Newsletter Harmon Sieff A Law Corporation Attorneys Encino California

January 2012

NEW LAWS FOR THE NEW YEAR

Once again, the California Daily Journal has published its annual compendium summarizing new statutes adopted by the Legislature during the past calendar year. Almost sixty pages were required just to list short snippets of the legislation. As always, this Newsletter will mention only those few which may be of interest to our clientele.

So many laws, so little time.

1. Employment

Commissioned personnel must be provided written contracts describing the method of calculating compensation, but violators are no longer subject to treble civil damages. Using credit reports for hiring decisions is now very restricted; “prevailing wages” must be paid on most public works projects; and it is unlawful to restrain the exercise of the right to pregnancy leave.

2. Residential Housing

Domestic violence victims can terminate leases early. Tenants have a right to display political signs relating to an election. Many condo owners can rent their units despite new CC&R’s to the contrary. Homeowner association board meetings cannot be conducted by e-mail. Landlords can prohibit smoking in any portion of a building.

3. Professional Photocopiers

They must now carry and present photo identification cards.

4. Building Contractors

Workers’ Compensation insurers must report to the State when a licensee’s insurance is cancelled. There are new notice requirements when a licensed qualifier disassociates from a licensee.

5. School Disruption

Threatening student safety is now a misdemeanor.

6. Design Professionals

They now have mechanic’s lien rights, and licensed architects have more time to organize as limited liability partnerships.

7. Masseurs

The new California Massage Therapy Council, which certifies massage establishments and workers, now has greater powers, and it is now a misdemeanor to lie about receiving massage therapy instruction.

8. Animals

Those convicted of animal abuse cannot possess an animal for up to 10 years following conviction. Premises used for dog or cock fighting are now public nuisances and violators can be evicted. Mountain lion carcasses can now be possessed if prepared for scientific or educational display. It is illegal to possess or sell shark fin.

9. Corporate Notices

Businesses can now elect to receive e-mail notifications from the Secretary of State instead of paper mail.

10. Civil Rights

It is now unlawful to discriminate on the basis of “gender identity”, “gender expression,” or “genetic information”.

11. Gender Transition

“Transitioning” persons may now obtain new birth certificates.

12. Firearms

Carrying an exposed handgun, outside of a vehicle in a public place, even if unloaded, is now a misdemeanor.

13. Car Insurance

Low cost and assigned risk policies can now be sold via websites.

14. Maternity Insurance

This coverage must now be included in individual health policies.

15. Controlled Substances

It is illegal to sell certain over-the-counter cough syrup to minors or to import, produce, or sell caffeinated beer. No alcohol can be sold at a customer-operated check stand, but wine can now be sold over the Internet with a special permit. It is now a misdemeanor to sell synthetic marijuana.

16. Criminals

Victims now have the right to receive email notification of an offender’s custody status.

17. Tanning

It is illegal for minors to use ultraviolet tanning devices.

18. State Hospitals

It is now a misdemeanor to smuggle wireless devices, tobacco, or currency to a patient.

19. Circumcision

Local governments cannot prohibit or restrict this practice.

This law office serves as a “lawyer of first resort”. We also represent serious accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Your recent referrals have been greatly appreciated.

Remember: Preventative lawyering is the most effective kind.
Have a Safe and Lawful Year,
HARMON SIEFF

HS: lm
Sieff-Newsletter-January 2012

© 2012 Harmon Sieff. All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional nor as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

December 2011

RECENT LEGAL DEVELOPMENTS

1. Unlicensed Contractors

A construction dispute between a church and its builder was presented to an arbitrator who ordered the return of the church’s money because the builder was unlicensed. A Court affirmed. The contract was not automatically void just because there was no license. The customer could obtain a refund by arbitration.

2. Labor Commissioner

An employment contract prevented a worker from complaining to the State Labor Commissioner for unpaid wages and required private arbitration, but the contract was invalidated because of the public policy precluding the waiver of the right to a hearing.

3. Motorcycle Group Rides

A company sponsored a motorcycle charity-ride and asked participants to sign a liability release. One rider refused to sign but somehow participated anyway and was seriously hurt. His lawsuit was unsuccessful because he assumed the risks inherent in the activity even though he signed nothing. The sponsor’s only obligation was to avoid creating more danger than otherwise existed. The court ruled that collisions are an inherent danger of riding motorcycles which risk was assumed by the rider.

4. Sexual Harassment

A long time advertising executive sued her agency for constructive termination due to sexual harassment. She described a “hostile environment” which included a history of bawdy, sexist, and vulgar behavior and conversation which culminated in an inappropriate e-mail which she inadvertently discovered.

Although a jury decided in her favor, the judge overruled it. To be “actionable”, the hostility of the work environment must be more than occasional, isolated, sporadic, or trivial, and must include a pattern of continuous pervasive harassment.

5. Real Estate Recording

Two banks loaned money to a property owner and recorded separate deeds of trust at the same time, although one was “indexed” first. The general rule of recording priority is that the earlier lien prevails, and the first-indexed bank sued to establish that it was the senior claimant.

The court ruled that the recording was simultaneous and the indexing was merely a clerical function. Neither bank had priority.

6. Insurance Audit

Workers compensation insurers collect estimated premiums during an insured year and later audit actual payroll records. Without this convenience employers would have to report every scheduling and personnel change -- a clerical mess.

One employer stopped paying premiums and was cancelled near the end of 2003. The policy allowed the insurer to perform an audit within three years from termination, which it did in 2005 and submitted a final bill. When it was not paid, the insurer filed suit in 2009. The court ruled it did not wait too long to litigate because it had three years to bill and four more to sue.

This law office serves as a “lawyer of first resort”. We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Your recent referrals have been greatly appreciated.

Remember: Preventative lawyering is the most effective kind.
Have a Safe and Lawful Year,
HARMON SIEFF

HS: lm
Sieff-Newsletter-December 2011

© 2011 Harmon Sieff. All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional nor as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

November 2011

RECENT LEGAL DEVELOPMENTS

1. Personal Injury Damages

Another court decision confirms that an accident victim may recover the “reasonable value” of medical services rendered even when a medical provider “writes off” or discounts a bill. In this case, a clinic was not fully paid by Medicare but waived the balance.

2. Settling Lawsuits

After a man who had routinely maintained several Fords died from asbestos poisoning, his family sued Ford which offered, pursuant to a specific statute, a token settlement for the claim. When a litigant rejects such an offer and fails to obtain a more favorable result, he is liable, win or lose, for his opponent’s court costs incurred after the offer. This family lost the trial and had to pay Ford almost $200,000 which would have been avoided had the family settled.

3. Independent Contractors

The Governor has signed a law imposing civil penalties of up to $15,000 for willfully misclassifying an employee as an “independent contractor”. In some cases, an employer can be ordered to post a notice on the Internet or other physical location reporting the violation, and a building contractor’s license can be revoked.

4. Small Claims Court

This summer the Legislature expanded the jurisdiction of the Small Claims Court to include most disputes of “natural persons” not exceeding $10,000, and insured auto claims up to $7,500. Sometimes the lawyer-free Small Claims forum is the fastest and most cost effective way to proceed.

5. Same Sex Marriage

An unexpected consequence of the federal law defining marriage as “between a man and a woman” arose in bankruptcy court. There, a
trustee sought to dismiss a joint petition filed by a married gay couple since that statute does not recognize a same sex “spouse”.

In an unusual procedure, 20 of the 24 judges on the federal bankruptcy court ruled that “no legally married couple should be entitled to fewer bankruptcy rights than any other legally married couple”. The federal definition of “spouse” was held to be an unconstitutional denial of equal protection.

6. Homeowner Liability

A satellite dish installer was seriously injured when he climbed on a homeowner’s roof overhang which then collapsed. His boss carried Workers’ Compensation Insurance which paid a settlement to the worker who nonetheless sued the homeowner for failing to warn him that the ledge was dangerous.

The homeowner won. Independent contractors are generally authorized to decide how best to perform their work, including which safety precautions to utilize, and the worker did not prove that the owner knew about the roof’s condition even though it was built without a construction permit. Having no permit was not negligence per se.

