August 2012 Archives

Electronically-In-Touch

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August 2012

Dear Young Lawyers Section Members:

Welcome to the latest edition of Electronically-In-Touch, the e-publication of the NYSBA Young Lawyers Section. The current issue includes a Message from our Section Chair, Michael L. Fox, Esq. regarding social media, upcoming events to consider attending and articles on Constitutional Law, Construction Defects, Professional Development, and Trademarks. We are always looking for submissions so please keep your articles coming to Electronically-In-Touch.

The Officers of YLS and the Editor of Electronically-In-Touch also wish to make clear that the thoughts and opinions expressed in the articles that follow are those of the respective authors alone, and do not represent the opinions of the NYSBA Young Lawyers Section, or its Officers or Executive Committee.

Erin K. Flynn, Esq.
Editor, Electronically-In-Touch
Erin.K.Flynn@gmail.com

Chair's Message

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Social Media and Its Developing Role in Legal Matters

By: Michael L. Fox, Esq.

As social media such as Twitter, Facebook and LinkedIn have become inseparable parts of our daily lives, it was only a matter of time before they also found their way into the legal framework that attorneys and litigants must deal with everyday. It is important that you understand how activities on social media may impact on a legal matter that you are handling - either a legal matter that is not yet pending or filed, or a legal matter that has already been filed in an administrative proceeding or in state or federal court.

First, it is interesting to note that in a very recent decision out of the United States District Court for the Southern District of New York, in the case of Fortunato v. Chase Bank USA, No. 11 Civ. 6608(JFK) (S.D.N.Y. June 2012), the Court determined that for service of process on a third-party under New York State law, a party could not utilize e-mail and a Facebook message to serve process on the party who was difficult to locate. Instead, the federal judge ordered that service be accomplished by publication in four local newspapers, and other means under New York CPLR 308.

That is not the only recent decision concerning social media and its growing involvement in litigation. In a recent decision from the New York State Supreme Court, Suffolk County, in the case of Romano v. Steelcase, Inc., Index No. 2006-2233 (Sup. Ct. Suffolk County 2010), the Court determined that an individual's Facebook postings could be reviewed and obtained by the opposing party as part of discovery - because the plaintiff had made her physical condition a matter at issue in the lawsuit. Plaintiff had social media postings that showed her doing things of a physical nature that called her injury claims into question. For another very recent decision, interestingly involving a criminal matter and a subpoena to Twitter, Inc., see People v. Harris, 2012 N.Y. Slip Op. 22175 (Crim. Ct. N.Y. County June 30, 2012).

Other recent rulings in the state and federal courts in civil matters have also held that when social media posts are related to or are relevant to claims or defenses in a legal action, they are discoverable and opposing parties can obtain them. This has become so even if those posts are contained within the private areas of a social media site, such as on a Facebook page only accessible by someone who has been "friended" by the poster or otherwise allowed to see the posts that are hidden from public view. If the party seeking discovery is able to demonstrate that the posts have a relevance to a claim or defense in the action, courts may direct that the other party(s) provide the posts, or possibly their password or an authorization to the social media provider to obtain the social media posts. A party opposing such disclosure could argue that the requests for the social media postings are nothing more than a "fishing expedition," and that the other party does not have a reasonable basis to believe that there is relevant material or material likely to lead to the discovery of admissible evidence in the social media posts. In such a case, at least in state court decisions, the judge may conduct an "in camera" review of the material at issue.

However, while one may be tempted to simply delete or remove social media postings that one believes could be troubling to their legal action, they are greatly cautioned against that in this article, and you should be sure to discuss this with your clients and explain the dangerous ground on which they tread if they attempt such action. Destruction, deletion or other types of changes or loss to discoverable material is called "spoliation," and is prohibited under the law. If an individual spoliates, or destroys, relevant and discoverable information before or during a lawsuit, the courts can and will issue sanctions, which may be severe and can include anything from monetary penalties up to and including an "adverse inference." An "adverse inference instruction", for those who are not familiar with it, means that the court advises the jury that there was material destroyed or lost, and the jury may take that to mean that the material was adverse to the case of the party that lost or destroyed it. Such a sanction can obviously be very damaging to a case. The courts require that parties, or those who believe they may become parties, to a legal action put a "litigation hold" on relevant data and information. The litigation hold applies to both electronic information and paper information. The "litigation hold" doctrine has its roots in federal cases including the Zubulake and Pension Committee line of decisions from the Southern District of New York. Recently, the Appellate Division, First Department adopted the Zubulake standard for New York State cases, as well, in Voom HD Holdings LLC v. EchoStar Satellite LLC, 93 A.D.3d 33 (1st Dep't 2012).

