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Navigating TITLE VII of the Civil Rights Act as an Employer

By: Jordan Curet
Recently, the Supreme Court has been putting employers on notice: they are watching and they do not like what they see. In particular, two cases have dealt with discrimination in the employment process, one tied to hiring and another to leave benefits. In both, the employee prevailed because the Court believed the wrong standard had been used to analyze the employees’ claims.
In Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, the difficulties of the hiring process were made clear. The Court ruled in an 8-1 majority opinion that an employment discrimination award against the clothing company Abercrombie & Fitch be reinstated, after they refused to hire a Muslim woman, Samantha Elauf, because she wore a head scarf, or “hijab”. Abercrombie argued they should not be held liable under Title VII of the Civil Rights Act of 1964, which bans discrimination in the hiring for religious reasons, since Ms. Elauf did not put the potential employer on notice of the need for an accommodation.
Prior to the U.S. Supreme Court’s ruling, the U.S. Court of Appeals Tenth Circuit had sided with the company by determining that Title VII did not apply where the employee never actually informs the potential employer of the need for the religious accommodation. The Supreme Court, however, ruled that a job applicant only needs to show that the need for a potential accommodation, religious or otherwise, was a motivating factor in an employer’s decision not to hire. Even an “unsubstantiated suspicion” by the employer that an accommodation might be needed or requested by the applicant would be enough to violate Title VII if that was the employer’s motivation for not hiring the applicant. The rule for employers is clear: you cannot make an applicant’s religious practice, confirmed or otherwise, a factor in your employment decision.
Meanwhile, in Young v. United Parcel Service, a 6-3 majority opinion vacated the U.S. Court of Appeals decision to dismiss a pregnant woman’s suit for discrimination after UPS denied her disability accommodations related to the pregnancy, instead placing her on unpaid leave. The Supreme Court ruled that the Pregnancy Discrimination Act’s amendments to Title VII allow an individual pregnant worker to argue disparate treatment by showing: (1) she belongs to a protected class; (2) she sought an accommodation; (3) the employer did not accommodate her; and (4) the employer did accommodate others with a similar ability or inability to work. Importantly, the employee does not have to show that those whom the discrimination favored and those whom the employer disfavored were similar in all but the protected ways. In other words, when you have policies allowing disability accommodations for some of your employees, if the same accommodation might suffice for one of your pregnant workers, you may want to consider whether she should also be covered by the policy.
These seemingly pro-employee rulings are important considerations when dealing with issues that arise during the employee lifecycle. Kelly | Dorsey, P.C. is here to help with advising employers on policies and procedures that will comply with Title VII and many other employment related matters.


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Tax Amnesty On The Horizon in Maryland?

By: Jerry Kelly •

Both the Maryland House and Senate recently passed a bill authorizing a tax amnesty program for 2015. While it has not passed the desk of Governor Larry Hogan yet, there is no indication of any opposition from the Governor. Each of the three prior state tax amnesty programs generated revenues of more than $30 million for the state. Over seven thousand taxpayers participated in the last amnesty program in 2009.

This amnesty period would apply to both individuals and businesses and cover a variety of taxes such as Maryland State and local income taxes, withholding taxes, and sales and use taxes. In order to qualify, the taxpayer would have to agree to pay their unpaid tax liability in full along with one half of any interest. In exchange, the Comptroller would waive all penalties (other than previously assessed fraud penalties) and one half of the interest. The amnesty period would run from September 1, 2015 to October 31, 2015. For those who are unable to full pay during this period, they would also qualify if they enter into an agreement with the Comptroller during those two months to full pay the tax and one half interest by December 31, 2016. However, if the taxpayer defaults the agreement, the waiver of penalties and interest is voided.

An interesting provision of this bill concerns criminal charges. Taxpayers who file returns or pay taxes during the amnesty period will not be charged with a criminal tax offense as a result of those actions. This forgiveness would not apply to those who have any criminal charges pending in the courts of Maryland or those who are under investigation of criminal charges by an office with the authority to prosecute violations of the criminal laws. These offices do not include the Office of the Comptroller.

