Publications

THE LEGAL RISK OF DIY

New Zealand is a proud Do-It-Yourself (“DIY”) nation whose people demonstrate what we Americans admiringly call “rugged individualism”. This national character trait likely takes its roots from the construction of a society so far away from the rest of the world thereby creating a unique mixture of self-reliance and communal harmony. A Kiwi will rarely ask for assistance, but will also be quick to help a neighbor in need. This has undoubtedly led to a unique DIY/ No 8 Wire culture and an amazing array of innovative businesses. However, taking a DIY approach when doing business in the United States is a recipe for disaster.

Many of our clients come to us once they are in a dispute or are facing governmental regulatory issues after having tried to navigate the complicated US legal systems without professional US legal advice. These disputes and problems could almost always have been prevented had the client sought out a US lawyer’s advice beforehand. While it is not difficult to find a free form on line or to use non-attorney legal service providers (ie Legal Zoom or Rocket Lawyer) to create your US legal documentation, use of these DIY legal document sources places you and your business at risk. Form documents are not specifically tailored to your business and leave many legal issues unaddressed and leave you exposed to a range of potential risks and liabilities.

For example, a client came to us regarding a dispute which they were having with an independent agent they hired to manage their US subsidiary. After training the agent for about a year on the intricacies of their business methods, sharing their sales strategies, and generally teaching the agent how to run the business, the agent quit and immediately opened up a competing business in the same city. They called us wanting to enforce a non-competition agreement that they had the agent sign when he first started working for them. Our client had used a form employment agreement they found online that included a non-competition clause in it, but did not have any effective trade secret protection language. Their thinking was that the non-competition clause would prevent the agent from using their trade secrets or business methods in competition against them. Unfortunately for them, this agent lived in California, where non-competition agreements are unenforceable. There simply was no contractual protection that the client could utilize, and since the client did not protect its trade secrets, there was no basis on which it could claim misappropriation against the ex-agent. This situation could have been prevented had they simply invested in an employment contract drafted specifically for their business by a US attorney.

Another regular problem our clients come to us with is where they find themselves receiving notices from state governments that their business owes back taxes and penalties for failing to register their business in that state. The common story we find is that a NZ company will start a subsidiary in Delaware by using an online incorporation service. Thinking that this is all that is needed, they open up an office in Texas (for example) to act as their importer of record or distributor. They are completely shocked when they find out that the Texas State Comptroller’s office wants to collect taxes and penalties for failing to register the business and the Texas Attorney’s General is seeking an injunction to shut down their office. This common problem comes down to the fact that a business entity must register in each state in which it is doing business. Any sales in that state are subject to state taxation and a company may not legally conduct business in another state without registering. The penalties, back taxes and business interruption caused by this sort of situation could have been easily avoided had the company simply sought out legal advice before beginning operations in the US.

The moral of the story is that the United States does not have a Do-It-Yourself type of legal system. Simple innocuous actions, like using on-line form legal documentation, can lead to disastrous and costly legal predicaments. Making the proper investment in legal advice on the front end will always put you in a better position later on.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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MINIMUM RETAIL PRICE PROTECTION WHEN ENTERING THE US’ COMMERCIAL MARKETS

Norris Echetebu Law – American Law Specialists

It’s always a good idea to create and maintain a unified pricing strategy when taking your goods to market in the United States. However, protecting your retail price is more difficult than one might imagine. Unless you are acting as the actual retailer yourself, it is very difficult to dictate the retail price at which independent distributors or retailers (ie “stockists”) will sell your goods.

Anti-trust laws often prohibit a manufacturer and/or distributor from setting a Required Minimum Retail Price. It appears that in New Zealand, resale price maintenance is illegal under the Commerce Act. It also appears that in Australia, it is illegal under the Competition and Consumer Act of 2010. The policy theory behind these laws is that the end-user consumer’s interest in purchasing low prices exceeds the manufacturer’s interest in setting a minimum price, and that, therefore elimination of these so-called “vertical restraints” will promote competition and efficiency.

However, in the United States, the US Supreme Court (which has ultimate authority to interpret US law) has issued an opinion finding that Retail Price Protection as a vertical restraint is not in fact anti-competitive and does not violate the US’ Federal anti-trust laws. See Leegin Creative Leather Products Inc v PSKS, Inc, 551 US 877 (2007). Prior to Leegin, all price restraints were held to be illegal per se. This change in interpretation of US anti-trust law by the US Supreme Court came about by the influence of the “law and economics” theory of the Chicago School of Law on several of the more conservative members of the Court.

Essentially, the US Supreme Court found that a manufacturer’s and/or distributor’s contractual requirement for its retailers to sell goods above a required minimum retail price did not always affect competition negatively. In fact, it sometimes protected the consumer by allowing manufacturers of competing goods to continue manufacturing those goods, because retail price restraints prevent deep discounts by uninterested retailers which hampered the manufacturer’s ability to continue production. Accordingly, the US Supreme Court applied a “rule of reason” test for all such vertical price restraints (basically asking whether the retail price restrain is reasonable given a totality of the circumstances).

Intriguingly, the US Supreme Court’s decision only applied to US Federal anti-trust law, leaving untouched the US states’ rights to create their own anti-trust legislation. In reaction to the Leegin decision, several major states (including but not limited to California, Texas and New York), enacted legislation which reaffirmed the prohibition against retail price restraints. The enactment of this sort of anti-trust legislation in these states that are the major population centers in the US effectively limits the application of the Leegin doctrine. This makes for a confusing legal landscape.

