Month: June 2021

Entrepreneur from History | Sally Ride – STEM Outreach Extraordinaire & First Lesbian Astronaut

By: Shila Bayor

Sally Ride was born on May 26, 1951, in Los Angeles, California. After graduating high school, she went to Stanford University where she would ultimately earn her doctorate in physics. On June 18th, 1983, Ride became the first U.S. woman in space.  Apart from being an astronaut, Ride has inspired countless people, as she lived a life committed to science, education, and inclusion. Among those that she inspired is Penn State Dickinson Law’s very own Dean Dodge. Ride was Dean Dodge’s physics and astronomy professor at UC San Diego.

“As a young person on campus in the LGBT community, she was so inspirational to us. She was incredible and such a memorable professor.”

The impact of Ride’s work extends far beyond her time on campus and in space as she was an absolute trailblazer who was unafraid of growth. She founded multiple companies and was involved in many initiatives to introduce STEM to young boys and girls. Ride founded Sally Ride Science alongside a small group of her colleagues. The company, which is now a nonprofit organization, works to promote literacy and diversity in science, technology, engineering, and math (STEM). The organization continues in Ride’s name to inspire young people of all backgrounds. 

The Trailblazer

NASA began looking for women astronauts in 1977. Ride was a student at the time and responded to an ad she saw in the school newspaper inviting women to apply to the astronaut program.  She was one of six women selected!

On June 18, 1983, Ride became the first American woman to fly in space. She was an astronaut on the STS-7 space shuttle mission where her job was to use a robotic arm to help put satellites into space. Ride flew on the space shuttle again in 1984. While Ride had a remarkable career at NASA,  she also encountered a number of obstacles in her career, including gender-biased questions from reporters. 

Ride stopped working for NASA in 1987 and started teaching at the University of California in San Diego. During this period, Ride started looking for ways to help women and girls who wanted to study science and mathematics. This desire to help increase the participation of women in STEM would turn her to entrepreneurship.

Inspiring Women to pursue careers in STEM through entrepreneurship

During her life, Ride found herself drawn to entrepreneurship. In the 1990s, Ride, along with a group of astronomy and business professionals, came together to develop a website dedicated to covering news related to space and astronomy, www.space.com. With the explosion of the internet and the public’s appetite for space exploration, Ride and her colleagues knew that a website dedicated to all things space would satiate this need. Ride worked on crafting a strategic plan for developing partnerships in the areas of education and science, in an effort to make the website as far-reaching as it could be. Her hard work paid off when Discover gave Space.com ad space in their print publications. Ride was then named the first president of Space.com. From that position, Ride created a separate channel within the Space.com site, called SpaceKids. Ride created SpaceKids to curate kid-specific content related to space and to help inspire kids to take up careers in STEM. Ride’s focus on inspiring kids to take up careers in science served her well in her next business venture, Sally Ride Science.

 To address the lack of girls in STEM, Ride helped to create a program that would increase participation. She felt that a business would be the best approach to solving the problem so she organized, managed and assumed the risk of this enterprise. Ride recognized a need and decided to fill it. 

In the late 1990s, Ride convened the leading minds in STEM education from across the country to understand the problems facing women in science. At the same time, Ride also started writing children’s science books and began to work on the EarthKAM project with NASA, a project that enabled middle school children to learn about space from a camera on the space shuttle.

These events served to convince Ride, her life partner–Tam O’Shaughnessy, and three academics from EarthKAM – Terry McEntee, Alann Lopes and Karen Flammer – to create a company that would address young girls, science, and gender stereotypes.

When Ride and her colleagues first established the business, they named it “Imaginary Lines” as a tribute to both the lines on a map and Ride’s oft-quoted description of seeing the atmosphere from space as the “thin blue hazy line” and the fragile nature of the earth. “Imaginary Lines” was to be a science education company.

Raising money and finding investors for their project was challenging. Ride and the other founders sought funding in 2001 and were successful in raising just under $1 million, an amount that was short of their expectations. Finally, several business advisors pointed out that by branding Imaginary Lines with the ‘Sally Ride’ name they would have an easier path forward, and so, Sally Ride Science, Inc. was born. From the time they tied Ride’s name to the venture, she and her co-founders were able to get sponsorships for their science programs for young women from such diverse organizations as Exxon Mobil and Hasbro.

As an entrepreneur, Ride was unafraid of growth. Although Ride was an introvert, she had to step out of her comfort zone and develop sales skills to get doors to open for her company. She generated multiple streams of income by selling books online and getting corporate sponsorship for teacher training. The business pushed her and other founders to step out of their comfort zone and do things they had never done before.

