BOTTOM LINE: The Corporate Transparency Act (CTA) is now fully enforceable. Most business entities—including condominiums and HOAs—must now report their beneficial ownership information by March 21, 2025.

All Injunctions Lifted; New BOI Reporting Deadline Set

On February 18, 2025, a U.S. District Court lifted the last nationwide injunction that had blocked enforcement of the CTA by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.

As a result, business entities  (“reporting companies”) must now report their beneficial ownership information (BOI) to FinCEN. This information includes the identities of the business owners. For most companies, FinCEN has set a new reporting deadline of March 21, 2025. For further details, see the FinCEN Extension Notice.

What Businesses Need to Know Now

BOI Reporting is Mandatory Once Again

BOI reporting requirements are reinstated nationwide. All reporting companies must comply by March 21, 2025 unless FinCEN announces further deadline modifications or your business falls into an exception specified in the FinCEN Extension Notice.

FinCEN Expected to Issue Additional Guidance

FinCEN is expected to provide further guidance regarding possible clarifications or modifications to the reporting rule to reduce burdens on low-risk entities, including small businesses.

Potential Legislative Relief Still Uncertain

Congress has been considering modifications to the CTA’s reporting deadlines. The House of Representatives recently passed H.R. 736, a bipartisan bill proposing an extension of the BOI filing deadline until January 1, 2026. However, the Senate has yet to act on this measure.

What This Means for Businesses

 Take Action Now—File to Avoid Compliance Issues

Given the reinstated CTA requirements, businesses should file their BOI reports as soon as possible. Even with FinCEN’s extension, waiting could lead to compliance risks and potential penalties if the compliance deadline is missed. FinCEN has an E-Filing system available at https://boiefiling.fincen.gov.

 Monitor FinCEN for New Guidance

Businesses should stay informed about any upcoming announcements from FinCEN regarding additional extensions, exemptions, or enforcement priorities. See the FinCEN website for updates

 Stay Prepared for Possible Changes

With legal challenges and pending legislation still in motion, the regulatory landscape could shift again. However, unless new legal action or legislative intervention occurs, businesses should assume compliance is required immediately.

Conclusion

CTA reporting obligations are back in effect, and businesses must ensure they meet their BOI reporting requirements. While a formal extension from FinCEN provides some relief, companies should still prepare to file as soon as possible. FinCEN may introduce further modifications, but businesses should remain vigilant and stay ahead of any updates. Additionally, the pending appeal of the Smith and other CTA court decisions has the potential to change the reporting obligations again, so continued monitoring of legal developments is crucial. For latest updates, access the FinCEN website.

BUSINESS LAW ATTORNEYS

Maryland & Washington DC

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The December 3, 2024 U.S. District Court injunction halting enforcement of the Corporate Transparency Act (CTA), previously reported, was removed and then reinstated by the U.S.Court of Appeals. As such, compliance is still voluntary pending appeal. Detail below.

Background on the CTA

The CTA mandates that certain business entities report beneficial ownership information (BOI) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement aims to prevent the misuse of anonymous shell companies for activities such as money laundering and tax evasion.

Recent Judicial Developments

• December 3, 2024 Preliminary CTA Injunction: The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, halting the enforcement of the CTA and its reporting requirements. The court expressed concerns about the constitutionality of the act, particularly regarding federal overreach into areas traditionally managed by states. See Court Temporarily Blocks CTA, Compliance Voluntary Pending Appeal
• December 23, 2024, Preliminary CTA Injunction Lifted: U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) granted a stay of the District Court’s preliminary injunction, effectively reinstating the CTA’s enforcement of the ownership reporting requirements. In response, FinCEN extended the reporting deadline to January 13, 2025, acknowledging the need for additional compliance time.
• December 26, 2024, Preliminary CTA Injunction Reinstated Pending Appeal: The Fifth Circuit vacated its previous stay, reinstating the nationwide preliminary injunction. This action suspends the CTA’s enforcement and reporting deadlines until the court can fully assess the substantive arguments concerning the act’s constitutionality.
• Pending Appeal Spring 2025: the Fifth Circuit issued an expedited briefing schedule with a hearing Scheduled on March 25, 2025. Any legal opinion or other decision as to the constitutionality and enforcement of CTA will likely come after that date.

Current Status

As of now, entities are not required to file BOI reports with FinCEN. However, voluntary submissions are permitted. Businesses should remain vigilant and prepared to comply promptly should the injunction be lifted following the court’s forthcoming decision.

The FinCEN website Alert updated January 2, 2025, confirms that reporting requirements are still voluntary pending the U.S. Department of Treasury’s appeal:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Current Status of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.) and Voluntary Submissions

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. The Department of Justice, on behalf of the Department of the Treasury (Treasury), filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in Texas Top Cop Shop, Inc., pending the outcome of Treasury’s ongoing appeal of the district court’s order. Treasury immediately issued an alert notifying the public of this ruling and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, Treasury extended reporting deadlines. However, on December 26, 2024, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. On December 31, 2024, the Department of Justice, on behalf of Treasury, sought a stay of the injunction pending the ongoing appeal from the Supreme Court of the United States.

