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Business Law Blog

Recent Presidential Executive Order on Immigration will not have Immediate Impacts

By:  Santiago J. Padilla, Esq.

On April 18, 2017, President Trump signed a new Executive Order, "Buy American and Hire American" which appears to target several immigration programs used by U.S. businesses.  For example, in the "Hire American" portion of the order, President Trump is directing the Department of Labor, the Department of Justice, the Department of Homeland Security, and the Department of State to review the current laws with respect to the H-1B professional employee program and suggest changes so that the most skilled and highest paid positions will be given priority.  President Trump also directed the federal agencies to review all employment based visa programs to crack down on fraud and abuse in order to protect U.S. workers.
Nevertheless, the American Immigration Lawyers Association ("AILA"), of which I am a member, stated that the changes suggested by President Trump will not have immediate impacts because the changes suggested would require legislative action or rulemaking and it would take time to go through the necessary processes.

The Importance of Legal Counsel in All Corporate Activities

By: Santiago J. Padilla, Esq.

Most business persons understand the valuable role of a legal professional in important transactions that are entered into by a company. Indeed, most companies will engage an attorney if a lawsuit is filed against the company, if the company is purchasing real estate, or if the company is acquiring another business. However, in this blog I suggest that companies should engage and involve legal counsel in all of the day-to-day activities of a business in order to make sure that its practices and procedures not only comply with the law, but also give the company a competitive advantage in the marketplace. Indeed, in my experience, most very successful companies have either an inside general counsel or maintain a fairly close relationship with outside counsel who plays the role of a corporate general counsel.  If done properly, this suggestion will be cost-effective and productive for the company for the following reasons, among others.

First, by working with an attorney on the day-to-day activities, a company can develop an invaluable strategic partnership, where the attorney's knowledge of the company deepens with each new activity. This "institutional memory" will serve the company in future transactions as well as in litigation involving the company. This type of knowledge enables the attorney to respond more effectively to day-to-day issues and proactively identify and resolve problems.

Second, while outside general counsel will not be an expert on all legal aspects, he or she can be the liaison with the experts that may be needed in a particular area. In fact, the attorney is in the best position to identify when a legal expert is needed and in what capacity. This is very much like a general physician who after reviewing the patient's vital signs and symptoms, refers the patient to a specialist, such as a neurosurgeon or cardiologist.

Many companies simply hire a law firm or attorney when the need arises and on an ad hoc basis. However, this type of practice could lead to operational inefficiencies because no one person will have a full grasp of the legal matters of the company. This practice also creates gaps in the depth of "institutional knowledge" of the outside counsel.

One real-life example could highlight the need of engaging corporate counsel in the day-to-day activities of a business. In this real-life example, a U.S. technology company commenced to build a niche for itself among certain high technology customers in Latin America. The company purchases computer parts and accessories from China and distributes them to companies throughout Latin America. In this example, the company began selling small orders of $10,000 to $20,000 to a particular customer in Colombia. These orders were generally placed with emails exchanged between the parties. After approximately 2 years, the Colombian company increased its orders and finally requested to purchase $900,000 of computer parts and accessories on credit. The U.S. company was excited about the prospect and filled the orders and shipped the parts and accessories. However, for some reason, the Colombian company failed to pay for the computer parts and accessories. Unfortunately, the U.S. company did not have a system or procedure in place for dealing with this eventuality. Specifically, the only recourse that the U.S. company had was to go to Colombia and file a lawsuit in Colombia to collect on its invoices.  However, this was an unnerving prospect because they quickly found that the deck was stacked against them in Colombia.  Of particular importance was that the U.S. could not sue the Colombian company in U.S. courts because the Colombian company argued that it did not have sufficient contacts with the U.S., which was actually true based on the facts of the case.

This could have been resolved by implementing procedures and practies that could have put the U.S. company in a better position.  Specifically, apart from the question of whether or not the company should have extended credit to the Colombian company, the use of order confirmation forms that contained language providing for exclusive jurisdiction, providing for arbitration or for some other method of dispute resolution in the U.S., could have resolved many issues that were faced by the U.S. company. This is precisely why I suggest that an attorney or general counsel of the company should be involved in organizing of opining on the effectiveness of the forms and procedures that a company uses in its daily transactions.

Do I Really Need a Lawyer to Purchase Real Property in Florida?

By: Santiago J. Padilla, Esq.

Many prospective clients ask me if a real estate lawyer is necessary to purchase a house or condominium unit. Invariably my answer is always an emphatic "YES." A simple example will demonstrate why I always say yes.

Let's assume that the buyer is seeking to acquire a house for a purchase price of $550,000 and will be taking out a loan for 80% of the purchase price, which means that the buyer will be paying at least 20% of the purchase price or $110,000 in cash in order to close the transaction. The real estate contract will naturally have a clause that the closing is subject to the buyer obtaining financing for the loan. However, one problem is that the current standard real estate contract that is used by real estate agents and brokers fails to adequately address the financing issue for several reasons.

One reason is that the current standard "as-is" real estate contract that realtors use, and which is approved by both the Florida Bar and the Florida Association of Realtors, contains a defective contingent financing clause. This "contingent financing" clause states that the closing is conditioned upon the buyer obtaining a Loan Commitment within a certain period of time. Therefore, if the buyer does not obtain a Loan Commitment within the period of time specified in the contract, then the buyer is relieved of his or her obligation to purchase the property and then receives a complete reimbursement of any good faith deposit that the buyer paid into escrow.  However, the contract fails to adequately address the issue of what happens if the buyer obtains the Loan Commitment, but for some reason cannot close on the purchase.

Continuing with the example, let's say that the parties sign the contract and provide for a closing to occur within 45 days and that the Loan Commitment must be obtained within 30 days. Let's further assume that the buyer makes a good faith deposit of $20,000 and obtains a Loan Commitment within the 30-day period indicated by the contract. Under the terms of the standard "as-is" contract, upon obtaining the Loan Commitment, the financing condition is met and the buyer is deemed to have waived the financing contingency, which means that if for some reason the buyer does not close on the purchase, then the buyer will lose the good faith deposit.

Yet, let's assume that prior to the closing, the bank informs the buyer that the bank's underwriting department requires that the buyer have at least 6 months of reserves in order to finalize the loan, which means that the buyer must have the equivalent of 6 months of monthly payments in the bank. If the buyer does not have any more money and cannot come up with the reserves required by the bank, then the buyer may not be able to obtain the loan to purchase the property and would lose his or her good faith deposit because the buyer has already waived the financing contingency according to the "as-is" contract.

The specific problem here is that the standard "as-is" contract provides that the financing contingency is waived upon receiving a loan commitment or soon thereafter. Therefore, what the contract needs to provide is that the purchase of the property is subject to the buyer actually obtaining the loan from the bank, including meeting underwriting approval and all other requirements of the bank. In the example above, if the buyer would have had an attorney negotiate the purchase contract and include a clause stating specifically that "this contract, and the buyer's obligation to close the transaction, shall be contingent upon the buyer actually obtaining a loan from the lender," then the problem would have been resolved. This is just one reason why I emphatically respond that a buyer should always have an attorney in order to purchase real property.

Employees who feel that they are being Subjected to a Hostile Work Environment Must Take Advantage of the EEO Procedures Implemented by Employer

By: Santiago J. Padilla, Esq.