Say 'Ello' to Public Benefit Corporations

On October 23, 2014, Ello, the burgeoning social network, announced that it converted to a Public Benefit Corporation. Ello describes itself as “a simple, beautiful, and ad-free social network created by a small group of artists and designers.” Ello’s business model appears to fly in the face of the current market trend of monetizing social networks – through the sales of advertising and user data.

In its press release, the founders and investors of Ello said “[t]o assure in the strongest possible way that Ello stays focused on its mission to be a different kind of social network, Ello has converted to a State of Delaware Public Benefit Corporation (PBC). A PBC is a special for-profit company in the USA that operates to produce a benefit for society as a whole. As a PBC, Ello is legally obligated to take its impact on society into account in every decision it makes.”

While Ello used Delaware law to convert to a Public Benefit Corporation, Pennsylvania amended its Business Corporation Law to provide the Benefit Corporation option for local companies effective as of January 23, 2013. In Pennsylvania, a Benefit Corporation shall have a purpose of creating a general public benefit, which means a “material positive impact on society and the environment, taken as a whole and assessed against a third-party standard, from the business and operations of a benefit corporation.” 15 Pa.C.S.A. Section 3302. A Benefit Corporation may also commit to specific public benefit purposes, including:

(1) providing low-income or underserved individuals or communities with beneficial products or services;

(2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;

(3) preserving the environment;

(4) improving human health;

(5) promoting the arts, sciences or advancement of knowledge;

(6) promoting economic development through support of initiatives that increase access to capital for emerging and growing technology enterprises, facilitate the transfer and commercial adoption of new technologies, provide technical and business support to emerging and growing technology enterprises or form support partnerships that support those objectives;

(7) increasing the flow of capital to entities with a public benefit purpose; and

(8) the accomplishment of any other particular benefit for society or the environment.

Pennsylvania Benefit Corporations may be formed as a new entity, or an existing business corporation may convert to a Benefit Corporation.  The Benefit Corporation bridges the gap between nonprofit corporations and domestic business corporations and is a way to publicly display a for-profit business entity’s commitment to one or more of the above public benefits. Although there are no tax benefits as there would be with a nonprofit, a for-profit Benefit Corporation has a publicly-stated, legally-binding commitment to providing one or more benefits to society and does not solely consider maximizing value for shareholders as its sole purpose.  It enables the corporation to ensure it holds itself accountable to its desire to make a positive impact on society and it could play an important role in branding the company for marketing purposes. 

 
Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and practices in a variety of areas.

Be Careful What You Text

A story about a man who dumped his fiancé via text message found its way into my inbox recently. While arguably poor form to end a serious relationship via text message, that wasn’t what caught my attention. It was the fact that the content of the text message ended up costing the man $53,000.00. In ending the relationship, the gentlemen promised to reimburse his fiancé for money she spent on the wedding preparations and added the line “plus you get a $50,000.00 parting ring”. A few weeks later the gentlemen attempted to retrieve the ring from his now former fiancé, claiming by law, she had to return the ring. However, a New York judge ruled differently. While engagement rings have been found to be conditional gifts that do not vest until marriage, the text message stating the ring was a parting gift changed the nature of the ring and it was no longer seen as a conditional gift.  The court ruled that the jilted woman was the rightful owner of the $53,000.00 ring.

Pennsylvania courts have also held that engagement rings are conditional gifts that do not vest until marriage occurs. Generally, that means if the engagement is broken, the ring goes back to the person who purchased it, regardless of fault. Unless of course the nature of the gift is changed, say by a text message. Be careful what you text, you don’t know what it could cost you.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning and Domestic Relations 

What is Just Compensation?

Tonight I am speaking at the Pipeline Informational Event sponsored by Lancaster County Conservancy and Lancaster Farmland Trust.  I have been told that some property owners mistakenly believe that if they fail to accept the offer that is made to them or to negotiate an agreement with the pipeline company, their property can be taken without their consent, and that they would be unpaid.  This is totally incorrect.  A governmental agency or public utility can take property through eminent domain only if the landowner is paid just compensation.  