Word to the wise: Although these cases usually lose, they are expensive to defend and sometimes the worker wins. Careful homeowners should be sure that their liability insurance covers them for injuries to “occasional workers”.

7. Car Phoning

A driver was ticketed for using a cell phone while stopped at a red light even though he claimed he was not “driving” at the time. He was convicted because the law applies even when drivers pause momentarily; they are still “driving”. [Next time he should park in a safe area before calling.]

8. Apartment House Injury

A tenant was injured while using the treadmill in the building’s on-site health club. He sued the landlord but lost because his lease contained a liability waiver.

Generally, such provisions are void as contrary to public policy to protect a tenant’s basic need for shelter, but here, the amenity was well beyond “bare habitability” and the waiver was enforceable.

9. Electronic Piracy

A statute effective last year makes it a misdemeanor for a Californian to disseminate a commercial electronic audio or video file

without providing his e-mail address and identifying the file’s title. A convicted violator can be ordered to pay restitution.

10. Sidewalk Injuries

A pedestrian tripped on the edge of a broken sidewalk which was raised less than an inch. After several surgeries, she sued the sidewalk’s owner and property manager.

Although owners are required to correct dangerous conditions, they are not required to provide perfect maintenance or to repair minor or “trivial” defects. The pedestrian lost.

11. Unconscionable Contracts

A class of consumers sued a car dealer to invalidate fine print purchase contracts which limited their rights to sue. This court ruled that the specific “small font” wording on the back side of the last page was not easily noticeable, presented on a “take it or leave it” basis, clearly one-sided, and unduly “oppressive”. Judges are entitled to refuse enforcement of “unconscionable” contracts.

This law office serves as a “lawyer of first resort”. We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Your recent referrals have been greatly appreciated.
Remember: Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: lm
Sieff-Newsletter-November 2011

October 2011

RECENT LEGAL DEVELOPMENTS

1. Lease Advice

Over the past year, several landlord clients have become embroiled in bankruptcy court with commercial tenants. Although they are likely to recover possession (eventually) through federal litigation, they are unlikely to collect back rent, eviction costs, or other damages.

Before leasing to a private entrepreneur, it is best to obtain a full credit report and application just as a bank lender would do. When in doubt, require a solvent person to co-sign, co-lease, or guaranty a rental agreement.

2. Written Listing Agreements for Brokers

Perhaps especially because of these economic times, it is tempting for real estate brokers to become aggressive in seeking commissions. I work on many transactions each year and continue to see commercial brokers failing to obtain formal written listing agreements and then being surprised when denied a commission for facilitating a sale. Without a binding writing, the broker’s efforts are unlikely to be rewarded in the absence of special circumstances.

While this office is available to try to find such special circumstances, a broker is better off to be diligent from the beginning.

3. Documents Out of Control

In modern business, legal writings are usually created on computers and commonly exchangedby email. However, while technology changes every decade – if not every year - laws requiring certain actions to be written and enforced in court through specified procedures have remained generally unchanged for five centuries. In recent months, clients have encountered several problems with technology:

In one prolonged negotiation, the parties independently produced several “versions” of the same contract. Digital files were edited differently by multiple parties and they later disagreed on which “version” was the “final”. Their problem could have been avoided by using scanned or printed drafts, more careful proofreading, signing and initialing each page, or having retained a careful lawyer throughout the process.
In another transaction, after detailed preliminary drafts were passed around for weeks among executives, advisors, investors, and lawyers, negotiations were finally completed, but substantial clerical and professional time was required to proofread meticulously – each and every word of each and every version - to conform minor inconsistencies. Not everyone was adept at “tracking changes” and confusion was exacerbated by different computer operating systems, word processing programs, features such as “auto correct” and “auto format” – and perhaps motives to “sneak one by” the other parties. The simpler the paperwork, the easier to “trust but verify”.
Every document should be prepared for its ultimate purpose: to be an exhibit at a trial to enforce it. Especially when there are a lot of cooks in the kitchen, be sure that legal significance and enforceability are not lost or compromised by clerical confusion, especially the automated sort.

My office tries to use locked files or portable file format (pdf) whenever possible.

4. Medical Malpractice

Although this firm does not represent parties in professional malpractice actions, we note an Associated Press story reporting that 7.5% of doctors receive a malpractice claim annually, but only about a fifth of those claims lead to any settlement or monetary recovery. There is national debate over “tort reform”, but California limited malpractice recoveries long ago.

5. HMO Law

A man died because his HMO-selected doctor delayed treatment. The family sued the HMO but lost because a new law protects healthcare service plans against liability claims based on the actions or omissions of its contracted care providers.

6. Tax on the Reservation

A Native American Tribe objected to a new law requiring its retailers to collect excise tax on cigarette sales to non-tribal members who had previously reduced costs by purchasing on the reservation. The federal court upheld the tax because it was imposed on the visitors, not on the tribe, whose only obligation was to collect the tax from the customers and send it to the government. It did not pay the tax with its own money.

7. Overtime Compensation

The federal government sued Washington State for failing to pay overtime to its social workers. The State maintained that the workers were not entitled to overtime because they were members of a “learned profession” which is a well-accepted exception to overtime laws. However, the court ruled that the duties and qualifications of the particular job classification were sufficiently unspecialized so that the work was not considered “professional”. The social workers must be paid overtime.

8. Piercing the Veil

Although owners of corporations and LLC’s are generally not liable for business debts, if such are not carefully operated and documented separately, a creditor may “pierce the veil” and collect from the owners personally, sometimes even if the individuals are not originally named in a complaint. Also, the IRS and Franchise Tax Board can disallow tax advantages or reallocate taxable income if separateness is not maintained. Be vigilant and meticulous and call us if you have questions.

Remember: Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-October 2011

September 2011

RECENT LEGAL DEVELOPMENTS

1. Handicapped Barriers

A wheelchair bound customer sued a grocer because the store included barriers which interfered with his access. Although the grocer removed the obstructions, the customer amended his suit to identify previously unmentioned barriers.

The Americans with Disabilities Act allows individuals to sue a business owner for “personally encountered” architectural barriers which discriminate against the disabled claimant, but this customer did not personally encounter all the new ones – and lost.

2. Just in Time

Our firm recently settled a personal injury claim for a health-insured client which included a recovery based on the amount of medical bills rendered even though the doctors accepted a fraction of the requested amounts due to their HMO contracts. Soon after the settlement, the Supreme Court ruled that victims cannot recover medical damages in excess of the amount actually paid to doctors who accept lower HMO-negotiated amounts. Client can keep the money.

3. Native American Law

The concept that Indian reservations are “countries within a country” is reinforced. Although the Indian Civil Rights Act precludes tribal courts from imposing criminal sentences in excess of one year, a particular defendant, convicted of chasing children with a knife, was sentenced to almost three years -- the sum of several shorter sentences imposed for eight different crimes.

4. Elder Abuse

A claim for elder neglect requires “clear and convincing evidence” (more than probably, but less than certainly) that a defendant is guilty of recklessness, oppression, fraud, or malice. A recent case was dismissed where sufficiently egregious conduct was not alleged.

5. Void Contract

If a person is deceived into “entering” a contract without knowing there is a contract, the result is unenforceable. A car-maker’s Internet ad asked viewers to take a “personality evaluation” on a web page via mouse clicking. One who did began to receive “unsettling” spam e-mail, later learned it was all a “joke”, and sued for ten million dollars for emotional distress.

When the car-maker insisted she arbitrate her claim under the “contract” terms, the court ruled she had been “deprived of a reasonable opportunity to know the character of the proposed contract. The contract is consequently void because of fraud....”

6. Independent Contractor

A maintenance worker was injured by a conveyor belt while employed by an airline contractor which provided Workers’ Compensation. This meant he could not sue his employer, so he sued the airline. The airline won. It had delegated its “tort duty” to the contractor whose own workers cannot sue their boss.

7. Employer Retaliation

A factory worker reported to management that its time clocks were unlawfully located (which they were) such that employees were not paid for time changing into/out of protective gear. After being disciplined and fired, he sued and won damages for retaliation. Employers cannot discriminate against a worker who complains, even orally, of a workplace violation.

