Jason Lloyd

Sunday, 30 July 2006 20:00

The law of training

One of an employer’s biggest challenges is stemming the rising tide of employment law litigation. Jury awards against employers have been climbing at astonishing rates. Multimillion-dollar verdicts and settlements in class-action discrimination cases have become commonplace.

In 2005, the median award for employment litigation claims approached $300,000. Even when lawsuits have not been filed, simply investigating claims of employment harassment consumes many hours of time. The average cost for a company to investigate a legitimate harassment complaint has been estimated at $200,000 including both direct and lost-opportunity costs.

“Fortunately, a law of training has evolved that has changed the legal landscape of preventive practices,” says Douglas G. Smith, a partner in the Pittsburgh office of Jackson Lewis LLP. “Supreme Court decisions and state laws have provided a mechanism whereby employers may limit, or even avoid, legal liability for harassment cases. The cornerstone of such a program is training.”

Small Business spoke with Smith about the legal and practical importance of employment law training in the workplace.

Why should employment law training be a necessary part of a company’s overall employee relations strategy?
There are practical and legal reasons. From a practical point of view, training programs have been shown to reduce absenteeism and turnover. Effective employee relations programs increase morale and productivity and can help eliminate third-party interference such as union organizing and administrative charges being filed with outside agencies.

In addition, for employers that carry employment practices liability insurance, the insurance companies often offer reduced premiums to companies that provide effective employee relations training.

How have court decisions stressed the importance of workplace employment law training?
A few years ago, the U.S. Supreme Court established a so-called ‘affirmative defense’ for cases where harassment on the job does not result in tangible job action such as termination or demotion. In such cases, if the employer can show it exercised reasonable care to prevent and promptly correct the harassing behavior and the employee failed to take advantage of those opportunities, the employer can avoid liability completely and the case can be thrown out.

The courts have stated that employee relations training is a key component in establishing the affirmative defense.

Do any laws require that workplace training be provided?
The Pennsylvania Human Relations Commission has issued guidelines that clearly state that to avoid liability for harassment cases, the employer should ‘affirmatively raise the subject’ of harassment in the workplace through training. In addition, many states specifically require employee relations training in the area of harassment. California, Connecticut, Maine and Michigan are just a few of the states that require it by law.

What topics should be covered in such employment law training sessions?
There are two important components.

First of all, the company’s nonharassment policy should be reviewed before the training to make sure it is in accordance with legal requirements. The policy should explain what harassment is, what the mechanism is for addressing harassment on the job, and the consequences for employees who engage in inappropriate conduct. The policy should be carefully covered during the training.

Also, the complaint mechanism that the employer has in place needs to be clearly outlined so that employees are aware of what steps to take if they believe they’ve been subject to harassment. The idea is to educate employees as to prohibited conduct and steps they should take in the event harassment does occur.

Who should take part in the training?
In addition to a basic training program that should be attended by all employees, we strongly encourage extra training for supervisory employees. As agents of the organization, it’s very important to make sure supervisors are aware of the company’s legal obligations. They must play an important role in enforcing the company’s policy.

Who should conduct the training?
It’s very important to have a trainer who is specifically educated and has experience training in the law of harassment. Some trainers have actually created harassment liability as a result of comments they’ve made during the training sessions and the way they’ve handled the training sessions. So it’s very important to have a trainer who is aware of the legal framework. Most major law firms devote a part of their employment practice to such training programs. Additionally, the Equal Employment Opportunity Commission may offer assistance in identifying training programs.

How do you respond to the company that says training is too expensive?
Quite frankly it’s actually too expensive not to train. The possible liability and the sheer number of employment law cases that are being brought based on harassment really make it much cheaper for an employer to avoid legal liability by providing training than to risk the chance that they won’t get sued.

DOUGLAS G. SMITH is a partner in Jackson Lewis LLP. Reach him at (412) 232-0404.

Friday, 28 July 2006 20:00

Finding his FORTE

When Gene Forte finished his master’s degree 26 years ago, he had two options: Relocate to another state for a job, or go into business for himself.

He chose the latter and founded FORTE Industries, a private distribution operations improvement company. Today, the company is in fast-growth mode. It has twice been named to the Inc. 500 list as one of the 500 fastest-growing companies in the country and last year hit $18 million in revenue.

Smart Business spoke with Forte about the challenges of expansion and knowing when it is the right time to grow.

How did you know it was time to grow your company?
We’re pretty sophisticated on the financial side of our business. Even though we’re a small business, we think we’re run as good as or better than one of the large companies. We have a pretty sophisticated cash flow report and a pretty sophisticated sales pipeline report.

We merge the two and look at, ‘Where’s our financial situation today? What business do we have coming down the pipeline? What percent probability do we see all this business landing?’ Then we make a decision whether to invest on expansion or not.