Obviously, parties to a litigation must know that they need to retain all information related to or relevant to a legal matter, and must not destroy or delete anything until the case is over (including any appeals). However, even individuals who are not yet parties to an action but who "reasonably anticipate litigation" must keep an eye toward preservation of material that might become relevant or discoverable in a future litigation. Therefore, for purposes of this article, if you have clients who are active and avid social media participants, discuss the relevant issues and "litigation holds" with them, and understand the impact or involvement that social media may have on the legal matter.

Michael L. Fox, Esq. is the Chair of the Young Lawyers Section, and a Managing Attorney of the Litigation Team at Jacobowitz & Gubits, LLP. He can be reached at 845-778-2121 or mlf@jacobowitz.com.

3rd and 4th District Events

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3rd and 4th District Events

YLS 3rd/4th District Networking Event at Brown's Brewing Co.

On July 17th the 3rd and 4th Judicial Districts of the New York State Bar Association's Young Lawyers Section hosted a successful networking event at Brown's Brewing Co. in Troy, NY. The event was well-attended, and brought together many Capital Region attorneys and several law students. We hope to see everyone at our next event!


Upcoming RPLS/YLS 3rd/4th District CLE Event on Attorney Escrow Accounts and Day at the Track

On August 17th, the 3rd & 4th Judicial Districts of the New York State Bar Association's Real Property Law Section and Young Lawyers Section will be hosting an Ethics CLE Program and a Day at the Track. Anne Reynolds Copps, Principal Attorney at Albany, New York firm The Law Office of Anne Reynolds Copps, will be presenting on "Everything you Wanted to Know About Attorney Escrow Accounts but Were Afraid to Ask". The Ethics CLE Lunch Program will be held from 11:00 am to 11:50 am at the Saratoga Springs Public Library, Sussman Room, and will be worth 1 Ethics CLE credit. The Day at the Track portion of the program will follow beginning at 1:00 pm at the Saratoga Race Track. This event is being offered to RPLS and YLS members only, and seating is limited and will be offered on a first come, first served basis. We look forward to seeing you at this no cost, fun-filled day!

Events of Interest to Young Lawyers

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Summer in the City Networking Event

The Committee on Lawyers in Transition is hosting an evening of networking with fellow attorneys across all practice areas.

When: Wednesday, August 22, 2012
Where: Arctica, 384 3rd Avenue (between 27th and 28th Streets), New York, NY
Time: 6:00 p.m. to 8:00 p.m.
Price: $20 for NYSBA Members
Pre-registration is required. Register online now.


Mock Interviewing Panel

The Committee on Lawyers is Transition is continuing its series of free, live Career Development webcasts to help lawyers better manage their careers during this tough economy. The upcoming September 19th program will stage a series of interview questions with mock interviewers and interviewees focusing on issues and situations that may arise during the course of an interview.

When: Wednesday, September 19, 2012
Where: New York State Bar Association, One Elk Street, Albany, NY 12207
Time: 12:00 p.m. - 2:00p.m.
Free Live Program and Free Webcast for NYSBA members. Pre-registration is required. Register online now.

Constitutional Law

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The Supreme Court, Religion, and U.S. v. Alvarez: Contrasting Perspectives on False Speech

By Daniel Goodman, Esq.


The most significant news out of the Supreme Court in June was the ruling that the individual health insurance mandate is constitutional. The decision that upheld President Obama's Affordable Care Act, National Federation of Independent Business v. Sebelius, understandably garnered nearly all of the media's Court coverage, but we would be remiss to overlook US. v. Alvarez, the other decision delivered by the Court that same day. This overshadowed decision was a consequential First Amendment ruling, and is extremely important for what it says--and does not say--about the role of morality in the public sphere.

It is not against the law to lie. This principal has been part of Constitutional Law for some time, and is not a revelation; the First Amendment guarantees the right to free speech, regardless of the speech's factual content. Legislatures, though, are able to prohibit "false statements of fact" if they have compelling reasons to do so and if the lies cause tangible harm (e.g., in cases of fraud, libel, defamation, and misleading commercial speech); as lawyers and law students know, there are always exceptions. (And as the public knows, there is always a way to utilize legal jargon to turn a short and simple word like "lie" into a longer, more ambiguous phrase like "false statement of fact."). Alvarez effectively holds that it is perfectly legal to lie even when the lie could create public deception; although the decision was more nuanced than this, such is the effect of the decision. In a six to three vote, the Court overturned the Stolen Valor Act, which had made lying about receiving a military medal or decoration a federal crime.

