What to Do When You Are Served with a Lawsuit

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



For many individuals and businesses, being served with a lawsuit is an uncommon, or possibly even a once-in-a-lifetime, situation. Litigation can be stressful and being served with a lawsuit is often surprising as well.  However, in all situations when you or your business is served with a lawsuit, there are three simple, basic steps to best preserve your rights and protect yourself from the outset.

  1. Make Some Quick Notes

Often, as a result of the frustration or surprise associated with being served with a lawsuit, most people don’t pay attention to the details of how they were served. These details can be very important. There are specific rules and procedures about proper service of lawsuits, depending on the type of lawsuit and the court.

Take a few minutes to jot down notes related to the service. Specifically, identify the date and time of service, the manner of service including whether a sheriff or process server handed you papers or if the lawsuit was received by first-class or certified mail, and the recipient of those papers. These may be important facts for your attorney to know in determining whether or not service was proper and if you should contest service as a result.

Also, don’t assume that service is improper without getting legal advice. In some instances, service by mail or serving papers on your 16 year old son or daughter when you are not home can be proper service. Continue reading »

Short-term Rentals Via Internet Outlets: Three Tips for Homeowner & Condominium Association Boards

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



Community associations continue to struggle with the emergence of the “sharing economy” issues raised by AirBnB, VRBO and other online outlets (see CNN Money article: Why everyone is cracking down on Airbnb).

When addressing these issues, condominium, townhome, and neighborhood association boards should consider the following steps as a proactive approach to maintaining their desired community environment:

  1. Be vigilant. The good news is that you are only a few mouse clicks away from finding out whether your owners are making short term or transient leases. Nearly all of these sharing economy services are online and searchable by location. Additionally, urge other residents to keep an eye out for new faces on a regular basis.
  1. Know the rules. Does your association prohibit short term leasing or lodging? Is permission required to rent? Do tenants have access to all common areas?  The answers to these questions should all be found in your governing document, the declaration or indenture and possibly in your rules and regulations as well. Know the rules of the game and consider whether they should be updated or amended to address emerging issues.

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No Vacancy – When Bed & Breakfasts Run Afoul of Condominium Communities

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



The popularity of vacationing or traveling via bed and breakfast lodging, or, as more popularly known, “BnB,” is rapidly on the rise. The concept allows an owner with a vacant house, condominium, apartment, or even a single room, to create investment property by listing the space on a website for rent to vacation and business travelers, often for very short stays and possibly as short as a single night. Property owners can make a little extra money, and travelers can often find better accommodations at lower prices. Add in the ease of use by listing your space on the internet – airbnb.com and vrbo.com are among the most popular sites – and this is a quickly expanding industry.

Frequently, the phenomenon overlooks the legal ramifications of being a short-term landlord, or essentially acting as a hotel or lodge. Some local governments are addressing the issue and requiring that property owners apply for permitting, pay taxes, or maintain compliance with other local rules relating to lodging or short-term leasing. However, the Airbnb concept also runs afoul of various considerations applicable to community associations, specifically condominiums and townhomes. Continue reading »

No-Fly Zones: Using Drones for Commercial Purposes

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



Drones are all the rage. Actually, drones are causing quite a rage as well.

Last weekend’s Super Bowl in Arizona was a “no drone zone,” where flying drone aircraft for purposes of getting a better view of the action was prohibited. In fact, all NFL games are no-fly zones for drones, as are nearly all professional sporting events and other outdoor stadium events where more than 30,000 people are present.

Drones are threatening to interfere with air travel near airports, and one crashed on the White House lawn recently. The recent explosion of drone usage by the public has even caused one major drone manufacturer to begin a software update for its vehicles that will prohibit them from entering air space in Washington, D.C., or near airports.

Unmanned aerial vehicle (“UAV” or drone) technology is one emerging area where the speed of technology has eclipsed the speed of the law. If you were lucky enough to receive a drone as a gift during the holidays and want to use it for personal use, the good news is that the Federal Aviation Administration (“FAA”) is not stopping you from doing so, as long as you do so in a reasonable manner and do not infringe on others’ rights.

However, commercial use of drone technology is a different story. Continue reading »

Concussions and Litigation: the Beginning of the End for Youth Football?

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



Last week, the NFL announced the settlement of litigation with former players claiming ongoing health challenges and medical problems associated with post-concussion syndrome. The effects of repeated and severe concussions from playing football (and other contact sports) has become a significant topic for the sports, medical and legal worlds alike in recent years. What was previously not considered to be a barrier for participation is now giving substantial pause when it comes to weighing the benefits of the sport, especially at the amateur level.

While many consider the NFL’s reported settlement a victory considering the potential damages and the duration of the proposed payout by the league, the issue is likely to create a ripple effect on amateur sports, especially at the youth and high school level.

