11th Circuit Creates Bright-line Rule to Determine Citizenship of Dissolved Corporations in Diversity Cases

Recently, the Eleventh Circuit Court of Appeals, which controls all federal courts in the State of Florida, set out a bright-line rule for determining the citizenship of a dissolved corporation for purposes of establishing subject matter jurisdiction.  In Holston Investments, Inc. B.V.I. v. Lanlogistics, Corp., Case. Nos. 10-13442; 11-11122 (April 2012), the Eleventh Circuit was faced with determining whether the District Court had subject matter jurisdiction over a diversity case that went to judgment.

In Holston, the Defendant had sold a subsidiary company to a non-party, despite that Defendant had given a contractual right of first refusal to the Plaintiff.  Plaintiff alleged it had not been made aware of the offer to purchase the subsidiary and was deprived of its right of first refusal.  Defendant was a Delaware corporation headquartered in Miami, Florida.  After the sale, but before Plaintiff filed suit, the Defendant corporation dissolved and formally forfeited its right to conduct business in Florida.  After two years of litigation, and entry of a judgment in favor of the Plaintiff, the Defendant challenged the District Court’s subject matter jurisdiction, which had been based on diversity jurisdiction pursuant to 28 U.S.C. § 1332.

Under 28 U.S.C. § 1332, the federal courts have subject-matter jurisdiction to hear matters where the amount in controversy exceeds $75,000, and the action is between citizens of different states.  28 U.S.C. § 1332(a)(1).  Defendant argued that since (1) its principle place of business had been in Miami, Florida, and (2) Plaintiff was from Florida, there was not complete diversity of citizenship between the parties; therefore, Defendant argued, the District Court did not have subject matter jurisdiction over the matter.

The Eleventh Circuit recognized that this was an issue of first impression for this Circuit and analyzed conflicting decisions from the Second, Third, Fourth and Fifth Circuit Courts of Appeals.  Coming down on the side of the Third Circuit, and reasoning in a manner it felt was consistent with the U.S. Supreme Court’s Ruling in Hertz Corp. v. Friend, 130 S.Ct. 1181 (2010), the Eleventh Circuit established the bright-line rule that “a dissolved corporation has no principal place of business” and can only be a citizen of the state in which it had been incorporated.  Consequently, the Court held that Defendant was a citizen ofDelaware and there had been complete diversity of citizenship establishing the District Court’s subject matter jurisdiction.

By Peter E. Berlowe, Esq. is a shareholder of Assouline & Berlowe, P.A.  His practice consists of a wide array of business and intellectual property litigation.  Prior to becoming an attorney, he practiced engineering in Miami, Florida.  Mr. Berlowe can be reached at 305-567-5576 or peb@assoulineberlowe.com

ASSOULINE & BERLOWE

www.assoulineberlowe.com

Bankruptcy Judge for the Middle District of Florida Alexander L. Paskay Dies Peacefully with his Family at his side

The Honorable Alexander L. Paskay passed away early this morning, with his wife of of 62 years and their sons, Steve and Rick, at his side. Judge Paskay has played an intregral role shaping the law of bankruptcy in the State of Florida and the nation for decades. 

Judge Paskay is a law graduate of The University of Miami and has been admitted to the Florida bar since 1958.  In 1962, the United States Congress first established the Middle District of Florida, which was previously part of the Southern District of Florida.  Judge Paskay was soon appointed as the Middle District’s first full time bankruptcy referee and at that time was responsible for the Fort Myers, Orlando, and Tampa Divisions.  Judge Paskay eventually went on to become the Middle District’s first Chief Bankruptcy Judge.

The Middle District is well known as one of the nation’s busiest bankruptcy courts.  In fact, the Middle District contains an overwhelming thirty-five of Florida’s sixty-seven counties, and includes four of Florida’s most populated metropolitan areas (Fort Myers, Jacksonville, Orlando, and Tampa/St. Petersburg).

Judge Paskay will be missed by his the members of the bench and the bar in the Middle District of Florida and around the nation, together with his coleagues in the Tampa and Ft. Myers Divisions where he presided.

