Important MLMIC Demutualization and Sale Update: Policyholders who signed the MLMIC Consent Form in favor of their employers may still be able to recover their cash consideration from the October 1, 2018 demutualization and sale of Medical Liability Mutual Insurance Company

On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration.  MLMIC’s Plan of Conversion provided that the proceeds of sale would be distributed to policyholders in exchange for the extinguishment of their membership interests in MLMIC.  Following MLMIC’s sale, litigation ensued throughout New York State between policyholder-employees and their employers, who maintained that they were entitled to the consideration because they had paid their employees’ MLMIC premiums.

The New York Court of Appeals resolved the issue in favor of policyholders in Columbia Mem’l Hosp. v. Hinds, Schoch v. Lake Champlain OB-GYN, P.C., Maple Medical, LLP v. Scott et al., 2022 N.Y. LEXIS 943, 2022 NY Slip Op 03306, 38 N.Y.3d 253 (2022), holding that “when an employer pays premiums to a mutual insurance company to obtain a policy of which its employee is the policyholder, and the insurance company demutualizes, absent contrary terms in the contract of employment, insurance policy, or separate agreement, the policyholder is entitled to the proceeds from the demutualization.”

However, a great many – perhaps thousands – of policyholders executed a Consent Form provided by MLMIC, which permitted policyholders to designate their policy administrators as their agent to receive their allocated share of cash consideration.  In these cases, the policy administrators (typically employers) received the consideration from MLMIC.  Many of these policyholders maintain that they were misled by their policy administrators into signing the Consent Forms.

Following the Court of Appeals’ decision in Hinds, the Appellate Division, First Department recently issued two decisions that impact claims by policyholders who designated their policy administrator-employers to receive their consideration.

In Riggs v. Brooklyn Hosp. Ctr., 207 AD3d 405 (1st Dept 2022]), the court rejected claims by a physician-policyholder that his former employer had obtained his MLMIC proceeds through fraud and breach of fiduciary duty. In that case, the employer was not the policyholder’s policy administrator,  and the policyholder had executed an assignment of the proceeds (not the MLMIC Consent Form).  The First Department held that, absent the policy administrator designation, the employer did not owe a fiduciary duty to its employee—particularly where the employment relationship had ended years prior to the assignment. Further, the assignment agreement disclosed sufficient information about the MLMIC demutualization to put the policyholder on notice of the rights he was assigning, thereby undercutting any claim that he justifiably relied on the employer’s misleading statements or omissions.

However, in Cordaro v AdvantageCare Physicians, P.C., ___AD3d___, 2022 NY Slip Op 05267 (1st Dept 2022), the First Department reversed the lower court’s dismissal of the policyholders’ fraud and breach of fiduciary duty claims. In contrast to Riggs, the employer in Cordaro was the policyholder-employees’ policy administrator. As such, the First Department held that the employer, as policy administrator, owed a fiduciary duty to its employees by virtue of being their agent. Based on that fiduciary relationship, the court held that the policyholder-employees’ allegations that their policy administrator misled them into signing the Consent Form by (a) withholding relevant information about the MLMIC sale transaction and (b) advising the policyholders that they were required to sign the form were sufficient to maintain their breach of fiduciary duty and fraud causes of action (among others).

Cordaro provides support for policyholders who were misled into executing the MLMIC Consent Forms and who wish to pursue recovery of their MLMIC distribution. Although not addressed in Riggs or Cordaro, another factor supporting policyholders’ claims is the fact that the MLMIC Consent Form does not purport to “assign” the proceeds; it simply designates the policy administrator to receive the consideration as “agent”.

It is important to emphasize that the likelihood of success of recovering the MLMIC cash distribution from a policy administrator that received it by reason of a signed Consent Form will depend on the particular facts involved.

