Letters of Credit

Letters of credit have been in use for over two thousand years, in one form or another. From the time of ancient Greece and Rome up through the present, letters of credit have been mainly used to finance shipping contracts. However, letters of credit have uses that go far beyond just transportation. In a letter of credit arrangement, the issuing party, usually a bank or insurance company, contracts with one party to pay funds to a third party upon the fulfillment of certain conditions specified in the agreement. Most commonly, they are employed to finance a sale of goods where the buyer and seller have limited contact and experience with each other, such as an international transaction. Because letters of credit are employed so extensively in international trade, they are governed by an international treaty ("Uniform Customs and Practices Governing Documentary Credits"). But utility of letters of credit is not confined to international shipping; they can be quite useful right here in Virginia. A tenant can obtain a letter of credit which will become payable to the landlord upon a certification from the landlord that the tenant has defaulted on his rent. This arrangement has several advantages over a conventional security deposit. The landlord can demand a much larger security deposit in the form of a standby letter of credit than he could in cash, and the tenant does not have to use his valuable cash reserves to satisfy the security deposit, assuming the tenant has a reliable credit history. In addition, the tenant will not be at risk of losing his security deposit if a foreclosure occurs. *** The above is not meant to replace legal counsel. If you'd like to speak to one of the lawyers at Gross & Romanick, please call us at 703-273-1400 or fill out our online information request form.

Summer Venues and Marijuana Possession

Summer in Northern Virginia is synonymous with the start of the concert season at the Wolftrap National Park for the Performing Arts. It is also the time of year when area residents plan to camp in the Prince William National Forest and take weekend drives along the George Washington Memorial Parkway. Unlike Jiffy Lube Live, the Patriot Center, and the multitude of state parks in the Northern Virginia area, Wolftrap, the Prince William National Forest and the GW Parkway are “federal enclaves”. This means that misconduct at these venues can result in facing criminal charges in the United States District Court for the Eastern District of Virginia, Alexandria Division.

In other words, possession of just a small amount of marijuana can literally become a federal case. The United States Park Police routinely patrol the parking areas, overlooks and camp grounds. Often officers are dressed in plainclothes and are not easily identifiable. These federal officers can be aggressive in their efforts to uncover marijuana and alcohol possession.

In a case recently handled by our lawyers, we successfully persuaded the United States Attorney’s Office that the arresting officer’s aggressive behavior violated our client’s constitutional rights. In another recent case, an attorney at our law firm convinced a federal judge to suppress evidence of marijuana possession because the traffic stop which lead to the discovery of marijuana exceeded the permissible scope of the stop under the US Constitution. It is extremely important that every individual charged in federal court retain an experienced attorney to fully protect his or her rights.

The Americans with Disabilities Act and Reasonable Accommodations

The Americans with Disabilities Act (the “ADA”) was enacted into law by Congress in 1990. Title I of the ADA prevents employers from discriminating against a person with a disability, on the basis of that disability, with respect to job application procedures, hiring, advancement, discharge, compensation and other terms or conditions of employment. In 2008, after a series of U.S. Supreme Court decisions narrowed the definition of a “disability” so as to significantly limit the scope of the ADA, Congress passed the ADA Amendments Act. The purpose of the ADAAA was to broaden the definition of “disability” and thus provide coverage to a wider group of individuals.

The term “disability” means, with respect to an individual, a physical or mental impairment that substantially limits one or more of the “major life activities” of such individual. “Major life activities” include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating and working.

The ADA requires an employer with 15 or more employees to provide “reasonable accommodation” for individuals with disabilities. A “reasonable accommodation” is any change in the work environment, or in the way things are customarily done, that enables an individual with a disability to enjoy equal employment opportunities. A reasonable accommodation need not be provided if it would impose an “undue hardship” on the operation of the business of the employer. However, an employer may not refuse to provide an accommodation just because it involves some cost. Examples of reasonable accommodations include the following:

› making existing facilities accessible;
› part-time or modified work schedules;
› reassignment to a vacant position
› acquiring or modifying equipment; and
› changing tests, training materials, or policies.

A Summary Explanation of the Doctrine of Charitable Immunity

Charitable immunity is perhaps one of the most misunderstood concepts in the law. Many charities are under the mistaken assumption that they are immune from any lawsuit simply because they operate as a non-profit and for a charitable purpose. This is a misunderstanding that can have unfortunate consequences.