ASSOULINE & BERLOWE

Eric N. Assouline, Esq.

www.assoulineberlowe.com

Today, April 26th is World Intellectual Property Day 2012

The US Copyright Office Celebrates

April 26 marks World Intellectual Property Day, an international celebration of the visionary innovation and creative expression fostered by the intellectual property system. The U.S. Copyright Office is proud to join the World Intellectual Property Organization (WIPO), its Member States throughout the world, and our colleagues across the U.S. government in celebrating the significant contributions of authors and other creators to our global society.

We are fortunate to live in a culture that values the talent and dedication of writers, composers, musicians, photographers, filmmakers, artists, producers and other authors. As the Supreme Court has noted: “The immediate effect of our copyright law is to secure a fair return for an ‘author’s’ creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.” Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).

We also live in an age of great technological innovation. This not only affects the ways in which authors may disseminate creative works and consumers may enjoy them—it affects the very means by which works are created and knowledge is accessed. And it calls for a robust legal framework for the 21st century—a framework by which authors are respected, investments (both intellectual and financial) are encouraged, enforcement measures are responsive, and limitations and exceptions are meaningful.

For more information about copyright law, please visit our website at www.copyright.gov. To learn more about WIPO, visit www.wipo.int.

Maria A. Pallante
Register of Copyrights and Director
U.S. Copyright Office

ASSOULINE & BERLOWE

www.assoulineberlowe.com

 

Employers DON’T Have to Post Union Notices, Judge Rules – NY Times

By STEVEN GREENHOUSE

Published: April 13, 2012

 

A federal judge in South Carolina ruled on Friday that the National Labor Relations Board did not have the authority to order most private employers to post notices telling workers about their right to unionize under federal law.

The judge, David C. Norton of United States District Court in Charleston, rejected the labor board’s argument that its order to post such notices was necessary for the board to carry out its mission. He also rejected the board’s contention that Congress had delegated authority to the board to order the posting of such notices, which would explain the right to bargain collectively, to distribute union literature and to work together to improve wages and conditions.

Judge Norton’s decision clashes with one that a federal district court judge in Washington, D.C., issued last month, concluding that the labor board did have the authority to issue its order on posting notices.

Officials with the labor board and the United States Chamber of Commerce, the main plaintiff in the South Carolina case, said their lawyers were looking into whether Friday’s ruling would or should cause the suspension of the board’s order just in South Carolina or nationwide.

Nancy Cleeland, the labor board’s spokeswoman, said, “Our attorneys are studying the decision and deciding what our response will be.”

Randel K. Johnson, the chamber’s senior vice president for labor, immigration and employee benefits, said, “We’re quite pleased with the decision, and we hope the labor board will suspend the regulation across the country until this all gets sorted out.”

Several legal experts predicted that the South Carolina decision would be appealed to resolve the conflict between the two rulings.

The ruling on Friday came in a state where the labor board is hugely unpopular because it had sought to have Boeing move a new $750 million production line for its Dreamliner to Washington State from South Carolina.

Judge Norton noted that for the 77 years since the National Labor Relations Act was passed, the labor board “has been nearly unique among federal labor agencies in not requiring employees to post a general notice of employee rights in the workplace.” But he noted that last August, the board changed course and issued the new regulation, which business groups argued was part of the board’s pro-union tilt under President Obama.

Noting that many workers are unaware of their rights under the National Labor Relations Act, the board said the regulations were intended to make it easier for workers to exercise their rights under the act.

Judge Norton, appointed by the elder President George Bush, wrote, “The legislative history of this act supports a finding that Congress did not intend to impose a universal notice-posting requirement on employers, nor did it authorize the board to do so.”

In the Washington ruling, Judge Amy Berman Jackson, an Obama appointee, found that the board was reasonable in concluding that many workers including high school students, recent immigrants and other workers in nonunion workplaces were unaware of their right to form unions or bargain collectively.