What does this mean for Kiwi businesses selling their products in the US? It means that you are only allowed to have a Required Minimum Retail Price in specific states. It also means that you will need to develop some specific business and legal work-arounds to maintain limited control over the retail price of your goods in those US states which prohibit retail price control. This can be achieved through the use of contractual provisions which incorporate specific legal terms known as the Colgate clause as well as the Minimum Advertised Pricing clause. These strategic contractual provisions must be artfully and carefully drafted by experienced US legal counsel.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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Norris Echetebu Law – American Law Specialists

Arbitration: Is It Really All It’s Cracked Out To Be?

Most international commercial agreements contain clauses which provide for final and binding arbitration to settle any disputes between the parties. Many lawyers are inclined to tell their clients that arbitration is the best way to settle commercial disputes, as it is faster and cheaper than court litigation. Do these clichés really hold true?

In many cases, the decision to choose the court room over arbitration entirely depends on the situation. Court litigation generally becomes expensive because of discovery and motion practice. Discovery is the process by which litigants gather evidence to prove their case or defense before the court. In the United States for example, discovery generally consists of requests for production of documents interrogatories (written questions), and requests for admissions, third party document subpoenas, and witness depositions. Discovery can last from several months to several years, depending on the matters in controversy in the case. “Motion practice” is the general terminology used to refer to the various motions traded between parties asserting legal arguments before a case goes to trial. A typical case will contain motions to compel discovery (to settle disputes regarding discovery) and motions for summary judgment (asking the Court to decide the case on the law without the need for a trial). Many cases between international parties also contain jurisdictional challenge motions. Each of these US court procedures can cost several thousand dollars, with witness depositions and motions for summary judgment sometimes costing in the tens of thousands of dollars (in a worst-case scenario). On the other hand, a small case might only incur a few thousand dollars in discovery expenses and attorneys’ fees. Most if not all of these expenses can be avoided through arbitration.

That being said, arbitration is no cheap endeavor. It requires upfront expenses which are not incurred with court litigation. Initiating a commercial arbitration case generally requires an up-front average fee of approximately $9,000.00 USD. This fee generally covers the filing fee, the arbitration administration association’s fees, and the costs of a venue for the arbitration. This does not include the additional $5,000.00 USD to $30,000.00 USD or more in attorneys’ fees for the initial arbitration submissions and notices, or the general fee of $5,000.00 USD to $10,000.00 USD for a single arbitrator to hear the case and issue a ruling. Most arbitration clauses call for a panel of three arbitrators, and this can substantially increase the costs. Initiating a lawsuit in court generally requires a filing fee of approximately $300.00 USD depending on the state or federal court where the case is filed, plus attorneys’ fees from $500.00 USD to around $5,000.00 USD or more. Further, the upfront costs of arbitration can increase significantly where one of the parties is not a willing participant. As happens quite often, many commercial disputes that require arbitration result in one party simply refusing to come to the table at all. Thus, the party that wishes to initiate the arbitration is forced to file a lawsuit in court in order to have the court issue an order for the arbitration to go forward and for all parties to participate. This common situation significantly increases the up-front costs for the party making the arbitration claim.

There is also a common belief that arbitration is more expedient than court litigation, but industry studies conflict on whether arbitration is truly quicker than court litigation. In our experience, arbitration is indeed quicker if the parties both participate in the process. Generally speaking, if there is a single arbitrator, you can agree from the outset that the arbitrator must issue an opinion within a set amount of time. This sort of dictate cannot be placed on a court which generally operates on its own time frame.

Arbitration is also final. There are no appeals and there are very limited circumstances where a court will overturn an arbitration award. In the US, a party that is victorious at trial in court litigation can as a matter of course expect the other side to appeal, or at least threaten to appeal, in an attempt to either overturn the trial court’s decision or force the claimant into settling for less than the amount of the judgment.

So what does all this mean in the end? Arbitration does not actually cost that much less than court litigation and that it sometimes costs more. Our general opinion is that an arbitration clause should only be included in an agreement if the client can afford the upfront costs of arbitration. If you are a small business and money is tight, then arbitration may not be the best option for you if you need to enforce your agreement in case of a breach. A contract with an arbitration clause that is not well thought-out may force your business into situations where significant breaches cannot be dealt with adequately or timely. This is because the amount of the upfront investment required for arbitration may be completely unaffordable for your business or too burdensome on your business given the likely outcome of the case.

Arbitration is an important mechanism in the world of international commercial transactions it should remain, in the appropriate situations, a mainstay of a well-drafted international commercial agreement. However one size does not fit all. Every business should carefully and honestly analyze its ability to incur the upfront set costs of arbitration before including such a clause in its agreements.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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Have you been told that your US branch HAS to be incorporated in Delaware to take advantage of the management friendly laws, or that you NEED to incorporate in Nevada or Wyoming to escape state income taxes? Do you need to choose your State of Incorporation?

Have you run across services boasting of the advantages of incorporating in a specific state and offering incorporation for a flat fee? We’ve seen a handful of Kiwi businesses that have followed this sort of advice, but don’t seem to be experiencing the promised tax or legal advantages after they actually start doing business in the US. While tax and jurisprudential advantages should be considered when making a determination of which state to incorporate in for your new business in the US, there are certain simple realities that come into play:

1. GENERALLY, YOU SHOULD INCORPORATE IN THE STATE WHERE MOST OF YOUR BUSINESS IS CONDUCTED.

For Kiwi businesses, your State of Incorporation is usually California. If you mostly do business in California, then don’t waste your time incorporating in another state. No matter what is promised, if your business makes sales inside California or otherwise conducts business in California, then it is subject to California registration and franchise taxes.