Hemingway believed that what is said is less powerful than what is unsaid. What applies to literature can often apply to law as well. Amidst all the discussion about whether the Constitution could actually prohibit lying (and if so, how egregious of a lie), there was scant discussion about the actual morality of lying itself. And rightly so; after all, the Supreme Court is not tasked with determining what is moral and immoral, but with the task of determining what is constitutional and unconstitutional. Many of us are well aware that the role of moral arbiter is not the judicial branch's function. Yet when a Court decision offends our intuitive sense of morality, we cannot help but feel a profound sense discomfort. A military decoration is one of our most honorable civil distinctions; lying about receiving one just seems wrong. If the highest judicial body in our land--and arguably our most trusted civil institution--has essentially affirmed the legality of an act that many deem highly unethical, than to whom are we to turn for ethical and moral guidance?

Idealistic secularism believed that civil government and humanitarian culture could determine morality. What it discounted, though, is the type of scenario represented by Alvarez. What if misinformation and deceit is tolerated by a culture, and that same culture's only recourse is to a legal system that does not contain within it the ability to prohibit something as unethical as lying about a military honor? It is in situations such as these where religion can play a useful role.

Religion can function as the moral arbiter that the Supreme Court cannot. We should not turn to government or culture for our sense of morality any more than we should turn to religion as a source of secular law. This is not simply due to the separation between church and state, which is a constitutional prescription ensuring that neither religion nor state influence each other. It is due to the different functions of law and religion.

Law may codify some of our moral principles into legislation, but it ultimately works based upon legal, not moral, principles. While most religious systems contain law, religious law is ultimately geared towards encouraging its adherents to behave ethically. While law cannot give us compelling reasons to act morally, religion can be morally aspirational. The fact that our society views lying as a moral wrong stems not from our legal system, but from the influence of religion. "You shall not lie to one another" (Leviticus 19:11), and the Biblical admonition to "distance yourself from a false statement" (Exodus 23:7), have been transmitted for thousands of years, while the Constitutional protection of free speech has only been extant for a few hundred years. That our legal system has not codified this aspect of our morality does not mean that it is moral to lie.

Moreover, one does not even have to believe in God to believe that religion has useful functions. The non-believing philosopher Alain de Botton's provocatively titled new book "Religion for Atheists" discusses the many useful, important, and necessary functions of religion. He argues that secular institutions have not constructed adequate substitutes for the essential functions once (and still) served by religion.

One of religion's most useful historic functions is the teaching of right from wrong. We still need moral instruction from some source, and if we are not getting it from law, then we should turn to religion for such guidance. Religion can inspire us to act morally, can teach us right from wrong (if we let it), and can bind us together as communities who agree upon its ethical principles. Religion can teach us that just because lying may be legal does not mean that it is moral. The law of lying has now been covered by the Supreme Court. But what is unaddressed is the morality of lying, and it is this void that our religious institutions can and should fill.


Daniel Goodman, Esq. is an attorney concentrating in Constitutional Law and a first-year rabbinical student at Yeshivat Chovevei Torah in New York.

Professional Development

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The Importance of Pro Bono Work in Your Practice as a New Attorney

By: Quinn Clancy, Esq.

Starting next year, applicants to the New York State Bar must perform 50 hours of pro bono work prior to their admission to the Bar. Although many will perform these required hours during law school, I urge new lawyers to continue with pro bono work throughout the course of their legal practice, and look at it not as a "requirement," but an opportunity - an opportunity for career development and an opportunity to further our noble profession.

As a new lawyer, it is easy to be consumed by and focused on the billable hour or work for your regular clients. Pro bono work all too often gets put on the back burner, to be done at some point in the future when you are less busy. Well, that time may not come for quite a while, and you might miss out on many important experiences in the meantime by foregoing pro bono opportunities.

First, pro bono work is important because as lawyers, it is our ethical and social responsibility to volunteer our time and resources to provide legal services for those in need. It is a central and long standing tradition in the history of our profession.

Second, pro bono work allows you incredible professional development opportunities, and allows you to sharpen your skills as a lawyer. If you are a litigator, for example, pro bono work may present opportunities to take depositions, argue motions in court, and even argue at the appellate level. If you are a transactional lawyer, as another example, pro bono work may give you the opportunity to form new corporations, restructure existing businesses, and otherwise advise clients on legal matters (such as tax issues, employment issues, lease issues, and contract issues). Depending on your practice, it may take many years before you are asked to perform these tasks for paying clients. Through pro bono work, however, you will gain valuable experience early, and you will be prepared when the time comes and you are asked to perform these same tasks in a non-pro bono context.

In my current role, I get many questions from new lawyers on how they can gain more experience, or gain more client contact. My answer is always the same: pro bono work. Pro bono work will provide you early on with a level of experience you cannot gain elsewhere, and will give you the experience to take on larger tasks in your regular practice later on. If you've taken a deposition in a pro bono case, a partner is more likely to trust you to take a deposition in his or her matter. And you will have the needed confidence when you take that deposition. Similarly, if partners know you have managed clients in the pro bono context, they are more likely to give you the client contact that you seek.

