Jennifer Peters Featured in BizWest

Each month BizWest invites a business leader to reflect on the issues affecting his or her industry. This month, BizWest asked Jennifer Peters to discuss issues facing her firm and the professional role she plays in the community.

To read the article click on the following link:

Transfer on Death Provisions

By: Brandy Natalzia- Published in the BizWest Thought Leader column in June 2018

What happens to a member’s membership interest in a limited liability company (LLC) upon his death? Generally, a death should be treated as nothing more than a transfer of interests between the deceased member and the person who is that member’s rightful heir. But what about any restrictions on transfer spelled out in the Operating Agreement? There is case law that holds that the express language in contracts (here, the Operating Agreement) addressing the disposition of the membership interest trumps contrary language in a testamentary instrument, such as a will or trust.

And what if the LLC is a single-member LLC and that sole member dies? When the decedent operates a viable business in a single-member LLC, significant value can be lost to the estate if the LLC is dissolved upon the death of the member. If there is no provision within the single-member LLC’s Operating Agreement for the transfer of ownership to someone else, the LLC can become an asset of the decedent’s estate. As such, it may encounter tax and probate problems. The LLC may be divided among family members, dissolved, or even sold off to people the decedent did not choose.

Consider the use of and effect of a Transfer on Death (TOD) registration of the LLC interest under the Uniform TOD Security Registration Act. Arguably, this can be used to name a TOD beneficiary of the LLC interest within the Operating Agreement. Although the TOD designation may be a powerful estate planning tool for the members, it may be difficult procedurally for the remaining members when a member passes away. It is important for the members to discuss whether they want to allow TOD designations when the Operating Agreement is being drafted and then to work with an experienced business lawyer who can help ensure that any TOD designations for the membership interests are recognized.

Adverse Possession: Losing the Farm Without Even Knowing It

By: Lia Szasz – Published in the BizWest Thought Leaders column in May 2018

Did you know that, under Colorado statute, someone can obtain title to your land without paying for it? Under the doctrine of adverse possession, if someone uses your land continuously for 18 years, it may become theirs. This doctrine became famous when a retired judge in Boulder obtained title to part of his neighbor’s property through adverse possession, and a lengthy (and expensive) legal battle ensued.

However, there are actions a landowner can take to prevent this from happening to them. While adverse possession is a concern for all Colorado landowners, it is especially important for those in agriculture, who often have hundreds or even thousands of acres of land. For example, if a neighboring landowner’s fence line is placed somewhere other than the true property line on a ranch, a portion of the ranch could become the neighbor’s property if the fence line stands for 18 years. Those in agriculture should take care to periodically monitor their ground for use by any third party and to put a stop to it.

On the other hand, if you’re buying a farm or ranch, it is also important to have a survey completed to determine the true boundaries of the property. Often, agricultural land is kept in the same family for generations, and a fence line may not reflect the true property line. When someone from outside the family purchases some or a part of that property, a survey may keep you from buying something you did not expect—the defense of an adverse possession claim. A competent attorney can assist those in agriculture, as well as any landowner, in ensuring that they are protected from losing some or all of their real estate to adverse possession.

ARE YOU THE CONTROLLING TYPE?

By: John Kolanz

A version of this article was published in the March 2018 BizWest Thought Leaders column.

If so, and you own property on which tenants engage in certain regulated activities, you should consider consulting a specialist for a little preventive care – legal, not medical. Controlling the activities of these tenants can draw enforcement against the property owner when the tenants’ operations raise environmental compliance issues, as a recent federal case illustrates.

The case involved a sportfishing group that sued an industrial park owner for Clean Water Act (“CWA”) violations caused by discharges of polluted storm water. The fact that any pollutants in the storm water were put there by the tenants did not protect the landlord. The court held that “owners and/or operators who have sufficient control over a facility can be held liable under the CWA even if they do not themselves perform the industrial activities that create the pollutants in the storm water discharge.” Here, the landlord owned and controlled the storm water drainage system from which the pollutants were released.

Operations requiring storm water permits are not uncommon, and can include transportation, food processing, and recycling businesses, as well as construction activities. The requirement can also apply to other operations on a case-by-case basis.

Moreover, this potential enforcement trap for landlords goes beyond CWA concerns. Owners who exert control over their tenants’ waste management practices may also risk enforcement. In recent years, retail outlets like hardware stores, pharmacies, and even groceries have been targeted by hazardous waste enforcement actions. This is because many common products like drain cleaners, over-the-counter drugs, and hand sanitizers can be considered hazardous wastes under certain circumstances.