The assumed advantage of incorporating in Nevada, Wyoming, Missouri, or some other state that has lower or no franchise/income taxes does not get your business around the reality that if it earns money in California from California sales or transactions, it has to pay California income taxes. This is the same for other states as well. If you are being told differently, you are not being given good advice.

While sometimes there are reasons for incorporating in multiple states, those reasons must fit the legal reality. For example, if you can structure your business so that the transfer of goods is from a warehouse in Nevada to another state where your customers are, then it would be a wise decision to incorporate in Nevada. However, a careful analysis of your business plan from a legal perspective should be undertaken before you make your incorporation decision.

2. COMPLICATED TAX ARRANGEMENTS MAY END UP COSTING MORE MONEY THAN THEY SAVE.

Tax arrangements such as offshore employee leasing contracts and complex IP leasing agreements which purport to reduce your tax exposure to US federal tax or to state tax systems should be entered into only after very careful consideration and independent legal advice. The IRS has issued warnings that it considers offshore leasing arrangements as tax avoidance under many circumstances.

Further, the simple use of a state as a tax base does not get around many other state income tax issues if you do not principally conduct business in your State of Incorporation. Finally, the costs of compliance with such schemes are often more than the expected savings. First of all, to incorporate in a state, your business must have a physical address, a working telephone number, and must have a registered agent for service of process. While there are services you can pay to act as a virtual office for you, these services can cost hundreds or thousands of dollars a year to maintain.

While many Fortune 500 companies do incorporate in Nevada or Delaware, the benefits they are able to take advantage of are because of the scale of their operations and do not transfer down to a small to medium sized business. Do not be scammed into a quick incorporation in a state where you do not have any legitimate legal interest.

3. PERSONAL ASSET PROTECTION MAY BE LOST.

If you are taking your business to the United States and plan on running it from the US personally, or having one of the shareholders or LLC members run the business from the US, you want to make sure that you or your fellow shareholder/member’s personal assets are protected. This also is a matter of concern if you are setting up your US business as a corporate subsidiary of your New Zealand business. You want to make sure that liability from the US business cannot be assigned to the parent corporation.

In order to maintain the corporate shield, you must ensure that your business is incorporated, or at the very least registered in every state in which your business is conducting business. Don’t be fooled: You Need Legal Advice when Choosing your State of Incorporation.

-Zachary D. Norris, JD, LL.M and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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Our Answers to your legal questions.

Have Questions? We are happy to provide you with Answers. We have compiled a list of our answers to Frequently Asked Questions (FAQs) for you below:*

1. Why should use Norris Echetebu Law’s American legal expertise instead of a New Zealand-based Law firm for our US-related legal matters?

Answer: The lawyers at Norris Echetebu Law are highly specialized in American law and practice only American law. New Zealand law firms are specialized in New Zealand law. Although a few New Zealand law firms may be able to provide you with American legal advice, these firms are usually the most expensive firms in the country. They use American-trained lawyers within their firms or farm out the work to other big name international law firms with presence in the US market. Norris Echetebu Law will provide you with exceptional legal representation right here in New Zealand and in the United States, and at more affordable rate.

2. What is the difference between the American and New Zealand legal systems?

A: Although both the American and the New Zealand legal systems have their roots in the Common Law, the US legal system and American laws in general are very different in form and substance. First of all the American system is very large and complex, as it is made up of a federal level, a state level and a municipal level. Each level has different laws and regulations. Further, every state’s laws are different from each other, and each state has its own court and legislative system which are independent (sometimes) from the federal courts and the federal legislative branch. Even though they are independent, the federal laws and regulations are interwoven with the state laws and regulation. Only a lawyer trained and experienced in the American legal system, like the lawyers at Norris Echetebu Law, can guide you through this complex system.

3. I would like to start/expand my New Zealand business into the American market, what do I need to know?

A: There are a number of important considerations that must be undertaken prior to initiating your American enterprise. Some of these include choosing the best legal entity through which you run your business (partnership, joint-venture, Limited Liability Corporation, etc) and making the decision as to the best location for your business (in terms of which State’s laws are most friendly to the business format you have chosen). Additionally, it is important to seek an American Lawyer’s advice on potential risks and exposure to liabilities on both the personal and business levels. Norris Echetebu Law lawyers are highly experienced in business law and can provide you with the necessary advice to grow your business into the lucrative American market.

4. What do I need to know do if I’m entering into business with an American firm?

A: First and foremost, do not agree to anything without a contract in place. We advise you to act on the assumption that the American is most likely represented by highly-skilled legal counsel and thus, that you should do the same. We highly recommend that you seek the counsel of an experienced American business lawyer before you sign your contracts. All too often, Norris Echetebu Law deals with New Zealand clients who come to us when they are in trouble that resulted from not having proper legal counsel during their business and contract negotiations. A lot of times, these clients end up being sued in the United States and face costly defence costs that may have been avoided had proper American legal counsel been sought. The lawyers at Norris Echetebu Law are highly experienced in the intricacies of negotiating, analyzing and drafting of business agreements and can help you avoid costly legal problems.

5. How do I incorporate my business in the United States and where?

A: We applaud you for your interest in expanding your business ideas into the lucrative US markets. That being said, there are many considerations and intricate steps that must be taken in order to properly incorporate your business in the US and we caution you to seek the advice of American legal counsel while doing so. As discussed in Question 2 above, the US legal system is a complex one and each state has its own laws and regulations. There are states that are friendlier to business than others when it comes to regulation, taxation and court decisions. Incorporating you in a US state that will best suit your business’s unique requirements in such a way as to provide you with the best protection from liabilities and to increase your profit margin by reducing taxation issues are some of the many things the lawyers at Norris Echetebu Law can do for you.