After Ride passed away in 2012, Tam O’Shaughnessy became CEO of Sally Ride Science, Inc. and negotiated the acquisition of the organization by UC San Diego. Sally Ride Science at UC San Diego is now a nonprofit and continues its mission to inspire girls and boys of all backgrounds to study science and imagine themselves in science and technology careers.

Her relationship with her partner of 27 years

Ride and O’Shaughnessy met in the 1960s when they were just kids playing tennis. Instead of paying attention to the tennis match when they were sitting on the bench, they would chat and get to know each other. Later, when they were both in their early 30s they started spending more time together. Their romantic relationship grew in bits and pieces over a long period of time until they both finally realized that the romantic feelings were there. While O’Shaughnessy was openly gay to her friends and family, Ride was not and so their romantic relationship was a secret. When Ride left NASA and moved to California, they thought that was when they would finally start to be open with everyone. But then they started working on Sally Ride Science, which they needed corporate sponsorships for. Because of the fear of discrimination, they felt that they still could not be publicly open about their romantic relationship. They were together for 27 years and they kept their relationship a secret from the public the entire time. In Ride’s last days, while she was battling pancreatic cancer, she left the decision to make her sexuality public up to O’Shaughnessy. It was then that Ride came out as a member of the  LGBTQ+ community. Ride is still the first and only acknowledged LGBTQ astronaut.

Remembering Her

In 2003, Ride was added to the Astronaut Hall of Fame, which honors astronauts for their hard work. Until her death on July 23, 2012, Ride continued to help students study science and mathematics. Ride’s legacy lives on and she is still remembered for her work, contribution to science and commitment to inclusion. In 2013, Ride received the Presidential Medal of Freedom from President Barack Obama. Tam O’Shaughnessy accepted the medal on behalf of Ride. 

Ride was a phenomenal entrepreneur who fought for inclusion and diversity in STEM. Ride famously said,

“You can’t be what you can’t see.”

Ride’s life and legacy show the power of representation. This Pride, we should all be inspired by Ride’s legacy and her fight for inclusion.

Shila Bayor, at the time of this post, is a rising second-year student at Penn State Dickinson Law. She is from New York City and is a graduate of Bard College. Shila is currently the president of the Business Law Society and secretary for the Black Law Student Union.

 

 

Sources:

https://airandspace.si.edu/stories/editorial/sally-ride-entrepreneur-space-science-and-inclusion

https://www.space.com/40916-sally-ride-pride-inspiration-legacy.html

https://www.earthkam.org/about

https://www.npr.org/2021/06/22/1009098412/loving-sally-ride

Bring Your Own Device (“BYOD”) Policies: Trading a Technology Budget for Legal Issues?

By: Martin Risch

Entrepreneurs are always looking for ways that money is being wasted. When electronic advancements came into the modern workplace, few employees owned the new time-saving devices, such as Personal Digital Assistants (PDAs) and pagers. However, nowadays, the opposite is true. Few employees do not already own the electronic devices that assist with their work, such as smartphones and laptops. As a result, Bring Your Own Device (“BYOD”) policies were born; rather than having a company-issued phone or laptop, employees can bring their personal electronics instead. Some companies even offer to pay for a portion of a device’s cost, with the expectation that the employee will then use their personal device for work matters.

Why Would a Company Institute BYOD?

Both employers and some employees find these policies attractive. For instance, an employer does not have to buy these devices, and an employee does not have to ensure that they keep multiple devices safe, make calls on ‘the right phone,’ or use ‘the correct computer’ to work. Additionally, as the employee already owns the device, there are far fewer instances where employees have to get accustomed to a new interface or system. Another benefit of a BYOD program is increased employee satisfaction due to being able to use their preferred devices. Rather than the company providing a specific phone or laptop, the employee can instead use the device they would choose – seeing as they already did so.

IT Issues

IT departments are quick to point out a variety of issues that these policies cause. First, with a variety of devices, there is no guarantee that all are compatible with a relevant program. Is the company going to provide IT support to personal devices? If so, employees may have chosen devices that the IT department may have less experience with, increasing the time and effort required to troubleshoot. In addition, do the company’s firewall and security programs work on all of the devices chosen? However, these issues remain without an explicit BYOD policy.

Who “Owns” the Data?