While the program’s coverage is very comprehensive, there are some taxpayers who cannot qualify. For example, businesses with over 500 employees in the United States would not be eligible. This includes members of a corporate group with more than 500 employees. Also those who have previously taken advantage of an amnesty program held in 2001 or 2009 are not able to participate. 


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legal, business regulations

Cut the Red Tape When Entering a New or Growing Business Niche

By The Firm •

Starting a business in today’s legal and regulatory landscape is not always easy or straightforward, especially when that business represents a new or growing niche in the marketplace in which our laws have yet to catch up.

As part of our business advisory practice, we recently had the opportunity to help a client through just such a scenario. The business? A crematory in the State of Maryland. Crematories are one of the fastest-growing segments of the burgeoning death-care industry. In fact, according to figures published by the National Funeral Directors Association and the Cremation Association of North America, cremation is experiencing a dramatic rise in the United States. Although in 1960 only 3.5 percent of the nation’s deceased opted for cremation, that rate had risen to over 43 percent by 2012. Indeed, the cremation rate has almost doubled since the dawn of the 21st century. There is many reasons people are choosing cremation in higher numbers: cremation is often far cheaper than traditional burial and may be more environmentally friendly as well. Whatever the reason, there is an undeniable trend that cremations are becoming more common and sought after.

Prior to 2014, crematories in Maryland existed in a sort of legal and regulatory limbo. Although permitted as death-care facilities in the State, they were essentially unregulated. The General Assembly made repeated efforts to change this landscape but with limited success. That first began to change in 2010, when House Bill 995 (2010 Maryland Laws Ch. 450) amended sections of the Business Regulation Article of the Maryland Code to require the Office of Cemetery Oversight and State Board of Morticians and Funeral Directors to promulgate regulations governing the licensing, governance, and operation of crematories. The new law also required that crematories—and crematory operators—receive permits from the State before engaging in a crematory business. See, e.g., Md. Code Ann., Bus. Reg., § 5-402. Unfortunately, it was another four (4) years until regulations were put into effect and accepted by the Legislature. Without these regulations, it was impossible for anyone other than a licensed funeral director or partnership between licensed funeral directors to enter the industry.

A client who was not a licensed funeral director approached our firm in this interregnum period, after the passage of House Bill 995 but prior to the promulgation and acceptance of the regulations, which now comprise Chapters 5 through 9, Subtitle 34. At the time, as a result of House Bill 995, the client was required to obtain a permit for the desired crematory and to have the crematory run by registered crematory operators. Of course, there was also no way for the client to obtain any such permit or registration because there were no regulations in place governing the process. Fortunately, on March 31, 2014, the State finally enacted the new regulations. Those regulations required, inter alia, the Office of Cemetery Oversight to issue applications which applicants could use to apply for registration with the State. However, the State did not release those applications for almost three (3) more months.

Our job was to walk the client through the delicate process of working toward obtaining the proper permits while at the same time putting pressure on the State and its administrative agencies to move forward on finalizing regulations and releasing applications. This involved countless meetings and phone calls with the directors of the relevant State agencies and the Attorney General’s office, providing guidance on zoning-related matters, ensuring the crematory build-out would match the State’s proposed regulations, attending inspections, and offering strategic legal advice on managing the process in a state of regulatory limbo. In January 2015, the client received the final regulatory approval and became one of the first registered crematories in Maryland’s death-care industry to be owned by individuals who are not licensed funeral directors; Kelly | Dorsey is one of the first law firms in the State of Maryland to assist such a business in coming to market.

It is cliché, but true: Starting a business is never easy. There are always new challenges and obstacles any budding entrepreneur will face in getting a business off the ground. What is often overlooked is that the legal and bureaucratic system in place to serve and protect the citizenry can often hamper progress in business development. The attorneys’ at Kelly | Dorsey understand the process and have ample experience in aiding entrepreneurs through the often time-consuming and difficult steps necessary to enter the market. We provide clients the tools and strategic advice to get from point A to point B as quickly and efficiently as possible. Though the road is not always straight, the attorneys at Kelly | Dorsey help businesses and business owners achieve their personal and professional goals without slowing down the ability to get products to market or to begin offering a service.

Sources (links are to sites and publications not controlled by KDPC):
Nat’l Funder Directors Ass’n, Trends and Statistics (last visited Oct. 22, 2014).