Finally, doing pro bono work looks great when it comes around to review time. Pro bono work shows that you are committed to your career; it shows you are taking ownership of your career by taking on work that will further your development as a lawyer. Your pro bono work also shows that you are committed to the practice of law; it shows you take your profession seriously and take the profession's calling to provide legal services to those who cannot afford it seriously.

Pro bono work is a win-win situation: you gain valuable experience and professional development, and those in need receive the legal assistance they need. So as new attorney, remember the value of pro bono work. I think you will find, as many do, that it is some of the most rewarding work you will do as a lawyer.


Quinn Clancy is the Director of Greenhorn Legal in New York (www.greenhornlegal.com) where he works with attorneys and law firms in training new lawyers in the transition from student to practitioner. Prior to joining Greenhorn Legal, Quinn was a litigation associate at Paul Hastings in New York. You can follow Quinn on twitter at @QuinnClancy and follow Greenhorn Legal on twitter at @GreenhornLegal. He can also be reached by e-mail at Quinn@greenhornlegal.com.

Torts

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Construction Defects

By: Mark Kane, Esq.

The following is a short discussion article on construction defects, which is primarily based on the author's experience firstly as a construction professional and more recently as a lawyer. If you are a construction lawyer or in general practice as an attorney you will regularly come across allegations of defective design and/or construction; this article is a relevant primer for those making a defect claim for their client or defending against such allegations.

Actions taken and decided in New York's courts' have always been sympathetic to parties injured by construction or design defects and have found no difficulty in finding against those responsible for the defects, absolute or by proportion. (Jewish Bd. of Guardians v. Grumman Allied Indus. Inc. 96 AD 2d 465,464 NYS 2d 778) Upon examination of various New York cases it can be stated that a party who hires a designer is entitled to the reasonable skill and care of an ordinary competent professional carrying out the professional activity retained for; such that performance below that standard can be regarded as malpractice and thus greatly increases the likelihood of defects in the design which may then be incorporated into the construction works. (see Jewish Bd. of Guardians v. Grumman Allied Indus. Inc. 96 AD 2d 465,464 NYS 2d 778; Spielvogel v. Merrill Lynch, Pierce, Fenner & Smith, Inc. 127 AD 2d532, 512 NYS 2d 75; Cabrini Medical Center v. Desina, 64 N.Y.2d 1059,1061 (1985); In Matter of R.M. Kliment & Frances Halsband Architects (McKinsey & Co. Inc.), 3 N.Y.3d 538, 788 N.Y.S.2d 648 (2004)) Likewise, in New York, a party who hires a contractor is entitled to a quality of workmanship and conformity with the drawings and specifications such that the construction work is free from defects. The courts have further to this capably dealt with concepts such as latent construction defects in residential construction holding responsibility properly rests upon the general contractor (see Caceci v Di Canio Constr. Corp., 72 N.Y.2d 52; Derenzo v State Farm Mut. Ins., 141 Misc.2d 456 (1988))

The formative and creative nature of construction work makes it prone to defects the majority of which are minor and in some cases are purely technical and so do not harm or occasion loss on the owner or user of the construction works once occupied. The reference to once occupied reflects the cause of action for construction defects generally arising once the works are complete and the potential for temporary disconformity during the course and progress of the construction works and arguably design. (see In re Arbitration Between Oriskany Central School Disrict & Edmund J. Booth Architects, A.I.A., 85 N.Y.2d 995, 630 N.Y.S.2d 960 (1995); Rite Aid of N.Y. Inc. v. R.A. Real Estate Inc., 40 A.D.3d 474, 474, 837 N.Y.S.2d 48, 49 (1st Dept. 2007)) and (see UK cases for analysis of the common law doctrine of temporary disconformity: Oval (717) Ltd v Aegon Insurance Co (UK) Ltd [1997] 54 Con LR; McGlinn v Waltham Contractors Ltd [2007] EWHC 149 (TCC) (21 February 2007)).

Design and construction defects differ in general definition; primarily because of the way the courts have classified the nature of actions. Design defects are generally negligent actions or omissions in the design process which lead to the design and therefore the constructed works not being compliant with laws or design standards that result in damage or loss or difficulty for the owner or third parties. (See InCity School District of City of Newburgh v. Hugh Stubbins & Associates Inc., 85 N.Y.2d 535, 626 N.Y.S.2d 741 (1995); Ossining Union Free School District v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 419, 541 N.Y.S.2d 335 (1989)).

