From The General Counsel’s Desk:

SOCIAL MEDIA:

The Rules of the Online Game – Part I

By: David J. Lynam

Lynam & Associates, Chicagoand Barrington, Illinois

            Employers and workers alike know that “social media” has become a buzzword used to encompass everything from marketing strategies to what employees are wasting time with at work. While most people know the basics of social media, like the sites and what they can do for you, most people don’t realize that there are rules for what you post, who you post to, who you search and what you can control.

Although social media interactions mostly take place in the online world, there can be very real benefits and consequences for any employer, including claims of defamation and/or discrimination based on the business’s use of these sites.  In addition to employers and business owners, employees can face embarrassment, discipline, and even termination for doing the wrong thing on a social network.  For example, it was just reported that Apple, Inc. – which has strict rules regarding online comments by its employees – fired a store employee for making unflattering comments about Apple on his Facebook page.

This two-part series will examine the benefits and the rules for social media, including Facebook, Twitter, and online review sites. In this Part I, we will discuss the benefits and rules from the employer and business owner standpoint, describing what you need to know about online marketing, interactions with employees, and online reviews. Part II will view the benefits and procedures from an employee’s perspective.

Marketing and Benefits

Despite the rules that apply, using social media is an integral part of doing business today: employees and clients – both current and potential alike – look to your online presence just as they do your in-person presence. Company profiles on Twitter, Facebook, and LinkedIn can be a resource for potential clients and potential employees, as well as a useful forum for you interact with each of these groups.  However, as in print media, any marketing and information provided via online social media must be truthful and not misleading. Most social media sites have their own policies and rules regarding promotions and content that you may post, which you should always review before utilizing the sites. Additionally, you should monitor the privacy functions of these sites and determine whether you want employees, clients, and/or the general public all viewing the same content, or whether you would like to specify what content specific groups should be allowed to access.

Are you “friends” with your employees?                  

Employers must know the rules before utilizing any benefits of social media. As little as five years ago, employers may have safely assumed that social networking was only an issue with employees under the age of 25. However, Pew Research Center has reported that the use of social networking sites like Facebook and Twitter has increased 100% in last year for those 65 and older, meaning 1 in 4 of that age group now have an account. These sites currently account for 25% of all time spent online in theU.S., making social networking the number one web activity. As such, social media is no longer something that employers and business owners can ignore.

An employer may initially wish to completely control or prohibit its employees’ online comments and interactions in an effort to avoid any possible problems. However, not only is total control or prohibition implausible, the courts have also ruled it to be illegal. Just as the National Labor Relations Act prevents employers from keeping their employees from meeting outside of work to discuss working conditions, the courts have found that employees “meeting” online and talking about working conditions in any form, even in a Facebook post, is protected labor speech. As such, there are guidelines employers should follow when it comes to regulating employees online conduct.

First, there should be a written policy circulated to and signed off on by every employee. The policy should detail what is and is not acceptable social networking behavior for employees. Your business has every right to ensure your employees’ online profiles do not reflect negatively on your company. In addition, the policy should make sure that certain information – including names of your company’s customers, any protectable trade information, and/or confidential client information – is kept confidential. The policy should address the fact that the company’s anti-discrimination, anti-harassment, and confidentiality policies still apply to employees when they are online, even during after work hours. Keep in mind, though, that while some employer rights are retained, the policy cannot be so broad as to prevent any discussion of work.

Once a policy is established, employees should be given a chance to review and ask questions on what will be considered proper and what could lead to discipline.  Ideally, there should be a way for employees to report possible problematic activity and request advice as to appropriateness before posting on social media sites.

In addition to developing a written social networking policy for employees, beware of how you access your employees’ online identities. You should disclose who you are if “friending” an employee, and should never sign on to an employee’s profile, whether or not you have permission to do so. While it may be tempting to see how an employee acts when the boss is not around, courts have considered some aspects of online profiles to be private, and you may be violating an employee’s rights by accessing his or her site.

Finally, while employers are allowed to perform online research on any prospective employee before hiring, they still must follow all anti-discrimination policies and ensure that (1) the research does not violate the prospective employee’s privacy rights, (2) the research is accurate, and (3) certain protected characteristics which can be discovered on these sites, such as race, do not enter into the hiring decision.

Online Review and Rating Sites       

Employees are not the only important social networking presence.  Whether or not you actively maintain an online presence for your business, one is likely being built; a presence that is extremely important and can be viewed by any potential customers or employees.

While every business owner knows that word-of-mouth recommendations are useful for business, the new reality is that a Tweet or a Yelp review could be just as useful, if not more. The Washington Post reported a study by Michael Luca ofHarvardBusinessSchoolshowing that a rating increase of one star on Yelp (an online rating and review site) leads to a 5-9 percent increase in revenue. While restaurant or store reviews and choices may be one thing, the use of online reviews in professional fields has also increased as people grow more comfortable in trusting online reviews and ratings.

An employer or business owner should not only regularly review what is being said in online reviews, but should know that there are some ways to control what is being said – and also some ways to get in trouble in this area. As an employer or business owner, you can use tools such as Google Alerts to keep up with what is being said about your company online and to use existing reviews – both positive and negative – to assess how your company is doing.

If you see that your company’s status is either not what you would like to see or is non-existent, there are some ways to encourage customers to provide reviews. The best course of action is to kindly ask your satisfied clients to take the time to write a review. However, be aware that there are potential legal pitfalls to asking people to post favorable reviews for your business. The Federal Trade Commission has stated that as with any product endorsement, it must be clear if the reviewer/blogger/rater has been paid or has any connection to the company.  This means that you cannot give cash to customers to write a positive review, nor can your employees pose as customers online without disclosing their status.  These rules extend to any promotion of your products, so if you decide to tout a product of yours on an industry message board, you must disclose your affiliation with the company.

One inescapable reality of online reviews is that some are bound to be negative. If you are concerned about the number or seriousness of negative reviews of your company, most online review sites will allow you to directly respond. In addition, some review sites require some verification of truthfulness and you can demand the removal of any false statements. Our law firm has had success in obtaining the removal of negative statements on behalf of clients, which can be laborious. Otherwise, there is frequently little that can be done about truthful negative opinions other than having thick skin and ensuring that there are offsetting positive comments and reviews.

Conclusion

The best advice is to view your actions on social media sites just as you would any in-person interaction: if you would not rifle through a future employee’s private information in person, don’t do it online; if you would not pose as a satisfied client to lure in future clients, don’t do it online; and if an employee is allowed to make the comment while talking to co-workers outside of work, they may be able to make it online.  Working with legal counsel to develop an appropriate social networking policy and consulting legal counsel when using a new online marketing strategy will help a business utilize all that these forums have to offer, without running into an unanticipated and costly lawsuit.

Flexible Spending Account Balances

Unless your employer has adopted the 2 ½-month grace period permitted by theIRS, be sure to check your balances on any flexible spending accounts and empty them out by December 31. Failure to do so could cause forfeiture of any money remaining in your account.