Nolan Heller Kauffman LLP has represented more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including (a) the policyholders in two of the three Appellate Division cases that went up on appeal to the Court of Appeals and led to the above-referenced Hinds decision (see Maple Med., LLP v. Scott, 191 A.D.3d 81 [2d Dep’t 2020]; Schoch v. Lake Champlain Ob-Gyn, P.C., 184 A.D.3d 338 [3d Dep’t 2020]) and (b) the policyholders in the Cordaro case discussed above.

If you were a MLMIC policyholder prior to its demutualization and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at jheller@nhkllp.com or Brendan J Carosi, Esq. at bcarosi@nhkllp.com, or call us at (518) 449-3300.

Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm based in Albany, New York, and serving clients throughout New York State.

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Important MLMIC Demutualization and Sale Update: Nolan Heller Kauffman obtains New York Court of Appeals Landmark Ruling that Policyholders – not their employers – are entitled to receive the proceeds of the October 1, 2018 demutualization and sale of Medical Liability Mutual Insurance Company

On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration. Following MLMIC’s sale, litigation ensued throughout New York State between healthcare providers and their employers or former employers over which of them was entitled to receive the cash proceeds of sale:  (i) the employees/healthcare providers, who became MLMIC policyholders—and thereby acquired an ownership interest in MLMIC—as part of the bargained-for exchange of consideration under their employment agreements; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for their employees’ services under, the employment agreements.

On May 19, 2022, the New York Court of Appeals issued its Opinion in Columbia Mem’l Hosp. v. Hinds, Schoch v. Lake Champlain OB-GYN, P.C., Maple Medical, LLP v. Scott et al., 2022 N.Y. LEXIS 943, 2022 NY Slip Op 03306, 38 N.Y.3d 253 (2022), resolving on a state-wide basis the competing claims of the physician and other medical provider-policyholders and their employers or former employers to the MLMIC cash consideration.

Nolan Heller Kauffman LLP has represented more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including those in two of the three Appellate Division cases that went up on appeal to the Court of Appeals:  See Maple Med., LLP v. Scott, 191 A.D.3d 81 (2d Dep’t 2020); Schoch v. Lake Champlain Ob-Gyn, P.C., 184 A.D.3d 338 (3d Dep’t 2020)., and represented the Policyholders in those cases before the Court of Appeals.

As a result of Court of Appeals’ recent decision, it is now settled law throughout New York State that “when an employer pays premiums to a mutual insurance company to obtain a policy of which its employee is the policyholder, and the insurance company demutualizes, absent contrary terms in the contract of employment, insurance policy, or separate agreement, the policyholder is entitled to the proceeds from the demutualization.”  Columbia Mem. Hosp. v Hinds, 38 NY3d 253 (2022).

If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at jheller@nhkllp.com, or call us at (518) 449-3300.

Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm based in Albany, New York, and serving clients throughout New York State.

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Important MLMIC Demutualization and Sale Update:  The New York State Court of Appeals has scheduled oral argument for April 20, 2022 in appeals which will resolve a split between the Appellate Division courts over who is entitled to receive the proceeds of the October 1, 2018 demutualization and sale of Medical Liability Mutual Insurance Company.

On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration. Following MLMIC’s sale, litigation ensued throughout New York State between healthcare providers and their employers or former employers over which of them was entitled to receive the cash proceeds of sale:  (i) the employees/healthcare providers, who became MLMIC policyholders—and thereby acquired an ownership interest in MLMIC; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for, their employees’ services under the employment agreements.