In the meantime, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. is once again in effect. FinCEN is complying with—and will continue to comply with—the district court’s order for as long as it remains in effect. As a result, reporting companies are not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Alert: Ongoing Litigation – Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 2, 2025]. See also the BOI filing website page.

Recommendations for Businesses

Companies should stay apprised of the status of the CTA

• Stay Informed: Monitor updates from FinCEN to remain aware of any changes in the CTA’s enforcement status at:
• • https://boiefiling.fincen.gov/fileboir

• • https://www.fincen.gov/boi

• Prepare Documentation: As a precaution, gather and organize the necessary beneficial ownership information to ensure readiness for potential compliance requirements.
• Voluntary Compliance: Some businesses have already complied or may choose to voluntarily comply. These business, however, should continue to stay informed in the event, a court ruling alters existing compliance requirements.
• Consult Legal Counsel: Seek advice from legal professionals to understand the implications of these developments and to ensure compliance with any future obligations under the CTA.

Conclusion

In summary, while the enforcement of the Corporate Transparency Act is currently suspended due to ongoing judicial review, businesses should stay alert and prepared for potential reinstatement of reporting requirements pending the court’s final decision.

To explore the broader implications of the ruling, see recent coverage Wall Street Journal and Reuters articles.

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Affidavit of Continued Use verses Resident Opportunity to Purchase Park

Under the Manufactured Housing Modernization Act of 2023

This Article provides an overview of Maryland laws governing the purchase and Sale of mobile home parks and manufactured housing communities under the Maryland Manufactured Housing Modernization Act of 2023 (MHMA).

The Manufactured Housing Modernization Act of 2023

When investors and developers purchase existing mobile home parks in Maryland, it can significantly impact the homeowners who rent lots in these communities. New park owners may increase lot rents substantially or announce plans to repurpose the property, requiring residents to relocate or abandon their mobile homes.

The MHMA addresses these concerns by imposing conditions on the sale of mobile home parks. If a prospective buyer does not plan to operate the property as a mobile home park for at least five years or refuses to limit rent increases for three years, the current park owner must give residents the opportunity to purchase the community.

Effective October 1, 2023, the MHMA amends the Maryland Mobile Home Parks Act of 1980 by incorporating new provisions codified in Maryland Real Property Article Sections 8A-1801 through 8A-1806.

New Mobile Home Park Terminology

The MHMA updates terminology to include both “mobile” and “manufactured” homes. Below is a guide to the terms used in the statute and this article:

• Manufactured Home: Refers to factory-built homes, synonymous with “mobile homes,” though “manufactured home” is the more modern and precise term. See Manufactured And Mobile Homes In Maryland.
• Manufactured Housing Community (“Community”): Also known as a “mobile home park,” this refers to a residential property divided into two or more lots leased to owners of manufactured homes (“homeowners” or “residents”).
• Manufactured Housing Community Owner (“Community Owner”): Also known as “park owner,” this refers to the person or entity who owns a manufactured housing community.
• Homeowner: Refers to a person owning a manufactured home and leasing a lot in a manufactured housing community (a/k/a park “resident”).
• Homeowners Organization: A group representing at least 75% of homeowners in a manufactured housing community.

Pre-Conditions To Accepting an Offer to Purchase a Manufactured Housing Community

An owner of a manufactured housing community (“community owner”) that receives an offer to purchase the community cannot accept the offer without fulfilling one of the following 2 statutory obligations:

1. Affidavit of Continued Use: the prospective purchaser files an affidavit stating its intention to continue operating the community for 5 years with a 10% cap on rent increases for 3 years ; or
2. Homeowners’ Opportunity to Purchase: the community owner discloses the details of the purchase offer and allows the homeowners an opportunity to make a matching or competing offer on substantially similar terms.

“Acceptance” of an offer to purchase a manufactured housing community is “conditioned on” the fulfillment of one of these two options.

Exceptions to this law include family sales, foreclosure sales, refinancing sales, sales among community owners, eminent domain sales, and certain merger or recapitalization sales.

A. Purchaser’s Affidavit of Continued Use as Manufactured Housing Community

Compliance with MHMA is straightforward if the prospective purchaser intends to continue using the property as a manufactured housing community and is agreeable to limit rent increases for 3 years. In this case, a community owner may accept the offer to purchase a manufactured housing community if the purchaser agrees to file an affidavit in the land records office of the county in which the community is located, confirming that:

1. the land will continue to be used as a manufactured housing community for 5 years after the purchase date; and

2. rent will not increase by more than 10% per year for the first 3 years after the purchase date.