Cremation Ass’n of N. Am., Annual CANA Statistics Report 2012: Executive Summary (2012).

Maryland Needs a Cremation Law, Balt. Sun (Feb. 20, 2002).


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Shop Small, Make a Big Impact

 By The Firm •

Today’s consumer environment is replete with big-box retail chains and multinational conglomerates. During the holiday shopping season, many of us are tempted to spend our money at these stores, forgetting that sometimes the very best bargains-both in terms of price and local impact-can be found at the myriad small businesses which pepper this nation. Indeed, one national survey has found that, when you shop at independent, locally-owned businesses, fully 52 percent of what you spend stays in your community, which in turn supports local organizations and services.

This Saturday, November 29, 2013, is national “Small Business Saturday.” Small Business Saturday is a day dedicated to encouraging consumers to “shop small,” supporting small and independent locally-owned businesses and their greater communities. Although shoppers are often eager to complete their holiday shopping on “Black Friday” at large chains and big-box stores, it is vital to remember that by shopping small, consumers can boost their local economies and improve the lives of their neighbors.

The attorneys at Kelly | Dorsey, P.C., are dedicated to the success and prosperity of small, local, and independently-owned businesses. Indeed, we spend our days advocating on behalf of various small business in courts and before federal and State agencies. We make it our business to make ensure that local businesses are well-protected, well-represented, and well-prepared for today’s modern business climate. As such, we invite everyone to take advantage of this Small Business Saturday and to remember: shop small, and make a big impact.

Happy holidays.
If you would like to learn more about Kelly | Dorsey’s business, please fill out and send the Contact Form on our Contact Us page. You can also connect with Kelly | Dorsey through FacebookTwitter,Linkedin, and Google+. Business and Litigation and Alternative Dispute Resolution Practice groups chair Gregory A. Dorsey can be reached via email at gdorsey@kellydorseylaw.com or telephone at (410) 740-8750. Tax Controversy practice group chair Gerald W. Kelly can be reached via e-mail atgkelly@kellydorseylaw.com or telephone at (410) 740-8750.

 



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The Entrepreneurial Spirit in the Shark Tank

By Gregory A. Dorsey •

Last night I took the liberty of watching an old episode of the critically-acclaimed business-themed show, Shark Tank. According to the show’s website, the “Sharks” are “tough, self-made, multi-millionaire and billionaire tycoons” who made it big in their respective industries: Kevin O’Leary (Educational Software), Lori Greiner (Prolific Inventor), Barbara Corcoran (Real Estate), Robert Herjavec (Technology), Daymond John (Fashion), and Mark Cuban (Media and Sports). Throughout the hour-long show, the “Sharks” listen to pitches from budding entrepreneurs who try to convince one (or some) of the “Sharks” to invest in their businesses. As is typical with most episodes, the business ideas in last night’s episode ran the gamut: newly-designed baby gear, a fly trap that uses dog feces to bait flies, and a different take on food storage containers. By the end of the episode, the “Sharks” invested in two of the three businesses (you guessed it, they could not get beyond the dog feces!).

One of the reasons I enjoy the show Shark Tank is that it reminds me of my own background and experiences. Specifically, in late 1995, I joined two other entrepreneurs to establish a computer services company then known as “Cyberage Technologies.” While we were fortunate to have a connection that allowed us to maintain offices in the CBS corporate offices housed in the Watergate Complex in Washington, D.C., we had to work through the stress associated with a technology startup and pitch our ideas to a local “Shark.” That I have been in the “Shark Tank” before, and that I can watch others embark on the sometimes risky and always rewarding process, both inspires me and serves as a potent reminder that the entrepreneurial spirit is alive and well. I love the entrepreneurial successes of the “Sharks,” the sheer determination of the budding entrepreneurs, and the emotion that emanates as the “Sharks” cross-examine the budding entrepreneurs to flush out the strengths and weaknesses of their business models.

