McNair RSS Feedhttp://www.mcnair.net/?t=39&format=xml&stylesheet=rss&directive=0&records=20en-us17 Nov 2018 00:00:00 -0800firmwisehttp://blogs.law.harvard.edu/tech/rssMcNair Represents Gnotec Group in Establishing Operations in Orangeburg County09 Nov 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=85692&format=xml&p=5352 Gnotec Group, a supplier to the automotive industry, is locating new operations in Orangeburg County. The company&rsquo;s $5.9 million investment is projected to create 78 new jobs in the community.<br /> <br /> Gnotec specializes in the engineering and manufacturing of metal components for automotive and commercial vehicles&rsquo; body-in-white and chassis structures. With operations in China, Slovakia and Sweden, the company utilizes state-of-the-art automated technology in metal stamping, welding and assembly to provide customers with premium-quality solutions.<br /> <br /> The company will be establishing operations in a 30,000-square-foot production facility at 152 Regional Parkway in Orangeburg, S.C. and is expected to come online in the first quarter of 2019. <br /> <br /> McNair Law Firm, P.A. acted as legal counsel to Gnotec Group. For more information, visit <a href="http://gnotec.com/">http://gnotec.com/</a>. <br /> http://www.mcnair.net/?t=40&an=85692&format=xml&p=5352 Burr & Forman to Acquire Carolinas Powerhouse McNair01 Nov 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=83766&format=xml&p=5352 <p><b>Columbia, SC, Nov. 1, 2018 </b>&ndash;Burr &amp;&nbsp;Forman LLP announced today that it will acquire Carolinas-based McNair Law Firm, P.A. with McNair attorneys and employees joining Burr &amp; Forman effective January 1, 2019. The acquisition solidifies Burr &amp; Forman&rsquo;s position as a full-service Southeastern based law firm with transactional, litigation and regulatory capabilities, creating a platform to better serve clients and deepen the firm&rsquo;s bench in key industries such as manufacturing, transportation, banking, public finance, intellectual property, real estate, food and beverage, hospitality and health care.</p> <p>&ldquo;In considering expansion, we are always mindful of our clients&rsquo; needs. Combining our resources greatly benefits both firms, growing our footprint into one of the largest firms in the Southeast with a collective portfolio that spans national practices and serves industries that are the cornerstone of our region&rsquo;s economy,&rdquo; said Ed Christian, chief executive officer at Burr &amp; Forman. &ldquo;Unlike many law firms outside the region who have entered into the Carolinas to capitalize on the area&rsquo;s growth, McNair understands the intricacies of doing business in South and North Carolina and immediately provides Burr &amp; Forman with an established history and tradition in the Carolinas &ndash; being founded by former governor Robert McNair nearly 50 years ago.&rdquo;</p> <p>McNair&rsquo;s in-depth legal skills in the areas of public finance, intellectual property, real estate, tax, economic development, government relations, and trust and estates bolster key practices where Burr &amp; Forman&rsquo;s client base is growing. Similarly, Burr &amp; Forman&rsquo;s strengths in economic development, health care, labor and employment, transportation, corporate and mergers &amp; acquisitions practices will provide additional resources for McNair&rsquo;s clients.</p> <p>&ldquo;Our entire firm is excited about the tremendous benefits that joining Burr &amp; Forman provides to our clients and team members alike,&rdquo; said David Tigges, who currently serves as managing shareholder of McNair and will join the firm&rsquo;s Executive Committee and serve as the Carolinas managing partner at Burr &amp; Forman. &ldquo;The cultural fit and business synergy we share with Burr &amp; Forman made this an easy decision for our shareholders. Both firms have great mutual respect for each other, and joining Burr &amp; Forman serves to strategically expand our collective capabilities in terms of resources, client service and diverse leadership.&rdquo;</p> <p>McNair&rsquo;s 84 attorneys will join Burr &amp; Forman from seven offices across North Carolina and South Carolina to create a stronger full-service firm with more than 350 legal and business professionals, expanding the firm&rsquo;s footprint to 19 offices across eight states with people who are fully invested in the firm&rsquo;s clients and communities. The firm will operate as Burr Forman McNair in South Carolina and Charlotte, NC for a period of two years.</p> <p><i>For more than a century, Burr &amp; Forman LLP&rsquo;s experienced legal team has served clients with local, national, and international interests in numerous industry and practice areas, ranging from commercial litigation and class actions to corporate transactions, including bankruptcy and restructurings. A Southeast regional firm with 300 attorneys and 12 offices in Alabama, Delaware, Florida, Georgia, Mississippi, North Carolina and Tennessee, Burr &amp; Forman attorneys draw from a diverse range of resources to help clients achieve their goals and address their complex legal needs. For more information, visit the firm&rsquo;s website at <u><a href="http://www.burr.com" target="_blank">www.burr.com</a></u></i><i>.</i></p> <p><i>McNair Law Firm serves clients at the intersection of business and government. With offices throughout South Carolina and in Charlotte, North Carolina, the firm continues to meet the changing needs of its clients, helping them address the challenges and opportunities of every economic cycle. McNair clients are companies and organizations in the manufacturing, banking and finance, telecommunications, energy, healthcare, technology, construction, and real estate industries as well as government entities, non-profit organizations, and individuals. For more information, please visit <a href="/">www.mcnair.net</a>.</i></p> http://www.mcnair.net/?t=40&an=83766&format=xml&p=5352 McNair Receives National Honor and 27 Tier One Rankings in 2019 Best Law Firms01 Nov 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=83773&format=xml&p=5352 McNair Law Firm, P.A. has been named a top-tier firm by U.S. News &ndash; Best Lawyers&reg; in its 2019 &ldquo;Best Law Firms&rdquo; rankings. McNair earned a national ranking in Land Use &amp; Zoning Law for the third year in a row and 27 Tier One rankings in markets across South Carolina. Those rankings, listed by office and practice area, are as follows:<br /> <br /> National<br /> &bull; Land Use &amp; Zoning Law<br /> <br /> Charleston<br /> &bull; Corporate Law<br /> &bull; Labor Law &ndash; Management<br /> &bull; Litigation &ndash; Real Estate<br /> &bull; Real Estate Law <br /> <br /> Columbia <br /> &bull; Banking &amp; Finance Law<br /> &bull; Bankruptcy &amp; Creditor Debtor Rights / Insolvency and Reorganization Law<br /> &bull; Commercial Litigation<br /> &bull; Corporate Law<br /> &bull; Employee Benefits (ERISA) Law<br /> &bull; Employment Law - Management<br /> &bull; Environmental Law<br /> &bull; Government Relations Practice<br /> &bull; Health Care Law<br /> &bull; Land Use &amp; Zoning Law<br /> &bull; Litigation - Bankruptcy<br /> &bull; Litigation - Construction<br /> &bull; Litigation - Real Estate<br /> &bull; Mergers &amp; Acquisitions Law<br /> &bull; Public Finance Law<br /> &bull; Real Estate Law<br /> &bull; Tax Law <br /> &bull; Utilities Law<br /> <br /> Greenville<br /> &bull; Bankruptcy &amp; Creditor Debtor Rights / Insolvency &amp; Reorganization Law<br /> &bull; Commercial Litigation<br /> &bull; Economic Development Law<br /> &bull; Litigation - Bankruptcy<br /> &bull; Public Finance Law<br /> <br /> <br /> <br type="_moz" /> http://www.mcnair.net/?t=40&an=83773&format=xml&p=5352 SC body bag noncompete case exhumed, revisited22 Oct 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=81326&format=xml&p=5355 <div><em>Two years ago, we wrote about a noncompete decision in which a special referee found a business seller had breached a sales agreement by violating both a noncompete covenant and an exclusive sales provision contained in the agreement (see &ldquo;Body bag dispute offers lessons on noncompetes in South Carolina&rdquo; on page 1 of the June 2016 issue). The seller appealed, and the South Carolina Court of Appeals reversed and remanded the case (i.e., sent it back to the lower court), holding the noncompete&rsquo;s 150-mile territorial restriction was unreasonable and unenforceable. The South Carolina Supreme Court reviewed the appeals court&rsquo;s decision and has now issued its own ruling. Read on to see what the supreme court did.</em></div> <div>&nbsp;</div> <div><strong>10-year exclusivity provision at center of dispute</strong></div> <div>&nbsp;</div> <div>In the 1980s, Robert Knight began operating a mortuary transport business, Knight Systems, Inc. (KSI), which eventually expanded to include the manufacturing and sale of body bags. In 2006, he decided to sell the mortuary transport portion of the business and approached a broker for assistance. In October 2006, Donald and Ellen Lintal, the CEO and CFO, respectively, of Palmetto Mortuary Transport, Inc., met with a broker to discuss the purchase of Knight&rsquo;s mortuary transport business. From November 2006 to January 5, 2007, the parties and their agents&mdash;including brokers, accountants, and attorneys&mdash;negotiated the terms of an asset purchase agreement. During the negotiations, Knight expressed to Mr. Lintal his desire to get out of the mortuary transport business.