So You Think Your Corporation or LLC Protects Your Personal Assets? Guess Again!!

John Catsimatidis is a self-made success. Starting with one supermarket in upper Manhattan in the early ’70s, he grew the Red Apple chain to ten stores by the time he was 24. In 1986, The Red Apple Group acquired the renowned Gristedes chain, and now they were the largest supermarket group in Manhattan. A tough area to grow a retail chain. The group also began to acquire and develop real estate. Catsimatidis runs a successful business and employs many of the local residents. He has expanded into fuel, convenience stores and a wide range of business operations.

Like most business owners, John believed his corporation provided a “firewall” against business-related lawsuits reaching his personal assets. Tragically, John was wrong. In a recent case called Irizarry v. Catsimatidis, the United States Court of Appeals for the 2nd Circuit held John, as the supermarket’s owner, chairman, and CEO, was an “employer” within the meaning of the Fair Labor Standard’s Act (FLSA) and therefore was held personally liable for millions of dollars in damages in FLSA collective-action liability.

What is so disturbing about this Court of Appeals decision is the Court reached this absurd conclusion even while acknowledging there was no evidence that the owner himself either was responsible for the FLSA violations or ever directly managed or interacted with the plaintiffs. Believe it or not, the FLSA does not definitively say who qualifies as an “employer”. Where allegations of personal liability are concerned, the courts decide the matter case-by-case, taking into account all of the relevant circumstances. They do so against the backdrop of the FLSA’s broad remedial purposes and its “expansive interpretation,” as the Second Circuit put it.

From working in his Uncle’s market to building highly successful retail, real estate and product companies, it can all be taken away even if you personally didn’t do anything wrong. It’s called vicarious liability. One can only hope that John’s personal estate planning lawyer offered to perform comprehensive asset protection planning and he took his lawyer’s advice.

Are you a self-made success? Do you employ many employees and now understand the same people whom you help put food on the table and a roof over their heads could be the ones who try to take away your food and shelter? It happens, just ask John Catsimatidis. But it doesn’t have to be this way. You can fight back by using the legal “firewalls” to remove the “profit from the plaintiff’s pursuit” creating doubt as to collectability.

Jeffrey M. Verdon Law Group, LLP works with high-risk families and business owners to protect their hard-earned wealth from the kinds of risks encountered by John and others meeting his fate. We are AV rated by Martindale-Hubbell with over 25 years of experience in comprehensive estate planning with asset & lifestyle protection.

Contact us for a complimentary estate planning review to assess your exposure so what happened to John doesn’t happen to you.

Posted in Client Alert and tagged , , , , .