Difference Between Preliminary Injunction and Temporary Restraining Order (TRO)

by Joshua Malone

The difference between a temporary restraining order (TRO) and a preliminary injunction seems fairly subtle. In litigation cases, the terms sometimes get used interchangeably. Both a TRO and a preliminary injunction provide a remedy for an allegedly aggrieved party and typically require an undertaking to provide monetary relief to the alleged aggressor.

According to NY case law, judges only issue preliminary injunctions in instances where the movant has demonstrated likely success at trial as well as a chance of irreversible damage if not for the preliminary injunction.These qualifications make preliminary injunctions somewhat rare. However, the most common preliminary injunctions arise in business disputes between shareholders and management or between business partners. For example, minority shareholders may wish to stop a corporation’s board from selling the company to the shareholders’ detriment.

A temporary restraining order has the same effect as a preliminary injunction but typically lasts only a few days where as an injunction could go on for months. Attorneys will seek a TRO when their clients need immediate remedy to prevent irreversible harm. Typically, the attorney motions the court with an Order to Show Cause and the judge will ask the Plaintiff to file their undertaking within the next few days but before opposing counsel can appear in a later trial.

The undertaking on a temporary restraining order or preliminary injunction protects the Defendant in the event the later trials determine the Plaintiff lacked the entitlement to any injunctive relief. Basically – the bond protects the Defendant. Judges usually determine the bond’s amount after hearing counsels’ recommendations. These bonds are highly time sensitive and require careful consideration. Underwriters typically want partial or full collateral for these bonds because of the unpredictable outcome of litigation. Underwriters will consider the Plaintiff/Principal’s financial strength and prestige of their attorney and law firm. To read some earlier posts concerning preliminary injunctions bonds, click here and here to learn how to cancel one of these bonds.

1. Chernoff Diamond & Co. v. Fitzmaurice, Inc., 234  A.D.2d, 200, 201, First Department, 1996.

Preliminary Injunction and Temporary Restraining Order

Preliminary Injunction and Temporary Restraining Order

Attorney Retainer Letters

by Joshua Malone

An attorney retainer letter diminishes some of the risk of fiduciary and probate bonds. The letter states the principal on the bond – the administrator, executor, or guardian - will keep their attorney involved throughout the entire duration of the principal’s appointment. Sureties prefer to maintain the attorney’s involvement during these appointments because attorneys have the expertise and knowledge to ensure a smooth and orderly administration or guardianship.

The letter typically states the attorney will assist the principal with drafting and filing the yearly accounting documents, as well as any other pertinent documents such as orders, affirmations, and ex parte orders of discharge. The attorneys prepare these documents and submit them to the court for a judge’s approval. Sureties must see all yearly accounting documents to verify the guardian or administrator has complied with the court and has not mishandled funds. As a further safeguard, the letter may state the principal must keep all funds and accounts within the state of jurisdiction.

Retainer letters always promise the principal will pay the premiums in a timely manner. Indemnity agreements already state this, but many Principals overlook or forget this important aspect. All filed accounting documents must take into consideration the paid premiums on the surety bond.

Usually, the attorney drafts the letter and presents it on their law firm’s letterhead. The attorney and the principal both sign the letter.The attorney and principal address the letter to the Surety undertaking the bond. The letter indicates the principal’s application for the bond as well as the bond amount.

Finally, the letter provides a provision in the event the principal changes attorneys. In the event of a change of counsel, the principal and/or attorney must notify the surety immediately. If the principal changes attorneys, it may indicate a disagreement between the parties and could potentially lead to claims. In any event, a fiduciary should always retain the services of an excellent attorney to help guide them through the sophisticated legal landscape of their appointment.

Retainer Letter

Retainer Letter

Happy Holidays!

by Carolyn McGrail

happy holidaysOffenhartz & Pedersen, LTD. would like to wish you and yourfamily a healthy and happy Holiday Season!

The holidays are a time to spend with family and friends and at O&P, we are available throughout the entire holiday season to take your calls and help guide you through any bonding procedures. We offer our expertise and insight 24/7 because bonding issues can come up at any time.

The Holidays are the most joyful time of the year, so here are some tips to stay safe and enjoy the season.

