News Highlights

PPP Second Draw Targets Smaller Businesses for Additional COVID-19 Assistance

               On February 22, 2021, a little more than a month after the U.S. Small Business Administration (“SBA”) began accepting applications for the second round of Payroll Protection Program (“PPP”) loans, the U.S. Department of Treasury is expected to announce that beginning February 24, 2021, new loan applications will only be accepted for employers with 20 or fewer employees. 

                Congress approved funding for a second round of PPP loans at the end of December, committing new funding for a loan program intended to help protect American small businesses and keep employers from having to resort to layoffs or reduced work schedules for their employees in order to manage decreasing revenues during the COVID-19 emergency.

                The PPP program has undergone some significant changes since the program was first initiated in 2020, with businesses being allowed to expend PPP loan funds over 24 weeks, instead of only eight weeks as in the original guidance. The SBA has also extended the term of PPP loans from two to five years, expanded the permissible uses for PPP funds and eased forgiveness requirements by reducing the percentage of loan funds that have to be committed to payroll expenditures from 75 percent to 60 percent in order to qualify for full loan forgiveness.  PPP funds may be utilized not only for employee payroll and benefits, but also for rent/mortgage expenses and utilities and other expenditures made necessary by the continuing pandemic.  So long as the majority of the funding (60 percent or more) is committed to direct employee wages and benefits, employers can qualify to have the loans (which carry one percent interest) fully forgiven. 

                Now with the most recent tweaks to the PPP program the federal government appears – for at least the next two weeks – to be trying to encourage smaller businesses and sole proprietorships to take advantage of PPP financing. Even small businesses that participated in the first round of funding in 2020 can participate in the “PPP Second Draw” if they can demonstrate decreased revenues of at least 25 percent from any one quarter in 2019 as compared to the same quarter in 2020.  For example, if a business earned $100,000 in the third quarter of 2019, it would qualify for a second draw PPP loan if its revenues from the third quarter of 2020 fell to $75,000 or below. 

                Currently, the second round of PPP funding is set to close on March 31, 2021. 

                Gordon & Simmons has assisted clients in navigating the PPP program, and if you are a small business owner or sole proprietor interested in pursuing either a first or second draw PPP loan and have questions or need some assistance in learning more about the program, please contact our office.  

Landmark Decision in Favor of G&S Client

On February 13, 2018, in a decision that could have a large impact on bankruptcy litigation nationwide, the United States Bankruptcy Court for the District of Delaware granted the Motion to Dismiss filed by Gordon & Simmons on behalf of its client, David Schwartz (“Schwartz”), against Debtors Rent-A-Wreck of America, Inc. and Bundy American, LLC (collectively, “RAWA” or “Debtors”), two companies that are among several private companies owned by J.J.F Management Services, Inc. (“JJFMS”).  John J. Fitzgerald, Jr. is the owner, president, CEO and chairman of the board of directors of JJFMS, as well as the chairman of the board of RAWA.

In her opinion granting the dismissal of RAWA’s Chapter 11 petitions, U.S. Bankruptcy Judge Laurie Selber Silverstein concluded that RAWA’s bankruptcy petitions fell on “the dark side of the spectrum ranging from the clearly acceptable to the patently abusive,” determining that RAWA failed to demonstrate true financial distress worthy of bankruptcy protection, and that RAWA’s underlying purpose for the bankruptcy was to terminate Schwartz’s Los Angeles Rent-A-Wreck franchise.

Schwartz, the founder of the Rent-A-Wreck and Bundy names, has been in litigation with RAWA in the United States District Court for the District of Maryland and the United States Court of Appeals for the Fourth Circuit for more than ten years, beginning in June 2007. As Gordon & Simmons’ attorneys led Schwartz to victories in two jury trials and subsequent appeals, Schwartz has had to endure multiple attempts by RAWA to terminate his business. In court, Schwartz was found to own an exclusive, royalty-free Rent-A-Wreck franchise in Los Angeles California. Schwartz has endured attempts by RAWA to divert his customers to other Rent-A-Wreck franchises hundreds of miles away, and these efforts resulted in a civil contempt citation against RAWA in June 2017.