6. Do I need an American lawyer to review my contract with an American business?

A: We highly suggest it. See our response to Question 4 above.

7. I am being sued in the United States, what should I do?

A: We advise that you immediately seek the advice of an American lawyer. American litigation is very aggressive and we do not advise that you attempt to defend yourself without proper legal counsel. Norris Echetebu Laws lawyers are highly-experienced litigators on both the Plaintiff and Defence sides. If you find yourself facing litigation in the United States, please call us immediately so we can preserve your rights.

8. I was injured while in the US, do I have any rights?

A: US law allows injured parties to recover damages if their injury was caused by the negligence of another party. When you are injured in the US, you may be entitled recover monetary awards for medical expenses, pain and suffering, disfigurement and impairment, loss of wages, loss of profit, emotional distress, loss of consortium, and sometimes punitive damages. If you have been injured, we advise that you immediately the lawyers at Norris Echetebu Law so that we can assess your case and provide you with representation if needed. We also advise that you do not attempt to negotiate directly with the party who injured you or any insurance company as this may result in a waiver of your potential claims and a substantial reduction or bar to any recoverable amounts to which you may be entitled.

9. Someone in the US owes me money, how do I collect?

A: Unfortunately, this is an issue that we face quite often from our New Zealand clients. While collecting from a US party may seem like a daunting and time-consuming effort, we advise that you seek the advice of US counsel prior to making the decision of whether to pursue collection or not. We can provide asset-location services and can help you determine if the debt owed to you have a likelihood of being paid by the US party. Additionally, we can help you secure and register a judgment in the US courts against the party who owes you money which will preserve your rights to enforce and collect from the party who owes you the debt.

10. I would like to buy (or sell) property in the United States, what do I need to do?

A: Buying and selling property in the United States have different, detailed and complex procedures than in New Zealand. It is best to have US legal counsel draft and review any real estate agreements into which you are contemplating entering.

11. I would like to live/work in the United States, how do I get the necessary visa?

A: The US offers several categories of visas to people who want to visit or work there. To determine if you may qualify to apply for a US work or long-stay visa, please contact us to discuss an assessment.

* No Legal Advice or Attorney-Client Relationship. The information contained above is for informational purposes only. It does not constitute the rendering of legal or other professional advice or services. Your use of the Norris Echetebu Law website does not create an attorney-client or confidential relationship between you and the firm or any of its attorneys. Information on this website should not be relied upon or used as a substitute for consultation with legal, accounting, tax, and/or other professional advisors. Nothing in the site is to be considered as either creating an attorney-client relationship between the reader and Norris Echetebu Law, it’s lawyers or any of its affiliated businesses or as rendering of legal advice for any specific matter. Readers are responsible for obtaining such advice from their own legal counsel. No client or other reader should act or refrain from acting on the basis of any information contained in the Norris Echetebu Law website without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue.

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Perhaps no one wants to say it, or admit it, but there seems to be a crises in some state courts in the US. As part of our business in New Zealand, we regularly return to the United States to go to trial for my clients in both the US and NZ. However, it is becoming increasingly difficult to obtain a reliable setting for trials in many courts due to the increasing amount of cases (the ‘docket’) needing to go to trial.

This tells us two things: (1) the population changes in many states, such as Texas and other Southern states (see http://projects.nytimes.com/census/2010/map?ref=us) , resulting from business friendly state regulatory schemes, no state personal income taxes, and low costs of living at a high standard have had an impact on the capacity of the courts; and (2) the hit on many businesses by the Global Financial Crisis has created an unwillingness in many parties in litigation to settle their cases.

However, the impact on the actual litigants in these courts is often misunderstood. For example, in the district courts of Harris County, Texas, the court schedules the trial of each case by giving it a two week slot in which that case, along with generally 20-30 other cases, might be called to go to trial (the so-called “docket”). The litigants are only given this vague warning that their case may be called, with actual warning not coming until generally 1-2 days before the actual trial begins. Generally those which are closer to the top of the docket list can be expected to be called before those who are lower on the list. However, in the past two years, even cases which are set at the very first of the list can not rely on the starting date. In the past two cases I have tried in Harris County district courts, the court has reset the case over 4 times each! This makes it almost impossible to rely on the schedule of the court and exceedingly difficult to adequately prepare for a case.

The litigants are the ones who generally lose out here, especially the plaintiffs which bear the burden of proof. You see, each litigant has a trial plan which coordinates witnesses in a tightly controlled presentation of the facts to the jury. As you can imagine, for complex commercial cases or personal injury cases, this often means the delicate choreography of third party witnesses who often do not live near the court. When the courts play loosey goosey with the scheduling of the trials, this choreography is often thrown into utter chaos, with the availability of witnesses changing daily (remember, no one wants to put on a witnesses to testify for you who is angry at you for calling them on a day which is inconvenient). This often results in the disturbance of the litigant’s trial plan, forcing the trial attorney to call witnesses out of order, which in turn causes a haphazard presentation of the facts to the jury. This can dramatically increase the costs of litigation, as expert witnesses who charge the litigants by the hour are left sitting in the wings waiting to come on, instead of being able to stick to a sharp schedule and control these costs. In the end, this significantly lessens the likelihood of a just outcome for the litigants, as the jury is not given an orderly and logical presentation of the facts and the litigants are forced to pay more to try a case than is necessary.

