Legalities & Realities®: The Blog

Artificial intelligence is everywhere. People use it hoping to avoid the time and expense of consulting with a trained and experienced lawyer. They use it to research legal issues (inaccurately), draft documents (improperly), and to receive quick answers to questions (which may not be correct).

Yes, when properly used it can provide a high-level overview of legal concepts and help people understand the vocabulary of a dispute, but context and nuance are important.

There is an important line people should remember:

AI is a tool. And tools need to be used properly. AI is not legal judgement or advice (it will even make that clear to the user). Judgement is where real legal outcomes are decided.

What AI Does Well—and Where It Stops

AI is good at summarizing general information. It can generally explain what a non-compete agreement is, describe the general concept of fiduciary duty, or outline the stages of litigation in broad terms. That can be useful background or to help someone get their bearings.

What AI cannot do is determine:

• What the actual law in your jurisdiction is
• Which facts actually matter
• Which facts are missing
• How a judge in your jurisdiction is likely to react
• In which direction the law may be shifting
• What strategic tradeoffs should be made
• When not to make an argument—even if it appears legally available

Law is not a multiple-choice test. It is analysis and applied judgement within the specific context of your specific situation. It is not cookie-cutter, particularly not in litigation.

Why Legal Experience Still Matters

Every licensed attorney has completed at least three years of formal legal education, prepared for and passed a rigorous bar examination, and ongoing professional and ethical training. But that is only the starting point.

What truly differentiates experienced legal counsel is pattern recognition built over decades:

• Seeing how similar disputes unfolded
• Knowing which arguments sound good on paper but will fail in court
• Understanding how opposing counsel typically operates
• Anticipating the procedural and strategic moves that are not obvious from statutes or case summaries

These insights do not exist in a database. They exist in experience. AI can retrieve information. It cannot replace judgement formed through hundreds or thousands of real cases, negotiations, hearings, and court decisions.

The Risk of “Mostly Right” Legal Advice

One of the most dangerous aspects of AI-generated legal content is that it can be almost right.

A document can appear polished while:

• Missing a critical exception
• Applying the wrong jurisdiction’s law
• Ignoring procedural requirements
• Assuming facts that are not legally supportable

In litigation and high-stakes disputes, “mostly right” can be far worse than obviously wrong. Small errors compound. Strategy built on faulty assumptions often collapses at the worst possible moment.

The Lawyer’s Role Has Not Changed—It Has Become More Important

As AI becomes more accessible, experienced lawyers play a more critical role, not a lesser one.

Our role is to:

• Filter noise from relevance
• Identify risk before it becomes exposure
• Apply judgement, strategy, and discretion
• Protect clients from unintended consequences

Technology can support that work. It cannot replace it.

How We View AI at Our Firm

We view AI the same way we view any tool:

• Useful when properly applied
• Dangerous when misunderstood
• Never a substitute for professional responsibility
• Always verified

We welcome informed clients. We also believe clients deserve advice grounded in law, experience, and accountability—not algorithms.

The Bottom Line

AI may help you understand the landscape. An experienced lawyer helps you navigate it. When your business, assets, reputation, or future are at stake, judgment matters more than speed, and experience still wins.

With offices in Albany, Buffalo, Rochester, and New York City, we can help you across New York State.

To learn more about these topics, check out our Legalities & Realities® Podcast and blog posts.

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart.

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.

Every year, divorce filings rise sharply in January and February. For professionals, executives, and business owners, the reasons are as strategic as they are personal.

Understanding why this happens matters. Timing can materially affect outcomes involving income, business equity, valuation dates, tax treatment, parenting arrangements, and long-term financial security.

1. The Holiday Season Creates Pressure, Not Resolution

For many households, the final quarter of the year is not a time of clarity—it is a time of containment.

Professionals, executives, and business owners often enter the holidays already managing significant stress:

• Year-end financial obligations and bonuses
• Business performance reviews and planning cycles
• Travel, family expectations, and compressed schedules

Rather than resolving marital strain, the holidays frequently intensify existing fault lines. Expectations of togetherness collide with unresolved issues, and the emotional and financial costs become harder to ignore.

Yet many people deliberately postpone decisions during this period.

2. December is a Planning Month, Not a Filing Month

What we consistently see is not impulsive decision-making, but quiet preparation.

December is often spent:

• Gathering financial information
• Assessing income streams, bonuses, and equity interests
• Thinking through business exposure and asset protection
• Considering the impact on children, reputation, and professional standing

For many of our clients, divorce is not an emotional event alone—it is a strategic inflection point. December becomes a time to understand options before acting.

3. The New Year Brings Psychological and Financial Clarity

January represents a reset.The holidays pass. Business cycles restart. Financial numbers crystallize. The emotional noise recedes. What remains is a clearer view of reality—and a renewed willingness to act.