  1. Always assign a family member or friend to be the designated driver. It is easy to forget when drinking strong holiday drinks like eggnog and hot cocoa with peppermint Snapps, the ability to drive becomes impaired.
  2. Take precautions against inclement weather. New York City has recently been covered with enough snow to make the roads dangerous and more difficult to navigate. Remember to change to winter tires, carry an ice scraper, and proceed with caution when snow is present.
  3. Be wary of shady vendors around the City. The holidays are a perfect time for swindlers to use shoppers for a quick buck. If a brand item is being sold for a reduced price, it could be stolen, and you could be implicated in the crime.

If you don’t have an immediate question but still have some concerns about a type of bond, you can look through our extensive blog post history to learn more about bonds for guardianship(s), appeals, preliminary injunctions, mechanic’s liens, and much, much more. We also offer some insight into common underwriting principles such as how to read financial statements and their components like income statements and balance sheets. O&P prides itself on our expertise in the field of commercial surety bonding.

Stay safe and Happy Holidays! 

Advance Payment Bond

by Joshua Malone

An advance payment bond provides an estate’s executor or administrator an early release of funds for a specific purpose. The bond guarantees the return of an advance payment if the court later finds the executor or administrator wrongly took the money. The court reviews the estate upon approval of the estate’s final accounting.

Most executors and administrators may request an advance payment to circumvent tax issues, especially if a large estate will make large lump sum distributions in the future.

If the estate’s heirs and beneficiaries agree to allow the executor or administrator to take an advance payment, no need for a bond would arise. However, some beneficiaries may disagree with the advance payment, and some heirs or beneficiaries (such as non-profits) may take too long to respond. Many deceased have Last Wills and Testaments bequeathing gifts to large charities and non-profits.

Typically, the executor or administrator pays the bond premium out of his own pocket. Furthermore, the bond does not renew. Premiums may equal  a percentage of the bond amount, and the bond amount equals the size of the advance payment. These bonds differ from regular administration and executor bonds, which typically allow for the executor or administrator to pay the bond premium with estate funds. Administration and executor bonds also renew yearly and the premiums follow a rate schedule based on the bond amount.

To underwrite these bonds, surety underwriters look at an applicant’s credit and regard the quality of the applicant’s legal counsel. An executor or administrator must petition the court to receive a decree awarding the advance payment. Therefore, sureties expert legal counsel’s involvement throughout the whole process to avoid the pitfalls of the legal system and prevent claims. Good legal counsel may protect the surety in the event of a claim as well. Our office can easily secure most advance payment bonds.

Last Will and Testament

Page by Craig A. Andreoli, www.andreolilaw.com

Market Capitalization

by Joshua Malone

Market capitalization is one of the go-to statistics for surety underwriters when evaluating a public corporation’s financial information. The market capitalization (commonly referred to as “market cap” for short) represents the value of the corporation’s outstanding shares and thus basically the value of the company. If an investor wanted to try and purchase a corporation via the market, he would theoretically have to pay the market cap value.

Market cap equals outstanding shares multiplied by the price per share. So for example, Target Corporation (NYSE: TGT) has a $39.7 billion market cap and $68.2 per share, so $39.7 billion divided by $68.2 per share equals 582 million outstanding shares.

Surety underwriters initially look at market cap to get some idea of the corporation’s size. As a general rule of thumb, big market caps exceed $10 billion. Middle market caps range from about $1 or 2 billion to $10 billion, and smaller caps equal less than $1 billion. The larger the market cap, the bigger the corporation. Thus, an underwriter will more likely approve the issuance of the corporation’s bond.

Depending on the bond amount and the market cap, some surety bond applicants can easily obtain various litigation bonds such as TROs, preliminary injunctions, and appeals without having to provide collateral. For example, Wal-Mart Stores, Inc. (NYSE-WMT) has a market cap of $264 billion. If Wal-Mart needed a $1 million dollar court bond, surety underwriters wouldn’t have much difficulty approving the bond. However, a corporation with a smaller market cap may need to post collateral or meet other requirements to obtain such a bond.

In sum, the market cap provides a quick frame of reference, as well as excellent starting point, for an underwriter to evaluate a corporation’s application. Public corporations have much of their financial data – including market cap – on business websites such as Google, Yahoo! and Bloomberg.

Please note: all example math figures are based on estimates from Yahoo! Finance as of the date of this article.

Comparing Target and Wal-Mart - Market Capitalization

Comparing Target and Wal-Mart – Market Capitalization


Happy Thanksgiving

by Joshua Malone

Offenhartz & Pedersen, LTD. would like to wish you and your family a healthy and happy Thanksgiving weekend!