What is the biggest challenge facing the CEO of a fast-growth company?
Finding good people. Some companies may say it’s financing or cash. We don’t have that problem. We haven’t borrowed money for working capital purposes since we’ve been in existence.

Because of the type of business we’re in and the terms and commercial provisions of contracts, cash hasn’t been a problem. Finding the excellent, outstanding people at the right time for the right positions has been one of our biggest challenges, probably our biggest.

How do you find those people?
We have an excellent HR department and staff, and we have very high recruiting standards. We try to hire smart people who are technically competent, are willing to take calculated risks and have good interpersonal skills and good common sense.

We do some in-house recruiting. We use the Internet for certain positions and professional recruiters for others.

How do you make sure the people you hire are the right fit for the job?
Our interview process is pretty rigorous and extensive. We don’t just interview someone once or twice. Even for any junior positions we have, someone would interview three or four times.

Not only do we look at the technical side but we also look to make sure there’s a good chemistry fit on the personal side. We have a very strong culture here, and we want to feel very confident that this person will fit our culture.

Years ago, when we didn’t have the hiring practices we do today, we made a lot of bad hires. Today, we have a lot of longevity and low turnover. It’s because of recruiting practices and again because of the culture of the organization. It’s a unique culture. When people fit, they like it and they stay.

What were some of the mistakes you made early on, and what did you learn from them?We probably were too trusting of the credentials that people were presenting us versus what they could actually deliver. Our interview process is quite rigorous both on the technical side and the interpersonal side. We try and really dig down and try to make sure that the people are very technically competent as well as exhibit good interpersonal skills.

Then we focus on compensation situations after we’ve determined the person would be a fit. Early on, we were only hiring people we could afford. Today, we hire people based on their qualifications as opposed to their compensation requirements.

You can focus more on the upper mobility within the organization - more pay for performance. The ability to be more creative and impactful in a small, growing organization can be appealing, as opposed to being just a number in a large organization.

HOW TO REACH: FORTE Industries, (513) 398-2800

Friday, 30 June 2006 06:46

Peter Shaper

Peter Shaper enjoys swimming upstream. When everyone was diving out of the telecom market a few years ago, Shaper was fighting his way in. He used Genesis Park, a private equity group of which he is a founding partner, to purchase CapRock Communications out of its parent company’s bankruptcy. Four years later, as the telecom market comes back into favor, Shaper is CEO of CapRock, a private satellite communications company with revenue exceeding $100 million. Shaper spoke with Smart Business about how he recognizes solid business opportunities and finds the best employees to grow his business.

Understand your business’s personality.
Every company is like a person — they all have a personality. They have a strategy they use in the market, they have a reputation and a brand, and that’s how they’re recognized by customers.

All of those aspects have to come together to be successful. The ones where I’ve been successful are where that personality came together — that combination of strategy, customer satisfaction, brand recognition, management team, people who really came together and really liked the business and were excited about building it.

That personality and gut feel has been a better indicator of which of all the businesses that have a strong financial model will be successful.

Once the numbers make sense, follow your gut feeling.
In general, the cold, hard figures are the hurdles. If you don’t get through those numbers, just walk away.

Once you do get sets of numbers that will work for an investment decision, then you have to spend enough time understanding what are you really trying to do. It’s all about the people.

Spend enough time with people and find out how excited they are, and then let your gut tell you, ‘OK, the numbers work, and not only do the numbers work, but it really is something that makes sense.’

I use my gut a lot, but never without the numbers. You have to use the numbers to get through the hurdles first.

You will never get every hire right every time.
I wish I could tell you I’ve got a 100 percent hit rate on hiring the right people. I’m far from it, unfortunately. The interview processes are so inexact, and I’ve had my share of wrong hires.

For me, you have to spend as much time as you can with the candidate to make a decision. You’ve got to get as many people in the organization as you can afford to take the time to really spend time with the candidate, because then you get a lot of perspectives. In the end, you have to go with your gut. And unfortunately you don’t always get it right.

People don’t always come across as they really are in the interview process. I’m always trying to find ways to improve our hit rate of getting the right people the first time.

If there is potential, work with a new hire.
Our hit rate in finding the best person to fill a spot is probably 75 or 80 percent. There’s a flip side to that: How many times have you picked the wrong person and you need to push them out the door?

That’s probably only 10 percent of the time. That other 15 percent or so is when, after a year or so, you say, ‘We may not have hired the best candidate, but they’re not so bad we have to push them out the door.’

There’s that middle ground that’s a little more tricky. The ones you have to push them out the door, bite the bullet and make the call as fast as you can so you can get someone better suited in the role. That doesn’t happen that often.

Be prepared to coach and train.
It could be something as simple as in the interview process, you thought someone had a lot of experience doing a certain aspect of their job, then after they got here, you realize maybe they don’t have quite as much experience or maybe they did it totally different and you need to train them how we would like to do it.

