Gibbons Law Alert

Gibbons Law Alert

Tagged: Contracts

NJ Appellate Division Holds That Residency of Party Making First Contact in Long-Term Business Relationship Is Not “Jurisdictionally Dispositive”

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Posted in General Litigation

On February 28, 2024

Personal jurisdiction over an out-of-state defendant cannot be based on the unilateral acts of an in-state plaintiff. Instead, a New Jersey court may assert jurisdiction over a defendant only if that defendant “reached out” to New Jersey in some meaningful way. Consequently, when an out-of-state defendant is sued by an in-state plaintiff alleging a breach of contract, the court will often look to see which party initiated the contractual relationship when deciding whether it has jurisdiction over the defendant. In a recent published opinion, however, the New Jersey Appellate Division clarified that, depending on the particular facts of a matter, jurisdiction may be asserted over an out-of-state defendant even when an in-state plaintiff initiated the relationship. In Allure Pet Products, LLC v. Donnelly Marketing & Development LLC , the plaintiff, a New Jersey-based supplier of pet products, telephoned the defendant, a Utah-based organizer of trade shows, in 2011 to request booth space for a biennial trade show planned for 2012. The agreement was consummated, and the plaintiff exhibited at the 2012 trade show. In 2013, the defendant mailed to the plaintiff a “special offer” to renew its booth space for the 2014 show. The plaintiff accepted the offer and exhibited at the 2014 show. The same pattern held for the 2016 and 2018 shows: The...

The NLRB’s Ongoing Shift Toward Employee-Friendly Standards

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Posted in Employment Agreements / Labor / Restrictive Covenants

On August 18, 2023

The labor law landscape is constantly in flux as changes in presidential administrations continue to play a significant role in the development of rulemaking and decisional law at the National Labor Relations Board (NLRB or the “Board”). Over the past several months, various NLRB decisions and guidance memorandums have tipped the scales further in the employee’s favor, requiring employers to re-think their current policies and agreements to avoid the pitfalls created by these recent decisions. Employee Handbook Policies The NLRB’s August 2nd opinion in Stericycle, Inc., 372 NLRB No. 113 (2023), found an employee policy unlawful because, from the employee’s perspective, it had a “reasonable tendency” to discourage employees from exercising their rights under the National Labor Relations Act (NLRA). This decision is a departure from the previous standard where the Board examined, “the nature and extent of the potential impact on NLRA rights, and [] legitimate justifications associated with the rule.” Now a policy is unenforceable if an employee could reasonably interpret it to restrict conduct protected under the NLRA, i.e., if the policy was enacted in response to such protected conduct, or if the policy, in practice, limits rights under the NLRA. In other words, the Board’s primary concern is whether an employee believes they cannot avail themselves of the concerted activities protected...

Appellate Division Affirms: Binding Dispute Resolution Provisions in Standard AIA Construction Contracts Are Enforceable

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Posted in Construction

On May 10, 2023

In a recent unpublished opinion, the New Jersey Appellate Division held that an agreement to arbitrate set forth in the binding dispute resolution provision in a standard form American Institute of Architects (AIA) construction contract between a condominium association and contractor was enforceable. The binding dispute resolution provision appears in the AIA standard form as a series of checkboxes in which the parties may select arbitration, litigation, or another dispute mechanism by placing an “X” in one of the boxes. The AIA standard form also contains language that applies if the parties have selected arbitration as the method of binding dispute resolution, including the rules for conducting that arbitration and finalizing an award. Arbor Green Condo. Ass’n, Inc. v. Start 2 Finish Restoration & Bldg. Servs., LLC et al. arose out of Start 2’s alleged deficient workmanship under a construction contract to restore two buildings damaged by a storm, which resulted in Arbor Green terminating the contract. Start 2 subsequently filed two construction liens and two demands for arbitration (one for each building) in accordance with the selected dispute resolution method in the parties’ AIA form agreement. Arbor Green failed to answer the demands for arbitration, resulting in awards in Start 2’s favor. Start 2 then filed two orders to show cause and verified complaints that...