In addition, you will want to be careful in deciding what amount you should put into your flex plan for 2012, because a $2,500 annual cap on FSA payins will go into effect in 2013.

Year End Gifts

If making a gift by check, be sure the recipient of the check deposits it in 2011 if you want the money to count as a 2011 gift for purposes of the gift tax. Delivery of a certified check to the recipient prior to December 31 will accomplish the same goal, even if the recipient does not make the deposit until next year. Keep in mind that if you don’t fully exhaust the $13,000-per-donee exclusion this year, the shortfall does not carry over.

Similarly, if giving a gift of securities, be sure to endorse them over to the donee and deliver them by year-end if you want the gift to count for 2011.

Deductions

If writing a check for a deductible item, be sure to mail the check before Dec. 31 to guarantee a 2011 write-off. Even if the checks don’t clear until after January 1, you can still claim the deduction for 2011.

If charging deductible items, be sure to follow the proper procedures. If a charge is made on a retail store charge account, you may claim the deduction for the item only in the tax year in which you pay the bill. However, if the charge is made with a bank credit card, you claim the deduction for the tax year in which the goods were charged, regardless of when you pay the bill.

Plan Deadlines

Pay careful attention to the various deadlines affecting retirement plans, IRAs and Coverdells. Most employer plans, including Keoghs, must be established by Dec. 31 to get a deduction for 2011. For SEPs, though, you will have until the due date for filing your return plus any extension. Accordingly, self-employed taxpayers who miss the Dec. 31 deadline for Keogh setup and who wish to adopt a SEP instead will have time to set up a SEP. Contributions to plans for 2011 are due no later than October 17, 2012.

Regular IRAs, on the other hand, must be established byApril 16, 2012in order to take advantage of deductions for 2011. All payins are due by that date as well. Extensions on time to file will not buy you additional time in this case.

In addition, nondeductible payins to IRAs and Roth IRAs and contributions to Coverdell education savings accounts are also due by April 16, 2012.

From The General Counsel’s Desk:

“Nightmare in Long Branch”

By: David J. Lynam

Lynam & Associates, Chicago and Barrington, Illinois

Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing, end them? -Hamlet, Act III, Scene 1

Introduction

As those who work with homeowners or condominium associations know, one of the things these associations won’t tell you up front is that “when in doubt, sue” is a maxim they often live by. It is estimated that at any given time, 60% of these types of associations in Illinois are involved in legal proceedings, and in other states that percentage is even higher. Developers and contractors also frequently become engaged in litigation when something in the project goes wrong, and the legal version of finger pointing begins. Sometimes that finger can be pointed at you.

Julius Ballanco, the Editorial Director of PM Engineer magazine, immediate past president of the American Society of Plumbing Engineers, and a sought after specialist on code compliance, was recently confronted with a daunting choice: to spend unknown thousands in legal fees to defend himself against a negligence claim brought by a condominium association, to “take arms against a sea of troubles”,  or spend a large but certain amount and concede that it is sometimes better to “suffer the slings and arrows of outrageous fortune” and choose to fight another day. Did Mr. Ballanco make the correct choice? Eight years and over $150,000 later, Ballanco would reflect on his experience as a “living nightmare.”

Ballanco’s story begins in Long Branch, New Jersey, where Renaissance Estates, L.P., enlisted Ballanco and his firm, JB Engineering and Code Consulting, P.C., to work on a large residential development. The development consisted of one free-standing and three interconnected mid-rise buildings, an underground garage, seven sets of townhouse buildings, six single-family residences, and a clubhouse.

Not only was this a big project, but because it was right on the ocean, it posed some unique problems. According to Ballanco, he and his firm had to take hurricane influence factors into account, the pilings became complicated because the development was on sand, and structural loading was difficult. In fact, Ballanco and his firm had to make many changes in the middle of the project because parts of the building were too heavy. In addition, any exterior sprinklers were exposed to wind and saltwater, further complicating the project.

There was another special issue with the development: snowbirds. Many of the New Jersey residents flew south during the winter, packing their bags, turning off the heat, and leaving their homes behind. As a result, all of the pipes had to have insulation or heat tracing and had to be placed correctly to avoid freezing problems.

Ballanco and his firm had done much design work and his experiences in plumbing engineering were quite varied. As president of ASPE and elsewhere, Ballanco has always been involved in seminars and other educational endeavors. He has written several codes and standards, including the new Illustrated Plumbing Codes Design Handbook published this spring. A large portion of his experience is in forensic engineering—examining system or component failures after litigation over a problem has commenced.

Due to his work in forensic engineering, Ballanco has had plenty of experience with the legal system, both at the negotiation table and in a trial or deposition. However, the Renaissance Estates project took Ballanco by surprise. After he worked on the project for two-and-a-half years, the condominium association sued him for defective sprinkler designs and for allegedly directing the sprinkler contractor to put glycol into the CPVC pipes used in one of the three interconnected mid-rise buildings.

Immediately after the condominium association sued, it offered to settle for $25,000, but Ballanco rejected the offer. Like many professionals who pride themselves on their expertise, the monetary value of settlement did not sit well with him. “I rejected all settlement demands involving money,” Ballanco said. “I called it legal extortion. It just ticked me off… [The attorney] started up from the very beginning and asked for $25,000 from my company, and I told him he was out of his mind.”

Ballanco chose instead to stick to his guns by fighting the condominium association and the various cross-claims brought by the contractor. While the monetary cost of the fight would prove to be high, the stress and anxiety brought on by the litigation was also immense. “It strained my marriage to no end,” Ballanco said. “My wife was yelling, ‘Why did you ever take that project?’ Talk about sleepless nights, I had many.” As his story demonstrates, no litigation is simple or easy, even when you are clearly in the right. Because proving that you are right can be a very costly thing, settlement should always be an option. Strange things can happen once you reach the litigation stage, and in Ballanco’s case, they did happen.

The Condominium Association’s Accusations

When Ballanco was sued, he felt his reputation was in as much danger as his pocketbook, if not more. The condominium association and the general contractor each claimed that Ballanco had not adequately designed the sprinkler systems. The condominium association’s expert witness, another plumbing engineer, claimed he found that Ballanco’s plumbing system design did not comply with the law.

On the other side, Ballanco argued that his designs were both adequate and legal, and that he knew the development’s problems were caused by the sprinkler contractor. His biggest concern, however, was the lawsuit’s threat to his credibility: “The worst was the attack on my integrity, which annoyed the living daylights out of me, because that’s all I have to sell,” Ballanco said.

As it turned out, Ballanco’s designs were adequate, but the sprinkler contractor’s execution of his designs had caused a number of problems throughout the development: the sprinkler contractor had not installed the type of sprinklers that Ballanco had indicated in his plans, and it used the very antifreeze solution that Ballanco had advised against using in every conversation he had with the contractor. In the end, Ballanco’s task became showing that his designs were solid and that any problems were not his fault.

