Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

The Age Discrimination in Employment Act (ADEA) and various state laws make it illegal for employers to make decisions that are motivated by an employee’s age.  Federal law limits age related lawsuits to persons who are 40 years of age or older.  However, other states such as New Jersey provide broader protections.
 
There are different legal standards and different levels of proof required depending on whether an employee is allegedly part of a reduction in force, terminated, not hired, or subjected to other adverse actions while still employed.  But one thing remains the same regardless of the type of adverse action that is premised upon an individual’s age, it is illegal. 
 
Many actions by an employer can indicate that age was a motivating factor in a decision that affected an employee or multiple employees. For example, references such as “grandpa,” “pops,” “old-timer,” or being stereotyped as slow or unable to learn new tasks (tricks) are all indicators of possible age discrimination.  Often times there are indications of age discrimination when an employee has been loyal and dedicated to an employer for a long period of time but is terminated or subjected to disparate treatment (along with other older employees) by a new supervisor or manager.

New Jersey courts have long sought to protect the right and ability of a person “to pursue one’s own business, calling or occupation free from undue influence or molestation.”  In the latter part of the 19th century, the courts recognized that a “wrongful and malicious combination to ruin a man in his trade may be ground for [legal action].”  Similarly, in a line of cases spanning the middle of the 20th century, New Jersey courts protected the rights of real estate brokers whose clients surreptitiously cut them out of a transaction to avoid paying a brokerage commission.  The courts have continued their oversight of business dealings through the present, and now call this an action for tortuous interference.

Tortious Interference With Contract
There are two separate causes of action for tortuous interference:  tortious interference with contract and tortious interference with prospective economic advantage.  The primary distinction between the two torts is the existence of a contract.  Each tort results from the need, or society’s desire, to protect certain types of business relationships.

To establish a claim for tortious interference with contractual relations, a plaintiff must prove: (1) actual interference with a contract; (2) that the interference was inflicted intentionally by a defendant who is not a party to the contract; (3) that the interference was without justification; and (4) that the interference caused damage.

To have acted “intentionally”, a client must have known of the contract,” but cannot have been a party to that contract.  Thus, this tort does not redress a breach of contract.  Rather, this tort addresses the separate injury caused by a third party inducing the breach.  Viewed from the perspective of plaintiff’s counsel, having a claim against party B for inducing that breach provides two potential pockets from which to recover.

The law governing this tort is relatively straightforward, inasmuch as the protected relationship between the parties is defined by contract.

Tortious Interference 
To prevail on a claim for tortious interference with prospective economic advantage, a plaintiff must prove: a reasonable expectation of advantage from a prospective contractual or economic relationship; that the defendant interfered with this advantage intentionally and with malice – that is, without justification or excuse; that the interference caused the loss of the expected advantage; and that the injury caused damage.

New Jersey’s emphasis on adequate proof of a reasonable probability of success is consistent with the national trend.  Summing up the standard for determining the existence of a reasonable expectation of economic advantage, one group of commentators has concluded:

[I]t is vital for the plaintiff – when pursuing a claim – to make certain that there is a bona fide and reasonable expectancy of a continuing and reasonable expectancy of a continuing and prosperous relationship, not just the mere desire or possibility for one.  In a prospective advantage case, the plaintiff must demonstrate that expected benefit with a reasonable degree of specificity.  More than a mere hope or optimism is needed; although the law does not require reasonable probability of economic benefit from a valid prospective relationship.

Malice
New Jersey courts describe malice in a variety of ways.  First, the courts make clear that malice does not mean ill will.  Rather, malice means that the conduct was engaged in without justification or excuse.  In the typical business case, competition between the parties may constitute justification.  The courts, however, require more than the assertion of competition:  A defendant must have a legitimate motive, such as success in the marketplace, and employ legitimate means to obtain that goal.

In Ideal Dairy, the Appellate Division specifically addressed proof of malice when competition is invoked as a justification.  The Ideal Dairy court held that there was nothing wrong with targeting a competitor, and that targeting a competitor by offering lower prices was, in fact, “the very essence of competition.”