8. Insurance Exclusion

A lawyer sued her boss for sexual advances, grabbing, and groping. His insurer refused to defend him because the misconduct was, even if true, excluded as “intentional”. The court agreed.

9. More Insurance Exclusions

When a building owner had its “cottage cheese” ceilings scraped, asbestos was released resulting in a citation from the Air Quality Management District. Expensive abatement and clean-up was required and an insurance claim filed. The court ruled the expense was not covered because the policy excluded pollution losses.

10. Real Estate Broker

A broker promised a homeowner he would buy her home, clear her mortgage, and sell it back to her, but he never wrote it down. Eventually, the house sold to someone else who refused to re-sell, and the homeowner sued.

Although the broker tried to exclude evidence of the unwritten contract, the court admitted it as evidence of a “breach of his fiduciary duty” which a broker owes his client. If he had been protecting her, he would have given her a signed promise

11. Crosswalk

The state was sued for maintaining a dangerous condition at an intersection where a pedestrian was killed. A public entity can be liable even if it is not the direct cause of injury. Here, the family could identify no physical or design characteristic which increased the danger to pedestrians from third party negligence.

12. Cigarette Liability

After a lifetime of smoking a certain brand of cigarettes, a cancer victim won almost $14,000,000 in punitive from the manufacturer based on the company’s failure to reveal that it secretly knew for years that smoking caused cancer. The verdict was upheld because it was based on “highly reprehensible" conduct.

Remember: Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-September 2011

August 2011

RECENT LEGAL DEVELOPMENTS

1. Piercing the LLC Veil

Just because a business is a corporation or limited liability company does not mean that its individual owners are never liable for company debts.

After a lender obtained a judgment against a defaulting LLC, it learned, in a court-ordered interview of the LLC's manager, that the manager was not only the LLC's sole owner and decision maker, but had failed to maintain a "separateness" between the LLC and himself as owner.

The court allowed the lender to "pierce the veil" and amend the judgment to include the individual owner as an "alter ego" and debtor. Statutes allow new debtors to be identified after a trial and this manager, although not technically a trial participant, was "virtually" represented throughout the proceedings since he had physically attended and controlled the entire defense, albeit it in the name of the LLC.

2. More Piercing

In a case involving law firms, after a lawyer quit and took away two major clients, the firm obtained a judgment against him for breach of contract. The lawyer started a new law partnership with others, filed personal bankruptcy, and then incorporated the new partnership.

First, the bankruptcy court would not protect him because he had lied about his finances. Then, since the judgment against him could be enforced against his share of the new partnership, it could also be enforced against his share of the corporation which was ruled to be a "mere continuation" of the partnership. The court disregarded the corporate form which it found to be illusory since the corporation had literally "stepped into the Partnership's shoes" without paying adequate consideration.

3. Recreational Immunity

A man was killed while biking on a dirt road in a County park which the decedent's family claimed was a "dangerous condition" on public property. The County won because a public entity is not responsible for an unpaved road which merely provides access within a recreational area. Because the road was ruled to be a "recreational trail", the County was immune from liability.

4. Abortion Clinics

A City outlaws intentionally approaching an individual entering a "reproductive health clinic". When a man was convicted of doing so, he sued the City for violating his First Amendment rights. The court ruled that although the law was valid, the City acted improperly by enforcing it only against anti-abortion speakers. Free speech can be regulated as to its "time, place and manner", but only if it is "content neutral".

5. Rescuer

A radio network was sued for the death of an off-road rider killed during a network-sponsored "sand dune" event. The rider and friend strayed from the course and the friend became stuck on railroad tracks with a train approaching. (This really happened.) The rider rescued his friend but struggled to extricate the vehicle which was eventually hit by the train and propelled into the "rescuer" causing great injury.

A "rescuer" can obtain compensation if injured rescuing someone in peril if his injury was foreseeable and reasonably expected. Here, the sponsor was not liable since the particular extended sequence of multiple occurrences was not reasonably foreseeable.

6. Loans to Felons

A convicted felon (illegal sale of weapons) invested in a company which sought to buy land with a mortgage. The lender refused to advance funds so long as the felon was a part owner of the borrower, so the felon sued the lender for violating his civil rights as a felon. The lender won.

Certain personal characteristics (race, religion, etc.) cannot be considered in lending decisions, but this lender had legitimate business reasons to deny the loan since it was reasonably concerned about repayment from a company managed, in part, by a criminal.

7. Foreign Jurisdiction

A machinist was seriously injured while using English equipment in New Jersey. He sued there for products liability which he alleged was a proper court because the English company had attended trade shows in the U.S. and some of its machines were in that state.

The Supreme Court found no jurisdiction over the English company because it did not purposely avail itself of the privilege of conducting activities in New Jersey.

8. Family Leave Act

Federal law entitles large company employees to receive twelve weeks unpaid leave to attend to a family member's "serious health condition". There is, however, a required technical application process with standard forms to summarize medical facts supporting the alleged diagnosis. One worker supplied an insufficient application, took leave without permission, and was terminated. The court refused to reinstate her.

This law office serves as a "lawyer of first resort". We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Your recent referrals have been greatly appreciated.

Remember: Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-August 2011

July 2011

RECENT LEGAL DEVELOPMENTS

1. Mental Illness and Insurance

Most liability insurance policies do not cover intentional acts. One insurer refused to cover a California house burned down by the owners’ mentally ill son, but the court decided that the innocent parents were still covered. The law is different in Wisconsin where a widow sued the mentally ill boy who gunned down her husband and the boy’s mother and her insurance company. The insurer did not have to cover the mother because she knew her boy was mentally unstable and should have anticipated such an act.

2. Junked Vehicles

A homeowners association ("HOA") amended its parking rules to prohibit the storage of inoperable vehicles and one owner’s inoperable van was tagged with a warning and towed the next month. Three years later, the van’s owner sued the HOA and its president for discriminating against him as the only member with such a vehicle.

An HOA is generally allowed to make its own rules and its majority vote will be enforced unless it is arbitrary, violates public policy, or creates more harm than benefit. Here, the HOA won because disabled vehicles are unsightly and reduce the aesthetic of the common interest.

3. Foreign Jurisdiction

Following a fatal bus accident in France, the victims’ survivors sued the manufacturer of the failed tires in North Carolina though the tires were made in Turkey by a subsidiary of an American company.

The families claimed that once the tires were placed “in the stream of commerce”, the manufacturer was responsible for any harm caused anywhere by a failed product. The U.S. Supreme Court noted the foreign subsidiary was not registered in, had no location or employee within, and did not make, design, advertise, or even ship their tires to North Carolina and found no jurisdiction over the company because it lacked “minimum contacts” with the state.

4. Landlocked

A couple owned an empty lot next to a house which they sold without realizing that it was “landlocked” with no direct highway access. They sued to establish an “equitable easement” over a neighbor’s driveway which was separate from most of the neighbor’s land and already used by other families to access their homes.

The court applied a “relative hardship test” comparing how much the neighbors would be harmed if the easement were granted vs. the harm to the couple if it were not. Since the couple could not otherwise access their land at all, while the neighbors would hardly notice, an easement was granted.

5. General Contractor

An individual licensee performed construction work “doing business as” a different name and sued a customer for an unpaid bill. The customer refused to pay since the contractor was not licensed under that business name, but the court ruled for the contractor. Using a fictitious business name (“dba”) does not create a separate entity. Since the individual was licensed, though he might face discipline for not properly registering, he could collect his money.

6. Overtime for Accountants

California overtime law does not apply to workers “in a learned or artistic profession”. So, when a class of unlicensed junior accountants sued their CPA-firm-employer, the company denied overtime because they were “professionals”.

The court ruled that the juniors were entitled to a trial where it would be decided if their actual work, despite its description, included any “significant degree of discretion”.

7. Bumper Cars

A mother took her kids to an amusement park and rode bumper cars where she was slammed so hard her wrist broke. She sued the park which claimed she had assumed the risk of engaging in a dangerous sport or activity. The court ruled that the ride was not a “sport”; the passenger did not need specific exertion or skill; and parks operated for profit implicitly warrant that their rides are safe.