Less than one month later, in July 2017, RAWA filed for Chapter 11 bankruptcy protection in Delaware, openly seeking to reject Schwartz’s franchise under 11 U.S.C. § 365, aiming to achieve through bankruptcy what RAWA was unable to do during the course of more than a decade of litigation in the U.S. District Court for the District of Maryland and the U.S. Court of Appeals for the Fourth Circuit. Gordon & Simmons’ members sought to dismiss RAWA’s bankruptcy petitions as made in bad faith, and further opposed any attempt by RAWA to reject Schwartz’s exclusive Los Angeles franchise that he had defended through more than ten years of litigation.

After a two-day trial and multiple rounds of briefing, Judge Selber Silverstein entered her opinion, concluding that the “primary purpose of [RAWA’s] bankruptcy filing is to reject Mr. Schwartz’s franchise agreement so Debtors can open the Los Angeles territory to multiple royalty-paying franchisees,” and stating that “[i]t is easy to conclude that if Debtors did not think they could reject Mr. Schwartz’s franchise agreement (and gain the benefit of his territory), they would not have filed these bankruptcy cases.”

Judge Selber Silverstein concluded her opinion by stating, “. . . here, I have no doubt these petitions were just another chapter in the attempt to terminate Mr. Schwartz’s franchise and obtain the benefit for JJFMS.  These bankruptcy petitions fall on the dark side of the spectrum ranging from the clearly acceptable to the patently abusive.”

An additional summary of Judge Selber Silverstein’s Opinion granting Schwartz’s Motion to Dismiss can be found at: https://www.law360.com/articles/1012296/rent-a-wreck-ch-11-case-tossed-as-bad-faith-filing

United States District Court Affirms Clerk’s Order Taxing Costs in Favor of G&S Client

On July 14, 2016, United States District Court Judge Peter J. Messitte entered an Opinion affirming the Clerk’s Order to tax $13,405.11 in costs to Defendants Rent-A-Wreck of America, Inc. and Bundy American, LLC (“Rent-A-Wreck). The Opinion requires Rent-A-Wreck to reimburse Gordon & Simmons’ client, David Schwartz (“Schwartz”), for expenses, totaling over $13,000, that he incurred throughout the nearly decade-long litigation.

The firm of Gordon & Simmons and Roger Simmons briefed the issues with the Clerk, and later Judge Messitte, and sought to recover costs for Schwartz relating to filing fees, private process server fees, transcript fees, document copies, and deposition expenses for multiple witnesses. Federal rules allow the “prevailing party” to be awarded his/her costs in litigation, and, in his Opinion, Judge Messitte stated that “Schwartz is thus unquestionably the ‘prevailing party’ in this litigation” and affirmed the Clerk’s order taxing costs against Rent-A-Wreck.

G&S Client Awarded $229,500 Verdict Following Termination From Limited Liability Company

Gordon & Simmons secured a jury verdict of $229,500 for its client, Hillary F., in a dispute over her ouster from a Maryland limited liability company (“LLC”).

In May 2014, Hilary F., invested in and became a member of an LLC that marketed advertising on golf carts as its business model.  At that time, Hilary F. and her two partners signed an Operating Agreement, agreeing that her membership interest was worth $229,500, and further, that Hilary F. had earned her membership interest through months of sweat equity in the growing business.

Despite this agreement, in October 2014, after Hillary F. had invested substantial additional sweat equity and cash in the company, Hilary F’s partners ousted her from the company, attempting  to take back her membership interest without any compensation, intending to sell her interest in the business to new investors in order to obtain more capital.

In December 2014, Hilary F. sued her erstwhile partners for breaching the Operating Agreement. After filing suit, and hiring two sets of counsel, Hilary F. retained G&S to bring the case to trial.

Gordon & Simmons tried this case over four (4) days before a Montgomery County, Maryland jury. After impassioned closing arguments, the jury unanimously found that Hilary F. had made substantial and valuable contributions to the company, that her partners had breached the Operating Agreement by ousting her from the Company without compensation, and that Hilary F.’s partners owed her $229,500, the value of her membership shares. The jury’s verdict also may allow Hilary F. to recover her attorneys’ fees and costs incurred during the case.

