Be Careful What You Wish For - You Might Just Get It

The New Jersey Appellate Court has upheld New Jersey’s Government Records Council determination that a freelance journalist must pay $1,877.93 in charges in connection for documents that he sought under New Jersey’s Open Public Records Act (OPRA), N.J.S.A. 47:1A-1, et seq. in Janon Fisher vs. Division of Law, Superior Court of New Jersey, Appellate Division, No. A-2288-06T3, A-2448-06T3.

Janon Fisher had submitted a wide-ranging request under the OPRA to New Jersey’s Division of Law, Department of Law and Public Safety.  The records custodian responded that several attorneys spent 52.5 hours searching for information that was responsive to Fisher’s request and submitted a invoice of $1,877.93 for the work, based on the salaries of the attorneys involved.  Fisher refused to pay the invoice and filed a complaint with the Government Records Council.

The Records Council required the Law Division to justify the charges, which it did by submitting records showing that the lowest paid attorney who reviewed the records had an effective hourly rate of $35.77. As part of its certification that the charges were justified, the Law Division stated that more than 15,000 emails and files were reviewed over a 2 year period.

Under the OPRA, an agency can charge for the actual costs of copying government records. N.J.S.A. 47:1A-5(b).  In addition, the OPRA permits an agency to levy a “special service charge” if searching for the requested records requires a “extraordinary expenditure of time and effort.”  N.J.S.A. 47:1A-5(c).

The moral of the story is, don’t request records unless you have the ability to pay for them.  This is also true when issuing document subpoenas, as many banks and other institutions will charge upwards of $1.00/page for “copying” costs and upwards of $50.00/hour for “research” costs.  What I’ve found helpful when issuing document subpoenas is to ask that if any charges might be incurred, that the custodian contact us before incurring any charges, so that I can see if our client wants to spend the money.

Pennsylvania Bill Seeks To Curb Misclassification Of Employees

Pennsylvania Rep. Bryan R. Lentz (D-Delaware) introduced House Bill 2400, which, if passed, would establish the presumption that all Pennsylvania workers are employees. Pennsylvania employers would bear the burden of proof if they seek to classify workers as independent contractors.

The potential impact on businesses, especially small businesses, is significant. Currently, if an employer classifies a worker as an independent contractor, the employer does not have to pay state or federal taxes, unemployment contributions, and workers' compensation premiums. Some employers misclassify workers to avoid these financial obligations, however, some workers are legitimate independent contractors.

House Bill 2400, which is expected to move to the House floor for a vote before summer recess, would require an employer seeking to classify a worker as an independent contractor to show the following: (1) the individual has been and will continue to be free from direction and control of the employer, both under contract of service and in fact; (2) the service is outside the usual course of the individual's business of the employer; and (3) the individual is customarily engaged in independently established trade, occupation, profession or business.

Violations under House Bill 2400 could result in prosecution and, if convicted, varying fines and possible imprisonment, depending on whether the violation was intentional. Violators could also be punished civilly, including administrative penalties and suspension of public contracts for up to three years. Under House Bill 2400, an individual could bring a civil action against his/her employer to recover any damages resulting from misclassification, including attorney's fees and costs.

In 2006, New Jersey began placing a similar burden on employers. Subsequent audits found 25,000 misclassified employees, which represented more than half a billion dollars in wages.

Since House Bill 2400 is expected to pass, Pennsylvania employers should begin reassessing all independent contractor relationships, especially when the individual works full time and/or exclusively for the employer.

Reducing Your Company's Outstanding Account Receivables

This post will be made by Wisniewski & Mensing, LLP's CFO, P. Bear:

Yes, I am cute, cuddly, and have fluffy ears.  But don't let that distract you from the advice I am about to impart to you.

Businesses, large and small, struggle with their account receivables.  Here are some ideas that are easy to implement to improve your cash-flow and reduce delinquent accounts:

(1) Try to get a deposit from your client at the time the contract is signed.  Ideally, you should obtain a 50% deposit.

(2) If your customer is a company, have the owner of the company sign the contract in their individual name, in addition to signing in the name of the corporation.  This can head-off problems down the road if the company runs into trouble, as you can then look to the individual for payment.

(3) In your contract, have the terms for payment no more than 30 days.  Better yet, have the contract state that payment is due upon receipt of any invoice.  If payment has not been received once it is due, call or send your customer a polite follow-up message.  The longer an invoice remains past-due, the risk of delinquency rises.

