Although the full extent of the damage from the recent economic downturn has not yet been measured, one thing appears certain—the prolonged recession will lead to a significant increase in litigation over the course of next several years.

In times of financial stress, our business clients are often presented with a Hobson’s choice—the stakes in business disputes are concomittantly higher when profit margins are lean, yet funds for litigation and dispute resolution are equally precious. One of the questions for lawyers, then, is how to most effectively aid clients in these tough times. Good lawyering, as always, requires gearing counseling toward maximizing efficiency and effectiveness and ensuring communication is clear and frequent, with heightened sensitivity to a client’s business status in this down economy. What follows is a short list of attitudes and actions to consider.

The legal concept of “deepening insolvency” has long been a volatile one.

Simple Steps for Avoiding Liability in Veil Piercing Litigation Against Close Corporations

Even in good times, creditors habitually cast a wide net in search of cash to satisfy their claims. In today’s economic climate, cash-starved creditors are sure to “follow the money,” pursuing a wellheeled corporate relative of the debtor, whether they have viable claims against that entity or not. For instance, where it has a direct claim against a subsidiary that is insolvent or nearly so, a savvy creditor and its attorney may also bring claims against a solvent parent company, affiliates or even individual officers or stockholders. There are numerous legal theories on which such claims are based, including the commonly alleged (and less commonly proven) action to “pierce the corporate veil.” Set forth below is a discussion of the legal basis for piercing the corporate veil, as well as practical steps that corporations can take to avoid these collateral attacks.

In these challenging economic times, employers are making tough financial choices. Companies may find themselves prioritizing payments owed to third parties, paying the “squeaky wheel” first. However, thinking that payments owed to employees are less pressing is a mistake. The number of lawsuits arising under the Massachusetts Wage Act has spiked in the last 18 months, resulting in substantial verdicts and settlements in favor of employees for unpaid compensation, multiple damages, and attorneys’ fees against their present and former employees.

Our Employment Law group continues to monitor developments under the Massachusetts Standards for the Protection of Personal Information of Residents of the Commonwealth, 201 CMR 17.00, commonly known as the new “privacy regulations.” The privacy regulations, which supplement the identity theft laws passed in 2007 (Mass. G.L.c. 93H and 93I), are slated to take effect on January 1, 2010. The regulations require individuals, businesses, and governmental agencies to use certain safeguards when collecting, maintaining, transmitting, disposing of, or destroying records (electronic or paper or otherwise) that contain personal information of Massachusetts residents. Personal information is a combination of a person’s name and a Social Security number, bank account number, or credit card number. The regulations apply to all entities conducting business in Massachusetts, regardless of their size.

Harold B. Murphy, founder and Director of Hanify & King’s Bankruptcy and Financial Restructuring Group, has become a Fellow of the American College of Bankruptcy. The College, an invitation-only organization, is dedicated to the advancement of the highest standards for the Bankruptcy and Restructuring profession and to the pursuit of educational and pro bono bankruptcy endeavors.

We are pleased to announce that attorney Stephanie Scruggs has been named a firm shareholder. Scruggs is an accomplished intellectual property attorney practicing in the firm’s Washington, D.C. office. She joined the firm as an associate in April 2008 when the firm’s Washington D.C. practice was founded.