We have previously reported that the New York Court of Appeals will resolve a split in authority between the Appellate Division, First Department, which held, in a four sentence decision in Matter of Schaffer, Schonholz & Drossman, LLP v. Title (171 A.D.3d 465 [1st Dep’t 2019]), that the physician-policyholder’s employer was entitled to the MLMIC proceeds because it paid the policy premiums, and subsequent decisions by the Appellate Division for the Second, Third and Fourth Departments, which each unanimously held, in detailed and well-reasoned decisions, that the policyholders – not the employers – were entitled to the consideration, based on the controlling provisions of the Insurance Law, the MLMIC Plan of Conversion, and the Dept. of Financial Services Decision approving the Plan, along with relevant demutualization and unjust enrichment case law, while specifically noting their disagreement with Schaffer.  See Maple Med., LLP v. Scott, 191 A.D.3d 81 (2d Dep’t 2020); Schoch v. Lake Champlain Ob-Gyn, P.C., 184 A.D.3d 338 (3d Dep’t 2020); Shoback v. Broome Obstetrics & Gynecology, P.C., 184 A.D.3d 1000 (3d Dep’t 2020); Columbia Mem. Hosp. v. Hinds, 188 A.D.3d 1337 (3d Dep’t 2020); Maple-Gate Anesthesiologists, P.C. v.  Nasrin, 182 A.D.3d 984 (4th Dep’t 2020).

As a result of the split between the First Department, on the one hand, and the Second, Third and Fourth Departments, on the other, the New York Court of Appeals granted leave to appeal in the Schoch, Hinds and Maple Medical cases.

The Court has now scheduled oral argument in these cases for April 20, 2022.  The Court’s ruling is expected to resolve on a state-wide basis the competing claims of the physician-policyholders and their employers or former employers to the MLMIC cash consideration.

Nolan Heller Kauffman LLP represents more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including the Schoch and Maple Medical appeals that will be heard by the Court of Appeals on April 20, 2022.  If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at jheller@nhkllp.com, or call us at (518) 449-3300.

Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm based in Albany, New York, and serving clients throughout New York State.

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Important MLMIC Demutualization and Sale Update: In 2022 the New York Court of Appeals will resolve a split between the Appellate Division courts over who is entitled to receive the proceeds of the October 1, 2018 demutualization and sale of Medical Liability Mutual Insurance Company.

On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration. Following MLMIC’s sale, litigation ensued throughout New York State between healthcare providers and their employers or former employers over which of them was entitled to receive the cash proceeds of sale:  (i) the employees/healthcare providers, who became MLMIC policyholders—and thereby acquired an ownership interest in MLMIC—as part of the bargained-for exchange of consideration under their employment agreements; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for their employees’ services under, the employment agreements.

In Matter of Schaffer, Schonholz & Drossman, LLP v. Title (171 A.D.3d 465 [1st Dep’t 2019]), the Appellate Division, First Department held, in a four-sentence decision, that the physician-policyholder’s employer was entitled to the MLMIC proceeds because it paid the policy premiums.   Subsequently, the Appellate Division for the Second, Third and Fourth Departments each unanimously held, in detailed and well-reasoned decisions, that the policyholders – not the employers – were entitled to the consideration, based on the controlling provisions of the Insurance Law, the MLMIC Plan of Conversion, and the Dept. of Financial Services Decision approving the Plan, along with relevant demutualization and unjust enrichment case law, while specifically noting their disagreement with Schaffer.  See Maple Med., LLP v. Scott, 191 A.D.3d 81 (2d Dep’t 2020); Schoch v. Lake Champlain Ob-Gyn, P.C., 184 A.D.3d 338 (3d Dep’t 2020); Shoback v. Broome Obstetrics & Gynecology, P.C., 184 A.D.3d 1000 (3d Dep’t 2020); Columbia Mem. Hosp. v. Hinds, 188 A.D.3d 1337 (3d Dep’t 2020); Maple-Gate Anesthesiologists, P.C. v.  Nasrin, 182 A.D.3d 984 (4th Dep’t 2020).

As a result of the split between the First Department, on the one hand, and the Second, Third and Fourth Departments, on the other, the New York Court of Appeals granted leave to appeal in the Schoch, Hinds and Maple Medical cases.  We expect that the Court of Appeals will schedule oral argument in the Spring of 2022.  The Court’s eventual ruling is expected to resolve on a state-wide basis the competing claims of the physician-policyholders and their employers or former employers to the MLMIC cash consideration.