The NFL and most colleges and universities have the financial ability and insurance coverage to defend and/or settle the increasing legal challenges, but lower level organizations, such as school districts, private schools, and private or charitable athletic organizations, might not. Along with this may come increased costs in the way of medical and training staff as well. Continue reading »

Missouri Supreme Court Upholds Foreclosure Laws

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



On April 12th, Missouri’s highest court granted lenders across the state a victory by ruling that banks only need to give defaulted borrowers, in foreclosure, credit for the amount of the foreclosure bid, as opposed to the fair market value of the property. The ruling is consistent with existing Missouri precedent, which, for decades, has maintained that the sale price of a foreclosed property is determinative with respect to the deficiency owed by the borrower to the bank, which is the remaining balance on the loan for which the lender can sue.

In the case, First Bank v. Fischer & Frichtel, the borrower, Fischer & Frichtel, a Missouri real estate developer, defaulted on loans to First Bank, which then foreclosed on properties securing the loan. First Bank purchased the property at the foreclosure sale. The lender proceeded to sue the borrower for the deficiency balance remaining on the loan. The borrower defended the case by alleging that the proper method of determining the deficiency was not the sale price at the foreclosure sale, but rather, the fair market value of the property. In so doing, the borrower essentially sought a modification of existing Missouri law with respect to calculations for suing on deficiency against a defaulted borrower. Fischer & Frichtel maintained that Missouri should align itself with other states which require a lender to determine the fair market value of the foreclosed property and apply that amount, which is generally higher than the foreclosure price, to the loan balance before suing a borrower.

The borrower argued that the current law often grants lenders a windfall after a foreclosure. Foreclosure sales require cash buyers on the day of the sale, except that the foreclosing lender can simply bid as a credit against the amount of the indebtedness owed by the borrower. This allows lenders to often easily outbid potential purchasers who may not have cash readily available. If the lenders obtain the properties at a depressed sale price at the foreclosure, they can then resell the property to a third party, in an arms-length transaction, and are entitled to keep any profits from the resale of the foreclosed property, without applying those profits to the borrower’s loan balance.

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Is Your Condominium Building Compliant With The Americans With Disabilities Act?

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



An aging baby-boomer generation and the increasing choice by empty-nesters to lower maintenance responsibilities and move into multi-unit residential buildings pose an interesting question for property managers and condominium board members. As a building’s age demographic increases, does a condominium association have an obligation to make the units or common areas accessible to persons with disabilities? Condominiums and other multi-unit residential developments present unique issues, because the building includes both private dwellings and public places. Some developments even include public commercial spaces as well. Given this dichotomy, building management will have to consider if, and what parts, of the building need to be accessible.

The Americans With Disabilities Act of 1990 (“ADA”) prohibits discrimination on the basis of disability in employment, public services, public accommodations and services operated by private entities and common carriers. However, according to a supplement issued by the U.S. Department of Housing and Urban Development, strictly residential facilities are not covered under Title III of the ADA. What may pose a dilemma for a condominium, though, is that certain common areas, which are located in residential facilities, are considered places of public accommodation in some circumstances. The ADA identifies 12 categories of places of public accommodation:

  1. Inns, hotels or places of lodging;
  2. Restaurants, bars or establishments serving food and drink;
  3. Movie theaters, concert halls or stadiums;
  4. Auditoriums, lecture halls or convention centers;
  5. Bakers, grocery stores or other sales or rental establishments;
  6. Laundromats, dry cleaners, banks, barber shops or other service establishments;
  7. Terminals, depots or public transportation stations;
  8. Museums, libraries or galleries;
  9. Parks, zoos or amusement parks;
  10. Nurseries and schools;
  11. Day care centers, senior centers or other social service establishments; and
  12. Gymnasiums, health spas or places of exercise or recreation.

Depending on the nature of the condominium building, some of these categories of places of public accommodation may be applicable. Property managers and the building’s board must consider the possibility that federal law imposes obligations to provide reasonable accommodations with persons with disabilities, whether residents or members of the general public. This is especially important if a building is considering renovations to common areas or commercial portions of a building.

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Supreme Court Ruling Protects Religious Organizations from Employment Discrimination Claims

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



On Wednesday, January 11, 2012, the United States Supreme Court granted victory to religious organizations across the nation by confirming that their First Amendment freedoms insulate churches and schools from certain employment discrimination claims. Some will consider this a landmark decision, and it may be the Court’s most significant church-state ruling in decades. The decision in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC confirmed churches’ and schools’ autonomy to make decisions about whom to hire and fire, when those employees have job duties related to the ministry of the organization.

The Court ruled against an elementary school teacher in her employment discrimination claim against Hosanna-Tabor Evangelical Lutheran Church and School, of Redford, Michigan, holding that the First Amendment protects the school from the reach of anti-discrimination laws, when the claims involve certain employees. The ruling was in line with many lower federal court rulings, but the issue had not previously been presented to the United States Supreme Court.