(4) In your contract, make sure to have it say that you will charge interest for any invoice that is past-due.  Usually, interest begins to accrue once an invoice is more than 30 days past-due.  Typical interest rates are 18% compounded annually.^*

(5) In your contract, have it say that the customer will be responsible for any costs or attorney fees that you might incur with any past-due invoice.^*

(6) If you frequently deal with clients who are located in another state (or in your state but some distance from you), you can add language to your contract which fixes the location for any disputes that might arise.  For example, if you are based in Philadelphia, PA, you can say that all disputes concerning the contract must be brought before any state or federal court situated in Philadelphia County, PA.^*

(7) You might want to incentivize your customers to pay on time, by offering a discount of a few percent if they pay on time.

(8) If possible, establish the credit bona fides of your new clients.  Have your customer fill out a credit application, where you ask them for their name, address, bank references, business references, etc.  You can also run a credit report.  For a business client, Dun & Bradstreet offer them.  For individuals, credit reports can be obtained from  Experian, Equifax, or TransUnion.  Be aware that information (or the lack thereof) might not be in every provider's report.  Also, when dealing with individual credit reports, you must insure that you comply with the Fair Credit Reporting Act.  Before pulling an individual's credit report, it is recommended that you get the person's written permission.

(9) If you have a lot of repeat business, every couple of months or so, have your accountant create a report listing all of the business' clients from the past 6 months.  You want to know how much you have billed each client during that time period and how prompt they were in paying their bills.  For the clients that have been consistently late with their payments, it might be a good idea to either cut the client off in the future,  insist on a larger deposit, or come up with other ways to insure payment, such as having them authorize you to bill their credit card.

*It is advisable to work with an attorney when modifying (or creating) your business' contract, to make sure that it the terms are clear and that it is enforceable.

Rob Lowe's Lawsuits - Legitimate or Attempt to Stifle Speech?

Rob Lowe recently filed law suits in California against two of his former employees, claiming that they violated a confidentiality agreement that the employees allegedly signed before working for Lowe.  Among the laundry list of counts, Lowe claims that the former employees breached the confidentiality agreement and defamed Lowe.  The law suits are available here and here.

What is interesting about this whole thing is that prior to filing the law suits, Lowe blogged about it in a post on the Huffington Post.  In his post, Lowe claims that one of his former employees had blackmailed Lowe, wanting, “$1.5 million by the end of the week or she will accuse us both of a vicious laundry list of false terribles”.  Minutes after the law suits were filed, Lowe’s attorney faxed a copy of the lawsuits to TMZ.com, who promptly posted them.  Upon hearing of the alleged blackmail attempt, the Santa Barbara County Sheriff contacted Lowe to offer to help.  Lowe is quoted as telling the Sheriff’s Office, “Your involvement isn't necessary. We're going to handle the matter civilly.”

To me, this whole thing smacks of nothing more than a public relations ploy by Lowe and his handlers to get in front of potentially damaging revelations by former employees.  In reading both of the law suits, it seems that they were written more as press releases, rather than legitimate complaints.  If Lowe really was being blackmailed (which is a crime), why would he turn away police involvement?

 Even more ominous for Lowe (and his attorney), is that it does not seem that either complaint would survive a motion to dismiss based on failure to state a claim.  Not only does either complaint attach a copy of the alleged confidentiality agreement, but the alleged agreements are not described in any sort of detail.  Also, the complaints do not meet the pleading requirements in order to state a claim for defamation, breach of duty of loyalty, breach of fiduciary duty, intentional infliction of emotional distress, negligent infliction of emotional distress, intentional misrepresentation, negligent misrepresentation, trespass or abuse of process.  For example, the complaints just say defendant defamed Lowe, without stating what the defamatory statement was, how it was defamatory or where the defamation occurred – all elements which are required to state a claim for defamation.  Not to mention that as a public figure, Lowe has to meet a heightened pleading requirement to show defamation and must show that the allegedly defamatory statements were made with actual malice (knowledge or reckless disregard for the truth) under the US Supreme Court’s decision in New York Times vs. Sullivan, 376 U.S. 254 (1964).