Nolan Heller Kauffman LLP represents more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including those in the Schoch, Shoback and Maple Medical Appellate Division appeals, and in the pending appeals in Schoch and Maple Medical before the New York Court of Appeals.  If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject,  please contact Justin A. Heller, Esq. at jheller@nhkllp.com, or call us at (518) 449-3300.

Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm based in Albany, New York, and serving clients throughout New York State.

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Your PPP Lender Says You Were Ineligible for Your PPP Loan – Now What?

Calculator, paper and pen

If your Paycheck Protection Program (PPP) lender has informed you that you were not eligible for the PPP loan that you received, you should be aware of the potential consequences of this determination if it goes unchallenged.

What’s at Stake?

Although this area of PPP law is currently developing and comes with a lot uncertainty, here are three of the most likely consequences:

  1. The Small Business Administration (SBA) has made clear that no portion of a PPP loan made to an ineligible borrower may be forgiven. If you have already spent all of the PPP loan proceeds, you will be required to repay the entire loan unless you are able to resolve this issue with the lender. If you have not yet spent all of the loan proceeds, then you might want to consider putting a hold on using the PPP loan proceeds until you (hopefully) are able to come to a resolution with your lender.

 

  1. Your lender’s understanding that you are ineligible may be construed as a default on your PPP loan, the loan may be accelerated, and the entire amount of the loan would become immediately due and payable. Unlike other non-PPP loans, your PPP loan promissory note might not require your lender to provide notice of these actions. This leaves open the possibility of your lender suing you, without being provided an opportunity to contest its determination that you were ineligible for the PPP loan.

 

  1. The lender might take the position that if you were not eligible for the loan in the first place, how could any use of the PPP loan proceeds be for an authorized purpose? Under the PPP and all applicable SBA rules, proceeds may only be used for PPP loan authorized purposes. If the lender believes it was tricked into making a PPP loan that it should not have made, it may refer the matter to be reviewed by the SBA. The SBA has issued Interim Final Rules (IFRs) that state that if you knowingly misuse PPP loan proceeds, the SBA might not only direct you to repay the funds that were misused, but it may also pursue any owner of the business through a civil action and/or potentially direct the United States Department of Justice to start a criminal PPP loan fraud investigation.

What Can Cause This?

Since the PPP generally allow lenders to rely on the certifications made by borrowers in their PPP loan applications to determine whether the borrowers are eligible, it is most likely that your eligibility issue is tied to one of the certifications made in your PPP loan application. Over time, the required certifications have changed, and the PPP loan application forms have even been revised to resolve certain ambiguities. Understanding how the PPP loan application process has evolved is crucial to being able to effectively contest your PPP lender’s determination.

What Can You Do?

Although PPP loans are unique in many ways, in the end, PPP loans are just unsecured business loans. The PPP does not grant PPP lenders any specific powers beyond those generally recognized under state law. This means that you, as a PPP loan borrower, similarly have all of the same tools available under state law to contest a pending lawsuit commenced by your PPP lender against you or to commence your own action against the PPP lender in order to seek a court order finding that you were eligible for the PPP loan and/or that you have not defaulted on your PPP loan. You may also be able to request that the SBA review the lender’s determination if it is part of a decision denying PPP loan forgiveness.

Take Action

If you have questions or concerns regarding the Paycheck Protection Program or how to navigate a dispute with your PPP lender regarding loan eligibility, please contact Matthew M. Zapala, Esq., by e-mail (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

PPP Loans & Bankruptcy: SBA Issues New Guidance

Earlier this month, the Small Business Administration (SBA) issued new guidance regarding the Paycheck Protection Program (PPP) and bankruptcy. When Congress passed the CARES Act, it did so without any statutory limitation on lending to businesses that were involved in bankruptcy proceedings. However, shortly after the PPP was first implemented, the SBA issued Interim Final Rules that prohibited a PPP loan from being made if the applicant, or any owner of 20% or more of the applicant, was “presently involved in a bankruptcy proceeding.” Prior to the SBA’s new guidance, it was safe to construe the phrase “presently involved in any bankruptcy” to mean that you are ineligible for a PPP loan as long as the applicant or owner is a debtor in a bankruptcy case that is open. Since bankruptcy cases may take years to close, this rule effectively prevented the vast majority of applicants that, directly or indirectly through an owner, had an open bankruptcy case.