8. Brother vs. Brother

A mom’s property was legally two parcels. She lived on one and one of her sons on the other. She constructed a well and pump on his land which was operated from her house. She died leaving her “son’s house” to him and her own house to her other boy who soon built a storage tank and diverted most of the water to his side.

The first brother sued the second for trespass. The court ruled that an easement to use the well was implied since the mother built it intending that the water be shared by the properties as she had done. The diversion was ruled unfair and the boys each entitled to reasonable use. Share and play nicely. Their mother would agree.

9. Overtime for Out-of-Staters

Out-of-state workers are covered by California’s favorable overtime laws when they work here even temporarily.

10. Ain’t That a Kick

At a drunken party involving young men cavorting and roughhousing, one was kicked in the groin by his good friend and host. When able, the victim sued the kicker and won $400,000, but the host’s insurance company refused to pay. The insurer won because it is not required to defend or pay a claim resulting from unintentional injury if the conduct (kicking) was deliberate. Ouch.

11. Electronic Signatures

Very often technology advances more quickly than the law. An online petition supporting a ballot initiative to legalize marijuana was rejected by a County since signatures must be personally affixed by voters. This law passed when the idea of an “online signature” was unimaginable, and the court decided that it was for lawmakers, not judges, to adopt or reject the new technology.

This law office serves as a “lawyer of first resort”. We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Your recent referrals have been greatly appreciated. Remember: Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-July 2011

June 2011

RECENT LEGAL DEVELOPMENTS

1. Injured Pet

A neighbor's cat was shot and paralyzed by a pellet gun while perched on a fence. The cat was saved with thousands of dollars of emergency surgery and medical care. The owner sued the shooter for "reasonable and necessary costs" incurred, but defendant claimed his liability was limited to the diminution in the cat’s market value.

The cat won. Its owner was entitled to recover all rationally expended amounts incurred (about $40,000) due to the wrongful act.

2. Asset Seizures

A creditor obtained judgment against a family antique business and obtained an order to seize several antiques to apply against the judgment balance. California exempts from seizure “tools” of a debtor's trade, but these items were “inventory” not "actually used" in the debtor’s business - and were not exempt.

3. Consumer Fraud

A bottled water company was sued by a customer because she thought the green drops on its labels meant the contents were ecologically superior and endorsed by an environmental organization.

The company won because it proved that "no reasonable consumer” could have reached such an unjustified conclusion.

4. Spousal Damages

The spouse of an accident victim is entitled, in some circumstances, to sue the parties who caused the injury if it prevents the victim from providing "conjugal society”. One defendant argued that a husband suffered no "loss of consortium" since he admitted that his love for his disabled wife was undiminished. The court decided he could recover damages despite overall marital satisfaction.

5. Easements

A conditional railroad easement became an alley along the boundary of three properties including a shopping center. The center sued the other two for a permanent easement for its visitors who had used the land for access, parking, and deliveries for thirteen years. The neighbors objected because they had paid property taxes separately assessed on the conditional easement which they said prevented anyone else from a claiming a permanent right to the alley.

The court ruled that paying taxes was irrelevant because the easement for "railroad purposes” did not preclude anyone from driving or parking on the land.The center received a permanent easement.

6. Usury

California limits loan interest to 10% (or less) unless the lender is a regulated finance company or bank, or the loan is "arranged" by a licensed broker. Two high-rate borrowers learned their arranger had lied about being licensed and they sued for usury ("loan sharking"), asking the judge to cancel all interest obligations and order the non-broker, and his investors, to return previously paid interest and fees. The loans were ruled usurious; the borrowers won.

7. Inconvenient Forum

When planning a lawsuit, lawyers must decide which court to use. Although any court (“forum”) with jurisdiction can hear a case, sometimes a selected court is so inconvenient that it may suspend proceedings and identify a different court as more "suitable".

A Hawaiian insurance company sold 99% of its policies in that state and a few to Californians. When the Hawaii Insurance Commissioner ordered the company liquidated, the company sued in California to stop the liquidation. Hawaiian defendants filed a motion to move the case to Hawaii (knowing the advantages - to them - of Hawaiian courts.)

The court agreed. All but one party was in Hawaii, Hawaiian officials were sued, and that state had great interest in the outcome. This complicated technicality yielded a fair result.

8. Foreclosure Law

The court ruled that paying taxes was irrelevant because the easement for "railroad purposes” did not preclude anyone from driving or parking on the land. The center received a permanent easement.

9. Employee Meal and Rest Breaks

UPS did not allow "meal and rest periods" as required by a legal technicality and employees sued for statutory damages. The court ruled they were entitled to a penalty for each violation, so each worker recovered one hour’s pay for every work day which included a denied meal time, and another hour for each day which included a denied rest break. Make sure your employees are properly scheduled.

10. Cigarette Jurisdiction

Tobacco is a highly regulated and taxed industry, but many laws do not apply to Native American tribes who are technically "sovereign entities." A tribal-chartered company in Nevada sold millions of cigarettes to a California tribe which resold them to smokers. California sued the Nevada company in California for unlawfully selling tobacco.

The tribal company claimed the court lacked jurisdiction, but a non-resident is subject to a court's jurisdiction if it “purposely avails itself” of the benefits of conducting business in the state. California won.

11. Frivolous lawsuits

After winning election, a police chief sued his electoral rival for campaign defamation and civil rights violations. Part of the case was dismissed as so "frivolous" that the chief was required to reimburse his opponent’s legal costs. On appeal, the U.S. Supreme Court ruled that the chief did not have to reimburse the "non-frivolous" claims, but only the cost of the “frivolous” claims.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-June 2011

April - May 2011

RECENT LEGAL DEVELOPMENTS

1. Nanny Drivers

A growing number of working families rely on paid babysitters to drive children to school and activities but are unaware that the driver is the family’s legal agent. If a child is in the backseat when his babysitter collides with a pedestrian, the family is "vicariously liable”. Since domestic workers generally carry little insurance, families should consult their insurance brokers to ensure that they are adequately protected from such a loss. Better safe than sorry.

2. Illegal Spite Fence

If a land owner "maliciously" erects a "structure in the nature of a fence" for the purpose of annoying a neighbor, the neighbor can sue for a "private nuisance".

In one dispute over downhill trees blocking an uphill owner’s view, the blocked neighbor sued for damages, claiming that the trees were planted purposely to bother him. The court agreed that the trees were a “spite fence", but decided the case on a technicality.

3. Notary Malpractice

Almost all licensed notaries are honest and law abiding, but occasionally, a forged signature is, carelessly or intentionally, "notarized". In a recent case a notary admitted approving forged signatures, but the case was dismissed for late filing - not within six years.

4. Americans With Disabilities Act

The Americans With Disabilities Act prohibits discrimination against otherwise qualified individuals based on disability and requires employers to make "reasonable accommodations" for them. The law requires an "interactive process" to determine appropriate accommodations but, in some situations, there is simply no practical solution. A blind bus driver is a just bad idea.

A deaf accountant complained that his company did not provide him with a sign language interpreter for meetings and work activities, but the company won because it had provided written notes and explanations.

5. Mortgage Brokers

When a real estate broker negotiates a mortgage for a borrower, he serves as the borrower's fiduciary. A homeowner retained a self-described "mortgage broker" company to “shop” a loan. Eventually the company loaned its own funds directly, representing that there was no prepayment penalty – but there was. When the borrower sued to recover the penalty, the broker claimed it was only a “lender”, but the court disagreed. A duty was owed and breached, and the borrower won.

6. Overtime Compensation

A supervisor/manager sued for overtime compensation at “time and a half”, but his non-manual management level job was exempt from this general rule. Executive, administrative, and professional employees are usually not entitled to overtime.

This law office serves as a “lawyer of first resort”. We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-April-May-2011

March 2011

RECENT LEGAL DEVELOPMENTS

1. Mediation Succeeds Again

While multi-million dollar jury verdicts attract attention and headlines, every day businesses are often confronted with commercial disputes over small amounts which are not always easy to resolve cost effectively. Our office often hires a retired judge to assist clients in reaching efficient compromises.

Last month, a $250,000 contract claim was on the brink of what would have been a protracted lawsuit involving injunctions, motions, hearings, and trials. A one-day mediation resulted in a mutually accepted settlement with minimal legal expense.

