This feature originally appeared in the August 25th edition of the Pittsburgh Business Times.

Q: What are some provisions I should include in my credit agreement in order to protect my rights against a defaulting credit customer?

Advice: A credit agreement provides the terms and conditions of a credit relationship and sets the ground rules for any future conflicts. I recommend that you include:

• Payment Terms – Here are the due dates, rates, discounts, late fees, percentages and payment options (the heart of a good, working credit relationship).
• Interest – When are late fees assessed? At what percentage rate? Unless creditors obtain a signature on an agreement, they may not be able to legally collect one.
• Waiver of Jury Trial – Credit criminals find wiggle room in asking for a costly jury trial. This provision waives the jury trial in the honeymoon phase of a relationship.
• Choice of Law Provision – Sellers usually understand the laws in their state (or know which states are favorable) and want them to apply in any dispute.
• Jurisdiction – Usually, a creditor wants disputes resolved close to their home, not the debtor’s.

Robert Bernstein
412-456-8101
rbernstein@bernsteinlaw.com

This feature originally appeared in the July 28th edition of the Pittsburgh Business Times.

Q: I have a business tenant that hasn’t paid rent. What should I do?

Advice: First, look at your lease to determine what remedies are set forth in the agreement. Many commercial leases include a confession of judgment clause for possession of the leased premises. This allows you to have the tenant immediately ejected from the premises for failing to pay rent. You may also have a confession of judgment clause that will allow you to collect money for past due rent.

If your lease does not contain these remedies, send your tenant a 30-day notice to vacate the premises. If they don’t vacate, be prepared to file suit in district justice court for possession of your premises and for unpaid rent. You may want to consult with counsel to assist you in enforcing the confession of judgment clauses and filing suit. Often, commercial leases contain a provision for recovery of attorney’s fees should legal action to enforce the lease become necessary.

Kirk B. Burkley
412.456.8101
kburkley@bernsteinlaw.com

This feature originally appeared in the June 23rd edition of the Pittsburgh Business Times. 

Q: What stops companies in financial distress from considering restructuring?

Advice: Like most things in life, the biggest obstacle is recognizing that there is a problem. Too often when a business is in financial distress, the owners believe that the solution is right around the corner. This often results in owners continuing to infuse their own capital into a failing enterprise without considering structural changes to the business.

If a business is going to restructure and survive, or liquidate and pay creditors, the owners must recognize the trends quickly and take decisive action. During financial distress, cash is king. Identifying problems, preserving cash and obtaining professional advice is the best recipe for a successful restructure or wind down, and will result in the best outcome for both the creditors and the owners of the business.

Kirk Burkley
412-456-8108
kburkley@bernsteinlaw.com

This feature originally appeared in the May 26th edition of the Pittsburgh Business Times. 

Q: My company received notice of a significant default judgment against it.  After investigating, I discovered that an employee received notice of the lawsuit in the mail but never opened it. Can we do anything?

Advice: After you are served with a lawsuit you have a certain amount of time to respond (usually 20-30 days depending on your jurisdiction). If you don’t submit a written answer to the lawsuit the court can enter a default judgment.

First, it is important to determine whether your company was properly served. Service by mail is only proper under certain circumstances. If you determine your company was not properly served with notice of the lawsuit, any default judgment is invalid and you should file a motion in Court to have the judgment removed.

If you discover that your company was properly served, you may still be able to open the judgment. Generally speaking, a default judgment may be opened if the moving party has (1) promptly filed a petition to open the default judgment, (2) provided a reasonable excuse or explanation for failing to file a responsive pleading, and (3) pleaded a meritorious defense to the allegations contained in the complaint. Setting aside a judgment can be time-sensitive and complex – the attorneys at Bernstein-Burkley would be happy to guide you through the process.

