Survivor Benefits for Unborn Children: Supreme Court Ruling Sides With State Law

The Supreme Court ruled on May 21, 2012 in Astrue v. Capato that twins conceived through in vitro fertilization after the death of their father were not eligible for survivor’s benefits through the Social Security Administration, upholding the Social Security Administration’s previous determination. According to the Court’s opinion, Mr. Capato lived in Florida at the time of his death. Under Florida law, the children do not qualify for inheritance through intestate succession (the children are not considered heirs of their father’s estate) and are ineligible to receive survivor benefits.

Florida law requires that in order for children to qualify for an inheritance, they must be born or conceived prior to the death of the parent. Because the Capato children were born 18 months after the death of their father, they were not considered to be his children for inheritance purposes under the law. Consequently, the Social Security Administration determined that the children were not eligible for survivorship benefits.

Unlike Florida, Missouri statute provides that all posthumous children (children born after the death of a parent) inherit as if they were born during the lifetime of the deceased parent, as do grandchildren and further descendants. However, other heirs, such as siblings or cousins, must be born and capable to take their share, prior to the death of the deceased.

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Social Media: Six Ways to Protect Today’s You and Tomorrow’s You

Thanks to an exponential growth rate in technology, the Internet has changed the world and how we communicate with each other.  In 1995, 16 million people used the Internet.  Last year, 2 billion people used the Internet and in 2020 it is predicted that the number will be over 5 billion.

Google, a 12-year-old company, has certainly fueled this growth.  Social media platforms have also supercharged Internet usage.  Facebook claims to have over 800 million active subscribers, LinkedIn claims 85 million subscribers and YouTube has over 100 million videos online.

However, the way we relate to and judge each other, whether it is for employment, relationships, or credit history, has not changed.  We are all trying to predict each other’s future behavior for the relationship(s) and transactions we seek.

Facebook purports to be worth $104 billion with its purchase of Instagram.  Why is it worth so much?  Because companies are spending over $2 billion per year to collect information from social media outlets about what we as consumers want.  Our behavior and our opinions can be measured in fine detail as we post and that behavior can be monetized.  For example, it is estimated that your personal/buying information is worth $50 to $500 to Google, depending upon how much you spend.  On Twitter, each of your followers, assuming you have a large following, could be worth as much as $2.50 each per month.  In short, personal data greases the Internet.  The data we share (names, addresses, pictures, precise locations, and links) helps companies target advertising based not only on demographic but also on personal opinion and desires.

What does all of this information mean to you as an individual? Technology rules will continue to change, so you need to be vigilant. It is important for you to keep up with the positives and negatives of the rapidly changing technology. Right now, social media is at its height but it is designed for websites. That is predicted to change as the world moves to smartphones.  Nearly $1 million worth of features come with any smartphone and there are a billion smartphones in the world.  Within the next decade, 6 billion people will have a constant connection to the Internet.  This explains why Facebook recently bought Instagram, a mobile app company, for $1 billion. Facebook wants to conquer the smartphone market and not be left behind.  Continue reading »

The Facebook Folly: Why Browsing an Applicant’s Facebook Profile Could Present Problems for Missouri Employers

Within the past few months more and more news outlets have reported stories of employers asking job applicants for their Facebook login information. While many applicants understandably feel uncomfortable with the idea of their potential employer delving through their private lives, applicants are typically not in the position to decline.

This new trend has sparked an inevitable inquiry: is it legal? At this time, the answer is uncertain. Like many issues arising from the fast-paced and ever-changing world of the Internet and social media, the law has not caught up with the question. There does not appear to be a statute, regulation or court decision directly on point – either at the federal or state level. Consequently, experts on both sides of the issue have begun considering and arguing whether any statutes, regulations, or court decisions indirectly apply to the issue.

