Business Transactions Archives - Castaybert Law, NYC

New York offers a great number of arbitrators and advocates with extensive experience in complex commercial matters in both domestic and international settings.
New York attorneys are familiar with cross-cultural perspectives and industry practices and customs.
Many attorneys, such as André Castaybert of Castaybert PLLC, are bilingual or multilingual. (Mr. Castaybert is fluent in French.)
Most influential ADR institutions, such as the International Court of Arbitration, the International Centre for Dispute Resolution, and the CPR International Institute for Conflict Prevention and Resolution, are located in New York.

To learn more about international arbitrations in New York, check out the NYIAC website here.

To learn more about Castaybert PLLC’s arbitration practice, click here.

New York offers a well-established body of law providing a reliable platform for adjudicating and resolving disputes.
In New York, the arbitrators have authority to determine whether there is arbitral jurisdiction, so long as parties showed an intention to resolve matters in arbitration.
New York arbitrators have authority to decide on defenses to arbitrability without court interference.
Arbitrations in New York are not subject to United States discovery practices, which may be burdensome and time-consuming.
The New York State Bar Association (NYSBA) has adopted a policy to conduct international arbitrations in accordance with internationally accepted practices.
New York offers many experienced arbitrators of diverse backgrounds, minimizing potential conflicts of interest.
New York has state and US federal statutory and common law that favor arbitration as a matter of public policy, eliminating hurdles in enforcing arbitration agreements.

To learn more about international arbitrations in New York, check out the NYIAC website here.

To learn more about Castaybert PLLC’s arbitration practice, click here.

A HIGHLY REGARDED BODY OF CONTRACT LAW

New York offers a well-established body of law providing a reliable platform for commercial transactions and adjudicating business disputes.
The parties have few limits on structuring their contractual relationships and allocating risks.
There is a strong public policy in favor of arbitration, favored by both federal and state courts, eliminating hurdles in enforcing arbitration agreements.
Commercial parties may agree to waive certain procedural laws and practices such as a right to a jury trial.
New York law has an established principle of a duty of good faith and fair dealing in contractual relationships. The parties’ expectation is an element considered by the courts in making a decision.

EXPERIENCED COURTS AND ARBITRATORS

New York Judges and arbitrators frequently decide cross-border disputes and have gained broad experience applying New York law in different commercial contexts. The New York State’s Commercial Division and arbitrators are well equipped to handle international and domestic commercial cases.
New York also has a wide selection of attorneys and law firms that specialize in resolving commercial disputes that are familiar with cross-cultural perspectives and industry practices and customs.

INTERNATIONAL AND INTERSTATE DISPUTES

The United States is a party to major international treaties and free trade agreements. New York courts apply widely accepted international arbitration standards in cross-border arbitrations.
New York’s courts permit consideration of international customs and practices in cross-border disputes, and legislations tend to implement international trade customs.
New York’s public policy and judicial decisions articulate and establish commercial principles and specialized jurisprudence in fields such as banking and finance, cross-border transactions, and long-term exclusive dealings contracts.
Foreign corporations have few limits on commencing legal proceedings in New York’s courts, so long as the forum is not considered to be inconvenient for the parties. In cases where the parties have agreed to the application of New York law and where the amount in controversy meets the threshold, New York will provide a forum to the foreign party.

REALIABLE AND PROMPT ENFORCEMENT

In accordance with various international conventions to which the United States is a party, commercial arbitral awards issued in any of the countries that ratified the agreement may be enforced in the United States. New York courts enforce foreign arbitral awards under conventions that bind the United States as a party.
New York has enacted laws such as a version of the Uniform Foreign Country Money-Judgments Recognition Act requiring New York courts to recognize and enforce monetary judgments of foreign courts with certain exceptions, thereby facilitating the enforcement of foreign judgments.
New York arbitral awards and court judgments granting declaratory, injunctive, or compensatory relief are widely enforceable outside the United States.

DAMAGES AND REMEDIES

Parties may provide for allocation of attorneys’ fees in connection with the litigation or arbitration of contractual disputes.
Court-ordered provisional remedies such as attachment, preliminary injunction, and receivership are available when warranted. New York law provides for attachment and injunction in domestic and international arbitrations.
New York courts generally uphold contractual provisions limiting damages or excluding indirect damages.

