Author Archives: Todd McMurtry

• posted: Nov. 30, 2017
• Todd McMurtry
• Uncategorized

Written By: Todd V. McMurtry

As a Kentucky lawyer, who lives on the Ohio border, I have seen Ohio lawyers, not licensed to practice law in Kentucky, “cross the river” to handle Kentucky cases. I have always cautioned these lawyers to tread carefully as Kentucky’s rules that govern the practice of law are stricter than one might expect. For example, may an attorney not licensed in Kentucky undertake a preliminary investigation of a case over which the courts of the Commonwealth will have jurisdiction? The short answer, yes.  But, an out-of-state attorney may not offer legal advice on the Kentucky matter until that attorney has affiliated with local counsel. Then, once the case is filed, the out-of-state attorney must seek pro hac vice admission and pay the one-time case fee pursuant to Supreme Court Rule (SCR) 3.030(2). While this is a strict interpretation of Kentucky’s Rules of the Supreme Court, it is based upon their plain language. As well, when compared to the American Bar Association’s Model Rules, the Kentucky rules do not provide a specific safe harbor for an attorney, not licensed in Kentucky, to undertake a preliminary investigation before associating with local counsel.

SCR 3.020 Practice of law defined describes the practice of law as “any service rendered involving legal knowledge or legal advice, whether representation, counsel or advocacy in or out of court, rendered in respect to the rights, duties, obligations, liabilities, or business relations of one requiring the services.”  SCR 3.130 (5.5) Unauthorized practice of law; multijurisdictional practice of law governs when and how a lawyer not licensed to practice law in the Commonwealth may do so. Section (a) of the rule states, “a lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction . . .”  Section (c) states, “A lawyer admitted in another United States jurisdiction . . . may provide legal services on a temporary basis in this jurisdiction if such services: (1) comply with SCR 3.030(2) . . .”  This rule states, “A person admitted to practice in another state, but not in this state, shall be permitted to practice a case in this state only if that attorney subjects himself or herself to the jurisdiction and rules of the Supreme Court of Kentucky, pays a one-time per case fee equal to the annual dues paid by those KBA members who have been admitted to practice law for five years or more to the Kentucky Bar Association and engages a member of the Association as co-counsel, whose presence shall be necessary at all trials and at other times when required by the court.”

Compare Kentucky’s rule with the American Bar Association’s Model Rule 5.5, which permits out-of-state lawyers to provide legal services on a temporary basis when they “are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter.” Rule 5.5 (c)(1).  The ABA rule  does not require the payment of fee. The Kentucky rule requiring payment of a fee creates confusion, because it does not advise a lawyer of what he is to do before suit is filed. Must he pay a fee to contact a witness to determine if the case is worth pursuit?

Another exception provided by the ABA Model Rule provides that an out-of-state lawyer may provide legal services on a temporary basis when the services relate to a pending or potential proceeding and when that lawyer reasonably expects that he will be authorized to appear. Rule 5.5 (c)(2). The ABA’s model rules provide guidance on the proper method for out-of-state attorneys wishing to investigate cases in other states and clearly permits them to do so. The Kentucky rules do not.

Fortunately, the Kentucky Supreme Court commentary acknowledges that “Paragraph (c)(1) recognizes that the interests of clients and the public are protected if a lawyer admitted only in another jurisdiction associates with a lawyer to practice in this jurisdiction.” SCR 3.130, cmt. 8. This comment goes on to state that the Kentucky attorney “must actively participate in, and show responsibility for the representation of the client.” Id.

So, for an Ohio attorney, whose client was injured in a car accident in Kentucky to provide “any service rendered involving legal knowledge or legal advice,” such service can only be provided where a Kentucky attorney actively participates. When a case has already been filed, and the attorney reasonably expects to be admitted pro hac vice, that lawyer may provide services on a temporary basis.

This analysis should give special pause to business lawyers, who have no means to seek pro hac vice admission, which provides the Court’s imprimatur that he may practice law in the state. At a minimum, out-of-state attorneys should affiliate with a Kentucky attorney whenever providing legal services, be that the negotiation of a contract or the investigation or a real estate transaction. Such activities require the active involvement of a Kentucky licensed attorney. The alternative is to take your chances.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Oct. 19, 2017
• Todd McMurtry
• Uncategorized

Written By: Todd V. McMurtry

I recently spoke at the Kentucky Bar Association’s Kentucky Law Update on behalf of the Alternative Dispute Resolution Section. One of the topics I addressed related to whether mediators should be credentialed. In general, the concept of requiring a mediator to be credentialed is similar to a lawyer being licensed to practice law or a doctor being licensed to practice medicine. Today, mediators are not credentialed. They may be trained, but they are not required to pass a test.