Once the case entered the evidence-gathering stage, Ballanco got his chance to confront the facts and present his own side of the story. He flew to New Jersey for his deposition, where the condominium association’s lawyers questioned him for hours. The deposition was, in Ballanco’s words, contentious: “I continued to refer, during the deposition, to their expert [in colorful terms]. I used words like that just because I was so frustrated. Finally, the attorney blew up at me, and it got very combative. People were holding everybody back. And [the attorney] goes, ‘I’m sick and tired of you calling this guy a moron!’ And I said, ‘Well, if you let me finish the answer, I’ll tell you why he is moron, and I’ll prove it to you.’”

Ballanco’s name calling stemmed from his personal feelings about the opposition’s faulty analysis of his design. The 54,000-square-foot underground parking garage was so big that it required two sprinkler systems under the NFPA 13 Standard for the Installation of Sprinkler Systems. In the expert witness’s analysis, he erroneously collapsed the two systems into one system and claimed that the design was illegal. Ballanco didn’t know that the expert witness had made the error in the analysis until he arrived at the New Jersey deposition. “They showed me a photograph of it, and I just got livid when I saw it,” he said. “The first time I saw the photograph was at the deposition, and I knew exactly where it was and exactly what they had done.”

Giving his deposition, Ballanco’s experiences as a forensic engineer and as an expert witness helped him to convince the plaintiffs to drop the claims based on his allegedly faulty design. “Their contention was that I didn’t provide an adequate design—that disappeared,” he said. “The details were adequate, the specifications were adequate, and they had nothing they could make stick at trial. Those issues disappeared quickly.”

The Tampered Memorandum

With the design claims dropped, the case seemed all but over. But then the entirely unexpected happened. Ballanco had noticed early on in the case that the expert’s copy of a memorandum written by Ballanco to the sprinkler contractor had been altered. The memorandum addressed an issue that had dogged Ballanco since the beginning of the project: one of the buildings was to have CPVC pipe, meaning that the antifreeze agent used in most steel pipes, glycol, could not be used, as it could degrade the CPVC pipes. Instead, a more expensive antifreeze agent, glycerin, was required. In the lawsuit, the condominium association was accusing him of telling the sprinkler contractor to use the corrosive glycol, and wanted him to pay for the damaged sprinkler system.

Ballanco had focused on the issue of CPVC’s sensitivity to glycol antifreeze from the beginning of the project. In fact, he ended every conversation with the contractors by mentioning that they had to use glycerine in the CPVC pipes. “It got to be a standing joke with them,” he said. “To the point that, whenever we were going to end the conversation, he’d say ‘I know, glycerin, not glycol, right?’ and I’d say ‘Yes!’”

Despite all of Ballanco’s warnings, the sprinkler contractors still ended up using the cheaper, more corrosive glycol antifreeze in the CPVC pipes. Afterwards, Ballanco wrote a memorandum on the antifreeze issue, stating that the sprinklers should have been filled with a glycerine-based antifreeze solution. The memorandum went on to mention that the CPVC resin supplier had OK’d the use of glycol in lower concentrations in CPVC pipes. A portion of Ballanco’s original memorandum is shown below:

The memorandum presented by the condominium association was quite different. The first paragraph, in which Ballanco clearly stated that glycerine should have been used instead of glycol, had been deleted. Without that paragraph, the memorandum seems to condone the use of glycol. It appeared that Ballanco had recommended the use of glycol and that he was to blame for the building’s sprinkler problems. If Ballanco was indeed found responsible, he would have had to pay to replace the entire sprinkler system.

Even worse, the sprinkler contractor died early on in the litigation. Witnesses dying or disappearing is at an increased potential in cases making their way to trial. Without the contractor available to cross-examine, Ballanco had to make his case on his own testimony.

Even though it was clear that there was a paragraph missing, the memo was admitted as evidence. So even though Ballanco was confident that the memo had been improperly presented and overall the evidence supported his belief, there were basic evidentiary problems that had to be addressed.

Ultimately, Ballanco was not found responsible for the sprinkler system problems. The judge found that even if the tampered memorandum was accurate, the memorandum was clear that the corrosive glycol solution had already been used in the CPVC pipes. The damage had already been done by the time Ballanco wrote the memorandum, and therefore he could not be held responsible for the damaged pipes. After eight years of litigation and countless sleepless nights, the “living nightmare” of a case was over, and Ballanco could finally return to his business and family.

The Insurance Problem

The court ultimately put an end to Ballanco’s part of the case by dismissing the condominium association’s case against him. However, Ballanco was still stuck with his legal fees, not to mention all of the potential work he missed out on while dealing with the case. For example, in the first year of litigation alone, he dedicated an estimated $30,000 worth of his time to the case. As to the total amount of time he spent on the case, he said, “We stopped counting when I put in over $100,000 of my time.” Obviously, the legal fees were only the beginning of the costs Ballanco incurred during the case.

Ballanco’s legal fees could have been covered by insurance. But as it turned out, the people he trusted never got around to buying the insurance he thought he had. Starting off as a code consultant for the project, insurance was not as much of an issue, because code consultants never directly sign off on any plans or drawings. However, once he began , the contractors convinced him to design the sprinkler system. Now acting as a designer, he was no longer just a code consultant,  and had significant legal exposure.

Once his role in the project changed, Ballanco told the contractor he was not covered by Errors & Omissions (E&O) insurance coverage and that they would have to cover him as an additional insured. He said, “Their response was ‘don’t worry, we’ll cover you for that.’ That was from day one.” Although it was in his contract, the developer never actually added Ballanco as an additional insured, and he therefore had no claim to any coverage. “When the lawsuits started flying, they all forgot that they had said word one to me [about insurance].” he said.

Ballanco said that one of his primary mistakes was his trusting the developer to procure the insurance he needed to protect himself. “Their contention was, ‘You don’t need this, we’ve got you covered, we’ll take care of you, and we’ll roll it over onto the sprinkler contractor,’” he said. He had placed his trust in the developer, and later said, “I should have never done that.”

Of course, with his own E&O insurance, Ballanco’s legal fees would have been covered. However, his principles he so vigorously stood by would have suffered, because with insurance coverage he would have had to surrender at least some control over the conduct of the lawsuit. An insurance company would have desired a settlement of the case at an early stage, depriving Ballanco of his chance to prove himself right. However, in another way, Ballanco had lost control of something else: his ability bring the suit against him to an end.

Looking back, Ballanco has his regrets. He would have chosen insurance coverage over what transpired: “I would have preferred to have insurance. Though I would have argued against the settling,” he said. As Ballanco’s story demonstrates, plumbing designers and engineers are subjected to many potential dilemmas when faced with legal action. Below, we identify some ways to help you navigate these dilemmas.

How Can You Avoid the Same Result?

First off, it is important you understand that you may not be able to avoid litigation, because when an injury occurs, parties like those that Ballanco encountered will attempt to shift responsibility to those who have the least leverage and financial wherewithal to defend themselves. However, you can attempt to avoid Ballanco’s financial losses through (1) carefully drafting agreements that attempt to shift responsibility, and (2) the use of insurance.