In Virginia, “[a] charitable institution is immune from liability to its beneficiaries for [ordinary] negligence arising from acts of its servants and agents, but only if due care has been exercised in their selection and retention.” Ola v. YMCA of South Hampton Roads, Inc., 270 Va. 550 (2005). This statement obviously merits further analysis.

First, in order to obtain charitable immunity, the organization must be a charitable institution. To determine whether an institution is charitable, Virginia courts “apply a two-part test, examining (1) whether the organization’s articles of incorporation have a charitable or eleemosynary purpose and (2) whether the organization is in fact operated consistent with that purpose.” Davidson v. The Colonial Williamsburg Found., 817 F.Supp. 611 (E.D. Va. 1993). It is therefore imperative that non-profit organizations operating as charitable or public benefit organizations not only draft articles of incorporation that reflect their mission, but that they also operate in a manner wholly consistent with that mission.

Second, a charitable institution is immune from liability only to its beneficiaries. In Virginia, charities are not immune from liability to legal strangers. A beneficiary is someone that receives something of value, which the organization, through its charitable purposes, undertakes to provide. Egerton v. R.E. Lee Memorial Church, 395 F.2d 381 (4th Cir. 1968). As an example, the recipient of an in-home meal from a charity providing in-home meals to the sick or disabled would be considered a beneficiary of the organization’s charitable purpose. However, the victim of an automobile accident occurring on the roads while the same charity was delivering a meal would not be a beneficiary.

Non-compete Provision - Revisited and Reversed by Virginia Supreme Court

On November 4, 2011, the Virginia Supreme Court issued an important opinion on the enforceability of non-compete agreements in Virginia. In Home Paramount Pest Control Companies, Inc. v. Shaffer, et al., the Supreme Court affirmed the Fairfax County Circuit Court's prior determination that a non-compete provision in a former employee's employment agreement was overbroad and, therefore, unenforceable.

In 1989, in a case involving the same employer, the Supreme Court ruled that an identical provision in an employment agreement was enforceable. Accordingly, the Supreme Court reversed its previous stance, demonstrating the shift in the law that has occurred over the last 22 years. The Supreme Court justified its decision on the basis of several other cases that have been decided since 1989, which cases clarified the law and created the framework from which the 2011 case was decided.

The Supreme Court explained that non-compete provisions are only enforceable if they are narrowly drawn to protect the employer's legitimate business interest, are not unreasonably burdensome on an employee's ability to earn a livelihood and are not against public policy. The employer bears the burden of proving each of these factors. Virginia Courts will consider the function, geographic scope and duration elements of the non-compete when evaluating whether the employer has met its burden. In assessing the "function" element, a Virginia Court will determine whether the prohibited activity is of the same type as that actually engaged in by the former employee while employed by the employer.

Successful Defenses to Virginia DWI/DUI

A November 7, 2011 article in the Fairfax News shows that “some 32,760 drunken driving arrests were made across Virginia in 2010, which resulted in 29,063 convictions.” Based upon these statistics, the statewide conviction rate for individuals charged with DWI is approximately 88.7%. This, of course, begs the question: what happens in the other 11.3% of cases.

Presumably, some of the 3,697 remaining cases resulted in plea bargains to lesser offenses such as reckless driving. Others were certainly dismissed after trial upon a finding of not guilty. How did these individuals manage to defy the odds and avoid a conviction for DWI after being charged?

There are a number of reasons why an individual may be found not guilty of a DWI. The situation may be such that the individual charged with DWI was in an accident, the police did not witness the accident and the other driver involved in the accident fails to appear in court. In this situation, if the defendant did not make any statements, there is no evidence that the defendant was driving the vehicle.

In order to stop a vehicle on the highways, police must have reasonable suspicion that the vehicle is involved in criminal activity or has committed a traffic violation. If the police stop a vehicle because they have nothing more than a hunch that the driver may be intoxicated, the traffic stop itself is unlawful and everything that follows will be suppressed by a court, including the arrest for DWI.

