Lana Del Rey May Have Creeped too Close to Radiohead’s Melody, Copyright Infringement Suit Nears

A tweet sent by Lana Del Rey earlier this week (likely to the chagrin of her attorneys) informed her 8.3 million followers that Radiohead is claiming that the song ‘Get Free’, off her recent album ‘Lust for Life’, infringed on Radiohead’s 1993 hit song ‘Creep.’ The 90’s band is seeking 100% of the profits related to the publishing of the song, which Del Rey is credited with co-writing along with songwriters and record producers, Kieran Menzies and Rick Nowels.

Fast forward to a few hours after the tweet was sent when Del Rey then repeated this sentiment at a subsequent concert in Denver, CO, where she referred to the song as her “personal manifesto.”  As an aside, it was a questionable move for Del Rey to go so public with this dispute, let alone state terms of settlement offers, as settlement negotiations are often confidential…unless where published in the manners Del Rey has done, and could taint the available jury pool. Check out a clip of Del Rey addressing the crowd here.

Does Radiohead have a case?

I’ve never been much of a gambler, but after listening to both songs I would say that Radiohead has a strong case in this copyright dispute. For those of you unfamiliar, a copyright arises from the creation of an original work that is fixed in a tangible medium of expression, described as “when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”  While the mere creation of the composition is enough to establish a copyright, registration affords the author/publisher additional protections. The courts often look to whether the composition contains a minimal spark of creativity. The spark can be in the chord progression, rhythm, melody or lyrics. In order to establish the infringement, a comparison of the songs must be done, often by an expert, and a judge or jury must then determine if such an infringement, or unauthorized borrowing or use of the same chord progression, rhythm, melody or lyrics, has occurred. Since such proof is often subjective to the fact finder, most cases are resolved prior to a final determination in Court.

In fact, the very song Radiohead is now claiming Del Rey has infringed upon, was itself the subject of a claim of infringement by Albert Hammond and Mike Hazlewood, regarding the 1972 song ‘The Air That I Breathe,’ sung by The Hollies. As a result of that claim, Hammond and Hazlewood received co-writing credits and a percentage of the royalties of Radiohead’s ‘Creep.’ While one might ask whether Hammond and Hazlewood should really be making the claim against Del Rey, it is too soon to tell whether it is the very same chord progression, rhythm, melody or lyrics involved in the Del Rey-Radiohead dispute as the Radiohead-Hollies dispute, as every song is made up of many different such elements. Time will tell whether Radiohead’s lawsuit will go anywhere, although my money would be on Radiohead winning, if it went to trial. However, odds are that there will be a similar result to the Radiohead-Hollies out of court settlement, with Radiohead sharing writing credits and royalties.

You Be The Judge: Take a listen to both songs here:

Prior Precedent 

Copyright disputes between musicians, writers and publishers have been part of the music landscape for decades. In 1971, former Beatle George Harrison had a number 1 single on his hands with ‘My Sweet Lord.’ Yet, while that single was still in heavy rotation, Harrison was hit with a lawsuit by publisher Bright Tunes Music, which held the rights to the Chiffons’ 1963 hit ‘He’s So Fine,’ written by Ronnie Mack. Harrison tried unsuccessfully to settle the matter and, ultimately, lost at trial, having to pay Bright Tunes damages in the amount of $1,599,987! As only a former Beatle could, Harrison did, however, turn the experience of tortuous litigation into another hit called ‘This Song.’

More recently, Robin Thicke, Pharrell Williams and Clifford Harris, Jr. were found to have infringed on the work of Marvin Gaye, in particular the song ‘Got To Give It Up.’ Interestingly, it was Thicke, Williams and Harris who pre-emptively filed suit against the Gaye family and Bridgeport Music, in an attempt to have the court determine Thicke and company had not infringed on Gaye’s work. The suit backfired, with a finding that Thicke and company had infringed on Gaye’s work and awarded $5.3 million in damages.  Thicke and company have appealed to the United States Court of Appeals for the 9th Circuit.  At oral argument, Thicke and company argued that there can be no infringement for a “groove,” which it sought to differentiate from a lyric, rhythm, etc.  No decision has been reached by the 9th Circuit as of yet, but Thicke, Williams and Harris have a tough road ahead to overturn the lower court’s verdict.

Questions? Let Jeff know.