Maybe it’s someone who is hard on people and they’re in a management role, so you have to coach them on better ways to manage people and lead people and get good production and keep people happy. There will be some aspect where we missed something in the process, but they’re still a good person to have, so they might need some coaching or training to get them where we want them to be.

Hear other perspectives before making decisions.
It starts by doing all the analytics and crunching the numbers to make sure you understand those hurdle issues. Take as much time as you can and talk about it as thoroughly as you can with as many people in your management team as you can.

Go find people with a totally different perspective who are likely to come at it very differently. I happen to be very collaborative because I think having a lot more input is a lot better than having me sit around trying to make a big decision. Typically, if it’s a big decision, you have a lot of input from people wanting to go in different directions.

You go through the data, make the call and say, ‘OK, we’re going to walk out of this room, and even though some of us thought another way was a better way to go, we’re going to stand behind this decision and give it our all, and if we’re wrong, we’ll change our minds later. But let’s get together and make this successful.’

Establish your vision.
When you’re talking vision, there’s no hard data or facts. You need credibility that comes from just a few things. Have you been right and successful in the past? Can you articulate it in a way that is convincing?

You can take someone’s objections and say, ‘Yes I understand those objections, yes, they’re good points, and here is why I think we can overcome that or why we should go this way anyway.’ And the last one is honestly just success.

If you have not been successful, it will be very difficult to get people to buy into your vision. The more successful we are, the more that vision becomes contagious.

Provide the best possible service.
I define success as first and foremost continuing to provide the best service to our customers, to continue to add value to them beyond what they’re paying us.

If we keep doing that, we should be able to grow, which provides opportunities for growth to our employees — opportunities to move up in the organization, opportunities for more responsibilities, opportunities to learn new things and see new challenges, and the opportunity for financial reward. That’s what I consider successful.

We’re protecting the core of who we are, we’re serving our customers and we are growing our business to provide opportunities for everybody. To me, that’s what’s exciting. That’s what gives me personal reward.

How to reach: CapRock Communications, (832) 668-2300 or www.caprock.com

Thursday, 27 April 2006 10:30

Akron renewed

Restaurants topped by luxury housing and affordable townhomes will soon surround parks in Summit County. The Northside Lofts, combined with the Spicer Village project are expected to revitalize and transform the city of Akron over the next four years.

Upon completion, both projects are expected to bring residents back from the suburbs to urban living, while cleaning up the city’s appearance. It’s happening by capitalizing on the sudden popularity of mixed-use living that combines retail and residential spaces. The concept is a hallmark bigger cities such as New York and Boston, and is being introduced to smaller ones such as Westlake, a Cleveland suburb that adopted the idea with the construction of Crocker Park. Now Testa Cos.’ CEO Joel Testa is trying to bring a similar feel to Summit County.

“The trend we’ve seen in construction is people moving away from the cities out to the suburbs,” Testa says. “It’s created a segregation by economic class. In the old neighborhoods, there was a true diversity of people of varying ages and religions and economic abilities. There’s a lot to be learned from that and we’re trying to get back to that.”

New spice in life
The $35 million Spicer Village project, developed by ASW Services and the Bord family, will transform what was once 40 rundown blocks on and near the University of Arkon’s campus into a polished region. The project is centered around the university, both geographically and operationally, and also involves the University Park Alliance, which includes the University of Akron, Summa Health System and the city of Akron.

“In a knowledge and innovation economy, which is the economy we’re in, the university is the key to the future of Akron’s economy,” says Ken Stapleton, the director of the University Park Alliance. “We’re not the largest employer, we’re probably not the largest tax generator. But we are either the most or one of the most strategic businesses in Akron in terms of economic development with technology and research. And we attract talent. Given the labor shortage, our ability to pull high-quality talent in is important for (other businesses) in the region. Of the companies around Akron, the university is going to have a major role in attracting, training and keeping the talent around.”

The university has spent approximately $300 million on campus, constructing a new residence hall on East Exchange Street and creating nine new buildings around campus. Summa will open a new critical care unit this spring and a new cancer center within the next two years. And perhaps most important, the neighborhoods to the south, east and north of the university’s campus are all undergoing extreme makeovers.

It starts with providing luxurious places to live. The idea is to bring buyers closer to their jobs and, as Stapleton hopes, improve the quality of life while improving Akron’s finances. There will be buildings on East Exchange Street with retail on the first floor and a combination of office space and residential living above. Just south of campus and East Exchange Street will be townhomes, condos and flats for purchase.

“The key to all that residential is that it’s about a piece of home ownership. It’s not a rental piece, which has been the history there for a long, long time,” he says. “Our home ownership rate is very low - below 20 percent. We want people investing their own dollars in this neighborhood and through the whole University Park area.”