Thus, a tenant’s business may not necessarily raise a red flag. Landlords should consider how monitoring protocols or proper lease provisions could provide protection from the environmental afflictions of their tenants, and save the expense of a pound of cure.

Surprising Scope of Asbestos Regulation

By: John Kolanz

A version of this article was published in the January 2018 BizWest Thought Leaders column.

Most know that asbestos is bad stuff. However, building owners are often surprised to learn that federal and state asbestos requirements can capture routine activities such as minor renovation and even cleaning.

Asbestos was a popular building material for years. While mostly associated with older buildings, its use was never completely banned, so asbestos can be present even in newer construction. In fact, except under limited circumstances, one must assume asbestos is present, and take appropriate action, before conducting demolition or renovation work.

Owners of commercial properties, even small ones, that contain asbestos are required to protect employees, tenants, and contractors from exposure through training, notice, and work practices. Willful ignorance of asbestos requirements is not an effective compliance strategy. One call from a concerned neighbor, angry former employee, or unsuccessful contract bidder can trigger civil, or even criminal, enforcement.

Asbestos risks can be managed. Understanding how to do so will allow current and prospective building owners to protect their investments.

Work/Family Boundaries: Your Attorney Can Help

By: Christian J. Schulte- Published in the BizWest Thought Leaders column in January 2018

As a litigator in a business law firm, I have seen the best and worst of family businesses. When they work, they work great, for intuitive reasons: family know and trust each other, they share values, they want to maintain a generational tradition. But when they sour, they are horrible. Family business dissolutions are like divorces: parties supposedly fighting over fair asset division are really fighting over hurt feelings and deeper family conflicts.

This Forbes article: https://www.forbes.com/sites/nextavenue/2017/03/08/how-family-businesses-can-set-workfamily-boundaries/#13f6abc62a80 is worth reading. The authors do not, however, mention that legal advice is essential too.

During formation, your attorney will consider things you might not. For instance, you may not think that a sibling, spouse, or child might leave the business, because of new interests, divorce, or an untimely death. Does your business have a buyout provision that lets someone separate without crippling the business? Is your agreement fair to the heirs of a deceased partner? Your attorney can help you make conscious decisions about these issues, instead of leaving them to spring up during a crisis. Hopefully, this makes litigation less likely.

When are falling apart, however, you should consult a litigator early. A litigator such as myself would give you a sense how much litigation can cost and your likelihood of prevailing, but more importantly would help you think about your case dispassionately. Family members may try to “guilt-trip” you into an unfair settlement, or you might be taking an untenable stance motivated by non-business considerations. Regardless, your litigator’s goal should be to help you stop and think, Is this really what you want to do?

Ultimately, whether you want to pursue settlement or a full lawsuit, your litigator’s job is to help you carry out your decision. But that decision should be your informed decision, not an unfortunate gut reaction.

Some things just don’t age well…

By: Brandy Natalzia – Published in the BizWest Thought Leaders column in September 2017

Unlike a fine wine, leases can leave a bad taste in your mouth if simply left on a shelf. Whether you are a commercial or residential landlord, if you haven’t read your lease recently, you can bet there are outdated terms or potentially inaccurate or incomplete provisions.

Many things have changed that have had quite the effect on leases – including the legalization of marijuana, reasonable accommodations, and the rights of tenants who are victims of unlawful sexual behavior and stalking.

One of the more recent changes took effect on August 9, 2017. Previously, both commercial and residential landlords could provide tenants under a short-term lease just seven days’ notice of lease termination, among the shortest notification windows in the country. C.R.S. § 13-40-107 extends that advanced notification requirement to 21 days.

If you think your lease may need to be dusted off, it might be a good time to reach out to an attorney for assistance.

Buying a Business? Make Sure Your Written Agreement Protects You from Future Competition!

By: Tim Odil – Published in the BizWest Thought Leaders column in August 2017

When disputes arise over the purchase of a business, it is often because the agreement did not adequately define what is being acquired by the buyer, what obligations remain with the seller, what representations are part of the basic understanding of the transaction, and what business information is confidential or trade secret.  Often, such agreements also fail to address the risk of departing employees.

Business strategies, customers, status of work, current and projected needs for future work, information about key employees and whether they will remain engaged after the sale is valuable, competition-sensitive information instrumental to the success of the business, and items that that any buyer should consider, define, and protect in the purchase agreement to help avoid future disputes.  Ask every question you can think of as part of the due diligence process.  Understanding what you are buying is crucial to successfully transitioning the company after sale.

Clean Water Act Rule: Review of the Clean Water Act Jurisdictional Rule Considerations for Moving Forward by: John Kolanz

John recently had an extensive article published in The Water Report (see link below).  He also spoke at CSU on June 13th on the Waters of the United States rulemaking at the 2017 Universities Council on Water Resources/National Institutes for Water Resources Annual Conference.  Way to go John!