Although an architect or other professional advisor has a duty to warn the owner/occupier about the occurrences of potential defects in either the design or the works constructed the contractor may not have the same duty dependent on the contract he is signed up to. (Jewish Bd. of Guardians v. Grumman Allied Indus. Inc., 96 AD 2d 465,464 NYS 2d 778) Although construction contracts differ as to the precise definition of a construction defect they are generally defined in essence as elements of the work that are not in accordance with the specifications and/or drawings and/or contract, therefore there is wide scope for the classification of a work elements as defective. It must be stressed that it is not necessary for a works element to cause harm or damage or loss prior to its classification as a defect. And as such before advising a client, consideration should be given to the executed contract's defects provisions.

The forgoing must be considered indicative as the classification of a works items as a defect is peculiar to an individual project; although the conditions of contract may be the same between two separate projects the way in which a works item is detailed or specified may prevent automatic classification of an alleged defect based on the other project. Likewise where dissimilar conditions of contract are used but the detailing and specification is the same the successful classification of the works items as a defect in one case does not guarantee that the other is unquestionably also defective. An example of this stated peculiarity is the case ofDerenzo vState Farm Mut. Ins., 141 Misc.2d 456 (1988), which on first reading bucks the trend, where at *460 the court decided "In this case, [the owner] supplied the specifications and selected [the sub-contractor] to perform the foundation work. It was thus [the owner's] duty to insure that the work was adequately and properly performed." The decision is made sense of when the reader understands that in that case the owner was his own general contractor and potentially engineer.

When a defect is raised it is done usually by the designer who in most cases will fulfill or part-fulfill the role of contract administrator and as such as the defect is notified to the contractor under the contract; those same contract provisions are of relevance in advising a party on their rights and remedies. (Jewish Bd. of Guardians v. Grumman Allied Indus. Inc., 96 AD 2d 465,464 NYS 2d 778) As a preliminary matter caution should be taken by the owner in accepting the designer's assessment of the contractor's liability for a defect given the potential conflict of interest and any self-preservation attempted by the designer in resting liability on the contractor. In some cases the contractor may have legitimate difficulty in accepting that he is solely liable for an alleged defect as it might relate to the inadequacy of the design or it may be a matter that was not contemplated by the construction contract executed. In such situations an attorney for the owner or occupier would be wise to at least listen and consider the contractor's argument and defence prior to solely pursuing the contractor. Jewish Bd. of Guardians v. Grumman Allied Indus. Inc., 96 AD 2d 465,464 NYS 2d 778 is a case worth reading with regard to the assignment of obligations under various contracts and the proportionment of liability between various members of the supply chain; including architect, general contractor and sub-contractor / supplier.


The contractor when in receipt of a defects notice under the contract is, in all but the most extreme case, given an opportunity to make good the defect such that the work then conforms with the drawing and/or specification and/or contract, whichever gave rise to the non-conformance of the work. The contract administrator may be empowered by the contract to set a timeframe under which the defect must be made right; otherwise a reasonable opportunity must be afforded to the contractor to make right the defect; in this respect the author notes that the great majority of construction contracts include for a defects rectification period post-substantial completion.

An important consideration for an attorney prior to advising that his client should hire another contractor to make right a defect that the original contractor has failed to remedy is that the contractor may have obtained a supply chain guarantee and / or warranty for the work which may be invalidated or otherwise made unenforceable by another contractor altering the works outside set procedures. This consideration becomes all the more critical in the case of mechanical and electrical elements of the works that will have standard manufactures' guarantee periods, provided installation and commissioning is completed soundly. An equally important consideration will arise in the case of outstanding multi-tier mechanics' liens and the complexity of litigation that can ensue as a result of altering the works where same are subject to multi-tier mechanics' liens. (see generally New York lien law; Matter of Northside Tower Realty, LLC v Klin Constr. Group, Inc., 73 AD3d at 1072-1073; Matter of Lowe, 4 AD3d 476 [2004]; Dember Constr. Corp. v P & R Elec. Corp., 76 AD2d 540, 544 [1980]; Matter of Luckyland (N.Y.), LLC v Core Cont. Constr., LLC, 83 AD3d 1073 [2011]).

Many of the standard construction contracts provide a number of remedies under the contract where a defect occurs. (See the American Institute of Architects, various contract documents at www.aia.org) As discussed previously a number of contracts provide that the contractor is to make good the defect within a period set by the contract administrator and equally a number provide that the contractor shall make good the defect within a reasonable period. The contractor may also ask the owner to accept the defect without rework and this can be appropriate in a case such as where the punch-list contains minor items that have been (from a practical perspective) picked up as observations and not true defects preventing substantial completion or full utilization of the works.

A number of standard construction contracts provide a method by which an owner can accept a defect and as such not have the contractor do the rework and an assessed sum will be taken from the contractors account, this has been industry practice for generations but express provision in the contract is preferable such that it allows the contract administrator and owner close out defects without having to later argue an implied term based on industry norms and the contractor is protected by the procedures laid out in the contract for the use of this provision. Inasmuch as it needs to be discussed the same procedures usually include for some form of natural justice whereby the contractor gets to comment and make submittal on the value of the defect if accepted prior to the owner taking a sum from the contractor's account.

