FROM OUR MANAGING PARTNER
Fall 2014 Newsletter

STEPHEN L. GOLAN

Managing Partner

Feeling the temperature drop and seeing the leaves change colors can mean just one thing: it’s time for the Fall edition of the Golan & Christie Newsletter. We’ve packed this issue with interesting information and news items that may impact your business decisions.

NEW ILLINOIS CAREGIVER LAW

The state passed a new law in August to provide families of a deceased individual a new weapon to fight fraud or undue influence when it comes to a caregiver receiving a bequest in a will. Barry Siegal explains how the law applies.

WHAT IS A 401(K) FIDUCIARY TO DO?

If your company is a 401(k) sponsor, you have important fiduciary duties and legal responsibilities that are continually changing. Andrew Williams provides important information on how to better protect yourself and your company.

IP LAW ALERTS

Beverly Berneman shares recent news regarding Intellectual Property matters including a SCOTUS decision on software patents and a copyright infringement case involving a tweet on Twitter.

This newsletter also contains Employment Law news regarding criminal background checks and risks of terminating employees for their conduct on social media.

As 2014 winds its way to an end, we hope you enjoy a prosperous fourth quarter. If there is anything that Golan & Christie can do to help ensure your continued success, please don’t hesitate to contact us.

-Stephen L. Golan
 Managing Partner

ESTATE PLANNING AND TAXATION
New Illinois Caregiver Law

BARRY P. SIEGAL

Partner

"The new law creates a presumption that transfers in excess of $20,000 which are effective at death to certain individuals are presumed to be void."

There is a noticeable increase in news reports about individuals who take advantage of elderly persons with whom they have a trusted relationship. In many cases, these individuals are caregivers who have developed a close, almost familial relationship. The situation can be complicated if the elderly person has a diminished ability to understand the motivation of the trusted individual.

In order to address this problem, the Illinois legislature in August passed an amendment to the Illinois Probate Act which adds a section entitled “Presumptively Void Transfers.”

The new law creates a presumption that transfers in excess of $20,000 which are effective at death to certain individuals are presumed to be void. In order for the law to apply, the receiving individual must be the transferring individual’s caregiver, but not a “family member,” including a spouse, child, grandchild, sibling, aunt, uncle, niece, nephew, parent or first cousin. A caregiver is defined as an individual who voluntarily or for compensation assumes the responsibility of caring for another individual who needs assistance with daily living activities.

The presumption created by the Act can be overcome in one of two ways. First, if the amount given to the caregiver is no more than the caregiver would have received before the individual became a caregiver, the law does not apply. For example, if the caregiver who is a friend of the transferring party received a bequest in a will prior to becoming a caregiver and the bequest was not increased by a later will, the statute would not apply.

Secondly, the presumption can be rebutted by “clear and convincing evidence” that the gift was not a product of fraud, duress or undue influence. This is a very high legal burden of proof which is not easily overcome.

It is important to understand a number of points with respect to the new law:

  • It only applies to transfers by will, trust or by operation of law, such as joint tenancy. It does not apply to lifetime gifts.
  • It does not apply to relatives, even if those relatives are distant relatives, who are not the “natural objects of the bounty” of the transferor, such as children.
  • Proving that “fraud, duress and undue influence” does not exist is extremely difficult, especially under circumstances where the transferor is elderly and may show some signs of diminished capacity.

The Act provides a new weapon for a family to combat fraud or undue influence by a caregiver. On the other hand, if an individual honestly has a trusted relationship with a caregiver and wants to make a substantial provision in his or her will or trust, the circumstances surrounding the individual’s motivation, as well as his or her mental capacity, should be clearly documented when the instrument is executed.

To discuss these issues or others related to your family business, contact: Barry Siegal, (312) 696-1699, bpsiegal@golanchristie.com.

ERISA AND EMPLOYEE BENEFITS
What is a 401(k) Fiduciary to Do?

ANDREW S. WILLIAMS

Partner

"...fiduciaries need to deliberate and make considered decisions. And the best way to prove such deliberation is documentation of the decision making process."