As I discussed at the seminar, two major institutions recently have considered the issue of credentialing. They are the ABA Task Force on Mediator Credentialing and the International Mediation Institute. The ABA Task Force issued its final report on credentialing to which the International Mediation Institute responded. Both organizations concluded that requiring mediators to become credentialed would not necessarily improve the quality of mediations. Their findings focused on the idea that parties choose mediators whom they know get results. These two bodies did not want to artificially limit the available mediators by requiring them to pass a test. In essence, they concluded that there may be an advantage to provide minimum qualifications through credentialing, but a mediator’s ability to be effective is governed as much by that person’s personality and knowledge of the law as by their training.

I had the opportunity to offer my opinion to the attorneys gathered for the seminar. I agreed with the ABA Task Force’s opinion. But, I did endorse the idea that mediators are well served to attend formal mediation training. I attended the Harvard Mediation Institute, and found it to be extremely helpful. The advantage of obtaining an education in mediation, as opposed to simply doing what works, is that formal instruction does provide additional tools that one may not know. (There is more than one way to obtain a successful result in mediation). As well, to attend a program like Harvard’s exposes the participant to many other successful mediators and mediation strategies.

So, while I do not think that mediators should have to obtain credentials to serve as a mediator, I do think it is a good idea to make the effort to undergo the more formal training provided by schools like Harvard and Pepperdine, both of which are recognized as the best programs in the United States.

Todd V. McMurtry is a Member at Hemmer DeFrank Wessels, PLLC.  He is a commercial trial attorney and Harvard trained mediator.  Todd has been married to his wife, Maria C. Garriga, for 32 years.  They have three adult children.

 

• posted: Oct. 05, 2017
• Todd McMurtry
• Uncategorized

Written By: Todd V. McMurtry

It is common in the ebb and flow of business for corporate directors to move in and out of corporations for a variety reasons. Therefore, it is critical for directors to understand the duties and obligations they have to the companies they serve. This article will focus on a director’s duty not to compete with a company for which he is a director.

Kentucky courts have long recognized that corporate directors owe a corporation they serve fiduciary duties that arise from the common law.  Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189 (Ky. 2013). These fiduciary duties are generally limited to that of care and loyalty.  Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006). The duty of loyalty essentially requires directors to always put the corporation’s interests above their own interests.  This duty is the one implicated when a director decides to compete. In Kentucky, part of that duty is that the director must not acquire an interest in a competing business. Id. 

Kentucky case law has many examples where a director of one company set up a competing business at the same time he was still a director of the company he was about to leave. In Aero Drapery of Kentucky, Inc. v. Engdahl, 507 S.W.2d 166 (Ky. 1974), Engdahl, an officer, director and shareholder of Aero Drapery, recruited key employees to start a competing business, shared confidential information with them, and loaned them money to purchase stock in the new competitor. All of this occurred in an eight-week period prior to Engdahl’s resignation. Needless to say, the Court determined that he violated his duty of loyalty to Aero Drapery. In its holding, the Kentucky Court of Appeals (then the state’s highest court) indicated that Engdahl could not have an antagonistic interest without full disclosure, and that he should have terminated his relationship when he first began his preparations to compete. Id.

Although this seems like a common-sense legal principle, in some circumstances, a person is a director of a number of companies that may compete in some manner. For example, business associates may own multiple companies that own commercial or residential real estate. Certainly circumstances arise where two people own Company A and one of those two is also an owner with a third person of Company B. It is possible that Company A and B might want to bid on the same property at a foreclosure auction. What should the director of both Company A and B do? This circumstance would put the director involved in both companies at risk to violate his duty of loyalty to one or both companies.

The best solution may be found in the Baptist Physicians Lexington case. There, a group of physicians resigned from New Lexington Clinic to join the nearby Baptist Physicians Lexington. The Kentucky Supreme Court analyzed the facts and looked favorably on physicians who left to compete because they had agreements that permitted them to leave and compete under certain circumstances.

This review of the law provides two good recommendations for those who serve as directors of a corporation. The first is to have a written agreement that protects both the company and the director should the director choose to leave to compete. Such an agreement can provide reasonable guidance to both parties. The second is, absent an agreement, to resign before starting a plan to compete; or at a minimum, fully disclose the plan to compete and obtain the consent of the corporation. These recommendations seem like common sense, but it is nevertheless smart to understand these duties and incorporate that understanding into the decision-making process.