Jeff Cohen is a member of Flaster Greenberg’s Litigation, Intellectual Property, Corporate and Real Estate Practice Groups. He has been a trial attorney for more than 23 years, counseling and representing a diverse range of clients in matters related to commercial contracts, shareholder and partnership agreements, trademarks, copyrights, patents, including Hatch-Waxman, insurance coverage, franchise disputes and commercial construction.


New Jersey Toughens Laws for Divorced Parents Wanting to Relocate their Children Out of State

Moving boxes with family.jpgA major New Jersey Supreme Court decision has made it more difficult for custodial parents to move their children out of state. The ruling calls for stricter legal standards to be applied by the New Jersey Judiciary in order to establish “cause” in all cases when a divorced or separated parent seeks to relocate from New Jersey with the minor children of the marriage without the consent of the other parent.

Prior to this decision, there were two standards that were applied:

  1. A lesser, more flexible standard when one parent is the parent of primary residence and the other is the parent of alternate residence, and
  2. One when the parties equally share legal and residential custody.

In the former, the lesser requirement was that the parent only had to demonstrate “good cause” for the move and that the move was not “inimical to the interests of the child”, and the burden to oppose the move then shifted to the objecting parent. In the latter, the parent had to demonstrate that the move was in the best interests of the child.

In the recent Bisbing v. Bisbing decision, the Court repealed the separate standards. The Court mandated that in all cases where a parent seeks to relocate from New Jersey with the minor child(ren) of the marriage without the consent of the other parent, the courts must conduct a best interests analysis to determine “cause” to determine whether the relocation is in the best interests of the child(ren). The Court is to apply the statutory factors set forth in N.J.S.A. 9:2-4 and other relevant considerations to determine whether the relocation is in the best interests of the child(ren) involved. This analysis must be performed whether custody is equal or whether one parent is primary.

The Court noted in its decision that adopting this singular standard may avoid disputes as to who should be the primary parent when it is clear that one parent is in a better position to serve that primary role. It would further avoid accusations that the designation was sought to facilitate the ability to move the child(ren) out of state.  The decision to move must now be proven to be in the best interests of the child(ren), rather than the parent.

The impact of this decision will have far-reaching effects, and will likely raise questions among divorced parents considering and/or opposing a proposed out-of-state move. For more information on this decision, or if you have questions on how your family may be impacted, we invite you to contact Steven B. Sacharow, or any member of our Family Law Group.

Flaster Greenberg’s Family Law Practice draws on decades of experience in the ever-changing legal landscape that affects the family dynamic. Our family law attorneys serve as advocates for our clients, providing guidance on virtually all family law-related issues including divorce, custody and parenting time, child support, spousal support (alimony), equitable distribution of property, same sex relationships, prenuptial agreements, adoption and family formation, and mediation and arbitration. 

Steve Sacharow, Flaster GreenbergSteven B. Sacharow has substantial and extensive experience in family law and is nationally recognized for his work. His representation of clients includes matters involving child custody, parenting time, child support, alimony and equitable distribution of assets. It also consists of legal aspects of relationship formation including cohabitation and prenuptial agreements. His family law practice further includes representation of individuals involved in same sex relationships, including cohabitation agreements and dissolution of relationships, involving both civil unions and non-formalized relationships, as well as mediation (as a mediator and representing clients in mediation) and collaborative divorce.  Additionally, his adoption practice is comprised of domestic and interstate adoptions, agency or private, and he has extensive experience in the litigation of contested adoption matters. He can be reached at 856.661.2272 or via email.

SCOTUS Reshapes Lanham Act: The Slants, the Washington Redskins and Those Seeking to Register Subjectively Offensive Trademarks Celebrate

This week, the U.S. Supreme Court, in one decision, both struck a blow for civil liberties and free speech and opened the floodgates to the registration of subjectively offensive trademarks.  Just ask the rock band “The Slants”, who prevailed in the case decided by the United States Supreme Court, and the NFL’s Washington Redskins’ defiant owner and dedicated fans, who will now see their marks registered, despite meanings that are offensive to large groups of Americans, in the name of free private or commercial speech.