The final consideration for this article is that NY CPLR Article 2 (statute of limitations) differs when considering defects. As architects and engineers are captured by the (non-medical) malpractice 3-year rule under CPLR §214 and a contractor, given the accepted contractual sounding of the action, is covered by the 6-year rule under CPLR §213. (Cabrini Medical Center v. Desina, 64 N.Y.2d 1059,1061 (1985)) Although it would be difficult for a contractor to string-out pre-litigation activities for 6 years from when the actual physical work was complete it would not be difficult for an architect or engineer to ride out the 3 year period given the contractor's general entitlement to make good and the owner's typical general disconnect from the administration of the construction contract. (Board of Education of Tri-Valley Central School District at Grahamsville v. Celotex Corp., 88 A.D.2d 713, 714, 451 N.Y.S.2d 290 (3d Dept. 1982); Frank v. Mazs Group, LLC, 30 A.D.3d 369, 369-70, 815 N.Y.S.2d 738, 738-39 (2d Dept. 2006); InCity School District of City of Newburgh v. Hugh Stubbins & Associates Inc., 85 N.Y.2d 535, 626 N.Y.S.2d 741 (1995)) NY courts have come across such situations and plaintiffs have argued that they had contracts with their architects and so the 6-year rule §213 was the governing CPLR rule. The courts have been quick to highlight the policy considerations involved (see Civil Practice Law and Rules Article 2 §214.6 "malpractice, regardless of whether the underlying theory is based in contract or tort") and the true or core malpractice sounding of an action against an architect or engineer such that it will make difficult any argument that an action can be taken against an engineer or architect after the 3 year period even if within the six year contractual period. (For more complete analysis see Statutes of Limitations for Design and Construction Defects; New York Law Journal; Volume 244:92; November 10, 2010.)

CPLR §214.6, and more generally CPLR §214, has been considered by the courts and same appropriately applies where the plaintiff is owner or has control over the retained professional and as such does not limit an injured plaintiff's ability to claim well after 3 years from the completion of the work where same has suffered as a result of malpractice; specifically the author notes personal injury cases brought by plaintiff's who had no involvement with the design or construction of the works but were injured as a result of a design defect caused by negligence of an architect or engineer. (In City School District of City of Newburgh v. Hugh Stubbins & Associates Inc., 85 N.Y.2d 535, 626 N.Y.S.2d 741 (1995); Ossining Union Free School District v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 419, 541 N.Y.S.2d 335 (1989)) Although this is not without limitation and the courts have signaled that they will not entertain "fanciful argument" by plaintiffs. (Spielvogel v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 127 AD 2d532, 512 NYS 2d 75)

Mark Kane is an International Construction Lawyer practicing primarily in Europe, in addition to serving as an Arbitrator and Mediator in construction disputes. The views expressed in this article are his own and are in no way representative of any of his clients. www.constructionandlegal.com

Bankruptcy

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Solving the Young Lawyers' Student Loan Financial Crisis by
Reforming the Bankruptcy Code

By: Russell Hasan, Esq.

All across the United States many recently admitted lawyers feel the same way: that the job market for lawyers, weakened by the Great Recession, is not sufficient to support the student loan payments which they owe as a result of law school student loans. For example, a recent graduate who undertook approximately $75,000 to $100,000 of student loans to pay for three years of law school might owe student loan monthly payments as high as $500 to $1000 or more, potentially to be paid for ten to twenty years or more, depending upon repayment options offered by the lender. The job market for lawyers right now is terrible, nationally but also especially in the state of New York where many out-of-state lawyers choose to come to start their careers. Under these circumstances, this problem amounts to something more than a mere annoyance for a few lawyers; it is a crisis afflicting the legal profession as a whole, endangering the next generation of lawyers and threatening the stream of new entrants into the profession.

Possible solutions for this crisis are hard to come by. One possibility would be to lower the required law school curriculum from three years down to two years, which would cut tuition by one third. But the ABA members who control law school accreditation would likely meet this with resistance. Another idea, which I put forward here, is to ameliorate the situation by reforming the Bankruptcy Code. In particular, I recommend reforming section 523(a)(8), which excepts student loans from discharge, specifically, student loans made or guaranteed by the government. Normally an individual debtor's claims which arose prior to the filing of the bankruptcy petition are "discharged" upon the completion of a successful Chapter 7 or Chapter 13 bankruptcy proceeding, meaning that the debt is wiped out. But an exception to discharge means that the debt continues to exist, so bankruptcy cannot be used to provide sustainable relief from a student loan that is beyond the debtor's ability to repay. A debtor can attempt to prove "undue hardship" to escape the section 523(a)(8) provision, but in practice "undue hardship" is difficult to prove absent an illness which prevents the debtor from working, and a weak job market probably would not meet the test for undue hardship. I advocate a wholesale removal of section 523(a)(8) from the Bankruptcy Code.

