While you wait for this brutal winter’s snow and ice to melt, we encourage you to curl up next to a fireplace and enjoy reading this edition of the Golan & Christie Newsletter. We’ve tried to include interesting information and important news that may impact you and your business decisions.

ESOPs: THE ULTIMATE SOLUTION

If you’re a business owner worried about what may happen to your company after you retire, learn how an ESOP can preserve the corporation as an ongoing independent business and offer unmatched tax advantages.

G&C ATTORNEYS RECEIVE HIGH HONORS

We’re pleased that more than a dozen of our attorneys have earned spots on the prestigious list of “Super Lawyers” and “Leading Lawyers” 2015. Find out who has been honored.

IP LAW ALERTS

Beverly Berneman reports on two January 2015 rulings by the Supreme Court that impact intellectual property, including a case involving the issue of trademark tacking.

In this newsletter you’ll also find information on employment law matters, plus we welcome our new attorney, Keith R.C. Pozulp.

We hope that 2015 turns into a successful and prosperous year for all of our clients and friends. Please remember that Golan & Christie is always just a phone call or email away from assisting you with whatever you need.

-Stephen L. Golan
 Managing Partner

Baby Boomers currently own 66 percent of all private businesses that have employees. Those Baby Boomers are now reaching retirement age at a rate of 10,000 per day. An estimated $10 trillion — that’s trillion with a “t” — worth of businesses will change hands in the next 10 years. For Baby Boomer entrepreneurs with no inheritance option (due to the fact that Boomers had fewer children than their parents), succession and the associated liquidity needs require a solution.

Possible solutions include a sale of the business to a “strategic buyer,” a venture capital group or incumbent managers (a “leveraged buyout”). These transactions may make sense but they all have drawbacks. Many entrepreneurs hate to see their business legacy absorbed in a disruptive transaction that results in the liquidation of the business and the termination of the employees.

An Employee Stock Ownership Plan offers an underutilized alternative – a solution that preserves the corporation as an on-going independent business and offers unmatched tax advantages.

HOW AN ESOP WORKS

What are Employee Stock Ownership Plans (ESOPs)? Think of them as ordinary profit sharing plans on steroids. ESOPs have two features that distinguish them from a typical profit sharing plan: (1) the ability to fund primarily with the sponsoring employer’s stock, and (2) the ability to borrow money. This allows the ESOP to borrow money to buy company stock (a “securities acquisition loan”) in a leveraged transaction. So, a business owner can sell his or her stock to the ESOP in a tax-advantaged transaction.

If the company is a private C corporation and you have owned your stock for at least three years, you can defer capital gains tax on the sale of your stock to the ESOP so long as you sell at least 30 percent of the outstanding shares andyou invest the proceeds in “qualified replacement property.” No capital gains tax will be assessed until (and unless) you “dispose” of the qualified replacement property. Qualified replacement property is broadly defined to include stocks and bonds of any U.S. domestic operating company. That definition encompasses most of the publicly traded securities that are available to private investors – in other words, the same investments you probably already own in your personal portfolio. So, you can accelerate liquidity and diversify your investment without selling the company – or even giving up control.

Improving Morale & Productivity

Most ESOPs are sponsored by small and medium sized companies (there are over 500 ESOPs in Illinois). Do not be put off by the bad press associated with troubled ESOPs set up by United Airlines or the Tribune Company ESOP transaction engineered for Sam Zell’s takeover. And many ESOP sponsors find that, beyond the unique ESOP tax advantages, the most important ESOP advantage turns out to be improved employee morale and productivity.

Baby Boomer entrepreneurs are well advised to put ESOPs on their succession planning short list. ESOPs are flexible, require no negotiation or post transaction dealings with adversarial buyers, and they offer unique tax advantages that subsidize both the cost of borrowing and the selling shareholder’s net return.

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

We are very pleased to announce that Golan & Christie attorneys have been named to the prestigious list of “Super Lawyers” and “Leading Lawyers.”