</div> <div>&nbsp;</div> <div>On January 5, 2007, Knight and Palmetto signed the agreement. Under its terms, Knight sold various tangible assets, goodwill, and customer accounts&mdash;including body removal service contracts with Richland County, Lexington County, and the University of South Carolina&mdash;to the buyer for $590,000. The agreement included an exclusivity provision requiring (1) Palmetto to purchase body bags from Knight for 10 years and (2) Knight to sell body bags to Palmetto for 10 years. The provision became a central issue in the dispute between the parties.</div> <div>&nbsp;</div> <div>A 10-year, 150-mile noncompete covenant also was signed and included as an exhibit to the agreement. Although the noncompete restricted Knight from providing mortuary transport services within a 150-mile radius of Lexington County, it placed no limits on KSI&rsquo;s ability to continue its body bag manufacturing business. The noncompete covenant also provided that Palmetto&rsquo;s breach of the agreement or other ancillary sale documents would release Knight from any and all of their restrictions.</div> <div>&nbsp;</div> <div>During the trial, Donald Lintal testified the 150-mile territorial restriction around Lexington County was included to ensure Knight would not compete with Palmetto in South Carolina for 10 years. Lintal acknowledged that at the time Palmetto purchased the transport business, KSI provided services primarily in Richland and Lexington counties. Lintal added: &ldquo;We didn&rsquo;t know where the business was actually going to&mdash;what we were going to&mdash;if we were going to try to expand it at different locations. We wanted to keep our options open if it was doable.&rdquo;</div> <div>&nbsp;</div> <div>In 2011, Palmetto still held the mortuary transport services contract with Richland County. Since the original five-year term between the two parties was expiring, the county issued a request for proposal (RFP) seeking mortuary transport services for the next five years. Palmetto submitted a timely response to the RFP.</div> <div>&nbsp;</div> <div> <div>As noted above, the exclusivity provision required Palmetto to purchase body bags from KSI for 10 years. From 2007 through 2011, Palmetto bought more than $45,000 worth of body bags from the company. Palmetto also purchased body bags from other manufacturers costing $884.97. The amount included 31 infant bags ($192.75), four extra-large body bags ($213.72), six heavy-duty body bags ($208.50), and six water retrieval bags ($270). When Knight became aware of the infant-bag purchases in 2009 or 2010, he immediately considered them to be a breach of the agreement but didn&rsquo;t confront Palmetto for almost two years. Knight testified he didn&rsquo;t become aware of the other purchases until discovery (the pretrial exchange of information) during litigation.</div> <div>&nbsp;</div> <div>Palmetto didn&rsquo;t believe the exclusivity provision required it to buy infant or extra-large bags from KSI. Palmetto agreed it had breached the exclusivity provision by purchasing heavy-duty and water retrieval bags from other manufacturers but argued the breach wasn&rsquo;t significant. Instead of canceling the agreement, Palmetto argued it should be allowed to pay damages totaling $478.50&mdash;the sum it had given the other manufacturers for the heavy-duty and water retrieval bags. Knight, on the other hand, argued the exclusivity provision required Palmetto to purchase all of its body bags from KSI and claimed the breach was significant and nullified all terms and conditions of the agreement, including the noncompete covenant.</div> <div>&nbsp;</div> <div><strong>Business seller &lsquo;didn&rsquo;t want to be left out in the cold&rsquo;</strong></div> <div>&nbsp;</div> <div>On June 16, 2011, a day before the deadline to respond to the RFP, Knight recorded a conversation with Lintal. During the talk, Knight accused Palmetto of buying infant body bags from other manufacturers. Lintal replied he didn&rsquo;t believe the purchase was &ldquo;significant&rdquo; or that &ldquo;it was anything to break [the agreement].&rdquo; As noted above, before the confrontation, Knight had been aware of Palmetto&rsquo;s supposedly illicit purchase of infant body bags for almost two years.</div> <div>&nbsp;</div> <div>Afterwards, Lintal suspected KSI was going to bid against Palmetto for the Richland County contract. His suspicion was correct&mdash;Knight submitted his own RFP the very next day. Even though Knight had received $590,000 for selling the business and an extra $45,000 in body bag purchases from Palmetto, he testified, &ldquo;I didn&rsquo;t want to get back in the business. I was forced to. . . . I felt like if I didn&rsquo;t take action at that time, I was going to be left out in the cold.&rdquo;</div> <div>&nbsp;</div> <div>After the RFP deadline passed, Knight contacted the Richland County Procurement Office and told an official that KSI should be awarded the contract because it was the sole provider of odor-proof body bags&mdash;an RFP requisite. Although Palmetto&rsquo;s response to the RFP contained the lowest price for services and received the highest number of points from the procurement office, the county awarded the contract to KSI.</div> <div>&nbsp;</div> <div>Palmetto sued Knight for breach of the agreement, alleging he violated (1) the noncompete covenant prohibiting KSI from providing mortuary transport services within the 150-mile limit for 10 years and (2) the exclusivity provision, based on his refusal to supply Palmetto with body bags. Knight counterclaimed, alleging the noncompete covenant was unenforceable because it contained an unreasonable territorial restraint and time restriction and wasn&rsquo;t supported by adequate consideration (or something of value given in return for signing it). Knight also alleged that any breach of the noncompete covenant was excused because Palmetto violated the exclusivity provision first by buying body bags from other manufacturers.</div> <div>&nbsp;</div> <div>The case was tried before a special referee who found the noncompete covenant was reasonably limited in time and territorial scope and supported by valuable consideration. The special referee found Knight breached the agreement by violating the noncompete covenant and refusing to sell body bags to Palmetto. On the other hand, Palmetto&rsquo;s purchase of the heavy-duty and water retrieval body bags from other manufacturers, although a breach, wasn&rsquo;t significant enough to excuse Knight from performing his contractual obligations.</div> <div>&nbsp;</div> <div>The special referee ordered Knight to pay attorneys&rsquo; fees and damages of $373,264.54 in lost profits resulting from the wrongful competition with Palmetto. The referee issued a permanent injunction requiring Knight to comply with the noncompete covenant for a period of five years and seven months after the date of his order but allowing KSI to complete its performance of the 2011 mortuary transport services contract with Richland County. Finally, the referee awarded $478.50 in damages to Knight for Palmetto&rsquo;s breach of the agreement.</div> <div>&nbsp;</div> <div>Knight appealed the ruling to the court of appeals, arguing the special referee erred in finding (1) the noncompete&rsquo;s territorial limits were reasonable and enforceable, (2) the restriction was supported by independent and valuable consideration, (3) the noncompete covenant wasn&rsquo;t void for being against public policy, and (4) it wasn&rsquo;t nullified by Palmetto&rsquo;s breach of the exclusivity provision. The court found the 150-mile limit unreasonable and unenforceable and sent the case back to the referee.</div> <div>&nbsp;</div> <div>Because South Carolina doesn&rsquo;t follow the &ldquo;blue-pencil rule&rdquo; (i.e., rewriting an agreement for the parties) and the noncompete didn&rsquo;t include a &ldquo;step-down provision (language eliminating grammatically unreasonable provisions, but not adding or rewriting provisions),&rdquo; the court of appeals found it couldn&rsquo;t redraw the arrangement to include a smaller territorial restriction. The supreme court granted Palmetto&rsquo;s petition to review the court of appeals&rsquo; decision.</div> <div>&nbsp;</div> <div><strong>South Carolina Supreme Court&rsquo;s decision</strong></div> <div>&nbsp;</div> <div>Palmetto&rsquo;s argument was that the court of appeals erred when it found the noncompete&rsquo;s territorial restriction to be unreasonable. The supreme court first pointed out that noncompetes are enforceable if they are not detrimental to the public interest, are ancillary to the sale of a business or profession, are reasonably limited in terms of time and territory, and are supported by valuable consideration. The court further stated that the reason why such covenants are held to be unenforceable is that unless they meet certain criteria, they constitute a restraint on trade, which is against public policy. With that backdrop, the court then looked at the facts and previous law in the noncompete area.