“I think people are realizing the suburban sprawl can’t keep expanding farther and farther away,” says Monty Miller, president of ASW Services, a company involved in Spicer Village’s development. “Not everyone likes to get in their car and travel. Also, we have people (who have) raised their family and now they want to be close to something and be part of the community. That’s Spicer Village. We reconnect to the community and have a neighborhood feel.”

Going north
That neighborhood feel is also the aim of the Northside Lofts project. The northern edge of the $35 million project runs between downtown and the popular biking/hiking trail of the Cuyahoga Towpath. This area will soon house shops, restaurants and, of course, residences.

“The design of the buildings is to look like old Chicago warehouses that have been rehabbed,” Testa says. Two 10-story buildings will stand together on Furnace Street, housing 89 residential condos - 61 warehouse-style lofts and 28 townhomes with brownstone walkups. “It’s the more traditional Boston, Washington or Chicago that people would think of.”

Canal Park is within walking distance, as are the bars and clubs surrounding the stadium. There will be a private limousine service and a concierge staff to book reservations, get tickets or pick up dry cleaning. Testa is trying to give residents the feel of a luxurious hotel, without the bill at the end of the week.

Testa approximated that buyers can spend anywhere from less than $200,000 up to $1 million on their residence — all located within the same building. “It opens it up to everybody in the buying market,” he says. “And more importantly, it gives you that diversity. People from various economic levels will all be living together.”

The goal is to provide the type of living that doesn’t exist anywhere else in the state of Ohio.

“We’re trying to bring the flavor of Manhattan to Akron,” Testa says. “We want little shops that are boutiques, cafes, delis and grocery shops so people can get a taste of Manhattan brought to Akron.”

Face of the future
Spicer Village and Northside Lofts aren’t alone. The art museum is undergoing massive changes, Canal Park is still one of the premiere minor league venues in the country and the university is discussing plans for new athletic facilities.

Together, it will all revive downtown Akron and make it a desirable place to live and work.

“It’s cultural diversity, it’s arts and entertainment, it’s lots of things areas with vibrant economies have in common,” Testa says. “This project is a large step with some of the other ones going around. The new art museum, the library, baseball ... all of those things help attain and attract residents. And ultimately, business will follow.”

Wednesday, 26 April 2006 10:44

Data migration

In the ever-changing world of business and data requirements, it is becoming increasingly imperative for companies to have sound data migration strategies. Business success today demands agility. To remain competitive, more and more businesses are becoming technology-driven. As these companies implement new business systems and technologies, their needs for accessing and reusing corporate data assets are increasing. Well-defined data migration strategies will maximize data reuse, minimize downtime and reduce data-loss risks.

“Data is often the lifeblood of companies,” says Candi Randolph, technical project manager for Perpetual Technologies. “Acquiring it, using it, protecting it and preserving it are all necessary for the continuity and growth of the company.”

Smart Business spoke with Randolph about sound data migration strategies.

What is data migration?
Data migration can encompass many data-related activities, but central to the effort is the movement of data, usually from a source system or storage device to a target system or storage device. Data migration may involve moving data files from one physical storage location to another, moving data from one storage format to another or moving data from one data structure to another. The last scenario often involves data transformation and increases the complexity of the data migration effort. Data Extract, Transform, and Load (ETL) solutions are commercially available from vendors such as Informatica and Pervasive.

How is data migration important, and what drives it?
Data is often the lifeblood of companies. New regulations such as Sarbanes-Oxley and the introduction of new technologies that help reduce costs and increase values are forcing many companies to face increasing numbers of data migrations.

How can factors affect the success of data migration?
Data migrations are rarely independent efforts. They occur most often when new application systems or storage technologies are implemented and are often included within the scope of the overall implementation project. Because the success of the data migration portion can directly affect the overall success of the implementation project, the importance of effectively planning and preparing for the migration should not be undervalued. There are many things that can affect the success of a data migration effort. Some of the critical success factors include:

  • Developing a Migration Strategy. All successful projects begin with a well thought-out and communicated strategy. Before finalizing your strategy, carefully consider your migration options and the cost and risk factors associated with each. Don’t assume any risks with your data that your company can’t afford to take.

  • Understanding the Data Requirements. Fully understanding the data requirements of the target system and the data implementation of the source system is imperative for a successful data migration, especially when data transformation is required. Data transformation is the restructuring of data to meet new system requirements. Failure to meet all the data requirements of the target system usually results in an inoperable or unreliable target system.

  • Cleansing the Data. Do not assume that the source system data is clean, especially when data transformation is required. Include effort in the project plan to determine the integrity of the source system data and take the time to cleanse it prior to the migration. When determining the integrity of the data, it is important to analyze more than one snapshot of the data. For large migrations, multiple copies of the source data taken at different points in time are often staged in an independent environment so that detailed analysis, and often times restructuring or editing of the data, can be accomplished.