There is also the issue of ownership of information. It is relatively easy to say that all of the information on a company laptop belongs to the company. After all, the employee signed a device usage policy detailing what the laptop is to be used for and it is company property.  With a BYOD policy, the device is still the employee’s personal property. They are likely to use it even when not working. So, who owns the data on the device at the end of the day? Now, if an employee leaves the company and does not want any data the company values, this is a nonissue. There are a variety of programs that companies can use to remotely delete employer data from personal devices – or even deleting all of the data off the device, including the employee’s personal information. Deleting data is easy; if the company wants the data, it can be significantly harder.

It is not difficult to imagine an employee creating a valuable list of suppliers or buyers. If the employee quits or is fired, who gets the list? Was it created with propriety data, or during working hours? Does a contract clarify that it is company property regardless? What if the employee was hired specifically due to their expertise in that field? Some company’s most valuable assets are their trade secrets. But who is the “owner” of the trade secret?[1]

Having a well-written contract stating the information is exclusively the companies helps. But, if an employee is fired, what is the practical effect of the contract if they refuse to give the data to the company or even destroy it? The contract may provide legal remedies, but they may not be adequate. Rather than simply getting the valuable data back, the company could be forced to sue the ex-employee and receive a favorable judgment. This forces the company to spend time and money trying to recover its data. If the data is unrecoverable, the company only gets some money from the ex-employee. If the company would not have sold the data for that price, the remedy is inadequate.

Trade Secret Protections

The earlier issues may be rather clear. However, establishing the company’s ownership of the data does not resolve all issues of a BYOD policy. Even data that is a protected trade secret before the employee is hired is not immune. A trade secret is only protected if it is valuable as a secret and “the owner thereof has taken reasonable measures to keep such information secret”.[2]  Here, the company is the owner. That is the easy part; far more difficult is defining the “reasonable measures.”  For example, a company may establish rigorous security settings and encrypt the relevant data on an employee’s device. However, is that enough? Few companies would want to risk destroying their trade secret protections based on the actions of employees. Remember, at the end of the day, these are employees’ personal devices. A work laptop may only travel between desks at home and work, but employees use their personal devices in a variety of places. The more places the device moves around to, the higher the risk of it being forgotten or stolen, and the company’s valuable data along with it.

Discovery

In fact, establishing the company’s ownership of data may have unintended consequences. Federal Rule of Civil Procedure 34 (“FRCP 34”) requires a party to produce during discovery, inter alia, the electronically stored information in the responding party’s “possession, custody, or control”.[3] Courts have found that relevant data on employee-owned devices must be produced when requested under FRCP 34, and the failure to do so has resulted in sanctions against the company.[4]  On the other hand, well-crafted BYOD policies have allowed other companies to avoid sanctions.[5]

This post has been reproduced with the author’s permission. It was originally authored on March 29, 2021, and can be found here.

Martin Risch, at the time of this post, is a rising third-year law student at Penn State Dickinson Law. His interests in law include intellectual property, international business transactions, contracts, and regulatory compliance.

 

 

 

Sources:
[1] 18 USC §1839(4).

[2] 18 U.S.C. §1839(3)(A).

[3] FED. R. CIV. P. 34(a)(1)

[4] In re Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., No. 312MD02385DRHSCW, 2013 WL 6486921, at *17 (S.D. Ill. Dec. 9, 2013), order rescinded sub nom. In re Petition of Boehringer Ingelheim Pharm., Inc., & Boehringer Ingelheim Int’l GmbH, in Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., 745 F.3d 216 (7th Cir. 2014), modified and order aff’d in part sub nom. In re Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., No. 312MD02385DRHSCW, 2014 WL 984911 (S.D. Ill. Mar. 13, 2014), Small v. Univ. Med. Ctr. of S. Nevada, No. 2:13-CV-00298-APG, 2014 WL 4079507 (D. Nev. Aug. 18, 2014), report and recommendation adopted in part, overruled in part sub nom. Small v. Univ. Med. Ctr., No. 2:13-CV-0298-APG-PAL, 2018 WL 3631882 (D. Nev. July 31, 2018), and report and recommendation adopted in part, overruled in part sub nom., No. 2:13-CV-0298-APG-PAL, 2018 WL 3795238 (D. Nev. Aug. 9, 2018).

[5] H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., No. 2:15-CV-00631-AJS, 2015 WL 12791338, at *2 (W.D. Pa. July 28, 2015), report and recommendation adopted, No. 2:15-CV-00631-AJS, 2015 WL 12792025 (W.D. Pa. July 31, 2015).

