extended permanently and you may claim it for 2015. Then, starting in 2016, the deduction will be adjusted for inflation. Also, if you are paying college tuition, the above the line deduction of up to $4,000 was extended for 2015 and through 2016. As the cost of college continues to rise, while this is a very small percentage, it is a help.
Finally, in the area of estate planning, there is a great benefit for charities and those wishing to donate funds from their IRA to a qualified charity. More specifically, if you are age 70½ or older, you can donate up to $100,000 a year to a qualified charity from your IRA and those funds are not included as part of your gross income. This provision has been made permanent. Before making such a contribution, you should consult with your investment advisor and accountant.
I am not sure if the reason that Congress extended some of these benefits is because it is an election year but, nevertheless, they will provide a substantial benefit to those facing a short sale, education expenses as well as those wishing to donate to charities from their IRA retirement funds. However, as with any serious financial transaction, I urge you to consult with the appropriate professionals such as your accountant and financial advisors before taking any actions to make sure you are in compliance with all the requirements necessary to qualify for these tax benefits.