The Importance of By-Laws to Resolve Governance Battles

Non-profit organizations need to have a clear governance structure. One reason is that it is not uncommon for the members, officers and/or directors of non-profit organizations to engage in power struggles, particularly if the organization has grown from a small, cohesive group to a larger, loosely organized membership. In some cases, a single member or a small group of members who disagree with the organization’s current management or general objectives can create a significant rift in the organization by publicly denouncing the current administration (or worse, purporting to assert control over the organization). As in any organization, a certain amount of turnover and change can be very positive, but a power struggle may destroy the organization itself. In order to minimize governance battles, the organization’s governing documents need to be strong enough to prevent dissention amongst the members, officers or directors from crippling the organization’s stated purpose (and perhaps, its existence).

The best way to proactively eliminate the risk of organizational anarchy is for the organization to adopt clear, coherent and thorough by-laws. In our experience, many non-profit organizations fail to adopt by-laws with mechanisms designed to provide clear power demarcations and methods for resolution of control issues. In addition, many organizations are using outdated by-laws which were not written for the organization as it is currently structured and operated, or for the technological age, when e-mails and social media can improve communication but can also facilitate membership dissention on a very public platform.

At a minimum, the by-laws of every non-profit organization should clearly set out the following:

What Creditors Can't Seize

A fellow being chased by creditors would be smart to give his fiancee' an expensive engagement ring. She'll be thrilled, and he'll be making a safe investment, since Virginia law specifically exempts wedding and engagement rings from attachment by creditors. Lawmakers have decided that, for public policy reasons, people should keep such property in the family. Better not divorce!

A religious couple might consider investing in a Guttenberg Bible, since the law also exempts the family Bible.

Animal lovers can rest easy, too. Creditors can't take the family pet, whether it's a dog, cat, squirrel or snake. As long as the debtor does not raise the animal for sale purposes, the creditor cannot take it.

Someone facing bankruptcy might not be in the frame of mind to dwell on mortality, but it's an opportune time to purchase a burial plot. The law also exempts this property as a matter of policy. Who said you can't take it with you!!

Investigate Credit Worthiness

* Call other creditors of applicant
* Call industry contacts
* Check with landlords and credit references
* Obtain a Credit Bureau Report
* Review Dun & Bradstreet Reports
* Study court records for information about: Judgments, pending litigation, title to real estate, liens on realty, and UCC financing statements
* Hire an investigator or attorney Have your CPA review financial records

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The above is not meant to replace legal counsel. If you'd like to speak to one of Gross & Romanick's lawyers, contact us by calling 703-273-1400 or by filling out our online information request form here.

Avoid Personal Liability: Always Use Legal Name of Business

In Virginia, a business entity properly registered with the State Corporation Commission (“SCC”) is a legal entity, separate and independent of its owners. Accordingly, unless it is necessary to promote justice, a business owner cannot be held responsible for the obligations of his/her business.

Nevertheless, business owners can quickly lose this shield of protection if they fail to disclose to third parties with whom they do business that they are acting in the capacity of an agent for the business, and not in their individual capacity. If this agency relationship is not disclosed (i.e third parties do not know they are doing business with an entity as opposed to an individual), the business owner may be held personally responsible for the obligations of the entity.

The same situation applies for business entities that use tradenames. If the tradename is not properly registered with the SCC, and the actual legal name of the entity is not disclosed to third parties, the business owner can be held personally responsible for the obligations of the entity.

Accordingly, it is very important for a business owner to make sure that all business correspondence (including letters, e-mails, contracts, agreements, business cards, etc.) clearly states the full legal name of the business. The full legal name includes the acronym identifying the form of the business entity (i.e. “Inc.”, “LLC”, “PC”, “LP”, etc.). When signing for the business, owners should always designate their title next to their name (i.e. President, CEO, etc. ) or use the term “authorized agent”. If a tradename is being used by the business, then it must be properly registered with the SCC. If not, all business correspondence must clearly state the actual legal name of the business, and not just the tradename.

Gross & Romanck, P.C. is currently representing an individual business owner being sued by a vendor for a debt of his business. The business had placed a purchase order with the vendor for expensive industrial machinery. When the business failed to pay for the machinery in full, the vendor sued the owner in his personal capacity for the debt. The vendor is relying upon the fact that the purchase order does not disclose the legal name of the business to argue that the order was placed by the owner, and not his business.

The lawsuit could have been avoided if the purchase order clearly identified the full legal name of the business or if the tradename had been properly filed with the SCC.

Do not let this happen to you! Always make sure that the full legal name of your business entity is disclosed to the third parties with whom your entity does business; and make sure that you always sign as an agent of the business.