Missouri statute does not appear to directly prohibit such a practice; however, this does not mean it is wise for employers to engage in it. The reason has little to do with the actual practice of asking for the login information, but rather concerns what may be potentially discovered by such practice. No, I am not referring to finding rants about past employers or photos of bad decisions and misdemeanors. Employers should be concerned about finding family or pregnancy photos, photos of the applicant in the hospital, and/or religious views.

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10 Best Practices for Protecting Your Company’s Trade Secrets, Internet Access and Good Will

The exponential growth of technology has created amazing efficiencies in how businesses operate. Such cost savings come with a cost and companies need to continuously adapt to the ever changing opportunities and vulnerabilities. In 2020, it is predicted that over 5 billion people will be using the Internet, and within the next decade 6 billion people will have a constant connection to the Internet. The growth of your business is inextricably combined with the growth of the Internet.

Below are 10 best practices for your businesses to consider as you move forward:

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Missouri Supreme Court Upholds Foreclosure Laws

On April 12th, Missouri’s highest court granted lenders across the state a victory by ruling that banks only need to give defaulted borrowers, in foreclosure, credit for the amount of the foreclosure bid, as opposed to the fair market value of the property. The ruling is consistent with existing Missouri precedent, which, for decades, has maintained that the sale price of a foreclosed property is determinative with respect to the deficiency owed by the borrower to the bank, which is the remaining balance on the loan for which the lender can sue.

In the case, First Bank v. Fischer & Frichtel, the borrower, Fischer & Frichtel, a Missouri real estate developer, defaulted on loans to First Bank, which then foreclosed on properties securing the loan. First Bank purchased the property at the foreclosure sale. The lender proceeded to sue the borrower for the deficiency balance remaining on the loan. The borrower defended the case by alleging that the proper method of determining the deficiency was not the sale price at the foreclosure sale, but rather, the fair market value of the property. In so doing, the borrower essentially sought a modification of existing Missouri law with respect to calculations for suing on deficiency against a defaulted borrower. Fischer & Frichtel maintained that Missouri should align itself with other states which require a lender to determine the fair market value of the foreclosed property and apply that amount, which is generally higher than the foreclosure price, to the loan balance before suing a borrower.

The borrower argued that the current law often grants lenders a windfall after a foreclosure. Foreclosure sales require cash buyers on the day of the sale, except that the foreclosing lender can simply bid as a credit against the amount of the indebtedness owed by the borrower. This allows lenders to often easily outbid potential purchasers who may not have cash readily available. If the lenders obtain the properties at a depressed sale price at the foreclosure, they can then resell the property to a third party, in an arms-length transaction, and are entitled to keep any profits from the resale of the foreclosed property, without applying those profits to the borrower’s loan balance.

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Is This by Consent? Changes to Missouri Supreme Court Rule Affect Use of Non-party Subpoenas

Part of a series on issues related to Manufacturers, Distributors and International Trade

A major change involving subpoenas to non-parties has hit the business world in the state of Missouri.

A new amendment to the Missouri Supreme Court Rules now requires non-party record custodians to physically appear at deposition to produce subpoenaed items, unless all parties to the litigation have agreed that the subpoenaed party may produce the items without appearing.

The amendment changes the prevailing practice where parties send out subpoenas to third parties with a letter explaining that they will be excused from appearing at deposition if they produce the requested items along with what is known as a business records affidavit.

Rule 57.09, as amended, now requires parties to first obtain consent from all other parties to the litigation before a subpoenaed witness may produce documents without attending the deposition. This agreement must be communicated to the witness in writing. Absent this agreement, a witness must appear to produce subpoenaed items at deposition.

What does this mean to you? If you receive a subpoena, you may only produce the documents to the party serving the subpoena without appearing at deposition if that party represents to you in writing (e.g., in a letter) that all other parties have consented to production of the docume

nts without need for you to appear at the deposition. Such a letter should protect you from allegations that you improperly produced records by mail, instead of bringing the documents to the deposition. You do not need to see the actual agreement. If you have any questions as to whether you can simply mail the documents, instead of appearing at deposition, you should either call your attorney for advice or simply wait and bring the documents at the time and place designated in the subpoena.