2. Departing Employees

Especially in economies such as we have today, departing employees often lead to unforeseen legal complications if not employer liability. "Tying up loose ends", including a reasonable exit interview and a written separation agreement, can insulate companies from not only lawsuits, but administrative claims for discrimination, workplace injury, malfeasance, or for unpaid wages or benefits.

3. Texting Alert

Texting while driving is not only reckless, but is now illegal. Litigants can demand discovery of mobile device usage as evidence of "de facto negligence" by a texting party. Even if no one sees the device at the accident scene, a record of a transmission at the time of collision may well establish fault.

4. Liquidated Damages

Some transactions include terms requiring parties to perform or be liable for a fixed sum. In many situations, such as an unjustified contract cancellation, a “liquidated damage” provision (sometimes called “stipulated damage”) is enforceable if it reasonably estimates fair compensation for a potential loss for which the exact amount of damage is impractical to calculate.

A cell phone carrier was recently prevented from collecting early service termination fees included in its fine-print contracts (presented to consumers as "take it or leave it”) because the amounts were unrelated to actual damage.

5. Real Estate Brokers

A buyer sued her broker for breach of fiduciary duty, claiming the broker had actually assisted the other party. After complicated legal proceedings, a bankruptcy court allowed the broker to discharge the claim because he had held no asset in trust for the buyer. An unusual decision.

6. Commercial Leases

A developer who rented improved property intending to convert it to retail stopped renovation, and even maintenance, when the economy collapsed, but continued paying the rent.

The owner sued for the "cost of repair" of the deteriorated property, but the court ruled it could not recover more than it had actually lost. (Had the landlord waited to sue until the lease ended, it might have won, but by then the deterioration may have been irreversible.)

7. Alter Ego is Nuts

In a case about selling almonds, a corporation's sole shareholder allegedly embezzled corporate assets before it filed for bankruptcy. The shareholder was sued as the corporation’s "alter ego".

Many enterprises operate as corporations (or LLCs) to insulate owners from company liability since general partners and sole proprietors are fully responsible for business debts.

The court found no "general” claim by which a bankruptcy trustee could sue an “alter ego” on behalf of all creditors, though a single creditor can sue an owner with proof of misappropriation, commingling, improper bookkeeping, inadequate capital, or failure to maintain the separation between human and company.

8. Health Insurance

A major health insurer bases rates for married couples on the younger spouse’s age. After one couple enrolled through the older spouse, they learned this and sued for a refund, but the court found the insurer had no duty to help customers obtain lower prices.

9. Harassed Prison Guards

A female security worker was constantly harassed by male inmates with sexual gestures and lewd remarks. While her male supervisor admonished the inmates, it did not help. When she was terminated a few years later, she sued the prison for a "hostile work environment".

Although prisoner harassment is an unavoidable part of a guard's job, damages can be awarded because employers are required to take corrective action and stop harassment.

10. Personal Injuries

California law is evolving regarding suits by accident victims. A new case reduces recoveries for medical damages where victims benefitted from negotiated HMO/PPO contracts. Other courts have ruled differently and the issue will be reviewed by the Supreme Court.

11. NFL Slogans

The league sued a company for multiple claims because it sold counterfeit shirts labeled "Steel Curtain", a league trademark. Although the company’s insurer refused to defend the case since most claims were uninsured, the court ordered it to pay for defense lawyers because at least one claim was covered.

This law office serves as a “lawyer of first resort”. We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-March-2011

February 2011

RECENT LEGAL DEVELOPMENTS

1. Negligent Parking

Drivers are obligated to use ordinary care in parking vehicles to prevent injuries. After a motorcyclist was struck by an automobile whose driver could not see around an extremely large grocery truck parked along a road, the court affirmed a verdict which attributed 35% of total liability to the truck driver and owner. Although the location was a legal place to park, since the truck was so big, the risk and likelihood of injury was great if not foreseeable.

2. Corporations Take Note

Lately several of our corporate clients have been unknowingly suspended by the Secretary of State for failure to file Statements of Information, those familiar "blue and white" forms which have been traditionally mailed from Sacramento to every California corporation. Apparently, these mailings are no longer budgeted so be sure to keep track of your own deadlines.

3. Unprivileged E-mails

While the secrecy of an attorney-client communication is one of the most sacrosanct rules of law, yet another court case has confirmed that an e-mail communication to an attorney is not privileged if the electronic means (computer, e-mail system, etc.) belong to someone else.

In the Holmes case, a worker e-mailed her lawyer - to complain about her employer - from a company-owned computer knowing she might be monitored. The communications were adjudged to be without an expectation of privacy and not privileged.

4. Wrong Address - Big Penalty

A company entrusted to collect and pay property taxes for its clients mistakenly mailed several checks payable to Stanislaus County (for over $5.5 million) to the San Francisco Tax Collector which dutifully deposited the checks into its own account. The error was eventually discovered and the money refunded, but not before Stanislaus had imposed a 10% penalty.

The company sought to reverse the penalties, but an appellate court affirmed them.

5. Condo Living

An apartment and condominium may appear similar, but applicable laws are very different. The owner of a condo unit contained within a building is subject to the covenants, conditions and restrictions of the owners' association. In most instances, the owner has exclusive use and responsibility for the private "unit", while all owners generally share the ownership and responsibility of "common areas".

In a case involving leaking sewer pipes, the court held that the defective part of the plumbing was located within a "common area", interconnected to the system of the entire building, and therefore all owners must share the cost of repair.

6. Payroll Services

Many small companies rely on outside payroll companies to keep records and calculate total wages, tax withholding, overtime compensation, and other bookkeeping tasks. One such processor miscalculated many individual checks, and the workers sued - not their real employer but the payroll service - for the deficiencies.

The court ruled that the check processor was not a legal "employer" who controlled the conduct of any of the workers, but that it performed merely clerical functions. The employees lost.

7. Where's My Seat?

A few cases are currently being litigated by cashiers against retailers for failing to provide stools. California law requires all employers to provide "suitable seats" if the nature of the work allows. Recent decisions against Home Depot and 99 Cents Only Stores ordered seating to be provided and penalties to be paid.

8. Tax Exempt Organizations

A privately owned building was considered architecturally historic. The owner reorganized as a non-profit religious corporation and announced plans to demolish and replace it with a home for religious refugees from abroad.

When the City moved legally to preserve the structure as a landmark and prohibit demolition, the owner claimed the preservation law did not apply to "non-commercial" property owned by a religious group.

The court decided the exemption did not apply since this owner had reorganized only when it realized it might be prevented from pursuing its development plans.

9. Male Harassment

The U.S. Equal Employment Opportunity Commission reports that while sexual harassment claims in general have fallen over 20% in the last decade, the proportion filed by men has increased to one out of six.

10. Included Overtime

Non-salaried workers must be paid time and a half for work exceeding 40 hours a week but a recent case affirms that workers can agree to adjust pay and schedules with flexibility.

A janitor agreed to work 66 hours a week calculated at $11.14 hourly for 40 hours and $16.71 for the other 26. When he sued for time and a half, the court affirmed his "wage agreement" and he lost.

11. Credit Cards

The State Supreme Court ruled this week that it is illegal for a vendor to request a customer's zip code as a condition for processing a credit card transaction because this type of "personal identification information" is covered by a statute which specifically prohibits retailers from requesting addresses or phone numbers.

While large penalties can be awarded, judges have broad discretion to award customers other "damages" such as gift cards.

This law office serves as a "lawyer of first resort". We also represent accident victims on a referral basis only. If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-February 2011

©2010 Harmon Sieff. All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional nor as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

January 2011

NEW LAWS FOR THE NEW YEAR

With the end of the legislative session, the local legal newspaper, The Daily Journal, has printed a 47-page compendium summarizing hundreds of new statutes. This newsletter will mention only those few which may be of interest to many of our clientele.

1. Farmers Markets

Produce sellers can initiate a system for accepting food stamps.

2. Gambling Expansion

Local governments can grant casinos permission to add two additional tables without voter approval.

3. Self-Storage Facilities

After proper notice, property managers can enter rented spaces and deny access to delinquent tenants.