The purchaser must provide notice of the affidavit to each homeowner via first class mail and post a copy of the affidavit in a public area of the community.

This affidavit provides residents assurance of stability for five years, with predictable rent increases for three years. Violations can result in a $10,000 penalty paid to the homeowners’ organization.

B. Notice of Intent to Sell and Homeowners’ Opportunity to Purchase

If the prospective purchaser will not agree to file an affidavit of continued use, the community owner must alternatively give the homeowners notice of its intent to accept the offer to purchase the community including a description of how the homeowners can make their own competing offer to purchase the community. The notice must conform to the following requirements:

1. Notice of  Intent Accept Offer to Sell: each homeowner in the manufactured housing community must be provided with notice of the terms of the offer or the actual contract to purchase the community which the community owner wishes to accept or has conditionally accepted on compliance with the statute. The notice must include the price, material terms and conditions of the offer and any evidencing documentation. The notice must also be given to the Maryland Department of Housing and Community Development (“DHCD”) and the appropriate housing agency for the county and/or city in which the community is located.

2. Statement of Homeowners’ Opportunity to Purchase: The notice of intent to accept an offer, must also contain a statement advising the homeowners that they may purchase the manufactured housing community through a homeowners organization by submitting an offer on substantially similar terms to the offer that the community owner wishes to accept from a third-party prospective purchaser. The homeowners organization must submit this offer within 60 days of the mailing date of the notice. The notice of this opportunity to purchase must also list organizations and agencies available to assist homeowners with financing for the purchase of the manufactured housing community.

This notice, referred to as a “notice of intent to sell a manufactured housing community” must also be posted in a public area of the manufactured housing community and be sent by registered or certified mail to the homeowners organization. The statute does not specify how the notice of intent to sell must be provided to each individual homeowner and DHCD. It would be prudent to at least mail the notice by registered or certified mail as the statute refers to “mailing” as the starting date for the 60-day period within which a homeowner organization must submit its offer to purchase. It would also be prudent deliver notice by hand delivery or certified mail, return receipt requested, to avoid a notice compliance issue from arising, especially if there is no homeowners organization to receive notice.

Within10 days after providing its notice of intent to sell, the community owner must “make available to the homeowners organization” the same information about the manufactured home community that it provided to the prospective purchaser “or would provide to other prospective purchasers.”

Homeowners Organization Offer To Purchase

The homeowners organization has a 60-day period to offer to purchase the community once the notice of intent to sell the manufactured housing community is given. The statute sets forth the procedure by which the homeowners organization may make this offer.

A. Creation of Homeowners Organization

If a homeowners organization does not exist, the homeowners who wish to make an offer will need to create one in a short period of time. A homeowners organization can be an incorporated or unincorporated organization, including a cooperative housing corporation formed under Maryland’s Cooperative Housing Corporation Act (Md Corps & Assns Article § 5-6b-01, et seq.). If a Homeowners organization exists at the time a notice of intent to sell is made, it will be in a better position to make a timely response within the 60-day period allowed by statute. To qualify as a “homeowners organization,” it must:

(i) be open to all homeowners;

(ii) represent the interests of the homeowners;

(ii) be controlled by members of the organization; and

(iv) be comprised of homeowners who lease or rent at least 75% of the lots in the manufactured housing community.

B. Contents of Homeowners Organization’s Offer To Purchase

The homeowners organization may offer to purchase the manufactured housing community by notifying the community owner of its intent to purchase the manufactured housing community within 60-days of the mailing of the community owner’s notice of intent to sell. This notification must be sent to the community owner by registered or certified mail and contain the following:

(i) Documentation indicating that at least 75% of the resident members of the homeowners organization voted to purchase the manufactured housing community; and

(ii) A proposed agreement to purchase the manufactured housing community, containing terms substantially similar to the terms described in the community owner’s notice of intent to sell.

Community Owner Consideration of Homeowners Organization Offer

The community owner is not required to accept the homeowners organization’s proposed agreement to purchase the manufactured housing community. However, it must “consider the offer in good faith,” and has a statutory duty: (1) not “to act to scuttle all the proposed agreement;” (2) “not to arbitrarily or capriciously refuse to proceed with negotiations;” and (3) “not to engage in misconduct or dishonesty in the negotiations.” RP § 8A-1804(c)(1). If the community owner “willfully fails” to comply with these obligations and duties it will be liable to the homeowners organization for $10,000.

The community owner’s statutory obligation to consider offers from the homeowners organization ends once the 60 days period expires without an offer being made. Likewise, even if the homeowners organization makes a timely offer, the community owner is not required to consider “additional offers” from the homeowners organization after the 60 days period expires.