Todd V. McMurtry is a Member at Hemmer DeFrank Wessels, PLLC.  He is a commercial trial attorney and Harvard trained mediator.  Todd has been married to his wife, Maria C. Garriga, for 32 years.  They have three adult children.

 

• posted: May 03, 2016
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Todd V. McMurtry

Today most courts require that litigants attempt to mediate a resolution to their dispute before the court will set the matter for trial. For this reason, it is critical that the parties evaluate a number of key variables before they go to mediation.  Here is starting point for the process.

• What is the relationship between the two businesses? Is there the potential to preserve the existing business relationship so that the parties can continue to do business with each other after the dispute is resolved? Or, is this a one-time deal after which the parties will likely have no future business relationship? If there is a possibility that the parties might have a future business relationship, this potential opens up new opportunities to find a business solution to the dispute. Perhaps, as a portion of a settlement, one party can offer a discount on future business? If a future business relationship is unlikely, the negotiation will more likely focus on a financial solution.

• What is the relationship between the principals? Do they get along? Has the situation become emotional in any way? Does the person participating in the mediation have knowledge of the events? Oftentimes, the principals have a long history. Sometimes, they are friends and would prefer to maintain that relationship. The opposite can also be true. No matter, in many situations, the principals will be living in the same industry for years to come.

• What is the best outcome? Is it just about money? Sometimes a successful mediation requires an affirmative act by one of the parties. For example, if one construction company has multiple ongoing projects with one general contractor, the solution to the current problem may involve modifications to all of the existing business. Does a subcontract need to be revised? Does a particular project manager need to be removed? It is always important to discuss potential outcomes with your client before start of mediation. Both of you need to have established parameters to define what is an acceptable outcome.

• When is the time right? Too often, mediation comes too early or too late. If it’s too early the parties may still be ready to fight. All lawyers know that litigation is hard on the client. But, if mediation comes too early, the client may not have experienced some of the negative reinforcement (legal fees and aggravation) that would encourage a resolution. Instead, the client may still have visions of a smashing victory in court. On the opposite end, if the client has already invested a significant sum in the litigation process, it may be forced to go to trial to have any hope of breaking even. So, think carefully about when you should suggest mediation.

• Who is opposing counsel? As we all know, some attorneys just can’t help themselves. A win-win settlement is just not part of their vocabulary. When an attorney like this is on the other side, you should advise your client that mediation may not be productive.

It is always a good idea to reflect carefully on the questions presented in this this blog and those developed from your own experiences before deciding if and when to mediate. Once you make that decision, discuss these issues with your client to improve your chances for successful outcome.

Todd V. McMurtry is a Member at Hemmer DeFrank Wessels, PLLC.  He is a commercial trial attorney and Harvard trained mediator.  Todd has been married to his wife, Maria C. Garriga, for 28 years.  They have three adult children. If you have questions or comments, contact me at tmcmurtry@hemmerlaw.com.

 

• posted: Apr. 05, 2016
• Todd McMurtry
• Uncategorized

Written By: Todd V. McMurtry

The Fair Labor Standards Act (“FLSA”) requires that most employees be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the employee’s regular rate for hours worked over 40 in a workweek.

Section 13(a)(1) of the FLSA, however, provides an exemption from the minimum wage and overtime pay requirements for certain executive, administrative, and professional employees. This exemption is commonly referred to as the “white collar” exemption. In 2015, the Department of Labor (“DOL”) announced major changes to the “white collar” exemption in an effort to increase the number of employees who are eligible for overtime pay. These changes will significantly impact nearly every employer in Kentucky and across the country.

Currently, to qualify for the “white collar” exemption, an employee generally must (1) be salaried; (2) be paid at least $455 per week ($23,660 annually); and (3) primarily perform executive, administrative, or professional duties. The DOL’s proposed changes, however, include raising the minimum salary level to the 40th percentile of weekly earnings for full-time workers. This change would raise the salary threshold to qualify as “white collar” from $455 per week to $970 per week in 2016 ($23,660 to $50,440 annually).

The DOL sent the proposed changes to the White House Office of Management and Budget for final review in mid-March 2016. Experts expect the changes to take effect in just three months. With major changes expected in July, employers should begin to take action now.