  • Testing the Migration. Do not overlook the importance of developing and executing detailed test cases and allowing adequate time in the schedule to investigate and resolve all failures. Proceeding with a data migration before identifying and resolving all data discrepancies is taking unnecessary risks and is rarely successful.

  • Conducting a Mock Migration. Conducting mock implementations should be a part of every data migration plan. Mock implementations will help ensure that all aspects of the final data migration will be successful and can be accomplished in the timeframe allocated.

How important is it to get professional help when migrating data?
Experience is tantamount. Size, complexities and risk factors associated with data migrations vary widely, as do the skills of a company’s IT staff. Risk avoidance is the key to successful data migrations. Outsourcing the data migration effort or augmenting your IT staff with consultants who have proven successes with previous data migrations can significantly reduce overall cost, schedule and risk factors.

CANDI RANDOLPH is the technical project manager for Perpetual Technologies. Reach her at mailto://candi.randolph@dfas.mil.

Thursday, 30 March 2006 10:32

Financial statements

With a struggling economy and businesses trying to maximize profit margins, the role of accountants and financial statements are becoming increasingly vital.

Business owners are not always sure why it is so important that they communicate with their accountants on services both used and offered.

“Recently, a number of our clients have negotiated with the bank for a lesser level of service,” says Jim Koepke, director of accounting and auditing for Doeren Mayhew LLC. “They’ve gone from an audit to a review, or a review to a compilation, to save money. Most of it comes from the economy getting tight and looking to save money wherever they can. You’re looking at the services across the board and, in essence, an attempt to save fees whenever possible.”

Smart Business spoke with Koepke about what services a business should receive from accountants and how to maximize financial statement presentations.

How can a business owner ensure the financial statements are being used properly?
The elementary thing that a business owner has to do is determine who uses the financial statements and how confident are they in their staff putting together the statements. How much do they want someone to oversee or test the numbers and information being put together?

We have some clients who request us to do an audit, examining supporting documentation for various transactions, physically observing inventory and observing pricing. Even though they don’t need it for outside use, they want to feel comfortable going to sleep at night that their numbers are good numbers. Then we have others who, at the end of year, say, ‘I get a tax return, and basically I trust my people giving me numbers. I’ll just have an outside CPA firm come in and assemble the proper financial statement.’ That’s a compilation report, and we don’t express any opinion in those. In an audit, we express an opinion on the financial statements.

What options does a company have?
A lot of times, clients don’t understand. I’ll be performing a compilation, and the client will get a call and say, ‘I can’t talk to you right now, the auditor is here.’ For that client, I’m not an auditor. I think the best thing they can do is talk to their CPA and say, ‘What do I need? Are there requirements? What are the different levels of service?’ Have it explained, because I don’t think a lot of them understand the difference.

A compilation is the lowest level. It provides no assurances on financial statements.

A review consists of limited procedures and provides limited assurance on the financial statements being presented.

An audit includes auditing the systems, obtaining evidence for documentation and a number of transactions, testing the client’s systems to make sure they’re being applied appropriately, and providing positive assurance on the financial statements being presented.

How can someone use their financial statements to get more money?
Lenders look at various key items, including the entity’s ability to generate cash from operations. Some will look at working capital or debt-to-equity ratios. One of the easiest things to do is what I call ‘dressing up the balance sheet a little bit.’

A lot of outside parties like to see a lot of cash. Just by delaying paying a couple of bills at the end of the year, and paying them on Jan. 1 or 2 instead, can show more cash at the end of the year. Lenders will say, ‘Look at all the cash,’ instead of looking at the liabilities side. If they have some lines of credit or current type of borrowings, you can often get the banks to set an expiration date on the line of credit greater than a year from the financial statement date, so it shows as a long-term liability and not a current liability. It looks like you have more cash and resources than the other presentations. And that’s just changing presentation of an item.

How can managing inventory properly help a financial statement?
Make sure you’re including all indirect costs of producing items in inventory costs, which will shift some of the cost to the balance sheet and improve the income by increasing inventory amounts on financial statements.

In summary, a good CPA can help a client pay for only what they need or help them negotiate with lenders to reduce their requirements. In addition, some simple changes in financial statement presentations can dramatically alter the way users of the information look at the company.

JIM KOEPKE is the director of accounting and auditing at Doeren Mayhew LLC. You can reach him at (248) 244-3011.

Sunday, 26 March 2006 19:00

Controlling litigation costs

While it may seem counterintuitive to have your attorney be one of the first respondents following a catastrophic incident at your facility, that may be the best method of cost control for your company. Companies throughout the nation have used the services of law firms with immediate response capabilities to quickly analyze liability, damage and governmental issues.