Photo Sources:

https://images.app.goo.gl/RafTabYsW65wnzPm7

https://arstechnica.com/gadgets/2021/02/the-worlds-second-most-popular-desktop-operating-system-isnt-macos-anymore/

https://www.trendmicro.com/vinfo/us/security/news/cyber-attacks/data-breach-101

The EEOC, Pride Month, and the Anniversary of the Bostock case

By: Adrianna Dunn

In observance of LGBTQ+ Pride Month and the anniversary of the Supreme Court’s landmark decision in Bostock v. Clayton County, the U.S. Equal Employment Opportunity Commission (EEOC) released new resources to help educate employees, applicants, and employers. One of the resources is a page on the EEOC website with information regarding sexual orientation and gender identity discrimination. The other resource is a new technical assistance document that aims to help the public understand what the Bostock decision means and the established EEOC positions on the laws it enforces. Below are some key takeaways from the technical assistance document.

What is Title VII and Who Does it Apply to?

The technical assistance document first gives a summary and explanation of the Bostock case. In this case, the Supreme Court recognized that discriminating against someone on the basis of sexual orientation or transgender status is discriminating against someone on the basis of sex, which is prohibited under Title VII of the Civil Rights Act of 1964. Title VII is a federal law that prohibits employers from discriminating as to any term, condition, or privilege of employment based on a person’s race, color, national origin, sex, and religion. Some specific areas where an employer cannot discriminate based on sexual orientation or gender identity are hiring, firing, furloughs, reductions in force, promotions, demotions, discipline, training, work assignments, pay, overtime, other compensation, and fringe benefits. Title VII applies to the federal government, employment agencies, labor organizations, and both the private and public sectors that have 15 or more employees. It applies regardless of citizenship or immigration status; however, it does not typically apply to independent contractors. Finally, because Title VII is a federal law, it applies nationwide regardless of state or local laws. Even if not required by law, it makes sense for all businesses to comply with Title VII.

What are some of the specific prohibitions regarding sexual orientation and gender identity?

The technical assistance document notes that because Title VII prohibits harassment and other forms of discrimination based on sexual orientation or gender identity, this includes those that are, for example, straight or cisgender.

The document further notes that an employer’s discriminatory action cannot be justified by customer or client preference. Discrimination is not allowed because customers or clients would rather work with those that have a different sexual orientation or gender identity. Also, employers cannot segregate employees because of actual or perceived customer preferences.

An employer cannot discriminate against an employee because that employee does not conform to society’s stereotypes about feminine or masculine behavior, whether or not the employer knows an employee’s sexual orientation or gender identity. This includes the way an employee decides to dress. An employer cannot require a transgender employee to dress in accordance with the sex the employee was assigned at birth. Also, using names or pronouns that are not in accordance with an individual’s gender identity can be considered harassment. The EEOC recognized that accidentally misusing a transgender employee’s preferred name and pronouns is not a violation of Title VII. However, intentional and repeated use of the wrong name and pronouns could contribute to an unlawful hostile work environment. For the conduct to be considered unlawful, it must be severe or pervasive when taking into consideration all other unwelcome conduct based on the employee’s gender identity, leading to a work environment that a reasonable person would consider intimidating, hostile, or offensive.

An employer may have separate, sex-segregated bathrooms, locker rooms, and showers for men and women. Of course, they can also choose to have unisex bathrooms, locker rooms, and showers. However, the EEOC takes the position that employers cannot deny an employee equal access to a bathroom, locker room, or shower that corresponds to the employee’s gender identity.

What can an individual do if their Title VII rights have been violated?

An applicant or employee in the private sector or state and local government can contact the EEOC for help in deciding what to do in these situations. If the individual decides that they want to file a charge of discrimination, the EEOC will investigate to decide if applicable Equal Employment Opportunity (EEO) laws have been violated. It is important to note that an individual must file within 180 days of the alleged violation, or 300 days if the employer is covered by a state or local employment discrimination law, in order to take further legal action. For more information on filing a charge, visit this site. To start the process of filing a charge of discrimination against a private company or a state or local government employer, visit the EEOC Online Public Portal or visit your local EEOC office.

Those in the federal government must contact the EEO Office at the federal agency they believe committed the unlawful employment discrimination. A federal applicant or employee has to request EEO counseling within 45 days of the incident. For more information on the federal sector process for alleging employment discrimination, visit the EEOC’s website.

Finally, an employer cannot retaliate against, harass, or otherwise punish an employee when the employee opposes employment discrimination that they reasonably believed was unlawful, when an employee files an EEOC charge or complaint, or when an employee participates in an investigation, hearing, or other proceeding connected to Title VII enforcement.

Adrianna Dunn, at the time of this post, is a rising third-year law student at Penn State Dickinson Law. She is from Wheeling, West Virginia, and is a graduate of West Virginia University. Adrianna is a Research and Teaching Assistant for Professor Prince.