Though I don’t find myself in the “Shark Tank” these days, as I sit in the conference room of my law office, I often hear stories very similar to those I witnessed on television:

• The Dunkin’ Donuts® franchisee who had to spend nights sleeping on the floor of his first doughnut shop who now owns in excess of 20 different franchised businesses;

• The electrician who recognized a void in the environmental industry and now owns a successful environmental construction firm and environmental wastewater processing plant;

• The unexpectedly-unemployed individual realizing financial independence through personal development, leadership training, and network-building businesses;

• The group of business-minded emergency room doctors who decided to branch out from their hospital to spearhead the development of an urgent care center, recently opening their second location;

• The young programmer who independently developed a cloud-based, scalable ticket and merchandise sales platform looking to turn his idea into a successful company with a marketable business;

• The engineer who, along with two others, formed a company to deliver process control engineering services and systems that today has six offices, employs over 100 people, and provides services and support throughout the world.

These stories, among countless others, encourage and inspire the attorneys at Kelly | Dorsey to continue their practices at a law firm that understands the entrepreneurial spirit and works to protect and foster entrepreneurial successes. Indeed, Kelly | Dorsey was organized from the ground up with “Sharks” and budding entrepreneurs in mind. Our business advisory practice group works to ensure that entrepreneurs and those looking to expand their preexisting businesses are well-equipped to compete in the market economy, from choosing and organizing the optimal business entity to protecting valuable intellectual property. Our litigation and alternative dispute resolution practice group aggressively advances and defends the entrepreneur when internal or external challenges arise. Our tax controversy group advances the rights of entrepreneurs and defends their interests when the Internal Revenue Service or State taxing authorities impede or inhibit our clients and their legitimate business activities.

Whether you are a “Shark” or are looking to become one, the attorneys at Kelly | Dorsey will leverage their considerable experience, know-how, and business acumen to help you reach your personal and professional goals. Long live the entrepreneur!
If you would like to learn more about Kelly | Dorsey’s business, litigation, alternative dispute resolution, or tax controversy practice groups, please fill out and send the Contact Form on ourContact Us page. You can also connect with Kelly | Dorsey through FacebookTwitterLinkedin, andGoogle+. Business and Litigation and Alternative Dispute Resolution Practice groups chair Gregory A. Dorsey can be reached via email at gdorsey@kellydorseylaw.com or telephone at (410) 740-8750. Tax Controversy practice group chair Gerald W. Kelly can be reached via e-mail atgkelly@kellydorseylaw.com or telephone at (410) 740-8750.

 


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Where’s My Paycheck?; Private Sector Pay During the Government Shutdown

By Darren H. Weiss •

As of October 1, 2013, the United States federal government entered a partial shutdown, ceasing all nonessential activities as a consequence of Congress’s failure to pass a budget to fund the government. The most immediate and easily-foreseeable consequence of the shutdown has been the furloughing of hundreds of thousands of federal government employees, the vast majority of whom are legally prohibited from engaging in any work for the government during the shutdown. The effects of the shutdown, however, reverberate throughout the United States’ economy. This is in no small part a direct consequence of the fact that hundreds of thousands of private-sector employees—and their employers—rely upon a functioning federal government. From consultants to contractors, much of the private sector—especially in the past decade or so—has become so intertwined with the public sector that the shutdown of the public sector can cause a “shutdown” of sorts in the private sector.

The import of this relationship on employers and employees in the private sector is perhaps no more evident than when payday arrives and private sector Employee (in the State of Maryland) is advised that Employer (also in the State of Maryland) will be unable to pay her wages due to the federal government shutdown. One reason this may occur is that Employer relies on payments by the federal government to pay its employees. Employee understandably wants to know if Employer is legally permitted to refrain from paying Employee in such dire circumstances. As is common in the legal world, the answer is not necessarily straightforward, and resolution of the foregoing inquiry depends upon a number of factors.

In 1991, the Maryland General Assembly enacted the Wage Payment and Collection Law (the “WPCL”). Md. Code Ann., Lab. & Empl., § 3‑501 et seq. The WPCL requires an employer to pay its employees for work actually performed during the time that an employee remains employed by the employer, unless payment of the wages are dependent upon conditions other than the employee’s efforts. In other words, if payment to Employee (above) is expressly contingent upon Employer’s receipt of funds from the federal government, those wages may not fall under the WPCL’s mandate. If, however, there is no such contingency, Employer must pay Employee her wages.