For this reason, a number of entities with PPP loans that are involved in Chapter 11 bankruptcy proceedings have successfully challenged the SBA’s authority to enact this regulation. However, the results have been mixed in federal courts across the country and it appears that a majority of courts have concluded that the SBA had the authority to instill this prohibition even though it is completely contrary to the primary intent of the PPP – to get forgivable loans into the hands of America’s struggling small businesses quickly and efficiently.

Recently, the SBA released a more detailed explanation of what it means to be “presently involved in a bankruptcy proceeding” that opens the door to many borrowers that would have previously been ineligible because of how long bankruptcy cases can remain “open”. Understanding this guidance is critical to determining when, and if, your business is eligible to receive an U.S. Small Business Administration Paycheck Protection Program (PPP) loan and how you might be able to use a PPP loan to assist with your efforts to reorganize, despite certain bankruptcy proceedings.

PPP Loan Bankruptcy Guidance by Chapter:

The SBA’s PPP loans and bankruptcy guidance can be broken down by the Chapter and type of bankruptcy case:

Chapter 7

For Chapter 7 bankruptcy filings and PPP loans, “the applicant or owner is considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered a discharge order in the case.”

Chapters 11, 12, or 13

For Chapter 11, 12 or 13 bankruptcy and PPP loans, “the applicant or owner is considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered an order confirming the plan in the case.”

Dismissed Case

“Additionally, if the Bankruptcy Court has entered an order dismissing the case, regardless of the Chapter, the applicant or owner is no longer “presently involved in any bankruptcy.”

Understanding The Guidance

This PPP bankruptcy loan guidance represents a drastic departure from the SBA’s prior interpretation. For example, a Chapter 13 bankruptcy case may remain open and active for four to five years after an order confirming the plan is entered. Now, an individual who has a confirmed chapter 13 plan, or a business owned which they own, is eligible as soon as the order confirming the plan is entered – they no longer have to wait until the case is closed.

Additionally, this clarification from the SBA presents a new source of potential funding in Chapter 11 cases in order to increase the chances of being able to successfully emerge from Chapter 11. Now, it is conceivable that businesses in pending Chapter 11 cases, or those contemplating potential reorganizations, may be able to propose reorganization plans that, at least in part, provide for obtaining PPP loans after a confirmation order is entered to help fund their plans and increase the likelihood of completing successful reorganizations.

Take Action

If you have questions or concerns regarding the Paycheck Protection Program or how PPP loans might be utilized as part of a Chapter 11 bankruptcy reorganization, please contact Matthew M. Zapala, Esq., by email (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

New York City Property Value Declines Also Expected in Upstate Markets

New York City through Fence

The January 2021 New York City annual report of the City’s real property tax base shows expected COVID-related hits across the spectrum. Retail buildings and hotels/motels registered a market value decline of 21.1% and 22.4%, respectively. Office buildings experienced a decline of 15.6% in market values.[1]

Although the New York City real estate market differs from Upstate New York, some of the same forces that hit these sectors there are clearly at work in Upstate New York as well. Owners and investors in Upstate New York real estate markets may find that 2021 is an opportune time to look closely at their property assessments. In New York, assessed values are set based on a theoretical value in the prior calendar year, making 2021 a great year to challenge an assessment based on devaluation in 2020. The deadline to challenge your real property tax assessment for most jurisdictions in Upstate New York is May 25, 2021 (best to confirm with your local assessor).