New Jersey case law does not permit a competitor to use wrongful means.  New Jersey courts use the term “malice” to describe conduct that is “injurious and transgressive of generally accepted standards of common morality or of law.”

The New Jersey courts have reduced this inquiry to whether the conduct was sanctioned by the “rules of the game.”  The rules of the game standard first appeared in 1957 in DiCristofaro v. Laurel Grove Memorial Park, and has become the standard for determining malice in tortious interference cases.  The DiCristofaro court found that a cause of action might lie based on allegations that the defendant cemetery owners imposed excessive charges and costs upon patrons who obtained monuments and memorials from someone other than the cemetery when, as a result, the outside company was prevented from realizing its “normal business expectancies.”

The tort of tortious interference with prospective economic advantage requires that business competitors act within the moral and ethical framework required by society, as well as their own industry.  The rules of the game depend on the customs, practices or code of ethics of the industry, which have typically been vetted time and again by what is necessary to achieve efficiency in the marketplace.

New Jersey courts, harkening back to the advice dispensed by all mothers in our society that “just because someone else is doing it doesn’t make it right,” require that conduct during the course of competition must not only be consistent with the rules of the game, it also must not be “fraudulent, dishonest, or illegal.”

The New Jersey courts have enumerated several examples of what may constitute fraudulent, dishonest or illegal conduct, but the list is by no means exhaustive.  For example, liability will ensue where a competitor uses “violence, fraud, intimidation, misrepresentation, criminal or cruel threats, and/or violations of the law.”  Moreover, the conduct complained of must be independently actionable.  For example, one of the issues analyzed by the Appellate Division in Ideal Dairy was whether the defendant had violated the antitrust laws through the use of extremely low pricing.

The Ideal Dairy court held that, absent a violation of the antitrust laws, a claim of tortious interference could not be premised on “extremely low, or unprofitable prices” because that conduct was not independently actionable.”

Conclusion
The painful irony is that you may not have done anything wrong, and may have been engaging in intense, but legitimate, competition in the marketplace, but you may, nonetheless, have to endure months of expensive discovery to prove that this conduct does not subject him/her to liability so goes the capitalist way.

Gift Tax Returns - The same general rules applicable to income tax returns apply to annual gift tax returns. That is, a 3-year statute of limitations applies to the initiation of an audit. The IRS has issued regulations describing substantiation requirements to ensure the protection of the statute of limitations for gift tax purposes. At this time, we have no cases or rulings on these new requirements. It is possible that the IRS could challenge the substantiation or appraisal information on gift tax returns many years after the expiration of the statute of limitations. The challenge will be based on the adequacy of the substantiation provided with the initial return and will most likely occur when the donor’s estate is audited. Our recommendation at this time is that all records, such as valuation reports, bank records, and any other items substantiating a gift tax return, should be kept until the donor’s estate tax return is settled.

Estate Tax Returns - The statute of limitations is, again, 3 years from the date the return is filed. However, in many cases, the estate tax return is extended by 5 months beyond the normal due date of 9 months following the date of the decedent’s income tax returns as long as the estate is open. These income tax returns will also have a 3-year statute of limitations. A good rule of thumb is to keep the estate records for 5 years after the decedent’s death or until a final closing agreement is reached with the IRS, if later.

Looking for something you can give your children and grandchildren that can’t be swallowed, won’t be recalled and doesn’t contain excessive amounts of lead? Consider contributing to your children’s and grandchildren’s 529 college savings plan.

The gift of a 529 plan probably won’t make your children and grandchildren squeal with joy but years from now, when they graduate from college debt-free, they’ll thank you.

Every state offers at least one 529 college savings plan, and you don’t have to invest in your own state’s plan. Your contributions aren’t deductible on your federal tax return, but more than 30 states allow residents who contribute to their own state’s plan to deduct some or all of their contributions from their state taxes. Your investments grow tax-deferred, and withdrawals are tax-free, as long as the money is used for college expenses.

Parents and grandparents can set up their own 529 plan, naming the child or grandchild as a beneficiary, or contribute to an existing plan set up by the child’s parents.