4. Eviction

There are technical changes to procedures for removing commercial tenants.

5. Deed Services

False statements to property owners about the "necessity" of obtaining deed copies [really just solicitations] are outlawed.

6. Wineries

Licensed wine growers can produce "spirits" which are by-products of wine fermentation without distillery licenses. Also, after 2013, "Sonoma County" products must be properly labeled as from an "American Viticultural Area".

7. Optometrists

They can now practice in long-term care facilities.

8. Contractors' Licenses

These can now be issued to limited liability companies.

9. Engineers/Land Surveyors

They can now operate as limited liability partnerships as do architects, lawyers, and other professionals.

10. Construction Stop Orders

These can be issued by the State Board where a contractor fails to maintain workers' compensation insurance coverage.

11. Alcohol

Hotel gift shops can now sell sealed containers of beer and wine.

12. False Imprisonment

Civil liability can now be imposed if imprisonment is committed with the intent to obtain someone's visual image or sound recording.

13. Providing Alcohol

Adults who knowingly serve minors who are later injured bear "social host" liability.

14. Intellectual Piracy

Current fines are doubled for pirating intellectual property.

15. Zoo Trespass

It is now a crime to trespass in an animal enclosure at a zoo, circus, or traveling animal exhibit.

16. Residential Rentals

Penalties have increased for unlawfully renting dwellings.

17. Helpful Drunks

Intoxicated minors are immune from prosecution for possession or consumption if that person reports an alcohol-related medical emergency.

18. Gun Restrictions

It is a crime to bring certain weapons into a legislative building or office.

19. Protecting Ruins

Criminal penalties are increased for defacing burial grounds or archaeological sites on public land.

20. Marijuana

Possession of less than 28.5 grams while driving is reduced to an infraction.

21. Voting

Certain ballots can be faxed.

22. Military Children

New law protects custodial rights of parents on active duty.

23. Umbilical Cords

A blood collection program has been established to be supported by birth certificate fees.

24. Daycare Drinking

Beverages served at childcare facilities are now regulated.

25. Noodles

Certain rice-based products must be properly labeled; sale of cooked Asian rice noodles is now regulated.

26. Childrens Jewelry

Distribution of products containing defined level of cadmium is now prohibited.

27. Health Insurance

A temporary federal high risk fund has been established.

28. Children's Health Insurance

Coverage for children is now guaranteed.

29. Estate Plans

A bequest to a will-writing lawyer is now presumed fraudulent.

30. Pedi Cabs

Local governments are authorized to license and regulate these vehicles for hire.

31. Mobile Billboards

Local governments can now regulate these displays.

32. Tenant Rights

Landlords are now prohibited from evicting due to violence on the premises caused by non-tenants, and required to change locks on request for cause.

33. Internet Impersonation

It is now illegal to impersonate another ("credibly" and without consent) on the Internet in order to harm, threaten, or defraud.

This law office serves as a "lawyer of first resort". If we can be of any assistance to you with your legal or business issues, consider calling or writing proactively as soon as a question is identified. Preventative lawyering is the most effective kind.

Have a healthy, safe, and lawful year.

Sincerely,

HARMON SIEFF

©2011 Harmon Sieff. All rights reserved. This summary is intended only as a courtesy to our clients as a general informational source to identify interesting legal issues. It is not intended to constitute legal advice in any particular matter. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content of this Newsletter which does not, of course, identify all new laws or serve as a substitute for consultation with a legal professional.

HS: jhs
SieffNewsletter-January 2011

December 2010

RECENT LEGAL DEVELOPMENTS

1. Free Speech

A shopping mall guard "arrested" a clergyman who was “discussing” religion with mall visitors and refused to leave when requested by a shop owner.The clergyman sued the mall for prohibiting peaceful conversations between strangers.The mall contended that it could lawfully enforce reasonable time, place and manner regulations governing non-commercial expressive activity on its private property.

The State Constitution, however, protects free speech in a privately owned shopping mall and the content of such speech can be restricted only when absolutely necessary to serve a "compelling interest" (e.g., to address a “clear and present danger”).Finding no such justification, the court found the rules to be unconstitutional restrictions on speech.

2. Woman Harasses Man

Laws prohibiting sexual harassment work both ways.A female airport worker continued to deliver love notes and suggestive comments to a male co-worker long after he told her he was not interested. When she was finally warned to leave him alone, she began making offensive “gestures” at him every day. The male continually complained to several supervisors. They not only did not stop the female, they fired the male for poor attitude and he sued for sexual harassment based on the "hostile work environment".

Although the bosses did not take him seriously, a court eventually did, finding sufficient evidence of unwelcome sexual conduct tolerated by management which led to his termination.

3. Car Rental Liability

The survivors of a deceased victim of a negligent driver sued the driver and his car rental company for wrongful death. In addition to owner liability, the rental company was sued for failing to investigate the driving record of its customer who, unknown to the company, had a history of drunk driving convictions. The family contended that since it was so easy to check the driving record, the rental company should have done so and then refused to rent to a known reckless driver.

While rental companies are required to confirm that customers do not appear mentally or physically impaired and are properly licensed,the company won because it had no legal duty to examine driving records.

4. No Police Retaliation

A policeman was consistently evaluated as deficient in many required skills and assigned to “work improvement” status. He eventually sued the Department for retaliating against him for his threatening to expose racial discrimination in the Department.

The officer lost because he could not identify a specific act of retaliation.Where an employer provides a legitimate reason for an adverse employment action (reassignment), the worker has the burden to prove the action was retaliatory or discriminatory.

5. Title Insurance

A couple bought real estate with customary title insurance.However, while the preliminary report contained accurate legal property descriptions, the final policy contained clerical errors among pages of typical legalese.As a result, when they tried to sell several years later, they learned that they did not own the entire property.

The title insurer denied coverage because the omitted land was not described in the policy.The insurer lost because it had not only written and printed the policy language, but it was complicated beyond the capacity of reasonable consumers to understand. The ambiguity among the documents (different wording between the report and policy) was resolved in favor of the customers who are entitled to the protection they reasonably expected.

6. Personal Liability

A corporation owned by an individual sold kiosk businesses to investors, promising to identify locations, install terminals, and deliver profits. Eventually, the FTC learned that most of the sold kiosks did not exist and that the seller, and its individual owner, had committed deceptive business practices.

The individual appealed, claiming he was just a worker for the corporation, but the court affirmed his personal liability based on his knowledge of a "high probability of fraud" by the company he owned.

7. Interstate Contractors

An international freight delivery service contracted with California drivers to work in California under Texas law. California’s labor laws are much more favorable to workers, and the drivers sued for their rights as California employees.

The drivers won because in California, the burden of proof is on the employer to prove that a worker is an independent contractor and not an employee.The California court held that Texas law did not apply and the drivers had all the rights of California employees.

8. Non-Compete Clauses

Yet another case has upheld the law of California (but not of most other states) which guarantees individuals the right to pursue any employment they choose and voids non-compete clauses.

A saleslady was instructed to execute such a contract to keep her job, but was fired anyway and quickly hired by a competitor.The first company called the second and threatened to sue it for complicity in violating the non-compete contract, so the second company fired her.

The saleslady sued the second company for wrongful termination and the court held it liable for its part in enforcing the void agreement which illegally limited her employability.

This law office serves as a “lawyer of first resort”.If we can be of any assistance to you with any of your legal or business issues, consider calling or writing proactively as soon as a question is identified.Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: lm
Sieff-Newsletter-December 2010

© 2010 Harmon Sieff.All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional or as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

November 2010

RECENT LEGAL DEVELOPMENTS

1. Maximizing Personal Injury Awards

A cardinal rule of American tort law is the so-called "collateral source rule" pursuant to which an injured victim is entitled to recover from a negligent party the dollar value of medical, hospital, and similar "special damages" whether or not some other source (usually insurance) has paid the victim's bills.

In a current office case, our client received hospital services worth $45,000 but the hospital was required to accept only $5,000 per its contract with her health insurer. The hospital "wrote off" the $40,000 "discount" pursuant to its negotiated price list.