For many, the question becomes less about whether change is necessary and more about how to proceed intelligently.

This is why filings rise sharply in January and February. Decisions that were deferred during the holidays are finally executed.

4. Timing Matters More When Assets Are Complex

For individuals with closely held businesses, partnership interests or equity compensation, professional practices, or variable income, bonuses, or carried interests, the timing of a divorce filing can materially affect:

• Valuation dates
• Cash-flow analysis
• Support calculations
• Tax exposure
• Negotiation leverage

January filings are often intentional—not accidental—because they align with financial clarity and strategic positioning.

5. A Familiar Pattern for Experienced Lawyers. A Rare Experience for Clients.

For those of us who practice in this area, the seasonal rhythm is well known.For those living it, it is often disorienting, private, and deeply consequential.

That is why early, discreet consultation—before filings spike—can be very important. The goal is not escalation. It is informed decision-making, risk management, and control over outcomes.

A Final Thought

Divorce is not merely a personal transition. For high-income professionals and business owners, it is a complex financial and legal event that intersects with reputation, enterprise value, and long-term planning.

January and February bring action because December brings reflection.

Handled correctly, timing can be an asset—not a liability.

At The Glennon Law Firm, P.C., we represent professionals, executives, and business owners across New York in divorces involving large and/or complex assets.

With offices in Albany, Buffalo, Rochester, New York City, we can help you across New York State.

You may learn more about the nuances of divorce involving businesses or other assets by visiting these pages:

• High net worth divorce
• Equitable distribution
• Business valuation
• Prenuptial and postnuptial agreements
• Gray Divorce

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blogs:

• Blog Posts:
  • Dividing the Practice: How Professional Businesses Are Handled in a New York Divorce
  • Navigating the Complex Terrain of Business Divorce in New York: A Deep Dive
• Podcast:
  • Dividing Your Business In a Matrimonial Divorce in New York

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart.

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.

“Phantom equity” sounds like a theoretical benefit—something symbolic or soft. In reality, these agreements can lead to very real and very expensive legal disputes. When structured improperly or misunderstood by the parties involved, phantom equity can become the focal point of business divorces, executive litigation, and trust or estate disputes. 

Phantom equity plans, which are often meant to align incentives without giving away actual stock, can become legal landmines if not clearly defined or fairly executed. 

What is Phantom Equity? 

Phantom equity is a contractual promise to give an executive, employee, or partner a financial benefit that mirrors the value of real ownership, without actually granting stock, membership interest, or voting rights. 

Common forms include: 

• Phantom stock, which mimics the value of actual shares but carries no ownership. 
• Stock appreciation rights (SARs), which pay out the increase in company value over time. 
• Synthetic equity, a broader term often used in closely held or private companies where traditional equity structures are complex or undesirable. 

These are often used when: 

• Owners do not want to dilute control. 
• The business is privately held and hard to value. 
• The recipient is a key employee being incentivized with a long-term payout. 

Why it Leads to Litigation 

At their best, phantom-equity arrangements reward performance and align interests. But in practice, they often become the subject of dispute, especially when: 

• A triggering event like a sale, separation, or death occurs. 
• The business experiences rapid growth or valuation shifts. 
• The terms of the plan were unclear or inconsistent with how the parties operated. 
• One party claims they were denied payment, misled about his or her rights, or wrongly removed before vesting. 

Because there is no actual stock to refer to, everything depends on the contract and many of these agreements are drafted loosely or not updated to reflect changes in the business. 

Two Common Scenarios We See 

1. The departing executive 

An executive was promised phantom equity as part of the compensation package. Years later, the executive helps the company grow significantly, then leaves on less-than-ideal terms. When the company is sold, the executive expects a payout, but the company claims the agreement lapsed or that the value is far lower than expected. This often results in litigation over valuation, vesting, and contractual language. 

2. The inherited interest 

A business owner includes phantom equity in a trust or estate plan, intending to benefit a loyal key employee. But after the owner’s death, heirs or fiduciaries dispute the employee’s entitlement—questioning whether it was earned, vested, or properly documented. The result is often a trust or estate litigation tied to an executive compensation issue. 

Key Legal Issues in Phantom Equity Disputes 

• Valuation: How is the payout calculated? At what time and by whom? 
• Vesting: Did the recipient meet the conditions required to earn the benefit? 
• Termination language: Does the plan allow forfeiture if the relationship ends? 
• Change in control clauses: Is a payout triggered upon sale, merger, or restructuring? 
• Tax treatment: Are the parties aligned on how the payout is treated for tax purposes? 

Because phantom equity does not involve actual ownership, every detail must be defined in writing. And if it is not, the court will be asked to interpret vague or conflicting terms, often with significant money at stake. 