How does this impact a prospective trademark registrant?  Simply, the examiner must now ignore whether the mark is disparaging and evaluate the mark solely from a viewpoint neutral position.  To see the practical impact of this, one need only look to the controversial mark “Redskins”.  In June 2014, the USPTO cancelled the registration of the NFL’s Washington Redskins, determining that the “Redskins” mark was disparaging to Native Americans.  However, this week’s ruling, barring application of the disparagement clause, would seem to open the door for the Washington Redskins to apply to register the “Redskins” mark anew, as well for others to seek registration of future marks that may well be disparaging to other persons, institutions, beliefs or national symbols.

Click here to read more.


Jeffrey A. Cohen is a member of Flaster Greenberg’s Litigation, Intellectual Property, Corporate and Real Estate Practice Groups. He has been a trial attorney for more than 23 years, counseling and representing a diverse range of clients in matters related to commercial contracts, shareholder and partnership agreements, trademarks, copyrights, patents, including Hatch-Waxman, insurance coverage, franchise disputes and commercial construction.

City of Philadelphia Enacts Law Making it Unlawful for Employers to Ask Job Applicants for Their Salary Histories

Philadelphia has been prominently featured in the local and national news lately for enacting new laws that can be classified collectively as having as one of their primary purposes an attempt at “social engineering.”  Just last year, the City enacted an ordinance, popularly referred to as “Ban the Box,” which made it illegal for Philadelphia employers to inquire about a job applicant’s history of criminal convictions.  In so doing, Philadelphia joined a national trend of similar enactments by several other government entities, all motivated by a desire to improve employment prospects for ex-cons. Then, a little later last year, Philadelphia enacted a first-of-its kind soda tax, which, although probably aimed primarily at creating a new source of revenue, was rationalized, in large part, by the Philadelphia City Council that passed it as a measure to try to curb juvenile obesity among inner city children.

Now, Philadelphia has stuck its neck out again trying to control its private employers’ hiring practices and procedures and, thus, so the theory goes, their hiring results.  Motivated by a desire similar to the Ban the Box legislation, the City has now focused its attention on gender-based wage inequality, by enacting legislation making it unlawful for employers to consider a job applicant’s salary history in deciding what salary to offer that candidate.  In so doing, Philadelphia has put itself in the forefront of the attack on gender-based salary inequality.  Massachusetts passed a similar law last year, but, when the new Philadelphia Wage Equity Law becomes effective on May 23, 2017, Philadelphia will become the first US city to make it illegal for an employer to ask a job applicant to reveal his or her salary history.

As it had done with the Ban the Box ordinance, Philadelphia’s City Council made a number of findings on the record in support of the Wage Equity Law.  For example, City Council noted that women in the job market, especially minority women, on average, earn less — in some cases, significantly less — than men in comparable positions.  Specifically, City Council found that, basing salary decisions on an employee’s past earnings history “only serves to perpetuate gender wage inequalities.”  Finally, City Council concluded that the salary for a position should be based upon the responsibilities of the position, rather than an applicant’s prior salary.

What Does The New Law Prohibit?

The Wage Equity Law makes it an unlawful employment practice for an employer or an employment agency to (1) inquire about a prospective employee’s wage history, (2) require disclosure of wage history, (3) condition employment or consideration for an interview or employment on providing a wage history, (4) retaliate against a prospective employee for failing to provide a wage history in response to a request for one, or (5) rely, at any stage of the employment process, upon a wage history provided by a current or former employer in determining the employee’s wages or in negotiating or drafting the employee’s employment contract.  There are 2 exceptions to the law’s prohibitions.  First, the employer can rely on a prospective employee’s wage history if the applicant “knowingly and willingly” disclosed it.  And, second, the law does not apply to any action taken by an employer or employment agency pursuant to a federal, state or local law that specifically authorizes the disclosure or verification of wage history for employment purposes.  As just one example of the second exception, many government positions are authorized by statutes or regulations that include a requirement that the candidate’s employment and salary history be reviewed and verified.

What Is The Likely Impact Of This New Ordinance?

It is difficult to predict whether the Wage Equity Law will have its desired effect.  On the one hand, despite widespread criticism of the new law from the business community, a case certainly can be made that some portion of the apparent gender pay inequality is based on past wage discrimination by other employers, and that this ordinance will, in time, help stop the perpetuation of that inequality.