</div> <div>&nbsp;</div> <div>Relying on a 1942 decision, the court wrote that in determining whether a contract in partial restraint of trade is reasonable, it will look at (1) the contract&rsquo;s &ldquo;whole subject matter,&rdquo; (2) the kind and character of the business, (3) location, (4) the purpose to be accomplished by the restriction, and (5) all circumstances that show the parties&rsquo; intention must have entered into the making of the contract.</div> </div> <div>&nbsp;</div> <div> <div><strong>Contract&rsquo;s subject matter. </strong>The noncompete covenant between Knight and Palmetto arose out of a business sale between two sophisticated parties. Noncompetes signed during a business sale should be scrutinized at a more relaxed level than those that are tied to employment contracts. The latter are generally disfavored and strictly construed against an employer because of the unequal bargaining power that may exist between the two parties. The risk is significantly lower when the restriction arises during a business sale between two sophisticated parties. Also, signing a noncompete covenant in connection with the business sale allows the seller to capitalize on the disposition of the enterprise's goodwill and bargain for a higher price.</div> <div>&nbsp;</div> <div>Looking back at the pertinent facts, the court noted the agreement involved the somewhat complex sale of Knight&rsquo;s mortuary transport services business to Palmetto for $590,000. Both parties were sophisticated and represented by legal counsel throughout the negotiations. Knight had to consider the restrictions in the noncompete before deciding to enter into the agreement. The noncompete was integral to Palmetto&rsquo;s decision to sign it. Lintal testified about Knight&rsquo;s &ldquo;strong reputation&rdquo; in the business and stated, &ldquo;[The noncompete covenant] was very important to us because without [it], we wouldn&rsquo;t have bought the business.&rdquo; Further, the covenant provided, &ldquo;[Knight] has agreed to provide such covenants as set forth herein as <em>a material inducement to [Palmetto]</em> to enter into and close the Purchase Agreement&rdquo; (emphasis added). It&rsquo;s clear the noncompete was a centerpiece of the agreement and that both Palmetto and Knight bargained for and intended to benefit from its terms.</div> <div>&nbsp;</div> <div>While the noncompete caused a partial restraint of trade by limiting Knight&rsquo;s ability to provide mortuary transport services, it was offset by KSI&rsquo;s continuation of its body bag manufacturing business and the exclusivity provision requiring Palmetto to buy bags from it throughout the covenant&rsquo;s term. Indeed, Palmetto purchased approximately $45,000 worth of bags from KSI before the current controversy arose. The agreement didn&rsquo;t prohibit KSI from continuing to sell bags to other customers. It&rsquo;s clear that both sides carefully considered and calibrated their options and best interests before striking the deal.</div> </div> <div>&nbsp;</div> <div> <div><strong>Kind and character of the business, and its location.</strong> Knight&rsquo;s territorial restriction consisted of a 150-mile radius around Lexington County. When Palmetto bought the business, it mainly served Richland and Lexington counties. Focusing only on the existing territory, however, and Palmetto&rsquo;s lack of concrete plans for geographical expansion ignores the &ldquo;kind and character&rdquo; of the business.</div> <div>&nbsp;</div> <div>Because a mortuary transport business necessarily involves the mobility of services, an expansion into other areas of South Carolina was certainly foreseeable. This isn&rsquo;t a brick-and-mortar local retail business of the 1950s. Palmetto, a sophisticated buyer, saw the opportunity to expand outside KSI&rsquo;s existing business area and thus negotiated the agreement with Knight, a sophisticated seller, to protect its interests by implementing the 150-mile restriction. At his deposition, Lintal testified that since the agreement went into effect, Palmetto has added new customers and &ldquo;on occasion&rdquo; provides services for people outside of the Columbia and Lexington areas.</div> <div>&nbsp;</div> <div>After considering the agreement as a whole and giving the noncompete the more relaxed scrutiny it requires, the court found the 150-mile radius didn't exceed what was essential to reasonably protect the rights Palmetto purchased.</div> <div>&nbsp;</div> <div><strong>Other concerns.</strong> In looking at any potential invalidity of the agreement on public policy grounds, the court admitted there may be times when a restriction against competition between potential competitors for public contracts will be voided for being against public policy, but KSI&rsquo;s case didn&rsquo;t rise to that level. Based on all of the facts including Knight&rsquo;s desire to get out of the mortuary transport services business, the court declined to create a blanket rule that would find such agreements to be against public policy.</div> <div>&nbsp;</div> <div>Agreeing with the special referee, the supreme court held that while Palmetto breached the exclusivity provision by buying $478.50 worth of body bags from other manufacturers, the breach wasn&rsquo;t significant and didn&rsquo;t nullify Knight&rsquo;s obligation to honor the noncompete. The court reversed the court of appeals and reinstated the referee&rsquo;s order.</div> </div> <div>&nbsp;</div> <div> <div><strong>Lessons for SC employers</strong></div> <div>&nbsp;</div> <div>First, you&rsquo;ve just witnessed the rigorous application of the requirements for successful noncompete covenants in South Carolina. Imposing limited restrictions on time and place and providing adequate consideration will still be the norm. The courts will likely strike down any workplace noncompetes that are overly broad.</div> <div>&nbsp;</div> <div>Second, the standards won&rsquo;t be as vigorous in the business context. As we&rsquo;ve explained, the courts will look at the whole subject matter of the contract, the kind and character of the business, the location, the purpose to be accomplished by the restriction, and all circumstances showing the parties&rsquo; intent. Be careful not to conflate the standards for the sale of a business with situations involving a single employer/former employee noncompete issue.<br /> <br /> For more information on the BLR, click <a href="https://www.blr.com/" target="_blank">here</a>. For more information on the South Carolina Employment Law Letter, click <a href="http://store.blr.com/scemp?referrer=hrhero" target="_blank">here</a>.&nbsp;</div> </div> http://www.mcnair.net/?t=40&an=81326&format=xml&p=5355 Opportunity Zone Regulations: First Impressions22 Oct 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=81332&format=xml&p=5355 <p>After months of eager anticipation, today the Department of the Treasury released regulations defining and refining certain requirements set forth in the &ldquo;Opportunity Zone&rdquo; law.</p> <p>While the Opportunity Zone statute provided a framework for tax-deferred investments, most projects have been on hold pending the regulatory framework. The regulations released today answer many questions, while others remain unaddressed. According to today&rsquo;s release, more guidance will be forthcoming by the end of the year.</p> <p>Some highlights of the proposed regulations include:</p> <p><strong><u>Substantial Improvement</u></strong></p> The basis attributable to land on which a building sits is not taken into account in determining whether the building has been substantially improved. Whether this exclusion is meaningful, for purposes of reducing the amount of investment required for redevelopments such as affordable multi-family housing, remains to be seen. This will also require buyers and sellers to thoughtfully allocate purchase price among land and buildings. <br /> <br /> <u><strong>&ldquo;Reverse&rdquo; Opportunity Zone Investments</strong></u><br /> <br /> The regulations do not provide a mechanism for a taxpayer to acquire an interest in a qualified opportunity fund through an intermediary and then subsequently make its qualifying investment from deferred gain. <br /> <br /> <u><strong>Investment Dispositions and Replacements</strong></u><br /> <br /> If a taxpayer disposes of a qualified opportunity fund interest, the regulations allow the taxpayer to sell all, but not some of that interest, and reinvest the gain in a new qualifying investment and continue to defer their gain. <br /> <br /> <u><strong>&ldquo;Substantially all&rdquo; Requirement</strong></u><br /> <br /> For purposes of satisfying the requirement that &ldquo;substantially all&rdquo; of a qualified opportunity zone business&rsquo;s leased and owned tangible property be qualified opportunity zone business property, the regulations propose that at least 70% of such tangible property be qualified opportunity zone business property.