What happens if Employer agrees to pay Employee some wages, but not the full amount to which she would otherwise be entitled? Answering this question requires reference to federal and State minimum wage laws. If Employer is governed by the federal Fair Labor Standards Act, Employer generally cannot pay Employee reduced wages such that Employee would not be receiving minimum wage. Maryland also has a minimum wage law that imposes similar restrictions.
If you work in the private sector and have been informed that your employer will not be paying you for work you have already performed, please fill out and send the Contact Form on our Contact Uspage. You can also connect with Kelly | Dorsey through FacebookTwitterLinkedin, and Google+. Attorney Darren H. Weiss can be reached via email at dweiss@kellydorseylaw.com or telephone at (410) 740-8750.


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Gotta Have IT!

By Gregory A. Dorsey • Posted 10/08/13

As a former software developer, I was once called upon to develop custom software for a law firm in its defense of a multinational corporation involving hundreds, if not thousands, of plaintiffs. When I started practicing law nearly 17 years ago, I presumed law firms—large and small—were similarly implementing technology into their client engagements, even if not to the scale of a law firm representing a major corporate client with billions of dollars at stake. I quickly learned that was not the case. The same holds true today.

I represent individuals and businesses in litigation where the outcome has the potential to bankrupt the client or force the business to close its doors. Such disputes can threaten the very existence of a company, challenge an ongoing business relationship, or present an important point of principal. Whatever the case, and regardless of the amount in controversy, the attorneys at Kelly | Dorsey are required to be well versed in legal technology and its implementation in the courtroom. Indeed, Kelly | Dorsey Associate Darren H. Weiss has even co-authored an article in the Maryland Bar Journal on the topic. See Hon. Lenore R. Gelfman, Darren Weiss, & Carolyn Mech, A Solo Practitioner’s Guide to the Use of Technology in the Courtroom: A View from the Bench, Md. Bar J., May/June 2012, at 43 (provided with the permission of the Maryland State Bar Association).

The benefits of being cognizant of, and conversant in, cutting-edge technology and tools of the trade extend far beyond mere efficiency. For example, I recall representing a construction and remodeling company in a breach of contract action against homeowners who locked the client out of their residence, preventing the completion of a significant remodeling project. During the course of the multi-day jury trial, there were many times I was called upon to provide assistance to opposing counsel in his use of the courtroom technology—often at his request during his examination of a witness or at the request of the trial judge—all while the jury remained observant from the jury box. To the jury I appeared helpful to my adversary, trusted by the judge, and knowledgeable not only of the intimate facts of my client’s case, but also of evolving high-technology courtrooms. I had clearly been there before. The jury returned a verdict in favor of my client.

A more recent example that comes to mind is my firm’s use of technology throughout the course of an extended multi-million dollar breach of contract and fraud litigation. During the course of motions hearings and a scheduled two-week jury trial, my firm’s expert use of courtroom technology—from digitally manipulating exhibits for presentation purposes to providing multimedia demonstrations in aid of argument—not only compelled opposing counsel to ensure he was equally versed in such technology, but demonstrated to the jury competence, professionalism, and adeptness. Again, judgment was rendered in favor of our clients.

Of course, the use of technology—whether inside or outside of the courtroom—will never guarantee success for our clients. However, there is no question that technological proficiency and responsible use of that technology demonstrates both to clients, other attorneys, and courts of law that counsel is prepared, organized, and equipped with the skills to achieve results. Let the attorneys at Kelly|Dorsey show you how they use technology to their advantage in the course of advancing or defending your legal rights.

If you would like to learn more about Kelly | Dorsey’s business, litigation, and alternative dispute resolution practice groups, please fill out and send the Contact Form on our Contact Us page. You can also connect with Kelly | Dorsey through FacebookTwitterLinkedin, and Google+. Business and Litigation Practice groups Chair Gregory A. Dorsey can be reached via e-mail atgdorsey@kellydorseylaw.com or telephone at (410) 740-8750.


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Individual Liability for Business’ Failure to Pay Payroll Taxes

By Mario Dispenza • Posted 10/03/13

Concerned new clients regularly come to us with the following inquiry: “The IRS can’t hold me personally responsible for my business’ payroll taxes because the business and I are separate entities, right?”

