Recent media attention, including ubiquitous coverage of the Target Corp. security breach over the holidays, has highlighted the increase in security intrusions affecting organizations across industries. As technology moves forward exponentially, security threats and leaks continue to emerge.

“In the digital age, nearly every company holds personally identifiable information of its employees or customers in digital form,” says Christina D. Frangiosa, an attorney at Semanoff Ormsby Greenberg & Torchia, LLC. “It’s imperative that this information is protected from unauthorized disclosure and that companies have a plan to address any breaches.”

Smart Business spoke with Frangiosa about data protection, the role of state laws when it comes to breaches and the importance of assembling a strong data breach response plan.

How should a business go about protecting the data it collects?

First, it’s important to understand what kind of data are collected and what are stored. For instance, some companies collect credit card numbers in order to process transactions, but don’t keep them.

Once a company understands what it stores, it’s important to understand where the data are kept and who has access to them. Companies should limit access to relevant personnel and ensure that security protocols are up to date. If vendors or third parties will have access to these data, it is important to understand their policies so the company’s privacy policies can accurately reflect them.

Customers need to know what the company is going to do with their personal information before they entrust it. It’s essential that a company abide by the privacy policies it announces.

How should a business proceed if it experiences a data breach?

The first question to ask is, ‘What has been accessed and how many people have been exposed?’ Then it’s important to act quickly. Hopefully, the company already has a plan in place for locking down the data to prevent further breaches, for investigating the source and nature of the breach, and for notifying affected individuals. State laws will govern when and how affected individuals need to be notified.

What role do state laws play in notifying affected individuals?

Forty-six out of the fifty states have implemented data breach notification laws. Companies should consider such laws in each state where their customers reside or where they do business. These laws provide the timeline for reaching out to individuals affected by a data breach and, potentially, notifying credit agencies. The notification may need to happen very quickly after the breach occurs. Some data breach notification statutes provide exceptions to the notification requirement. However, companies should plan ahead so they know what their obligations are and are able to meet them promptly.

What type of personnel should be included in a data breach response team?

A data breach response team should include not only internal personnel — like IT, HR, legal counsel, facilities management, and upper management — but also external resources, such as forensic investigators, law enforcement, notification firms and consumer fraud protection agencies. It’s also important to enlist publicity/marketing personnel to help craft public communications about certain breaches. A security breach can have a negative impact on a company’s reputation. For instance, Target reported that its profits plunged 46 percent in the fourth quarter of 2013, largely due to revelations of customer data theft.  Preventing further loss will be important.

Why is it so important for companies to be proactive about data security?

If a breach occurs, there will only be a short window of time in which the company has to act. Companies that have prepared in advance and developed a response plan will be in a better position to protect themselves, their customers and their employees. It’s important to reach out to potential resolution partners before there is an issue so that the company can complete its own assessment of available services and costs without needing to make immediate decisions in response to a ticking clock.

Christina D. Frangiosa is an attorney at Semanoff Ormsby Greenberg & Torchia, LLC. Reach her at (267) 620-1902 or

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Published in Philadelphia

Some firms owned or dominated by family have achieved monumental success. Others have found the transition process to be more difficult. Relentless competition and struggle for customer loyalty, combined with the thorny issues of family dynamics, prove challenging.

When preparing to transfer a family business, the first step is making certain each successor is fully committed. Talk to them well in advance and explain the benefits and pitfalls from the perspective of an owner.

Prior to joining the family business, outside employment in a related field is beneficial. “Working for an accounting, finance or legal firm can help a member of the younger generation gain confidence and stature while attaining valuable knowledge,” says Howard Greenberg, managing member of Semanoff Ormsby Greenberg & Torchia.

Smart Business spoke with Greenberg about the characteristics of different generations, family dynamics and the importance of outside help.

How would you describe a typical entrepreneurial founder?

Typically, entrepreneurial founders do not have significant resources, but they do have lots of resourcefulness, drive and passion for the business, talent, and willingness to work very long hours with little pay. These characteristics, along with an intense drive to succeed, help an entrepreneur create something that can be passed on to the next generation.

What characteristics does the second generation typically possess?

The second generation watched Dad and/or Mom exert their efforts into their venture, witnessed their passion, and it rubbed off on them. They feel the responsibility to further the business and want to look good for their parents. Although they might not have quite the same drive, they may have the privilege of greater resources and more education. They are often successful at maintaining, growing and managing the business.

What changes with the third generation?