Best Practices to Avoid Litigation 

If you are offering or receiving phantom equity, here are tips to help protect your position: 

For Business Owners: 

• Clearly define valuation methods and payout timing. 
• Include vesting schedules and termination provisions that reflect your business goals. 
• Review the plan annually, especially if your company is growing or changing rapidly. 
• Ensure consistency between agreements, emails, and oral statements to avoid misunderstandings. 

For Executives: 

• Get independent legal advice before signing a phantom-equity agreement. 
• Ask how your payout will be calculated and under what circumstances it may be lost. 
• Understand the vesting timeline, change-in-control provisions, and tax implications. 
• Do not rely solely on verbal assurances—insist on clear documentation. 

Conclusion 

Phantom equity may be “synthetic,” but the legal and financial consequences are very real. These agreements are not window dressing. They are enforceable contracts that can fuel serious disputes if not handled carefully. 

At The Glennon Law Firm, P.C., we represent business owners, executives, and fiduciaries in high-value litigation involving phantom equity, executive compensation, and business ownership. If you are facing a conflict over a phantom-equity agreement—or want to avoid one—schedule a confidential consultation with our litigation team today. 

With offices in Albany, Buffalo, Rochester, New York City, we can help you across New York State.  

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Blog posts:
  • Understanding Business Divorce
  • Navigating the Complex World of Fiduciary Duties and Retaliation Protections: Essential Insights for Professionals and Executive
  • Legalities & Realities® Podcast: Business Divorce: Can You End Your LLC Business When Owners Don’t Agree?

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart. 

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly. 

When disputes arise among business partners, co-owners, board members, or operators, litigation often follows. Whether it is a breach of fiduciary duty claim, a misuse of company assets, or a deadlock among members or shareholders, these cases can quickly become high-stakes battles.  

One of the most overlooked—and contested—questions in these disputes is: Who pays the legal bills? And more specifically, can company money be used to pay them? 

Here are some guidelines if you own or operate a corporation, limited liability company (LLC), or partnership, and you are involved in a dispute—whether you are the one bringing the claim or defending it. 

What Types of Lawsuits Are Involved? 

These issues often arise in: 

• Derivative actions brought by minority owners claiming the controlling parties harmed or harming the business 
• Internal disputes where Members or shareholders are suing each other over control, access to financials, or diversion of funds 
• Claims of mismanagement, fraud, or breach of fiduciary duty 

Who Might Use Company Funds in a Lawsuit? 

In most cases, the parties seeking to use business funds for legal costs fall into two categories: 

• Owners or executives initiating a lawsuit—typically claiming they are doing so on behalf of the company to protect its interests (a derivative action) 
• Owners or Managers defending themselves against claims of wrongdoing (e.g., a managing Member accused of misusing funds) 

Why Is This Important? 

The misuse of business funds to pay for personal legal defense is not only legally risky, but it can also trigger additional claims. In many cases, the very act of using company funds to pay for legal defense inappropriately has become a central issue in the litigation itself, leading to orders to repay the business, claw back demands, or even fiduciary duty breach findings. 

How Does the Business Entity Type Affect the Issue? 

These rules apply across all types of businesses, whether it is: 

• A corporation with shareholders and a board of directors, 
• An LLC with managing Members, or 
• A partnership where general partners hold decision-making power. 

However, it is important to note that the entity’s legal form matters. For example: 

• Corporations often have bylaws or statutory provisions that allow (or limit) indemnification. 
• LLCs and partnerships rely more heavily on their operating or partnership agreements. 
• Some entities, like condominium associations, may be unincorporated and fall completely outside corporate indemnification rules. 

So, When Is It Permitted to Use Business Funds for Legal Fees? 

Only under very limited circumstances.  

Here is how it generally breaks down: 

• If the governing documents are silent, the general rule is no reimbursement or advancement of legal fees unless the court finds it equitable and justified under the circumstances. 
• If the lawsuit is in the company’s name, and the company benefits from the outcome, courts may allow the company to reimburse the plaintiff’s legal fees—but only after the case is successful and has created a benefit for the business. 
• If a company officer is defending a lawsuit and the company’s bylaws, operating agreement, or partnership agreement explicitly provide for indemnification, that officer may be entitled to use company funds—again, typically only if they acted in good faith and were ultimately successful. 

How Should You Protect Yourself or Your Business? 

1. Review your governing documents. 
2. Make sure your bylaws, operating agreements, or partnership agreements clearly address who may be indemnified, under what circumstances, and whether fees can be advanced during litigation. 
3. Act in good faith. 
4. Even if indemnification is available, it usually requires a showing that you acted honestly and in the best interests of the business. 
5. Do not assume reimbursement. 
6. If you are bringing a derivative action or defending one, do not expect legal fees to be covered unless the court specifically orders it or the governing documents provide for it. 
7. Consult experienced counsel early. 
8. These are high-stakes decisions with real consequences. The right legal strategy, and understanding what your business can and cannot pay for, can make all the difference. 