Kerri C. Sturm
412-456-8167
ksturm@bernsteinlaw.com

When people hear that an attorney specializes in bankruptcy, they often want to run in the opposite direction. Some people say that being a bankruptcy attorney sounds interesting, but they hope they will never need to employ one. “Bankruptcy,” however, encompasses so much more than just representing debtors who have filed for chapter 7, 11, or 13 protection. There are many other good reasons to keep a bankruptcy attorney on speed-dial.

First and foremost, bankruptcy attorneys can actually help an entity avoid the need to file for bankruptcy protection. Bankruptcy attorneys have extensive experience negotiating workouts, forbearance agreements, and debt forgiveness with lenders and creditors of all sizes. Involving a bankruptcy attorney early – before the entity has depleted its bank accounts – can preserve both the entity’s business and business relationships, and therefore negate the need for bankruptcy protection.

Venture capitalists and other acquisition companies can use the bankruptcy process to acquire a company or investment. Bankruptcy can help the existing entity renegotiate or unload debt and emerge as a new, profitable company under new management or ownership. Bankruptcy attorneys can also work jointly with business ventures to review pending bankruptcy cases to purchase prospective distressed assets.

Additionally, companies can use the bankruptcy process to restructure their real estate portfolio. Pursuant to section 365 of the Bankruptcy Code, debtors may assume or reject any executory contract or unexpired lease of real property. Debtors can use the bankruptcy process to terminate an above market lease or sell a below market rate to generate extra income. Non-debtors can be the beneficiary of a debtor assuming and assigning an undermarket lease.

These just are a sampling of the many reasons why companies and individuals should not shy away from consulting with a bankruptcy attorney on a regular basis. For more information or to schedule a conference with one of Bernstein-Burkley’s many experienced bankruptcy attorneys, please contact us by email or phone at 412-456-8100 or info@bernsteinlaw.com.

This feature originally appeared in the April 28th edition of the Pittsburgh Business Times. 

Q: My company has been awarded a subcontract on a major construction project.  What can I do to optimize the chances of getting paid on the job, and protecting any lien or bond rights I may have?

Advice: You should get as much information as possible about the construction project. This will allow you to know who should receive the required notices to protect your mechanic’s lien rights or payment bond rights (i.e., the project owner, the surety company, the general contractor). Providing these notices in a timely manner will let those who control payment on the project know that there is a vigilant subcontractor or supplier on the job who is aware of his rights and remedies.

The first thing you want to find out is whether this construction project has been registered on the Pennsylvania State Construction Notices Directory, located at www.scnd.pa.gov. It is a central database on which construction projects in Pennsylvania with a prime contract amount of $1.5 million or more can be registered. There you can search construction projects by various search parameters and find detailed property and surety information about the project.

It is best to consult an expert before attempting to navigate the proverbial “minefield” of requirements to protect your lien and bond rights. A qualified attorney will help you determine what notices you need to provide to whom, and when.

Nicholas D. Krawec
412-456-8103
nkrawec@bernsteinlaw.com

Written By: Lara Shipkovitz

Did you know that nine of the top ten public company bankruptcy filings in 2016 were energy companies? In the past year, Bernstein-Burkley has witnessed a sharp increase in our firm’s representation of energy firms and creditors in insolvency proceedings. We have represented energy companies, creditors, servicers, lessee’s, potential purchasers nationwide. The question is: what facilitated the acute weakening in financial solvency within the energy industry?

Low oil prices and the distress of solar, coal, and oil & gas producers are significant contributing factors to this decline. From January 2015 to December 2016, the number of bankruptcy filings in oilfield services increased from under 5 to 120. The majority of filings were distributed as follows:

• Texas: 59
• Louisiana: 10
• Delaware: 10
• Pennsylvania: 7

Pennsylvania alone had over $60,695,247 in aggregate debt and included the following filings:

• North Shore Energy Services
• Somerset Regional Water Resources, LLC
• Nuweld, Inc.
• Perry Petroleum Equipment Ltd, Inc.
• Patriot One, Inc.
• A-K Supply Company, Inc.
• Royal Flush, Inc.