In the decision, written by Chief Justice John Roberts, the Court confirmed the “ministerial exception” to certain anti-discrimination laws, concluding that the courts could not force the school to reinstate the teacher, Cheryl Perich. Perich claimed she was fired because she pursued a claim under the Americans with Disabilities Act, alleging she suffered from narcolepsy.

While the Supreme Court confirmed the ministerial exception for religious organizations, such as churches and schools, it did not provide a strict test for determining exactly who was considered a “minister” for purposes of the exception. However, the Court’s ruling is clear that the exception applies to a class of employees broader than merely clergy. Perich was an educator, and was responsible for teaching secular courses, in addition to religion class, and she attended chapel with students. However, she had formal religious training and had recently been designated as a “called” teacher of the school, as opposed to a lay or contract employee. Chief Justice Roberts’ opinion is clear that her duties with respect to religious instruction at the school were sufficient for her to fall under the umbrella of the ministerial exception. The Court was further not persuaded that the small amount of time spent by the teacher teaching religion class during her work day was a significant factor, stating “the issue before us, however, is not one that can be resolved with a stopwatch.”

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Pension Underfunding Contributes To Illinois Credit Downgrade

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



A recent article by the St. Louis Post-Dispatch reports that the Moody’s Credit Agency has downgraded the State of Illinois’ credit rating to A2. The Post-Dispatch reports that this is the lowest mark Moody has given to any state, and, in part, the state’s severe pension underfunding has contributed to this credit problem.

The impetus of the story is new legislation passed by the Illinois legislature which outlaws “double dipping” by union officials. According to the article, union officials allegedly misused the pension system to secure large public pensions based upon short teaching stints and even substitute teaching for as little as a single day. Certainly this kind of abuse, if true, is, or should have been, discouraged by all the players involved, including both the state and the public pension plan trustees.

As highlighted by the rest of the article, Illinois continues to face a significant fiscal and budgetary problem, due to many factors, including public pension liabilities. The author notes that the crisis currently amounts to an $83 billion funding shortfall, resulting in the worst unfunded pension liability in the nation, with only 43% of the long-term pension obligations currently funded. Part of the fault certainly lies with the State of Illinois for its failure to fund in earlier, more prosperous times. If uncorrected, this funding shortfall will continue to cause headaches for Illinois lawmakers and public pension plans alike. Ultimately, if not corrected, the continuing trend could possibly cause personal financial losses to deserving retirees across the state.

While unions and public pension plan officials urge the state to fully fund the pension liabilities, lawmakers continue to evaluate plans for both the temporary and permanent fix to the state’s pension woes. Employees and retirees will be keeping a close eye on these legislative developments, and some options may threaten continued benefits for future and/or existing employees.

As the author of the article correctly points out, any attempt by the Illinois legislature to modify the retirement benefits of existing employees entitled to those pensions will almost certainly raise serious legal and constitutional questions that the Illinois, or perhaps even Federal courts, will ultimately decide.

Posted by Attorney Jeffrey R. Schmitt. Schmitt practices in commercial litigation including banking, real estate, construction, and other matters for individuals and businesses.

Bank Transfer Day and its Prospects for “Main Street” Banking

Jeffrey R. Schmitt

By Jeffrey R. Schmitt



November 5, 2011 marked “Bank Transfer Day” around the United States, as initiated by 27-year old Los Angeles art dealer Kristen Christian, via this facebook page in early October. The movement, purposefully or not, coincided with the Occupy Wall Street movement and spread throughout the United States, denouncing big banks and the Wall Street financial industry. Perhaps the greatest alleged perpetrator, and possibly the greatest victim, of the Occupy and Bank Transfer Day movements was Bank of America, who announced earlier this year it intended to implement $5.00 monthly service fees for certain deposit accounts. Bank of America’s plan imploded when other big banks failed to follow suit with their own fees, and Bank of America became the sole target of criticism for its planned fee policy.

The result, in part, was the concept of Bank Transfer Day, where consumers were urged to withdraw their deposits from big banks and move their money to smaller and locally run credit unions. The result, according to the Credit Union National Association (CUNA), was that more than 40,000 people signed up for accounts at credit unions on November 5th, corresponding to about $80 million in deposits.  CUNA represents most of the chartered credit unions in the United States, and reports that its members saw increases in new account activity during the month of October and early November, prior to Bank Transfer Day.

While Bank Transfer Day created headlines and long lines at credit unions on a Saturday morning, did it really have the desired impact on Bank of America and other big banks?  The answer is probably not, given the size of the market share that Bank of America and other top banks in the United States hold, a loss of even tens of thousands of customers in a given week probably does not represent much of a blip on the banks’ radars. In fact, most large banks are flush with deposits right now, given the unstable market and the desire for many people and investors to remain liquid. Additionally, banks are benefitting from the low interest rates on deposit accounts, which means that many consumers are not even shopping rates to find the best return on their deposits, as has historically been the case.

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