Admit it: Your company, as a 401(k) sponsor, and the company decision makers who direct plan operations (including in-house trustees), are ERISA fiduciaries. Don’t quibble about this but take a step back and figure out what to do about it.

SOME BASIC STEPS

You’ve read about investment advisors who can assist in performing investment duties and fiduciary insurance for claim protection. (This insurance should not be confused with the required ERISA fidelity bond that protects the plan, not the fiduciaries). Those options may make sense for you, and may not. But, whether or not you use an investment advisor or purchase fiduciary insurance, there are other, more basic steps to take.

Bear in mind that retirement plan fiduciaries do not have to make perfect decisions. For example, they don’t necessarily have to select the cheapest mutual funds in the market for their plan’s investment array. But they do need to deliberate on their investment decisions and perform periodic reviews of investment results.

This is necessary because cases which question fiduciary investment decisions frequently turn on the nature of the process followed by plan fiduciaries rather than the substance of the resulting decision. In other words, a “correct” investment decision reached in a flawed decision making process is still subject to question.

So, fiduciaries need to deliberate and make considered decisions. And the best way to prove such deliberation is documentation of the decision making process. Such documentation can take the form of meeting minutes, memos or committee resolutions. There are no hard and fast rules on how to do this. The bottom line is that any reasonable written record of how and why the fiduciaries made their decision will work to protect them from breach of duty claims.

FEE DISCLOSURE QUESTIONS TO ANSWER

Also consider the Section 408(b)(2) fee disclosure rules that have been in effect since August 2012. The specific matters that plan fiduciaries must consider have been expanded by the new fee disclosure rules. “Responsible plan fiduciaries” have to evaluate each provider’s fee disclosure statement to determine:

  • Have all covered plan service providers submitted fee disclosure documents?
  • Are provider fees reasonable?
  • Does the provider’s fee disclosure document meet all of the requirements of the fee disclosure rules?
  • Have plan fiduciaries made a written record of their evaluation of the provider fee disclosures?
  • Do your plan fiduciaries meet regularly to review the plan’s investment performance and provider’s fees?

A “no” answer to any of these questions is a red flag.

Need help with any of this? Plan service providers can provide invaluable assistance. Third party administrators (TPAs) can help benchmark provider fees so fiduciaries have some guidelines on “reasonable” fees. Investment advisors can assist in selecting investments for the plan and in monitoring investment results. And they can help with documentation of fiduciary decisions. But the ultimate responsibility for these matters likely falls on the shoulders of your in-house fiduciaries.

HELPFUL GUIDELINES FROM RECENT COURT CASES

You may have seen commentary on recent court decisions and settlements that involve multi-million dollar recoveries against retirement plans and their fiduciaries. These court decisions get the headlines but some less publicized decisions provide helpful guidelines as well.

Consider the U.S. Supreme Court case that can help control plan liabilities and related fiduciary exposure. The Supreme Court’s 2013 decision in Heimeshoff v. Hartford Life & Accident Insurance Co. demonstrates the effectiveness of the most important provision that probably is not in your plan.

Heimeshoff upheld the validity under ERISA of a plan provision which required any suit to recover plan benefits to be filed within a three (3) year period after a proof of loss is due under Wal-Mart’s insured disability plan. So, even a valid benefit claim by a plan participant cannot be pursued in court after the expiration of a claim limitation period provided in the plan document. (That’s if the period is reasonable in length and there is no controlling statute to the contrary).

For states like Illinois, which provides a “borrowed” ten (10) year statute of limitations for ERISA suits to collect benefits, the imposition of a two or three year limitation period through the plan document can provide considerable additional protection.

The bottom line is that there is no downside to this kind of provision. It should be in your 401(k) plan document, summary plan description, and benefit distribution forms. It should be there now.

RECOMMENDATIONS

Fiduciaries need to deal with expanded liabilities from the changing regulatory and judicial landscape. Employers, plan administrators, HR staff and plan service providers should make sure that plan fiduciaries meet regularly to discuss plan business and document their deliberations. If you have any concerns about the prior conduct of plan fiduciaries, make sure you consult top notch plan service providers – and keep their advice confidential by dealing through independent legal counsel and not your company’s regular corporate or benefits lawyer.

