By JODI SOKOLOWSKI
Buffalo Law Journal

Court decisions and legislative changes can have a sweeping impact on a company's operations and the cost of doing business.

"Court decisions, in subtle ways, affect all sorts of business practices and change the way businesses do business," said John Zak, a Hodgson Russ LLP partner.

Legislation can be equally impactful, as illustrated by one recent tax-code change.

If U.S. companies make money overseas and want to repatriate the funds, they have to pay a tax. But in the past few years, the IRS decided to temporarily lower that tax to encourage companies to bring the money back to reinvest it here rather than overseas, Zak said.

"Maybe the profits were used to invest in the United States or to pay dividends or increase salaries," he said. "It clearly had an impact on business. That's just one example of things that happen everyday."

We asked lawyers to highlight some other influential rulings and laws that are changing the way companies conduct business.

E-discovery pitfalls

A recent ruling is forcing companies of all sizes to create document-retention and -destruction policies in case they are sued or need to sue another entity.

"People don't even know what information they have, so it's a real shock to them when they find themselves in litigation and all of a sudden are forced to do a search," said Andrea Schillaci, a Hurwitz & Fine PC partner and chair of the Buffalo law firm's business-litigation department.

Schillaci said it seems not a week goes by when a new case involving e-discovery prompts more questions. But the Qualcomm Inc. v. Broadcom Corp. case has lawyers urging client companies to enact new or expanded document-handling policies and procedures.

In January 2007, a court determined that Qualcomm had infringed upon patents that Broadcom acquired. But the litigation didn't end there.

After the court learned of Qualcomm's discovery misconduct - the San Diego-based telecom company failed to produce 46,000 documents that could easily have been found through an e-mail search - U.S. District Judge Hon. Rudi Brewster issued a sanction order Jan. 7 of this year, referring six attorneys to the State Bar of California over their handling of the case. Brewster ordered the company to pay Broadcom's legal fees and costs, which amounted to more than $9 million.

The case provided a high-profile lesson for lawyers and corporate litigants about the consequences of not conducting e-discovery properly and following strict policies.

If a company's policy calls for disposal of electronic and hard-copy documents after seven years, for example, and a lawsuit arises the day after the documents are destroyed, that company is theoretically safe from allegations of misconduct, Schillaci said. However, if a company has a reason to believe that litigation is imminent, it has an obligation to retain all documents and suspend destruction.

"Just like a company periodically reviews its insurance coverage, this is something that should be done periodically too," Schillaci said.

The amount of electronic data that is sent and received can be endless, she noted.

"People are less careful of what they say in e-mails, so it's potentially a gold mine of information," Schillaci said. "People think it's erased, but it's not."

Cleaning up their act

On June 24, the state Legislature passed the New York State Brownfield Cleanup Law (S-8717, A-11768) to set caps on tax credits while still encouraging developers to clean up and develop sites.

Since the Brownfield Cleanup Program Act was enacted in 2003, said Nixon Peabody LLP partner Jean McCreary, the initiative has been criticized for favoring downstate projects after a few New York City-area developers qualified for hundreds of millions of dollars in tax credits for large commercial or residential buildings that involved modest cleanup work. The state was faced with more than $3 billion in potential brownfield tax-credit liability and $1 billion in guaranteed tax credits for 54 projects in the pipeline.

"Several downstate projects sucked up the money and depleted the funds allocated to the program," said Marc Romanowski, a Harter Secrest & Emery LLP partner.

In a series of cases, he said, judges found that the state Department of Environmental Conservation's methods were "arbitrary and capricious." So in April, the Legislature passed a 90-day moratorium, which is set to expire July 23, to prevent the DEC from accepting new applications to the program.

The amendments now cap the tangible property-tax credit at $35 million or three times the cleanup and site-preparation costs, for nonmanufacturing properties, and at $45 million or six times those costs, for manufacturing sites.

The amendments make the tax credits more equitable between regions, Romanowski said, because "downstate values are so much higher that it makes remediation costs a much smaller (portion) than the total value of the project."

It's a "boon" for Western New York, he said, because the revised law makes "dirtier" former industrial sites such as some on the Buffalo waterfront more attractive for developers.

Site redevelopment "won't seem as insurmountable as it had in the past," Romanowski said.

IDA ideas

A statute governing industrial-development agencies - it expired July 31, but has been extended through Jan. 31 - allows civic facilities, such as charter schools, to be financed by tax-exempt industrial-revenue bonds.

"There was a flurry of activity to get as many deals closed as possible, because the Legislature wasn't sending any positive signals that the provision would be extended beyond Jan. 31," said Anthony Mancinelli, a Harter Secrest & Emery LLP partner.

A reform package pending now would increase transparency and accountability for the entire IDA process, require that projects be subject to union-friendly prevailing wages and apprentice rules and require green buildings for certain projects, he said. The Assembly already passed it, but the Senate has not yet agreed.

The bill's critics say its provisions will increase development costs by at least 60 percent, if not more.

"It certainly increases the bureaucratic requirements and potentially changes the cost-benefit equation," Mancinelli said, "so the cost of compliance might outweigh the value of the benefits conferred through IDA assistance."