Courts Enforce Contracts As Written – Except Sometimes

By Michael J. Spithogiannis, Esq. & Floyd Grossman, Esq.
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A lawsuit is the last thing you would expect when signing a real-estate contract.  And if litigation does ensue, you would expect a court to follow established rules of contract interpretation and hold the parties to what they signed.  Here we examine a recent court decision which seems to disregard a basic rule of contract law: a court determining the intent of contracting parties should not look to any evidence outside the contract unless the writing is unclear.

Last year, the Appellate Division, Third Department, decided Prendergast v. Swiencick,[1] based on what the Court perceived was a common practice in residential real-estate sales rather than enforcing the contract as written.  

By statute in New York, all that is necessary to create a binding enforceable real-estate contract is a signed writing clearly describing the property, and specifying the sales price.  There are, however, many other issues covered by real-estate contracts: closing date; how the purchase price will be paid; mortgage-loan contingency; title issues; defaults.  Indeed, many pertinent issues are addressed to reflect clearly the intent of the parties without having to rely on anything outside the contract to determine what they meant.

If the parties’ full intent is ascertainable from the contract, considering evidence outside the writing – parol evidence – is not permitted to explain what the parties meant. Parol evidence can be in the form of oral or written communications evidencing how business was done in the past, or a common practice under similar circumstances.  But here’s the key: only if a court decides, in the first place, that the writing is unclear, may parol evidence be considered.  Although this is a bedrock principle of contract interpretation, we find examples where the rule has been disregarded or overlooked.  

In Prendergast, the seller sued her buyer under a written contract for failing to close on the agreed-upon closing date.  The buyer argued she was not required to close, because mortgages against the property had not been satisfied.  The buyer argued that under their contract the seller was required to deliver title on the closing date free from all mortgages. 

The seller argued that, even though the mortgages were unsatisfied, the buyer’s interests could have been protected.  To this point, the seller made arrangements to satisfy the mortgages by using the buyer’s purchase money, after which the lenders would issue satisfactions for recording.  Indeed, part of the service a title-insurance company can provide is to attend the closing, verify the amounts owed to lenders, pick up checks to satisfy the mortgages, deliver payment to lenders, and obtain mortgage satisfactions.  A title insurer could then insure the buyer’s title as of the closing date, even if the mortgages were satisfied after closing.  These procedures are indeed common practice in real-estate closings.  Accordingly, the sale could have been completed even though the seller did not comply with the contract. 

But the contract had no requirement that the buyer purchase title insurance or avail herself of a title company’s closing services.  

Was the buyer compelled to follow this common practice even though the contract itself did not require her to do so?  Who breached the contract?  Was it the seller who failed to satisfy existing mortgages? Was it the buyer who refused to tender the purchase price, buy title insurance, or consent to post-closing satisfaction of the mortgages?

In Prendergast, four out of the five Justices ruled in favor of the seller, concluding that the buyer could not refuse to close.  The Court reasoned that the parties used a standard-form, real-estate contract, which “reflect[ed] the  parties’ intent to embrace the common practice over the years in the real-estate closing realm” with respect to existing mortgages.[2]  In other words, the buyer was found to have agreed to something that was  not actually stated in the contract.  Not only did the buyer forfeit her down payment, but she was held liable for the difference between the contract price and the lower price the seller received from a subsequent buyer.

What is troubling is that the Court’s majority did not first find any ambiguity in the contract, which would have justified considering parol evidence.  

One Justice dissented, pointing out that the majority did not find the contract ambiguous, needing clarification. Moreover, he did not agree that the “standard form real estate contract necessarily incorporate[d] the common practice in the real estate industry such that those practices are given more weight than the language of the contract itself.”[3]  He opined that the contract’s express terms should control even if common practice might have facilitated the transfer of title.  He concluded that the seller was in breach.  

Whether the majority’s decision to rely on parol evidence without first deciding that the contract was ambiguous is simply an anomaly or heralds a departure from long-established, contract-interpretation principles remains to be seen.  So far, no courts have cited Prendergast as authority for the point discussed.

If there be a moral to our story, it is that real-estate contracts – indeed, all contracts – should be carefully considered, negotiated and drafted so as to avoid – as far as practicable – unintended consequences.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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[1] 183 A.D.3d 945 (3d Dep’t 2020).