Community Owner Acceptance of Homeowners Organization Offer

If the community owner enters into an agreement with the homeowners organization based on its offer to purchase the manufactured housing community, the homeowners organization must be given at least 105 days after the date of the agreement to obtain financing and close the purchase unless the parties agree to an alternative period (the “allotted financing period”). However, the community owner’s statutory obligation to consider offers from the homeowners organization ends if the homeowners organization is unable to obtain financing and fails to close in the allotted financing period.

Assignment Of Homeowners Organization Right to Make an Offer 

A homeowners organization may assign its statutory right to make an offer to purchase a manufactured housing community to a state or local government agency or nonprofit that intends to purchase the property for purposes of continuing its use as a manufactured housing community, providing affordable housing.

Notice of Contract of Sale

A community owner that moves beyond the offer stage and enters a contract of sale, either with the homeowners organization or a third-party, must give prior notice of the sale to each homeowner and DHCD. The notice must be given 30 days before the date of the sale and posted in a public area of the manufactured housing community.

Relocation Plan for Change in Use of Property

If the new owner wishes to close the manufactured housing community and use the property for another purpose, it is required to apply for a change in land use with the appropriate local government agency (county or municipal corporation) where the community is located. The application must include a relocation plan for the homeowners who are also entitled to receive a 1-year prior written notice of termination of their rental agreements.

NOTE ON MHMA, MOBILE HOME PARK ACQUISITION & LEGAL ADVICE

The MHMA ensures greater protections for residents of manufactured housing communities, giving them stability and a fair chance to retain their homes. For additional guidance on these regulations, contact Cowie Law Group, P.C. , Washing ton DC and Maryland business law attorneys handling manufactured housing matters.

This article should not be considered legal advice as to any specific purchase of a mobile home park in the state of Maryland. Each transaction regarding the purchase and sale of a manufactured housing community requires individual evaluation to determine the applicable laws and the strategies available for mobile home park acquisition. For a free consultation, contact Cowie Law Group, P.C., a Maryland mobile home park law firm with Mobile home park attorneys and manufactured home community lawyers assisting clients with the purchase and acquisition of mobile home parks in Maryland and providing legal advice regarding the sale and on-going operation of manufactured housing communities throughout the state of Maryland.

BUSINESS LAW ATTORNEYS

Maryland and Washington DC

MARYLAND MOBILE HOME PARK ATTORNEYS

MARYLAND MANUFACTURED HOUSING COMMUNITY LAWYERS

Maryland and Washington DC Real Estate Lawyers

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Parties entering into a contract should consider: (1) what law will govern the interpretation of the contract; and (2) what jurisdiction’s courts will have the right to hear a contractual dispute. The answer to both of these questions can be extremely important in terms of outcome, expense and convenience in the event that a breach of contract results in the filing of a law suit.

Determining the applicable governing law and jurisdiction can become a complex and disputed legal issue when a contract has connections to more than one state or country. For example, a Delaware corporation might enter into a contract with a Maryland LLC to perform services in Washington, D.C.. A legal dispute over applicable law and proper court juridiction can often be avoided by simply incorporating clauses into the contract that specify the governing law and court applicable to any legal disputes that may arise out of the contract. Such clauses are commonly referred to by attorneys and as “choice-of-law” and “forum-selection” clauses, respectively.

Governing Law Clauses in Contracts

 A governing law or “choice-of-law” clause is a provision in a contract that specifies what law will govern in the event a dispute arises under the contract. An example of such a clause is as follows:

“This Agreement, including its formation, performance and enforcement, shall be governed by and construed in accordance with the laws of Maryland, without regard to conflict of law principles.”

 Jurisdiction Clauses in Contracts

 A jurisdiction or “forum-selection” clause is a provision in a contract that specifies a particular court or courts that will have jurisdiction to hear a legal dispute that arises under the contract. An example of such a clause is as follows:

 “The parties agree that all legal proceedings arising out of or in connection with this Agreement shall be brought only in a Maryland State Court located in Baltimore County and any appeal thereof shall be to the appellate courts of the State of Maryland.

 Enforceability

Courts in the United States will generally enforce choice of law and forum selection clauses if freely agreed to by parties in a commercial setting. However, before selecting governing law and jurisdiction, an attorney should first consider the likelihood that these clauses will be enforceable under the circumstances of the contract and the laws of the chosen locale.

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Adverse Domination and Accrual of Business Law Claims

Tolling Statute of Limitations on Corporate Legal Claims when Wrongdoer Dominates Corporation

By DC & Maryland Business Lawyer, Nicholas D. Cowie

This article provides an introduction to the Maryland doctrine of adverse domination, a legal theory that, in some cases, can effectively “resurrect” business law and corporate legal claims that might otherwise be barred by the statute of limitations.