<br /> <br /> <u><strong>Allocated Capital Gain</strong></u><br /> <br /> The regulations clarify that only capital gains are eligible for deferral. The regulations do provide that for pass-through entities, both the entities and the taxpayers to whom the entities pass through income are eligible to defer gain. The partner&rsquo;s 180-day period generally begins on the last day of the partnership&rsquo;s taxable year, but the partner in some instances may be able to elect the date of the partnership&rsquo;s gain (i.e., the date of sale) to commence its 180-day period. <br /> <br /> <u><strong>Post-10 Year Gain Exclusion</strong></u><br /> <br /> The statutory expiration date of the designated qualified opportunity zones is December 31, 2028. Proposed Regulation 1.1400Z-2(c)(1) continues to allow the 10-year gain exclusion for interests acquired after 2018, provided the disposition of the investment occurs prior to January 1, 2048.<br /> <br /> <u><strong>Self-certification</strong></u><br /> <br /> Echoing the FAQs issued by the IRS earlier this year, the regulations provide that a qualified opportunity fund may self-certify, which certification (i) must identify the first taxable year that the eligible entity wants to be a QOF, and (ii) may identify the first month (in that initial taxable year) in which the eligible entity wants to be a QOF. If the self-certification does not specify the month, then the first month of the eligible entity&rsquo;s initial taxable year as a QOF is the first month that the eligible entity is a QOF. Pre-existing entities may qualify, but the eligible entity must satisfy all of the requirements of section 1400Z-2 and the regulations thereunder, including the requirements regarding qualified opportunity zone property being acquired after December 31, 2017.<br /> <br /> <u><strong>Form</strong></u><br /> <br /> Newly-promulgated Form 8996 allows each fund to certify that is it organized to invest in qualified opportunity zone property, and must also be filed annually to certify that the fund meets the investment standards of the statute, or to calculate the penalty for failure to meet the standards. This form will be available shortly at <a href="http://www.irs.gov/draftforms">www.irs.gov/draftforms</a>. <br /> <br /> <u><strong>Effective Date</strong></u><br /> <br /> The regulations are effective once they have been adopted as final regulations, but provide that eligible taxpayers &ldquo;may rely on the proposed rules in this section with respect to investments, and deemed contributions, before the date of applicability of this section, but only if the taxpayer applies the rules in their entirety and in a consistent manner.&rdquo;<br /> <br /> The proposed regulations are silent as to reporting and establishing community impacts, leaving it up to state and local governments to fill the gaps in the federal law with their own opportunity zone-focused programs.<br /> <br /> The release may be found at <a href="https://home.treasury.gov/news/press-releases/sm530">https://home.treasury.gov/news/press-releases/sm530</a>.<br /> <br /> <br /> <br /> <br type="_moz" /> http://www.mcnair.net/?t=40&an=81332&format=xml&p=5355 Tax Reform and Estate Planning: How the 2017 Tax Cuts and Jobs Act Impacts Estate Plans for McNair Clients05 Oct 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=80790&format=xml&p=5355 <p align="left">When the 2017 Tax Cuts and Jobs Act was passed, significant changes were made to the Federal Estate, Gift and Generation-Skipping Transfer Tax, the most prominent of which is the increased applicable exclusion amount, which is the amount that is excluded from a decedent&rsquo;s gross estate for federal transfer tax purposes.&nbsp;<br /> <br /> The applicable exclusion amount was $5.49 million in 2017. This amount is doubled for decedent&rsquo;s dying and gifts made after 2017 and before 2026. It is currently $11.18 million&nbsp;and will continue to be adjusted for inflation.&nbsp;This generous increase in the exclusion amount is scheduled to revert to the 2017 exclusion amount on January 1, 2026.<br /> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> A decedent&rsquo;s estate may elect to transfer any unused portion of the decedent&rsquo;s exclusion amount to the surviving spouse. This election is referred to as the &ldquo;portability&rdquo; election. If the surviving spouse is the sole beneficiary of the decedent, the decedent&rsquo;s estate could transfer up to $11.18 million to the surviving spouse in 2018, enabling the spouse to shelter more than $22 million&nbsp;at the subsequent death.<br /> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br /> The increased exclusion amount may drastically alter the intended results of current estate plans, particularly older plans that have not been updated after 2012. Because of the increased exclusion, clients are encouraged to review their current estate plan taking into consideration several items listed below:</p> <ul> <li><strong>Review trust agreements and look for formula clauses tied to the exclusion amount</strong>. These clauses attempt to fully utilize any unused exclusion amount that may be available at death by allocating assets&nbsp; to a trust or to a specific non-spouse beneficiary. This situation could occur after significant life time gifts have been made, with the intent to utilize the remaining exclusion amount as a further gift at death. Another common plan is to first allocate the available&nbsp; exclusion amount to a &ldquo;family trust&rdquo; or &lsquo;by-pass trust&rdquo;, designed to benefit numerous beneficiaries, with any remaining funds passing outright to or for the benefit of the surviving spouse.<br /> &nbsp; <ul> <li>&nbsp;As a reminder, the exclusion would have been $675,000 in 2001, $1.5 million in 2005 and $2 million in 2008. Because of the increased exclusion amount, the existing formula provisions could divert all assets to the non- spouse beneficiary or to the &ldquo;family trust&rdquo;, thereby unintentionally limiting assets available to transfer to or for the benefit of the spouse.<br /> &nbsp; &nbsp;</li> </ul> </li> <li><strong>Review trust agreements to simplify estate plan.&nbsp;</strong>&nbsp;In the past, many plans used the &ldquo;family trusts&rdquo; or &ldquo;by -pass&rdquo; trusts referred to above in order to reduce federal estate taxes. With the increase in the exclusion amount, there may be no need to use this type of trust, creating an opportunity to simplify the estate plan. This type of trust may even be a&nbsp; disadvantage due to the income tax consequences to beneficiaries inheriting assets from this trust. Assets distributed at the death of the lifetime beneficiary do not receive an adjustment in income tax basis when these assets pass on to the remaindermen.<br /> &nbsp;</li> <li><strong>Review net worth and character of assets.&nbsp;&nbsp;</strong>Over the years, your net worth may have changed significantly or you may have changed how assets are owned, or sold or acquired assets that weren&rsquo;t accounted for in your original&nbsp;estate plan. If the value of your assets has changed significantly or the types of assets you own are concentrated in illiquid assets, you may now require planning for disposal of these assets at death or the use of ownership entities to manage for future generations.&nbsp;In addition, the 2017 Tax Cuts and Jobs Act included income tax changes that impact the choice of entity for business operations. Prior to this act, the choice of entity for small business owners was generally a &ldquo;pass through&rdquo; entity such as a partnership or limited liability company that was not taxed separately for income tax purposes, but passed through earnings to be taxed at the individual level. Due to the change in corporate tax rates and the implementation of the qualified business income deduction for certain qualifying business, the use of a regular corporation as an entity may be a more appropriate choice in the new tax environment and should be planned for accordingly. The use of a corporation may also offer more options in estate planning, enabling more flexibility in using various trusts to own these assets.<br /> &nbsp;</li> <li><strong>Consider Trusts for other purposes.&nbsp;</strong>While the use of trusts solely for tax planning may not be not be as important under the 2017 Tax Cuts and Jobs Act for many clients, there are a myriad of other reasons why certain trusts may be useful. They may be used to protect assets for children or grandchildren, to manage assets for the disabled or elderly, to maintain privacy by avoiding a probate administration, or to establish charitable gifts. In reviewing your plan, your goals or the original purpose of your plan may have changed. Your new goals should be coordinated with the new tax structure.<br /> &nbsp;</li> <li><strong>Plan for changes in the Federal Gift Tax.&nbsp;</strong>In addition to the changes in the Federal Estate Taxes, there have also been changes to the Federal Gift Tax. You may use your federal exclusion amount of $11.18 million to shelter large gifts.