This is where problems arise and where some outside help is required. Often, the third generation has more resources, more education and more alternatives than the founding patriarch/matriarch had. But they may have other interests, lack the same abilities, and there are usually more of them.

How should management issues be handled?

You shouldn’t staff your business based on family. Staff it based on talent. Perhaps your family has talented managers, or people in finance. If not, you need to fill the gaps in with non-family members. Similarly, if the third generation isn’t ready to take the reigns, bring in interim managers as caretakers until the younger generation is ready for its role.

What problems can arise with shared third-generation ownership?

The people who run the business often resent producing for the people who just inherited the business. Conversely, those who inherited the business often resent those who run the business because of their salaries and compensation.

It may be better to provide the people not actively running the business with other assets from the estate. To reward long-term performance for a successor generation running the business, it’s advised that the company recapitalize to lock in the current value with preferred interests. This provides the generation ceding control with the value of their interests, and provides the next generation to control with the value of their future contributions. Include these provisions in shareholder and operating agreements as well as employment agreements and continuation plans.

Why use outside consultants?

It’s nearly impossible for the first or second generation to objectively evaluate the talents and value of their children. And if the second generation comprises more than one sibling, there will be arguments concerning rewarding the third generation and picking leaders. And trying to make things equal for everyone is a mistake because people are not equal. Outside advisers can help make those decisions objectively. They can assist in preparing the comprehensive agreements that are carefully tailored to the particular family business. Doing this in advance of the generational transition is highly recommended.

Howard Greenberg is a managing member of Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-3042 or

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It’s something every business owner fears — the phone rings or you get a letter or email from your bank. They don’t want you as a customer/borrower anymore. What do you do from that point?

The most important thing is not to panic, says Charles W. Ormsby, Jr., managing member at Semanoff Ormsby Greenberg & Torchia, LLC. The situation is often not as bad or bleak as the bank originally presents it.

“They make it seem awful, but it can actually turn out pretty well when it’s all done,” Ormsby says.

Smart Business spoke with Ormsby about how to handle this type of problem with your lender.

When might a business owner hear from the bank about a problem?

In many cases, the business owner has defaulted on his or her loan. Perhaps they haven’t made a payment or are in violation of financial covenants. But it could also be due to the internal machinations of the bank. Maybe they want to get out of lending to your particular industry. Let’s say a bank is skittish about chemical manufacturing. It might call you up and say, ‘Look, we have the right to discontinue this relationship and that’s what we’re doing.’

Other times, a bank may want to clean up its balance sheet. If the bank is trying to sell or merge, it could need to get certain loans off its books. In addition, a loan can be classified as troubled without a business owner’s knowledge. If you’re getting more attention than normal — more communication and requests for information — that’s a red flag they are concerned about something.

What is the first step after that initial phone call, email or letter?

Take a deep breath, and then immediately contact your attorney and your accountant, who are hopefully experienced in this area. Having advisers who are experienced in dealing with, and standing up to, banks will end up paying big dividends — but only if you follow their advice.

Where do business owners make mistakes when negotiating with the bank about a troubled loan?

Never sign or promise anything without your attorney and accountant being involved. The bank is going to demand things, and in the absence of somebody who is experienced at advising a borrower, the borrower or business owner may feel compelled to comply. They might try to get you to waive rights, contribute cash, provide additional collateral or give personal guarantees.  

You need to evaluate where the bank stands, in terms of the collateral they already have, including personal guarantees. Don’t just accept what the bank is dictating to you. You may have considerably more leverage than you originally thought. As the saying goes, ‘Whoever has the money has the power,’ and you, as the borrower, have the money. Keep in mind banks ultimately don’t want your business, they want their money.

For example, I recently had a client whose bank called his loan and told him he had to put $1 million cash into his business. However, by the end of the negotiations the bank ended up loaning a multiple of that million dollars to my client. One of the things people find remarkable in these situations is how often banks will advance more money to keep you afloat.

One of the great fears for the bank is that you’re going to sit at the negotiating table — and I’ve done this on occasion — and slide the keys across the table and say, ‘Why don’t you run the business now.’ That’s the last thing they want. More often than not, their best chance of recovering as much money as possible is for the business owner, who has the relationship with his or her customers, employees and vendors, to stay involved.

Banks very rarely will precipitously shut you down. They will shut you down, however, if they start to feel you’re being deceitful. Its not a great strategy to play hide the ball with your bank. You want to be very clear and upfront with them. Banks don’t like surprises. If you are forthright with them, and get strong, you’ll get a better result.