What is just compensation?  Payment of just compensation is what makes eminent domain, the involuntary taking of private property by government, constitutional.  The Fifth Amendment to the United States Constitution states, “nor shall private property be taken for public use without just compensation.” 

“Just compensation” is defined in the Pennsylvania Eminent Domain Code as “the difference between the fair market value of the condemnee’s entire property interest immediately before the condemnation and as unaffected by the condemnation and the fair market value of the property interest remaining immediately after the condemnation and as affected by the condemnation.” 

If only a portion of the property is taken (as is the case with the pipeline easements) just compensation includes another element in addition to compensation for the property taken.  The second element is damages for injury to the remainder of the property after taking, sometimes called severance damages. 

There are many court cases, and federal and state statutes and regulations addressing what is the appropriate just compensation to be paid for condemned property.  Every property is different, and what represents just compensation for one landowner will differ from another. 

The panel of attorneys and appraisers speaking at tonight’s event will address valuation factors determining how much property owners will be paid for the easements sought by Williams to install and maintain the pipeline.  We will also address the temporary construction easements and just compensation for that taking.  Any property owner who has been advised that their property is subject to acquisition by Williams or by any other utility or governmental agency will benefit from obtaining more information about landowners’ rights and condemnors’ obligations before signing any agreement. 

The primary point I want to stress tonight is that a landowner who does not reach an agreement with the condemning agency, such as Williams, must still be paid just compensation for property that is taken. The failure of the parties to reach an amicable agreement does not leave the landowner without remedy or recourse.  The landowner cannot be compelled to agree with the condemnor as to the amount of money paid, and has the right to challenge the amount of just compensation in court.

More information on the event can be found here.  

Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and practices in a variety of areas.

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Criminal Charges, Convictions and Employment

When I read that Lancaster City Council voted on October 1, 2014 to delete the box inquiring whether an employment applicant had been convicted of a crime from Lancaster City’s employment application form, it reminded me of how conflicted our positions are on criminal activity and employment. 

The “Ban the Box” movement is a nationwide effort to reduce the effects of criminal convictions on employment. At the same time that Council is explaining that taking this action is necessary to give people a fair chance for a job, others are criticizing NFL officials for failing to ban football players from the League when accused of off-field violence, sometimes before they are even charged, much less convicted. Is domestic violence different from other crimes, or are football players different from Lancaster City employees?  What does this mean for other employers?

Pennsylvania’s Criminal History Record Information Act provides that an employer may consider felony and misdemeanor convictions “only to the extent to which they relate to the applicant’s suitability for employment." The Act is often cited for the proposition that summary offenses and charges that do not rise to convictions may not be considered in hiring. 

Notwithstanding the Criminal History Record Information Act, each body of the Pennsylvania General Assembly has enacted substantially similar legislation that would require an applicant for a position involving direct contact with children to provide a written statement of whether the applicant “has been the subject of an abuse or sexual misconduct investigation by any employer . . . unless the investigation resulted in a finding that the allegations were false.”  Employers will be asked to indicate whether a former employee “was the subject of any abuse or sexual misconduct investigation.”  This legislation, referred to as “Pass the Trash”, has the admirable goal of protecting school children from sexual abuse. But considering an “investigation” conducted by a prior employer and perhaps in the remote past certainly doesn’t comport with the policy requiring consideration only of criminal convictions, not unproven charges.  See my blog post on Employment Law Lessons from the Penn State Scandal.

Now, Lancaster City Council will consider a resolution calling on other employers to “Ban the Box.”  At the same time, the Pennsylvania legislature may in its few remaining session days enact “Pass the Trash” legislation. This is an interesting area where employers’ obligation to protect workers, customers and students, employees’ civil rights and public policy to employ those who have paid their debt to society intersect. 

Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and has practiced in the area of employment law for over 25 years.

Understanding the Changes for Powers of Attorney in Pennsylvania

You may have heard about the new power of attorney legislation that became the law in Pennsylvania in July.  If you have executed a power of attorney or are thinking about executing a power of attorney, you may be wondering how that legislation affects you.