Putting all of the above aside for a minute, it could be that Lowe’s law suits are what are known as Strategic Lawsuit Against Public Participation (“SLAPP”) suits, which is a law suit that attempts to stifle comment in connection with a public issue.  As Lowe is a public figure, it could be argued that any public comments about his life are a public issue.  Several states, including California (Cal. Civ. Pro. §425.16), have enacted laws to combat SLAPP suits.  If the Court determines that a law suit is a SLAPP suit, the Court can sanction the filer of the SLAPP suit and award attorney fees and costs.

Could it be that there was no blackmail and Lowe is just using his law suits as a way to hush up former employees who might say some unflattering things about Lowe (and drum up some publicity for himself)?  It will be interesting to see how this plays out.

Consumer Debts - Myths and Facts

I've spent some time reviewing the questions (and posted answers) over on Yahoo's Answer section relating to questions about personal credit issues.  It amazes me the number of misconceptions and outright falsehoods that people continue to spread about consumer debt issues.  In no particular order:

Myth: Collection Agencies can do whatever they want and there is nothing I can do to stop them or prevent them from harassing me.

Fact: Collection Agencies and all 3rd Party Debt Collectors (including attorneys attempting to collect consumer debts) are governed by the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et seq.  The FDCPA strictly regulates how a debt collector can interact with a consumer and what the debt collector can and cannot do.  Violations of the FDCPA can result in the awarding of statutory damages plus attorney fees and costs.  Wikipedia has a good overview of the FDCPA.

Also, many states, such as California and Pennsylvania, have consumer protection statutes the regulate how consumer debts can be collected.  Sadly, New Jersey has no such statute.

Myth: Credit card companies and other creditors must comply with the FDCPA.

Fact: The FDCPA only governs 3rd party debt collectors, not original creditors.  A credit card company attempting to collect its own debt is not covered by the FDCPA.  But the minute the account is turned over to a collection agency or attorney, the FDCPA applies to those 3rd party debt collectors.

Myth: Credit card companies and other creditors can run roughshod over consumers.

Fact: While the FDCPA does not apply to original creditors, there are some states, such as California and Pennsylvania (via the Fair Credit Uniformity Extension Act, 73 P.S. §2270.1 et seq.) which have consumer protection laws that generally mirror the FDCPA but expand the scope so that they apply to original creditors attempting to collect their own debt.  Sadly, New Jersey has no such statute.

Myth: A collection agency can garnish my wages if I don't pay them.

Fact: Some collection agencies like to threaten that they will garnish wages in order to get people to pay them.  Such threats are prohibited under the FDCPA.  Also, not all states permit wage garnishments.   Pennsylvania is one of them.  And, even if you live in a state that permits wage garnishment, it is only permitted if the plaintiff wins the lawsuit and there is a court-ordered judgment entered against the defendant.

Myth: I don't have any money / assets, so I have nothing to worry about if a collection agency contacts me / I am sued for unpaid bills.

Fact: This belief is based on a person's belief that they are "judgment proof", i.e. that since they have no assets / money, that there would be no money for a plaintiff to go after if they win a lawsuit.  However, one must consider the effect of having an account placed in default on their credit report, which can reduce the ability of the person to obtain credit in the future.  Also, the person might not be as "judgment proof" as they think, as a determined plaintiff who prevails in their lawsuit has many tools at their disposal to discover assets of the defendant in order to execute upon.

Myth: I can be sued at any time for a past-due account, even one that is many years old.

Fact: Each state has laws (called the Statute of Limitations) governing the maximum time that a person can file a law suit concerning a matter.  After this time has passed, a law suit can not be filed.  In New Jersey, the SOL for written contracts (such as credit card debt) is 6 years.  In Pennsylvania, the SOL for written contracts is 4 years.  The SOL begins to run when the debt became due (i.e. the contract was breached or account went into default) or the last payment was made.  Be aware that the SOL can be re-set if a payment is made or the debt is re-validated (i.e., the debtor reaffirms the debt).

Myth: I can be arrested and send to jail if I do not pay my debts.

Fact: Debtor prisons haven't been legal in the US for over 150 years.  You can not be arrested or sent to jail for not paying your debts.  The only way you can be sent to jail in a civil matter is if you ignore a court order, are held in contempt of court and the court orders your arrest until you comply with the court's order.

As always, it is best to seek the advice of an attorney who is licensed in your state and familiar with consumer collection (also called consumer litigation) issues.  You can usually get an attorney  referral from your local county bar association and you might be eligible for free legal assistance from your local county Legal Aid office.