Charles W. Ormsby, Jr. is a managing member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-0200 or

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To protect consumers from unwanted autodialed or prerecorded telemarketing calls, referred to as telemarketing robocalls, new Federal Communications Commission (FCC) regulations took effect in October.
These regulations require a consumer’s “prior express written consent” before businesses can make telemarketing robocalls, eliminating the prior exception of an “established business relationship.”

“Businesses will need to modify their consumer contracts or create a separate consumer consent if they want to make these calls to their consumers,” says Ashleigh M. Morales, an associate at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Morales about what the new regulations require.

What calls are considered telemarketing robocalls under the new FCC regulations?

An autodialed call is any call placed using an automatic telephone dialing system that can produce, store and call telephone numbers using a random or sequential number generator. If your organization uses any type of call center software as part of a telemarketing campaign — calls offering or marketing products or services to consumers — the regulations most likely will deem it an autodialed call.

The new regulations apply to calls to cell phones as well as to landlines. In addition, the FCC considers a cell phone text message a call under the regulations.

Are any types of calls excluded?

The regulations do not apply to manually dialed calls or calls that do not contain a prerecorded message. The regulations also do not apply to purely informational prerecorded calls, such as calls from nonprofit organizations or for political, emergency or non-commercial purposes, such as those delivering information regarding school closings.

Is any customer base grandfathered in?

The FCC chose to not grandfather consumer consents granted under the old regulations. As a result, businesses and third-party telemarketers may need to re-solicit consents in order to satisfy the new requirements.
The old regulations allowed telemarketing robocalls to be made to consumers with whom there was an established business relationship. The new regulations eliminate this exception.

How can businesses best obtain written consent for calls?

To get prior express written consent, the consent must be signed by the consumer and include a clear and conspicuous disclosure informing the consumer that he or she is:

  • Consenting to receive telemarketing messages using an automatic telephone dialing system or a prerecorded voice to the telephone number the consumer provides.
  • Not required to sign the agreement regarding consent to telemarketing messages as a condition of purchasing any property, goods or services.

Electronic and digital forms of signature are acceptable provided the business complies with the federal E-Sign Act. In addition to modifying current consumer contracts, companies should obtain new consumers’ written consent to future autodialed or prerecorded calls at the time the consumer signs an agreement with the business. Then, the business must implement procedures to maintain records of the consents and ensure telemarketing robocalls only go to the telephone numbers for which the consumers have consented to receive calls.

What are the penalties for failure to comply?

Failure to comply with the new regulations can result in actual damages as well as statutory damages of at least $500 per call, which can be increased to $1,500 per call. In determining the amount of statutory damages, courts will look at whether the violation was willful. Since telemarketing campaigns generally involve hundreds, if not thousands, of calls, the potential damages could be great. If you have not already done so, contact your legal counsel to ensure you are complying with these new regulations.

Ashleigh M. Morales is an associate at Semanoff Ormsby Greenberg & Torchia, LLC
. Reach her at (215) 887-0200 or

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A letter of intent, memorandum of understanding or term sheet — all essentially the same — is intended to be a nonbinding expression of the parties’ intended business transaction, creating a framework for putting a deal together.
It’s useful for a merger, acquisition or other combination, stock purchase, joint venture, real estate sale or lease, purchase or licensing agreement, or business contract.

Business owners usually aren’t in the business of doing deals, so it’s better to address the salient, material business points upfront in a simple, understandable way, says Peter J. Smith, a member at Semanoff Ormsby Greenberg & Torchia, LLC.

“The last thing you want is to go through an entire negotiation, do your due diligence, get your financing and then find out there’s an issue that becomes a deal killer,” he says. “You’ve now spent tens of thousands of dollars in time and expense on a deal that doesn’t, or won’t, close.”

Smart Business spoke with Smith about why using a letter of intent makes sense.

What is the purpose of a letter of intent?

It allows the parties to see if there is a basis for, and to document as a preliminary matter, the terms of a deal before expending time, energy and money. It’s better to determine if you can reach an agreement on the basic framework before you and your organization spend significant time, plus out-of-pocket expenses for attorneys, accountants, inspections, application fees, appraisals, travel and more.

The letter of intent also lays the groundwork for the transaction, including areas businesspeople don’t consider at first like non-competes, non-solicitations or indemnification. If it is sufficiently detailed and anticipates all major points, a letter of intent limits future negotiation, surprises and issues that could derail the deal, making the transaction more efficient and likely to close smoothly.

How detailed should a letter of intent be?

Unless there is a specific reason not to, a letter of intent should be as detailed as possible. The more you can include, the less there is to argue about later.