Hilary F. was delighted with the result, and with Gordon & Simmons’ thoughtful, measured guidance both before and during trial. Hilary F. wrote:

Although I have a great deal of experience dealing with law firms and lawyers, I have never been inclined to offer a testimonial in praise of the legal professionals I have worked with, but it is my absolute pleasure to do so for Roger Simmons, and the firm of Gordon & Simmons, LLC.

Roger, unlike a prior counsel involved with my case, saw exactly what to do right from the get-go and developed a brilliant strategy. Had I retained he and his firm at the beginning of my case I could have saved myself an immense amount of money in legal fees. He knew what to do from the very first, not after months and months of legal machinations.

My case was multi-faceted, intricate and arduous.  At every single step of our year-long engagement Roger, Jacob and their staff were not only diligent, prepared and determined, but they produced results, winning a six-figure jury verdict for me.

It is one thing to be a brilliant attorney, it is another to have tremendous “bed-side manner” and be able to communicate with, and relate to, a client effectively. I found this case difficult as I am not a fighter, but just determined to see justice done. At different times during the course of the case, my emotions often were getting the better of me — especially outrage and despair. The firm was by my side, always with excellent counsel, with exceptionally good legal judgment and, importantly to me, with comforting, yet strong, words of logic.

I couldn’t recommend Roger Simmons and the firm of Gordon & Simmons more highly. I would be glad to speak to anyone who is considering retaining Gordon & Simmons about my case and specifically regarding how well it was managed and  how exceptionally professional, tenacious and honest this firm is.

Gordon & Simmons is pleased that the jury followed Maryland law and found that a limited liability company membership interest is personal property that cannot be taken without just compensation. The firm is pleased that the jury recognized Hilary F.’s efforts for, and investment in, the company, even when her partners did not, and compensated her accordingly.

Gordon & Simmons prevails on Motion to Discharge Lis Pendens in D.C. Superior Court

Gordon & Simmons (“G&S”) was successful in removing a lis pendens on motion to the D.C. Superior Court on behalf of one of its business clients. The D.C. Superior Court granted G&S’s motion, prepared and filed by Roger Simmons & Chris deBettencourt, to cancel a lis pendens in litigation that was brought against property owned by G&S’s client, a Washington D.C. property developer. The lis pendens threatened to block the pending sales of the developer’s renovated condominium property. G&S argued, inter alia, that there was no basis for the lis pendens against its client’s property first, because the lis pendens failed to state a dollar amount for damages and second, because the underlying litigation did not involve the ownership of the property. G&S’s successful motion will allow the developer to proceed with the sales of condominium units it had contracted to sell.

G&S Prevails on Motion to Dismiss Filed by Second Largest Pizza Hut Franchisee in the United States

The United States District Court for Maryland has held that federal litigation on behalf of G&S’s client, Ellen D. Kennedy, against her former employer, the second largest Pizza Hut franchisee in the United States, may proceed in court and not before an arbitrator. Mrs. Kennedy alleges that the franchisee, and her former supervisor, wrongly terminated her more than 20 year employment after she took short-term leave to tend to her ailing, elderly parents who resided in a different state. Mrs. Kennedy sued the franchisee and her former manager for interference with her rights under the Family and Medical Leave Act (“FMLA”), 29 U.S.C. § 2601 et seq.; retaliation for assertion of her rights under the FMLA; defamation per se; violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 207(a)(1), and its Maryland counterpart; and wrongful discharge.

Defendants moved to dismiss Mrs. Kennedy’s claims or to compel arbitration, arguing that she had agreed to arbitrate her claims in November 2007 when she completed an “employment application” asking for her biographical information (after she had worked at the same location for the past 15 years) in preparation for a change of store ownership. Defendants threatened Mrs. Kennedy with sanctions because she had, in their mind, filed her law suit in bad faith. Mrs. Kennedy refused to back down, and the Court resoundingly found in her favor.

The Court ordered Defendants to answer Mrs. Kennedy’s allegations in accordance with the Federal Rules.

 

G&S Prevails on Motion to Dismiss Filed by Former Outback Steakhouse Executives in New York

A federal district court in New York has held that commercial litigation filed by Gordon & Simmons on behalf of its client, David Lerner, can proceed against two well-established entrepreneurs in the restaurant industry, Chris T. Sullivan and Hugh M. Connerty, Jr., among other defendants.