 

 

Sources

https://www.justia.com/employment/employment-discrimination/title-vii/

https://us10.campaign-archive.com/?e=13a33fc926&u=41fab58a900ff039c399dedb8&id=d76b8bb4c0

https://www.eeoc.gov/laws/guidance/protections-against-employment-discrimination-based-sexual-orientation-or-gender

https://www.eeoc.gov/sexual-orientation-and-gender-identity-sogi-discrimination

https://publicportal.eeoc.gov

https://www.eeoc.gov/how-file-charge-employment-discrimination

https://www.eeoc.gov/field-office

https://www.eeoc.gov/federal-sector/federal-employees-job-applicants

Photo Sources

https://images.app.goo.gl/6SPddt1wcR7VMJL47

https://images.app.goo.gl/pNrWLQBdRSJHGG329

https://images.app.goo.gl/WqFs5LJX8QSok28R8

Real Estate Rental Investing: How to Protect Your Insurance Blind Spot

By: Jacob Ryder

Investing in rental real estate provides two main financial benefits: monthly cash flow from rental income and appreciation in home values. While these are substantial benefits for building wealth, there are also significant risks. The risk of extended vacancies, tenants who damage your property, and – the largest risk of all – the threat of personal exposure, can be daunting. The risk of being forced to use personal assets to satisfy debts incurred through rental activity has driven many investors to form LLCs for real estate investing. These types of investors (let’s call them ‘traditional LLC’ investors) purchase the rental property through an LLC to protect what they have worked so hard for – their personal assets. Personal ownership of rental property gives a creditor a direct line to use your personal assets to satisfy debts, including legal judgments.

When done properly, an LLC forms a ‘brick wall’ to cut off the direct line between creditors and your personal assets. While a traditional LLC investor might have an ‘LLC wall’ to protect personal assets from creditors, what about protecting the real estate asset that generates their financial returns? This is where the ‘traditional’ LLC investor’s formation falls short.

Will Property Insurance Cover it?

The traditional LLC investor’s rental property is not without any protection. If the investor went through the process of forming an LLC to avoid risk, there is a good chance the investor has also purchased insurance. While general property insurance will protect the structure from damage caused by wind, fire, hail, or lightning, this discussion centers on liability insurance and its shortfalls.

While a good thing to have, liability insurance protects the real estate investment from only a few, although arguably the most common, kinds of creditor actions in real estate investing. Generally, insurance protects against negligence – claims that the entity did not exercise ‘reasonable care’ in actions concerning the real estate asset and that the creditor was injured as a result. This ‘partial protection’ will fully protect the real estate asset in circumstances where there is coverage, but it will provide no protection where there is none. Claims that may not be covered by liability insurance include breach of contract, fraud, and other claims alleging intentional conduct. Without coverage, a direct line remains between the creditor and the real estate asset. The investor who already formed an LLC and purchased insurance to minimize risk has to ask, “How do I protect myself from this insurance blind spot?”

Two LLC Formation

As the traditional LLC investor, you already formed one LLC to protect your personal assets. Why not form another LLC to protect your real estate asset? Using two LLCs can offer protection for the insurance blind spot. The set-up is simple. The first of the two LLCs, the ‘traditional’ or ‘holding’ LLC, will only own the rental property. The second LLC, the ‘operating’ LLC, will handle everything, including every interaction with a tenant, repairman, or property management company. This LLC should have a bank account with enough money to pay for repairs as they become necessary. Therefore, the investor’s exposure is limited to the amount of money in the ‘operating’ LLC’s bank account. This protects in a similar way to the ‘LLC wall’ explained in the ‘traditional’ formation, but this time, it separates the rental property itself from creditors.

Illustration

Suppose Stacy, an investor, owns a multifamily rental property in town. The unit is valued at $100,000, and she used $30,000 of her own money to finance a purchase through an LLC. She has two happy tenants and collects $1,200 a month in rental income. Unfortunately, a tenant misunderstands what was promised in the lease, and the tenant brings a claim for breach of contract. While likely unrealistic, assume a court awards the tenant $75,000 in damages for the LLC’s breach of contract.

In the first scenario, let’s assume Stacy has the ‘traditional’ LLC formation to own her rental property. The lawsuit, in this case, would be against the same entity that owns the rental property. This is terrible news for Stacy. The creditor can attach the judgment against the property and possibly force the LLC to sell it. In this scenario, Stacy will only keep the rental property if she can fund the LLC with $75,000 and satisfy the debt. Otherwise, her best course of action will likely be to sell the rental property.