“The notice-posting rule is a reasonable means of promoting awareness,” she wrote, upholding the regulation.

A version of this article appeared in print on April 14, 2012, on page B7 of the New York edition with the headline: Employers Don’t Have to Post Union Notices, Judge Rules.

 

ASSOULINE & BERLOWE

www.assoulineberlowe.com

Ellen M. Leibovitch, Esq.

Board Certified by the Florida Bar in Labor & Employment Law

 

Ponzi Scheme Mastermind Arthur Nadel Dead at 80

Arthur Nadel, who caused enormous financial harm to hundreds of individual investors out of his Sarasota, Florida based hedge fund, died in federal prison at the age of 80. 

Nadel bilked his investors out of millions of dollars of investments and was incarcerated in the same prison as Bernard Madoff, at his request.  

More American Workers Sue Employers for Overtime Pay – USATODAY.com

By Paul Davidson, USA TODAY

Americans were pushed to their limit in the recession and its aftermath as they worked longer hours, often for the same or less pay, after businesses laid off almost 9 million employees.

Now, many are striking back in court. Since the height of the recession in 2008, more workers across the nation have been suing employers under federal and state wage-and-hour laws. The number of lawsuits filed last year was up 32% vs. 2008, an increase that some experts partly attribute to a post-downturn austerity that pervaded the American workplace and artificially inflated U.S. productivity.

Workers’ main grievance is that they had to put in more than 40 hours a week without overtime pay through various practices:

•They were forced to work off the clock.

•Their jobs were misclassified as exempt from overtime requirements.

•Because of smartphones and other technology, work bled into their personal time.

“The recession (put) more pressure on businesses to squeeze workers and cut costs,” says Catherine Ruckelshaus, legal co-director of the National Employment Law Project. If employers had to bear the actual expense of overtime, she says, they likely would have hired more workers in the economic recovery.

In response, employers are playing defense. They’re drawing clearer lines between workers and managers, and in many cases, reining in modern office privileges, such as company-issued smartphones and telecommuting. The upshot, in many instances, could be a very different American workplace.

Courts, meanwhile, must reconcile decades-old labor laws with ever-evolving technology. The spread of BlackBerrys and iPhones has many workers tethered to employers, for better or worse, even during off hours and vacations.

The controversy has reached the Supreme Court, but in a case involving an age-old profession: sales. Monday, the justices will hear oral arguments in a class-action lawsuit against drugmaker GlaxoSmithKline. Pharmaceutical sales representatives — traditionally classified as exempt from overtime pay — say they’ve been misclassified, a stance backed by the Labor Department in another case. Glaxo says the sales force clearly is exempt under current law.

Legacy of another time

Employers say the explosion of lawsuits shows how the 1938 Fair Labor Standards Act (FLSA) — at the center of the Glaxo case — has become outmoded in an age when most employees want the flexibility to work at home or answer office e-mail while running about on their free time.

“The law has not kept pace with the contemporary workplace,” says Randy MacDonald, IBM‘s head of human resources.

Many companies have reclassified salaried executives as hourly employees — often to the consternation of the workers themselves, says Dan Yager, general counsel of the HR Policy Association, which represents human resource professionals. Such a strategy lets employers head off lawsuits by paying a lower basic wage that accounts for expected overtime.

Under the FLSA, employees are entitled to overtime unless they’re executives who manage and hire and fire employees; administrators who make key decisions; or professionals — such as lawyers and engineers — with advanced degrees, among other criteria. Also exempt are certain information technology workers and sales representatives whose hours can’t easily be tracked.

Employees must earn at least $455 a week to be exempt. While all hourly employees are entitled to overtime, salaried workers may also qualify if they don’t fall under any of the exemptions.

Last year, 7,006 wage-and-hour suits, many of them class actions, were filed in federal court, nearly quadruple the 2000 total, according to defense law firm Seyfarth Shaw. Meanwhile, in fiscal 2011, the Labor Department recovered $225 million in back wages for employees, up 28% from fiscal 2010.