Eventually, as employers get used to the new law, perhaps they will also get used to the idea of offering salaries based upon the responsibilities of the job, rather than the candidate’s salary at a previous position.  After all, not that long ago, it was standard procedure for employers to inquire about female candidates’ marital status and family plans, but now most employers will readily acknowledge that such questions are discriminatory and should be precluded, as the law now provides.  Perhaps in a few years, as a result of the new ordinance, questions about salary history will be viewed in the same negative light as we now view questions about plans to have children.

In addition, most employers, including those who routinely ask their applicants for past salary information, will acknowledge that trying to hire employees at the lowest possible salary can lead to other employee relations problems for the employer.  Consider, for example, the possible tensions that could be, and, in fact, often are caused by two employees who have the same job responsibilities and comparable performance ratings, but are paid very different salaries due solely to their different salary histories before they came to their current employer.

On the other hand, some critics have suggested, although, to date, no concrete evidence has been presented to support their position, that the Wage Equity Law will actually hurt the movement to equalize salaries.  The theory is that, if employers cannot ask for a candidate’s salary history (or criminal background), they will simply guess or assume one.  For a female candidate, so the theory goes, the employer will assume she has a lower salary and will, in turn, offer her a lower salary.  If the employer’s assumed salary is lower than the candidate’s actual salary, the lack of a salary history, under this set of assumptions, will result in a lower offer than would have been the case if the employer had been able to ask the candidate for her salary history. The proponents of this viewpoint cite as support for their argument what they claim is anecdotal evidence that the Ban the Box law has actually hurt ex-convicts’ chances of landing a job, but there have been no scientific studies performed to date to prove or disprove the assumption.

In addition, employers who want to get around the law will, no doubt, be able to find ways to avoid or work around the law’s restrictions.  Just as employees often seem to know, despite their employers’ best efforts to maintain confidentiality, what their fellow workers are earning, employers will, no doubt, find ways to gather salary histories “off the record” if they really want them.  However, employers who engage in such behavior will run the risk of liability under the Wage Equity Law, which also prohibits reliance on salary history information in determining wages at any step in the employment process, regardless of the source of information.

More importantly, the consequences of getting caught violating the law could be severe.  In addition to having the power to order the hiring or reinstatement of an aggrieved employee, the Philadelphia Commission on Human Relations, which is the agency designated by the ordinance to enforce its provisions, also has the power to award the following relief to any person damaged by a violation of the Wage Equity Law:

  • Back pay
  • Compensatory damages.
  • Punitive damages up to $2,000 per violation.
  • Attorney’s fees and costs incurred by the Commission

The real enforcement hammer in the Wage Equity Law is reserved for repeat offenders, who can be imprisoned for up to 90 days for subsequent violations.        This provision will likely serve as a deterrent to willful violations of the law.

More difficult to assess will be the predictions of critics of the law that it will have a negative impact on the creation of new jobs in Philadelphia.  The Philadelphia Chamber of Commerce, among others, lobbied hard against the bill.  The Chamber criticized the bill as just the latest example of an overly-controlling City government telling companies how to run their businesses.  It warned that the law would hurt job growth and business expansion, claiming that the bill sends the message that “Philadelphia is not open for business.”  Indeed, Philadelphia has been accused in the past of having a reputation for having a high cost of doing business.

Finally, some business leaders, led by David Cohen, a senior vice president of Comcast, which is headquartered in Philadelphia, have challenged the legality of the law, saying that it impinges on employers’ First Amendment rights to ask prospective employees their salary history as one means of determining a fair salary for their new positions.  To date no court challenges to the law have been filed.  However, after City Council approved the new law but before the mayor signed it into law, Comcast’s legal team sent a lengthy memo to the City, which was made public.  The memo threatens a lawsuit against the City if the new law was not vetoed by the mayor, which we now know did not happen.  Instead, Mayor Jim Kenney signed the pending law, which now becomes effective 120 days from the January 23, 2017 signing date.  The ball is now in Comcast’s court whether to sue or not.

What Should Employers Do To Prepare For the Effective Date of the New Ordinance?

Philadelphia employers should begin now to revise their hiring processes and application forms to be ready for the May 23 effective date.  Obviously, written application forms will have to be edited to remove any questions about prior salaries.  More difficult will be training interviewers not to ask questions that they have routinely asked job candidates for countless years, especially for companies that give line managers, rather than human resources department personnel, responsibility for hiring decisions.  Such employers might be better advised to tell all interviewers that they should refrain from any discussion of salary, past, present or future, with job candidates, and that such discussions will be undertaken by human resources personnel trained in the nuances of the Wage Equity Law.