Introduction: Statute of Limitations and the Discovery Rule

The statute of limitations is the time period within which a legal claim must be filed in a court of law or it will be forever barred. In Maryland, most common law legal claims (i.e., legal claims not created by statute) have a three-year statute of limitations period that “accrues” (i.e., begins to run) on the date that the claimant knew or reasonably should have known that a wrong had been committed against them. This legal formula for determining the accrual date for the general statute of limitations is also known as the “discovery rule,” first adopted in Maryland in the case of Poffenberger v. Risser, 290 Md. 631 (1981). As a general proposition (with some exceptions not discussed herein), a legal claim in Maryland must be brought within three years of “discovery,” unless a statute provides a different period of time. See, Poffenberger case and general statute of limitations set forth at § 5-101, Md. Cts & Jud. Proc. Article.

The Doctrine of Adverse Domination

There are a variety of legal theories under which courts will toll, that is stop, the running of the statute of limitations, or deem that it is prevented or delayed from accruing or commencing based on the factual circumstances of a given case. One of these theories is known as the adverse domination doctrine, which generally applies to corporate claims against directors and officers who have harmed a corporation or other legal entity (such as a limited liability company). When this doctrine applies the claims against the wrongdoing directors and officers do not accrue while they are in control the corporation.

If corporate directors have taken illegal advantage of a corporation for their own benefit, then presumably the corporation, which acts only through its directors, has knowledge of the wrong. Such knowledge would normally commence accrual the statute of limitations under the discovery rule. However, if the wrongdoing directors fail to disclose the injury to the shareholders and fail to take legal action on behalf of the corporation against themselves, can they simply sit back and allow the statute of limitations to run out by choosing to do nothing while they dominate the board of directors? This is one example where the Adverse Domination doctrine can be applied to toll or delay the accrual of the statute of limitations while the corporation is dominated by the wrongdoers, thereby affording it additional time within which to bring a legal claim.

In the case of Hecht v. Resolution Trust Corp., 333 Md. 324, 339-49 (1994), the Maryland Court of Appeals adopted the doctrine of adverse domination finding it consistent with existing Maryland law. The court held that the statute of limitations on a corporation’s legal claim “against its directors and officers for injuries to the corporation” did not accrue, or begin to run, while “the culpable directors constituted a majority of the board of directors.” Hecht at 352. Thus, unless rebutted (as discussed below) there is a presumption that accrual cannot occur until after the culpable directors have been replaced by disinterested directors “in control of the corporation.” Hecht at 352. The doctrine applies to claims belonging to the corporations as well as the claims of individual shareholders. See, Shah v. HealthPlus, Inc., 116 Md.App. 327, 339-340 (1997).

Rationale for the Adverse Domination Doctrine

The adverse domination doctrine is based on the recognition that “it is unrealistic to expect that [the wrongdoers] will either facilitate discovery of a claim or assert a claim against themselves in favor of the corporation. Such actions are clearly adverse to their own interests….” Hecht at 345 . The Hecht decision recognizes the practical reality that an adversely dominated board will not sue itself and should not be allowed to argue that the statute of limitations accrued or expired under its watch.

The adverse domination doctrine is analogized to and consistent with the principle of Maryland agency law known as the “adverse interest exception” under which the knowledge of an agent whose interests are adverse to the principal cannot be imputed to the principal. Hecht at 345. The doctrine extends the discovery rule to situations in which a corporation is prevented from discovering a cause of action because there is no one who has the knowledge, ability, and motivation to act for the corporation. Hecht at 351. It goes beyond the principles of agency law by providing a rebuttable presumption that a corporate plaintiff cannot have knowledge of wrongdoing by directors when they are in control of the corporation and, therefore, there can be no accrual of the statute of limitations based on discovery until after control is relinquish or terminated. Hecht at 351. This presumption is rebuttable by showing someone other than the wrongdoing directors had knowledge of the basis for the corporate legal claims, combined with ability, and motivation to bring suit during the period of culpable director control. Hecht at 352.

Expansion of the Adverse Domination Doctrine by Maryland Business Attorneys

Experienced Maryland business attorneys and lawyers know that there are many complex legal nuances applicable to the adverse domination doctrine, including varying versions of the doctrine with specific legal elements, exceptions and expansions adopted by other jurisdictions that have yet to be considered by the Maryland appellate courts. For example, precedent from other jurisdictions opens the door for the logical application and extension of the doctrine in Maryland to third parties who are not members of the wrongdoing board of directors. See, e.g., Alexander v. Sanford, 181 Wash. App. 135, 176, 325 P.3d 341, 365 and FN 26, 33 (stating that doctrine of adverse domination can toll the accrual of unit owner vicarious liability claims against a third party developer / builder of condominium based on actions taken by developer-appointed directors of condominium association who allegedly concealed and misrepresented the existence of condominium construction defects and failed to take action to address those defects), petition for review granted, 339 P.3d 634 (2014); Lease Resolution Corp. v. Larney, 308 Ill. App.3d 80, 241 Ill.Dec. 304, 719 N.E.2d 165 (Ill.Ct.App.1999) (applying adverse domination to toll accrual of claims against third parties who act as board members’ co-conspirators).