Several precedents have limited victims' recoveries to the amounts health care providers were actually paid by the "collateral source". In a surprising departure, a court recently ruled that a victim is entitled to recover the full value of the requested medical expenses whether or not the provider accepted a lesser amount. This could add $40,000 to our client's recovery.

2. Real Estate Broker Liability

When escrows fall apart, brokers are commonly blamed. We represent many real estate clients and a new case should encourage special caution.

A listing broker negotiated a home sale to buyers without telling them that recorded mortgages exceeded its value. Expecting their escrow to close as scheduled, the buyers sold their own home and prepared to relocate. When the lenders refused to cut their liens [a "short sale"], the escrow was cancelled. The buyers were homeless but not lawyerless.

A court ruled that since the sales price was so much less than what the lenders were owed, the brokers should have foreseen a substantial risk that the transaction would not close. Therefore, the brokers had a legal duty to disclose the negative equity in advance and were liable to the buyers for negligence and deceit.

3. Suing Accountants

When the restaurant's CPA refused to "correct" inaccurate W-2 forms, the waiters sued, not their boss but the CPA, for reimbursement of excess tax owed for misreported income. The waiters lost because the accountant was entitled to rely on the information he received from the boss. If that information was incorrect, it was not the CPA's fault. (It was the boss's fault.)

4. Building Contractors

State law requires home improvement contracts to be in writing, but oral contracts are occasionally enforced depending on specific facts. In a case where the owners were deeply involved in designing and planning an extensive remodel, even employing a special consultant to help them, the contractor was allowed to collect under an oral agreement because the court determined that to do otherwise would "unjustly enrich" the owners. [Note: This case could have gone either way. Building contracts and change orders should always be in writing.]

5. Importance of Title Insurance

An investor at a foreclosure sale called a title company to learn the existing mortgages on the offered property. In exchange for the information, the investor agreed to purchase the company's title insurance when he sold future properties.

Unfortunately, the title company provided inaccurate information. The investor seriously overbid and eventually lost $1,000,000 for which he sued the title company, but he lost because no title insurance policy or "abstract of title" was actually purchased. You get what you pay for.

6. Employee Loses

A saleslady complained that her supervisor was becoming increasingly hostile and angry toward her and had issued an undeserved negative performance evaluation. She quit and sued (a year and a half later) for discrimination, but lost for lack of evidence and was ordered to pay the company'slegal expenses under the Fair Employment and Housing Act.

7. Commercial Leases

A drugstore entered a lease with a landowner to occupy part of a planned shopping center which required certain government "traffic" permits. The parties agreed that "if, for any reason the Lease Term has not commenced by [three years], Tenant and Landlord shall each have the right to terminate this Lease...."

When the permits were denied, the owner said it might cancel. The drugstore sued, but lost, because of the "plain language" of the Lease. The court refused to consider evidence of earlier rough drafts which allowed only the tenant to terminate. Since the landlord could also terminate under the signed final version, the suit was dismissed.

8. Business Insurance

It is important to consider, understand, and select carefully the appropriate types and amounts of insurance which are consistent with management's risk assessments. A company carried auto, excess, umbrella, and commercial general insurance policies, but was still underinsured when an employee killed someone in a traffic collision, causing damages well in excess of all policy limits.

Although some of the policies paid their limits right away, the general insurer refused because it excluded auto liability. The company sued that insurer on a technicality but lost because it could not avoid the exclusion.

9. Violent Sailors

Two men at a Navy base dance were ejected for fighting. One followed the other to a private parking lot where he shot and killed him. The victim's family sued the Navy for not stopping the killer.

Landowners are generally obligated to protect their customers from foreseeable third party criminal conduct but that duty ends at the property line.

Remember that this law office serves as a "lawyer of first resort". If we can be of any assistance to you with any of your legal or business affairs, consider calling or writing proactively as soon as an issue is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-November 2010

© 2010 Harmon Sieff. All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional nor as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

START NEXT MONTH

1. Independent Contractors

An international freight delivery service contracted with California drivers to work in California under Texas law. California's labor laws are much more favorable to workers, and the drivers sued for their rights as California employees.

The drivers won because in California, the burden of proof is on the employer to prove that a worker is an independent contractor and not an employee. The California court held that Texas law did not apply and the drivers had all the rights of California employees.

8. Employer Retaliation

A policeman was consistently evaluated as deficient in many required skills and assigned to "work improvement" status. He eventually sued the Department for retaliating against him for his threatening to expose racial discrimination in the Department.

The officer lost because he could not identify a specific act of retaliation. Where an employer provides a legitimate reason for an adverse employment action (reassignment), the worker has the burden to prove the action was retaliatory or discriminatory.

17. Liability of Car Rentals

The survivors of a deceased victim of a negligent driver sued the driver and his car rental company for wrongful death. In addition to owner liability, the rental company was sued for failing to investigate the driving record of its customer who, unbeknownto the company, had a history of drunk driving convictions. The family contended that since it was so easy to check the driving record, the rental company should have done so and then refused to rent to a known careless driver.

Rental companies are required to confirm that customers do not appear mentally or physically impaired and are properly licensed. The company won because it had no legal duty to examine driving records.

20. Free Speech

A shopping mall guard "arrested" a clergyman who was "discussing" religion with mall visitors and refused to leave when requested by a shop owner. The clergyman sued the mall for prohibiting peaceful conversations between strangers. The mall contended that it could lawfully enforce reasonable time, place and manner regulations governing non-commercial expressive activity on its private property.

The State Constitution, however, does protect free speech in a privately owned shopping mall and the content of such speech can be restricted only when absolutely necessary to serve a "compelling interest" (e.g., to address a "clear and present danger"). Finding no such justification, the court found the rules to be unconstitutional restrictions on speech.

22. Personal Liability

26. Insurer Liability

A couple bought real estate with customary title insurance. However, while the preliminary report contained accurate legal property descriptions, the final policy contained clerical errors among pages of typical legalese. As a result, when they tried to sell several years later, they learned that they did not own the entire property.

The title insurer denied coverage because the omitted land was not described in the policy. The insurer lost because it had not only written and printed the policy language, but it was complicated beyond the capacity of reasonable consumers to understand. The ambiguity among the documents (different wording between the report and policy) was resolved in favor of the customers who are entitled to the protection they reasonably expected.

28. Woman Harasses Man

Laws prohibiting sexual harassment work both ways. A female airport worker continued to deliver love notes and suggestive comments to a male co-worker long after he told her he was not interested. When she was finally warned to leave him alone, she began making offensive "gestures" at him every day. The male continually complained to several supervisors. They not only did not stop the harassment, they fired him for poor attitude and he sued for sexual harassment based on the "hostile work environment".

Although the bosses did not take him seriously, a court eventually did, finding sufficient evidence of unwelcome sexual conduct tolerated by management which altered job conditions and led to his termination.

29. Non-Compete Clauses

Yet another case has upheld the law of California (but not of most other states) which guarantees individuals the right to pursue any employment they choose and voids non-compete clauses.

Asaleslady was instructed to execute such a contract to keep her job, but was fired anyway and quickly hired by a competitor. The first company called the second and threatened to sue it for complicity in violating the non-compete contract, so the second company fired her.

The saleslady sued the second company for wrongful termination and the court agreed that the second company was liable for its part in enforcing the void agreement which illegally limited her employability.

October 2010

RECENT LEGAL DEVELOPMENTS

1. Read Before You Sign

If you have been reading the news, you know about the "Dodger Divorce" case and the possibly dramatic consequences of not proof reading a legal document. The ownership of the ball club may be awarded based on what one side considers a typographical error. If a paper is important enough to "execute", it is important enough to review carefully - before it is signed.

2. Pollution Insurance

Allegedly, a sewer service company had "fixed" a sewer line for a water district but it malfunctioned anyway and damaged a nearby residence. The homeowner submitted claims to the district, but the district's insurer denied coverage based on a pollution exclusion to the policy.

Most basic casualty policies exclude "pollution damage" to some extent. Eventually, the district sued the service company but its insurer refused coverage for the same reason. Finally, the service company sued its own insurance company for a "bad faith" breach of the insurance contract. These drawn out claims were originally denied in 1996 when binding precedents supported broad interpretations of pollution exclusions. By the time the bad faith claim was asserted, the law applied narrower definitions and insurers could no longer exclude "conventional pollution". Still, the insurer won because it could not have committed "bad faith" by following the law as it existed when the claim was submitted.