Some of the changes made by the law, such as protecting banks from liability, were effective immediately.  Other changes, such as changes to the Notice and Acknowledgement parts of the power of attorney will become effective January 1, 2015.  Almost every day, new articles appear and professional meetings are held as the various communities such as banks, lawyers and others concerned with estate planning and elder affairs consider the interpretation and implementation of the changes.

If you have a properly executed power of attorney, your power of attorney is valid and will remain valid even after all of the new changes take effect.

Under any circumstances, you should always look at your estate planning documents every few years, or when you have major changes within your family, to ensure that they still reflect your wishes. 

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Pipelines and Eminent Domain

Last Wednesday, I attended an excellent program sponsored by the Penn State Cooperative Extension, “Making Sense of Natural Gas Pipelines and Right-of-Way Agreements”.  Over the years, I have represented both condemnors and condemnees and was interested to hear how the acquisition process works with the pipeline proposed by Williams in Lancaster County.  I learned many practical and tactical considerations that landowners and their attorneys can use to their benefit.

What is commonly referred to as the “Williams Pipeline” (part of the Atlantic Sunrise Expansion Project to be built by Williams’ subsidiary, Transco) is an interstate pipeline and, therefore, acquisition of the property necessary to construct the pipeline is governed by federal law, not state law.  (Other pipelines, called gathering and distribution lines, are regulated under state law.) 

A natural gas company, such as Williams, is required to obtain a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission (FERC).  This process is currently underway and comments on the potential environmental effects, reasonable alternatives and measures to avoid or lessen environmental impacts can be submitted to the FERC on or before August 18, 2014.  Because the comment period is limited, in order to preserve rights, landowners and other stakeholders are advised to act now.  The FERC issued a Notice of Intent to Prepare an Environmental Impact Statement which includes information as to how to comment. 

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Pennsylvania Liquor Control Board Lowers Fee for Gaming Licenses

The Pennsylvania Liquor Control Board announced yesterday that it was lowering the license fee for a tavern gaming license from $2,000 to $500.  It’s safe to assume that the PLCB has had to take a long hard look at its tavern gaming licensing process, application fees and regulations because of the minimal interest that eligible bars and restaurants have had in seeking the gaming license.  When the tavern gaming legislation was first passed, the state estimated that it would generate nearly $100,000,000 in revenue through the licensing process and the tax generated on the games themselves.  Legislators soon realized that that estimate was grossly out of line and through the first half of 2014, there have only been 21 tavern gaming licenses issued according to the PLCB.

While the reduction of this license fee appears to be some recognition that the tavern gaming process needs to be addressed, licensees should still understand that this reduction affects only one of the multiple fees that are paid throughout the process.  In order to obtain a tavern gaming license, the applicant must still submit an application packet along with a $2,000 non-refundable application fee.  That $2,000 fee is split between the PLCB for its processing of the application and the Pennsylvania Gaming Commission who conducts the background investigation.  If an applicant makes it through that initial phase and if their application is approved, in order to receive the license, the applicant must pay this newer, reduced fee of $500.  So as a whole, while the initial cost of obtaining the license is reduced, it is still significant at a total of $2,500.

Whether this is a significant enough change to generate some more interest in the tavern gaming licenses remains to be determined. 

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and practices in a variety of areas including Business Law and Liquor License matters.

 

Real Estate Disclosures - Murder/Suicide Not a Defect

 Last Monday, July 21, 2014, the Pennsylvania Supreme Court entered what should be the final opinion with respect to whether a home seller in Pennsylvania needs to disclose that a murder/suicide took place in the home.  I had posted two previous blog articles, one on February 28, 2012, entitled “What Do You Mean My House Is Haunted”, and a second one on January 30, 2013, entitled “Real Estate Disclosures – Does It Matter If My House Is Haunted”.

You may remember that this case involved a lawsuit by a home buyer who, after settlement, discovered that the home she had bought and improved had been the site of a murder/suicide where a previous owner had allegedly killed his wife and himself on the property. She contended she would not have bought the house had she known of this crime. Originally a three judge panel of the Superior Court held, in a two to one decision, that the murder/suicide could be a material defect in the property requiring disclosure under Pennsylvania disclosure law. In January of 2013, the Superior Court reversed the panel’s decision on the basis that the disclosure of psychological defects would be a descent down a very slippery slope. 