Are you wondering how to lower your property tax assessment? Nolan Heller Kauffman can help. Our attorneys stand ready to assist new and existing clients during these uncertain times. We are happy to provide a fee-free initial consultation to evaluate whether you may have a good case for a property tax assessment reduction. If you feel you have an Upstate New York property tax assessment that is out of line with market values, please contact John Hartzell at Nolan Heller Kauffman LLP at (518) 432-3106, or jhartzell@nhkllp.com.

[1] New York City Department of Finance Press Release 1-15-21

 

 

 

 

 

 

 

Important MLMIC Demutualization and Sale Update: On December 9, 2020, the Appellate Division, Second Department issued its decision in Maple Medical v. Scott, joining the Third and Fourth Departments in ruling in favor of MLMIC Policyholders in Disputes over MLMIC Conversion Payouts.

On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration. Following MLMIC’s sale, litigation ensued throughout New York State between healthcare providers and their employers or former employers over which of them was entitled to receive the cash proceeds of sale:  (i) the employees/healthcare providers, who became MLMIC policyholders—and thereby acquired an ownership interest in MLMIC—as part of the bargained-for exchange of consideration under their employment agreements; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for their employees’ services under, the employment agreements.

On December 9, 2020, the Appellate Division, Second Department issued its decision in Maple Medical, LLP v. Joseph Scott, et al., 2020 NY Slip Op 07366 (2d Dep’t Dec. 9, 2020), ruling that the employees/policyholders are entitled to the MLMIC proceeds. In its Decision, the Second Department expressed its agreement with the Third and Fourth Departments’ decisions in Top of Form

Schoch v. Lake Champlain OB-GYN, P.C., 184 A.D.3d 338 (3d Dep’t June 18, 2020); Shoback v. Broome Obstetrics & Gynecology, P.C., 184 A.D.3d 1000 (3d Dep’t June 18, 2020); and Maple-Gate Anesthesiologists, P.C. v. Nasrin, 182 A.D.3d 984 (4th Dep’t 2020);Bottom of Form and rejected the First Department’s contrary holding in Matter of Schaffer, Schonholz & Drossman, LLP v. Title, 171 A.D.3d 465 (1st Dep’t 2019).

With the Maple Medical decision, the Second, Third and Fourth Departments have all ruled that the Policyholders are entitled to the MLMIC payout, leaving only the First Department’s decision in Schaffer supporting claims by employers to MLMIC funds.  Notably, each of the other Departments have expressly rejected Schaffer.  See, e.g., Maple Medical (“We do not agree with our colleagues in the First Department”).

Uniformity throughout New York State is likely to come in the first half of 2021.  In early 2021, the First Department is expected to hear oral argument in Mid-Manhattan Physician Services, P.C. v. Dworkin, 2019 WL 4261348 (Sup Ct, New York County 2019).  Given the well-reasoned analyses in the decisions of the other Departments, we expect that the Frist Department will give serious consideration to reversing its earlier decision in Schaffer.

In addition, the New York Court of Appeals will be hearing an appeal of the Third Department’s decision in Schoch.  The Court is expected to hear argument in the Spring of 2021.  An earlier decision from the First Department in Dworkin in favor of the Policyholder would likely render this appeal moot.

Nolan Heller Kauffman LLP represents more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including those in Schoch, Shoback, Maple Medical and Dworkin.  If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject,  please contact Justin A. Heller, Esq. at jheller@nhkllp.com or Alexandra B. Becker, Esq. at abecker@nhkllp.com, or call us at (518) 449-3300.

Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm with offices in Albany and Syracuse, New York, and serving clients throughout New York State.

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3 Nolan Heller Kauffman Attorneys Named to 2020 Super Lawyers®

Sparkler by Suvan Chowdhury

We are proud to announce that 2020 New York Super Lawyers Upstate Edition has recognized three Nolan Heller Kauffman LLP attorneys.