Final Thought 

Using company funds to pay legal fees in business disputes is not as simple as cutting a check from the business account. The rules are technical, the consequences are serious, and the optics can be damaging. If you are in a dispute involving your business or co-owners, make sure you understand where the law draws the line—and stay on the right side of it. 

If you are facing a partnership dispute, ownership battle, or derivative claim, our litigation team helps high-stakes clients protect what they have built. Reach out to schedule a confidential consultation.  

With offices in Albany, Buffalo, Rochester, New York City, we can help you across New York State.

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Blog posts:
  • Navigating Business Disputes: Understanding New York's Uniform Commercial Code (UCC)
  • Can a Corporation or LLC Sue or Be Sued in New York Courts? What Business Owners Need to Know

• Legalities & Realities® Podcast:
  • Business Divorce: Can You End Your LLC Business When Owners Don’t Agree?

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart.

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.

In high-net-worth families and business-owning households, trust and estate planning is not just about legacy—it is about control, continuity, and clarity. But what happens when something goes wrong, such as when an estate receives property that rightfully belongs to a trust? 

This issue, though often overlooked, can derail even the most well-crafted estate plan—and lead to litigation involving significant assets, such as business equity, investment accounts, or income-producing property. 

The Problem: Assets Meant for a Trust End Up in the Estate 

Trusts and estates serve different purposes. A trust typically offers control and protection for beneficiaries—especially when business interests or generational wealth are involved. A trust typically is planned for and controlled. An estate, on the other hand, is intended to finalize a decedent’s affairs, subject to probate procedures, and some issues may be unanticipated and the estate must be administered under the situation in which it finds itself at the that time. 

Often times, a trust pre-exists an estate or is otherwise integrated with an estate plan. When a person passes away, that death may trigger certain rights to assets under the trust or the estate. But other times, the estate executor is simply unclear about what property enjoyed by the decedent belonged to the trust and which property belonged directly to the decedent, making it likely estate property at the time of death. Or certain property of decedent’s is supposed to go to a trust upon the death, but does not make it to the trust. 

Mistakes happen. Property intended for a trust might be titled incorrectly, deposited into an estate account, or retained by an executor who fails to recognize the trust’s superior claim. When that occurs, legal intervention may be required to correct the error. 

The Legal Fix: Compelling Return of Trust Assets 

New York law provides clear remedies when trust property ends up in the wrong hands: 

• Compelling the return of property: Under the Surrogate’s Court Procedure Act (SCPA) § 2102, a party can bring a proceeding to compel the estate’s fiduciary to return specific property or, if that property is no longer available, to pay its value to the trust. 
• Court-ordered transfers: Courts have the authority to issue orders directing executors to transfer misallocated funds or assets from the estate to the appropriate trust. This often includes not just the principal but any income the property generated while under estate control. 
• Fiduciary accountability: If an executor or trustee fails to protect trust assets or uses them improperly—for example, by commingling funds, delaying transfers, or making unauthorized investments—they may be held personally liable. Courts can order the fiduciary to restore the trust property and compensate for any losses. 

The Fiduciary’s Duty: The Prudent Investor Standard 

Trustees in New York are bound by the Prudent Investor Act (EPTL § 11-2.3). This statute requires trustees to manage and invest trust assets with care, skill, and caution, keeping in mind the goals of the trust and the needs of its beneficiaries. 

When a trustee allows trust property to remain improperly in an estate—or fails to act swiftly to recover it—he or she may violate this fiduciary duty. At best, this results in loss of trust; at worst, it triggers litigation and potential removal. 

Consequences of Misconduct: Removal and Sanctions 

Surrogate’s Court Procedure Act § 719 allows the court to suspend, modify, or revoke an executor’s or trustee’s authority without a formal petition if they have: 

• Commingled trust funds with personal or estate assets 
• Improperly managed trust or estate property 
• Become ineligible or disqualified to serve 

This is a powerful protection for beneficiaries and a warning to fiduciaries: mishandling trust property is not a minor error; it is a serious breach of duty. 

Why This Matters 

If you or your family relies on a trust to protect business assets, maintain privacy, or manage long-term wealth, the mishandling of trust property can have significant consequences. It can disrupt estate plans, harm beneficiaries, and delay asset distribution—especially in cases involving substantial income, equity, or business holdings. 

Whether you are a trustee, executor, business owner, or beneficiary, understanding these legal boundaries is important to avoiding disputes—or winning them. 

How We Help 

Our litigation team represents high-net-worth individuals, families, and business owners in complex trust and estate disputes. When things go wrong—and when significant assets are at stake—we step in to resolve the matter swiftly and strategically. 