 

Unfortunately, we are often in the position of having to explain to incredulous business owners that the IRS can in fact hold them personally responsible for payroll tax deficiencies. While it is true that incorporating a business or otherwise registering the business as a separate entity generally veils a business owner’s personal assets from liabilities arising out of the conduct of the business, this is not the case when it comes to the IRS and the collection of payroll taxes. Whereas a creditor must ordinarily mount a case for “piercing the corporate veil” in order to reach the personal assets of an individual member of an LLC or a shareholder of a corporation to satisfy a debt, the IRS is not required to do so.

 

The IRS does not have to mount a case to pierce the corporate veil in order to collect past-due payroll taxes from individual business owners. Congress passed a law expressly giving the IRS authority to do so. Title 26 of the United States Code, section 6672(a) (I.R.C. § 6672(a)) expressly states that

 

[a]ny person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.

 

The IRS calls this the “Trust Fund Recovery Penalty” or “TFRP.”

 

Of course, like most tax issues, imposing the TFRP is not a cut-and-dry process. In fact, in reading the language of the statute a few questions may have come to mind, the first of which may be: “What does this even mean?” Plainly put, even if your authority for decisions was limited to financial matters, a personal assessment against you is possible for all or a portion of the debt owed by the business.

 

You may also be asking: “How does the IRS determine whether I was the individual required to make key decisions regarding payroll taxes? I have partners and I’m not even sure that divisions of responsibility are clearly drawn?” Another critical question you may be asking is: “What does the phrase ‘willfully fails’ mean?” Finally, you may be asking: “Can the IRS take my assets without establishing the answers to these questions?”

 

The answer to the final question is no, it cannot. Prior to imposing the TFRP, the IRS is required to establish the answers to the foregoing questions and that you are a responsible individual under the statute. Although it need not pierce the corporate veil, the IRS must adequately establish the pertinent roles of your business’s personnel and whether willfulness was present in the failure to pay payroll taxes. But adequate protection during such a lengthy and complicated process requires the skill and experience of a seasoned representative.

 

If you find yourself being questioned by the IRS concerning your business’s payroll taxes, please do not hesitate to call one of the attorneys at Kelly | Dorsey. We have been there before, and have over 50 years of combined experience dealing with the IRS. Our attorneys will aggressively defend your rights and protect your overriding legal interests while making every effort to ultimately resolve your tax issue.

If you would like to learn more about Kelly | Dorsey’s criminal tax defense, civil tax litigation, IRS audits, and IRS collection practice groups, please fill out and send the Contact Form on our Contact Us page. You can also connect with Kelly|Dorsey through FacebookTwitterLinkedin, and Google+. Tax Controversy Group Chair Gerald W. Kelly can be reached via e-mail atgkelly@kellydorseylaw.com or telephone at (410) 740-8750.


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Just When You’ve Done All You Think You Should Do: Evidentiary Burdens in Establishing Insurability

By Darren H. Weiss • Posted 10/01/13

Are you embroiled in a dispute with your insurer over the extent, existence, and limits of your insurance policy? Have you ever trusted your insurance needs to a broker and later discovered that you never received a policy or that the coverage described to you is different than the coverage you received? If you would answer any of these questions in the affirmative, a recent decision by the United States District Court for the District of Maryland, Boiardi v. Freestate, et al., Case No. 1:11-cv-01676-ELH, may shed some light on your ability to obtain relief from your insurance broker.

In Boiardi, Homeowner purchased a home in Maryland (the “Home”). Although the Home was assigned a fire-risk rating of “Protection Class 10,” which is the worst rating a home can receive based upon proximity and access to fire protection services, at the time of purchase Homeowner was able to secure a policy of insurance (the “Initial Policy”) through Broker. As a consequence of non-payment of premiums, the Initial Policy was cancelled. When Mortgagor’s demands that Homeowner secure insurance for the Home went unanswered, Mortgagor secured a lender-placed policy for the Home (the “Lender-Placed Policy”) which demanded significantly higher premiums to be paid into escrow. Mortgagor sent Homeowner a notice explaining the Lender-Placed policy and that said policy did not provide coverage for, inter alia, “loss or damage to personal property.” When Homeowner, a citizen of the United Kingdom who spent a significant period of time overseas, thereafter learned of the lapsed Initial Policy and the imposition of the Lender-Placed Policy, she contacted Broker. Homeowner asked Broker to secure another policy in lieu of the Lender-Placed Policy. According to Homeowner, Broker asked Homeowner to forward him the notices Mortgagor had sent concerning the Lender-Placed Policy and advised that he would “take care of it.”