Importance of Consultation with DC & Maryland Business Litigation Attorneys regarding Statute of Limitations Issues

Anyone seeking to pursue legal claims on behalf of a business entity should seek an immediate legal consultation from one of the experienced Maryland business attorneys and lawyers at Cowie Law Group, P.C. for purposes of determining all applicable statute of limitations time periods within which suit must be filed in order to preserve those claims. Different legal claims can have different statutes of limitations periods accruing at different times so a comprehensive evaluation is warranted to ensure that all claims are pursued in a timely fashion. Time is of the essence. Even when settlement of legal claims is a possibility, the running of the statute of limitations should not be ignored during negotiations. In such circumstances, a tolling agreement can and should be utilized to stop the statute of limitations from running so as to preserve legal claims without having to file a law suit. Finally, any business seeking to rely on the doctrine of adverse domination should seek legal advice from experienced Maryland business attorneys to determine the doctrine’s potential applicability to the facts as a legal basis for tolling the accrual of the statute of limitations.

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COWIE LAW GROUP, P.C. is a DC & Maryland business law firm with litigation attorneys who handle legal disputes involving Maryland & DC Business Law and Corporate Legal Claims. Our main law office is located in Crownsville, Maryland, and we represent clients in business law matters throughout the State of Maryland and Washington, D.C.

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Protecting Businesses from Unfair Competition in Maryland: Companies transacting business must often disclose confidential or proprietary business information developed through hard work and monetary investment. For example, client contact lists, business plans, supplier information, marketing strategies, business opportunities, employee identities and skills, manufacturing processes, ingredients, source code, proprietary technology, software and other intellectual property and trade secrets. If not protected, such information can be misappropriated by employees, subcontractors and others to start their own competing business.

Companies doing business in Maryland have a legal right to protect or restrict the use of such information when transacting business by entering into contractual agreements that: (1) prohibit solicitation of employees and customers; (2) require that disclosed information be kept confidential; and (3) restricting certain types of competition in a specified geographic area for a specified period of time. Such provisions are often used in employment agreements, subcontracts, business purchase agreements, service contracts, technology teaming agreements and other agreements that involve the disclosure of valuable business information to third parties.

If breached, these contractual provisions can be enforced in court through emergency injunctive relief (e.g., temporary restraining and cease and desist orders) or monetary damages or both. Attorneys fees and litigation expenses can also be recovered. Enforceability, however, will depend on the reasonableness of the restrictions in the context of the circumstances and the particular type of business or industry involved. Therefore, this article should not be relied upon as legal advice. Consultation with a Maryland business law attorney is essential when entering into or seeking to enforce any agreement containing such contractual provisions.

Below is a brief overview of these contractual provisions commonly referred to as Non-solicitation, Non-disclosure and Non-competition Agreements.

Non-solicitation Agreements

A Non-solicitation Agreement is an agreement that contains a contractual provisions under which a party to the agreement promises not to solicit the other parties’ employees or customers by hiring them away or seeking out their business.

Non-solicitation provisions are used in employment agreements to prevent employees from soliciting customers of a business after the termination of employment. These provisions are also used by businesses to prevent contract partners and clients from luring away skilled company employees or interfering with valued customer relationships.

A Non-solicitation provision is typically limited in time to the duration of agreement and for an additional period of time after the agreement has ended. There are many direct and indirect ways to solicit a businesses’ employees and clients so the meaning of the terms “solicitation,” “employee” and “customer” as used in a non-solicitation provision should be carefully defined to meet the circumstances the business in question.

Non-disclosure or Confidentiality Agreements

A non-disclosure agreement (also known as a “confidentiality agreement”) is an agreement that contains a contractual provision where one party promises not to disclose or otherwise use information received from the other party, except as specifically permitted under the agreement.

Non-disclosure agreements are entered into when two companies are considering doing business and need to have access to each other’s business information and technology for the purpose of evaluating potential business relationships or working together to pursue a joint business opportunity. Non-disclosure provisions are also utilized in employment agreements to restrict employees’ use and dissemination of disclosed confidential information.

In order to be enforceable in court, a non-disclosure agreement should: (1) identify the confidential material, knowledge or other information that is to be disclosed and/or kept confidential; (2) define the limited manner in which that information can be used, if at all; and (3) describe how the information should be handled / protected, including the identify which individual employees can have access to that information and under what circumstances

Non-competition Agreements

A non-competition agreement (also known as a “non-compete agreement”) is an agreement that contains a contractual provision under which one party agrees not to enter into business competition with the other party for a period of time in a specific geographical area. Non-competition provisions are best known for their use in employment agreements to prevent employees from leaving to start up competing companies or to work for competitors. Employers justify these agreements because they invest time and money in teaching employees the company business, and, in some cases, entrusting them with confidential proprietary information, only to have them use that knowledge to start an identical business in direct competition with them.