When faced with this sort of issue, the government needs to react to increase the number of courts. A failing court system is a negative indicator on the health of a democracy. Adequate and relatively inexpensive access to the civil justice system is an absolute necessity.

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US Workplace Safety Standards

Imagine that a New Zealand business’s US subsidiary has been sued in the United States. One of its customer’s employees was injured by its operations on the job site. The CEO of the subsidiary has been placed on the witness stand and is being grilled by the plaintiff’s attorney as to why business had substandard safety protocols in place to prevent injuries to third-parties. When the CEO answers honestly that the subsidiary does not have any safety programs in place for its US operation, the jury begins to consider placing a punitive award against it for this failure. It’s a nightmare scenario, and one that is faced all the time by US businesses that have been sued when a personal injury occurs.

As is well understood by most Kiwis, the United States allows lawsuits for personal injury and does not have an ACC system. This means that one is exposed to this sort of litigation while doing business in the United States. While insurance policies may cover most personal injury claims made against one’s business in the US, it is best to avoid a finding of negligence against the business in a US court because the business has not taken any steps to mitigate the risk of personal injury from its operations. In order to do this, one must operate one’s business in the US under strict risk mitigation guidelines and standards which includes a US safety program. Further, as indicated above, the lack of a safety program is often used by plaintiff’s attorneys and juries as a basis for finding punitive damages.

It is important to remember that safety standards in the US and in New Zealand are different to a degree, as in the US the safety standards are thoroughly fleshed out, litigated, and legislated. The general work place safety guidelines are established by the federal Occupational Safety and Health Administration (“OSHA”). However, in US negligence law, these guidelines only serve as a minimum standard. There are countless cases where a business has been found negligent in causing a personal injury even when the OSHA standard has been strictly followed. This has led to the implementation of industry wide safety standards which exceed the minimum standards set by OSHA regulations.

Thus, it is important to remember that one must conduct one’s operations in the United States under US standards. A key defensive action a company can take in this regard is setting up an internal safety program which (1) ensures compliance with OSHA standards; (2) trains employees on the state of the art industry safety standards; (3) ensures that all of the company’s business equipment is up to date; and (4) ensures that there is a qualified employee in charge of inspecting all work sites for safety standard violations. These sorts of safety programs can be designed through professional third-party safety consultants and can be implemented through strict safety policies drafted by US counsel.

After reading this, one may be thinking that your operations in the US only involve work in an office and so this scenario cannot apply. Yet, there are any numbers of scenarios where non-industrial operations might lead to a personal injury which either deeply injures your reputation in the United States or exposes you to a punitive damages award which is not covered by your insurance policy. Further, there are OSHA standards which apply to general office work places as well as in the industrial setting. It is important to familiarize yourself with these standards by looking through the OSHA regulations at www.osha.gov.

In the end, it is a matter of genuinely analyzing the safety issues faced by your US workers and third-parties or customers on your business premises. By taking these steps and issuing written safety policies which address any safety issues that can be reasonably identified, a Kiwi business will have taken a major step in avoiding potential injuries and have insulated the business against a punitive damage award should there be an injury down the line.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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PROTECT YOUR NEW ZEALAND INTELLECTUAL PROPERTY

Understanding the protection afforded to your intellectual property by US law is of key importance when doing business in the United States. Many a hopeful entrepreneur has found his or her ideas stolen or their intellectual property copied because they did not take the necessary steps to protect themselves. These unfortunately regular and costly scenarios are doubly true for New Zealand businesses launching into the US market.

Generally, intellectual property rights are not rights that are self-activated by mere creation of the intellectual property. To secure one’s intellectual property rights, one must take steps to protect their intellectual property both domestically and internationally. International intellectual property protection must include US intellectual property protection if one is taking an idea or product into the US market. Intellectual Property in the US is protected under four categories: (1) Patents; (2) Copyrights; (3) Trademarks; and (4) Trade Secrets.

A US patent can be granted for an original invention, and grants the owner of the patent the right to exclusively exploit the patent for 20 years after the date the patent is granted. Unlike New Zealand, patents are available for software only under certain specific circumstances. The US Supreme Court has recently affirmed this in Alice Corporation v. CLS Bank, where it found that a patent for software is available when it does not include claims for “abstract ideas” and mere “business methods”. It is important to remember that patent rights are territorial. This means that your New Zealand patent does not provide you with patent protection in the United States. If you want patent protection in the US, you must obtain a US patent.

Copyright law in the United States covers original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed. In the US, a copyright exists from the moment a work is created, much like in New Zealand. However, unlike New Zealand, US copyright protection extends for 70 years after the death of the author or 120 years from the date of creation if it is the work of a business (i.e., a work created by an employee or a work for hire). The US and New Zealand are signatories to several treaties which provide for respect of each other’s copyright laws. While registration of your copyright is not required for protection under US law, registration of your copyrighted work is recommended, as this triggers additional infringement claim rights.

Under US law, a trademark may be granted for the use of any word, name, symbol, device, or combination thereof, used to distinguish your goods and services. In order to obtain trademark protection under US law, you must be the first to use the mark. In order to register your trademark in the US, you must accomplish interstate sales generally. However, if you already have an existing trademark in New Zealand, you can obtain an international registration of that mark under the Madrid Protocol.

Finally, US law protects trade secrets from misappropriation. Generally, what this means is that you can make a legal claim against any wrongfully disclosing party who was given your trade secrets under a duty of confidentiality or who used improper means to acquire your trade secrets. This is the category of legal protection which your business must carefully take advantage of by drafting confidentiality provisions into your contracts with US businesses and US agents.