Employers who plan to ask their job applicants for “knowing and willful” waivers of their right not to reveal their salary histories, should be sure to put the request for waiver in a written document to be signed by the candidate.  That notice should explain to the candidate her right not to reveal her salary history and include language that the applicant has agreed, knowingly and willfully, to waive that right and provide the salary history.

What about non-Philadelphia employers who come to the city to recruit employees; does the Wage Equity Law apply to them?  How about an employer located outside the city, an executive of which comes into the city to meet with a job candidate?   And if a Philadelphia resident goes to New York for a job interview with a national employer that happens to have operations in Philadelphia, does the ordinance apply to that situation? As with any new law, the scope and applicability of the law will become clearer as time goes on, as the Philadelphia Commission on Human Relations decides how broadly it intends to try to enforce it, and as the courts rule on the legality of the Commission’s decisions and interpret the gray areas of the law.


Philip Kirchner is a shareholder in and former chair of Flaster/Greenberg P.C.’s Commercial Litigation Practice Group, a member of the Labor & Employment and Construction Litigation Practice Groups, and member of the Restaurant & Hospitality, Construction, Nonprofit & Charitable Organizations, Gaming and Alternative & Renewable Energy Industry Groups.

5 Things to Keep in Mind When Planning for a Divorce

Part I of a II part article 

As Neil Sedaka said, breaking up is hard to do. When planning for a divorce, a careful and calculated approach is required to protect your interests. This article will highlight 5 things to consider based on our firm’s decades of handling these cases, both in court and in private resolutions. These tips focus primarily on New Jersey’s divorce laws and procedures. Divorce laws vary from state-to-state, but these tips are generally helpful to a wide range of divorce situations.

  1. Keep Good Records

Maintaining good records is incredibly important when facing a divorce. You should anticipate that your pay history, assets, and liabilities will be thoroughly analyzed. Be prepared to exchange hundreds of pages of documents during the divorce process. If you have a financial advisor, accountant, or investment broker, let them know you’re getting divorced and ask for their assistance in putting together an outline of your assets and liabilities. A caution, however: check first to determine whether your professional, due to company policies, will feel or be obligated to advise your spouse of the contact, especially if they are a joint professional. You should also determine if your professional will be required to place a freeze on the liquidation of your assets once they are informed of a pending divorce. If your divorce is litigated in the courts, you will need to prove, usually through documentation, your assets and debts. The more organized you are, the more credible you will look at a trial. It is also a cost-saving benefit to you if you can provide the information to your counsel rather than expending attorney or paralegal fees to obtain the information.

  1. Don’t Hide Things

This is the flip side of item 1, but it’s a concept that needs to be reiterated because it surfaces time and again in these disputes, usually to the detriment of the “hider.” In divorces, the other side is entitled to complete transparency and full disclosure with respect to your income, assets, and debts. A broad “discovery phase” in divorces allows each side to obtain documentation and information from the other side, and pretty much nothing is off limits, especially financially. In high asset cases, you can anticipate that the discovery phase will be lengthier and more complex as the other side tries to uncover as much information as possible. It can be tempting to try to hide things, such as a significant upcoming bonus or a recent investment acquisition. Any semi-attentive attorney on the other side is going to look for these types of omissions. Once a judge learns that you have tried to hide something, your entire case will be tainted and you will have negatively affected your credibility. If your case goes to a trial, a judge may have a hard time ruling in your favor if he or she thinks you have purposely tried to mislead your spouse and the court by hiding assets or income. Therefore, it’s best to be open and honest about your income and assets with your attorney, and leave it up to her or him to work with you to fashion the strategy to achieve the best outcome for you.