Non-competition contractual provisions are also used outside the employer-employee context. For example these provisions are useful in connection with the purchase of a business where the business seller agrees not to start a new business that competes with the business being purchased.

Where employment agreements are concerned, non-competition agreements must not be overly broad so as to unreasonably retrain trade and the ability to earn a livelihood. Generally, courts will enforce non-compete agreements against employees who provide unique services, or to prevent a former employee’s misuse of trade secrets and client lists, or solicitation of customers. In such cases the restriction on completion must be reasonably limited in geographic scope and duration as reasonably necessary for the protection of the employer’s justifiable legitimate business interest without imposing undue hardship on the employee or disregard of the public interests in having citizens be able to earn a living. Nonetheless, even overly broad non-competition agreement may be enforceable under Maryland’s “blue pencil rule,” which allows a Judge to strike the overbroad portion of a non-competition agreement and, in some cases, still enforce remaining provisions.

For more information about legal agreements that protect Maryland businesses from unfair competition, contact the Maryland lawyers at the business law firm of Cowie Law Group, P.C.

410-327-3800

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1321 Generals Highway, Suite 302, Crownsville, MD 21032

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The post Non-solicitation, Non-disclosure and Non-competition Agreements — Protecting Businesses from Unfair Competition in Maryland appeared first on Maryland & DC Business Attorneys.

By DC & Maryland Business Lawyer, Nicholas D. Cowie

Licensing agreements are legally binding contracts utilized by businesses (“licensors”) to protect their inventions and ideas while sharing them with others (licensees) for profit. Maryland Business Lawyers and Attorneys create licensing agreements for their clients who then use them to distribute, merchandise, franchise and sell software, technology, designs, products, services, creative works and other intellectual property over which the licensor/owner has a patent, copyright, trademark or other recognized property right.

The licensing agreement not only specifies how the licensee user will compensate the licensor owner for the use of its ideas and inventions, but also provides the owner with contractual protections by defining the terms under which the licensee can use the inventions and ideas so as to prevent or deter misuse or misappropriation. These protections can include confidentiality provisions that protect proprietary formulas, technologies or other trade secrets as well as indemnification provisions that impose liability on the licensee for any infringement or other unauthorized use that may occur due to the licensee’s failure to comply with the licensing agreement.

The licensing agreement most people are familiar with is the so-called “end-user license” associated with the purchase of patented software used on smart phones, laptops and personal computers. The end user licensee must click an “accept” button signifying his or her agreement to the terms before the software will install on their device. These end-user license agreements typically prohibit the end-user from sharing the software and grant access to install and use the software on a limited number of devises.

Licensing agreements are also used in franchising a branded product (protected by a trademark) or a branded service (protected by a service mark). In such cases, the business franchisor grants permission to a franchisee/licensee to distribute products or sell services under its trademark / service mark. The franchising agreement will contain a licensing provision that allows the franchise licensee to use and sell the branded product or service without fear of a trademark or service mark infringement claim.

Another example of how DC & Maryland Business Lawyers and Attorneys use licensing agreements to the benefit of their clients is where a licensee is granted permission to copy and distribute copyrighted works such as “art” or fictional characters. With such license, a licensee need not fear a claim of copyright infringement brought by the copyright owner.

DC & Maryland Business Lawyers and Attorneys can customize the terms of a licensing agreement to establish conditions and limits for use of intellectual property. For example, the license agreement may specify the period of time during which the licensee has a right to use the product or intellectual property, or limit the licensee to a specific territory or geographic region. Likewise, the licensing agreement may specify whether the scope of the license is exclusive to the licensee or multiple licensees, and whether and to what extent the licensee has permission to sublicense the product. DC & Maryland Business Lawyers and Attorneys at Cowie Law Group can assist in drafting and negotiating the terms of licensing agreements.

When a party fails to comply with the terms of a licensing agreement, there may be contractual rights and claims for breach of the licensing agreement, as well as claims for: infringement of copyrights, trademarks, patents, and trade secrets; misappropriation of trade secrets; business torts; and other claims for unlawful trade practices and unfair competition. These claims can be pursued and prosecuted by the DC & Maryland business lawyers and DC & Maryland business attorneys at Cowie Law Group, P.C. Such licensing or franchising litigation is pursued by licensors both to recover lost profits, payments due, and other damages as well as to obtain injunctive relief, including temporary restraining orders (TRO’s), intermediate injunctions, and final injunctions to protect intellectual property from further infringement and improper use. Enforcing property rights and licensing claims can also serve as a proactive step to ensure that others do not follow suit and that a business retains full control of its intellectual property.