&nbsp;What is not used during lifetime is available to shelter bequests at death. The annual exclusion amount available for gifts to an individual in one year is now $15,000 per donee. Spouses together can make gifts of up to $30,000 per donee without using any of the federal exclusion amount. An easy gifting strategy of the use of the annual exclusion amount can transfer&nbsp;significant&nbsp;wealth over time.&nbsp;In addition, for some of the wealthier clients, a gift of $11.18 million may be a useful strategy considering that the exclusion amount may revert back to $5 million&nbsp;in 2026. If that is the case, such a gift would effectively remove the excess over the estate exclusion amount from being taxed. However, it is not clear if the IRS will adopt&nbsp;regulations that gifts would first use exclusion from the excess portion. If not, a large gift may be the most prudent way to insure the full use of the exclusion before it reverts back to the lower amount.&nbsp;<br /> &nbsp;</li> <li><strong>Review Beneficiary Designations.</strong>&nbsp;It is important to review the beneficiary designations on your life insurance and retirement plan accounts to insure that they still coordinate with your overall estate planning goals.<br /> &nbsp;</li> <li><strong>Review the impact of miscellaneous income tax changes.</strong><br /> &nbsp; <ul> <li><strong>Kiddie Tax</strong>. A &ldquo;kiddie tax&rdquo; has long been imposed on a child&rsquo;s unearned income taxing such income at the parent&rsquo;s rate. This tax applies to children under 19 and college students under 24. The 2017 Tax Cuts and Jobs Act now taxes the unearned income at the applicable trusts and estate tax rates. A child&rsquo;s unearned income over $12,500 will be taxed at 37% which can be higher that the parent&rsquo;s rates.<br /> &nbsp;</li> <li><strong>Qualified Tuition Plans or 529 Plans</strong>. A QTP or otherwise known as a 529 Plan may be established for a designated individual to pay his or her qualified&nbsp;education expenses. These plans are generally established by the states, or a state agency. Gifts to these plans qualify for the gift tax annual exclusion amount but are not generally deductible for federal income tax purposes. Contributions are deductible for South Carolina income tax purposes but not North Carolina.&nbsp;Distributions from the QTP are not included in income of the designated beneficiary to the extent the distributions are used to pay qualified education expenses. The Tax Cuts and Jobs Act has added a provision that allows up to $10,000 per student, per year to be distributed annually for tuition expenses at private or religious K-12 schools. This change in law allows individuals paying for private or religious tuition for grades K-12 to make distributions&nbsp;from a 529 plan now, as opposed to having to wait until their children attend a higher education school.<br /> &nbsp;</li> <li><strong>Cash Contributions to Charities</strong>. Taxpayers may deduct gifts to charity if they itemize&nbsp;deductions. The amount is limited by a percentage of Adjusted Gross Income (AGI). The old law limit was 50% of AGI for gifts of cash to a qualified charity. The new law is now 30% of AGI for cash contributions.<br /> &nbsp;</li> <li><strong>Standard Deduction</strong>. The standard deduction has been increased to $12,000 for an individual and $24,000 for married couples. This change may impact the amount of future charitable contributions since many taxpayers may not be required to itemize deductions. Many individuals that are charitably inclined and are seeking to maximize their deduction are utilizing donor advised funds.<br /> &nbsp;</li> <li><strong>Income Tax Basis.</strong>&nbsp;Because of the significant increase in the federal exclusion amount, most clients will not have to plan for paying estate taxes. However, the focus on income taxes becomes more important. Assets included in a decedent&rsquo;s estate receive an adjustment in income tax basis to the fair market value as of the date the decedent&rsquo;s death.&nbsp;When these assets are sold by the heirs, the capital gain is computed only on the appreciation occurring after the date of death. In view of the elimination of federal estate tax for many taxpayers, the income tax planning becomes paramount and the preservation of the &ldquo;step up&rdquo; in income tax basis becomes the focus of many estate plans.</li> </ul> </li> </ul> <p align="left"><br /> It has now been nine months since the Tax Cuts and Jobs Act has been in effect, with many questions still unanswered until further IRS regulations are implemented. Nevertheless, the known impact on estate planning is significant and requires immediate attention. The estate planning team at McNair consists of seasoned attorneys with a broad range of experience and the ability to handle estate planning needs for both North and&nbsp;South Carolina residents.<br /> &nbsp;<br /> Please feel free to contact us:<br /> <br /> <u><strong>North Carolina:</strong></u><br /> <br /> Charlotte office:</p> <ul> <li align="left"><a href="http://www.mcnair.net/sherri-l-mcgirt" target="_blank">Sherri L. McGirt</a></li> </ul> <p align="left"><strong><u>South Carolina:</u>&nbsp;</strong><br /> <br /> Charleston office:</p> <ul> <li align="left"><a href="http://www.mcnair.net/james-b-moore-jr" target="_blank">James B. Moore, Jr.</a></li> <li align="left"><a href="http://www.mcnair.net/george-e-morrison" target="_blank">George E. Morrison</a>&nbsp;&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;</li> </ul> <p align="left">Columbia office:</p> <ul> <li align="left"><a href="http://www.mcnair.net/joseph-d-walker" target="_blank">Joseph D. Walker</a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</li> </ul> <p align="left">Greenville office:</p> <ul> <li align="left"><a href="http://www.mcnair.net/jim-denning-jr" target="_blank">Jim Denning, Jr.</a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</li> </ul> <p align="left">Hilton Head office:</p> <ul> <li align="left"><a href="http://www.mcnair.net/jennie-s-cerrati" target="_blank">Jennie S. Cerrati</a></li> <li align="left"><a href="http://www.mcnair.net/john-m-jolley" target="_blank">John M. Jolley</a>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;</li> </ul> http://www.mcnair.net/?t=40&an=80790&format=xml&p=5355 McNair Named one of the south's Best Economic Development Law Firms04 Oct 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=80784&format=xml&p=5352 <p align="left">McNair Law Firm is pleased to be recognized as one of the best economic development law firms in the south by <i>Southern Business &amp; Development</i>. Selections were made by the Southern Economic Development Roundtable, an elite group of top economic development minds in the South.</p> <p align="left">McNair represents businesses throughout the United States and the world in locating in South Carolina. The firm advises multinational corporations locating their U.S. headquarters and manufacturing facilities in the state to local businesses seeking to grow here.</p> <p align="left">As South Carolina&rsquo;s reputation has grown as a leader in foreign investment, so, too, has McNair in the breadth of its experience in advising economic development clients. We regularly advise our economic development clients on corporate structuring, site selection, permitting and regulatory issues, real estate acquisition and finance, building construction, employment law, federal and state taxes, and immigration.&nbsp;&nbsp; McNair also advises clients on economic development incentives, including negotiation and implementation of these incentives.</p> <p align="left">Please contact <a href="http://www.mcnair.net/erik-p-doerring">Erik Doerring</a>, McNair&rsquo;s economic development team leader, if your business would like to discuss an upcoming project.</p> http://www.mcnair.net/?t=40&an=80784&format=xml&p=5352 Disaster Recovery: A Resource for Property Owners18 Sep 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=80417&format=xml&p=5355 <p align="left"><i>Alicia Thompson is a shareholder of McNair Law Firm, and her practice is focused on community association governance and litigation matters. She knows firsthand how to recover from a disaster related situation, in that she is a survivor of Hurricane Katrina and Myrtle Beach&rsquo;s largest tornado strike to date.</i></p> <p align="left">Hurricane Florence was the first major hurricane of the 2018 Atlantic hurricane season and inflicted considerable damage around the border of North Carolina and South Carolina. As property owners look toward recovery from natural disasters, they need a plan of action for assessing damage, communicating with the right entities, and making claims to recover all funds available. The following checklist will better position our clients to be made whole after a casualty occurs, and McNair attorneys are here to walk you through the legal procedures required to restore your property.</p> <p align="left">Recovery Checklist:</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">1.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Engage</u>.&nbsp;Retain counsel immediately to assist you in the recovery process and to ensure that you are documenting damage, submitting claims, and preserving all rights to available funds.