In the second scenario, let’s assume Stacy created the two LLC formation. In this case, the tenant will sue the entity it interacted with, the ‘operating LLC,’ which, as described above, only owns a bank account. Let’s assume there is $6,000, or five months of rental income, in the operating LLC’s bank account. By using two LLCs, Stacy has put up another ‘LLC wall’ between the creditor and her investment. Stacy’s risk in this scenario, instead of $75,000 worth of the rental unit, is only $6,000. Stacy can rest easy knowing that the creditor cannot force her to sell her rental property to pay off the debt.

Benefits and Costs

The two LLC formation not only protects personal assets, but it can also protect the rental property – something the investor worked equally hard for – when insurance does not. However, this is not a perfect solution. LLC ownership risks still exist, including the risks that a court will disregard the entity if the investor mixes business and personal funds and the risk that the individual will be directly liable for any acts they personally commit. There are also additional costs to form and maintain another LLC.

The ‘traditional LLC’ may protect your personal assets, but it leaves only the partial umbrella of insurance to protect your investment. Forming two LLCs can protect what insurance does not. Before choosing a form of entity, an investor should always weigh its costs and benefits. No solution fits every investor, and as always, an investor should always consult with an experienced attorney before making any legal decision.

This post has been reproduced with the author’s permission. It was originally authored on February 11, 2021, and can be found here.

Jacob Ryder, at the time of this post, is a 2021 graduate of Penn State Dickinson School of Law. Prior to moving to Carlisle, Pennsylvania to attend Dickinson Law, he was a resident of Olney, Maryland. He attended Towson University in Baltimore, Maryland where he earned his bachelors degree and played four years of Division 1AA football. Jacob was a comment editor for Dickinson Law Review and a research assistant for the professors who work in the Law Library. Following graduation, he will be pursuing his interest in business law as an associate at Morris, Nichols, Arsht & Tunnell in Wilmington, Delaware.

 

Sources

Smith v. Wells, 212 A.3d 554, 557 (Pa. Super. 2019).

Ward and Smith, P.A. (October 14, 2016) https://bit.ly/3p8aPiU.

Hyojung Lee, Joint Center for Housing Studies of Harvard University (August 18, 2017) https://bit.ly/2MRiy80.

Allstate, Homeowners Insurance vs. Landlord Insurance for a Rental Property (Updated January 2019) https://al.st/2Z2et3q.

Pennsylvania Department of State, Business Fees & Payments (last visited February 10, 2021) https://bit.ly/3p6ZyPV.

Photo Sources

https://bit.ly/3d2xB9E

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Real Estate Investing’s Big (Legal) Picture

By: Jacob Ryder

While there are significant advantages to investing in real estate, like the ability to use leverage and real estate’s low correlation to the broad stock market, there are also disadvantages. Possibly the most daunting to a new investor is the risk of legal liability and the seemingly unending world of laws in which the investor doesn’t know what she doesn’t know.

This blog post will highlight federal, state, and local laws that impact real estate investing in Pennsylvania. Real estate investing can take the form of an investor acting as a landlord, so this post will include laws applicable to the landlord-tenant relationship. While not a complete list, the information below will help highlight some of the biggest ‘red flags’ and provide links to additional resources. Having an idea of the legal framework and significant issues can transform the unknown and daunting risk of legal liability into manageable management practices and necessary costs.

Federal Regulations

While property ownership rules are typically found at the state level, several federal regulations apply to landlords and real estate investors.

The Fair Housing Act prevents landlords from discriminating based on race, color, religion, sex, disability, familial status, or national origin when renting homes. These protections apply to most residential property with certain exceptions, including owner-occupied buildings consisting of four or fewer units.

The Fair Credit Reporting Act protects consumers’ sensitive information within the credit reporting system. Unlike the general public, landlords are entitled to review ‘consumer reports’ (which include credit reports and rental histories) to screen prospective tenants. Importantly, landlords engaging in this screening method must comply with the Act’s requirements and use limitations, including providing adverse action notices to applicants. For more information on the requirements, visit the Federal Trade Commission’s page on a landlord’s use of consumer reports.

Possibly the most impactful federal rule is the eviction moratorium recently created by the Centers for Disease Control and Prevention (CDC) in response to the global health crisis caused by COVID-19. On September 4, 2020, the CDC issued an order temporarily preventing evictions. The moratorium has been extended at least through March 31, 2021. The CDC’s order prevents residential landlords from evicting certain individuals, including those who have suffered substantial income loss. Tenants must provide a signed declaration to their landlord before the restrictions are imposed. Importantly, landlords who violate the order are subject to criminal penalties. To learn more about the moratorium, visit the CDC’s answers to frequently asked questions.