410-327-3800

cowielawgroup.com

1321 Generals Highway, Suite 302, Crownsville, MD 21032

(click on address above for directions and Map)

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COWIE LAW GROUP, P.C. is a DC & Maryland business law firm with DC & Maryland Technology & Intellectual Property Lawyers assisting clients with licensing agreements and other contractual documents that allow businesses to profit from and protect ideas and inventions. The experienced DC & Maryland business lawyers of COWIE LAW GROUP, P.C. provide legal advice and legal representation to business professionals, entrepreneurs, local businesses, national corporations and multinational companies.

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Although merely being a officer or shareholder of a corporation does not make one personally liable for the actions of the corporation, when a corporate officer directly engages and participates in negligent conduct on behalf of a legal entity which results in injury or monetary damage to others, that officer can be held personally liable in a tort action along with the corporation he or she was acting on behalf of. For example, I once served as a trial attorney in a case filed in the Circuit Court of Maryland for Montgomery County in which the jury awarded  over one million dollars ($1Million) against the president of a corporation based on written misrepresentations that the president had personally made to consumers on behalf of the corporation. More recently, business litigation lawyers at Cowie Law Group, P.C. represented a client in the Circuit Court of Maryland for Baltimore County where the court ruled that trustees and officers of a business trust could be held personally liable for actions taken on behalf of the trust. These are but a few examples of the business litigation aspect of cases where business owners have been held personally liable.

This blog post discusses the personal liability of officers, shareholders and members for conduct they take on behalf of a company, even though the company is set up as a corporation, LLC or other recognized form of legal entity.

Action or Inaction That Can Result in Personal Liability of corporate Officers and LLC Members

 Maryland & DC Business Law Attorneys

It is true that an individual member of an LLC or an officer or a shareholder of a corporation, cannot be held liable for the acts of the company merely by reason of their title and association with the company.  Also, an officer or member who signs a contract as a representative on behalf of a corporation or legal entity cannot be held personal liable for the performance of the contractual obligations. This legal theory, often referred to in Maryland as the “corporate veil doctrine,” insulates corporate officers and members of limited liability companies from personal liability in these and other situations.

However, under Maryland law, the corporate veil doctrine generally does not insulate corporate officers from personal liability in negligence actions if their personal failure to exercise due care results in damage to Plaintiff.  Tedrow v. Deskin, 265 Md. 546, 550 (1972) (“[t]he general rule is that corporate officers or agents are personally liability for those torts which they personally commit, or which they inspire or participate in, even though performed in the name of an artificial body”); T-UP v. Consumer Protection Division, 145 Md. App. 27, 72 (2002) (“[o]fficers of a corporation may be individually liabile for wrongdoing that is based on their decisions”).  Fletcher v. Havre de Grace Fireworks Co., 229 Md. 196, 201 (1962) (an officer of a corporation may be held personally liable for torts committed by the corporation if the officer either specifically directed, or actively participated or cooperated in the corporation’s negligent conduct); Marycle, LLC v. First Choice Internet, 166 Md. App. 481, 528 (2006) (“’If an officer either specifically directed, or actively participated or cooperated in the corporation’s tort, personal liability may be imposed’”).

Under the so-called “rule of Tedrow” (cited above), corporate officers in Maryland are personally liable for negligent acts they commit in connection with the performance of a contractual duty on behalf of a corporate entity.  Thus, where a corporate building company contracted to construct plaintiffs’ home and where the president of the company chose the materials for and designed a defective wooden support structure for a brick wall at the home, the Court held that the president could be liable for his participation in the alleged negligent design and construction under the same standard of care applicable to the corporate building company.  St. James Constr. V. Morlock, 89 Md. App. 217, 222-24 (1991).

Likewise, where a developer contracted with an engineering company to provide engineering services for the construction of a commercial property and where the president of the engineering company made misrepresentations regarding the cost of engineering services, the Court held that under “the rule in Tedrow”, the president of the engineering company could be held personally liable for his misrepresentations.  Brock Bridge LTD. Partnershiop, Inc. v. Development Facilitators, Inc., 114 Md. App. 144, 164-66 (1997).

Consultation with Maryland Business Law Attorneys to Avoid Personal Liability

Business owners, LLC members, corporate officer and members of a Board of directors are well advised to consult with a Maryland business law attorney about the manner in which they involve themselves in the daily operation of the business.

For more information about Maryland business law and personal liability of corporate officer, LLC members and other business owners in DC & Maryland and to discuss legal strategies to protect your business from liability, contact the Maryland business law attorneys and lawyers at the Maryland and Washington DC business law firm of Cowie Law Group, P.C.

410-327-3800

cowielawgroup.com

1321 Generals Highway, Suite 302, Crownsville, MD 21032

(click on address above for directions and Map)

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COWIE LAW GROUP, P.C. is a DC & Maryland business law firm with DC & Maryland business law attorneys and DC & Maryland business lawyers who handle business law transactions and business litigation and legal disputes in Maryland and Washington, DC. Our main law office is located in Crownsville, Maryland and we represent clients in business law matters throughout Washington, DC and the State of Maryland.

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