</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">2.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Contact Help</u>.&nbsp;Consider contacting the entities below to provide notice of damage and to elicit help in recovery.&nbsp;If you&rsquo;re a business, consider delegating communication to trusted employees to expedite the process.</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Emergency Response Agencies and Non-Profits (ex. Fire Department, Red Cross)</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Building Management</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Homeowners Association</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Emergency Response/Management Agencies (ex. FEMA)</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Utility Companies</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Service Providers (Attorneys, Bankers, Vendors to Repair)</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Insurance Agency</p> <p align="left" style="margin-left: 1in; text-indent: -0.25in;">&middot;<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Post Office</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">3.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Insure</u>.&nbsp;Review your insurance policies, and provide notice to all carriers as soon as practically possible.</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">4.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Assess</u>.&nbsp;Photograph and videotape all damage as support for any claim filed.&nbsp;Document the damage to the premises with a list of all items/systems affected.&nbsp;Do not throw away any items, as the adjusters may need to evaluate any damage caused.&nbsp;Retain all proof of expenses in connection with the disaster, including receipts of rent/hotel, food, gas, and repair to damage.</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">5.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Secure</u>.&nbsp;Secure your home and building to avoid any further loss by turning off gas, water and electricity, tarp damaged roofs, and install a temporary barrier around the property to warn individuals not to enter unless authorized. Empty your fridge of any food to avoid spoliation of appliances and mold growth.&nbsp;Board up windows and doors to prevent vandalism and looting.&nbsp;Meet your financial obligations in connection with the property, including mortgage and insurance payments.</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">6.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Recover</u>.&nbsp;Remove undamaged personal property or office equipment.&nbsp;Secure any electronic data by backing up to a cloud provider or offsite servers.</p> <p align="left" style="margin-left: 0.5in; text-indent: -0.25in;">7.<span style="font-variant-numeric: normal; font-variant-east-asian: normal; font-stretch: normal; font-size: 7pt; line-height: normal; font-family: &quot;Times New Roman&quot;;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span><u>Mitigate</u>.&nbsp;After claims have been filed, work with adjusters, attorneys, and vendors to secure repairs to your property.&nbsp;Enter into written agreements to ensure that they are enforceable and to protect your property from unnecessary liens in the event of a contractor dispute.</p> <p align="left">We are here to help.</p> <p align="left">&nbsp;</p> <p align="left">McNair Law Firm can assist you in the planning and recovery stage of any natural disaster.&nbsp;Our attorneys know the ins and outs of interpreting homeowners association covenants and insurance policies to best determine who is financially responsible for the damage incurred. McNair attorneys are also well equipped to assist with retaining contractors to complete repairs and handling any transactional matters that are involved with the restoration process.&nbsp;In the event a dispute arises with any third-parties regarding contractual or insurance matters, our litigation attorneys are well positioned to assist.&nbsp;</p> http://www.mcnair.net/?t=40&an=80417&format=xml&p=5355 Event Series: Fourteen Years Later: What is the State of Handbook Law in South Carolina?17 Sep 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=79781&format=xml&p=5341 <div>Fourteen Years Later: What is the State of Handbook Law in South Carolina?</div> <div>Recent South Carolina cases and statutes have impacted handbook law in our state. Understanding these changes will assist employers in writing a useful employee handbook and will aid in comprehension and use of the handbook. This event series will focus on changes to your handbook language, specifically the impact of the South Carolina Pregnancy Accommodations Act, and how employers should respond. Key topics include:</div> <ul> <li>Handbooks in South Carolina and case law that impacts their use</li> <li>South Carolina Pregnancy Accommodations Act</li> <li>Non-Compete Agreements</li> <li>Basic IP Strategies for Protecting Ideas</li> </ul> <div>Event schedule is as follows:</div> <div>&nbsp;</div> <div>September 17 - Charleston</div> <div>8:00 - 8:30 am: Registration</div> <div>8:30 - 9:30 am: Program</div> <div>McNair Law Firm</div> <div>100 Calhoun Street, Suite 400</div> <div>Charleston, SC 29401</div> <div>Presenter: Rick Morgan</div> <div><a href="https://www.eventbrite.com/e/employment-event-fourteen-years-later-what-is-the-state-of-handbook-law-in-south-carolina-tickets-48735715838?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER</a>&nbsp;</div> <div>&nbsp;</div> <div>September 17 - Myrtle Beach</div> <div>11:30 am - 12:00 pm: Registration</div> <div>12:00 - 1:00 pm: Program</div> <div>Myrtle Beach Area Chamber of Commerce</div> <div>1200 N. Oak Street</div> <div>Myrtle Beach, SC 29577</div> <div>Presenter: Jim Gilliam&nbsp;</div> <div><a href="https://myrtlebeachsccoc.wliinc1.com/events/Fourteen-Years-Later-What-is-the-State-of-Handbook-Law-in-South-Carolina--5703/details?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER&nbsp;</a></div> <div>&nbsp;</div> <div>September 18 - Columbia</div> <div>8:00 - 8:30 am: Registration</div> <div>8:30 - 9:30 am: Program</div> <div>McNair Law Firm</div> <div>1221 Main Street, Suite 1800</div> <div>Columbia, SC 29201</div> <div>Presenter: Rick Morgan&nbsp;</div> <div><a href="https://www.eventbrite.com/e/employment-event-fourteen-years-later-what-is-the-state-of-handbook-law-in-south-carolina-tickets-48735621556?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER&nbsp;</a></div> <div>&nbsp;</div> <div>September 19 - Hilton Head</div> <div>8:00 - 8:30 am: Registration</div> <div>8:30 - 9:30 am: Program</div> <div>Hilton Head / Bluffton Chamber of Commerce</div> <div>1 Chamber of Commerce Drive</div> <div>Hilton Head Island, SC 29938</div> <div>Presenters: Melissa Azallion and Jon Eggert&nbsp;</div> <div><a href="https://www.eventbrite.com/e/employment-event-fourteen-years-later-what-is-the-state-of-handbook-law-in-south-carolina-tickets-48735472109?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER&nbsp;</a></div> <div>&nbsp;</div> <div>September 20 - Greenville</div> <div>8:00 - 8:30 am: Registration</div> <div>8:30 - 10:00 am: Program</div> <div>McNair Law Firm</div> <div>104 S. Main Street, Suite 700</div> <div>Greenville, SC 29601</div> <div>Presenter: Reggie Gay&nbsp;&nbsp;</div> <div><a href="https://www.eventbrite.com/e/employment-event-fourteen-years-later-what-is-the-state-of-handbook-law-in-south-carolina-tickets-48734769006?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER</a>&nbsp;</div> <div>&nbsp;</div> <div>September 21 - Anderson</div> <div>8:00 - 8:30 am: Registration</div> <div>8:30 - 10:00 am: Program</div> <div>Hospice of the Upstate</div> <div>1835 Rogers Road</div> <div>Anderson, SC 29621</div> <div>Presenter: Reggie Gay&nbsp;&nbsp;</div> <div><a href="https://www.eventbrite.com/e/employment-event-fourteen-years-later-what-is-the-state-of-handbook-law-in-south-carolina-tickets-48733099011?utm_source=E%26L+LIST_MASTER&amp;utm_campaign=ce310b5fdf-EMAIL_CAMPAIGN_2017_12_18_COPY_01&amp;utm_medium=email&amp;utm_term=0_39d4851266-ce310b5fdf-47847677" target="_blank">REGISTER&nbsp;</a></div> <div>&nbsp;</div> <div> <div>We hope you can join us! 1.0 HRCI and SHRM credit available.&nbsp;&nbsp;</div> <div>&nbsp;</div> </div> http://www.mcnair.net/?t=40&an=79781&format=xml&p=5341 Non-Competes in the Employment Context Revisited14 Sep 2018 00:00:00 -0800 http://www.mcnair.net/?t=40&an=80376&format=xml&p=5355 <p><i>In 2016 we wrote about a non-compete decision where special referee found that a seller of a business had breached a sales agreement by violating both a non-compete covenant and an exclusive sales provision contained in the agreement. The seller appealed, and the Court of Appeals reversed and remanded, holding the 150-mile territorial restriction in the non-compete covenant was unreasonable and unenforceable. The South Carolina Supreme Court reviewed that Court of Appeals decision and has now issued its decision. Read on to see what the Supreme Court did.