To protect your New Zealand intellectual property in the US can be a complicated and lengthy process and this is often seen as a hindrance to entering the US market. However New Zealand businesses can take preemptive protective measures for their intellectual property by ensuring that they utilize the protections afforded by a well-crafted, detailed and enforceable Non-Disclosure/Confidentiality Agreements drafted by a US lawyer, among other contractual agreements.

The United States has a strong tradition of intellectual property protection. Nevertheless, as a New Zealand businesses you must take careful steps to make sure that you are not exposed to infringement and to zealously protect your New Zealand intellectual property by taking advantage of the US intellectual property laws.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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US Employment Issues – Part 2 – The Independent Contractor*

In our Auckland practice we have the privilege of working with many New Zealand clients that are expanding their businesses into the United States. Often times these clients enter into contractual relationships with American distributors or sales agents/marketing representatives rather than sending one of their own employees to the US to work. Such an arrangement is usually entered into to avoid problems such as immigration issues, direct employment costs and expenses, taxation concerns, as well as management and control concerns among many others. Prior to entering into business arrangements of any sort with US individuals or business entities, NZ businesses must exercise extreme caution and proper due diligence.

It is easy to believe that a simple agreement providing an outline of the parties’ obligations to each other is all one needs in these situations. However, in order to convey legally binding independent contractor status in the United States and in the individual State with jurisdiction over the contract, one must be careful regarding the specific wording of the contracts. Improper and/or imprecise contractual language can result in an individual being classified as an employee rather than an independent contractor, thereby exposing the NZ party to liabilities. Examples of the liabilities that could result from improperly and/or imprecisely worded Independent Contractor Agreements include being liable for the contractor’s (now classified as an employee) actions and/or omissions and for payment of US payroll taxes and employment benefits.

Where an NZ business is employing an individual to act on its behalf in the US, unless that individual is treated as an independent contractor (as documented in the contractual language used) the individual could be reclassified as an employee. Generally, under US law, an independent contract must include specific language that demonstrates the following:

1. That the NZ Company does not control. This is determined by looking at whether the NZ Company instructs:

a. When and where to do the work;

b. What tools or equipment to use;

c. What workers to hire or to assist with the work;

d. Where to purchase supplies and services;

e. What work must be performed by a specified individual; and

f. What order or sequence to follow in doing the work.

2. That the NZ Company does not specifically train to perform a service in a particular manner (the independent contractor ordinarily uses their own methods).

3. Who controls their own financial matters related to the contract. Thus, the NZ company should avoid:

a. Reimbursing the worker for all business expenses;

b. Prohibiting the worker from investing in their own facilities or working for other clients;

c. Paying the worker a salary. Payment should be structured on a flat-fee basis such as lump sums on agreed-upon dates, or that are contingent on the occurrence of events or mile markers agreed upon in the Independent Contractor Agreement, or on an hourly or commission basis;

d. Insulating the worker from making a profit or loss by providing the worker with a workplace, tools, materials, equipment, supplies and other business costs.

4. That does not receive employee benefits from the NZ Company.

5. That is responsible for the payment of all taxes related to any compensation or payment arising out of the Independent Contractor Agreement.

(These are general requirements only and vary depending on specific circumstances and the state in which the contract will be based).

The above-stated required characteristics of an independent contractor must be reflected in the language of the Independent Contractor Agreement. If exacting control is required by the NZ Company over the worker, then advice should be obtained on whether independent contractor status is actually available under the circumstances. Careful legal drafting techniques should be used which consider both US federal and state specific law for any Independent Contractor Agreement.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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US Employment Challenges – Part 1 – The At-Will Employee*

New Zealand businesses expanding into the US often face the following decisions of whether: (1) to directly hire employees in the US; (2) to hire a third-party contractor who acts as the Kiwi business’s agent, (3) to hire a third party employment agency to manage and pay any individuals performing work for them; and/or (4) to bring in Kiwi employees to run the business in the US. All of these options require consideration of the impact of US employment law.

Many New Zealand businesses in the US market are often overwhelmed by the complexity of US employment law. In addition to the federal system, each state has its own individual legal system with employment and labor laws which apply to employees of businesses located in that state. While this additional layer of complexity can be daunting, a Kiwi business will be pleasantly surprised to learn of the “pro-employer” tone of most US employment law.

Generally, the fundamental legal principle underlying all employment law in the United States is the At-Will Doctrine. Under the At-Will Doctrine, an employer is free to terminate an employee for any reason whatsoever, without notice or need for just cause. Generally, the only limitations on the At-Will Doctrine are restrictions on terminations for discriminatory purposes based on an employee’s race, gender, religion, national origin, age, pregnancy status, and disability status. Bearing in mind these limitations, in essence the At-Will Doctrine allows employers to act nimbly and quickly in making adjustments to their labor forces and incentivizes employee performance.

The At-Will Doctrine can often be augmented or replaced altogether by a written employment contract, and sometimes by promises made in an employee handbook (depending on the relevant case law of each state). New Zealand businesses which are already operating directly in the US, considering should take care in the shaping of their US employment policies in order to not unnecessarily eliminate the competitive advantage allowed for US employers by the At-Will Doctrine.

This is just one example of the substantive differences between US and New Zealand employment law. A legal assessment of your business plan in the US by a US lawyer will assist you in creating employment policies which make sure your business complies with US law and retains the advantages offered by the At-Will Doctrine.

In Part 2 of this series which will appear in next month’s issue, we will address some of the basic legal considerations regarding entering into an independent contractor agreement in the United States and US employment challenges.