If you believe trust property has been wrongfully withheld or mismanaged by an estate, we can help recover what is rightfully yours. 

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between. 

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart. 

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• When a Fiduciary Fails: How SCPA § 2102 Protects Your Interests in Estates and Trusts; 
• The Prudent Investor Rule in New York: Fiduciaries Need to Know, Particularly In Trust & Estate Disputes; 
• Was Your Loved One Manipulated? When is a Will the Result of Undue Influence and How to Spot it; 
• 5 Reasons Why Trust and Estate Litigation Attorneys Are Essential for Resolving Trust or Estate Disputes; 
• Understanding In Terrorem Clauses and How to Avoid Costly Mistakes; and 
• When Fiduciaries Fail: Understanding Suspension and Removal in Trust and Estate Disputes 

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly. 

What Business Owners, Executives, and Professionals Need to Know About Set-Offs in New York Litigation 

When disputes arise—whether in a business breakup, a trust and estate controversy, or a complex financial matter in divorce—multiple parties are often named as defendants. But litigation rarely unfolds neatly. Some parties settle early. Others go to trial. And when a damages award is issued, the question becomes: how do those earlier settlements affect the final judgment and damage award? Simply stated, they count as payments made on the final damage award. 

In New York litigation, this issue is governed primarily by General Obligations Law (GOL) § 15-108 and certain provisions of the Civil Practice Law and Rules (CPLR). Understanding how these rules work is important for all parties, whether plaintiffs, settling defendants, and non-settling defendants alike. 

What is a Set-Off? 

A “set-off” is a legal credit. If a plaintiff settles with one defendant, the amount recovered in that settlement is applied as a credit to reduce the final damages awarded against the remaining defendants at trial. This prevents a plaintiff from recovering more than their actual loss—commonly referred to as avoiding double recovery. 

The Governing Rule: GOL § 15-108  

Under GOL § 15-108(a): 

• If a plaintiff gives a release or covenant not to sue to one of multiple parties liable for the same injury, that release: 
• Does not discharge other liable parties unless the release says so, and 
• Reduces the plaintiff’s claim against the remaining defendants by the greatest of: 

1. The amount stipulated in the release, 
2. The amount actually paid, or 
3. The settling party’s equitable share of the damages. 

This applies in tort actions, including those involving personal injuries, property loss, wrongful death, and other types of civil harm. 

An Example

Imagine a business dispute where two companies are sued by a former partner company. One company settles with the plaintiff before trial for $300,000. The second company goes to trial, and the jury awards the plaintiff $1 million in total damages. 

If the second company (which went to trial) is found 50% responsible, and the settling company’s equitable share is determined to be 50%, the court must reduce the $1 million verdict. The reduction will be the greatest of: 

• $300,000 (amount paid), 
• $300,000 (stipulated in the release), or 
• $500,000 (50% of $1 million). 

Here, the verdict would be reduced by $500,000, and the remaining defendant would owe the plaintiff the other $500,000. 

But what if the jury awarded plaintiff only $400,000? Then the $300,000 is a credit and the second company would owe only $100,000.  

If the jury awarded plaintiff $300,000 or less? Then the second company would not have to pay anything to plaintiff. 

The Aggregate Approach: When There Are Multiple Settlements 

Courts in New York favor the aggregate method when calculating set-offs. That means all the settlement amounts are added together and compared to the combined equitable share of all settling defendants. The set-off is the greater of the total settlement paid or total share of liability assigned to those parties. 

This approach promotes fairness, ensuring plaintiffs are made whole—but not more than whole—while non-settling defendants pay only their proportionate share, no more. 

Special Considerations 

• Timing matters: To preserve the right to a set-off, defendants typically must assert it in their answer as an affirmative defense. However, courts can allow post-verdict motions if doing so causes no prejudice to the plaintiff. 
• Social Security or other collateral sources: Under CPLR 4545, defendants may seek additional offsets for benefits paid to the plaintiff from certain collateral sources, like insurance or government benefits. This requires separate application and evidence. 

Effect on contribution rights: Under GOL § 15-108(b), a settling defendant is shielded from contribution claims by non-settling defendants. Once a party settles in good faith, he or she is out of the case—and out of reach for any further payments from other defendants. 

Key Differences Between Plaintiffs and Defendants 

• Plaintiffs must weigh carefully whether to settle with one party and proceed against others. Strategic settlements may lock in value while preserving the right to trial—but could limit total recovery if not structured properly. 
• Settling defendants may benefit from certainty, limit future liability, and exit the litigation—but must ensure the release complies with GOL § 15-108 to protect against contribution claims. 
• Non-settling defendants should track all settlements closely, demand disclosure, and assert their right to a set-off early. If other defendants have paid large sums, those amounts could significantly reduce their exposure at trial. 