Labor has added 300 wage-and-hour investigators the past two years, increasing its staff by 40% to 1,050. The department “has stepped up its efforts to protect workers,” particularly “in high-risk industries that employ low-wage and vulnerable workers,” such as hotels and restaurants, says Nancy Leppink, deputy administrator of the wage-and-hour division.

Several attorneys for plaintiff workers say employers wrung more output from fewer employees during recoveries following the 2001 and 2007-09 recessions. Both upturns initially yielded sluggish job growth.

“A lot of companies make a business decision to say, ‘We can cut corners on this, and we won’t get sued,’ ” says plaintiffs’ attorney David Schlesinger of Nichols Kaster in Minneapolis.

U.S. productivity, or output per labor hour, rose 2.3% in 2009 and 4% in 2010 — a period that includes the recession’s final months and its aftermath — vs. increases of 0.6% to 1.6% the previous four years. Some economists say the gains are overstated because many overtime hours were not properly counted, as employees worked off the clock.

Richard Alfred, chairman of Seyfarth Shaw’s wage-and-hour practice, has a different view. He agrees that the recession helped drive the growth in lawsuits, but he says that’s because many laid-off workers became lead plaintiffs in class-action suits to reap financial windfalls after they couldn’t find new jobs.

The biggest reason for the lawsuit surge, he says, is that lucrative settlements a decade ago prompted labor lawyers to file copycat complaints, and the suits are far simpler and less costly to pursue than discrimination cases.

With class-action cases exposing companies to multimillion-dollar judgments, “the liability becomes so substantial that a vast majority of these cases settle,” says Garry Mathiason, vice chairman of Littler Mendelson, which defends companies in such lawsuits.

Case in point: In November, Oracle agreed to pay $35 million to settle claims by 1,666 software testers, technical analysts and project managers that they were denied overtime because they were misclassified as administrators or professionals. The company did not admit wrongdoing.

The vice of technology

The newest variety of plaintiff is a worker with a handheld device. Jeffrey Allen, a sergeant in the organized crime unit of the Chicago Police Department, says he got a near-constant barrage of e-mails, text messages and calls on his department-issued BlackBerry until around 10 p.m. every weeknight. Each required a response lasting from a minute to an hour or two, he says.

While dining with his family, mowing the lawn or watching his son play soccer, Allen often had to step away to coordinate search warrants and compile reports on seized assets, among other tasks. Two years ago, he filed a class-action suit against the city on behalf of himself and other hourly paid police officials. Allen says they’re owed back overtime pay from 2007 to 2010. The case is pending.

“You feel like you don’t really get a break from your job,” says Allen, 47, who still works for the department, but in a different role.

Roderick Drew, a spokesman for the city’s law department, says it’s policy to let police officials request overtime. In a legal filing, the city argued that Allen failed to show that his communications were more than an insignificant amount. Some courts have said that applies to anything less than 10 or 15 minutes.

Other wage-and-hour cases seek compensation for off-the-clock work in the office. In a class-action complaint filed in February against Verizon Wireless, customer service representative Heather Jennings says she had to be at a Mankato, Minn., call center 10 to 15 minutes before her shift officially started. Jennings says workers such as herself had to log into their computers and open databases so they were ready to take calls.

“I thought it was unfair,” says Jennings, 31, who was laid off by Verizon last May.

Verizon spokesman Tom Pica says the company “compensates its employees fairly and fully.” In a legal filing, Verizon said that Jennings’ pre-shift activities were minimal and that she failed to take advantage of complaint procedures at the time.

Other lawsuits allege that employers gave workers fancy titles to avoid paying overtime.

Richard DeLeon is among more than 750 current and former assistant store managers of Big Lots in Florida suing the discount department store chain. DeLeon, 57, says he spent his workday running cash registers, unloading trucks and tidying the Cutler Ridge, Fla., store.

He says managerial functions — such as assigning tasks to employees — took up 10% to 15% of his time, but he couldn’t hire, fire or discipline workers. DeLeon says he typically worked about 60 hours a week and earned $43,000 a year. His workload increased, he says, when managers had to run stores with fewer employees in 2009.