Engineers and designers can protect themselves by acquiring their own individual insurance. Individual insurance may be necessary because professionals cannot use their LLC or corporation as a shield against professional negligence claims. Commercial General Liability and E&O policies cover amounts you have to pay if sued, and will pay your legal fees throughout litigation (up to the coverage limits, which are unique to each policy). Such insurance policies are expensive, but in the end the costs may pale in comparison to the price of litigation. It is up to each individual to evaluate and determine which burden they would rather bear.

If you are unable or unwilling to obtain your own insurance, it may be possible to get limited insurance coverage under another contractor’s CGL (Commercial General Liability) policy by being listed as an “additional insured” on that policy. An essential step in being able to piggy-back as an “additional insured” on contractor policies is to be sure that a requirement to that effect is written into the contract you sign, along with the appropriate indemnity clause. While Ballanco was correct in requesting to be covered as an additional insured, he should have been more persistent in obtaining a Certificate of Insurance listing him as such. Without such a certificate or a copy of the policy with his name appearing as an additional insured, he had no way of establishing that he had any right to coverage.

Certificates of insurance are generally issued by the insurance provider and list the names of the insurer, the insured, and any parties who are additional insured’s. In addition, they list the names and monetary limits of any policies held by the insured. While a certificate of insurance is a form of proof of insurance, it is not a statement of coverage. Statements of coverage are contained in the specific policies themselves, and those are where you get your rights and coverage. As such, it crucial to make sure that both the certificate and the policy list you as an additional insured.

It is worth noting that that there is a difference between being an “additional insured” and being an “additional named insured” under the policy. Depending on the language of the contract of insurance, being an “additional named insured” may negate certain coverages that an “additional insured” would have, and vice versa. Unfortunately, there is no standard language for additional insured coverage on CGL policies. It is vital that you evaluate and understand which of these options would be most beneficial to you, and that you negotiate each contract accordingly. If you are sued based solely on your own negligence, there may be no coverage despite being listed as an additional insured. In addition, some states recognize a party listed as an additional insured differently than others, so where you might be covered as an additional insured in one state, another state’s courts may not recognize that coverage. As always, it is important to know your rights and the insurer’s obligations under a policy.

Another important point to know is that if you are listed as an additional insured on multiple policies, you may be able to pick and choose which insurance provider to use. For example, Illinois’s targeted tender rule allows you to choose which insurance carrier will cover litigation costs if you are sued. Institute of London Underwriters v. Hartford Fire Ins. Co., 234 Ill.App.3d 70 (Ill. App. Ct. 1992). You should be aware, however, that as of the writing of this article, this targeted tender rule is unique to Illinois.

Lessons

There are lessons to be learned from the Mr. Ballanco’s “Nightmare in Long Branch.” First, always take the initiative to obtain insurance and do not rely on others to make sure your interests are protected. Next, if you forego obtaining your own insurance, and are relying on another party’s coverage, be sure you understand the rights that go along with being named in that policy. Furthermore, although Ballanco found himself in a bad situation, it could have been even worse if not for his familiarity with the legal process. As such, you should take the time to help yourself by getting to know your legal rights. Finally, choosing whether to prove that an antagonist is wrong and that you are right can come with a heavy cost. Sometimes it is better to “suffer the slings and arrows of outrageous fortune” by controlling the outcome and paying a negotiated amount beforehand, thus saving the fight for another day.

By following our recommendations, and learning from Julius Ballanco’s experience, the next time adversity strikes, you may be much better equipped to avoid the next “Nightmare in Long Branch.”

An increase isn’t always obvious on the face of the assessment notice—Cook County’s notices showed no change in the gross assessment for many commercial properties, but other changes in assessment percentage, etc., will result in big bills. In many cases, commercial property owners can lower their tax bills by proving that the Assessor has overestimated the income they receive from their properties.

Even if your residential or commercial property tax assessment was lowered, remember that local governments still need as much or more money than ever; you may be paying more in property taxes next year, even after a reduced assessment, because you may have to pay a larger portion of the levy than before.

Filing a residential property tax appeal is relatively simple and can be done online at http://www.cookcountyboardofreview.com. Usually appeals have to be filed within thirty days of receiving your home’s “Notice of Proposed Assessed Valuation.”

If you are considering filing an appeal on your commercial property’s assessment, please contact Lynam & Associates.

From The General Counsel’s Desk:

“The Pen is Indeed Mighty: Contract Language Limits Design Professionals’ Duties”

By: David J. Lynam

Lynam & Associates, Chicago and Barrington, Illinois

“I shall fulfill my contract, no more nor less.” – Lily Langtry

Introduction

When a design professional or engineer decides to sign a contract and undertake a design job, he obviously makes himself liable to the party with whom he agrees to work. What that same design professional may not anticipate is being liable to completely unrelated third parties for injuries they may suffer. These third parties will frequently use expert testimony in an effort to establish that the design professional owed a duty of care to the general public and that his actions deviated from that duty of care, even when the expert’s opinion assumes duties and obligations that are absent from or conflict with the terms of the design professional’s contract. In some cases, these claimants were successful in circumventing contracts, and design professionals were found negligent and liable for the claimant’s injuries. However, the Illinois Supreme Court recently reinforced its position that a design professional’s duties and obligations are limited to those outlined in the contract in Thompson v. Gordon, 241 Ill. 2d 428 (2011). This article will discuss the court’s decision and the lessons it provides to design professionals.

Negligence Claims Against Design Professionals

As in any negligence suit, a third party claimant bringing a negligence claim against a design professional must show the necessary elements of negligence. First and foremost, the claimant must show that the design professional owed a duty of care to the claimant. Unlike the other elements of negligence, the purported duty of care is a “question of law,” and is determined by the judge or court, and not by a jury. This is the point where the claimant will bring an expert witness, who will attempt to enlarge or modify the contractual duties of the design professional to include a duty of care not contemplated by the parties to the contract. It was at this point that the Illinois Supreme Court decided that contracts govern the duties owed, and in doing so limited the power of expert witnesses and the ability of third parties to circumvent contracts to bring negligence claims against design professionals.

The Decision: Thompson v. Illinois

        A. Factual Background and Case History

In Thompson v. Illinois, the design-professionals-turned-defendants had contracted to design the following: (1) improvements to roads leading to a shopping mall, and (2) a replacement of a pre-existing bridge deck over the nearby interstate. Crucial to the court’s decision in the case, the contract specifically outlined that the roads were to be “improved,” while the bridge deck was to be “replaced.” The original bridge deck had a concrete median which was six inches high and four feet wide, and the replacement deck designed by the defendants had a median seven inches high and four feet wide.

Over six years after the work had been completed, a horrific accident occurred on the bridge. A driver lost control of her car, jumped the median, and struck an oncoming car, killing two of its passengers and seriously injuring a third. The wife of the man killed in the accident became the plaintiff in the case, suing, among others, the engineers for negligence. To prove that the engineers owed her a duty and breached it, the plaintiff enlisted an expert witness to testify that they failed to meet the ordinary standard of care. In the expert’s opinion, the standard of care would have required the defendants to consider and analyze crossover protection for the bridge, and that if they had worked within the standard of care, a larger barrier providing crossover protection would have been recommended and built on the bridge. Essentially, the expert witness argued that if the defendants had followed his definition of their duty of care, the accident never would have happened.

