Indiana Business Lawyer Blog

In July of 2009, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued guidelines on employee severance agreements titled “Understanding Waivers of Discrimination Claims in Employee Severance Agreements.” Frequently, employers offer departing employees money or benefits in exchange for waiving liability for all future claims connected with the prior employment relationship, likely including discrimination claims as well as claims brought under the civil rights laws which the EEOC enforces.

The EEOC guidance states that a waiver in a severance agreement will generally be valid when the employee “knowingly and voluntarily consents to the waiver.” To determine whether the employee actually did know of and voluntarily waived his or her potential discrimination claims, most courts look beyond the language of the contract and consider the totality of the circumstances in order to determine whether the employee knowingly and voluntarily waived his or her right to sue. The following factors have been used by courts to determine the totality of the circumstances: (1) whether it was written in a manner that was clear and specific enough for the employee to understand based on his or her education and business experience; (2) whether it was induced by fraud, duress, undue influence or other improper conduct by the employer; (3) whether the employee had enough time to read and think about the advantages and disadvantages of the agreement before signing it; (4) whether the employee consulted with an attorney or was encouraged or discouraged by the employer from doing so; (5) whether the employee had any input in negotiating the terms of the agreement; and (6) whether the employer offered the employee consideration that exceeded what the employee already was entitled to by law or contract and the employee accepted the offered consideration.
Continue reading

In a case of interest to Indiana business lawyers, Abdalla v. Qadorh-Zidan, the Indiana Court of Appeals addressed issues relating to corporate and limited liability company (“LLC”) fiduciary duties owed to former shareholders and members with respect to preparation of tax returns for time periods prior to members and shareholders’ relationship being terminated. In this case, the Court held that LLCs and corporations owe a fiduciary duty to former members and shareholders regarding preparation of tax returns for periods prior to former members and shareholders’ separation from the company’s incorporation when these tax returns are prepared for time periods where former members and shareholders were associated with the corporation and LLC. The Court recognized that shareholders in a closely held corporation owe each other fiduciary duties, and fiduciaries must deal fairly, honestly and openly with the corporation and fellow stockholders and must not be distracted from their performance of such duties by personal interests. The Court in this matter held that former shareholders of a corporation and members of an LLC are entitled to inspect books of the corporation or LLC with respect to tax records and information relating to transactions that occurred prior to the termination of their interest in the corporation and/or LLC.

Abdalla v. Qadorh-Zidan, 913 N.E.2d 280 (Ind. Ct. App. 2009).

Jeremy L. Fetty is an associate at Parr Richey whose practice focuses on corporate law, utility law, municipal law, and labor and employment law. The statements contained herein are for information purposes only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have questions regarding this article, please contact an attorney.

Indiana farm business owners and Indiana lawyers should be aware that the Indiana Court of Appeals recently held that a farmer’s mycelium drying business constituted a nuisance.¹ In Bonewitz, the farmer’s neighbors complained that the mycelium drying business caused foul odors, noise and vibrations from delivery trucks, sawdust particles blowing onto their property, and gas and sawdust ash emissions from the dryer.² The neighbors sought monetary damages as well as a permanent injunction, but the trial court only ordered the farmer to discontinue unloading raw sawdust outside to mitigate the blowing sawdust.³

Under Indiana law, nuisance is defined as “whatever is injurious to health, indecent, offensive to the senses, or an obstruction to the free use of property, so as essentially to interfere with the comfortable enjoyment of life or property.”⁴ Indiana courts have stated that the competing interests of landowners must be balanced in deciding whether an activity constitutes a nuisance.⁵ Indeed, “reasonable use of one’s property may be a defense to a nuisance action” if the activity only causes “incidental injury” to a neighboring landowner.⁶ However, even a lawful business may constitute a nuisance if it causes harm that is greater than the neighbor should bear under the circumstances.⁷
Continue reading

Lenders who take possession of collateral based on a default on a loan are often concerned about ensuring that the sale of such collateral would be found to be commercially reasonable by a court if challenged. Of interest to Indiana creditors and Indiana creditor lawyers, the Indiana Court of Appeals recently had the opportunity to address commercially reasonable sales in Moore v. Wells Fargo Constr. 907 N.E.2d 1038 (Ind. Ct. App. 2009). In Moore, the lender provided a company with an approximately $558,000 loan for the refinance of an excavator. However, to secure the loan, each of the principals of the company also executed a security agreement and personal guaranty for the indebtedness. When the company defaulted on the loan, the lender took possession of the excavator, which it planned to sell to satisfy a portion of the outstanding debt. The lender sent a Notice of Disposition of Collateral to both the company and a principal against whom the lender planned to pursue a deficiency action against. The lender had some difficulty selling the excavator, but it provided notice to both the company and the individual each time it attempted to sell the excavator. Eventually, the excavator was sold for $54,000, although an earlier higher offer had been countered by the lender, and the lender filed a deficiency action against the individual. After a decision in favor of the lender, the individual argued that the sale of the excavator had not been conducted in a commercially reasonable manner. Id. at 1039.

In determining the commercial reasonableness of the sale, the Court referred to its prior decision in Walker v. McTague, where the court recognized that the Uniform Commercial Code does not define commercially reasonable sale. Id. at 1041 (quoting Walker v. McTague, 737 N.E.2d 404, 410 (Ind. Ct. App. 2000)). In Walker, the court noted that where a fair sale price is not obtained, price alone is not determinative, and the court will consider “whether there were legitimate causes for the low price or whether the low price was caused by the secured party’s failure to proceed in a commercially reasonable manner” as well as “whether the collateral is sold on a retail or wholesale market . . . the number of bids received or solicited . . . that the time and place of the sale is reasonably calculated to bring a satisfactory turnout of bidders.” Id. (quoting Walker, 737 N.E.2d at 410. The Court also noted that the court in Walker recognized the factual nature of such determinations. Id. (citing Walker, 737 N.E.2d at 410).
Continue reading

The Internal Revenue Service (IRS) and Department of the Treasury have promulgated final regulations impacting tax-exempt organizations with gross annual receipts that generally do not exceed $25,000. The final regulations, and removal of temporary regulations, became effective July 23, 2009. The regulations are applicable to annual periods beginning after 2006.