“This is really a game plan by the company to keep labor costs down,” says DeLeon’s lawyer, Mitchell Feldman of Feldman Fox & Morgado.

Big Lots did not return messages seeking comment. In court papers, the company said the “primary duty” of the lawsuit’s lead plaintiff, Angela Schenburn, was assistant manager, but “at times” she may have done lower-level tasks “concurrently.”

Even office workers who sometimes earn $100,000 a year, such as securities brokers and financial advisers, are demanding overtime pay, arguing they’re just salespeople rather than key decision-makers.

In a class-action case, Scott Finger, 46, a former MetLife mortgage loan officer, says he had to work about 65 hours a week at the firm’s Melville, N.Y., office to meet sales targets while earning about $5,700 a month in commissions. While he recommended whether to approve loans, he says, underwriters made the final decisions.

MetLife spokesman Ted Mitchell would not comment on pending litigation. The company has asked a judge to dismiss the case, saying it duplicates a previously filed suit.

A changing workplace

Companies say the lawsuits have forced them to grant workers less flexibility.

Several years ago, IBM voluntarily reclassified 7,000 salaried technical and support workers earning an average $77,000 a year to hourly employees after it settled a class-action labor suit for $65 million. The company cut their base salaries 15% to account for potential overtime, says IBM’s MacDonald.

IBM’s Shar Anderson oversaw 20 workers in a customer service group. “It made me feel less valuable to the company,” says Anderson, 55, who has a bachelor’s degree in computer science and several professional certifications. Anderson, who’s now in a similar but higher-level salaried position, says she “wasn’t able to do my job” because she sometimes had to hand off emergency responses to colleagues after 5 p.m.

In a survey by the HR Policy Association last year, a third of the 155 large member firms that responded said they’ve restricted telecommuting as a result of the lawsuits, and 56% said they’ve curbed the use of communications devices outside the office.

Johnna Torsone, head of human resources for mailing systems maker Pitney Bowes, says the firm would like to give about 30 overtime-eligible sales support staffers the ability to work from home but has held back while searching for a way to track their time.

“You just don’t take the risk,” she says.

This article was published in USATODAY.com:

More American workers sue employers for overtime pay – USATODAY.com.

ASSOULINE & BERLOWE

The BUSINESS LAW Firm

Miami – Ft. Lauderdale – Boca Raton

International Arbitration – Santander Bank Succeeds in Sending Madoff-Related Claims to Arbitration

As printed on April 13, 2012 in the Daily Business Review, by L Andrew S. Riccio, Associate, and Daniel E. Vielleville, Partner, Assouline & Berlowe, P.A. (www.assoulineberlowe.com)

In the wake of the fall of the Madoff Securities Ponzi scheme, where multitudes lost millions from badly placed investments, litigation has been rampant. While many investors have sought remuneration from their bankers or investment advisors for making these bad calls, not all make it to court. In one such truly international instance, shareholders of personal investment holding corporations sued Banco Santander for placing their money with a Madoff Securities-managed fund. The case, Solymar Investments, Ltd v. Santander, 11^thCir. Ct of Appeals, No. 11-12515, decided February 28, 2012, involved Panamanian shareholders of personal investment holding corporations organized under the laws of theCayman Islands who invested an undisclosed sum of money with Banco Santander, the giant Spanish bank.

The case, however, never made it to the merits arguments, as the U.S. District Court for the Southern District of Florida and the U.S. Court of Appeals for the Eleventh Circuit decided that the case was subject to arbitration and could not be tried before a judge. Santanderhad invested some of Solymar et al.’s money in a fund called Optimal Strategic. This fund happened to be managed by Madoff Securities and thus suffered the well-documented substantial losses incurred by Madoff’s Ponzi scheme. After the loss, and presumably in order to maintain the business relationship, many of Santander’s customers and the bank entered into exchange agreements, exchanging the suspended Madoff-invested accounts for preferred securities with Santander. Among these customers were Solymar et al., who agreed to execute the exchange memorandum as part of a multi-part, comprehensive settlement which included the issuance of additional promissory notes in Solymar’s favor. Pursuant to the exchange agreement, Solymar agreed to (i) releaseSantanderof any liability arising from the Madoff-related investments, and (ii) arbitrate any issues arising from the agreement inGeneva,Switzerlandin accordance with the Rules of Arbitration of the International Chamber of Commerce, and to submit to the jurisdiction of  theGenevacourts for enforcement of the arbitration agreement.