Delaware’s “Freedom of Contract” Approach to Non-Compete Agreements – Even Between Sophisticated Parties in the Sale-of-Business Context – Has Its Limits

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Posted in General Litigation

On March 29, 2023

Non-compete agreements have recently gained a new round of attention with the Federal Trade Commission’s (FTC) proposed rule that would effectively ban employers from imposing non-competes (albeit not in certain sale-of-business scenarios). While lawyers and businesses wait to see whether the FTC rule materializes, the nation’s most prominent business court – the Delaware Court of Chancery – recently issued two decisions demonstrating limits to its contractarian approach to restrictive covenants. Interestingly, both cases arose in the sale-of-business context, in which the court has traditionally enforced relatively broad restrictive covenants negotiated by sophisticated parties. In HighTower Holding, LLC v. Gibson (Vice Chancellor Will, Feb. 9, 2023), the court refused to enforce the parties’ Delaware governing-law provision and, instead, after performing a choice-of-law analysis, applied Alabama law to invalidate the non-compete. In Intertek Testing Services NA, Inc. v. Eastman (Vice Chancellor Will, Mar. 16, 2023), the court found a non-compete provision that prohibited the defendant from competing “anywhere in the world” to be unreasonably broad and, therefore, unenforceable. Delaware governing law provision rejected HighTower Holding, LLC v. Gibson. HighTower, a Delaware limited liability company, purchased a majority interest in an Alabama-based wealth advisory firm owned by Gibson, a licensed financial advisor, and other individuals. As part of the sale, Gibson and his former partners signed a protective agreement...

Proposed Nationwide FTC Ban on Non-Compete Clauses: UPDATE – Virtual Public Forum Scheduled for February 16, 2023

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Posted in General Litigation

On February 14, 2023

As we recently reported, in January 2023, the Federal Trade Commission (FTC) announced a proposed nationwide ban on non-compete clauses. The proposed rule would restrict employers from enforcing all existing and future non-compete agreements with their employees. The FTC announced that it will host a free and open public forum on Thursday, February 16, 2023, from 12 p.m. to 3 p.m. EST, examining the proposed rule and providing the public (workers and business owners) with an opportunity to ask questions, express concerns, and share their past experiences with non-competes. Attendees may register to speak at the forum on the FTC’s website. Registration to speak is on a first come, first served basis. Details about the forum and registration may be found here. The public may also submit written comments on the proposed ban through March 20, 2023, at Regulations.gov. Interested parties should monitor the situation accordingly and consider contacting the firm if they have questions about the proposed rule or seek guidance ahead of the forum and comment period deadline.

The Federal Speak Out Act and Implications for Employers

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Posted in Employment Agreements

On January 10, 2023

In December 2022, President Biden signed into law the Speak Out Act (the “Act”), which has become effective. As discussed below, the Act prohibits pre-dispute nondisclosure and nondisparagement agreements relating to sexual assault and sexual harassment disputes. In connection with the new law, Congress presented, inter alia, the following findings: Sexual harassment and assault continue to be pervasive in the workplace. 81 percent of women and 43 percent of men experience some type of sexual harassment or assault in their lifetime. One in three women has encountered sexual harassment in the workplace, yet an estimated 87 to 94 percent of those who have experienced harassment never file any type of formal complaint. Many women leave their job or industry or pass up advancement opportunities as a result of sexual harassment. To combat sexual harassment and assault, victims must be able to report and publicly disclose such issues. Nondisclosure and nondisparagement provisions in agreements between employers and employees can allow harassment and assault to continue by silencing victims and those with knowledge of the conduct, while protecting those engaging in such conduct, thus allowing it to continue. Prohibiting nondisclosure and nondisparagement clauses will provide transparency around unlawful conduct, allow victims to come forward, hold perpetuators accountable, and make workplaces safer. Explanation of the Act The Act...