In 2006, the Pension Protection Act was passed, including a requirement that the Treasury Secretary promulgate regulations regarding the time and manner in which certain tax-exempt organizations must file annual electronic notification. The regulations that followed amend the Income Tax Regulations (26 CFR Part 1, section 6033(i)(1)), which relate to requirements for notification by entities that are not currently required to file an annual information return under section 6033(a)(1).

After establishing temporary regulations in 2007, and twice revising the regulations in the same year, the regulations were again published in the Federal Register. The IRS and Department of the Treasury responded to four comments regarding the published regulations, confirming that there is no de minimis exception which would allow organizations with minimal income to avoid reporting under the rule, that all submissions must be made electronically, and that the regulations do not apply to Qualified State and Local Political Organizations. In addition, the IRS and Department of the Treasury stated the intent of the regulations is to provide the public with accurate information about tax-exempt organizations. The agencies noted that if an organization is the subordinate of a parent organization and is already included on the parent organizations return, the subordinate organization need not submit separate notification.

Have you been approached by a wind energy company soliciting your land for inclusion in a new wind farm proposed for the area. If you have, the promised compensation may look good for the fairly small acreage committed for the structures and related equipment. You may have been given a draft agreement for review and execution. It will likely be long and complicated, but the company representative may describe it as “standard” or in line with what other companies are offering. Don’t accept that at face value; these leases often vary widely from company to company and from project to project. You may be intrigued, and even interested, but what should you do next?

The attorneys at PARR RICHEY have represented landowners in several Indiana counties in lease negotiations with several wind energy companies. In so doing we have learned much about these companies, how these projects work, and what they are typically willing to agree to in assembling the land needed for a viable project. We do not represent any wind energy companies, so our interests are aligned with those of landowners.

There is strength in numbers, and normally better terms can be leveraged through coordination with other landowners in your area. Your group should check with your neighbors, the local Extension Agent, or your County’s planning director to learn as much as you can about the proposal and its status. Perhaps more importantly, check on the company’s experience and track record in bring projects on line. Much information is available on the Internet about these companies and wind farms in general. Does your county have an ordinance permitting or regulating these projects? How likely is this company to move forward with a project if enough land is obtained? Or is it merely attempting to assemble lease rights for parcels that it can later sell to another wind company?
Continue reading

The Internal Revenue Service (IRS) and Department of the Treasury have promulgated final regulations impacting tax-exempt organizations with gross annual receipts that generally do not exceed $25,000. The final regulations became effective July 23, 2009. The regulations are applicable to annual filing periods beginning after 2006.

In 2006, the Pension Protection Act was passed, including a requirement that the Treasury Secretary promulgate regulations regarding the time and manner in which certain tax-exempt organizations must file annual electronic notification. The regulations that followed amend the Income Tax Regulations (26 CFR Part 1, section 6033(i)(1)), which relate to requirements for notification by entities that are not currently required to file an annual information return (Form 990) under section 6033(a)(1).

Under the final regulation, 26 CFR § 1.6033-6, tax-exempt entities under § 501(a) that are not required to file annual information returns as described in § 1.6033-2(a)(2) must submit electronic notification containing the legal name of the organization, any assumed business names, mailing and web address, tax identification number, name and address of principal officer, evidence of ongoing basis for exemption under § 6033(a)(1), and any additional information required for processing. Certain employer-created qualified pension, profit-sharing, and stock bonus plans, as defined in § 401(a) and certain religious and apostolic organizations, as defined in § 501(d) are not subject to the regulation. By submitting the electronic notification, an organization acknowledges it is not required to file a return under § 1.6033(a) because its annual gross receipts do not normally exceed $25,000. The regulation also contains requirements for record maintenance, as provided in § 1.6001. If the organization submits a complete Form 990 or 990-EZ, however, the requirements of annual electronic notification will be deemed satisfied. The final regulation does not relieve an organization from any other filing requirements.

This past May, the Indiana Court of Appeals ruled on a breach of a non-compete agreement case addressing whether a former employee’s covenant not to compete with his past employer was enforceable under Indiana law and determined the proper measure of damages for a breach of this agreement.

Coffman, an employee of Olson & Co., an accounting firm (“Olson”), signed a non-compete Agreement in 2005, which specified that in the event of termination of employment, he would not directly or indirectly compete for Olson’s clients in the firm’s geographical area for a period of two years. The Agreement did not restrict employees from seeking accounting jobs elsewhere. The Agreement specified that if Coffman chose to provide accounting services for any of Olson’s clients during the two year period following termination of employment, he must pay Olson an amount equal to two times the amount of that client’s most recent twelve month billings. He must also notify the firm of his relationship with these clients in writing, and if Coffman failed to notify Olson of his intent to perform services for prior employees, the amount due to Olson shall be three times that client’s most recent twelve month billing.

Coffman terminated his employment with Olson on September 1, 2006 and formed his own accounting Limited Liability Company soon after. Seventeen of his clients terminated their relationship with Olson and hired Coffman to perform accounting services. Coffman did not notify or compensate Olson, and Olson soon thereafter filed suit alleging breach of the non-compete agreement.
Continue reading