The rise in oilfield services filings can also be attributed to the crash of crude prices in 2014, which led to more rigs sitting idle. The lack of rig use facilitated a decline in jobs for the service companies that help producers pump oil and gas. And although oil prices have risen to about $52 a barrel, a recent CNBC article written by Tom DiChristopher forewarns that it’s not over. He asserts that the 100+ oil & gas bankruptcy filings in North America since the start of a two-year oil price rout are only half of what’s to come. We could expect 100 more filings by the end of this trend.

Most reports also indicate that the crude market will continue to rebalance itself, while ongoing financial woes will pressure energy sector creditors to negotiate a solution within the bankruptcy process.

The increase in filings is not limited to North America. A recent Deloitte study concluded that a third of the world’s publicly traded oil companies are at a high risk of going bankrupt this year. A recent report on OilPrice.com confirms this prediction, alleging that most crude oil producers in the Middle East, Africa, and the emerging economies of Europe shouldn’t expect better solvency news in 2017.

If you are a lender, creditor or oilfield services company facing these statistics firsthand, or, if you are forecasting these troubles ahead and want to protect yourself, Bernstein-Burkley’s experienced attorneys can provide insight and counsel to prevent you from being another statistic.

Written By: Ray Wendolowski

Stop me if you’ve heard this one before. A buddy of yours gets hired to do some home improvement work for a customer. The customer wants to install marble tile in a bathroom and your buddy is just the man for the job. The tile installation goes well for a bit, but suddenly the customer has a complaint about the color of the tile and refuses to pay. Your buddy stops doing the work since payment has stopped, and the next thing he knows the Sheriff is serving him with a lawsuit seeking damages under the Home Improvement Consumer Protection Act (HICPA) by way of the Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL).

This scenario is a very real possibility for many home improvement contractors, and contractors are often placed in the unenviable position of paying to defend themselves when they have a hiccup occur on the job site. Although it likely isn’t possible to prevent all of these suits from occurring, home improvement contractors can take steps to ensure that they protect themselves from significant exposure in the event they ever find themselves in this position.

HICPA and the UTPCPL work together to allow customers to file a lawsuit against a home improvement contractor for their actual damages or $100, whichever is greater, and the court hearing the lawsuit has discretion to award treble (triple) damages plus attorneys’ fees to a prevailing consumer. As you can see, HICPA and the UTPCPL can be a significant threat to home improvement contractors because of the damages that consumers can seek under the statutes. Knowing the potential risks, home improvement contractors should do everything in their power to ensure they are complying fully with the statutes and not taking unnecessary and preventable risks that will expose them to massive liability.

One of the most important things for a contractor to do is to register as a home improvement contractor in the Commonwealth of Pennsylvania. Once a contractor is registered, they should make certain to place their home improvement contractor number on each of their contracts, advertisements, business cards, and any other communication that will reach potential or current customers. Failing to register is a big problem and can lead to significant exposure. Even if you do something seemingly innocuous, like forgetting to put your number on an ad or a contract form, you could end up being sued by a consumer for a violation of HICPA.

Once you register with the state, you will need to also make sure your contracts comply with the requirements of HICPA and that you do not take actions while on the job that would run afoul of HICPA. The potential violations of HICPA that may be lurking in your contracts are myriad, and I will not attempt to address each of the potential pitfalls that exist. The most common problems are failing to include a right of rescission and requesting a deposit greater than HICPA permits. The right of rescission lets a consumer know that they have a right to terminate the contract, without penalty, within three days of entering the same. If you fail to include the correct language notifying a customer of their right of rescission, you have automatically violated HICPA and exposed yourself to unnecessary liability. You should also be certain not to request a deposit greater than one third of the total contract price, or one third plus the cost of special order materials (meaning materials that are not stock, cannot be returned, and have no other viable use). If you do, you again immediately violate HICPA and will be facing liability you can easily avoid.