“Getting counsel involved at an early stage not only provides protection for the company, it also integrates a cost-savings approach for the long run,” says attorney Brad Wright, practice manager for the Risk Management and Product Liability Practice Groups at Roetzel & Andress LPA. “The first 48 hours after a catastrophic incident are the most critical for ensuring that all bases are covered from the standpoint of the company.”

It also ensures that your company is protected should future litigation result from the incident. By conducting an early evaluation, a company can more effectively protect itself and control litigation costs.

Smart Business spoke with attorney Brad Wright on other methods companies can use to control litigation expenses.


How can a company control litigation costs?
In addition to early evaluation of claims and cases, it is important to retain a specialist in a particular area of the law to eliminate the “learning curve.” Another key factor is hiring an attorney who takes the time to become extremely familiar with the company’s business operations. If your attorney knows the company’s business inside and out, he or she can more effectively represent your interests, acting as a business partner who understands the company’s business, philosophy and goals. Additional cost savings come from the appropriate legal staffing of cases. Not every case requires the services of a senior partner. Assigning particular aspects of the matter to an associate or paralegal may be the more cost-effective allocation of time and resources.


What keys are there to better manage cases?
Effective case management involves implementing early case assessment, technology, proper staffing expectations, an agreed-upon litigation plan, and open communication between the company and attorney. A company should be actively involved in the handling of its lawsuit. This ensures that the attorney and the client are on the same page with regard to both case management and litigation expenses.


How can litigation budgets and revenues help?
Many large companies throughout the country are requiring that litigation budgets be set and reviews be scheduled with their attorney at the early stages of the matter. This allows the client to fully appreciate what costs will be associated with that type of litigation or what alternate approaches may be considered. This also allows the client the opportunity to determine what course of action he or she wants to pursue on the matter. Many companies have begun to participate in pre-litigation mediation and other forms of alternative dispute resolution that reduce litigation costs and effectively resolve their matters.


What are the benefits of pre-litigation mediation?
Pre-litigation mediation allows a client the opportunity to assess the potential for resolution of a matter before spending a significant amount of time and energy in the discovery and court phases of litigation. More and more companies are seeking this alternative in catastrophic injury and damage cases.

Keep in mind that litigation not only involves the cost of counsel, it usually takes the focus away from employees and business operations. Again, if counsel has obtained all of the information following the catastrophic incident, pre-litigation mediation should not fail for lack of information.


Are there any cookie-cutter methods of controlling costs insofar as each company is different?
There is no one approach or resource to control costs in every situation. Counsel’s familiarity with the company will enable both the client and counsel to effectively establish methods that best address the suit, given the circumstances of the case. Costs are not solely limited to the expenses incurred by the attorney. They also include the ultimate cost to resolve the action. Both of these components should be considered in determining what methods a company should implement.


BRAD WRIGHT is practice manager for the Risk Management and Product Liability Groups at Roetzel & Andress LPA. Contact him at (330) 849-6629 or bwright@ralaw.com. Roetzel & Andress (www.ralaw.com) has nine offices throughout Ohio, Florida and D.C.


Monday, 28 November 2005 11:37

Problem solved

There is a new, low-cost alternative to resolving disputes that does not involve the slow-moving and expensive court system.

According to Jeremy Lewin, a labor and employment litigation attorney at Barnes & Thornburg and former investigator and mediator for the Equal Employment Opportunity Commission (EEOC), nearly 70 percent of the cases he saw with the EEOC that attempted mediation ended in a resolution.

Smart Business spoke with Lewin about the benefits of mediation and in what situations it works best.

Why has mediation become so popular over the last 10 years?
Various government agencies are heavily promoting mediation. Congress loves mediation in the federal sector because it’s efficient. Rather than clogging the courts with employment disputes and going through an expensive taxpayer-funded investigative process, there’s an opportunity to resolve a dispute in one setting.

How is mediation better than court?
It’s fast. It’s possible to resolve conflict...that would otherwise take years to resolve in one sitting. In employment law, one of the parties to the dispute is usually an individual person. That person brings emotional issues that can be as important in driving forward with the litigation as the underlying legal issues.

If someone is terminated, the emotional issues can play as important of a role as the legal issues. It’s a less formalized setting that offers an opportunity to present and hear issues from the other side much, much more quickly. You get to the heart of the matter faster.

Also, a mediator can sometimes be a retired attorney or judge and can offer an objective analysis of facts and legal issues surrounding case. And often this is the first time (the parties) have had the chance to hear an objective view of the case.

Otherwise, the first and only chance might be a jury that delivers a verdict. So years before that happens, they can hear from someone not involved in the case what they think.

What is the cost of mediation compared to court?
Typically a mediator might charge a few hundred dollars an hour and you might be able to resolve the conflict in a day. So several thousand dollars can resolve a suit that otherwise might have cost $100,000 in legal fees. That amount varies by case.