The case was appealed to the Supreme Court and, in Monday’s decision, the Supreme Court, in what they stated was a matter of first impression, decided the underlying question . . . whether psychological stigmas are material defects. The Court determined that to require the disclosure of psychological defects would clearly be beyond the intent of the disclosure law. The Plaintiff argued that the psychological stigma on the property reduced its value and that the failure to disclose this tragic event constituted a material defect. The Court, again mentioning the slippery slope of determining what a particular buyer may find objectionable, stated that efforts to define those that would warrant mandatory disclosure would be a Sisyphean task. (We will all remember that Sisyphus was punished for chronic deceitfulness by being compelled to roll an immense boulder up a hill.)

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Countdown for Annual Tax Assessment Appeal Filing

The deadline for challenging your 2014-2015 Lancaster County property assessment is August 1, 2014.  Appeals filed after August 1, 2014 won’t be heard until 2015 and won’t take effect until 2016.  And if you are relying upon an appraisal to support your appeal, the written appraisal report must be filed with the Lancaster County Assessment Office by August 15, 2014.  This means the time to act is now.

How do you know whether an assessment appeal is warranted?  We look at the current assessment, the common level ratio, the current total tax millage rate and evidence of current fair market value.  Current assessments and property account numbers are posted online. (The property account number, and in some cases, the assessment, is listed on recently issued school district real estate tax notices.)  The common level ratio (CLR) is the factor applied to the assessment that converts the assessed value into fair market value. As of July 1, 2014, the common level ratio increased to 1.26. Total tax millage rates now include 2014-2015 school district taxes.     

Property owners should multiply their assessment by the CLR (1.26) to see if the fair market value is accurate. For example, an assessment of $100,000 implies a fair market value of $126,000 [$100,000 times 1.26]. 

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The Impact of Adoption

The other night I found myself sitting with my children watching America’s Got Talent. While America’s Got Talent is clearly a popular show, it is not one which I have seen before. That being said, my children and I became engrossed in the wonder of this all-American talent show where some acts were silly, others dangerous and some downright amazing. What struck me most of all however, was a young man named Jacob, who at just eighteen years old sang a moving rendition of John Mayer’s “Waiting”. It wasn’t so much that he was young, handsome and extremely talented, but it was his back story that touched my heart. You see, Jacob shared with the world that he had been the child of neglectful parents who are addicted to drugs and ultimately, their inability to care for him and his sister caused them to be placed in foster care.  At the time, Jacob was only five years old and spent several years bouncing from foster home to foster home. He described this experience as being like someone’s luggage, never knowing where you would end up. Clearly what he wanted most was a family that loved him and the stability of knowing where he would end up.

Fortunately for Jacob, he and his sister were adopted, and before he took the stage that night his adoptive mother shared words of encouragement and gave him a big hug. Jacob walked confidently out on to the stage and delivered an extraordinary performance. But again, even then, it was not the performance that struck me, but instead, the words of his mother after hearing Jacob’s backstory as portrayed by NBC.  She said without hesitation, “That is my son, and I am his mother.” Those simple but impactful words are the epitome of what adoption means to me and my law practice. The thousands of children that are adopted every day are impacted by the generosity and compassion of the families that add them to their home. That addition is not done for fame or fortune, it is not to gloat or to be perceived as a good person.  Instead, it is a simple, yet profound relationship just as Jacob’s mom suggested, “That is my son, and I am his mother”.

For families who open their homes and their hearts to children awaiting adoption, the impact of the decision to include a child as part of a family will change that child’s life forever. Jacob is a perfect example of that. At five years old he was trapped in a neglectful home and then removed to the instability and uncertainty of the foster care system. Jacob’s parents’ decision to adopt him, changed his life forever and allowed him to be a strong confident eighteen year old, standing on a stage in New York City, singing a song for hundreds of thousands of people in that theater and watching across the country.  How could anyone ever question the impact of adoption?

Holly Filius is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Adoption