-Zachary D. Norris, JD, LL.M and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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Most agreements contain clauses which select the law of the jurisdiction, the Jurisdiction Selection Clause, which controls the interpretation of the agreement. Many business people fail to realize that this selection will also, for the most part, determine the law which controls any dispute over the contract as well.

We have run into several cases where clients do not understand the significance of this factor. For instance, if you are buying goods from a Turkish company and the purchase order has language which states that Turkish law controls the agreement, then you have a significant limitation which is placed on you once you accept goods under an invoice. Specifically, Article 23 of the Turkish Commercial Code contains a provision which stipulates that “A person in receipt of an invoice is deemed to have accepted its contents unless there is an objection to the invoice or its contents within eight days from its receipt”. This kind of law catches the unsuspecting foreign purchaser of non-conforming goods by surprise by specifically limiting the purchaser’s right to sue for breach of contract by placing a short trigger period and notice requirement on the claim. One may not suspect that by the simple statement that the “purchase order is controlled by Turkish Law” that this brings into effect other provisions of the law which may be vastly different from your home jurisdiction’s laws.

This same sort of issue comes up daily with foreign businesses entering into transactions with US businesses. US businesses will often insist that transactions have agreements controlled by the law of a specific US state in which that business is located. While most US states have very similar contract law to other nations following the English Common Law tradition, there are some very substantive differences which are singular to American law, and other important differences on how a conflict will be treated depending on what state’s law applies to the contract or any dispute.

Before you sign the agreement for your foreign business (be it Kiwi or other country), contact the US attorneys at Norris Echetebu Law and the Norris Law Firm for a consultation on how this important and often overlooked clause could affect your rights.

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The Monsanto Protection Act Bill – Is All the Hype True?

Recently there has been a lot of misinformation floating around the Internet regarding what is dubiously referred to as “The Monsanto Protection Act”, giving rise to such claims as “the US Government has granted Monsanto absolute immunity from prosecution in US courts.” This claim is not exactly true. As with many things political, the truth is somewhere buried underneath the mud. The so-called “Monsanto Protection Act” was actually a last minute inclusion in a bill called the “Consolidated and Further Continuing Appropriations Act, 2013”, which provided funding for vital US federal agencies and programs. As with many political moves, the congressional supporters of bioengineering/food corporations had enough votes to attach this as a rider, (a legislative procedural move that allows an attachment to a bill which has little to do with the main subject matter of the bill), when they couldn’t muster enough support to pass it outright. Riders are often used to either push politically controversial or unpopular legislation through by attaching it to critical funding legislation which must be passed. In other words, where there is a majority which can force a riders’ attachment to a larger and vital bill, it can effectively override the President’s ability to keep the unpopular legislation out by constraining his veto. For President Obama to have vetoed the bill to keep out the rider, the collateral damage by allowing federal welfare, health, national security, and numerous other agencies and programs to be defunded, which would potentially cause much more harm than the perceived harm of allowing the rider to pass.

Thus, this politically unpopular law was passed through Congress and was forced on President Obama (who has previously expressed his opposition to unsafe bio-engineered seed stock) as it would have been equally unpalatable to not pass the spending bill to which the “Monsanto Protection” act was connected as a rider. A short examination of the rider reveals that it allows farmers who had previously purchased seed which was declared legal by the USDA to continue to use the seed even though a federal court has ordered the USDA to take it off the market pending further investigation. It does this by making it mandatory for the USDA to issue a temporary permit for those farmers who already have the seeds to continue using the seeds during the pendency of the investigation ordered by the federal court. If we think about it from the perspective of the innocent farmer who purchased this seed after the USDA approved, it makes sense, as this would cause immediate financial harm to an innocent third party, the farmer, and could also cause a spike in food prices (as there could be large amounts of crops that could not be harvested). Further, we must remember what is actually going on in these lawsuits. The federal courts have Constitutional oversight over the USDA in that they can examine the actions of the USDA to make sure that it is following the law. The federal courts cannot, and do not, substitute their judgment for that of the USDA on the issues of whether the bio-engineered seed is actually safe or not. This would violate the Constitutional principle of deference given to an administrative agency on issues under the purview of the agency. There has long been an understanding in the federal courts that the federal court is in no position to substitute its judgment for the judgment of the agency on specialty issues handled by that agency. This in and of itself would violate the “separation of powers” protections of the Constitution because the administrative agencies were granted their authority to act by Congress. Thus, the courts cannot usurp this power.

The courts may only tell the agency that it has violated the law, or that it is not doing its duty under the law. In the cases relevant to the issues here, the courts are telling the USDA, “you have not made the proper investigation.” However, the federal courts cannot and do not make the pronouncement that the bio-engineered seeds are dangerous and may not be planted. The only way this finding would come up would be through a personal injury products liability lawsuit. So, is all the hype true? No. There is no order here giving Monsanto immunity.

If the seeds are dangerous and cause actual harm, Monsanto may be sued under ordinary theories of negligence. It is undoubtedly true that this rider was the product of the Monsanto lobby and it is not a good idea from a policy point of view. It would be wise to allow the USDA to have discretion halt the use of seeds that could be potentially dangerous or to allow the federal court to issue an injunction if there is a credible indication of imminent harm based on evidence before the court. If anything, this abusive action by right-wing pro-corporate farming congressmen is a shining example of why the line-item veto needs to be re-introduced. This law is a bad law, but it is not as bad as the hype.

– Zachary D. Norris, JD, LL.M. and Ada Echetebu, JD, LL.M.