The trial court followed the holding in Ferentchak v. Village of Frankfort, 105Ill. 2d 474 (1986), and found that the defendants’ duty to plaintiff was circumscribed by the contract it had signed for the job, and that the scope of their work was determined by their contractual undertaking. Since the contract did not specifically call for the assessment of the median barrier, the defendants owed no duty to perform such assessments and the trial court granted summary judgment in favor of the defendants.

The appellate court, however, reversed the trial court and remanded for further proceedings. While the appellate court agreed with the defendants that the contract required them only to submit plans to rebuild the bridge deck and median exactly as it already existed, it also found that the defendants were obligated to act within the prescribed standard of care. This standard of care would require them to perform the contractual task with the degree of skill and diligence normally employed by professional engineers. The appellate court then found that there was at least a question of fact as to whether the defendants had a duty to consider and design an improved median barrier. Therefore, it overruled the trial court’s summary judgment and re-opened the possibility that the defendants would be liable to the plaintiff. It was at this point that the defendants appealed to the Illinois Supreme Court.

        B. Illinois Supreme Court Limits Design Professionals’ Duties to Contract

In its decision, the Illinois Supreme Court first addressed whether the Scope of Service clause in the defendants’ contract gave rise to a duty to design or recommend a median providing better crossover protection. The Court reiterated that its primary objective in construing a contract is to interpret it to mean what the parties intended it to mean by looking at the contract and its language as a whole, construing any unambiguous words to have their ordinary and plain meanings. In reading the contract according to those rules, the Court determined that the term “replacement” in the contract meant strictly that, and did not require any investigation into improvements or crossover protection for the bridge deck. The Court found this to be true because the Scope of Services section of the contract specifically used the word “improvements” in the section about the roads to the shopping mall and “replacement” in the section about the bridge deck. If the defendants were supposed to analyze improvements to the bridge deck, the contract clearly would have kept using the word “improvement.” However, because it did not, the defendants only had a duty to design a replacement bridge deck.

Next, the Court examined whether the contract imposed a professional duty of care on defendants’ work. In doing so, the Court looked to the language of the contract’s Standard of Care provision, which stated: “The standard of care applicable to ENGINEER’s services will be the degree of skill and diligence normally employed by professional engineers or consultants performing the same or similar services.” The Court held that the appellate court wrongly relied on a case that held a professional’s standard of care is “the use of the same degree of knowledge, skill and ability as an ordinarily careful professional would exercise under similar circumstances.” Crucial to the Court’s decision that the two standards were different was that the defendants’ contract included the words “performing the same or similar services.” In this case, the “same or similar” service to which the standard applied was replacing the bridge deck, and not improving or considering adding a barrier to it, because those were the services which the defendants unambiguously agreed to perform.

Finally, the Court discusses why the appellate court was wrong to distinguish this case from Ferentchak v. Village of Frankfort. In doing so, the Court reaffirms the court’s holding in Ferentchak that the degree of skill and care required of a design professional depends on his contractual obligation. Because in this case both the work and standard of care obligations were outlined in the contract, the defendants’ duties were limited to those contained therein. As the Court goes on to explain, it cannot and will not impose a duty or obligation that was not provided for in the contract, or add any terms or meanings to terms or conditions to which the parties have not assented. If a provision could easily be put in a contract but is not, the court will not construe it to be present. As such, design professionals’ duties are limited to those which are included in the contract.

Lessons to Learn from Thompson v. Gordon

While Thompson v. Illinois did not involve plumbing engineers, there are a number of lessons that all design professionals can learn from the case and the Illinois Supreme Court’s decision.

First, it is of course important to always have a written contract for any and all work you are to perform. Without a contract that sets forth both the scope of services and the standard of care, you may find yourself liable to parties who use expert witnesses to expand and extend your duties beyond those to which you thought you agreed.

Second, make sure that the terms of the contract are clear and unambiguous. Be certain that the terms in the contract specifically describe the services you are to perform, and only those services. Including ambiguous language as to the services you are to perform can open up questions about both those services and your duty of care owed while performing those services. Such questions can expose you to liability which could have been avoided with a carefully and clearly worded contract.

Third, have your attorney review each and every contract before agreeing to its terms. Attorneys are trained and experienced in making sure that contract language is as specific, narrowly tailored, and as clear as possible. By having your attorney review each and every contract, you will be maximizing the protection that a contract can offer you. As Thompson v. Gordon illustrates, a design professional may be shielded from liability solely by reason of the language used in a contract.

Finally, it is important to keep in mind that this decision was made by the Illinois Supreme Court, and as such is only binding in that state. However, most courts will find that the language of the design professional’s contract is the primary determinant of his legal duties and will only look elsewhere (i.e. expert witnesses) when the contract language is ambiguous. Your attorney can give you a clearer picture of what standards of care exist in your jurisdiction and allow you to better protect yourself. Regardless of where you live, though, the suggestions for contract drafting and review in this section are universally important.

The presentation’s three main points were:

1. The Illinois Estate Tax is back for 2011 and beyond. In addition, while the Federal estate tax now recognizes the portability of exclusion amounts between spouses, Illinois does not. For Illinois Estate Tax purposes, each spouse’s exclusion amount is limited to $2 million, regardless of the exclusion amount used by the first-deceased spouse.
2. Old funding formulas in estate plans no longer work the way they were intended, due to the difference between the new Federal and Illinois exclusion amounts.
3. Illinois Estate Tax Returns, IL Form 700, are required for all estates of over $2 million. In addition, if anIllinoisreturn is required, a Federal Estate Tax Return, Form 706, must also be prepared. This is so even when no Federal Estate Tax is due.

If you would like any further information or have questions relating to estate planning, estate taxes, or any other related matter, feel free to contact Lynam & Associates.

From The General Counsel’s Desk:

Green Litigation: A Failure to LEED Can Be Worse Than You Think

By: David J. Lynam and Carolyn E. Sorock
Lynam & Associates, Chicago and Barrington, Illinois

Green building has been getting a bad rap. One of the major green certification systems, the Leadership in Energy and Environmental Design (LEED), was recently involved in a class action lawsuit, in which plaintiffs alleged that the LEED building rating system made false promises as to performance of LEED certified buildings and manipulated data showing that LEED-constructed buildings were more efficient than standard-constructed buildings. (Gifford et al v. U.S. Green Building Council, Docket No. 10 CIV. 7747.) A federal court stopped one city from enforcing its green building code under the legal doctrine of federal preemption, because the federal government has already taken over the area of energy regulation. (AHRI v. City of Albuquerque, decided October 3, 2008.) Even green advertising is affected: the Federal Trade Commission (FTC) has issued new guidelines restricting the use of “green” and other marketing that claims a product or service’s environmental benefits. (FTC, Guides for the Use of Environmental Marketing Claims.)