It is unclear why government student loans should be excepted from discharge when private loans for non-educational purposes generally are not. If the latter is discharged, there is no obvious reason why the former should not be also. There is, perhaps, a double standard here, such that the government's zealous activity in making student loans available to all comers means that sometimes, especially in a bad job market, the government knows that it is making loans, which the debtor probably will not be able to service. The government is protected from the consequences of making bad loans that are not financially sound, whereas a private lender would be forced to bear the economic consequences of a bad loan which he should have known would not be repaid and which might drive the debtor into bankruptcy. This, it seems to me, is to some degree a hypocritical double standard.

The counterargument is that the government has an obligation to make education affordable for low-income people seeking to increase their earnings capacity via higher educational degrees, and therefore a different standard should apply. This governmental policy, however, conflicts with the principle, well learned from the study of free market economics, that if a borrower will not be able to pay back the loan with the increased earnings capacity arising from the degree obtained via the loan then the loan is not economically sound and then someone else will have to pay for it because it will not pay for itself. If the student loan would pay for itself then the for-profit market of private lenders would be financially motivated to provide it by the profit from loan interest, without any government activity. And if a loan will not pay for itself but the government wants it to exist anyway, perhaps because of positive externalities associated with higher education, then the taxpayers should pay for such loans, and the lending program should be structured in a way so that the taxpayers see that they are paying for something that does not pay for itself, rather than creating the illusion that the government can provide loans which do not pay for themselves but somehow get the borrowers to repay them rather than billing them to the taxpayers. Thus, I believe that this bankruptcy reform proposal would not only help hundreds of young lawyers who are utterly unable to service their student loans in today's decimated job market, but it would also help reform the government's policy of being too active in facilitating law school student loans, by forcing federally backed lenders to suffer from the consequences of handing out bad loans to a greater extent than they do right now. A reduction in the federal government's overactive student lending would decrease the supply of new lawyers and help the legal job market find a better equilibrium point between supply and demand for the future.

It is conceivable that some young lawyers might abuse the Bankruptcy Code's discharge in order to shirk moral responsibility for debts that they promised to repay and are under an ethical obligation to service. But, contrary to popular wisdom, I think that lawyers tend to be more ethical than most people, and this is a problem with the general concept of discharge in bankruptcy. Discharge is the price that our society has chosen to pay in order to avoid the evils of economic slavery via debt. And this reform would not only help lawyers who file for bankruptcy, but would also help young lawyers negotiate with lenders by giving them a better bargaining position. Unfortunately, because the lobbying interests of poor young lawyers is dispersed and diffused whereas the lobby interest of federally backed lenders is concentrated and powerful, it is unlikely as a practical matter that this proposed reform will be taken seriously.


Russell Hasan is a graduate of Vassar College and graduated with Honors from the University of Connecticut School of Law in 2011. He was admitted to the bar of New York in 2012. His interests include trademark law and bankruptcy law, among other practice areas. He is currently seeking an entry-level associate position and can be reached at 917-669-944 or rushasan@yahoo.com.

Trademark

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What You Need To Know About Trademark Licensing

By: Adam Walker, Esq.

Trademarks are everywhere. You see them everyday. They are source identifiers. They tell consumers where a particular product or service comes from, and denote a certain level of quality that consumers can come to expect.1 If a trademark is utilized correctly it increases the business' goodwill, which in turn increases the value of the brand. An old saying is if all the assets of the Coca-Cola Company were destroyed except the trademark registration to Coke®, the Coca-Cola Company would immediately be able to obtain a multi-billion dollar loan.

In an effort to increase brand awareness, it is common for trademark owners (the "licensor") to permit another party (the "licensee") under license to use its trademark(s) in commerce. Trademark licenses are not required to be in writing; however, indiscriminate use of a trademark by a third party may result in significant consequences, such as, diminished brand value or loss of trademark rights, including abandonment. The complexities of trademark licenses vary depending on the needs and goals of the parties involved, but the following key elements should always be addressed in any license in order to avoid potential pitfalls.

I. Licensed IP/ Scope of Rights.

It may seem obvious but clearly defining the specific trademark(s) being licensed should be step one. This will avoid confusion as to what mark is authorized to be used. Additionally, one of the most important terms is to define the scope of rights the licensee shall have. Will the license be exclusive or non-exclusive? How will the licensee use the licensed mark? What is the term of the license's length? Will there be renewal terms?