We would like to thank all of our firm’s clients, friends and referral sources for helping us continue to receive these high honors, year after year. We share these awards with you to honor your continued support and partnership.

FOUR NAMED “SUPER LAWYERS”

In 2015, Golan & Christie partners Stephen Golan, Barbara Yong, Margaret Gisch and Barry Siegal have all been named by Illinois Super Lawyers® magazine. Only five percent of the lawyers in the state are named by Super Lawyers.

The selections for Super Lawyers are made by Law & Politics, a division of Key Professional Media, Inc. of Minneapolis, Minn. Each year, Law & Politics undertakes a rigorous multi-phase selection process that includes a statewide survey of lawyers, independent evaluation of candidates by Law & Politics’ attorney-led research staff, a peer review of candidates by practice area, and a good-standing and disciplinary check.

TWO SELECTED AS “RISING STARS”

Additionally, Golan & Christie partners Laura Balson and Matthew Wasserman were selected by Illinois Super Lawyers magazine as “Rising Stars” in Illinois for 2015.

The selection process for Rising Stars is the same as the Super Lawyers selection process except that a candidate must be either 40 years old or younger or in practice for ten years or less. While up to five percent of the lawyers in the state are named to Super Lawyers, no more than 2.5 percent are named to the Rising Stars list.

A DOZEN NAMED “LEADING LAWYERS”

Also in 2015, the following Golan & Christie partners have been named as Leading Lawyers in Illinois: Stephen Golan, Margaret Christie, Margaret Gisch, Donna Hartl, Anthony Taglia, Barbara Yong, Peter Katsaros, Barry Siegal, Robert Benjamin, Beverly Berneman, David Saltiel and Andrew Williams.

Leading Lawyers is a division of Law Bulletin Publishing Company. Leading Lawyers surveys lawyers, asking them which of their peers, indeed their competitors, they would recommend to a family member or friend if they could not take a case within their area of law or geographic region. To maintain the quality and credibility of the survey, lawyers cannot nominate themselves or anyone at their own law firm. Based upon survey nominations and approval by our Advisory Board, only the top lawyers are nominated and eligible for membership in Leading Lawyers. Leading Lawyers limits the total number of Leading Lawyers in a state to less than five percent of all lawyers licensed to practice law in that state.

Pictured top to bottom: Stephen Golan, Margaret Christie, Margaret Gisch, Donna Hartl, Anthony Taglia, Barbara Yong, Peter Katsaros, Barry Siegal, Robert Benjamin, Beverly Berneman, David Saltiel, Andrew Williams, Laura Balson and Matthew Wasserman.

As of January 1, 2015, the Occupational Safety & Health Administration (“OSHA”) has updated requirements regarding an employer’s responsibility to report any workplace injuries or deaths. While serious workplace injuries are rare, it is important that all employers are aware of their responsibilities under OSHA, should tragedy occur.

Under the new requirements, if an employee is killed as a result of a work-related incident, the employer must report the fatality to OSHA within eight (8) hours of the incident. If an employee is injured in a work-related incident and requires in-patient hospitalization or if an employee’s injury results in amputation or loss of an eye, the employer must notify OSHA within twenty-four (24) hours of the incident. A company may be fined if they fail to notify OSHA within the time limits. These reporting requirements are in addition to the mandatory logs that all employers must maintain of any work-related injuries. For copies of necessary forms, you may contact OSHA through its website at www.osha.com or the toll-free central telephone number: 1-800-321-6742. If you have additional questions, please feel free to contact Golan & Christie.

In December 2014, the Illinois Supreme Court issued a decision that narrows the burden on employers who are trying to defend against a claim of retaliatory discharge tort claims. The holding in Michael v. Precision Alliance Group, LLC, 2014 IL 117376 was that an employer is not required to provide a reason for an at-will employee’s discharge when facing a retaliatory discharge claim, but if an employer does provide a reason, and the judge or jury believes that reason, the employee’s case is over because the causation element of a retaliatory discharge claim cannot be met.