PROTECTION OF COMMERCIAL INTERESTS

New York law protects security interests by upholding security agreements against collateral purchasers and creditors.
New York recognizes and protects third-party beneficiary rights by allowing third-party claims under specified circumstances.

To learn more about how CASTAYBERT PLLC can assist you in arbitrations, click here.

May 17, 2022

The April 14^th decision by the Delaware Court of Chancery sheds new light on the consequences for non-compliance with confidentiality provisions in employment contracts, mainly that there are few if any at all. The case, AlixPartners v. Mori, C.A. No. 2019-0392-KSJM (Del. Ch. April 14, 2022)., involves termination of the employment relationship and the subsequent measures the defendant took to copy thousands of documents belonging to the plaintiff onto his personal devices. The defendant, who lives and worked out of the plaintiff’s Milan office, was entitled to use the documents related to his lawsuit against the former employer, according to Italian Law, deemed applicable after a prior decision involving jurisdictional issues.

Central to the Italian court’s reasoning was Section 178(1) of the Restatement (Second) of Contracts, that a term of agreement is unenforceable in instances where the term conflicts with public policy. Italian law provided because Mori’s employment litigation required use of the AlixPartners documents to move forward, the conflicting confidentiality clause ultimately failed the public policy requirement.

The court found no violation of the contract’s non-solicitation clause and determined Italian law governed issues of trade secrets, which were also unviolated. Permanent injunction and damages were denied except for a nominal $7 compared to the defendant’s $2 million award in connection with his employment claims against the plaintiff. While the court warned its precedent-setting reasoning should be limited to the facts in this case, this will be an important case for corporate and commercial litigators to keep on hand for its persuasive analysis of noncompliance in the handling of confidential documents.

To read the full article from the Delaware Business Court Insider, click here.

To read how Castaybert PLLC can assist you with employment matters, click here.

Generally copyrights are only issued to the author of the original work. The Work Made for Hire doctrine is an exception to this rule where an employer is the owner of the work and the copyright, but this is contingent on whether the creator is an independent contractor or employee.

When an employer hires an independent contractor to produce an artistic work, the copyright remains with the independent contractor unless he or she agrees to license or transfer those rights. The Work Made for Hire exception as applied to independent contractors, on the other hand, specifically requires (1) for both parties to sign a written agreement; (2) the agreement must specifically state that the work is a Work Made for Hire; and (3) the artistic work must fall under one or more 9 specific types of work.

These types are:

• Contribution to a collective work,

• Part of a motion picture or other audiovisual work,

• A translation,

• A supplementary work,

• A compilation,

• An instructional text,

• A test,

• Answer material for a test, or

• An atlas.

Thus if an employer, instead of the independent contractor, provides an agreement that includes appropriate Work Made for Hire language, then it is imperative that the work itself still fits into one of the nine enumerated categories.

The Work Made for Hire exception as applied to employees requires that the work is created within the scope of their employment; either created on the job or at the direction of their employer. While this seems to be more straightforward, there are of course gray areas – specifically, what is an employee? The Supreme Court has ruled that employment status is determined by weighing a number of factors examining how much control the employer has over a person’s work. In the case of freelancers, especially those with long-term contracts, it is best to clarify these things at the outset to avoid hiccups down the line.

For more information on how Castaybert PLLC can help you in securing, defending, or enforcing Works Made Hire Agreements with freelancers, please click here.

https://fashionista.com/2018/06/how-to-fund-finance-fashion-business?utm_source=Fashionista%20Newsletters%20Master%20List&utm_campaign=aeab032d23-EMAIL_CAMPAIGN_2017_12_19_COPY_01&utm_medium=email&utm_term=0_a23c93579d-aeab032d23-410579153

Alexander Wang x Judith Lieber clutch. Photo: @judithleiberny/Instagram

Dhani Mau of Fashionista recently published a very useful overview describing the various fashion finance options available to burgeoning fashion entrepreneurs. Among these fashion finance options are: loans via friends and family and traditional lenders, venture capital, private equity, factoring, side hustles and licensing deals, crowdfunding, and incubators, contests, and holding companies. Mau details each option’s pros and cons, making this a great introduction to fashion financing for anyone considering a fashion startup.

Find the full article here. To learn more about how Castaybert PLLC can assist with fashion financing matters, please click here.