What You Should Do 

Whether you are a business owner resolving internal disputes, an executive involved in an employment or contract dispute, or a trustee or beneficiary entangled in a complex estate fight, this area of law can have significant financial consequences. 

Before deciding whether or not to settle, speak with litigation counsel who understands how GOL § 15-108 and related provisions apply to your situation. In high-value disputes, the math matters—and a strategic approach to settlements can be the difference between a fair resolution and a costly mistake. 

Our litigation team advises businesses, professionals, and fiduciaries across New York in high-stakes disputes. If you have a question about litigation strategy, verdict exposure, or settlement risks, we are here to help. 

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between. 

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart. 

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Dividing the Practice: How Professional Businesses Are Handled in a New York Divorce; 
• The Cost of Love: How High-Net Worth Divorce Settlements Really Work  
• Legalities & Realities® Podcast: Dividing Your Business In a Matrimonial Divorce in New York 

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly. 

When professionals, executives, or business owners enter into employment contracts or sell a company, they often agree to restrictive covenants, such as non-compete clauses. But what happens when those restrictions are violated—or when enforcement is delayed? Can the period of restriction be paused or extended? Yes, it is possible. 

In New York, the concept of “tolling” plays a key role in these situations. Whether included by contract or applied by a court, tolling can determine how long a non-compete restrictive period lasts—and whether it is enforceable at all. 

Here is what you need to know. 

What is a Tolling Agreement?  

A tolling agreement in the non-compete context is a clause that allows the period of restriction (e.g., one or two years) to pause or extend during any time the agreement is being breached. 

For example, if a contract states that a former employee may not compete for 12 months, but that employee secretly violates the restriction for six of those months, a tolling clause can extend the restriction to cover the time lost due to the breach. 

Even when not explicitly included in the agreement, courts can apply equitable tolling to prevent a breaching party from benefiting from his or her own misconduct. 

Tolling in Employment Contracts vs. Business Sale Agreements 

New York courts treat tolling differently depending on whether the restrictive covenant arises out of an employment relationship or a business sale. 

Employment Agreements: Strict Standards 

• Courts apply narrow scrutiny to non-compete clauses in employment agreements. 
• Express tolling clauses can be enforced, especially if the employee received legal counsel and compensation. 
• Courts are more cautious about equitable tolling and often refuse to extend the covenant unless there is clear evidence of bad faith or concealed violations. 
• Mere departure to a competitor—even if in breach—without deception may not justify tolling. 

Business Sale Agreements: Greater Flexibility 

• When a non-compete is part of a business sale, New York courts are more inclined to enforce and toll the restriction. 
• This reflects a desire to protect the buyer’s investment, goodwill, and the value of the business. 
• Even without a tolling clause, courts have extended the restriction where the seller secretly violated the agreement. 
• Courts view tolling here as a way to ensure fairness and prevent a seller from undermining the deal through deception. 

Equitable Tolling vs. Contractual Tolling: What is the Difference? 

• Equitable Tolling applies when a court exercises its discretion, usually to prevent a party from benefiting from a hidden or bad-faith breach—especially common in business-sale disputes. 
• Contractual Tolling occurs when the agreement explicitly states that any time spent in breach pauses or extends the restriction time period. These are more likely to be enforced, especially in employment contracts where clarity and legal representation are evident. 

Why It Matters 

Whether you are: 

• Hiring an executive with a past employer restriction, 
• Selling your business and signing a non-compete as part of the deal, 
• Or facing allegations of violating a restriction yourself, 

…tolling provisions can affect your risk, timeline, and options. 

They can revive a previously expired restriction, extend a current or pending one, or even be dismissed entirely if poorly drafted or improperly applied. 

Key Takeaways for Executives and Business Owners 

• Do not assume the clock starts ticking on a non-compete the day someone leaves the company. It may be paused or extended by a tolling clause or a court ruling. 
• Employees face stricter scrutiny: courts require clear proof of bad faith and are hesitant to rewrite contracts. 
• Business sellers face broader exposure: courts aim to protect the buyer’s investment and are more open to equitable tolling. 
• Always review and negotiate tolling clauses—they should not be boilerplate. 
• If you are in a dispute, understand how tolling might affect your strategy and timelines. 

Need Help Navigating a Restrictive Covenant or Dispute? 

At The Glennon Law Firm, P.C., we advise high-level professionals, executives, and business owners on complex disputes involving employment and business agreements, including the enforceability and strategic use of tolling provisions. If you are dealing with a restrictive covenant or facing enforcement, contact us to protect your rights and advance your position. We help employers and employees. 

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between.  

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart. 