  1. Don’t Understate Your Marital Standard of Living

As part of the divorce process, you will be required to complete a document that outlines your marital standard of living. In New Jersey, this document is called a Case Information Statement, or CIS. In the CIS, you must list what you spend each month on fixed expenses, such as a mortgage, car payment, and utilities, as well as your fluctuating expenses, such as food, clothing, and entertainment expenses. These expenses are then tallied to determine your approximate monthly marital standard of living. Courts use the marital standard of living mostly to determine a party’s spousal support (alimony) entitlement or obligation. To try to lower the alimony, it is not uncommon for one spouse to purposely attempt to under-value their monthly expenses. For example, although they may know that the family eats out several times a week for $150 per dinner, a spouse might claim on their CIS to only spend $100 per month on dining and restaurants, when in reality the figure is closer to $1,000. Under-stating the marital lifestyle can lead to excessive litigation as the courts will require proofs to determine the true expenses. It is usually not that difficult for the other side to prove the marital lifestyle, either through receipts, credit card statements, or witness testimony. Here again, if a judge realizes that a party has purposely tried to under-value the marital standard of living, that person’s credibility will be greatly damaged. Therefore, when outlining the marital standard of living, carefully analyze what happens with your net monthly income and make sure that the monthly standard of living is on par with that figure. If you bring home $20,000 net per month and you claim your marital standard of living is only $7,500 per month, be prepared to show the court that you have accumulated approximately $12,500 per month in savings. Otherwise, something won’t add up.

  1. Make Sure Your Standard of Living Matches Your Historical Earnings

Similar to the tip above, you should also be careful that the marital standard of living you disclose to the court is not so high that your purported income could not satisfy that type of lifestyle. This is most common for entrepreneurs and business owners who are not typical W-2 wage earners. If you or your spouse tell the court that your marital standard of living is $8,000 per month ($96,000 per year), but your tax returns show gross income of only $65,000 per year, it becomes obvious that you have not fully disclosed your income. Courts are savvy to the many ways that business owners and sole proprietors can decrease their gross income “on paper,” so don’t expect the judge to simply rely on your tax returns for income determination purposes. If your spouse can prove that you’ve enjoyed an upper-middle-class lifestyle for the past ten years, it’s going to be very difficult to convince a judge that you earn minimum wage. Once again, if you attempt this approach, your credibility is shattered.

  1. Understand the Expanding Definition of Income

Many professionals have complex compensation packages that become particularly relevant during a divorce. Things like paid vehicles, expense reimbursements, travel and accommodations, or stock options can all be analyzed and included as part of your income when determining your alimony or child support entitlement or obligation. It is not uncommon to find yourself in court arguing over whether or not a particular benefit should be included or excluded from your income when determining your financial entitlements or obligations incident to a divorce. It is helpful to provide your attorney, and often the court, with your complete employment contract and any other documentation that demonstrates your salary and perks. Bonuses are another frequently-litigated issue. Don’t assume that just because your bonus is “discretionary,” it will be excluded from your income. The court will instead look to prior years; if you’ve consistently earned a bonus, you can expect that it will be included in your income. To the extent that you can demonstrate that your bonuses have fluctuated over the years, the court may average them and then increase your base pay by the average bonus figure. To assist your attorney in limiting your spouse’s attempts to overinflate your income during the divorce process, be as candid and detailed as possible about the myriad ways you are compensated for your work.

** Part II of this Installment Series will be presented in Flaster Greenberg’s next Litigation Newsletter, due out in early spring. **


Angie Gambone is a member of Flaster Greenebrg’s Family Law Department concentrating her practice in the areas of complex family law, divorce and custody matters. She also focuses her practice on adoption, family formation and the family law needs of nontraditional and LGBT families. She can be reached at 856.382.2217 or



Hot Topics in Bankruptcy Law: Alter Ego Claims

Most of us believe that when we set up a corporation to conduct business, we’ve accomplished many positive things. One of these, in particular, is that we’ve shielded ourselves from personal liability for any of the company’s business obligations. Unfortunately, that may not always be the case.

Usually a corporation is treated as a separate legal entity, and the corporation is solely responsible for the debts that it incurs. However, whether your business is financially sound, or is having cash flow issues, individual owners are not immune from suit by an aggressive creditor, or some other party seeking to recover a claim for a variety of other reasons.

In such cases, a plaintiff may file suit against not only the corporation, but its owners, officers or directors. How and under what circumstances can this type of action be successful? When can you be personally responsible for the debts of your corporation?

Courts have developed a concept known as “piercing the corporate veil.”  Essentially, it is a legal concept in which courts cast aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts under a theory that the corporation is their “alter ego.” Veil piercing is most common in small, closely held companies.

In determining whether a corporate veil may be pierced, which can result in personal liability, courts will look to a number of key factors.

Undercapitalization.  Was the corporation undercapitalized from the outset?  Failing to sufficiently capitalize a newly formed company can not only lead to financial distress, but also leaves its shareholders susceptible to suit.