1. What is the status of your trade secrets?

Trade secrets come in many forms, and a proper assessment of your company’s assets in this area will ensure that you are current regarding the number, kind, and value of the company’s trade secrets. Some examples of possible trade secrets that you will want to review include: your company’s proprietary lists, such as customer lists and source material supplier lists; the manufacturing or production processes employed; training methods; research methods; and details of operational systems either in use or being tested.

2. What protects your trade secrets?

Once you have a complete picture of the trade secrets possessed by your company, it is critical to properly safeguard these secrets. This is not only to protect them from theft, but to also to demonstrate, should the need arise, that appropriate measures were taken to guard these assets. In the event of a formal dispute about any theft of trade secrets from the company, a court will want proof that the company took logical steps to guard those secrets and that these assets were not left unprotected, vulnerable to attack or to misappropriation. As each company’s set of trade secrets is unique, a trade secret protection system should be tailored specifically for the company it is meant to protect, and that system should also be modified as the company goes through changes affecting its trade secrets.

3. Whose trade secrets are they?

Another critical question to ask in the process of assessing and protecting your company’s trade secrets is “to whom do they belong?” While the full roster of trade secrets known to you may be employed in your company’s processes, there is a possibility that the true owner of those trade secrets is not in fact the company. Your company may have developed into its current incarnation as a result of mergers, acquisitions, selloffs, dissolutions, and other combinations. Trade secrets used by the company may in fact belong to smaller companies that played a role in your company’s history. It is therefore critical that each of the trade secrets used by your company can be traced to a transaction in which it was lawfully acquired.

4. Does employee behavior pose a risk for a dispute?

Part of trade secrets management is protecting these assets from theft. But another part is protecting your company from disputes created by employees who misappropriate trade secrets from parties other than your company. For example, your company may deal with other organizations and individuals who provide services as vendors, suppliers, brokers, or outsourced labor. Each of these trade partners likely has its own set of trade secrets, and you must ensure that agents for your company are not—either by accident or intentionally—employing those secrets in the processes conducted by your company without express permission from the secret’s owner. To prevent costly litigation, it is important to know how to detect any trade secret misappropriation conducted by your company’s employees. Similarly, it is key to appropriately inform them of the nature of trade secrets, lest they mistakenly use another’s trade secrets in a way which is unlawful.

5. What is your response plan in the event of an attack on your company’s trade secrets?

The first thing to have in place is a response team, with your trade secrets lawyer being one of its key members. Second, you will need to consider the likely ways in which a breach could occur, and what measures you will take in the event that such a breach actually happens. Your trade secrets counsel can prepare, in advance, by identifying which forms of legal action will be most appropriate and effective for the various types of breaches your company must protect against. State law and federal law each offer their own unique set of remedies, and one may be more effective than the other. That attorney should also consider ways to resolve a breach by means other than litigation, such as through alternative dispute resolution, mediation, or negotiation.

The attorneys at Castaybert PLLC are skilled in the areas of contract formation and analysis, and also with the intellectual property management issues discussed above. Please contact Andre Castaybert at acastaybert@nullac-counsel.com to get more information about how you can protect your company’s trade secrets.

By: Karen E. Clarke, Of Counsel

As discussed in our June 8, 2016 article, 28 U.S.C. § 1782 is a helpful U.S. statute that enables foreign litigants to obtain documentary or testimonial evidence from U.S. persons for use in a proceeding in a foreign or international tribunal. The statute authorizes a U.S. District Court to order discovery from a person who “resides or is found” within the court’s jurisdiction. However, as the Eleventh Circuit has recently held, the evidence itself need not be found in the United States; it need only be within the “control” of a U.S. resident to be obtainable under § 1782.

Sergeeva v. Tripleton Int’l Ltd., 2016 WL 4435616 (11th Cir. Aug. 23, 2016), concerned a Russian proceeding in which an ex-wife contended that her ex-husband was concealing and dissipating assets, for which she sought documentary evidence from a financial planning company located in Atlanta, Trident Atlanta. The order required production of documents within the “possession, custody, or control” of Trident Atlanta and its agents, representatives, and attorneys. Id. at *1. Trident Atlanta objected to the extent that the requested documents were in the possession of a non-U.S. affiliate, Trident Bahamas, and was held in contempt when it failed to comply with an order requiring the production of the Trident Bahamas material. Trident Atlanta argued that the court’s orders were invalid because § 1782 does not have extraterritorial scope and may not be used to reach documents located in foreign countries.