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Preliminary Injunctions and Business Asset Sale-Based Non-Compete Agreements: A Comprehensive Guide; 
• Navigating the Duty of Loyalty in New York: A Guide for Employers and Employees 
• Legalities & Realities® Podcast: Severances and Separation Agreements: What to Consider 
• The Glennon Guides: Am I Stuck In This Practice?: A Guide On Non-Compete Agreements For Doctors, Nurses, Dentists, And Other Health Care Providers  

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly. 

When you invest in real estate, build a business, or manage significant assets, you expect to enjoy the use and economic benefit of your property without undue interference. Yet, in New York State, local governments sometimes impose regulations or procedural hurdles that, while falling short of physical seizure, can significantly damage the value and usability of your assets. In certain situations, those heavy or targeted regulations interfere with your business and can be consider an unlawful taking of your property. 

Understanding your rights under the Fifth Amendment’s Takings Clause is critical to protecting your investments. 

What is a Regulatory Taking? 

The Fifth Amendment provides that private property shall not be “taken for public use, without just compensation.” While most people associate “takings” with physical appropriation (such as eminent domain), the law also recognizes regulatory takings—when government regulations or actions go so far in restricting property use or reducing its value that they are tantamount to an actual taking. 

In New York, these disputes often arise when municipalities enact or enforce zoning ordinances, environmental restrictions, or property maintenance regulations that significantly impact how a business owner can use his or her land or real estate holdings. 

Two Main Types of Regulatory Takings 

1. Categorical Takings: These occur when the government’s actions either physically invade the property or completely deprive the owner of any economically viable use. If a regulation renders a property completely useless for any productive purpose, it constitutes a categorical taking requiring compensation. 
2. Non-Categorical Takings: These are more nuanced and require a case-by-case analysis. Even if some use remains, a taking may be found if the government’s actions severely diminish the property’s value or interfere with investment-backed expectations. 

The U.S. Supreme Court has developed a flexible, fact-intensive test—known as the Penn Central Test—to determine whether a non-categorical taking has occurred. This test considers: 

• The economic impact on the property owner 
• The extent of interference with the owner’s reasonable investment-backed expectations 
• The character of the government’s action, including whether it singles out the owner unfairly 

How Claims Arise Against New York Municipalities 

Business owners and investors across New York often face escalating regulatory demands, shifting zoning approvals, and even strategic delays that can seriously disrupt projects or reduce the profitability of commercial property. 

For example, a municipality might: 

• Continuously change zoning rules after development approvals 
• Impose repetitive inspections, fees, or procedural roadblocks targeting a particular property 
• Selectively enforce building codes or property maintenance standards in a way that disproportionately burdens one business or owner 

In these cases, even without an overt taking, the property owner may have a strong regulatory takings claim if the government’s actions substantially interfere with the ability to derive value from an investment. 

Legal Burdens and How to Present a Strong Claim 

Courts scrutinize takings claims carefully. To succeed, business owners must: 

• Clearly identify the property interest affected (real property, not merely contractual rights like leases or lender agreements) 
• Quantify the economic loss, showing significant diminishment in property value or lost business opportunities 
• Demonstrate reasonable expectations based on existing laws and conditions at the time of purchase or investment 
• Show bad faith or unfair treatment, particularly if the government’s actions were targeted or arbitrary 

Vague or generalized claims—such as “the regulations made business difficult”—are not enough. Precise allegations, supported by detailed financial and factual documentation, are important. 

Protecting Your Rights: What New York Business Owners Should Do 

1. Maintain thorough records: Keep detailed documentation of your property’s valuation, regulatory communications, permit applications, and any changes in zoning or regulatory policies. 
2. Consult litigation counsel early: If you face unusual regulatory hurdles, consult an attorney experienced in complex property and constitutional litigation. Early action can prevent regulatory entanglements from escalating into more severe losses. 
3. Evaluate investment-backed expectations: Before acquiring property or expanding a business, understand not only current regulations but also the municipality’s historical enforcement patterns. 
4. Be proactive: If a municipality’s actions threaten the value or use of your property, do not wait until the damage is done. Timely legal action can preserve your rights and set the groundwork for potential claims under the Takings Clause. 

You may learn more about our firm and how we operate by visiting these pages: About Us and What Sets Us Apart. 

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between. To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Understanding Business Torts: What Business Owners, Executives, and Professionals Need to Know; 
• The Mohawk Doctrine: What Business Sellers and Buyers Should Understand 

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly. 

When trust or estate assets are involved—whether through inheritance, estate planning, or business succession—understanding the duties and responsibilities of trustees becomes essential. For New Yorkers, one of the key guiding principles in this area is the Prudent Investor Act, a statute that governs how fiduciaries, including executors of estates and trustees of trust, must manage and invest assets.  