Failure to adhere to corporate formalities.   Does the corporation have an operating agreement and/or corporate by-laws?  Does it conduct regular board meetings and keep minutes?  If it fails to do follow these and other simple rules, the risk of personal exposure is higher.

Substantial intermingling of corporate and personal affairs.  Are there significant intercompany transfers, or are funds being paid out of the corporation that are clearly not business related?  When business owners use their various corporations to shuttle funds back and forth between them, or they utilize their corporation as a personal piggy bank from which they can withdraw money at will, the corporate form will be disregarded.

Use of the corporate form to perpetuate a fraud.   Does someone with whom you do business routinely appear to be starting up, then shutting down, his corporations?  Clearly, where individuals set up companies solely and knowingly to shield themselves from liability, they will be found to take on the liabilities of the company.

Recently, veil piercing through an alter-ego theory was tested by two courts in Pennsylvania, with opposite results.

In Liberman v. Corporacion Experianca Unica, S.A., — F. Supp. 3d —-, 2016 WL 7450464 (E.D. Pa. Dec. 27, 2016), the U.S. District Court decided in favor of business owners where the plaintiff sought to pierce the corporate veil.  There, the plaintiffs were not paid rental profits from their investment in a time share in Costa Rica.   In their subsequent suit, the plaintiffs attempted to pierce the corporate veil in order to hold the defendants and defendants’ principal liable for all resulting damages.

The court rejected the plaintiffs’ arguments outright.  First, the court drew a distinction between undercapitalization and underperformance, the latter of which does not lend to a successful veil piercing claim.  Also, the court found that the need to borrow money at the beginning of a project was not evidence of undercapitalization and noted the absurd result that could stem from such a ruling.

The plaintiffs’ argument that the defendants failed to observe corporate formalities was also rejected.  The court noted that each defendant maintained separate board meetings, shareholder meetings, insurance, tax returns, officers, title to assets, books and records and financial statements as evidence that the defendant corporations were all maintained as separate entities.  Finally, in rejecting the plaintiffs’ contention that intermingling occurred, the court found that the fact that funds were being transferred and booked, between different companies actually supported the defendants case, because it was evidence of the maintenance of separate books and records.  Importantly, the court stated that common ownership was not evidence of intermingling and did not support an alter ego theory of liability.

In stark contrast to the District Court’s decision in Liberman, the Superior Court of Pennsylvania upheld a verdict by the Court of Common Pleas to pierce the corporate veil in Power Line Packaging, Inc. v. Hermes Calgon/THG Acquisition LLC, 2017 WL 90617 (Pa. Super. Jan. 10, 2017).  In Power Line, the plaintiff supplied a line of mists, lotions and shaving gels to the corporate defendants.  When the corporate defendants failed to pay, the plaintiff sued them, as well as the defendants’ principals.  After a non-jury trial, the Court of Common Pleas issued comprehensive findings, holding the defendants’ principals personally liable.

First, the Court found that the defendant corporations were undercapitalized in that they were never solvent and never had any substantial assets at any time.

In addition, unlike the defendants in Liberman, the Power Line corporate defendants held no board meetings, kept no minutes and had board members that never participated in the companies’ business affairs.  Moreover, the corporate defendants distributed dividends to shareholders with absolute disregard of their investment in that corporation, or the corporation’s financial ability to pay a dividend.  Thus, the court held, corporate formalities were not observed.

The Court also found that the defendants and their principals frequently comingled their assets, stating, in fact, that one principal operated under the assumption that all of the money in all of the companies belonged to him and could be used at his leisure.

Finally, the Court held that the principals of the defendants used the defendant corporations to perpetrate a fraud and render the defendant companies insolvent.  The court highlighted multiple misrepresentations from the defendants to the plaintiff that caused the plaintiff to continue to do business with the defendants, at a substantial loss. 

When conducting business, it is important to be mindful of the red flags that can result in personal liability for corporate debt. In order to minimize these risks, it’s helpful to have a sound business model at the outset, maintain accurate business and financial records and comply with the standards of conducting a business that have been discussed above. Flaster Greenberg’s attorneys provide advice and counseling on business formation and risk management, and when litigation is unavoidable, we represent our clients tenaciously to resolve the dispute as quickly and efficiently as possible. If you have questions about managing risk or ways to avoid personal liability for your business obligations, please contact Harry Giacometti or Damien Tancredi.