What type of cases can best be served by mediation?
Cases where litigation might be long and expensive, where emotions are involved, where nontraditional settlement terms may help a resolution.

In an employment setting, in addition to or instead of money, an employee might want a letter of reference, or in the case of continuing employment, they might want a promotion or change in job title or a raise. That’s another key when mediation can be effective — when you have a continuing relationship.

If you have a current employee, litigating a matter can be devastating to a relationship. In a best-case scenario, the mediator can repair some of the damage to the relationship, so things can be resolved in ways litigation simply can’t offer. Mediation really has fewer boundaries as far as what items can be offered in settlement.

Whether or not they made it to mediation, how many cases that you’ve seen would make good mediation cases?
In employment disputes, I would say possibly as many as half. In other areas of law, mediation may be less practical.

But in many areas, it can offer a practical approach. And the settlement rate for cases where mediation is attempted in many settings is very high. It generally happens that day, and often you would execute a contract that same day.

What is the most important key to know heading into mediation?
Come in prepared to do as much listening as talking. Come in with an open mind. Be willing to be flexible. Try to be willing to be creative in terms of nontraditional settlement items.

What traits should companies look for in a mediator?
The most important thing as a mediator is to maintain neutrality, to remember you’re not a judge, to not try to achieve any certain results and not be invested in the outcome of the case. An Israeli diplomat [once told me], ‘Sometimes I’m paid not to have an opinion.’ To some extent, that’s what a mediator has to do. You have to remember your role is to resolve the dispute, or act as a facilitator to the dispute, and maybe even to back off of your own notions of fairness and instead offer both sides objective views.

Jeremy Lewin is a Labor & Employment attorney for Barnes & Thornburg LLP. For more information on mediation, contact him at (312) 214-5661.

Wednesday, 28 February 2007 19:00

Looking for shelter

The days of oil and gas and real estate limited partnerships — tax shelters with 3 to 1, 4 to 1 and 5 to 1 write-offs — are but a distant and faded memory in the minds of most experienced investors and real estate professionals. Nonetheless, even in today’s significantly more conservative climate, there is a vehicle available to help taxpaying businesses and individuals defer taxation in connection with the disposition and acquisition of property. It’s Section 1031 of the Internal Revenue Code and it is commonly referred to as a tax-free exchange, a like-kind exchange, or simply as a 1031 Exchange.

“In a typical situation, an owner selling its property would be taxed on any gain realized from the sale of the property,” says Claude P. Czaja, an attorney in the Real Estate Practice Group at Gambrell & Stolz LLP. “Section 1031 provides a mechanism that allows the property owner to defer taxation on the gain and keep all the proceeds invested.”

Smart Business spoke with Czaja about the benefits of a 1031 Exchange.

How does a 1031 Exchange work?

Typically, as a company outgrows its building, it develops a need for more space, and thus a new location. In a retail setting, the desire is to add new stores while reducing underperforming or older units. In each of these situations, the property to be sold, known as the relinquished property, is exchanged with the property to be purchased, known as the replacement property.

At the sale of the relinquished property, the proceeds are not tendered to the seller, also known as the exchangor. Rather, they are placed into an escrow account with a qualified intermediary, who holds the funds for eventual disbursement to pay for the purchase of the replacement property. Exchangor has 45 days to identify a limited number of replacement properties and 180 days to close on the purchase of the replacement property. If these and other technical requirements of the tax code are met, the exchangor will be able to roll the proceeds from the sale into the new facility and be spared from paying any tax on the gain that otherwise would have been realized in a routine sale of the property. This type of exchange is commonly described as a deferred exchange.

Besides real estate, can any other type of property benefit from a 1031 Exchange?

Yes, provided the subject property is like-kind or like-class to the property being relinquished or replaced, as the case may be, personal property used in a business can qualify for the tax shelter effect of Section 1031. Besides real estate, it is not uncommon to see equipment and furnishings, collectibles or larger-ticket items such as aircraft, being exchanged under Section 1031.

Actually, there are certain types of property that are specifically excluded from Section 1031 treatment. This group includes property held primarily for sale, inventory, stocks, bonds and other securities, and notes and other evidences of indebtedness. In general, if the property is not on the excluded list, it can qualify for tax-deferred treatment provided it is like-kind or like class property.

Are there any types of transactions that qualify for treatment under Section 1031 other than the deferred exchange?

Yes. In addition to the deferred exchange, there are a few other types of exchanges worth mentioning:

  1. Simultaneous exchange. As its name implies, the consummation of the closing of the sale of the relinquished property and the closing of the replacement property occur at the same time.

  2. Reverse exchange. This is a more complicated, costly and less frequently-used exchange method. In it, the replacement property is actually acquired prior to disposition of the relinquished property. These transactions are sometimes referred to as parking arrangements because the replacement property is purchased and ‘parked’ with an exchange accommodation titleholder who holds title to the replacement property until the exchangor is able to sell the relinquished property.