</i></p> <p><b>FACTUAL AND PROCEDURAL HISTORY</b></p> <p>The factual and procedural history of this case is very instructive and bears repeating in this article. In the 1980&rsquo;s, Robert Knight (Knight&rdquo;) began operating a mortuary transport business, Knight Systems, Inc. (&ldquo;KSI&rdquo;). KSI eventually expanded to include the manufacturing and sale of body bags. In 2006, Knight decided to sell the mortuary transport portion of its business and approached a broker for assistance. In October 2006, Donald and Ellen Lintal (the CEO and CFO of Palmetto Mortuary Transport, Inc. [&ldquo;Palmetto&rdquo;]) met with a broker to discuss the purchase of Knight's mortuary transport business. From November 2006 to January 5, 2007, the parties and their agents&mdash;including brokers, accountants, and attorneys&mdash;negotiated the terms of an asset purchase agreement (&ldquo;Agreement&rdquo;). During negotiations, Mr. Knight expressed to Mr. Lintal his desire to get out of the mortuary transport business.</p> <p>On January 5, 2007, Knight and Palmetto executed the Agreement. Pursuant to the Agreement, Knight sold various tangible assets, goodwill, and customer accounts&mdash;including body removal service contracts with Richland County, Lexington County, and the University of South Carolina&mdash;to Palmetto in exchange for $590,000.The Agreement included a provision (Exclusivity Provision) requiring Palmetto to purchase body bags from Knight for ten years and requiring Knight to sell body bags to Palmetto for ten years. The Exclusivity Provision became a central issue in the dispute between the parties.</p> <p>A ten-year, 150-mile non-compete covenant was also executed and was included as an exhibit to the Agreement. Although the non-compete covenant restricted Knight from providing mortuary transport services within a 150-mile radius of Lexington County, it placed no restrictions on Knight's ability to continue its body bag manufacturing business. The non-compete covenant also provided that a breach by Palmetto of the Agreement or such other documents ancillary to the sale, shall constitute a breach of the non-compete covenant and shall release Knight from any and all restrictions under the Agreement.</p> <p>During the trial of the case, Mr. Lintal testified the 150-mile territorial restriction extending from Lexington County was included to ensure Knight would not compete with Palmetto in South Carolina for ten years. Mr. Lintal acknowledged that at the time Palmetto purchased the transport business, Knight provided services primarily in Richland and Lexington County. Mr. Lintal testified that at the time the Agreement was executed, &quot;We didn't know where the business was actually going to -- what we were going to -- if we were going to try to expand it at different locations. We wanted to keep our options open if it was doable.&quot;</p> <p>In 2011, Palmetto still held the mortuary transport services contract with Richland County pursuant to the Agreement. Since the original five-year term between Palmetto and Richland County was expiring, Richland County issued a Request for Proposal (RFP) seeking mortuary transport service for the succeeding five years. Palmetto timely submitted its response to the RFP.</p> <p>As noted above, the Exclusivity Provision required Palmetto to purchase body bags exclusively from Knight for ten years. From 2007 through 2011, Palmetto purchased over $45,000 worth of body bags from Knight. Palmetto had also purchased body bags from manufacturers other than Knight in the amount of $884.97. These purchases consisted of thirty-one infant bags ($192.75), four extra-large body bags ($213.72), six heavy duty body bags ($208.50), and six water-retrieval bags ($270.00). Knight became aware of the purchase of infant bags in 2009 or 2010 and immediately considered the purchase to be a breach of the Agreement, but did not confront Palmetto about the supposed breach for almost two years. Mr. Knight testified he did not become aware of the other purchases until discovery was exchanged after litigation began.</p> <p>Palmetto believed the Exclusivity Provision did not require Palmetto to purchase either infant or extra-large bags from Knight. Palmetto agreed it had breached the Exclusivity Provision in purchasing heavy duty and water-retrieval bags from other manufacturers but argued this breach was not material. It argued the remedy for this breach was not cancellation of the Agreement, but rather money damages in the amount of $478.50, the sum it paid other manufacturers for heavy duty and water-retrieval bags. Knight argued the Exclusivity Provision required Palmetto to purchase <i>all </i>of its body bags from Knight and claimed the breach was material and nullified all terms and conditions of the Agreement, including the non-compete covenant.</p> <p>On June 16, 2011, one day prior to the deadline for responses to the RFP, Mr. Knight recorded a conversation he had with Mr. Lintal. During the conversation, Mr. Knight accused Palmetto of purchasing infant body bags from other manufacturers. Mr. Lintal replied he did not believe his purchase of these body bags from other manufacturers was &quot;significant,&quot; and he noted he did not believe &quot;it was anything to break [the Agreement].&quot; As noted above, Mr. Knight was aware of Palmetto's supposedly illicit purchase of infant body bags for almost two years before he confronted Mr. Lintal.</p> <p>Following his conversation with Mr. Knight, Mr. Lintal suspected Knight was going to bid against Palmetto on the Richland County contract. Mr. Lintal's suspicion was correct&mdash;Mr. Knight submitted his own RFP the very next day. Even though Knight had received $590,000 for the sale of the business and an extra $45,000 in body bag purchases from Palmetto, Mr. Knight testified, &quot;I didn't want to get back in the business. I was forced to. . . . I felt like if I didn't take action at that time, I was going to be left out in the cold.&quot; After the RFP deadline passed, Mr. Knight contacted the Richland County Procurement Office and told a Richland County official that Knight should be awarded the contract because it was the sole provider of odor-proof body bags&mdash;a requisite of the RFP. <sup>&nbsp;</sup>Although Palmetto's response to the RFP contained the lowest price for services and received the highest total points from the Richland County Procurement Office, Richland County awarded the contract to Knight the next month.</p> <p>Palmetto sued Knight for breach of the Agreement, alleging Knight violated: (1) the non-compete covenant prohibiting Knight from providing mortuary transport services for ten years within the 150-mile territorial restriction and (2) the Exclusivity Provision, based upon Knight's refusal to supply Palmetto with body bags. Knight answered and counterclaimed, alleging the non-compete covenant was unenforceable because it contained an unreasonable territorial restraint, contained an unreasonable time restriction, and was not supported by adequate consideration. Knight also alleged any breach of the non-compete covenant was excused because Palmetto first materially breached the Exclusivity Provision by purchasing body bags from other manufacturers.</p> <p>The case was tried before a special referee. The special referee found the non-compete covenant was reasonably limited in time and territorial scope and was supported by valuable consideration. The special referee found Knight breached the Agreement by violating the non-compete covenant and by refusing to sell body bags to Palmetto. The special referee determined Palmetto's purchase of heavy duty and water-retrieval body bags from other manufacturers, although a breach, did not constitute a material breach of the Agreement such that Knight was excused from performance of its contractual obligations. The special referee ordered Knight to pay (1) attorneys' fees and (2) damages of $373,264.54 in lost profits resulting from the wrongful competition with Palmetto. The special referee issued a permanent injunction requiring Knight to comply with the terms of the non-compete covenant for a term of five years and seven months following the date of his order, but allowing Knight to complete its performance of the 2011 mortuary transport contract with Richland County. Finally, the special referee awarded Knight $478.50 in damages for Palmetto's breach of the Agreement.</p> <p>Knight appealed the special referee's order to the Court of Appeals, arguing the special referee erred in finding (1) the territorial restriction in the non-compete covenant was reasonable and enforceable, (2) the territorial restriction was supported by independent and valuable consideration, (3) the non-compete covenant was not void as against public policy, and (4) the non-compete covenant was not voided by Palmetto's breach of the Exclusivity Provision. The Court of Appeals reversed the Special Referee and remanded (sent the case back to the Referee), holding the non-compete covenant's 150 &shy;mile territorial restriction was unreasonable and unenforceable. Because South Carolina does not follow the &quot;blue pencil rule&quot; (&lsquo;i.e., rewriting an agreement for the parties) and because the non-compete covenant did not include a &quot;step-down provision (language eliminating grammatically unreasonable provisions, but not adding or rewriting provisions),&quot; the Court of Appeals found it would be impermissible to redraw the Agreement to include a smaller territorial restriction. The Supreme Court granted Palmetto's petition to review the Court of Appeals' decision.