[2] 183 A.D.3d, at 947 (emphasis added).

[3] 183 A.D.3d, at 954.

Understanding Dental Employment Contracts

By Mathew J. Levy, Esq.
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Unfortunately, yet understandably, most dentists are reluctant to read all of the provisions in their employment contracts in the belief that they face a “take it or leave it” quandary. However, dentists often do not realize that while there are provisions in such contracts that are standard in the industry, there are many issues which can be negotiated.  Those dentists who simply execute the document without an understanding of the issues contained therein (and their potential impact) often find themselves at odds with their employers, actually unemployed, or in increasing numbers – in a court of law.  This article is intended to help dentists avoid any such eventuality.

Compensation:  Most dentists do not realize that they can negotiate and increase their total compensation through a productivity incentive provision.  Employers can readily appreciate the inherent profitability of collecting three (3) times the amount of money paid to their employee and are, therefore, more than willing to share a percentage of the revenue “collected” for those services rendered by the employee, in excess of three times their salary.  

Quality of Life Issues: To many, this aspect of the contract is more important than any compensation provision. Dentists should weigh heavily such elements as:

· What is the call policy of the practice? Often, dentists find themselves working far more hours than are set forth in their agreement. For example, an agreement may provide that the employee is responsible for “call”; however, does the agreement provide that “call” will be on an equal rotating basis, or state what will happen if one of the dentists leaves the practice? 

· Does the practice have multiple locations?  Will you have to travel?  If there are multiple locations and traveling is required, dentists can often negotiate a monthly expense account (ex. $500.00 per month for auto expenses, insurance, gas, tolls, etc.).

·  How long have the employees been at the practice?  What are the partners like? What are their billing procedures? Do the partners have any Office of Professional Discipline or malpractice history?

Duties & Responsibility: Ask your potential employer to allow you to shadow a partner for a day.  This will give you an idea of what a typical day might be like and help you understand what will be expected of you.

Malpractice Insurance: Dentists should be aware that there are two types of malpractice insurance, “Occurrence” or “Claims Made”.  While Occurrence is the preferred form of coverage, it is also the most expensive in that it covers the dentists for services rendered during and after the term of The Employment Contract.

On the other hand, Claims Made insurance only provides coverage during the term of employment. The moment the agreement is terminated, no matter the reason for the termination, the dentist is no longer covered for any of the professional services rendered during the term of the agreement. Therefore, the dentist is obligated to purchase additional insurance known as “Tail Coverage”. Tail Coverage is expensive; however, the one-time fee can be paid over time and in most dental employment contracts, negotiations can result in the cost being shared equally with the employer.

Termination: There are normally two types of termination sections within an Employment Agreement – termination without cause and termination with cause. 

· Termination Without Cause: Pursuant to New York law, a termination without cause provision relegates a dentist to “at will employee” status.  Unfortunately, an “at will dentist-employee” can be terminated at any time for no reason at all. Such dentists have absolutely no recourse, unless the termination is predicated upon illegality (i.e., age, race or gender discrimination).   

· Termination With Cause: Every employed dentist should be careful of this “catchall provision” that allows the employer to terminate the dentist if, in the employer’s sole discretion, it is determined that the dentist is detrimental to the practice. Such provisions are too subjective and the consequences are too great in that termination under this provision is immediate, and no notice period is required.  As a result, such provisions must be removed or an opportunity to cure must be added.  

Restrictive Covenants: The restrictive covenant is one of the most litigated issues in the history of employment agreements.  The courts in New York, as in most states, do not like to prohibit dentists from offering medical services to patients simply because there is a written employment agreement containing a restriction on the employee’s ability to compete with his or her former employer.  New York courts will often be flexible and inventive in finding ways to find the restrictive covenants not binding. However, the courts have held that if the restrictive covenant is deemed to be reasonable, the non-compete provision will be enforced.  

A restrictive covenant has two elements – Geographic area and time frame. When faced with a restrictive covenant, a dentist must consider where they would seek to work, in the (likely) event that they will leave the practice.  If the location is within the restricted area, then the restricted area should be negotiated to a smaller region that does not include the future location.  

In conclusion, a good contract should be reasonable for both sides.  Armed with a fair contract, both parties are on their way to a mutually rewarding and successful future.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions. 

