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In the News || Legal News
SEC Proposes to Ease Restrictions on Resales of Restricted Securities and Private Placements
As part of a series of measures aimed at improving capital-raising by smaller companies, the Securities and Exchange Commission has recently proposed rule changes that will make it easier for investors to resell restricted securities into the public market and for public companies to sell their securities in private placements.
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New Worrisome
Development in Lease Payment Guarantee
Many Landlords rely on lease payment guarantees from the individual
principals of a tenant entity that is leasing space. A recent case
decided by the New York Appellate Division, First Department in
Manhattan raises problems for landlords who rely on such guarantees.
Madison Avenue Leasehold, LLC vs. Madison Bentley Associates
LLC, ___ A.D.2d ___, 811 N.Y.S. 2d 47 (1st Dep’t March
14, 2006) (“Madison/Bentley”).
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U.S. Supreme
Court Makes Avoiding Arbitration More Difficult
Earlier this year, the United States Supreme Court issued an important
decision that will affect arbitrations in New York and throughout
the United States. In Buckeye Check Cashing, Inc. v Cardegna, __
U.S.__, 126 S. Ct. 1204 (February 21, 2006), the Supreme Court held
that, under the Federal Arbitration Act, 9 U.S.C §1 et seq.,
the question of whether a contract that contains an arbitration
provision is void is to be determined by the arbitrator, and not
by a court, unless the challenge is to the validity of the arbitration
provision itself. That means that a party will not be able to avoid
arbitration by asserting that an arbitration clause is contained
in an agreement that is void, unless the party can establish that
the arbitration clause itself is unenforceable. Under the Supreme
Court’s decision, the court should enforce the agreement to
arbitrate and refer the question of the legality of the overall
contract to the arbitrator.
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Second Circuit
Clarifies Short-Swing Profit Rules as Applied To Options
Under § 16(b) of the Securities
Exchange Act of 1934, directors, officers and 10% shareholders of
public companies who, within six months, purchase and sell (or sell
and purchase) securities of their company can be compelled to disgorge
their profits on the transaction. In the words of § 16(b),
this provision has “the purpose of preventing the unfair use
of information which may have been obtained by such beneficial owner,
director, or officer by reason of his relationship to the issuer.”
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Recovery
Of Attorneys’ Fees in Landlord-Tenant Disputes
As a general rule in New York, a party to a litigation is not entitled
to recover its attorneys’ fees unless the dispute involves
a contract that provides for such recovery or an award of attorneys’
fees is authorized by statute. In the commercial landlord-tenant
context, disputes concerning the right to recover attorneys’
fees are not uncommon, because many such leases contain an attorney
fee provision. This article sets forth the circumstances in which
such fees can be recovered as well as the procedures for doing so.
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Basic Tax
Considerations in Choosing An Entity for a New Business
Every time an individual or entity establishes a new business or
expands a business into a new location, one of the first decisions
to be made is choosing the type of legal entity for the new business
or location. The types of entities most often used are corporations,
limited liability companies, corporations and limited partnerships.
This article will briefly describe them and their basic advantages
and disadvantages. The main considerations are minimizing taxes
and minimizing the owners’ liability.
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Recent Developments
in Estate Planning
"Transfer On Death" Securities Accounts; Attorney-Fiduciary Disclosure;
Termination of an Uneconomically Small Trust.
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Selling
Your Closely Held Business: What You Need to Do Before the Purchase
Agreement Arrives
If you’ve ever thought of selling your closely held business,
you’ve probably focused your attention on the terms that would
be included in the purchase agreement, particularly the purchase
price. In addition to how much you would receive, you may have thought
about how it would be paid -- whether the purchase price would be
paid in cash at the closing, or partially in cash with the remainder
paid over time, or partially in cash and partially in stock of another
company. You may have thought about whether you would sell for a
specified, fixed amount, or whether there might be some additional
“earnout” or “upside” based on the Company’s
future performance. If you’ve been involved in a prior sale
of a business or know people who have, you may even have given some
thought to the other provisions of the purchase agreement, such
as representations and warranties, and indemnification. But if you
are seriously considering selling your closely held business and
you’ve been thinking only about the purchase agreement, then
you are getting way ahead of yourself.
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Protecting
a Security Deposit Against the Risk of a Commercial Tenant's Bankruptcy
For quite some time we have been recommending to real estate
owners, landlords or sublandlords that when they take a security
deposit, it should be in the form of a letter of credit rather than
cash. We gave this advice because, in our judgment, a letter of
credit protects the landlord better than cash if the tenant files
for bankruptcy. A recent decision by the Ninth Circuit Bankruptcy
Appellate Panel, Redbank Networks, Inc vs. Mayan Networks Corporation
(In Re Mayan Networks Corporation) 42 BCD 196 (9th Civ. BAP
2004) (hereinafter the “Mayan Case”) has confirmed that our advice
was correct, but also highlights some additional precautions the
landlord should take in the letter of credit transaction.
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APPELLATE
COURT REAFFIRMS APPLICATION OF SPECIAL RULE GOVERNING THE MEASURE
OF DAMAGES IN CONTRACT CASES
A case our firm recently won in the New York Appellate Division,
First Department, established that despite apparently contrary language
in the Uniform Commercial Code (“UCC”), a plaintiff who sues for
breach of contract for sale of goods cannot recover more than his
actual damage from the breach.
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