</p> <p><b>THE COURT&rsquo;S OPINION</b></p> <p>Palmetto&rsquo;s argument was that the Court of Appeals erred in holding the territorial restriction in the non-compete covenant was unreasonable.</p> <p>The Court first set forth the standards for non-competes - A covenant not to compete is enforceable if it is not detrimental to the public interest, is ancillary to the sale of a business or profession, is reasonably limited as to time and territory, and is supported by a valuable consideration. The Court further stated that the reason why such covenants are held to be unenforceable is that unless they meet certain criteria, they constitute a restraint upon trade which is against public policy. Against this standard the Court then looked at the facts and prior law in the non-compete area.</p> <p>Relying on a 1942 decision, the Court wrote that in determining whether a contract in partial restraint of trade is reasonable, the court will look to the whole subject matter of the contract, the kind and character of business, its location, the purpose to be accomplished by the restriction, and all circumstances which show the intention of the parties and which must have entered into the making of the contract. In determining whether a contract is reasonable in respect to the restraint being challenged the prior case observed that it would seem that the fair and full protection of the business, good will and trade name which the vendee has purchased and paid for, may well be accepted as the test. <i>It follows naturally that each case must be governed in the main by its own facts</i>. The 1942 case had a lifetime restriction for the seller to not re-enter the business.</p> <p>Disagreeing with the Court of Appeals analysis the Supreme Court wrote that an analysis of the reasonableness of a territorial restriction in a non-compete covenant must take into account relevant facts surrounding the making of the agreement.; specifically noting that whether a non-compete covenant is reasonable, the following should be considered: (1) the whole subject matter of the contract; (2) the kind and character of the business; (3) location; (4) the purpose to be accomplished by the restriction; and (5) all circumstances which show the intention of the parties and which must have entered into the making of the contract.</p> <p>In applying these criteria the Court was careful to note that as for the subject matter of the contract, the non-compete covenant between Knight and Palmetto arose out of the sale of a business between two sophisticated parties. Non-compete covenants executed in conjunction with the sale of a business should be scrutinized at a more relaxed level than non-compete covenants executed in conjunction with employment contracts. The Court explained as follows: Non-compete covenants executed in the context of an employment contract are generally disfavored and are strictly construed against an employer. The probability of unequal bargaining power that may exist between an employer and employee is significantly reduced when the restriction arises in the context of a sale of a business between two sophisticated parties. Also, a non-compete covenant executed pursuant to the sale of a business allows the opportunity for a seller to capitalize on the disposition of the business's goodwill and bargain for a higher price.</p> <p>In the context of examining each case on its own facts the Court noted the following facts - the Agreement involved the somewhat complex sale of Knight's mortuary transport business to Palmetto for $590,000. Both Palmetto and Knight are sophisticated parties and were represented by legal counsel throughout the negotiation and execution of the Agreement. Knight necessarily considered the restrictions in the non-compete covenant in making his decision to enter into the Agreement. The non-compete covenant was integral to Palmetto's decision to enter into the Agreement. Mr. Lintal testified about Mr. Knight's &quot;strong reputation&quot; in the business and stated, &quot;[The non-compete covenant] was very important to us because without the non-compete, we wouldn't have bought the business.&quot; Further, the non-compete covenant specifically provided, &quot;[Knight] has agreed to provide such covenants as set forth herein as <i>a material inducement to [Palmetto] </i>to enter into and close the Purchase Agreement.&quot; (emphasis added). It is clear the non-compete covenant was a centerpiece of the Agreement and that both Palmetto and Knight bargained for and intended to benefit from its terms.</p> <p>While the non-compete covenant effected a partial restraint of trade by limiting Knight's ability to provide mortuary transport services, this restraint was offset by Knight's continuation of its body bag manufacturing business and the Exclusivity Provision requiring Palmetto to purchase body bags from Knight throughout the term of the non-compete covenant. Indeed, Palmetto purchased approximately $45,000 worth of body bags from Knight before the current controversy arose. The Agreement did not prohibit Knight from continuing to sell bags to other customers. It is clear that both Knight and Palmetto carefully considered and calibrated their options and best interests in striking their bargain.</p> <p>The Court then considered the kind and character of the business and the location of the business. The territorial restriction in this case consisted of a 150&shy; mile radius surrounding Lexington County. At the time Palmetto purchased Knight's business, the business predominantly serviced Richland and Lexington counties. However, focusing only upon the existing territory of Knight's business and Palmetto's lack of concrete plans for geographical expansion ignores the kind and character of the business. A mortuary transport business necessarily involves mobility of services, and expansion into other areas of South Carolina is certainly foreseeable. This is not a brick and mortar 1950&rsquo;s local retail business. Palmetto, a sophisticated buyer, saw the opportunity for expansion outside Knight's existing business area and thus negotiated the Agreement with Knight, a sophisticated seller, to protect its interests by implementing the 150-mile territorial restriction. At his deposition, Mr. Lintal testified that since the execution of the Agreement, Palmetto has added new customers and &quot;on occasion&quot; provides services for customers outside of the Columbia and Lexington area.</p> <p>After considering the Agreement as a whole, and after giving the non-compete covenant the more relaxed scrutiny it requires, the Court&nbsp;found that the territorial restriction was not greater than what was essential for a reasonable protection of the rights purchased by Palmetto.</p> <p>Further in looking at any potential invalidity on public policy grounds, the Court found that although there may be situations in which this Court may find a restriction of competition between potential competitors for public contracts to be void as against public policy, this case does not rise to such a level. Based on all of the facts in the case including Knight&rsquo;s desire to get out of the mortuary transport business the Court declined to create a blanket rule that a non-compete covenant that restricts competition between potential competitors for public contracts is invalid and void as against public policy.</p> <p>Further, agreeing with the Special Referee, The Court held that while Palmetto breached the Exclusivity Provision by purchasing $478.50 worth of body bags from manufacturers other than Knight this breach was not material and did not nullify Knight's obligation to honor the non-compete covenant.<br /> <br /> The Court reversed the Court of Appeals and reinstated the Special Referee&rsquo;s Order.</p> <p><b>LESSONS FOR EMPLOYERS</b><br /> <br /> A first take-away is that the rigorous application of what is going to be required for an&nbsp;employer/employee non-compete remains. Non-competes in the employment context will still be disfavored and very specific restrictions with limited times and places signed with adequate consideration will still be the norm. Overbroad non-competes in the employment context will likely be struck down by the Courts. The second take-away is that in the business context, the standards will not be as rigorous. The Courts instead, on a case by case basis, will look at the following: (1) the whole subject matter of the contract; (2) the kind and character of the business; (3) location; (4) the purpose to be accomplished by the restriction; and (5) all circumstances which show the intention of the parties and which must have entered into the making of the contract. Be careful not to conflate the standards for the sale of a business in a single stand-alone employer/former employee non-compete issue.</p> http://www.mcnair.net/?t=40&an=80376&format=xml&p=5355