Calling this extraterritoriality argument “a question of first impression in this Circuit,” the Eleventh Circuit held that § 1782 does permit a court to require production of documents located outside the United States. Id. at *4. The extraterritorial “location of responsive documents and electronically stored information – to the extent a physical location can be discerned in this digital age – does not establish a per se bar to discovery under § 1782” and should not serve to “categorically restrict the discretion Congress afforded federal courts” in § 1782. Id.

The Court focused on § 1782’s provision that discovery is to be produced “in accordance with the Federal Rules of Civil Procedure” unless otherwise ordered. Federal Rule 45 requires subpoenaed parties to produce items in their “possession, custody, or control,” and its only geographical limitation concerns the location of the act of production and not the location of the documents or information to be produced. Therefore, the District Court could, consistent with the Federal Rules, require that Trident Atlanta produce responsive documents and information located outside the United States so long as Trident Atlanta had “possession, custody, or control” of such material. Id.

Noting that “control” for discovery purposes means “the legal right to obtain the documents requested upon demand,” the Eleventh Circuit endorsed the District Court’s determination that such a legal right may be established where affiliated corporate entities “have actually shared responsive information and documents in the normal course of their business dealings.” Id. at *5. The evidence showed that Trident Atlanta and Trident Bahamas were affiliates within an international financial planning group and had indeed shared the requested information in servicing their mutual clients. Accordingly, the § 1782 discovery order and contempt order were proper.

This appears to be the first circuit court decision squarely addressing the extraterritoriality issue. Pre-Intel, the Second, Seventh, and Ninth Circuits had suggested in dicta that § 1782 may not authorize discovery of material located in foreign countries. See Kestrel Coal Pty. Ltd. v. Joy Global Inc., 362 F.3d 401, 404 (2004); Four Pillars Enters. Co. v. Avery Dennison Corp., 308 F.3d 1075, 1079 (9th Cir. 2002); Chase Manhattan Corp. v. Sarrio S.A., 119 F.3d 143, 147 (2d Cir.1997). More recent district court decisions reflect a split of authority. Compare, e.g., In re Gemeinschaftspraxis Dr. Med. Schottdorf, No. Civ. M19-88 (BSJ), 2006 WL 3844464, *5 (S.D.N.Y. Dec. 29, 2006) (ordering production of documents in control of U.S.-based entity but located abroad, as the statute “requires only that the party from whom discovery is sought be ‘found’ here; not that the documents be found here”), and In re Applic. of Republic of Kazakhstan, 110 F. Supp. 3d 512, 515 (S.D.N.Y. 2015) (permitting discovery from law firm’s New York office of documents located in the firm’s London branch, because the two entities “operate as a single law firm”), with In re Godfrey, 526 F. Supp. 2d 417, 423-24 (S.D.N.Y. 2007) (discussing congressional intent and policy rationales for limiting § 1782’s reach to documents located within the U.S., and declining to order production of documents located in Russia “because the connection to the United States is slight at best and the likelihood of interfering with Dutch discovery policy is substantial”), and In re Kreke Immobilien KG, No. 13 Misc. 110 (NRB), 2013 WL 5966916, *4 (S.D.N.Y. Nov. 8, 2013) (following Godfrey analysis and denying application seeking documents from Deutsche Bank in Germany for use in German suit). It will be interesting to see which line of authority the other circuit courts adopt.

Category: Business Transactions | Commercial Litigation | Discovery Practice

The New York Appellate Division Third Department determined Supreme Court properly withheld from disclosure both tax returns and documents which reflect information included in tax returns: ” ‘The policy behind the [tax] secrecy provisions is twofold: to protect personal privacy interests in the information on a return, which may reveal information concerning a person’s activities, associations and beliefs, and to encourage voluntary compliance with the tax laws by preventing use of return information to harm the reporting taxpayer”’… . The statute prohibits the disclosure of ‘any particulars’ by any person who ‘is permitted to inspect’ a return, receives ‘any information contained in any [return]’ or who ‘in any manner may acquire knowledge of the contents of a [return]’ (Tax Law § 211 [8] [a]). By its terms, the confidentially required by the statute necessarily extends to any document that reflects information included in a return. If we were to construe the statute to only protect the secrecy of the return, the purpose of the statute would not be served . . . , and we find, in particular, that Tax Law § 211 (8) (a) prohibits the Department from releasing an agreement made with another taxpayer (see Tax Law §§ 171 [18]; 210-A [11]). … Contrary to petitioner’s arguments, where, as here, a document is exempt from disclosure pursuant to state statute, it may not be subjected to redaction …’.