With the 2008 financial crisis and the decline of building in general, green plumbing’s prominence is growing. As explained by LEED faculty member Kathleen Smith in a U.S. Green Building Council (USGBC) publication, “there is a lot of low-hanging fruit that new and existing buildings can implement. For example, installing new plumbing fixtures in existing buildings.” In a recent renovation project, Smith found that retrofitting the plumbing had the greatest impact. “The owner[s] decided to retrofit the plumbing fixtures in the whole building when they realized how much water they consumed (the water closets were 3.5 gpf [gallons per flush], urinals were 1.6 gpf, etc.).”

Several third-party organizations have created green building certification programs with emphases on efficient and environmentally-friendly water use. The most widely-used certification program is the USGBC’s LEED certifications. LEED requires improvements in water efficiency as one of the five categories used to determine a project’s rating of Certified, Silver, Gold, or Platinum. In the water efficiency categories, projects can earn Water Efficient Landscaping credits, an Innovative Wastewater Technology credit, and a Water Use Reduction credit (for 20-percent and 30-percent reductions in water use).

Forty-five states and hundreds of local governments have incorporated LEED’s certification requirements into legislation requiring or incentivizing the use of LEED standards. According to the USGBC, LEED-related spending will generate an additional $12.5 billion dollars in GDP and will support 230,000 jobs that will in turn provide $10.7 billion in labor earnings from 2009 to 2013. LEED-certified buildings will also produce $4.8 billion in energy savings during the same five-year time period.

As more governmental bodies add incentives for green building, such as tax breaks, expedited permitting, grants, and marketing assistance, the stakes for green engineers grow higher. Installing a plumbing system that does not meet LEED’s certification requirements will not only bring costs in retrofitting the noncompliant system, but also losses in tax incentives, grants, and economic losses connected to delay in achieving the desired certification. Design profes-sionals are now faced with lawsuits claiming enormous damages as a result of the refusal of the sought-after LEED certification.

There are several steps you can take to protect yourself and your business from major litigation based on green building claims.

Insurance

You can now insure against green building claims with a new insurance policy. For example, Argo Insurance Brokers, Inc., a regional insurance broker, offers the first green professional liability policy for engineers and other design professionals doing work for green building projects. The policy covers design services “provided as an accredited/certified professional in the areas of sustainable site development, water savings, energy efficiency, materials and resource selection, indoor environmental quality, and computer aided drafting and design services.”

Argo also offers Green Reputation Coverage, which could reimburse you for your costs of defending against “adverse green claims,” which are lawsuits alleging that you failed to comply with green building standards, and “adverse green publicity events,” which are negative reports in the media regarding the green project. However, the policy does not appear to offer coverage specifically for a project that fails to achieve the required LEED certification.

Other insurance carriers are also covering green building liability with broader property and environmental endorsements that can be added to your liability insurance policy. For example, you could obtain an endorsement that includes liability for underground pipes and cisterns used to capture water runoff, which is ordinarily excluded from liability policies. These kinds of policies could pro-tect you against the building damage that green building techniques may cause, but would not protect you against damages stemming from a failure to achieve the correct certification for a project.

If you purchase a green insurance policy or endorsement, it could cover warran-ties and guarantees you make in design agreements. However, it is not yet clear how courts will interpret these new types of policies and endorsements. Con-sider the costs carefully when picking a green policy or endorsement.

Don’t Make any Promises

While an insurance policy can protect you after a green building client files suit against you, there are many steps you can take to prevent litigation from the beginning of a project.

The best rule to follow during design agreement negotiations is to limit, as much as possible, the promises you make. This starts with managing expectations from the beginning of negotiations, meaning that you may have to budget in some extra time so that you can address all of the green building aspects of a project. As you begin conversations with owners, contractors, and consultants, keep in mind that you need to develop reasonable expectations about what you can achieve. Remember the many factors that are out of your control, particularly if you are retrofitting an older building.

The next step is to control the words of your design agreement to make sure that you aren’t signing onto more responsibility than you can afford. This means avoiding language stating that you, the design professional, “certifies” or “warrants” a certain result (such as green building certification), or language stating that “the design will achieve” a certain result. Avoid specific guidelines as to water savings and avoid promising a specific amount of LEED points.

Of course, the owner or contractor you’re negotiating with may ask you to sign LEED documentation forms that require you to “declare,” “affirm,” or “certify” certain responsibilities to the U.S.G.B.C. Thus, you may want to insert a section into your design agreement that makes it clear that you are not making any promises beyond those to the U.S.G.B.C. in the LEED documentation forms you signed. State explicitly that you were giving your professional opinion to the best of your knowledge, not promising or guaranteeing anything.

Make sure that you aren’t promising to assume more liability than is appropriate. In lawsuits over green building projects, often the largest amounts of money demanded are “consequential damages.” If an owner or contractor doesn’t achieve the necessary LEED certification, damages will go beyond merely making repairs or replacing systems—you may be held liable for consequential damages, which include lost tax benefits, lost income from the building, and other economic losses. Often, design professionals overlook contractual liability avoidance techniques that can minimize exposure to risk. For example, you may be able to avoid paying such damages if the owner or contractor signs a consequential damages waiver, which could significantly limit the amount of money an owner or contractor could claim from you. Additional waivers are useful if you plan to use new, untested products or designs.

Beyond limiting the promises that you make, important points of green contract negotiation include determining who will be handling the paperwork. Which party will be submitting the documentation necessary to achieving the desired green certification and documentation necessary to getting the tax breaks and other privileges for green builders? Which party is responsible for keeping track of the information required and assembling it for such documentation? Who will pay for that work?

Finally, before signing a design agreement, make sure that you review all of the parts relating to your liability carefully, preferably with a lawyer: review the warranty, damages, and “act of God” sections. Pay attention to the insurance section, and double check that you have fulfilled the contract’s insurance requirements.

When doing all of the above contract negotiations, have an attorney draft the special language necessary for green building contracts and protect yourself against adverse green lawsuits. With careful contract negotiation and contract drafting, you may limit or avoid costly litigation.

Green building and sustainable design will likely grow in importance and popularity in coming years. President Obama’s 2011 state of the union address announced several new green initiatives, including tax incentives aimed at decreasing the energy use of commercial buildings by 20-percent and increased Small Business Administration (SBA) financing to provide small businesses with the capital for energy efficient retrofit projects. In order to fully take advantage of the economic opportunities available in the green building and green engineering businesses, protect yourself, whether in the form of an insurance policy or in the form of careful contract drafting with the help of an experienced attorney.

From The General Counsel’s Desk:

Protecting your Trademark, Protecting your Brand

By: David J. Lynam and Carolyn E. Sorock, Esqs.

ASPE®, CPD®, Plumbing Systems & Design® are all familiar toASPEmembers and supporters as being names directly identified with the Society. They are all also United States registered trademarks owned and carefully safeguarded by ASPE. They represent powerful rights and protections in an environment increasingly occupied by scammers, cyber-squatters, rip off artists, and sound-alike competitors.