Employers should perform internal FLSA audits to determine which employees will be affected by the “white collar” exemption changes. The DOL anticipates that the changes will bring nearly 4.7 million currently exempt employees within the scope of the FLSA’s overtime pay provisions. As part of the internal FLSA audits, employers should consider whether it is necessary to update job descriptions to ensure compliance.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Feb. 29, 2016
• Hemmer DeFrank Wessels PLLC
• Uncategorized

Written By: Todd V. McMurtry

Most lawsuits today are settled through mediation.  For this reason, a lawyer’s skill at managing the mediation process is more critical than ever.  So, a lawyer has to be prepared for the unexpected.  Take for example, a client that has become incapacitated.  Time and circumstance may cause a client who started the case in full possession of her mental faculties, to later suffer diminished capacity to the point of incapacity.  This change imposes additional duties on the lawyer

Common examples of diminished capacity are (1) a spouse suffering debilitating depression as the result of a divorce proceeding, and (2) an elderly client who shows signs of dementia or foggy thinking.  The National Institute of Mental Health defines Major depression as “severe symptoms that interfere with your ability to work, sleep, study, eat, and enjoy life.”  These symptoms would certainly describe a client with diminished capacity.  Similarly, an elderly client may show signs of dementia or clouded thinking caused by Alzheimer’s, a recent surgery or new medication.  Any of these conditions could limit a client’s ability to engage in the mediation process. 

The ABA Model Rules of Professional Conduct, Rule § 1.14 governs this situation.  Subsection (a) states, “When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.”  This rule favors that the lawyer do all she can to work with a client under these adverse circumstances, but it also provides further guidance if the lawyer believes this effort has become untenable.

Subsection (b) states, “When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian.”  By this rule, the “risk of substantial . . . harm” is the trigger for the lawyer to act. 

Either of these scenarios could befall an attorney without notice at mediation.  If faced by a scenario where counsel believes her client may be at risk of substantial harm, such as entering into a damaging mediation agreement, due to incapacity, and where counsel cannot adequately act in the client’s best interest, the best decision is to adjourn the mediation and immediately consult with individuals that have the ability to protect your client from substantial harm.  

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.

 

• posted: Oct. 26, 2015
• Todd McMurtry
• Uncategorized

Written By: Todd V. McMurtry

Over the years I have practiced law, one of the most common complaints that I have encountered is when business partners encounter difficulty in their relationships.  For example, one member may believe another has acted selfishly, diverted a valuable business opportunity or not disclosed significant expenditures.  This article will focus on the duties and obligations that business partners in member-managed Kentucky Limited Liability Companies (“LLC”) have to each other and from where those obligations arise.  It will help members of a member-managed LLC better understand the obligations each has to the other. 

An LLC is a legal entity that among many other benefits protects its members from personal liability for the acts of the LLC.  LLCs can be managed by a manager or by its members.  When managed by its members, each member of the LLC has authority to bind the LLC.  With the exception that it insulates its members from liability, it is similar to a partnership. 

In Kentucky, a member in a member-managed LLC owes the duties required by the operating agreement and the LLC Act. Additionally, a member may still owe duties imposed by the common-law.  An LLC operating agreement is an agreement among the LLC members about how an LLC will function.  Generally, the members can govern themselves in any manner they wish.  This includes limits on the duties that each may have to the other.  But, when an operating agreement does not limit those duties, Kentucky law governs. 

Kentucky Revised Statute 275.170(1) imposes on members a statutory duty of care. A member is liable to another member if his act or failure to act constitutes wanton or reckless misconduct.  To limit liability to wanton or reckless misconduct is consistent with Kentucky’s business judgment rule that protects business decision makers from liability where they act in good faith, on an informed basis, and in a manner honestly believed to be in the best interest of the LLC.  It is logical then that members in a member-managed LLC should always act in an honest and informed manner.  To act otherwise may subject them to liability. 

Members of a member-managed LLC also owe duties to the LLC.  KRS 275.170(2) imposes on members a statutory duty of loyalty. This duty does not apply to the other members.  Reported Kentucky cases suggest this duty applies to conduct such as diverting business from the LLC to oneself or another company that person owns or controls.

In addition to the statutory duties of care and loyalty, the common-law may also impose fiduciary duties on LLC members. The Kentucky courts have held that absent contrary provisions in an operating agreement, members owe each other a common-law fiduciary duty. 

In conclusion, a member of a member-managed LLC owes the other members a duty of care.  A member must act in good faith, on an informed basis and in the best interest of the LLC.  As well, a member should be very familiar with the operating agreement that governs the LLC.  While this seems like common sense, problems with these duties and obligations arise with great frequency. 

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; mickey@finneylawfirm.isoc.net; 513.797.2850.