To discuss these issues or others related to your family business, contact: Andrew Williams, (312)696-1373, aswilliams@golanchristie.com.

New Illinois ‘Ban The Box’ Law Goes Into Effect January 1

LAURA A. BALSON

Partner

MARGARET A. GISCH

Partner

Starting on January 1, 2015, Illinois employers and staffing agencies are no longer allowed to ask any question about an applicant’s criminal history until after an interview or conditional job offer has been made. The “Job Opportunities for Qualified Applicants Act” (otherwise known as “Ban the Box”) provides steep monetary penalties for any violations. If the job application your company currently uses asks whether an applicant has any criminal convictions, this language must be removed no later than January 1, 2015. Please contact Golan & Christie if you would like assistance in updating your company’s application forms.

There are certain exceptions to the Act including these situations: (a) the company is permitted by state law to exclude applicants with certain convictions, (b) if the position being applied for requires a standard fidelity bond, or (c) if the position requires licensing under the Emergency Medical Services Systems Act. If you believe that you are an exception to the Act, please contact Golan & Christie so that we can confirm this or clear up any misunderstandings, and help you avoid monetary penalties in the future.

Social Media Policies Continue To Make Headlines

In the July/August 2014 issue of Inc. Magazine, business owners were given a stern warning that any company with a social media policy that hasn’t been updated in the last 18 months is probably violating the law. The ongoing mission of today’s National Labor Relations Board (NLRB) seems to be finding and penalizing companies whose social media restrictions go too far.

In addition to having an attorney review any policies in a company’s employee handbook that might be interpreted to limit what an employee can say on social media, employers also need to be cautious when making termination decisions based on an employee’s online posts. In an August 22, 2014 decision, the NLRB found that an employer violated the law when it fired two employees based on their involvement in negative comments made on a former employee’s Facebook page. The case, against employer Triple Play Sports Bar and Grille, was groundbreaking in that it was the first time the NLRB had addressed whether a “Like” on Facebook could constitute protected activity under the National Labor Relations Act. The NLRB found, specifically, that:

  • A Facebook “Like” was an endorsement of the complaint made in the former employee’s initial “status update” and thus constituted “protected, concerted” activity under the National Labor Relations Act (NLRA);
  • The employees’ activity did not lose the protection of the NLRA, even though it was part of profanity-laced commentary; and
  • Triple Play’s discharge of the employees was a violation of the NLRA.

To discuss how these issues apply to your company contact:
Laura A. Balson, (312)696-1351, labalson@golanchristie.com
or Margaret A. Gisch, (312)696-2039, magisch@golanchristie.com.

US Supreme Court Decision Puts Software Patents In Jeopardy

BEVERLY A. BERNEMAN

Partner

In Alice Corp. v. CLS Bank International, SCOTUS affirmed a Federal Circuit decision invaliding a patent for using a computer to execute a well-established method of settling investment trades. Justice Thomas, writing for the Court, said that “merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.” The plaintiff in the case, Alice Corp., is a non-practicing entity (also known as a “Patent Troll” because they use their patents to accuse others of patent infringement for large settlements or long-term licensing deals). Some commentators are praising the decision as bringing clarity to the gray areas in patent law that Patent Trolls use to intimidate businesses into paying them for licenses. Those in the software industry are concerned that the decision will stifle innovation.

TAKE AWAY: This case may have a devastating effect on patent protection for software and mobile apps. There are other avenues for protecting software and mobile apps, for instance copyright and trade secrets. It all depends on a number of variables such as the projected shelf life, the amount of testing and bug fixes needed before it can be marketed and the extent to which the company can keep the source code a secret.

EVEN ESTABLISHED TRADEMARKS CAN EVOKE THE WRONG MESSAGE.

The Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office issued a monumental decision to cancel six registrations of the Washington Redskins. The basis for the cancellation was that the Redskins mark is a “scandalous or immoral” mark, which, under the Lanham Act (the federal trademark statute) is grounds to refuse or cancel registration. The team can still use these trademarks. It just no longer has registration. The team has appealed the ruling.

TAKE AWAY: Sometimes we have a ‘tin ear’ when it comes to choosing a trademark. It sounds good to us but to others it can be offensive or off-putting. For instance, it may be counterproductive to choose a logo design that is reminiscent of a symbol with a bad history. When choosing a trade name, logo or tag line, make sure that it doesn’t put a dark cloud over your product or service.

AGENCE FRANCE-PRESSE AND GETTY IMAGES LIABLE FOR COPYRIGHT

In 2010, photographer Daniel Morel took a series of photos of the aftermath of the Haiti earthquake. He posted them on his Twitter account. Agence France-Presse (“AFP”) took the photos and licensed them to Getty Images. Morel sued for copyright infringement. AFP and Getty Images argued that the Twitter terms of use allowed AFP to exert ownership over the photos and license them to Getty Images. A jury found against them and awarded Morel $1.2 million in statutory damages. In denying AFP and Getty’s motion to overturn the jury verdict, the court held that this type of intentional and willful disregard for Morel’s copyright justified the large award.

TAKE AWAY: This case has two primary take aways. First, not everything on the Internet is free for the taking. Second, carefully read the terms of service and use section of an agreement if you are going to use someone else’s creative content. The Twitter terms of service grant a license only to “Twitter and its partners.” AFP didn’t fall into the definition of a Twitter partner. AFP took the images, stamped its own identifier on them and then licensed them to Getty for its own personal gain. That use was certainly beyond the scope of Twitter’s terms of service.

FALSE POSITIVE REVIEWS ARE JUST AS BAD AS FALSE NEGATIVE REVIEWS.

Social media has given the public a forum for voicing opinions about everything. False negative reviews can drive away customers. But what about false positive reviews? False positive reviews can expose a business to claims of false advertising. The New York Times article titled “Give Yourself 5 Stars? Online, It Might Cost You” (New York Times, September 22, 2013) reported that New York regulators cracked down on deceptive false positive reviews on reputation websites such as Yelp, Google and Yahoo. Nineteen companies were forced to pay a

TAKE AWAY: Social media and reputation websites can be a great resource for business building. However, you can’t assume an alias and make up a review for your own product or service. Nothing stops you from advertising how good your products and services are. But you have to identify yourself as the source of the glowing report. To discuss how these issues

To discuss how these issues apply to your company contact:
Beverly A. Berneman (312)696-1221, baberneman@golanchristie.com

IP NEWS BLOG WILL LAUNCH NOV. 3RD

If it’s important for you to keep up to speed with the latest IP Law news, then be sure to read Golan & Christie’s new blog “IP News for Business” by Beverly Berneman. You’ll find the blog on our Web site www.golanchristie.com starting November 3.

G&C PARTNER PRESENTING AT BANKRUPTCY CONFERENCE
Best Practices in Client Advocay: From Beginning to Bitter End

BARBARA L. YONG

Partner

7th ANNUAL CHICAGO CONSUMER BANKRUPTCY CONFERENCE

NOV 11, 2014

THE UNIVERSITY OF CHICAGO GLEACHER CENTER, CHICAGO IL

Join ABI in the Windy City this fall for the Seventh Annual Chicago Consumer Bankruptcy Conference! This day-long educational program, devoted entirely to consumer bankruptcy professionals, will focus on current issues affecting debtors and creditors in consumer cases.

Faculty members include Bankruptcy Judges Janet S. Baer, Donald R. Cassling, Catherine J. Furay, Thomas M. Lynch and Eugene R. Wedoff, as well as experienced local chapter 7 and 13 consumer attorneys and panel trustees.

CONFERENCE HIGHLIGHTS INCLUDE:

  • 6.75 Hours of CLE, including 1.5 Hours of Ethics
  • Sessions on the proposed National Chapter 13 plan, best practices in client advocacy, evidentiary hearings, social media and much more
  • Onsite networking lunch