Federal environmental law administered by the Environmental Protection Agency (EPA) requires landlords renting most buildings built before 1978 to provide lead paint disclosures. The landlord must provide the tenant an EPA-approved brochure, any known information about the building’s lead paint status, and a ‘lead warning statement’ as an attachment to the lease.

State Regulations

In Pennsylvania, the Landlord and Tenant Act of 1951 serves as the statutory basis for the landlord-tenant relationship. The Act covers many landlord obligations and rights, including rules regarding security deposits, notice and entry, licensing (when applicable), subleasing, and the prohibition of retaliation and recovery of possession. For a summary of Pennsylvania’s landlord and tenant law, read a Housing Equality Center (HEC) of Pennsylvania’s publication here.

In addition to statutory landlord-tenant law, there are judge-created laws that can apply to landlords. The most relevant of these judge-created laws appear below:

        • The implied warranty of habitability imposes a burden on landlords to provide every tenant with a safe, sanitary, and reasonably comfortable living space. This requires that the property be fit to live in, not aesthetically pleasing. Significantly, parties cannot modify this by contract.
            • A landlord’s failure to comply with this minimum standard gives the tenant several options: terminate the lease and leave, reduce monthly rent, or remain in the property and sue the landlord for damages. For more on tenant remedies, read HEC’s report.
        • The implied covenant of quiet enjoyment restricts the landlord’s ability to use or access the tenant’s property. Landlords cannot unreasonably or excessively intrude on the tenant’s right to possess the property. Usually, this requires the landlord to give advance notice and to enter during reasonable hours, but parties can modify this obligation by contract. Breach of this rule can act as a breach of the lease agreement.
        • Landlords must also refrain from using ‘self-help’ to effectuate evictions. Self-help is when a landlord takes certain steps outside the court system to get a tenant to move out, like changing locks, turning off utilities, or removing the tenant’s personal property. A landlord engaging in this type of illegal eviction can expose himself or herself to significant liability.

Landlords should also be mindful of state tort laws. Generally, tort laws give relief to people harmed by intentionally bad conduct or negligent conduct – when an individual does not exercise ‘reasonable care’ in actions, meaning they fall short of doing what a reasonably prudent person would do.

Local Regulations

Most significant at the local level are zoning rules and ordinances covering rent, noise, and other health and safety standards.

Zoning: While getting zoning ‘right’ during the rental purchase may seem straightforward, landlords must continually ensure that tenants do not violate the zoned purpose. A home business run by a tenant could easily contravene zoning ordinances, which could cause big headaches for the landlord. Read this blog post by Movoto Real Estate for more.

Other ordinances: There are many other regulations local governments can pass that would impact landlords. Rules like rent control, noise limitations, and health and safety standards can affect a landlord’s ability to operate.

A landlord may already have a lot on their plate with property management on top of a full-time job. It is likely not worth the trouble to learn each rule’s ins and outs. It would be sufficient for the landlord to know how to spot issues, research further when necessary, and know when to use legal counsel.

This post has been reproduced with the author’s permission. It was originally authored on February 11, 2021, and can be found here.

Jacob Ryder, at the time of this post, is a 2021 graduate of Penn State Dickinson School of Law. Prior to moving to Carlisle, Pennsylvania to attend Dickinson Law, he was a resident of Olney, Maryland. He attended Towson University in Baltimore, Maryland where he earned his bachelor’s degree and played four years of Division 1AA football. Jacob was a comment editor for Dickinson Law Review and a research assistant for the professors who work in the Law Library. Following graduation, he will be pursuing his interest in business law as an associate at Morris, Nichols, Arsht & Tunnell in Wilmington, Delaware.

 

Sources

Pugh v. Holmes, 384 A.2d 897 (Pa. Super. 1979).

Weighley v. Muller, 51 Pa Super. 125 (1912).

Minnich v. Kauffman, 108 A. 597 (Pa. 1919).

Lenair v. Campbell, 31 Pa. D. & C.3d 237 (Phila Comwth. Ct. 1984).

Smith v. Wells, 212 A.3d 554, 557 (Pa. Super. 2019).