AsASPE’s General Counsel, we protect and monitorASPE’s trademarks, and we recognize that the competitive business landscape is in a state of great flux. As demand shrinks, marketing and branding may become a larger part of your business responsibilities. While basic marketing will get your name out to customers, branding will ensure that your name actually means something to customers. AtASPE’s Convention, we had the pleasure of meeting a number ofASPE’s members at the convention’s seminars, booths, and parties. We noticed that many ofASPE’s members are business owners, meaning that many of you are juggling the demands of a business—keeping accounts, making employees happy, and marketing the business—along with the usual demands of plumbing engineering.

A branding strategy goes beyond simply identifying your business with basic marketing strategies; a brand should evoke the strengths of your business in your customers’ minds and help them to remember your business the next time they have plumbing engineering needs. Think of the Ivory brand, which started as White Soap and was rebranded as Ivory Soap. “White” is merely descriptive, while “Ivory” is memorable with connotations of beauty and exotic origins. With some tweaks to your marketing model, you can build a brand name and brand loyalty, meaning that customers will keep going to you for their plumbing products and services needs, and they will be recommending your products and services to their friends.

The legal side of marketing and branding is trademark law, a unique area of the law in that complying with trademark law directly helps your business. We’ll be outlining some easy tips and tricks to protect your trademark. We’ll show you how protecting your trademark will help to build, solidify, and protect your business’s name.

You may already own a trademark or service mark. American trademark law allows you to acquire legal rights in a trademark simply by using it, whether the mark is a logo, a word, or phrase, or even distinctive packaging or colors. No registration is required to acquire very basic trademark rights. For example, if you run a business called “The Jolly Plumbing Engineer Company,” and have a website or run a yellow pages advertisement for “The Jolly Plumbing Engineer,” you’ve earned some trademark rights in that name. (But, do make sure you are properly registered in your home state if you’re doing business under a different name than your business name.)  Filing for aU.S.trademark for your name confers the full set of rights that are conferred by official trademark status, as discussed later.

Once you start using a mark—say, “The Jolly Plumbing Engineer”—here are our tips and tricks for using the trademark to both enhance your legal rights and to create a powerful brand:

Pick your trademark carefully

Trademark Strategy: Many considerations go into picking a brand name, so it may seem distracting to have to worry about whether a name will be protectable and registrable with the U.S. Trademark Office, too. However, by consulting an expert, such as a trademark lawyer, before picking a brand, you can avoid spending thousands on a designed logo, promotional materials, and a website address when your brand is being used by someone else or is not eligible for trademark protection.

Brand Strategy: Taking the time to consult an expert before picking out a trademark makes business sense. A brand is very useful, but it also is a major investment for your company. Having a distinctive and legally-protected brand name makes your business more valuable, as intellectual property like trademarks often form a large part of the price paid in business acquisitions and mergers because of the good faith value in the brand name that is protected by trademark law.

Use a brand name, not your business name

Trademark Strategy: You cannot simply trademark your business name, but many businesses have trademark rights in their names. If you’re trademarking your business name, it’s best to drop the “Inc.,” “Ltd.,” “Co.” or “LLC,” as you cannot use such designations if you decide to register your trademark. Then, you have to show that you have used your business name as a trademark. Using a name as a trademark means printing your business name in distinctively bolder, larger, and different lettering than the lettering you use for your address, phone number, and other business information. Use of contrasting color also distinguishes your business name as a trademark. If your business name is simply your surname (e.g., “Smith and Co.”), you may have to select a new trademark that is different than your business name, as surnames are generally not trademarkable.

Brand Strategy: Good branding calls for a brand name that is memorable and evocative of your selling points—for example, quality, value, reputability, and prestige. In many cases, the best brand name to sell your company’s products or services may not be the business name that you registered with the Secretary of State when you first started your business. Many business owners do not fully consider their brand (and do not consider its trademarkability) when choosing their business’s name—they’re thinking about raising capital and sticking to their business plans. To pick out a trademark, take some time to consider your brand, the qualities you want it to convey, and do a quick Google search to see how many other businesses are using the name already. Most importantly, check to see if the internet address using your brand name (e.g., www.jollyplumbingengineer.com) is available—if not, you should probably keep looking. Ask business associates, friends, and employees about the strengths of your business and for suggested brand names.

Make your brand memorable

Trademark Strategy: Not all trademarks are equally strong. Although you can get a weak trademark registered, you won’t have much protection against others who want to use the same trademark. It’s best to pick a strong trademark when deciding on a mark, and the strongest trademarks are those that are unique. The strongest marks are ones that are not words found in any language, such as Pepsi and Xerox. Other strong marks are those that use a known word in an unfamiliar way, such as “Apple” for computers. Marks that are merely descriptive of an aspect of your goods or services, such as “Quality” or “Speedy,” are weaker and much more difficult to register. However, if your mark is descriptive in a fanciful, more subtle way, such as “Coppertone” for a tanning lotion, it is a strong mark.

Brand Strategy: Smart trademarking and smart branding may seem to be running contrary when it comes to picking a brand name. At first, you may want to snatch up a brand name that conveys the qualities that make your products or services the best choice for a consumer, such as “Quality Plumbing,” “Value Plumbing,” or “Best Plumbing.” However, a smart brand strategy should lead you to pick memorable and unique brand names for your business, because hundreds of other companies have probably tried using the “Best” or “Quality” brands and have failed. Better branding insists on using a unique brand that will distinguish you from the other providers of plumbing engineering services or plumbing equipment.

Use your brand consistently

Trademark Strategy: Many businesses undermine their own trademark rights by using their trademarks/brand names inconsistently. Make sure you decide on a trademark and use it the same way every time you advertise for your business or mark the goods you are selling. Take a look at your business’s website—do you use your business name in some places and your trademark in some other places? It shouldn’t be “The Jolly Plumbing Engineer, Inc.” in some places, “The Jolly Plumbing Engineer” in others, and “Mr. Jolly Plumbing Engineer” in another place. Finally, using your internet address/url/domain name (e.g. www.jollyplumbingengineer.com) does not count as using your trademark unless your trademark actually includes the “www” and “.com.”

Brand Strategy: Picking a single brand name and using it consistently doesn’t only strengthen your legal rights in the brand, it will also strengthen your brand name. This is the most basic step in brand management—picking a brand and sticking to it. Using a single brand name in the same way each time you use it, whether on your website, on your trucks, or on your flyers, will solidify your brand in the eyes of consumers. In fact, if you don’t use your brand name consistently, you won’t really have a brand at all.

Get everyone on board

Trademark Strategy: To protect trademarks at companies with many employees and outside contractors, everyone needs to know about your trademark goals—not just your top officers and marketing department. Communicate with your web designers, graphic designers, and anyone who has a hand in designing your promotional materials. Communicate with your sales and customer service team and make sure they know how to use your brand name, know to always refer to your company by that name, and know what the brand name represents. Everyone needs to know to put your business name in large letters if you’re using it as a trademark. Make sure all employees use the same lettering and spelling and leave out extraneous words every time they use the brand name.

Brand Strategy: Streamlining your approach to your brand name by informing your sales team and outside marketing contractors about your plan for trademark protection will also help to strengthen your brand. If customer service and sales know your brand message, they will build your brand while protecting your trademarks at the same time. Make sure everyone is responsible for building the brand.