Sometimes business owners want a quick, one-page agreement that doesn’t get too hung up on the details. However, parties tend to be more agreeable and reasonable at the letter of intent stage. Plus, in my experience, the more detailed the letter of intent, the more likely the transaction is to close. Letters of intent also help minimize the ‘difficult lawyer’ problem, when counsel wants to continually negotiate the deal or make so many changes that the deal doesn’t come to fruition.

How can you negotiate important points if you have only done limited due diligence?

You can ask for the information upfront to resolve the issue, which is probably the best solution. If this is not practical, use a range or formula, or you can raise an issue, but leave the details for after due diligence.

What good is a letter of intent if it’s not binding?

Though not legally binding, a letter of intent has a psychological impact. It memorializes the understanding of the parties, and most people don’t want to be seen as breaking their commitments. Parties should sign a letter of intent, even if there are no binding provisions, solely for the emotional effect.

Nevertheless, a letter of intent often contains binding provisions such as confidentiality, no shop, non-solicitation of employees or customers, good faith negotiations or best efforts. It may provide a timeline for deposits, break-up fees or other provisions that become binding over time.

A letter of intent also can be provided to third parties to evidence the parties’ commitment and terms of the deal, perhaps in support of financing applications, approvals, etc.

In addition, you may not want to read a 30-page agreement, line-by-line, that is full of legalese. That’s why you pay a lawyer. With a letter of intent in place, counsel can say, ‘Yes, the agreement says the same thing as the letter of intent, and here are the five additional things you need to know.’ A detailed letter of intent helps you understand the deal better and results in a smoother, more cost-efficient transaction.

Peter J. Smith is a member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-0200 or

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Published in Philadelphia

The legal exposures that come with terminating employees are always present. But with a troubled economy continuing, increases in certain types of claims, more publicity in the media about employment discrimination cases, and the Department of Labor and state agencies spending greater resources on investigation and enforcement, it’s more important than ever to take potential legal exposure seriously.

“An employer should absolutely take the time to review all circumstances of the employee’s time with the company prior to terminating the employee,” says Alfredo M. Sergio, member at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Sergio about what to do before, during and after employee terminations.

What considerations need to be weighed before firing someone?

There are a number of questions to ask before terminating an employee. Employers may still choose to terminate, but should proceed carefully. For example, consider whether the employee:

  • Is in a protected class such as age, race, religion, national origin, disability, gender, sexual orientation or veteran.
  • Suffers from a medical condition, disability, is pregnant or is taking care of a family member with a disability.
  • Has ever requested a disability-related accommodation, or taken or requested pregnancy or medical leave.
  • Has ever made a claim of discrimination, sexual harassment or retaliation, or has ever threatened to sue.
  • Is subject to an employment contract, a non-compete, non-solicitation, confidentiality and/or inventions agreement.
  • Needs to cooperate with the company after being separated, e.g., in other litigation or on a project.

If any of these apply, you may want to consult with your attorney before you proceed with termination. Of course, if the soon-to-be terminated employee is violent or threatens anyone, immediate termination may be warranted.  

What else might employers do to prepare before terminating an employee?

Employers should document the decision to terminate when the decision is made, and accurately document employees’ conduct and performance throughout their employment. This will help the company prove its legitimate reasons for termination and put the company in a better position to defend itself.

Before the termination discussion, employers should think about how, where and when they will communicate the termination, and be prepared to answer questions about pay and benefits.  Employers should think about changing passwords, getting back keys, security badges, computers, tools, equipment, customer lists and/or obtaining summaries of current projects.

How should the termination be handled?

Consider whether there are any written policies regarding termination. Treat the employee with dignity and be professional, and keep the meeting brief. The supervisor communicating the termination may also want to have a human resources representative present. At the meeting/in a separation letter, set forth the reasons for termination. Remind the employee of his or her obligations if the employee signed a non-compete, non-solicitation or other agreement. In some instances, it may be appropriate to obtain a release of claims from the employee through a severance agreement, which may provide protection and deterrence against future claims.

What do employers need to do afterward?

Employers should pay the terminated employee’s final paycheck within the required time periods, and should be careful they provide the separated employee any notices required under COBRA. Also, plan how to communicate the termination to other employees, since rumors or gossip can have a negative effect on employee morale.

In the end, reviewing possible legal exposure and practical concerns before firing an employee best positions the employer for a smoother transition.

Alfredo M. Sergio is a member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-0200 or

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Published in Philadelphia