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To Prevail on a Trademark or Unfair Competition Claim There Must Be a Likelihood of Confusion

Part of a series on issues related to Manufacturers, Distributors and International Trade

In order to prevail on a claim of trademark infringement under the Lanham Act (the federal trademark law), a common law claim of trademark infringement, or a claim of unfair competition, a plaintiff is required to show that the infringing use be “likely to cause confusion or to cause mistake.” 15 U.S.C. § 1114(a).

In Sensient Technologies Corp. v. Sensory Effects Flavor Co., 636 F.Supp.2d 891, 899 (E.D.Mo. 2009), the Court set out determine whether such a likelihood of confusion existed. To make the determination, the Court

“… [considered] six nonexclusive factors.” Everest Capital Ltd. V. Everest Funds Management, LLC, 39 F.3d 755, 759 (8th Cir. 2005). These factors are:

“(1) the strength of the owner’s mark; (2) the similarity of the owner’s mark and the alleged infringer’s mark; (3) the degree of competition between the products; (4) the alleged infringer’s intent to ‘pass off’ its goods as the trademark owner’s; (5) incidents of actual confusion; and (6) the type of product, its cost, and conditions of purchase.”

Luigino’s Inc. v. Stouffer Corp., 170 F.3d 827, 830 (8th Cir. 1999).

Step One in the determination of a claim of trademark infringement involves the strength of the owner’s mark. If a mark is generic, it is entitled to no protection. If the mark is descriptive (which is the weakest category of protectable marks), it is only entitled to protection where the mark has developed secondary meaning; i.e., where the mark is widely recognized as identifying the source of the goods.

A generic term can never function as a trademark because it refers to the common name or nature of the article. Id. A generic term does not identify the source of a product, but rather indicates the basic nature of the product. See id…. “Because a generic term denotes the thing itself, it cannot be appropriated by one party from the public domain….” Likewise, descriptive terms are generally not protectable because they are needed to describe all goods of a similar nature. Such a term describes the ingredients, characteristics, qualities, or other features of the product…to be afforded protection, then, a descriptive term must be so associated with the product that it becomes a designation of the source rather than a characteristic of the product. Schwan’s IP, LLC v. Kraft Pizza Co., 460 F.3d 971, 974 (8th Cir. 2006).

“A strong and distinctive trademark is entitled to greater protection than a weak or commonplace one.” SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091. (8th Cir. 1980).

Strong marks are those that are suggestive, fanciful or arbitrary, with the last classification (essentially made up words) being the strongest.

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Importance of Maintaining Formalities with Your LLC: It Will Affect Your Deductions

Many individuals establish LLCs and then operate a business as if it was an extension of themselves, commingling funds and not following proper formalities. A recent Tax Court decision provides a sobering realization for individuals who fail to properly title their assets and follow the required formalities. In this case, the court found that a taxpayer’s purchase of an RV did not increase the amount he had at-risk in the LLC because he could not show the LLC owned or used the RV. As a result, deductions he had taken based upon that amount at-risk were disallowed by the IRS.

In Estate of Roberts v. CIR, the taxpayer had established an LLC to lease equipment to his S corporation. He lent money to the LLC, which issued him a promissory note in that amount. With the proceeds of the loan, the LLC purchased an RV. However, there were several issues with the RV’s ownership and use. Even though the RV was titled in the name of CTI Leasing, it was not titled in the name “CTI Leasing, LLC,” the company’s legal name. The EIN on the car title belonged to his S corporation. The RV was not on the LLC’s depreciation schedule. The taxpayer used the RV for his own purposes. Lastly, there was no record that the LLC ever used the RV, because there was no written lease between the LLC and the S corporation concerning the RV.

As a result, the IRS concluded, and the Tax Court confirmed, there was no evidence that the LLC owned the RV or used it. Because the taxpayer could not show that the LLC owned or used the RV, the taxpayer was unable to claim tax deductions based upon the LLC’s capital at-risk in connection with the RV.