The employees in Michael alleged that they were whistleblowers and that the company discharged them in retaliation for reporting the company to the State of Illinois for allegedly shipping underweight bags of agricultural products, in violation of Illinois law. The company responded to the allegations by stating that the plaintiffs were actually discharged for either engaging in horseplay with a forklift or as a result of a reduction in force. The circuit court determined that the company’s reasons were believable and therefore dismissed the claims. On appeal, the appellate court reversed and remanded, applying the familiar burden-shifting framework which is common in federal discrimination cases. On appeal to the Supreme Court, the appellate court’s decision was overturned, based on a finding that once the company provided its reasons for the discharge, and those reasons were believed by the trier of fact, that ended the inquiry.

There are several take-aways for employers: 1) always document the reason for an employee’s termination and 2) consider whether the reason would be believable by a trier of fact in light of other circumstances occurring around the same time as the termination decision.

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.

In January 2015, the Supreme Court of the United States (SCOTUS) decided two cases involving who decides issues in Intellectual Property cases.

Teva Pharmaceuticals USA Inc. et al. v. Sandoz Inc. et al.

The first case, Teva Pharmaceuticals USA Inc. et al. v. Sandoz Inc. et al. involved the standard of appellate review for patent claims construction. The Federal Circuit had reviewed the District Court’s factual findings on the de novo standard and invalidated several of Teva’s patents for a multiple sclerosis drug. In a 7-2 decision written by Justice Stephen Breyer, SCOTUS held that patent claims construction should be treated like any other factual findings by a trial court. Patent claims construction requires familiarity with specific scientific principles. Therefore, appeal of the factual findings should be reviewed on the clear error standard. Justice Breyer explained that the district court judge who presides over the case and listens to the entirety of the proceedings would be more familiar with the facts than an appeals judge who would have to rely on reading a transcript of the proceedings. The legal conclusions based on the facts, however, can still be reviewed de novo on appeal.

Hana Financial Inc. v. Hana Bank

The second case, Hana Financial Inc. v. Hana Bank, involved trademark tacking. Trademark tacking allows a trademark owner to slightly modify a trademark and maintain priority based on the original date of first use. The defendant had previously used the name “Hana Overseas Korean Club” before the plaintiff started using its trademark, “Hana Financial”. After plaintiff started using the Hana Financial trademark, the defendant started using “Hana Bank”. The defendant argued that it could claim priority over the plaintiff’s mark by tacking its revised trademark onto the original trademark. The plaintiff argued that only a judge and not a jury can decide the matter. In a unanimous decision written by Justice Sonya Sotomayor, SCOTUS held that tacking was a factual issue that could be decided by a jury. The plaintiff had argued that allowing a jury would reduce the predictability required for a functioning trademark system. Justice Sotomayor explained that in every area of the law, juries have been able to decide factual questions. The fact that different juries might come to a different conclusion has never stopped juries from deciding factual questions.

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

We’re pleased to announce the addition of Keith R.C. Pozulp to the Golan & Christie team. Mr. Pozulp concentrates his practice on complex commercial disputes and also has experience in commercial transactions, patent litigation, false advertising, employment matters, and regulatory compliance. He has represented clients in a wide variety of industries. His experience includes representing pharmaceutical companies, manufacturers, real estate developers, hospitality groups, and retailers.

Mr. Pozulp has significant experience in all aspects of litigation in state and federal court, from the discovery phase through trial and appeal. In honor of his pro bono work, Mr. Pozulp received the Northern District of Illinois and Federal Bar Association Award for Excellence in Pro Bono and Public Interest Service.

Mr. Pozulp graduated in 1999 from the University of Illinois with a B.S. in Finance. He received his J.D., magna cum laude, in 2005 from the Loyola University-Chicago Law School, where he was a member of the Loyola Law Journal. Prior to joining Golan & Christie, Mr. Pozulp spent seven years as a litigator with Winston & Strawn LLP.