Licensors will advocate for a narrow scope of rights whereas Licensees will invariably seek for a broader definition. The licensor must ensure that the scope of rights granted does not have a chilling affect or impair the licensor's own commercial exploitation of the mark, and potential use by additional third parties, if applicable. Specifying restrictions on how the licensed mark is to be used on products and advertisements, and the geographic territories, channels of trade and markets the licensed product may be sold will minimize potential dilution of the mark and prevent overlap and cannibalization of the relevant markets the mark will be used.

II. Termination/ Post-Termination Rights.

No party intends for an adverse occurrence during the term, nonetheless, licenses should adequately address what will happen in the event of breach or termination. Differentiating between curable and non-curable breaches will allow either party to remedy minor immaterial breaches without severe penalties, while still allowing either party to immediately terminate upon gross misconduct of the other party. Also, upon termination, determine whether there will be a "sell-off" period for the licensee to dispose of inventory, or will all use of the mark cease immediately.

It is also important to ensure that certain terms survive termination or expiration, such as warranties, confidentiality, payment obligations and indemnification, in order to properly protect both parties' interests in the license. Lastly, it is impossible to forecast everything, good or bad, which may happen during the length of the license. Therefore, ensure that there is an "out clause", the ability to terminate the license without penalty, so long as sufficient notice is provided to the other party. This will allow either party, without penalty, to pursue more advantageous opportunities should they arise, or cease the business relationship if the license fails to perform as originally envisioned.

III. Compensation Provisions.

Payment schemes for licenses vary wildly depending on the scope of rights granted. Customarily, royalties are paid to the licensor based on "net sales" of licensed products sold. It is extremely important to draft a precise definition of net sales 2, or however payment obligations are to be calculated, since this definition will determine the amounts owed.

If a royalty model is selected, the parties should decide whether royalties will remain flat or escalate depending on whether certain sales thresholds are achieved, as well as if a minimum royalty shall be paid each year by the licensee. If sales are projected to increase during the life of the license, thereby increasing the value of the mark, escalation and minimum payments may be the best approach to optimize the commercial viability of the mark.

Invariably, every license structure, as well as the entities involved in them, will vary depending on the facts of the matter. In situations where enforcement of a judgment or obtaining personal jurisdiction in the event of breach, such as with foreign entities, will be difficult; requiring upfront or advance payment will increase the likelihood that the licensor will recoup some of the amounts owed to it under the license.

IV. Quality Control

Trademarks denote a certain level of quality and acts as a source identifier of the trademark owner's service or product. As a result, unequivocally, the most important term in a trademark license is the licensor's ability to exercise quality control over use of the licensed mark. Licenses lacking any quality control are considered a "naked license" 3, and can have severe consequences; such as, (i) devalue of the licensed mark as a source identifier; (ii) totally abandonment of the licensor's rights in the mark; or (iii) permitting uncontrolled use of the mark by the licensee.

Therefore, in any license the licensor should include guidelines specifying how the licensed mark is to be used, and provisions allowing the licensor the ability to review use of the mark on products, packaging, advertising materials, etc. In addition to the right to review, the licensor should also maintain the ability to require the licensee to make changes if the mark is used outside the scope of the agreement. Contractual rights are a good beginning, but words alone are likely insufficient. To satisfy the licensor's quality control obligation, the licensor must be sure to take action, regardless of how minimal it may be, in order to avoid any naked licensing claim.

V. Miscellaneous Provisions

Other key considerations to examine, in additional to the customary transactional provisions, such as warranty, indemnification, and governing law, are what currency will royalties be paid, the right to audit the licensee's accounting statements to ensure payment accuracy, and when dealing with foreign entities, requiring the licensee to appoint a domestic agent to accept service of process will alleviate any such headaches in the event a claim is brought.

As the owner of the licensed mark, all benefits of use of the mark should inure to the sole benefit of the licensor. Similarly, although a licensee may wish to have the ability to enforce the rights of the mark against alleged infringers, it is likely best that the licensor maintain such rights since enforcement of the mark by the licensee may be against the licensor's goals and potentially adversely affect the licensor's rights in the mark.

VI. Conclusion

All licenses can be tailored to the needs of the parties, and certain provisions are more applicable than others. Regardless of the complexities involved, licensors must always be mindful to properly control use of their mark.


1. See 15 USC § 1127.
2. "Net sales" is often defined as 'gross amounts received by the licensee less items such as trade discounts and returns actually credited".
3. See FreecycleSunnyvale v. The FreeCycle Network, 626 F.3d 509 (9th Cir. 2010) (holding that The Freecycle Network was estopped from asserting rights to the "Freecycle" trademark because it had abandoned its rights in the mark by failing to maintain quality control over its licensee's use of the mark).

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