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Weiss Zarett & the PAP (Physician Advocacy Program)

Weiss Zarett will continue to offer the PAP (Physician Advocacy Program) for 2022 and we will be providing the same services. The 3 programs offered by the 2022 PAP are as follows:

Premium Program

  • $949 per year 
  • Legal representation in connection with a matter before the OPMC, OPD, OMIG, MAC, OIG, QIO, OSHA or OCR.  
  • Providers WITH administrative coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.
  • Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance. 
  • FREE review of your medical records by a certified coder and a conference call to discuss.
  • FREE 30-minute consultation on ANY legal matter within the scope of practice of Weiss Zarett.    

Comprehensive Program

  • $649 per year 
  • Legal representation in connection with a matter before the OPMC, OPD, QIO, OIG, OSHA or OCR. 
  • Providers WITH coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.  Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance.  
  • *Please note that the Comprehensive Program does NOT include a review of your medical records, a conference call between you and the coder and no 30-minute call. 

Basic Program

  • $349 per year 
  • Legal representation in connection with a matter before the OPMC or the OPD.
  • Providers WITH administrative coverage from their insurance company will receive legal representation pursuant to the PAP without additional cost until the later of the following: (1) the limits of the administrative coverage under their insurance policy are reached; or (2) through the initial interview/appearance before the applicable governmental authority.  
  • Providers WITHOUT administrative coverage from their insurance company receive legal representation without additional cost through the initial interview/appearance before the applicable governmental authority.  Legal representation pursuant to the PAP does not include subsequent services during any hearing process following the initial interview/appearance.  
  • *Please note that the Basic Program does NOT include a free review of your medical records by a certified coder and a conference call to discuss the findings related to your documentation and coding or representation in connection with matters before QIO, OIG, OSHA, OCR, MAC or OMIG, or the annual 30-minute consultation. 

If you are interested in enrolling in the 2022 PAP or have any questions, please contact Mathew Levy, Esq. at 516-926-3320 or MLevy@weisszarett.com.

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Heavy HIPAA Enforcement Efforts!

By Mathew J. Levy, Esq.
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To date, the U.S. Department of Health and Human Services’ Office of Civil Rights (“OCR”) has resolved 98% of nearly 257,000 Health Insurance Portability and Accountability Act (“HIPAA”) Privacy Rule complaints. OCR has settled and imposed civil monetary penalties totaling $130,980,482.00. According to the HIPAA Journal, in recent years OCR’s enforcement efforts increased. Particularly, in 2020, OCR settled nineteen cases. This 2020 increase can be attributed to OCR’s 2019 HIPAA Right of Access Enforcement Initiative.

To avoid HIPAA violation(s), “covered entities” and “business associates” should take a proactive approach instead of a reactive one. “Covered entities” such as hospitals, healthcare providers or health plans and “business associates” (those providing services to covered entities involving protected health information or “PHI” disclosure) generally know their HIPAA obligations, but may not be aware of recent trends in HIPAA enforcement and priorities, and how to prepare accordingly. 

ENFORCEMENT TRENDS

OCR’s 2020 report findings and its commitment to enforcement, as discussed in a previous publication, “OCR’ Audit Report Reveals Concerns That Continue To Guide HIPAA Enforcement,” remains relevant as Physicians and private practices (next to Hospitals) are among the most common violators of HIPAA privacy regulations. 

The top investigated issues in 2020 include: 

  • impermissible uses and disclosures;
  • safeguards including administrative (e.g., conducting risk assessments) and technical (e.g., implementing tools for encryption and decryption); and 
  • access.                                                                                                         

The top HIPAA violations resulting in financial penalties arise from failure to

  • perform an organization-wide risk analysis to identify risks to confidentiality, integrity, and availability of PHI; 
  • enter into a HIPAA-compliant business associate agreement; impermissible disclosures of PHI; delayed breach notifications; and 
  • safeguard PHI.

OCR has continuously pursued egregious violations of HIPAA Rules. Most recently, OCR announced resolution of its twentieth investigation in its HIPAA Right of Access Initiative, resulting in an $80,000 settlement and corrective action plan. Specifically, HHS’ investigation found that Children’s Hospital & Medical Center failed to provide timely access to PHI to the complainant, which violates HIPAA Right of Access requiring covered entities to take action on an access request within 30 days of receipt (alternatively, 60 days if an extension applies). 