In an order entered on September 30, 2015, Judge Leonard D. Wexler of the U.S. District Court for the Eastern District of New York ruled that Lerner’s Complaint, which was prepared and filed by G&S attorneys stated facts sufficient to sustain claims for breach of contract, defamation, tortious interference and fraud, among other claims.  Lerner filed suit in September 2014 against Sullivan, Connerty, ConSul Partners, LLC and Besito, LLC in connection with Lerner’s role in a new venture to acquire and develop restaurant properties, including the Besito restaurant concept.  Defendants moved to dismiss Lerner’s claims in February 2015.  Judge Wexler held the matter under advisement before ruling that Lerner’s case may proceed.

Connerty and Sullivan are well-established in the restaurant industry.  Both were intimately involved in the expansion and growth of the Outback Steakhouse franchise in the U.S. and internationally, as well as in the development and growth of other well-known restaurant properties, including Longhorn Steakhouse, Hooters, Steak and Ale and Bennigans.  In his case, Lerner alleges that he was denied promised commissions and equity for his role in launching a new venture focused on identifying, acquiring and expanding new restaurant properties in the United States.  Besito was the first target of the new venture, and several new locations of this upscale Mexican restaurant have opened, or are planned, on the East Coast.  Nevertheless, Lerner has been largely denied the compensation promised to him for his efforts.

The Court’s ruling means that Lerner’s claims, as pleaded by G&S, shall continue.  That parties are in the midst of fact discovery, which is due to be concluded by the end of the year, with trial anticipated for 2016.

G&S Obtains Favorable Settlement for Local Charity

In January, 2015, the firm obtained a settlement for the benefit of the Frederick Police Activities League (“PAL”) without initiating litigation, and upon terms that were mutually agreeable to all parties. Thereafter, PAL kindly recognized the firm as its honored guests at PAL’s annual fundraiser held at the Delaplaine Visual Arts Center.

G&S (Again) Prevails Against Rent-A-Wreck of America, Inc. in Appeal to the Fourth Circuit.

A significant victory in a hard-fought case against an implacable and well-financed opponent was recently achieved on March 10, 2015, by the firm in David Schwartz, et al. v JJF Management Services, Inc., et al., Case No. 13-2189, before the United States Court of Appeals for the Fourth Circuit. See opinion. In the 1970s, David Schwartz, the firm’s client, created and founded a revolutionary rental car system that later became Rent-A-Wreck of America, Inc. In 2006, Rent-A-Wreck of America, Inc. was purchased by local car dealer and businessman, Jack Fitzgerald, who, in one of its first acts, directed the company to terminate the rental car franchise of its founder, David Schwartz, “just to ‘see how high [Schwartz] jumps.” After two jury trials and two wins by David Schwartz, Rent-A-Wreck of America, Inc. launched a second appeal to the Fourth Circuit. This second appeal led to a unanimous opinion by the Court in Schwartz’s favor, holding that the District Court “rightly rejected” Rent-A-Wreck of America, Inc.’s attempts to undo the express and/or implied-in-fact contracts formed over forty years of history favoring Schwartz in the operation of his business within an exclusive territory in Los Angeles, California. David Schwartz now enjoys a Rent-A-Wreck franchise whereby he pays no fees to the national company and may operate in his exclusive territory in Los Angeles for the rest of his life.

G&S Wins Summary Judgment in Commercial Lease Dispute

The law firm of Gordon & Simmons and Chris deBettencourt, representing a commercial property owner in a breach of contract action, prevailed on a Motion for Summary Judgment in the Circuit Court for Harford County.  Gordon & Simmons represents the manager of a retail shopping center in an action against a former tenant and two individual guarantors.  In the landlord-tenant action, the Harford County Circuit Court granted summary judgment in favor of the firm’s client against two of three defendants on claims for breach of contract and breach of guaranty.  G&S and Chris secured a judgment for $225,530.16 for its client.  On summary judgment, and despite objection from the Defendants concerning the amount of damages, G&S and Chris successfully enforced a treble damages provision in the underlying lease agreement, dramatically increasing the damage award to its client.  Gordon & Simmons also prevailed on the summary judgment motion filed by a third Defendant in the case, and Chris and G&S are set to try the remaining claims on February 11, 2015.

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