When assets, whether business, investments, or cash, are involved in a trust or estate, this law should be on your radar. This law applies to both executors of estates and trustees of trusts, but because trusts tend to exist for longer periods of time than estates do, we reference trusts more frequently below. Remember that it applies in both situations. 

What Is the Prudent Investor Act? 

The Uniform Prudent Investor Act (UPIA), adopted by New York and codified in Estates, Powers and Trusts Law (EPTL) §11-2.3, modernized how executors and trustees are expected to invest estate and trust assets. It replaced outdated rules that restricted investments to narrow “legal lists,” and instead introduced a standard that reflects real-world investing: managing assets with prudence, strategy, and portfolio context. 

In short, the Act requires executors and trustees to invest assets in the same way a smart, capable investor would—with care, skill, and caution—but always with the best interest of the trust beneficiaries in mind. 

Key Principles of the Prudent Investor Rule 

Let us break down the core principles that the Act establishes, without the legal jargon. 

1. The Whole Portfolio Matters 

Executors and Trustees must evaluate investments not as stand-alone choices but as part of an overall portfolio. That means a single “risky” investment might be okay if it balances out other holdings and supports the estate’s or trust’s total return goals. This mirrors how a wise investor builds and manages a diversified portfolio. 

2. Every Investment Has to Make Sense for the Estate’s or Trust’s Goals 

The executor or trustee has to think about: 

• Complying with responsibilities to administer the estate properly and timely (executors) 
• The purpose of the trust (trustees) 
• Who the beneficiaries are 
• When distributions might be needed 
• The expected return and risk of each investment 

For example, a trust intended to support a retiree now will require different investment decisions than one meant to provide for grandchildren decades down the road. 

3. Diversify, Unless There is a Good Reason Not To 

Trustees are expected to diversify trust investments. That means spreading assets across different types of investments to reduce risk—just like any savvy investor would. The only exception? If the trust’s purpose is better served by keeping things concentrated. 

4. Review and Adapt Quickly 

When a trustee takes over, they must promptly review all assets and decide whether to keep or reallocate them to match the prudent investor standard. This is not a “set it and forget it” approach. Trustees have a duty to continuously monitor and adjust the portfolio as markets and trust goals change. 

5. Keep Costs Reasonable 

Managing money costs money, but the Act says only costs that are appropriate and reasonable are allowed. That means investment advisors, legal fees, and administrative costs all need to be scrutinized and justified. 

6. Delegating is not Dodging Responsibility 

Trustees can bring in outside experts, like financial advisors or managers, but they cannot walk away from oversight. The trustee must: 

• Choose the right expert 
• Clearly outline his or her role 
• Keep an eye on how they are performing 

If the trustee is careless in this process, they are still liable for any loss. 

Why This Matters in Disputes Over Wealth and Business Assets 

In our firm’s litigation work, especially involving trust and estate disputes, divorces involving business ownership, and business succession fights, the Prudent Investor Rule often comes into play when fiduciaries are present. 

Trustees, often family members or longtime advisors, may have made well-intentioned investment decisions that violate the Act. Failing to diversify, ignoring risk, or holding onto old business assets too long can trigger breach of fiduciary duty claims, leading to courtroom battles. 

Understanding these duties, and holding executors and trustees accountable to them, is important to protecting the assets that you or your family have spent decades building. 

What Should You Do? 

If you are: 

• Setting up a trust involving business or investment assets 
• A beneficiary questioning whether trust funds are being wisely managed 
• A trustee who wants to ensure you are following the law 
• In litigation involving trust or estate management or fiduciary duties 

…you should consider these issues.  

Our firm regularly advises and represents clients in high-stakes trust, estate, and business disputes across New York State, and we help ensure that the wealth you’ve worked hard to create is respected, protected, and properly managed. 

Want to learn more or schedule a consultation? Contact us today. We will help you understand where you stand and how to take action. 

We can help you in Albany, Buffalo, Rochester, New York City, and everywhere in between. 

You may learn more about us and how we operate by visiting these pages: About Us and What Sets Us Apart. 

To learn more about these topics, check out our Legalities & Realities® Podcast and other related blog posts:  

• Uncovering Hidden Estate Assets: Understanding SCPA 2103 Proceedings in New York, 
• When Fiduciaries Fail: Understanding Suspension and Removal in Trust and Estate Disputes, 
• When the Court Steps In: Suspending, Modifying, or Revoking Fiduciary Authority in Trust or Estate Matters, 
• Advice and Direction: Empowering Fiduciaries to Make Confident Decisions, 
• Don’t Put All of Your Eggs In One Basket (or Bank) -- Why Trustees and Executors Should be Following the Bank Closing News.  

This blog post is for informational purposes only and does not constitute legal advice. For specific legal counsel, please contact our office directly.