If you are a home improvement contractor of any size, you should speak to an attorney to ensure that you are doing everything you can to protect yourself from needless liability under HICPA. An attorney can review your contracts to help give you a better defense to claims for triple a consumer’s actual damages and their attorneys’ fees. If you have questions about whether you may have HICPA violations in your contract or to get guidance about what other actions are not permitted under HICPA, please drop me a line at rwendolowski@bernsteinlaw.com or call me directly at (412) 456-8119. Our firm can give you the advice you are seeking.

Click Here to View Bernstein-Burkley’s Spring 2017 Newsletter

Included in the Newsletter:

• Bernstein-Burkley Service Spotlight: Asset Acquisition
• A Window of Opportunity for Reclamation Claims
• The Five Minute Legal Master Series: Automatic Stay in Bankruptcy
• Bernstein-Burkley’s Litigation Group Welcomes New Partner, Kerri Coriston Sturm

Written By: Kit Pettit

The process for starting a real estate investment fund involves much more than an attorney drafting the formation and disclosure documents and preparing regulatory filings. Drafting the documents is only one component of a comprehensive fund formation process. Long before the attorneys begin preparation of the formation and offering documents, there should be significant time dedicated to structuring the offering, considering the legal and tax issues involved, and deciding on appropriate investment terms in light of the fund manager’s strategy and access to investors.

Starting a hedge fund requires the attorneys to engage in an orderly, methodic approach to structuring the fund. This process should be driven by client goals, market understanding, legal considerations and regulatory understanding. To properly document the fund terms and structure to the manager’s objectives requires the attorneys to make a considerable investment of time to thoroughly understand the objectives of the fund. Once legal counsel and fund managers are on the same page with regard to the strategy and objectives, the attorneys are better able to walk the managers through the pros and cons of the various structural and investment term options. By taking the necessary time up front to understand the fund’s structure and giving appropriate guidance on the various applicable legal and regulatory issues, our clients avoid unnecessary delays in the process and errors in the initial offering documents. Our focus is to have a meeting of the minds between our attorneys and our clients on all material terms of the fund prior to commencing the drafting process. Our approach to establishing real estate investment funds involves three primary phases: (i) Strategy and Goals; (ii) Terms and Structure; and (iii) Drafting.

The Strategy and Goals phase starts before our firm is engaged. During the initial consultation with one of our attorneys, prospective clients have the opportunity to discuss their fund strategy, goals and potential investor base. From this discussion, our attorneys are able to begin the process of advising the client on the environment in which the fund will operate and identify specific risks, legal concerns, required registrations and potential exemptions. Upon engagement, we seek a more in-depth understanding of the fund objectives and strategy through in-depth telephone calls and/or personal meetings with the client.

After the initial engagement, our attorneys stay in constant contact with the client as they work through setting the terms and structure of the fund. We provide analysis as to how the fund strategy and structure will be affected by various legal and regulatory considerations. We also provide the client with an understanding of available options and the market and legal consequences of the various investment fund terms, including subscription issues, management compensation issues (including fund management fees), investor rights issues, and others. As we progress through the Terms and Structure phase, our attorneys continue to work with our clients to narrow down decisions on fund terms and structural considerations. Throughout the engagement process we seek to clarify issues, answer questions and collaborate on progress through regular contact with and updates to the client.

The final stage of the fund formation process is drafting the governing documents and offering documents and preparing any required filings. With adequate understanding and preparation in the previous stages, our attorneys proceed to prepare the documents tailored to the client’s specific needs. This preparation-based approach avoids delays caused by extensive redrafting, refilings and/or amendments, and helps prevent errors. Those interested in learning more about real estate investments and other commercial real estate matters, including financial transactions, should consider consulting with one of our attorneys, who can help explain the legalities, risks and processes behind such undertakings.

The goal of our bankruptcy and restructuring team at Bernstein-Burkley is to provide guidance and peace of mind to trustees and plan administrators as they manage their bankruptcy estates. Our expertise ensures that we advise our clients of the best course of action to maximize the estate’s recovery, while preventing any recourse that the debtor or other creditors may claim against our clients for their administration of the estate.