The Top 5% of Attorneys in Upstate NY Receive Super Lawyers Recognition

Super Lawyers is a rating service of outstanding lawyers, from more than 70 practice areas, who have attained a high degree of professional achievement and peer recognition. The rigorous candidate selection process includes independent research, peer nominations and peer evaluations. Only the top 5% of attorneys in Upstate New York receive this yearly Super Lawyers recognition.

Learn More About Nolan Heller Kauffman

Founded in 1964, Nolan Heller Kauffman is a preeminent award winning business law firm providing a full range of legal services in business and commercial matters. Its clients include publicly traded and privately held companies, financial institutions, commercial real estate owners and developers, contractors, entrepreneurs and startups, municipalities and state government agencies.

New York State Liquor Authority Updates: New Rules & Enforcement due to COVID-19

Person reading the news

The attorneys at Nolan Heller Kauffman LLP understand that many businesses in the hospitality industry have been negatively impacted by COVID-19. We are here to help you navigate both the financial and regulatory compliance aspect of keeping your business during this difficult time.

If your New York licensed business has been charged with violations of the COVID-19 or other regulations, or if you are interested in ensuring that your business is fully compliant with these regulations and with the terms of your license, please contact Alexandra B. Becker, Esq. by email (abecker@nhkllp.com) or phone (518.432.3188).

Task Force Crackdown:

On July 23, 2020, Governor Cuomo announced a new multi-agency New York State task force to enforce COVID-19-related regulations at licensed establishments, including bars and restaurants. The task force is led by the New York State Police and New York State Liquor Authority (“SLA”) Chairman Vincent Bradley and will include investigators from:

The goal of the task force is to ensure that all licensed establishments are fully complying with the State’s rules regarding COVID-19, including but not limited to enforcement of social distancing measures, proper use of face coverings, and the prohibition on indoor dining and alcohol consumption (for the New York City area).

Licensed establishments found in violation of COVID-19 regulations face fines up to $10,000 per violation. Egregious violations may result in the immediate suspension of a bar or restaurant’s liquor license.

Between July 21 and 23, the task force conducted over 1,000 compliance checks, which resulted in documented violations at 84 establishments, and 10 liquor licenses being suspended. Between July 25 and 26, the task force conducted over 1,300 additional compliance checks, documenting violations at 132 establishments, leading to 12 further summary suspensions. An additional 644 compliance checks were completed Monday night, with investigators observing 26 violations in New York City.

Since the start of the pandemic, the New York State Liquor Authority has brought 443 charges against licensees statewide and imposed 33 Emergency Orders of Suspension, immediately closing establishments in order to protect public health and safety. A frequently updated list of licensees who have been charged and/or summarily suspended is posted on the New York State Liquor Authority’s website: www.sla.ny.gov.

NYS Liquor License Food Requirements:

Pursuant to Executive Order 202.52, effective Friday July 17, 2020, all licensed establishments with on-premises privileges (e.g. restaurants, taverns, manufacturers with tasting rooms, etc.) cannot serve alcoholic beverages unless such alcoholic beverage is accompanied by the purchase of a food item which is consistent with the food availability requirement of the license under the Alcoholic Beverage Control Law.

Under normal (pre-COVID-19) circumstances, any on-premises licensee is required to have some degree of food available for purchase at their premises. The type of food required is dependent on the type of license. Restaurants have the most extensive food requirements, and must offer “meals”, defined as “ the usual assortment of foods commonly ordered at various hours of the day”. Taverns and manufacturers with tasting rooms are permitted to offer a more limited scope of food options. Under pre-COVID rules, all licensees were required to have food available, but patrons were not required to purchase food in conjunction with a purchase of alcohol.

The Executive Order is aimed at permitting outside and limited indoor dining (outside of New York City and Long Island), with alcoholic beverages, while restricting the congregating and mingling that arise in a bar service/drinking only environment. The Order provides : “for each patron in a seated party, an item of food must be purchased at the same time as the purchase of the initial alcoholic beverage(s) . . . However, one or more shareable food item(s) may be purchased, so long as it/they would sufficiently serve the number of people in the party and each item would individually meet the food standard below.”