Clean Water Act Rule: Review of the Clean Water Act Jurisdictional Rule Considerations for Moving Forward by: John Kolanz

 

Kolanz, John A. “Clean Water Act Rule: Review of the Clean Water Act Jurisdictional Rule Considerations for Moving Forward .” The Water Report 160 (2017): 1-31. Www.NEBC.com. Web. 15 June 2017.

Utah Rodent in Middle of Ideological Tug-Of-War

By: John Kolanz

A version of this article was published in BizWest in May 2017.

Against the backdrop of the Trump Administration’s determined deregulatory efforts, the Tenth Circuit Court of Appeals (which covers Colorado) recently affirmed substantial federal authority to regulate activity on private lands.  While the Court delivered its opinion in the context of the Endangered Species Act (“ESA” or “Act”), the case has broader implications for environmental regulation in general.

Congress passed the modern day ESA in 1973, with barely a dissenting vote.  The Act’s main goal is to conserve threatened and endangered species along with their supporting ecosystems.  The ESA quickly gained a reputation as one of the most powerful environmental laws ever enacted when it stopped a massive and nearly-completed federal water project in its tracks to save a newly-discovered diminutive fish (snail darter) that is unsuitable for rod and reel.  (Congress eventually had to pass special legislation to allow completion of that project – the Tellico Dam.)

The Act can likewise affect private actions.  Once a species is “listed,” the Act’s keystone provision prohibits the “take” of that species without a permit or other authorization.  While “take” includes killing, the prohibition encompasses a much broader range of actions, such as harassing, harming, pursuing, or capturing.  It can even include significant habitat modification or degradation.

With respect to some species, this broad prohibition can complicate routine land management activities.  Such was the case with the Utah Prairie Dog (“UPD”), a listed species that lives only in Utah, and mostly on non-federal land.

People for the Ethical Treatment of Property Owners (“PETPO”) is a group of over 200 private landowners and other entities who say that regulation of the UPD has prevented them from building homes and starting small businesses.  PETPO challenged the authority of the United States government to regulate the take of UPDs on private land.

The United States Constitution delineates Congress’s powers.  Those not granted to Congress are reserved to the states or the people. The Constitution’s Commerce Clause authorizes Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”  Congress relied on this authority to pass the ESA and other environmental laws.

PETPO argued that the Commerce Clause does not authorize Congress to regulate the take on non-federal land of a purely intrastate species that does not itself substantially affect interstate commerce.  The Circuit Court, however, declined PETPO’s invitation to evaluate the prohibited activity in isolation, and instead considered its place in the ESA as a whole.

The Court determined that Congress had a rational basis to believe that regulating the take of the UPD is essential to the Act’s broader regulatory scheme.  The Court found this broader scheme to substantially affect interstate commerce, and therefore upheld the federal government’s authority to protect the UPD.

To hold otherwise, the Court said, would leave a “gaping hole” in the ESA, since almost 70% of species listed under the Act exist solely within one state.  The Court further explained that excising a specific activity governed within a larger statutory scheme would subject Congress’s Commerce Clause authority to “death by 1000 cuts.”  This would call into question the validity of the ESA itself, as well as other environmental laws.

The result in this case was not really surprising.  Every other Federal Circuit Court that has considered the issue has upheld the federal government’s authority to protect purely intrastate species under the Act.

That is not to say that the UPD should rest comfortably in its burrow.  The stringency of the Act itself has long generated calls for legislative relief.  Today’s political climate may make such efforts more likely.

Perhaps more importantly, since the mid-1990s the United States Supreme Court has showed renewed interest in reassessing Congress’s Commerce Clause power.  Landmark opinions in 1995 and 2000 began to curb a power that some legal scholars had begun to regard as virtually limitless.

The Trump Administration’s deregulatory effort envisions a stronger state role in environmental regulation.  This effort will undoubtedly encourage further legal challenges, and one – perhaps the UPD case – will eventually find its way to the Supreme Court.  When that happens, the makeup of the Court will play a significant role in the outcome.

The Supreme Court’s conservative justices show a decided preference for stricter limits on Congress’s Commerce Clause power.  Depending on the case and the makeup of the Supreme Court at that time, the resulting decision could profoundly and forever change the structure of environmental regulation in this country.

 

John Kolanz is a partner with Otis, Bedingfield and Peters, LLC in Loveland.  He focuses on environmental and natural resource matters and can be reached at 970-663-7300 or JKolanz@nocoattorneys.com.