Bankruptcy Trustees are appointed upon the filing of a chapter 7 bankruptcy and for cause in a chapter 11 bankruptcy (not to be confused with the United States Trustee, the “watch dog” division of the Department of Justice that oversees bankruptcy filings). The Bankruptcy Code vests trustees with the full authority to administer any bankruptcy estate for which they are appointed. Similar to trustees, the Bankruptcy Code also recognizes the rights and authority of Plan Administrators – i.e., individuals appointed following confirmation of a plan of reorganization or liquidation to oversee the confirmed plan. The primary purpose of both Trustees and Plan Administrators is to maximize the recovery of the estate, whether by way asset liquidation or pursuit of claims against creditors, insiders and any other party(ies) against whom the bankruptcy estate may have claims.

Our bankruptcy and restructuring department has decades of experience in representing chapter 7 trustees, chapter 11 trustees and plan administrators. Our firm has counseled trustees and plan administrators in all aspects of their duties. This may include obtaining approval of sales under Section 363 of the Bankruptcy Code, litigating objections to claims and pursuing recoveries by way of avoidance actions, such as preferences and fraudulent transfer claims, to maximize the recovery of the estate. Our attorneys ensure that our clients comply with the applicable provisions of the Bankruptcy Code, properly exercise their rights and obligations as trustees or plan administrators, and maximize the recovery of the bankruptcy estate. Some of our notable representations include:

1. In Re.: Rock Airport of Pittsburgh, LLC – Represented Chapter 11 Trustee and consummated the sale of the property for $9 million
2. In Re.: Prime Plastics, Inc. – Represented Chapter 11 Trustee and Chapter 7 Trustee and secured a settlement against officers and directors that enabled the sale of estate property for $1.8 million
3. In Re.: Berkline/BenchCraft Holdings, LLC, et al. – Represented Plan Administrator of the bankruptcy Estates of Berkline/BenchCraft Holdings, LLC, et al.
4. In Re.: Mon View Mining Company – Represented the Liquidating Trustee

If you have any questions regarding Bernstein-Burkley’s Bankruptcy & Restructuring services, please contact us at 412-456-8100.

You may know that if your customer files for bankruptcy, an automatic stay is enforced, preventing any form of collection activity. But did you know that a relief from automatic stay can allow collection efforts to resume? Though the automatic stay is indeed automatic, there are a number of reasons that a creditor may be able to obtain relief from stay. Bernstein-Burkley attorneys regularly work with clients to determine if they qualify, and to help them navigate this complicated process in Bankruptcy Court.

Whether a chapter 7 bankruptcy debtor chooses to redeem, reaffirm or surrender their secured assets, Bernstein-Burkley’s bankruptcy and restructuring team will work to determine if a relief from stay is possible. If they choose to surrender, we will seek the consent of debtor’s counsel and the trustee in order to file a consent motion for relief from stay. If it is redeem, we will follow-up on payment and file for relief from stay if debtor will not or cannot actually redeem the asset. If it is reaffirm, we will follow-up with debtor’s counsel to see if reaffirmation is actually viable and then move quickly to file relief from stay.

In chapter 11, 12 and 13 bankruptcies, debtors are required to propose a plan that includes payments for the amount overdue on secured assets, and must make these payments regularly. If these payments are not made, we will work to obtain relief from stay for our clients. Other irregularities such as not having insurance on the asset are cause for us to obtain relief from stay for our clients.

Finally, the automatic stay is not limited to collection activities for secured assets. It also includes a stay on activities such as lawsuits or actions to collect on insurance. If our clients need to continue a lawsuit for a specific purpose that is not contrary to the bankruptcy code or collect on insurance proceeds, we will aggressively pursue a relief from stay.

If you have any questions regarding Bernstein-Burkley’s Bankruptcy & Restructuring services, please contact us at 412-456-8100.