Although Broker and his colleagues thereafter attempted to secure a new policy (which presumably would include personal property coverage), the efforts were unsuccessful: one potential insurer refused to issue a policy, and another had not made a decision with knowledge that the Initial Policy had lapsed for nonpayment. As such, no new policy was in place on February 6, 2009, when the Home suffered severe damage as a result of fire. Homeowner’s loss included a significant amount of damage to personal property. Mortgagor remitted to Homeowner payment for structural damage to the Home, but did not compensate Homeowner for loss to personal property because the Lender-Placed Policy—the only policy in place at the time of the fire—did not include coverage for the same. Following the fire, Homeowner alleges that she suffered from severe depression, and even attempted to take her own life. Thereafter, she filed suit against Broker and the agency for which he worked (“Agency”) raising claims of negligence, breach of fiduciary duty, negligent misrepresentation, intentional misrepresentation, and fraud. Broker and Agency moved for summary judgment on all such claims.

After reiterating that Maryland law does not recognize an independent tort for breach of fiduciary duty and granting judgment in favor of Broker and Agency on that claim, the United States District Court for the District of Maryland proceeded to analyze the quantum of proof required to survive summary judgment on negligence and fraud claims and the apposite evidentiary burdens therefor. The court’s discussion centered on Broker’s and Agency’s argument that Homeowner’s damages were not proximately caused by Broker’s and Agency’s failure to secure a new insurance policy for the Home because Homeowner had not established that the Home was insurable. Because the Home was such a high risk for fire damage, argued Broker and Agency, the Home may not have been insurable against fire in the first instance, and as such Broker and Agency would have been unable to secure a policy for the Home. This averment was aimed squarely at Homeowner’s evidentiary burden: Broker and Agency contended that it was Homeowner’s burden to show that an insurance policy was obtainable in order for her to avoid entry of summary judgment.

Affirming what now appears to be a well-established line of legal precedent, the United States District Court for the District of Maryland rejected Broker’s and Agency’s argument. Rather, the court reiterated that “[t]he burden of proving the nonavailability of insurance coverage is on the insurer or the broker, because it is an affirmative defense that is within the peculiar knowledge of those familiar with the market.” (quoting United States Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 499 (4th Cir. 1998)) (emphasis added). The court explained that, in order for an insurer or broker to satisfy his burden to prove the “nonavailability of insurance coverage,” he must do more than merely show that one particular insurer would not supply insurance. The court held that if a reasonable factfinder could conclude that insurance is available—even if a plaintiff has presented no evidence on insurability—summary judgment would be inappropriate. As such, the court denied summary judgment on Homeowner’s claim of negligence, though granted judgment in favor of Broker and Agency on the remaining counts.

The court’s holding illustrates the importance of a defendant’s understanding and appreciation of the evidentiary burden required to successfully defend a suit. Understanding that it was Broker’s and Agency’s burden to establish that no insurance company would have insured the Home, Broker and Agency may have been able to obtain judgment in their favor. Of course, the Court may still have concluded that a genuine dispute of material fact existed given Mortgagor’s ability to secure the Lender-Placed Policy. What the Boiardi case does illuminate, however, is the significance of having adequate protections in place to make sure that you and/or your business are covered in case of catastrophic loss and that, if your coverage is less than ideal due to an insurance broker’s acts or omissions, that broker may be held responsible for his errors and omissions. If you have found yourself in a situation analogous to that presented in Boiardi, or have any questions or concerns related to potential claims you may have arising out of your attempts to obtain insurance coverage, please do not hesitate to contact the seasoned attorneys at Kelly | Dorsey.