Thanksgiving is a time for gratitude, and we would like to thank our business partners, clients, and colleagues for a great year of service and their tireless efforts.

Remember – we are available over the Thanksgiving holiday weekend to take your calls and help guide you through any bonding procedures. We offer our expertise and insight 24/7 because bonding issues can come up at any time.

If you don’t have an immediate question but still have some concerns about a type of bond, you can look through our extensive blog post history to learn more about bonds for guardianship(s), appeals, preliminary injunctions, mechanic’s liens, and much, much more. We also offer some insight into common underwriting principles such as how to read financial statements and their components like income statements and balance sheets. O&P prides itself on our expertise in the field of commercial surety bonding.

If you are traveling this Thanksgiving holiday, please use caution due to the inclement weather conditions around the country. Stay safe and enjoy your Thanksgiving courtesy of us and Mr. Charlie Brown!

Charlie Brown Thanksgiving Bond!

A Charlie Brown Thanksgiving Bond!

Foreign Indemnity

by Joshua Malone

Foreign indemnity can produce problems for surety companies based in the United States. A foreign citizen or business may need to obtain a surety bond in the United States during the regular course of business or litigation. However, only some sureties can take foreign indemnity – and those sureties that can take foreign indemnity usually only accept it from certain countries.

The term indemnity means “agreement to hold harmless or make whole.” When applying for a surety bond, an applicant indemnifies the surety by agreeing to repay any and all costs the surety pays due to a claim on the bond they issued for the applicant. Sureties expect to never have a loss.

If a foreign firm or citizen needs a surety bond in the United States, the surety needs to evaluate the worth of the foreign indemnity. A foreign enterprise may offer to indemnify the surety, but the surety may not actually have any way of collecting their dues for several reasons.

First, the foreign firm’s country may not have a stable political structure. A country in the midst of civil war or under a transitional government likely lacks the legal framework for a surety to file a claim against the foreign firm.

Second, the foreign firm’s country may have laws in place protecting their businesses from outside claims. A surety’s legal team cannot simply enter into another country’s jurisdiction or courthouse and file a complaint. The surety would have to hire foreign legal counsel and consult with them to learn about the country’s judicial process.

On top of these problems, any company working across international borders faces the issues of language barriers, time zone discrepancies, currency exchange rates, and cultural misunderstandings. This can make underwriting, consulting foreign legal counsel, filing a complaint, and communicating with the principal very difficult.

However, foreign firms can offer more than just foreign indemnity. In fact, some sureties will accept foreign indemnity from large, public, and well-established foreign firms from countries in Western Europe and Japan.

If a surety will not accept foreign indemnity, the foreign firm can still obtain the surety bond under other circumstances. The foreign firm can let their United States subsidiary indemnify if the subsidiary has strong financial statements, or post full cash collateral in exchange for the surety bond.

Because business nowadays encompasses international and global companies, we have a lot of experience working with foreign firms and obtaining surety bonds for their needs.

Fifa World Cup 2014 - Foreign indemnity

Fifa World Cup 2014 – Foreign indemnity

Non-Disclosure Agreement (NDA)

by Joshua Malone

Many of our clients and applicants request a non-disclosure agreement (NDA) before submitting a bond application with confidential financial information. The NDA guarantees privacy between the disclosing party (the applicant) and the receiving party (the surety) by restricting how the receiving party utilizes the shared information. Typically, an NDA will limit the amount of disclosure to only the receiving party’s employees on a need-to-know basis concerning the shared information. Those employees include underwriters, attorneys, and accountants, and officers.

Receiving parties have an obligation under the NDA to notify the disclosing party immediately of any breach of the agreement, regardless of whether an employee inadvertently or intentionally shared the information outside his authority. Additionally, an NDA contains a provision for surrendering disclosed confidential information as evidence in response to a subpoena. The agreement compels the receiving party to notify the disclosing party in such an event.

Many NDA(s) also include language expressing that the agreement does not in any way bind the parties into a business relationship. This limits the liability of the receiving party strictly to the disclosed information. Sureties therefore have an incentive to cooperate with the terms of the agreement to demonstrate good faith in securing the applicant’s business, as well as to prevent any repercussions against the applicant should the applicant choose to place his business elsewhere.

At any point during the existence of the agreement, the disclosing party may request the receiving party to return any shared information or to confirm it’s destruction or deletion.

