The judge overseeing Chrysler LLC’s bankruptcy entered an order on June 1, 2009 approving Chrysler’s motion seeking permission to sell substantially all of its assets to a new company.  The procedure by which this sale was accomplished, and by which a similar sale in the GM bankruptcy will likely be accomplished, is known in the bankruptcy and finance worlds as a “363 Sale,” after the relevant provision of the U.S. Bankruptcy Code.

(For those well-versed in 363 Sales, see Stephen Sather’s thoughtful post about practical and ethical concerns with the Chrysler sale here. )

Continue Reading 363 Sales of Assets in Bankruptcy – Chrysler and Beyond

As we continue our shift to a more knowledge-based economy, frequently the greatest assets of a company reside in the creativity of its employees. This is especially true for service companies in which the services can be repeated for multiple customers (example: software). Whether or not a company owns something that has been created by one of its employees will depend to a great extent on the category of intellectual property into which the creation is classified. Generally, the creations or discoveries of employees will fall into the intellectual property categories of copyright, patent, or trade secret.

Continue Reading Great Ideas by Employees – Who Owns Them?

On April 3, 2009, the National Environmental Development Association (NEDA) filed a petition for rehearing en banc on a controversial decision (Sierra Club v. EPA) by the D.C. Circuit Court of Appeals. In that case, decided December 19, 2008, the court vacated the Startup, Shutdown, Malfunction (SSM) rules contained within the NESHAP General Provisions, 40 C.F.R. Part 63, Subpart A. The exemption has been in place since the EPA adopted the General Provisions to 40 C.F.R. Part 63 in 1994 pursuant to Section 112 of the federal Clean Air Act. Until this decision, sources were exempted from MACT technology-based emission limits if all elements of the SSM exemption were satisfied. Sources were nevertheless required by the general duty clause to minimize emissions to the greatest extent possible. The appeal stems from proposed rulemakings by the EPA in 2002, 2003 and 2006 to revise the SSM requirements.

Continue Reading NEDA Files Petition for Rehearing on Controversial Decision (Sierra Club v. EPA)

In this day and age, everyone communicates by e-mail, on a laptop, desktop, Blackberry or other electronic device. But what about communication between a physician and a patient?

Is this permissible? Acceptable under existing law and practice? Recommended?

Continue Reading Patients and Electronic Communication: Permissible? Acceptable? Recommended?

The country is fixated with whether the 1,000 plus page American Recovery and Reinvestment Act (2), or near trillion dollars economic stimulus package, contains the necessary elements and spending mix to reinvigorate the economy. Equally important to every lawyer’s financial future, however, should be whether their firm, be it large or small, is ready to meet the 2009 economic challenges presented; or, does the firm need to enact a “Law Firm Evaluation and Recovery Act?” In order to answer this important question, firm members may wish to consider a law firm procedures and systems review to take the legal pulse of the firm’s health.

Continue Reading Law Firm Peer Review

A recent court case illustrates the need for having advance tax planning when selling a business. In the case of Muskat v. U.S., No. 08-1513, 103 AFTR 2d _____, the taxpayer was majority shareholder in a corporation. He and the other shareholders sold all of the stock in the corporation to a third party interested in buying the business. The buyer also agreed to pay the taxpayer $1,000,000.00 for a non-compete agreement. The transaction was documented in this manner.

After the fact, the taxpayer realized that the non-compete proceeds would be taxable as ordinary income to him. He attempted to re-characterize the $1,000,000.00 payment as the sale of his personal goodwill and claim capital gains treatment.

The IRS denied his claim for a refund and the court agreed with the IRS. The court found that the taxpayer had a significant burden of proof to overcome the manner in which the transaction was documented. The taxpayer could not overcome his burden of proving that the payment was not for his non-compete agreement given the fact that all of the documentation reflected that was the purpose for the payment.

Perhaps the result would have been different if the taxpayer had considered this issue prior to the sale and agreed with the buyer that the payment was for his personal goodwill. There have been some cases where courts have allowed shareholders to sell their “personal goodwill” as opposed to corporate goodwill when selling a business. Therefore, proper tax planning in negotiating a sale or other transaction is very important.

In 1997, the Louisiana Legislature adopted a claims review panel procedure involving “claims” against certified public accountants and firms.  “Claims” as contemplated by the Act are broadly defined as:

(1) “Claim” means any cause of action against a certified public accountant or firm, regardless of the legal basis of the claim, including but not limited to tort, fraud, breach of contract, or any other legal basis, arising out of any engagement to provide professional services, including but not limited to the following:

(a) The providing of attest services as defined in R.S. 37:73(1)(a).
(b) The providing of business or financial advice.
(c) Advice relative to plans or actions to qualify for tax benefits or otherwise reduce the amounts of
tax owed.
(d) Advice relative to the structuring of pension or retirement or insurance plans or other employee
benefits.
(e) The provision, including design, of computer software for accounting or bookkeeping functions.
(f) Any other advice relative to the conduct of any business whether conducted for profit or not.
Continue Reading Professional Liability Claims Against Louisiana Certified Public Accountants

The number of businesses seeking bankruptcy protection hit its highest level in more than two years in March, as the recession sends more companies into financial crisis, according to a story today in the Dow Jones Daily Bankruptcy Review. The 7,843 commercial bankruptcy filings in March 2009 represent a 23.2% jump from the 6,365 filings the previous month. It’s also the highest monthly total of business filings since at least 2006, according to Automated Access to Court Electronic Records, or AACER.

Other data from AACER, a private firm that tracks bankruptcy filings, shows a 52.4% increase in business bankruptcy filings during Q1 of 2009 over the number of filings in Q1 of 2008. One expert predicts a record number of public companies to file bankruptcy this year.

Read the entire story here.

In the current economy, corporate officers and directors face an increased risk of derivative suits and other litigation against them from frustrated shareholders and other stakeholders in a corporation. Should officers and directors also be concerned about claims brought against them by their company’s creditors? The answer may depend on what state’s law applies to the creditors’ claims.

Continue Reading “Zone of Insolvency” Claims Against Officers and Directors Still Alive (and Well?) Outside of Delaware