Even if the account isn’t in your name, you might be eligible for a state tax break. Most states that provide tax deductions permit non-account owners who contribute to an existing account to deduct their contributions, says Chris Hunter, program manager for the National Association of State Treasurers.

Make sure you keep a copy of your canceled check for your state tax records. You can find the rules for your own state at www.collegesavings.org.

The biggest drawback to contributing to an existing account is that you relinquish control of the money. The plan’s account owners can do anything they want with money in the account, says Bill Raynor, vice president of 529 plan sales for OppenheimerFunds. Raynor says he generally advises grandparents who want to contribute to a 529 to set up a separate account and name themselves as owner, so they can retain control of the money. That’s particularly important if you plan to make a large contribution to a 529 plan, he says.

Otherwise, he says, your contribution “could become a red Porsche convertible instead of the kid’s college fund.”

In addition, keeping the account in your name means you’ll be able to withdraw the money for emergencies, such as catastrophic medical expenses. You can withdraw money in your 529 account at any time, for any reason, says Jeff Coghan, Director of College Savings Programs for Hartford Financial Services. If the money isn’t used for higher-education expenses, however, you’ll owe income taxes and a 10% penalty on the earnings.

Contributions to a 529 savings plan are removed from your taxable estate, even if the account is in your name. That feature makes 529 savings plans a powerful estate-planning tool for wealthy parents and grandparents who are concerned about inheritance taxes, Raynor says.

You can contribute up to $12,000 a year, per beneficiary, to 529 plans without filing a gift-tax return with the IRS. Better yet, you can “frontload” your 529 plans by contributing five years’ worth of annual contributions in one year.

That means you can contribute up to $60,000 to a grandchild’s 529 plan — or $120,000 if you’re married — without filing a gift-tax return. If you have several children or grandchildren, you can set up multiple accounts and shelter hundreds of thousands of dollars from estate taxes, Raynor says. And if a couple of your children or grandchildren eventually don’t go to college, you can always change beneficiaries — as long as the accounts are in your name.

There’s one major drawback to setting up a 529 plan — or several plans — in your name. If you need nursing home care in the future, your 529 plan could hurt your eligibility for Medicaid, a joint federal/state health insurance program for low-income people. Because you control the account, the government considers your 529 plan a “countable asset.” That means you’ll be required to use that money to pay for your long-term care expenses before you qualify for Medicaid. (Except if you live in Arkansas, which enacted a law this year exempting 529 plans from Medicaid eligibility.)

If you think you might need to apply for Medicaid in the future, consider contributing to an account in someone else’s name, says Joe Hurley, founder of Savingforcollege.com. That way, the plan won’t be considered a countable asset for purposes of Medicaid.

Yet even this strategy won’t get you off the hook entirely. When you apply for Medicaid, the state will review your finances during the previous 60 months. Financial gifts made during this period, including contributions to a 529 savings plan, could hurt your eligibility for Medicaid benefits.

For more information, call or e-mail me or a financial adviser who specializes in long-term care.

November 30, 2007 – Fredrick P. Niemann participated in a seminar hosted by the Mercer County Bar Association entitled “Utilizing Special Needs Trusts in Personal Injury and Matrimonial Settlement”, and successful mediation in Probate Litigation and Family Disputes.

Freehold, NJ – The National Academy of Elder Law Attorneys (NAELA) has announced that Fredrick P. Niemann, Esq. of Hanlon Niemann, P.C. in Freehold has attended its annual Advanced Elder Law Institute held in Memphis, Tennessee, November 2-4 2007.

Some of the highlights of the 2007 NAELA Advanced Elder Law Institute, “It’s Now or Never!” included:

• Changing issues in Veteran’s benefits facing our aging veterans.
• Guardianship and elder abuse issues and ways the “system” can be improved to help our elders retain their dignity and remain safe.
• Cases involving patients who have suffered traumatic brain injury.

About NAELA

Established in 1987, the National Academy of Elder Law Attorneys (NAELA) is a non-profit association that assists lawyers, bar organizations and others. Members of NAELA are attorneys who are experienced and trained in working with the legal problems of aging Americans and individuals of all ages and disabilities. The mission of the National Academy of Elder Law Attorneys is to establish NAELA members as the premier providers of legal advocacy, guidance and services to enhance the lives of people with special needs and people as they age.