Proposed Nationwide FTC Ban on Non-Compete Clauses

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Posted in General Litigation

On January 6, 2023

On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed rule (“Rule”) that would effectively impose a nationwide ban on all existing and future non-compete clauses between workers and employers. By way of background, a non-compete clause is a type of restrictive covenant that prevents a worker from working for a competitor or starting a competing business, generally within a certain geographical area and time frame after the worker’s employment ends. The FTC’s position, as stated in the Rule’s overview, is that non-compete clauses prevent workers from leaving jobs, lower competition for workers, and reduce wages. According to the FTC, non-compete clauses also stop new businesses from forming, stifle entrepreneurship, and prevent novel innovation that would take place if workers were able to freely share ideas. On the other hand, proponents of non-compete clauses have historically argued, among other things, that they are necessary to protect an employer’s confidential information, trade secrets, and intellectual property and its often considerable investment in the training and development of  its employees. Non-compete agreements are currently subject to state law. Key components of the proposed Rule include: Providing that it is an “unfair method of competition” for an employer to enter into a non-compete clause with a worker, attempt to do so, or inform a worker they...

Colorado Is the Latest State to Enact a Data Privacy Law: Here’s What You Need to Know

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Posted in General Litigation / Privacy Class Actions

On August 9, 2021

Colorado has become the third state to enact a comprehensive data privacy statute imposing compliance obligations on legal entities that collect or process the personal data of its residents. The Colorado Privacy Act (CPA) is based on and enforces many of the same key concepts as do other data privacy statutes and regulations. As such, companies that are implementing or updating compliance programs for the European Union’s General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA), and Virginia Consumer Data Protection Act (CDPA) will be familiar with the main provisions of the CPA and likely will have an easier time achieving compliance. There are, however, some important distinctions that companies must consider as part of any ongoing compliance efforts in anticipation of the CPA’s effective date of July 1, 2023. As a threshold matter, the CPA applies to legal entities that (i) conduct business in Colorado or produce or deliver commercial products or services that are “intentionally targeted to residents of Colorado,” and (ii) either (a) control or process personal data of more than 100,000 consumers per year or (b) earn revenue (or receive a discount on goods or services) from the sale of personal data and control or process personal data of more than 25,000 consumers. Notably, the CPA...

Beyond Force Majeure: Government Quarantine Orders May Themselves Excuse Contract Non-Performance

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Posted in General Litigation

On April 27, 2020

The coronavirus pandemic is reverberating throughout commercial sectors, and countless contract obligations are going unperformed—shipments are not being made or accepted, payments are being missed, and contract milestone dates are lapsing every week that the pandemic and business shutdown continues. Those typically rare force majeure provisions are now being scrutinized. (For more on those topics, see previous entries in our COVID-19 “The Coronavirus Pandemic and Your Business: How We Can Help” client alert series, including “Litigation Issues That May Arise.”) And, in New Jersey, the precise language of such a clause is key, as courts in this state have held that they should be “narrowly interpreted as contemplating only events or things of the same general nature or class as those specifically enumerated.” Seitz v. Mark-O-Lite Sign Contractors, Inc., 210 N.J. Super. 646 (N.J. Sup. Ct. Law Div. 1986). With only some force majeure clauses including explicit references to pandemics, or broadly-worded “catch-alls,” the success of a force majeure defense is not necessarily certain. But before (or in addition to) attempting to invoke that force majeure provision, consider whether a court would ultimately determine that contractual non-performance is due to an “Act of God” or rather is being caused by the governmental orders quarantining segments of the population and/or shutting down whole swaths of the...

Force Majeure Provisions in Contracts

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Posted in Transactional Real Estate and Leasing

On March 18, 2020

No one is able to predict how the coronavirus situation will play out or precisely how each of us might be impacted or for how long. It is possible your ability to perform various contractual obligations will be delayed. Many contracts protect parties against an inability to perform due to uncontrollable circumstances, at least in some situations, by inclusion of a so-called force majeure provision. This provision excuses certain behavior in certain situations determined to be beyond the control of the party failing to perform. Obviously, the text of the particular provision is critical to understanding what it says. We are writing to alert you that many force majeure provisions include a mandatory notice provision. If you don’t provide the required notice, you are estopped from raising force majeure as a defense against a claim arising out of your failure to perform. So if the coronavirus pandemic is interfering with your ability to perform contractual obligations, we urge you to review your contracts and deliver any required notices so as to protect yourself to the extent possible, and if your contract mandates that any other steps be taken to preserve the defense, take those steps as well. Gibbons stands ready to assist with these concerns. If you have any questions regarding force majeure provisions in...

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