New Jersey Becomes First State In The Nation To Mandate That Physicians And Other Prescribers Must Discuss Addiction Risks With Minor Patients

Governor Chris Christie signed legislation requiring physicians and other health care prescribers to discuss with an emancipated minor, or the patient’s parent or guardian if the patient is under the age of eighteen (18), the risks of developing a “physical or psychological dependence” before prescribing a Schedule II opioid drug.  Controlled Dangerous Substances (CDS) are prescribed based upon one of five (5) classifications contained in the State’s regulations with Schedule I drugs having the highest potential for abuse. A Schedule II drug would include medications such OxyContin or Vicodin.

If the prescriber determines in his judgement that alternative treatment is appropriate, he or she may discuss the alternatives with the minor or parent. The prescriber is also required to include a note in the patient’s medical record documenting that a discussion about the risks has occurred.

This law is just one part of Governor Christie’s high priority initiatives to “stem the tide of drug addiction that has largely been caused by the misuse of prescription drugs.”  Governor Christie’s Administration is working on many fronts to “curb this epidemic.”

Obtaining the adoption of the new law was a multi-year initiative due to the opposition of medical professionals who argued that they already appropriately assessed and treated minor patients in acute pain. When legislation similar to the above law was first introduced in the 2014-2015 legislative session, it contained many more stringent requirements for how a physician or other prescriber would have to prescribe opioids.  For example, that legislation applied to all patients, not just minors.  It also required that the prescribers use a form created by the Division of Consumer Affairs (Division) to document that the discussion took place.   The Division was also empowered to create “guidelines” for the discussions with patients.

Due to the opposition of Assemblyman Herbert Conaway, (D Burlington), a physician and attorney, who is the Chairman of the Assembly Health and Senior Services Committee, the 2014-2105 Legislature did not pass the bill in the Assembly.  Dr. Conaway stated that the legislation would “unnecessarily interfere with the doctor-patient relationship.”

At the same time, the New Jersey Board of Medical Examiners (BME) supported the “concept” contained in the 2014-2015 legislation, but it stated that physicians were already required to meet the discussion and documentation requirements under the standard of care.  The BME also noted that the patient’s physician is in the best position to assess what information should be discussed and pain medications ordered.  The BME is generally not in favor of legislation mandating how a physician may care for patients.

After extensive debates between families, those concerned about drug abuse and legislators, a compromise was forged on the issue of mandating what a physician would be required to tell a minor patient.  Thus, new legislation was introduced in the 2016-2017 legislative session. Significantly, this legislation did not contain language mandating that a prescription should only be prescribed in “good faith” and codifying the BME’s CDS regulations among other prior provisions. The Legislature passed legislation simply requiring discussions between minors and prescribers and documentation of that communication in the medical record.

In view of the adoption of this “bare bones” legislation it is not surprising that in January Governor Christie directed Attorney General Christopher Porrino to implement emergency regulations limiting medical providers to issuing only an initial five (5) day prescription of CDS for acute pain. Governor Christie has signaled his unwillingness to wait for the Legislature to pass bills adopting the types of limitations on prescribing CDS to patients that he thinks are necessary.  Attorney General Porrino sent a January 18, 2017 letter to the BME informing them that they had thirty (30) days to determine whether they will “stand” with him in pursuing “administrative reforms.”   The clear implication is that if the BME does not go along with the five (5) day prescription limitation on opioids that emergency regulations will be adopted without the BME’s input.

We should anticipate that there will continue to be stringent efforts by Governor Christie’s Administration to take action against physicians and other prescribers who violate the evolving standards for prescribing CDS.   Meanwhile, physicians are arguing that the current regulations governing how they treat patients with acute pain are appropriate and that they should not be limited to only prescribing a five (5) supply of pain medications.  Prescribers are expressing concern about the impact on patients in pain if this emergency regulation is adopted.  Prescribers are also concerned about sufficiently documenting that their communication with a minor patient occurred if that a complaint is made or an investigation launched.


Alma L. Saravia is a shareholder of Flaster Greenberg PC in Cherry Hill. She practices in the area of health-care law and was a member of the N.J. State Board of Medical Examiners. She can be reached at 856.661.2290 or

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