Keep records

Trademark Strategy: Many, many trademark disputes revolve around one issue: Who was the first business to use a certain trademark? In theUnited States, that is a big question, one that affects who owns a trademark when a conflict arises. Thus, it is very important to keep records of how you use trademarks, where you use the trademarks, and when you started using trademarks. If you want to deny the registration of a competitor’s trademark that is too similar to your trademark, you may have to prove that you started using your trademark first. And, you may have to prove that you started using the trademark in a certain geographic region, such as theNew York metropolitan area, if that’s where your competitor is located. Start a trademark file, gather the oldest advertising and promotional materials you can find using the trademark, and save them indefinitely.

Brand Strategy: Brand names present significant investments, when you consider the money that goes into designing logos, websites, brochures, fliers, and letterhead. All of that investment can turn into money if you sell your business or use the trademark as collateralization for a loan. Also, your brand can constantly bring money into your business as customers come to recognize your brand as a source of high-quality services or goods. Because brand names are worth a lot of money, keeping records of your use of branding will help you to see how your brand value rises and falls over time and allows you to track the effectiveness of your marketing and sales efforts

Register your trademark

Trademark Strategy: Registration of your trademark with the U.S. Trademark Office is not an absolute guarantee of the superiority of your rights in the mark, but will do a lot to protect your trademark: (1) registration makes it easier to assert, prove, and enforce your trademark rights; (2) registration allows you to sue any infringer in federal court; and (3) registration makes your trademark easier to register and enforce abroad; for example, U.S. Customs will stop any goods that infringe on your trademark rights at the border. Even better, after five years of federal registration, your trademark rights become virtually incontestable.

Brand Strategy: Protecting your trademark always complements your efforts to establish and protect your brand name, and federal registration offers significant protections for your brand. Registering your trademark will place it on a nationwide database of registered trademarks, which other business owners will search before applying for their own trademarks. Another benefit of federal registration of your trademark is the right to use the ® signifier, which you can only use after you register your trademark with the U.S. Trademark Office. (Otherwise, you can use only the ™ signifier.)

Following these tips will build your brands and protect your trademarks, which will help your business to take on the challenges of the increasingly-crowded marketplace where online presence, branding, and well-protected trademarks are crucial.

DISCLAIMER: The application and impact of laws can vary widely based on the specific facts involved. Nothing in this column should be considered legal advice or an offer to perform services. Do not act upon any information provided in this column, including choosing an attorney, without independent investigation or legal representation. This column is not a substitute for consultation with an attorney.

If a disqualified former employee files for unemployment benefits, the employer is allowed to challenge this, and must do so within 10 days of receiving notice.  The employer must consider several things before challenging this.  First, they must have a basis for challenging the claim, such as the employee leaving voluntarily.  But a more hidden consideration is how your challenge could be used against you in later, higher-stakes lawsuits.

It is best to first contact a lawyer in the field to review any possible discrimination or termination claims.  If you are not careful, a quick statement about why the employee was fired will bind you to that in later litigation.  For example, if you make a statement about your company’s actions during an unemployment hearing, the former employee’s lawyer now may have easily obtained information for a later discrimination suit.  Or there are cases where the evidence you produce, such as multiple absences, then provides the employee with an FMLA claim.  These are delicate subjects and an opposition should be made only after consulting with an attorney that handles these matters regularly.

If you would like any further information or have questions relating to this matter, feel free to contact Lynam & Associates.

Last month, the U.S. Supreme Court refused to review, and in doing so certified, a class action against Pella Windows for defective windows.  The class is to include anyone who has purchased Pella ProLine windows directly or owns a home with Pella aluminum clad windows.  The design defect alleged allows water to seep in behind the window, causing wood rot and leakage to the actual window and possible structural damage to your home.  So, while this case continues, what should you as a homeowner with Pella windows be doing?

What You Can Do Now

Although it remains to be seen how this case will end, as a potential claimant under either the class action or your warranty you should take several steps to protect your claim.  If you fall into either class, it would be prudent to have your Pella ProLine windows inspected.  An inspection should check for the levels of moisture present, using a moisture measuring device, in the windows’ wood and particularly for signs of wood rot.  This would help establish a defect later on, if Pella chooses to state that problems are not present, or that they are due to faulty installation or your home’s humidity levels.  You should also take pictures of any signs of this defect such as peeling paint, swelling windows, wood joints or excessive condensation or mold on the window.  At this point, it is also wise to make a warranty claim to Pella particularly if you are within the ten (10) year warranty period. Be sure to also keep any records of your claim, money spent on replacement and to keep the actual defective windows if you are having them replaced.

You should also review the Pella window owner’s guide to caring for your windows and their separate condensation guide to ensure you are taking the steps they recommend.  The Wood Frame Owner’s Manual describes the different parts to your window, how the window functions, how to remove certain pieces and how to properly clean your window.  The Condensation Guide details the recommended levels of humidity in your home to prevent condensation and the detrimental effects it can have on the wood frame.  The guide states, depending on the temperature outside, your humidity level should be between 30%-40%.  Following Pella’s guidelines for proper care can prevent Pella from stating the problems with the windows are due to your lack of care, instead of their design defect.

What It Means to be a Class Member

It is important to know your rights as a class member.  This case involves two separate “classes” of Pella consumers with different rights and possible remedies.  The first class includes all persons in the United States who own structures containing Pella ProLine aluminum clad casement windows manufactured from 1991 to present.  If that includes you, you are a part of that class and have no right to opt out.  As a class member, if the suit is successful, you would receive six declarations that together essentially declare that all ProLine windows have a defect which results in premature rotting and this defect requires disclosure; that Pella modified its warranty without notice; that Pella must notify owners of the defect; that the ten-year limitation in the original warranty is removed; that Pella will reassess all prior warranty claims related to wood rot; and that Pella, upon a class member’s request, will pay the cost of inspection to determine whether the wood rot is manifest, with any coverage disputes adjudicated by a Special Master.

This class adjudication process would be followed by an individual claims process in which class members may file a claim with Pella for service “[i]f and when their windows manifest wood rot due to the alleged defect.”

Therefore, your options as a member of this class is to wait for the adjudication of this case, make your claim with Pella using the special claims process that the settlement/order will set up.  If your windows are found to have the defect, you will have the right to have those windows replaced at any time that the defect becomes manifest.  Additionally, you may file suit for monetary damages, such as the damage to your home’s structure, that may have resulted from this defect.

The second class also includes all persons who own structures containing Pella ProLine windows, based on a consumer fraud claim.  This class will provide monetary relief for those class members whose windows have already required replacing or whose windows have shown this defect and must be replaced.  As a part of this class, you have the right to notice of the case and the right to opt out and pursue action against Pella on your own if you should find this practicable.  The class is proposing that the case establish a standard amount of money for cost of replacement and provides this remedy for all class members whose windows have a manifest defect.

If you have Pella ProLine windows and have any questions as to what steps you should be taking, please do not hesitate to contact our office.