HEFTY HIPPA FINES:

Covered Entities: Most striking is a $6.85 million settlement and corrective action plan with a Premera Blue Cross, a health insurer, for noncompliance with the HIPAA risk analysis and risk management failures, and other potential HIPAA violations. The violations impacted 10.4 million patients. 

In January 2021, Excellus Health Plan, Inc. entered into a $5.1 million settlement and corrective action plan to settle potential HIPAA violations for a breach that impacted over 9.3 million people. The health insurer attributed the breach to cyber attackers that gained unauthorized access to its information technology system. Ultimately, OCR determined that the insurer failed to conduct an enterprise-wide risk analysis, to implement risk management, information system activity review, and access controls. 

Business associates: OCR announced at the end of September 2020 a $2.3 Million settlement with the business associate for a data breach attributed to hacking, which impacted 6 million people.

RECOMMENDATIONS: 

Just last month, the New York State Bar Association (“NYSBA”) HIPAA 2021 webinar highlighted OCRs enforcement efforts after OCR’s expressed commitment to increased enforcement following the audit report findings. Notably, NYSBA’s recommendations to stay proactive and avoid penalties include: 

(1) conducting an enterprise-wide risk analysis; 

(2) implementing risk management, information system activity, access and audit controls and 

(3) updating internal compliance plans.


STAY INFORMED 

Familiarize with the issued guidance and update your Compliance Work Plan accordingly.

In addition, it is always helpful to seek advice from a Health Care Attorney for specific concerns.

Importantly, if you are a provider seeking clarification on how these changes may affect you, you can contact Mathew J. Levy at 516-926-3320 or mlevy@weisszarett.com.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

Banking in the Cannabis Industry: Update on the SAFE Banking Act

By Mauro Viskovic Esq.
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On April 19, 2021, the U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Act of 2021, which would serve to greatly expand the financing alternatives to cannabis-related legitimate businesses and service providers for such businesses.  The bill is currently sitting within the Senate’s Committee on Banking, Housing and Urban Affairs awaiting consideration. As of now, it is uncertain whether the bill will remain stalled or if the committee’s chairman, Sen. Sherrod Brown, will move the bill forward.

To date, 47 states, 4 U.S. territories, and the District of Columbia have in varying degrees legalized the manufacturing, distributing and dispensing of cannabis products.  Nevertheless, most federally chartered banking institutions are reluctant to provide loans or offer other services to cannabis industry participants in any such states because cannabis transactions remain illegal at the federal level.  Under applicable anti-money laundering laws, federal banks are currently obligated to file a Suspicious Activity Report (SAR) when it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity. 

As a result, businesses participating in the cannabis industry have limited access to traditional banking and financial services, from basic bank account services to business loans and lines of credit.  Without suitable banking and financial services, these businesses have greater difficulty raising capital, obtaining loan facilities, safeguarding their profits, and generally expanding their businesses.  

The goal of the Safe Act would be to ensure access to financial services to cannabis-related legitimate businesses and service providers by removing some of the attendant legal and regulatory risks. The primary features of the Act include:

  • Providing that “proceeds from a transaction involving activities of a cannabis-related legitimate business or service provider” are not “proceeds from an unlawful activity,” so that processing transactions involving these proceeds will no longer constitute money laundering “solely” because the proceeds derived from cannabis.
  • Prohibiting federal regulators from terminating or limiting depository insurance solely because a financial institution provides services to a cannabis-related legitimate business.
  • Prohibiting federal regulators from taking adverse actions against, or otherwise discouraging, financial institutions from providing services to cannabis-related legitimate businesses.
  • Protecting depository institutions from civil, criminal, or administrative asset forfeiture for providing financial services to cannabis-related legitimate businesses.

Although the SAFE Act has received substantial bi-partisan support, there remain barriers to passage by many Senate members and lobbying groups.  There remains optimism that the bill will pass, especially with vast backing from organizations and businesses such as the American Bankers Association, the American Financial Services Association, and the Credit Union National Association.  

Should you have any questions regarding the SAFE Act and its implications to the cannabis industry, please contact Mauro Viskovic at 516-751-6537 or mviskovic@weisszarett.com.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.