If you would like to learn more about Kelly|Dorsey’s business, litigation, and alternative dispute resolution practice groups, please fill out and send the Contact Form on our Contact Us page. You can also connect with Kelly|Dorsey through FacebookTwitter, and Linkedin. Attorney Darren H. Weiss can be reached via email at dweiss@kellydorseylaw.com or telephone at (410) 740-8750.

 


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So, An IRS Special Agent Wants To “Speak to you About Your Taxes.”

By Mario V. Dispenza •

If you’re like most Americans, your immediate question is “what’s a ‘Special Agent’ and what does this mean?”
Unfortunately, it means that the IRS believes that you have committed a crime and they have assigned a highly-skilled, criminal investigator to investigate you and/or your business. Moreover, it’s more likely than not that the polite, professional special agent who contacted you has been investigating you for some time and already believes that there is enough evidence to have you indicted. What s/he hopes to gain from interviewing you is an admission to solidify the criminal case for presentation to the Assistant United States Attorney (AUSA) for the AUSA to bring the case to a Grand Jury, get the indictment and ultimately criminal conviction of you.

IRS Special Agents are Federal Law Enforcement Officers akin to Special Agents from other Federal law enforcement agencies such as the Federal Bureau of Investigation, the United States Secret Service, the Drug Enforcement Administration, and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), just to name a few. Each agency trains its special agents in the particular areas of the Federal Criminal Code that the agency enforces. Like their counterparts in their sister agencies, IRS Special Agents have extensive investigative training and expertise, are authorized to carry firearms, to make arrests, to seize assets, and to execute search warrants.

All of that seem ominous. But the real danger to you is subtle and you won’t even see it coming. In fact, the Special Agent has already started to use it on you. One of the most effective investigative techniques that they’re taught is interrogation, which they call “interviewing” – and they’re very good at it. In fact, they’re so good that contrary to what you have seen in movies and on T.V., you won’t even realize that you’re being interrogated. To you, it will feel like a pleasant conversation because that’s the best interrogation. They know that the more relaxed the interviewee is, the more willing the interviewee is to talk and to trust the interviewer.

I know firsthand. I was trained in those techniques and practiced them in my 25-year career as a Federal Agent, first for the IRS and then for ATF. In fact, the longest prison sentences I saw meted out were in cases in which the defendant had given a statement. The Special Agent who has approached you knows that, too and that’s why s/he wants to talk to you.
Now, you may be saying to yourself “This can’t be right, those folks can’t be after me. I’ve read about those types of investigators and seen movies. They’re the ‘Untouchables’ from the movie, the government agents who go after the Al Capones, organized crime figures, and big drug dealers. Besides, s/he didn’t ‘read me my rights’ or anything like that.” Well, that’s true they do target high-profile crime figures and those cases do make the headlines. But, those cases are not their day-to-day investigations. The IRS has Special Agents in offices around the United States and in a number of offices overseas. They target a broad swath of individuals and businesses, and they have in fact targeted you. Moreover, don’t be lulled into a false sense of security because they didn’t read you any warnings. Depending on the circumstances of the interview, they may not have to read you any warnings. They know the law very well in that regard and they’ve probably arranged the interview to avoid having to do so because they want you relaxed.

So, you’re rightfully concerned. What to do? First and foremost, state clearly to the Special Agent that you want to speak to a lawyer. Make no mistake. The situation has gone beyond finances and your liberty is at stake. Be polite, as confrontation will only unnecessarily inflame a situation. Confirm your identity if they ask for it, but above all say nothing more than you want to speak to a lawyer. Then, call one of our attorneys at Kelly|Dorsey, who collectively have over 50 years of IRS experience. We have been there before. Our attorneys will aggressively defend your constitutional rights and protect your overriding legal interests while ultimately resolving your tax issue.
If you would like to learn more about Kelly|Dorsey’s criminal tax defense, civil tax litigation, IRS audits, and IRS collection practice groups, please fill out and send the Contact Form on our Contact Us page. You can also connect with Kelly|Dorsey through FacebookTwitter, and Linkedin. Tax Controversy Group Chair Attorney Gerald W. Kelly can be reached via email atgkelly@kellydorseylaw.com or telephone at (410) 740-8750.


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