There are a few items to take away from this case:

1. You should always properly title your corporate assets and use the corporate title LLC, Corp., or Inc., as the case may be.
2. If you have multiple business entities, you must keep assets of each entity separate from other assets. If you lease an asset among entities, you must have a proper lease in writing executed by both entities.
3. It would be much cheaper for the taxpayer to seek the guidance of an accountant or attorney when completing these transactions than suing the IRS in Tax Court for the disallowed tax deductions.

These days, with Legal Zoom and other ready-to-order LLCs, people are buying assets and operating businesses without knowing the consequences of their actions. Before you enter into large transactions, it is important to understand the formalities that must be followed in order to receive the intended tax consequences.

Manufacturing Showing Signs of Improvement in St. Louis

Part of a series on issues related to Manufacturers, Distributors and International Trade

Historically, St. Louis has been known as a manufacturing region. But over the past few decades, manufacturing jobs have dropped significantly. St. Louis has lost nearly half of its factory jobs since 1990 and now only 1 in 10 working St. Louisans work in manufacturing.

2011 saw a slightly positive sign of recovery in manufacturing. 3,400 jobs were added to the manufacturing sector in this region. Boeing’s deal to build 85 F-15s for Saudi Arabia should continue fighter jet production in the region through 2020. General Motors recently decided to make a huge investment in its Wentzville plant, adding over 1,200 new jobs.

The U.S. Bureau of Labor Statistics recently announced that total nonfarm payroll employment rose by 243,000 in January and the unemployment rate decreased to 8.3 percent. The BLS also recently announced that nonfarm business sector productivity increased at a 0.7 percent annual rate during the fourth quarter in 2011. This reflects of 3.6 percent in output and 2.9 percent in hours worked.

There are positive signs that St. Louis manufacturing jobs are increasing.

Posted by Attorney Ruth Binger. Binger serves both emerging and mature businesses concentrating in corporate law, intellectual property and technology law, and labor and employment law. Her commitment to the success of small to medium-sized businesses, and her understanding of multi-faceted issues inherent in operations, are what distinguish Binger’s practice.

A Long Road to HIPAA Compliance: Privacy and Security Audits

Since the Health Information Portability and Accountability Act of 1996 (HIPAA) was implemented in 2003, the Office of Civil Rights (OCR) of the U.S. Department of Health and Human Services (HHS) has not conducted a formalized plan for auditing health care providers, insurance plans and other covered entities … until now.

OCR recently announced its pilot program to audit covered entities for privacy and security compliance and says in 2012 it will conduct up to 150 audits in their effort to ensure that covered entities and their business associates are complying with the HIPAA Privacy and Security Rules and the Breach Notification Standards. The OCR website provides useful information about this program and its objectives.

Previously, there was no mandated auditing process as a part of HIPAA, but rather reviews of covered entities typically would occur as complaints were raised by patients or consumers. With the American Recovery and Reinvestment Act of 2009, Section 13411 of the Health Information Technology for Economic and Clinical Health Act (HITECH) amended portions of HIPAA and requires HHS to develop procedures for auditing covered entities to verify compliance with the Privacy Rules and breach notification.

Covered entities need to ensure that their policies and procedures are updated for privacy and security compliance efforts. The entity must be prepared to provide documentation of its procedures, including with regard to breach notification, and documentation that its key personnel have been trained. Training does not include simply having a notebook containing policies and procedures that no one knows how to use.

According to the OCR website, the timeline is fairly quick, so individuals within the covered entity should be prepared to know what to do upon receiving a written notification that an audit is coming. If a “serious compliance issue” is found, OCR may initiate a compliance review to address the problem.

Of course, OCR will continue to accept complaints from individuals and covered entities through their privacy officers must continue to accept complaints from individuals. The goal of the pilot audit program appears to be to identify best practices and discover risks and vulnerabilities that otherwise have not come to light through the complaint process.

Covered entities that are prepared will shine, while those that are not prepared will have some explaining to do.