  3. Multi-asset exchange. This is an exchange that involves both real estate and personal property. Typical examples include exchanges of hotels or restaurants. In such transactions, the exchangor will exchange the real property as one part of the exchange and the furnishings and equipment as the second part of the exchange, with careful attention paid to ensuring that the furnishings and equipment are separated into groups of like-kind or like-class property.

  4. Construction exchange. In the construction exchange, the exchangor is allowed to build on or make improvements to the replacement property which is parked with an unrelated entity much like in the reverse exchange method. The exchangor can utilize escrowed exchange proceeds from the sale of the relinquished property to fund construction on the parked property. However, construction cannot occur on replacement property the taxpayer already owns.

CLAUDE P. CZAJA is an associate in the Real Estate Practice Group at Gambrell & Stolz LLP, concentrating on commercial real estate and business transactions. Reach him at (404) 223-2218 or cczaja@gambrell.com.

Wednesday, 28 February 2007 19:00

Detection is crucial

An acquaintance of Mary Murray, M.D. was diligent in receiving yearly mammograms, which always came back negative for breast cancer. Yet during one self-examination, the woman discovered a lump about the size of a half-dollar. By that time, it had progressed to the lymph nodes. Ultimately, a mastectomy was necessary.

It’s just one scenario, but it’s the perfect example of why Murray stresses the three facets to detecting breast cancer: annual mammograms beginning at age 40, self-exams once a month and an annual clinical exam beginning at age 25.

“Mammograms can be falsely negative about 15 percent of the time. That means there is actually something in there even though the mammogram says there isn’t,” says Murray, the breast surgical oncologist for Akron General Medical Center. “That’s why the clinical exam is so important on top of that. We like to catch all (breast cancer) as early as we can.”

Smart Business spoke to Murray about what women can do to ensure early detection of breast cancer.

How important is it to maintain regular mammograms?

The general recommendation is to start getting them at the age of 40 and every year after that. In the past, they’ve said every one to two years, but I firmly believe every year women should have one every year. If you skip one year, you could miss a tumor from the year before. By the time we see a tumor on the mammogram, it’s approximately 1 centimeter in size, which is about the size of an eraser on the tip of a pencil. The year before, it was half that. It doubles every year, so if someone skips a year, it’s going to be two to three times the size the next year. By the time a woman feels a mass on a self-breast examination, it’s usually the size of a nickel to a quarter. You can see it’s real important because a screening mammogram is the earliest way to detect a lesion before it even becomes palpable.

What are the survival rates for discovering breast cancer in a mammogram as opposed to a self examination?

If you catch it early, when it’s still very small and it hasn’t spread to lymph nodes and blood vessels, it’s called Stage One, which has a 95 percent to 99 percent survival rate. At that point, it may be about completely curable.

People who find them during a self-exam; usually, they’re the size of a half-dollar. Those people tend to have a poor prognosis. By that time, it has gotten to such a large size that it has been able to invade blood vessels. When it has access to the blood vessels, it can land in any other part of the body. As far as a prognosis at that point, at the latest stages you’re looking at a survival rate of 50 percent or less. When it becomes that advanced it’s almost impossible to cure.

How can women with dense breasts ensure they are doing all they can to detect breast cancer?

When we’re looking at mammograms, the things that are abnormal show up white, but the dense breast tissue also shows up white. Fat tissue shows up as gray, so it’s easy to see those abnormalities. But with the denser breasts, you can’t tell by feel or touch.

A study out of Toronto, recently published in the New England Journal of Medicine, studied more than 1,100 women in Toronto over a 25-year period. They found women with denser breasts have five times the risk of women that have a more fatty breast. Of all the women diagnosed with breast cancer, about one in six have dense breasts.

When people have dense breasts, it’s almost impossible to read on a mammo-gram and it can mask cancers. It’s like looking for a polar bear in a snow storm. These women are often diagnosed later. If someone comes into my office with dense breasts, I will use a Gail Model risk score.

How does that help detect breast cancer?

It helps classify a woman’s risk for breast cancer. It helps stratify women as far as the risk, then from that model you can recommend chemo prevention to help stop the tumors from growing or even forming. That can reduce a woman’s risk of breast cancer up to 50 percent.

If a woman has a higher Gail Model risk score and she has dense breasts and I can’t read the mammogram, I’ll order an MRI. That’s something that is not clear-cut in the literature, but the American College of Radiologists have put out guidelines that suggest women with higher risk scores should have an MRI. Not everyone follows that, but I think it’s a good idea that these women get them. It’s the most sensitive test you can have in picking up breast cancers. Most of the time, if you have breast cancer, an MRI will pick it up.

MARY MURRAY, M.D. is the breast surgical oncologist for Akron General Medical Center. Reach her at (330) 670-9700.

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