Non-disclosure agreements may terminate in three ways:

  1. By either party’s intent to terminate with 30 days written notice,
  2. Upon the disclosed information becoming public by an entity other than the receiving party,
  3. After a specified period of time, such as three years

Because sureties usually create non-disclosure agreements, courts may rule in favor of the receiving party for any conflicting or confusing language. Only in rare instances will a surety agree to edit or tailor the NDA to meet any clarifications or specifications made by the applicant.

Some underwriters refer to non-disclosure agreements as “confidentiality agreements.” They generally interchange the two terms.

An NDA is considered confidential

An NDA is considered confidential.

Process Server Bond NYC

by Joshua Malone

Update 1/7/2014: Many process server bonds will renew on February 28, 2014. If you need help obtaining a new bond, do not hesitate to contact our office!

To obtain a process server license in New York, an applicant must obtain a Process Server bond. Process servers have the responsibility to deliver (“serve”) court papers (“process”) to an unknowing party involved in legal action. New York City has a special administrative code governing the role of process servers. (A process server bond is a type of license and permit bond.)

The Process Server bond guarantees the applicant’s compliance with the NYC Administrative Code Sections 20-403 and Rules of the City of New York Sections 2-231. The bond equals $10,000.00 for an individual and $100,000.00 for an agency. If a process server violates the code or rules, he or she must pay the fines or damages, although the surety only guarantees payment up to $10,000.00 for an individual and $100,000.00 for an agency.

Typically, a process server may not be a named party to the litigation he or she is serving. Process servers must deliver papers, in person, to the representative of any business entities, such as corporations, LLCs, or LLP. A party receives process after a Plaintiff files a compliant, which lists the Plaintiff’s allegation, cause of action, and remedy sought, as well as the court’s jurisdiction.

In general, surety underwriters approve Process Server bonds freely. Underwriters will evaluate the applicant’s employer, but law firms and agencies typically hire most process servers and specialize in this line of work. Therefore, if the applicant’s employer is a law firm or agency, the risk of loss is small. (Lawyers admitted to practice in New York and government employees do not need to obtain Process Server licenses.)

Our office can issue these bonds fairly quickly and painlessly. Oftentimes we issue them on two year terms so the applicant does not have to pay the renewal premium every year. When issuing these bonds, it is important to use consistent information – such as the exact same address and exact same name – on the license application as well as the bond in order to file it with the City of New York Department of Consumer Affairs.

To read more about obtaining a Process Server License, click here, and click here to see sample bond forms.

Process Server Bond - "You Just Got Served!"

Process Server Bond – “You Just Got Served!”

Discharge of Mechanic’s Lien for Public Improvement Bond in New York

by Joshua Malone

Discharge of Mechanic’s Lien for Public Improvement bonds are very rare but they share some similarities to regular Discharge of Mechanic’s Lien (DML) bonds. These bonds arise in situations where a subcontractor, hired by a Principal contractor, has not received payment for work performed on a public project. In most cases, public entities require contractors to obtain payment bonds guaranteeing payment to their subcontractors to prevent liens. However, exceptions to payment bonds exist. In the event a subcontractor does not have a payment bond in its favor AND it does not receive payment from the Principal contractor, it may file a Mechanic’s Lien for Public Improvement against the funds due or to become due under the relevant contract.

The Lien Law of the State of New York allows a lienor, typically a subcontractor in the case of public improvement liens, to place a lien on due funds under contract for unpaid work performed. The Principal contractor bears the responsibility for satisfying the lien or providing payment to the subcontractor.

Section 21 of the New York Lien Law allows for a surety bond as an option to discharge a public improvement lien against due funds under contract. Like a DML bond, the bond must equal 110% of the lien amount. The lienor may file their lien with the New York City Department of Finance even though the Department of Finance may not have executed the contract. In essence, the Department of Finance represents New York as the obligee on the bond form because the Comptroller has authority over these types of contracts.

The lienor’s lien will also indicate the contract registration number, which public entity formed the contract with the Principal contractor, and identifies the Principal contractor itself. The Principal on the bond form should also be the Surety’s indemnitor. The bond form must reflect all this pertinent information as well.

A Discharge of Mechanic’s Lien for Public Improvement bond may seem complicated, but in effect the bond simply protects the city of New York and holds it harmless from the lienor’s claims. The bond guarantees payment, by the Principal Contractor, up to the bond amount in the event a ruling determines the lienor has title to valid claims.

Public Improvement

Public Improvement