The Department of Veterans Affairs should overhaul its outdated system of compensating former military personnel for disabling injuries they suffered during their service, the Institute of Medicine recommended yesterday.

The current system dates, in part, to the World War II era. It is out of step with modern medical advances in diagnosing, understanding and treating conditions such as traumatic brain injury, the institute said in a report requested by the federal Veterans’ Disability Benefits Commission. The institute is a branch of the National Academies, an organization chartered by Congress to advise the government on scientific and technical issues. The disability benefits commission, created by Congress in 2003 to study the VA compensation system, is expected to issue a report this year.

For years, the VA rating system has been criticized for bureaucratic delays and disability ratings that many veterans say are lower than they should be, which means they get less compensation. The subject is getting renewed attention as veterans of the wars in Iraq and Afghanistan return home with post-traumatic stress disorder, brain damage, amputations and other serious injuries and conditions.

Estates holding a closely held business interest valued at greater than 35 percent of the adjusted gross estate can elect to pay estate taxes in installments. The rules also permit the IRS to require the estate to post a surety bond to secure the government’s interest in the deferred tax. The IRS has imposed a policy to make the bond mandatory and the issue was litigated in Tax Court. The Tax Court held that the IRS should apply the bond requirement on a discretionary case-by-case basis. In response, the IRS announced a revision of its policy (IRS Notice 2007-90, 2007-46 IRS 1003) and will apply various factors to determine the need to require a bond. Among the factors to be considered are (1) the duration and stability of the business, (2) the timely ability to pay the installments of tax and interest, and (3) the compliance history of the business. The Notice requests comments from practitioners about other factors that might be appropriate. If you have questions on this issue, please call me to discuss.

Failure to Name an Alternate Beneficiary to an IRA Accelerates Income Tax Liability

In a recent case, the decedent, aged 78, owned an IRA at the time of his death. The designated beneficiary of his IRA was his wife. The decedent failed to name a secondary beneficiary, although a prior designation named his daughter as secondary beneficiary. When his wife died, the decedent failed to complete a new beneficiary form before his death. The executor got the probate court to approve a change in the beneficiary to the IRA owner’s daughter subsequent to his death. The IRS ruled (Ltr. 200742026) that the estate is the beneficiary of the IRA and that no individual can be named beneficiary for the purposes of determining the applicable distribution period of the IRA. Thus, the account must be distributed over the decedent’s remaining fixed-term life expectancy instead of the daughter’s life expectancy, causing income taxes to be incurred earlier than necessary. This ruling indicates the importance of checking beneficiary designations and making timely changes as necessitated by individual circumstances.

The Center for Medicare Advocacy has just issued a report discussing the circumstances in which Medicare may be liable for dental services. The report concludes: “The likelihood of obtaining Medicare coverage for non-routine dental care can be increased by taking certain steps. First, a treatment plan established at the outset by the primary physician providing covered medical services should include provision for ancillary dental care. As dental services are needed, the physician should record the fact that they are incident to and necessary for the patient’s primary treatment, and prescribe the specific dental services. This will take such dental services out of the exclusion for routine care, and show that they are “incident to and an integral part of” a covered course of treatment. In order to obtain a successful decision, it may be necessary for the beneficiary to go through a number of unsuccessful lower levels of administrative appeal before reaching the ALJ or federal court levels. At these higher levels of appeal, the beneficiary or her advocate will have an opportunity to overcome the presumption that Medicare never covers dental services. Testimony and medical records from the beneficiary’s physicians should be presented to show that the dental services were ordered and supervised by them as part of the claimant’s covered treatment. Legal arguments can be made that 1) the controlling Medicare statute, as shown by its legislative history, excludes only coverage of routine dental services; 2) the manual requirement that services be “incident to and an integral part of” covered services was met; or if not met, 3) the interpretations of the statute in the manual are too inconsistent and unreasonable to be given deference.”