Subsequent to the execution of the exchange agreement, Solymar and Santander could not agree on the promissory notes that were supposed to complement the exchange agreements.  Despite the arbitration and forum selection clauses, Solymar filed a 149-page complaint against Santanderalleging that the parties had never entered into a valid contract. As a result of these clauses, the parties argued whether the district court had the authority to hear the case. Santanderwon on its motion to dismiss based on both the arbitration clause and the forum selection clause, and Solymar appealed. On appeal, the U.S.Court of Appeals was presented with the question of whether the exchange agreement itself was legally binding on the parties. From Solymar’s perspective, it was the district court’s role, rather than an arbitrator’s, to decide whether the exchange agreement was but one part of a comprehensive agreement between the parties. Simply put, the court was left to determine “who shall decide what.”

Following the relatively recent Supreme Court decision Granite Rock Co. v. International Brotherhood of Teamsters, 130 S. Ct. 2847 (2010), the U.S Court of Appeals for the Eleventh Circuit ultimately dismissed the case in favor of arbitration. Of course, the decision was not without a full analysis of the relevant case law, as this is a relatively new issue for the court. Distilled to the opinion’s most basic form, the court determined that there is a two-step process required in considering the arbitrability of any contract with an arbitration clause.

First, it is up to the court to determine any challenges to the formation of the contract containing the arbitration clause. Whether a contract is validly formed or created depends upon state law. In this case, the plain language of the exchange agreement exhibited a valid contract underFloridalaw; thus, any issue arising therefrom is properly determined by an arbitrator, not a court. The second step in the process is whether the challenge goes to the formation of the arbitration clause specifically or to the contract in which the arbitration clause is found. Because Solymar did not allege in its complaint that there was an issue of formation specific to the arbitration clause, the court did not give this issue much attention. However, for the international lawyer or businessman, it should be noted that the court maintained this distinction. Following the Supreme Court’s landmark decision in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), the Eleventh Circuit refused to “invade the province of the arbitrator” and rule on “broad challenges to general contracts containing arbitration clauses.”

This case represents a continuing trend inU.S.federal courts to follow the Federal Arbitration Act and enforce arbitration agreements when they appear valid on their face. Accordingly, the decision to accept an arbitration clause contained in a contract must not be taken lightly as it is very likely the agreement to arbitrate will be enforced and the dispute referred to arbitration, even when there are allegations that there was never a contract. Secondly, this case involves two quite sophisticated parties, international investment funds and one of the world’s largest banking institutions, in an argument over the world’s most infamous fraudulent investing scheme. Needless to say, it is a big deal.

Lesson: Read your contracts carefully. If you believe your contract is merely a piece of a larger agreement, make sure it says that clearly, before signing. One of Solymar’s underlying contentions was that the exchange agreement did not cover their entire settlement agreement and thus the arbitration clause was not applicable to all of their claims. However, the integration clause, stating that all relevant terms between the parties are contained in that document, was prominent in their exchange agreement. Besides a properly drafted contract, the inclusion of the integration clause helped the court dismiss the case in favor of arbitration because it was clearly apparent that the parties intended to arbitrate these claims.

L. Andrew S. Riccio, Esq. can be reached at asr@assoulineberlowe.com

and Daniel E. Vielleville, Esq. can be reached at dev@assoulineberlowe.com

Or by telephone at ASSOULINE & BERLOWE’s Miami Office: 305-567-5576.

www.assoulineberlowe.com