*This article is for general informational purposes only and does not constitute legal advice, nor should it be construed as constituting any legal advice from Norris Echetebu Law, The Norris Law Firm or any of its affiliated lawyers. For specific analysis of your US legal issues, please contact the attorneys at Norris Echetebu Law at +64 (0)9-889-2602 or visit us on the web at https://nz-uslegal.co.nz/

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The United States Supreme Court recently issued an opinion regarding the US Alien Tort Claims Act.

Kiobel v. Royal Dutch Petroleum (No. 10-1491, April 17, 2013). In this case, Nigerian nationals residing in the United States attempted to sue Shell Oil Company for violations of the “Laws of Nations” in Nigeria. Specifically, these Nigerian nationals lived in the Ogoni land region, a site where there has been devastating environmental damage from the oil production carried out by Shell and it’s subsidiaries. See article at www.unep.org In addition to the horrendous environmental degradation in Ogoni land, the native population were faced with an actual deprivation of farm and fishing lands with no compensation from the government or from Shell. This sparked a large and well-publicized political uprising in Ogoni land, which was in turn violently suppressed by the Nigerian government. Justice Roberts explains that “throughout the early 1990′s, the complaint alleges, Nigerian military and police forces attacked Ogoni villages, beating, raping, killing, and arresting residents and destroying or looting property. Petitioners further alleged that responses (Shell) aided and abetted these atrocities by, among other things, providing the Nigerian forces with food, transportation, and compensation, as well as by allowing the Nigerian military to use respondents’ property as a staging ground for attacks.” After these attacks, the Nigerians obtained political asylum in the United States. They then filed suit against Shell in US District court asserting jurisdiction under the Alien Tort Statute. The ATS provides, in full, that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U. S. C. §1350. According to petitioners, respondents violated the law of nations by aiding and abetting the Nigerian Government in committing (1) extrajudicial killings; (2) crimes against humanity; (3) torture and cruel treatment; (4) arbitrary arrest and detention; (5) violations of the rights to life, liberty, security, and association; (6) forced exile; and (7) property destruction. The District Court dismissed the first, fifth, sixth, and seventh claims, reasoning that the facts alleged to support those claims did not give rise to a violation of the law of nations. The Court ruled that the Alien Torts Claim act does not grant US jurisdiction over torts which take place in a foreign sovereign’s territory when the action complained of is not illegal in that territory. The Court held that in order for an action within a foreign country to be found illegal under US law, Congress must specifically state in the the law that the law has extraterritorial application. The ATS “allows federal courts to recognize certain causes of action based on sufficiently definite norms of international law.” However, that does not imply that the ATS grants US Courts jurisdiction over acts committed in a foreign sovereigns territories. That only occurs when the specific statute has direct authorization for such by Congress (for example 18 U. S. C. §1091(e) provides jurisdiction over the offense of genocide “regardless of where the offense is committed” if the alleged offender is, among other things, “present in the United States”). Thus, “where transactions complained of originated or took place in a foreign country, they are not within the cognizance of our courts; nor can the actors be legally prosecuted or punished for them by the United States.” The Court’s decision here places an end to speculative assertions of US law in foreign territories. For a full briefing of how this ruling might affect your business, please contact Norris Echetebu Law.

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One of the most striking differences between the US and the NZ legal system is the rule regarding the payment of attorney fees by the litigants.

In New Zealand, and in most other Common Law courts, attorney fees of the litigants are controlled by the English Rule. The English Rule provides, in general, that the party which loses the litigation will be responsible for the winning party’s attorney’s fees and costs. This dramatically changes the litigation landscape as it forces plaintiffs to consider the true strength of their case before filing the case in court. This rule also promotes settlement, as a confrontation in court will generally result in an order for fees and costs against the losing party.

In the United States, litigation proceeds under a vastly different approach called the American Rule. The American Rule provides that each party bears its own litigation costs and attorneys fees, unless specifically provided for by statute or contract. The policy behind this rule is to promote access to the courts. This, along with the contingency fee arrangement, partially explains the litigious nature of American society.

When entering into business in the US, New Zealand businesses should specifically consider the American Rule when negotiating any contract or when entering into any dispute. NZ businesses should seek specific American legal counsel to insure that the contractual provisions being negotiated provide coverage for attorneys fees to the winning party in case of a dispute, or indemnity clauses which would provide for attorney’s fees in case of a claim by a third party.

Many clients are shocked to learn that they have no coverage for attorney’s fees in a dispute because of poor contract drafting. The language in these contractual clauses is highly specialised in each state and must be carefully drafted, or the opportunity for fee switching may be lost.

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About US Employment Law: The Family Medical Leave Act is a federal US law which applies to businesses with 50 or more employees. It provides an employee with 12 weeks unpaid leave who has a serious medical condition or a close family member with a serious medical condition. The employer is entitled to maintain any employee benefits and is required to hold open the employee’s position while the employee is out on leave during this time period under most circumstances

New Zealand businesses wishing to start operations in the United States of America need to understand that the Family Medical Leave Act is one of a myriad of federal employment laws which will apply to their operations in the US. Additionally, each state has a separate regime of state employment laws which will also apply to your business, and usually regardless of how many employees you may have.

This is an example of the complicated nature of employment law within the US. There are literally thousands of different regulations and laws throughout the 50 states which interplay with the federal laws in different ways. Running abreast of any of these laws could be an expensive mistake and embroil your business in undesirable litigation and governmental investigation for weeks.

How do you avoid a messy employment law situation for your new business in the US? Norris Echetebu Law can provide your business with a full employment law assessment which will inform you of the applicable employment laws for your business and provide you with procedures on how to make sure you are in full compliance.

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