The New York State Liquor Authority has provided additional guidance as to the standards of food required:

For Manufacturers with On-Premises Service Privileges: sandwiches, soups or other such foods, whether fresh, processed, pre-cooked or frozen; and/or food items intended to compliment the tasting of alcoholic beverages, which shall mean a diversified selection of food that is ordinarily consumed without the use of tableware and can be conveniently consumed, including but not limited to: cheese, fruits, vegetables, chocolates, breads, mustards and crackers.

For On-Premises Retailers with a Food Availability Requirement, Including Restaurants and Taverns: sandwiches, soups or other foods, whether fresh, processed, precooked or frozen.

The guidance further clarifies that for restaurants and taverns, “other foods” are “foods similar in quality and substance to sandwiches and soups; for example, salads, wings, or hotdogs” are considered acceptable’ whereas; “a bag of chips bowl of nuts, or candy alone are not.” Further, that dessert-type items can satisfy this requirement, as long as it is a “substantial item, such as a piece of cake/pie, an ice cream sundae, etc.” as opposed to a “drink with whip cream, a cookie, a piece of candy, etc.”

Patrons are not required to purchase a food item with each alcoholic beverage purchase. So long as food is ordered at the time of initial order of any alcoholic beverages that is sufficient in substance and is also of a quantity sufficient to serve the number of patrons who are present and being served alcohol.

Ongoing Efforts to Mitigate COVID-19 Impact on Licensees:

On March 16, 2020, in response to the COVID-19 crisis, Governor Cuomo issued a statewide mandate that restaurants operate only for takeout and delivery, causing many of those businesses to experience huge losses of revenue. In order to help those impacted businesses, the New York State Liquor Authority issued a series of directives aimed to ease the restrictions on operations and financial obligations of businesses licensed to serve alcohol.

Normally, on-premises licensees (restaurants, bars, taverns, clubs, arenas, catering establishments, etc.) are only permitted to sell alcohol for consumption on their licensed premises, with the exception of takeout beer. In order to boost revenues, the SLA is temporarily allowing on-premises licensees to sell wine and spirits- in addition to beer- by the bottle for takeout and delivery in conjunction with a food sale. The sale of mixed drinks for takeout or delivery in conjunction with a food sale is also permitted so long as they are in closed containers consistent with any open container ordinance. Licensees do not need to obtain any waiver or permission from the SLA in order to make such sales. These off-premises sales privileges have been extended multiple times, and currently run through August 5, 2020.

The New York State Liquor Authority has also extended its deferment of liquor license renewal fees through August 31, 2020, which will allow on-premises licensees, wholesalers, and manufacturers with licenses expiring between March 31, 2020 and July 31, 2020 to defer the submission of renewal payments until August 31, 2020. Licensees are still required to file their applications prior to their expiration date, despite not having to submit a renewal payment.

Each of these Advisories and temporary procedures are subject to further changes and/or extensions as the State Liquor Authority continues to evaluate the scope and status of the COVID-19 crisis and its impact on New York State licensed businesses.

The New York State Liquor Authority is continuing to process and review applications during this time, though Full Board Meetings are not open to the public. Any presentation in support or opposition of licensing and miscellaneous matters must be submitted via email by the date set forth in the notice (as is the current practice) and no appearances or other submissions will be permitted. All licensing applicants can request to have their application held in abeyance until normal Full Board Meetings resume.

How We Can Help:

We appreciate that maintaining compliance with the requirements of your liquor license, as well as with the ever-evolving COVID-19 restrictions is extremely difficult, and urge you to contact us to see how we may be able to assist you. Please contact Alexandra B. Becker, Esq. by email (abecker@nhkllp.com) or phone (518.432.3188).