Photo Sources

https://bit.ly/3m3xMUD

https://bit.ly/2PdFH5S

https://bit.ly/39oNiFx

https://bit.ly/3u6NZeJ

Sean McDonald | Entrepreneur of the Month | June 2021

By: Mari Boyle

It is an honor to introduce Sean McDonald as Dickinson Law’s June Entrepreneur of the Month. Sean McDonald is the founder, President, and Chief Executive Officer of Ocugenix, a therapeutics company developing drugs to treat blindness. He has been described as one of Pittsburgh’s “best-known life sciences executives and serial entrepreneurs” by publications such as the Pittsburgh Business Times. He was recognized as CEO of the Year by the Pittsburgh Technology Council for the impact his innovation and creativity have on his community. McDonald has extensive experience building companies from the ground up and helming healthcare and biotechnology businesses, often leading them through successful capital raising rounds, clinical trials, regulatory compliance, and acquisitions. His passion for innovation within the healthcare industry is evident throughout his career and he possesses the envied ability of “idea execution” or bringing an idea to life. But, before he was a CEO, Sean McDonald was a college student at the University of Pennsylvania studying chemical engineering.

The “I Could do that” Moment

Admittedly, becoming an entrepreneur was not a lifelong dream for Mr. McDonald. In college, he didn’t envision himself as an entrepreneur.  His specialty was in computer engineering and robotics. Rather, McDonald’s light-bulb moment did not come until later, while he was working in robotics at Westinghouse Electric during the day and pursuing an MBA from Carnegie Mellon in the evening. As he put together his ideas of unique ways to apply robotics technologies coupled with his growing understanding of the business side of things, McDonald realized, “hey, I could do that!” And that is a grossly simplified version of how McDonald’s first company, Automated Healthcare was born. Automated Healthcare was a first of its kind company that, by applying robotics to healthcare, allowed for a robotic medication dispensing system for hospitals. Automated Healthcare’s customers include over 700 hospitals such as John Hopkins Hospitals and Sloan Kettering. McDonald would go on to sell his company to McKesson but remained intimately involved as Group President. McDonald later rejoined the start-up world as President and CEO of Precision Therapeutics, a cancer therapy company dedicated to improving outcomes of cancer patients through individualized treatments.

McDonald’s latest venture is as founder, President, and CEO of Ocugenix. McDonald, along with four others, founded Ocugenix to develop therapies for blindness in those over fifty (wet macular degeneration) or with diabetes (diabetic retinopathy).

Finding the right business

McDonald has experience in founding companies based off his own ideas as well as joining and leading new start-ups. But how does an entrepreneur decide what new idea to back? McDonald recognizes the multitude of ideas there are in the world with potentially more ideas today than ever before. In deciding whether to join, build, or lead a new business, McDonald looks for ideas that capture his imagination.

“You have to be personally excited about the opportunity, because it can take years to get off the ground and the founders may be the only true believers in the business.”

Raising capital in biotech

McDonald has extensive experience in raising significant amounts of venture capital for healthcare and biotechnology companies. McDonald finds that one of the challenges in raising capital, particularly for biotechnology companies, is the difficulty in valuing the company, particularly in its early stages. This is because if the drug the company is developing works, the company can be worth billions. But, if it doesn’t, then it’s worth nothing. McDonald believes that what makes for a successful capital raising round is understanding how an investor thinks and anticipating how they will view the business opportunity. This requires an understanding of the associated risk and the projected timeline, looking at other companies doing similar work, and communicating your vision effectively.

The Entrepreneurial Mindset

There are countless skills that could aid a potential entrepreneur in being successful. But if McDonald had to narrow it down to three, they would be:

      • Relentlessness
      • The ability to communicate complex ideas to people in a straightforward manner; and
      • A willingness to be honest with yourself. Self-reflection is key. A successful entrepreneur has honest, internal conversations about refining their idea or approach and potentially recognizing when something is just a bad idea.

McDonald’s advice to those with an entrepreneurial mindset is to learn something really well. The best ideas, McDonald believes, come from those with expertise in a small or specialized area because that is often the area that a big company will miss. Additionally, he advises, don’t be afraid to work for someone. Just because you want to be an entrepreneur does not mean you shouldn’t have the experience of working for someone else. This experience allows you to gain insight into how decisions are made, good and bad. It could potentially lead you to your “I could do that” moment as it did for Sean McDonald.

Mari Boyle, at the time of this post, is a recent graduate of Penn State Dickinson Law. She is interested in corporate and business litigation and graduated with a certificate in Entrepreneurship Law.  Mari served as president of the Business Law Society, Senior Editor to the Dickinson Law Review, and was a member of the Moot Court Appellate Advocacy team. After graduation, Mari will begin her legal career as a judicial law clerk at the Delaware Superior Court.

Photo Sources

https://www.bizjournals.com/pittsburgh/news/2017/06/21/personalities-of-pittsburgh-sean-mcdonald.html

https://ocugenix.com.