Matter of Moody’s Corp. & Subsidiaries v. New York State Dept. of Taxation & Fin., 2016 N.Y. Slip Op. 05612, 3rd Dept 7-21-16

An S Corporation, also known as an S Corp, is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S Corporation.

An S Corp is a corporation with the Subchapter S designation from the IRS. To be considered an S Corp, you must first charter a business as a corporation in the state where it is headquartered. According to the IRS, S Corporations are “considered by law to be a unique entity, separate and apart from those who own it.” This limits the financial liability for which the owner, or “shareholder”, is responsible. Liability protection is limited. S Corporations do not necessarily protect you from all litigation such as an employee’s tort actions as a result of a workplace incident.

The S Corporation is different from a traditional corporation (C corp) in that profits and losses can “pass through” to your personal tax return. Consequently, the business is not taxed itself. Only the shareholders are taxed. There is an important caveat, however: any shareholder who works for the company must pay him or herself “reasonable compensation.” Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as “wages.”

Forming an S Corporation

Before you form an S Corporation, determine if your business will qualify under the IRS stipulations. To file as an S Corporation, you must first file as a corporation. After you are considered a corporation, all shareholders must sign and file Form 2553 to elect your corporation to become an S Corporation. Once your business is registered, you must obtain the necessary business licenses and permits. Regulations vary by industry, state and locality. Use the Licensing and Permits Tool on the Small Business Administration website to find a listing of federal, state and local permits, licenses, and registrations you’ll need to run a business.

Combining the Benefits of an LLC with an S Corporation

There is always the possibility of requesting S Corp status for your LLC. Your attorney can advise you on the pros and cons. You’ll have to make a special election with the IRS to have the LLC taxed as an S corp using Form 2553. You must file it before the first two months and fifteen days of the beginning of the tax year in which the election is to take effect. The LLC remains a limited liability company from a legal standpoint, but for tax purposes it’s treated as an S corp. Be sure to contact your state’s income tax agency where you will file the election form to learn about tax requirements.

S Corporation Taxes

Most businesses need to register with the IRS, register with state and local revenue agencies, and obtain a tax ID number or permit. All states do not tax S corps equally. Most recognize them similarly to the federal government and tax the shareholders accordingly. However, some states such as Massachusetts, tax S corps on profits above a specified limit. Other states don’t recognize the S corp election and treat the business as a C corp with all of the tax ramifications. Some states, such as New York and New Jersey, tax both the S corps profits and the shareholder’s proportional shares of the profits. Your corporation must file the Form 2553 to elect “S” status within two months and 15 days after the beginning of the tax year or any time before the tax year for the status to be in effect.

Advantages of an S Corporation

Tax Savings. One of the best features of the S Corp is the tax savings for you and your business. While members of an LLC are subject to employment tax on the entire net income of the business, only the wages of the S Corp shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a “distribution,” which is taxed at a lower rate, if at all.

Business Expense Tax Credits. Some expenses that shareholder/employees incur can be written off as business expenses. Nevertheless, if such an employee owns two percent or more shares, then benefits like health and life insurance are deemed taxable income.

Independent Life. An S corp designation also allows a business to have an independent life, separate from its shareholders. If a shareholder leaves the company, or sells his or her shares, the S corp can continue doing business relatively undisturbed. Maintaining the business as a distinct corporate entity defines clear lines between the shareholders and the business that improve the protection of the shareholders.

Disadvantages of an S Corporation

Stricter Operational Processes. As a separate structure, S corps require scheduled director and shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock transfers and records maintenance.

Shareholder Compensation Requirements. A shareholder must receive reasonable compensation. The IRS takes notice of shareholder red flags like low salary/high distribution combinations, and may reclassify your distributions as wages. You could pay a higher employment tax because of an audit with these results.