3. Lame-Duck Director

Generally, a corporate director has an almost total right to inspect company records. A new decision considered a director who wanted to inspect after learning he would not be renominated. The court held that he was a corporate "adversary" with no inspection rights.

4. Real Estate Liens

An owner faced foreclosure pursuant to an assessment imposed on a previous owner, but objected since it had never learned of the lien.

In California, a property owner is responsible for liens if it has constructive notice of circumstances which would lead a "reasonable person to inquire" if a lien exists. Here, a title report referenced the lien and the owner was deemed sufficiently notified to support the foreclosure.

5. No Internet Trademark

Toyota sued auto brokers for Internet advertising (under domain names such as "Buy-A-Lexus.com") to end the unauthorized use of the Lexus "trademark," but it lost because the court ruled that the brokers had made "fair use" of the name. After all, they did sell Lexus vehicles. Generally a court will stop a use only where it creates confusion in the marketplace. Here, the brokers were obviously resellers who would not be confused with the manufacturer.

6. Truck Drivers

A professional driver got a speeding ticket but asked the court for traffic school because a conviction would affect her employment. She lost because California law prohibits commercial drivers from using traffic school to avoid convictions. All of us should drive more carefully.

7. Grocery Picketing

A major grocer was picketed by workers trying to unionize. Every day, union agents marched on the store's private property until the grocer sought a court order to stop them.

Although specific statutes allow protesting on private property, the court ruled the laws were unconstitutional when applied to private property which is not "a public forum".

8. Expensive Toys

Mattel obtained an enormous judgment and product rights against MGA which had hired a former Mattel employee to develop Bratz dolls. The inventor had started work on the idea while at Mattel, but finished it at MGA. Mattel's victory was reversed because while Mattel owned the preliminary sketches, MGA is entitled to benefit from its work in creating a final product.

9. Recording Fraudulent Documents

While a County Recorder must record any instrument it receives if specified by statute and acknowledged by a notary, the Recorder is not responsible for assuring that every paper is genuine.

A man forged two deeds transferring property to himself from another who sued the County for wrongful recordation. The County won because it must, as a practical matter, rely on the notary public system to certify documents.

10. Age Discrimination

A 56 year-old applied for a job, but a 40 year-old was hired. The older applicant sued for age discrimination but lost because he needed to prove not only that he was qualified, but that the company's reason for picking the younger person - that she was better qualified - was either untrue or a sham to conceal unlawful discrimination. The case was dismissed for lack of evidence.

11. Payment Under Protest

An investor sued his financial advisor for fraud and bad advice. The advisor promised to return $4 million with a discount for early payment. The company later insisted that the amount had been miscalculated, and paid the full amount "under protest", reserving the right to re-claim the "overpayment". The investor refused the condition, took the money, and the advisor pursued the overpayment.

The court ruled the full payment was unconditional because the company knew the investor did not agree to accept under protest.

Remember that this law office serves as a "lawyer of first resort". If we can be of any assistance to you with your legal or business affairs, consider calling or writing proactively as soon as an issue is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

HS: cls
Sieff-Newsletter-October 2010

© 2010 Harmon Sieff. All rights reserved. This summary is intended only as a general informational source to identify interesting legal issues. It does not serve as a substitute for consultation with a legal professional nor as advice which can be provided only by a lawyer based upon all relevant facts and circumstances of a particular situation. Transmission of this Newsletter does not create an attorney-client relationship. Harmon Sieff does not warrant and is not responsible for errors or omissions in the content hereof.

September 2010

RECENT LEGAL DEVELOPMENTS

1. Beach Boy vs. Beach Boy

The famous rockers split up long ago. Part of the group owns the trademark for live performances (a "right of publicity") and tours the world as "The Beach Boys" while another ex-member records solo albums and tours independently. He promoted his tour in England with old photos and references to his "versions" of "Beach Boy" songs.

The main group sued the solo, promoters, and publishers under California law, but lost. Since all pertinent events occurred in England, which does not recognize a right of publicity, the California court had no interest in resolving a British dispute.

2. Guarantors

Bevery careful before you co-sign for anyone's loan. A real estate company obtained a large line of credit secured by real estate and the guarantees of three other companies. When the borrower defaulted, almost immediately, the bank sued all the guarantors who complained that the bank should have foreclosed on the collateral first. Unfortunately, the co-signers had agreed to pay on default (before foreclosure) and their assets were attached by the bank.

3. Alter Ego

A City employee formed his own contracting company to provide his employer certain services. At some point, the City canceled the contract and the company sued. The City won because it proved the contractor was the "alter ego" of the employee because it was inadequately capitalized, paid the employee's personal expenses, and kept insufficient records. It was also formed only to sell to the City despite the conflict of interest.

4. Passenger Arrested

After a state trooper chased and stopped a speeder, he peered into the vehicle and noticed a passenger "hiding or retrieving something" under his seat. When the passenger was ordered to exit it appeared he was "reaching" for his pocket. The officer performed a "pat down", found a handgun, and arrested the passenger for possession by a felon.

The passenger was convicted because an officer may pat down anyone during a traffic stop if he reasonably suspects the person is armed. The defendant's specific movements created "probable cause" for a pat down.

5. Pharmacy Liability

A woman addicted to prescription pain medicine paid $300,000 in cash to an employed pharmacist to continue her addiction. When her husband found out, she sued the pharmacy company for negligently failing to monitor and report missing medication.

The Drug Dealer Liability Act does allow a patient to sue a pharmacy-provider, but here, the individual pharmacist acted alone and his company was not liable.

6. Injured Construction Worker

A construction worker who sub-subcontracted to build concrete posts was injured at work and sued everyone including the prime contractor. The court interpreted the "Doctrine of Peculiar Risk" where one is hired to perform "inherently dangerous work" and delegates responsibility to another. Here, the prime contractor had no control over the subs and was not liable for the injury.

7. Partners in Crime

Generally, an injured victim cannot recover damages if injured while committing a felony. Nonetheless, when two burglars crashed their car while evading police, the passenger sued the driver for his injuries. Since participating in a car chase from police after a burglary is a crime, the case was thrown out of court.

8. Disabled Worker

A job-injured City worker was terminated while receiving disability benefits. This is generally a bad idea and she did, in fact, sue the City for failing to accommodate her resulting disability, demanding she be returned to work.

The City won because it proved the termination occurred only after the worker's own doctor informed her she would not be able to return to her job and she failed to request instatement in a timely way. Had she sued sooner, the result might have been different.

9. Outside Salesman

The Independent Wholesale Sales Representatives Act requires manufactures, jobbers, and distributors to enter written contracts and pay agreed commissions to salesmen or face liability for treble damages.

When a salesman sued his principal to enforce this law, the defendant claimed that the law required a finding of a "willful" violation, but the court ruled that treble damages could be recovered anyway because, according to the statute, willfulness was so difficult to prove that the law would never be utilized. Due to the poorly worded statute, the salesman won.

10. Public Accommodation

The Americans with Disabilities Act includes countless regulations for businesses to accommodate the disabled, including those in wheelchairs. One such individual sued a cafeteria-style restaurant where a 45-inch wall separated the "walking line" from the food preparation counter and chair-bound patrons could not view the available foods as could standing customers.

The restaurant claimed the law was followed because the cash register part of the counter was only 34 inches high, but it was ordered to lower its wall anyway (and pay penalties).

This practice endeavors to serve as a "lawyer of first resort". If we can be of any assistance to you with your legal or business affairs, consider calling or writing proactively as soon as an issue is identified. Preventative lawyering is the most effective kind.

August 2010

RECENT LEGAL DEVELOPMENTS

1. Password Planning

When I became a lawyer, the only "secret information" discussed during an estate planning interview was maybe the combination to a safe. In the 21st century, most of us have dozens, if not hundreds, of passwords, PIN numbers, alarm codes, and secret user names for personal and business accounts of all imaginable sorts. If you were incapacitated tonight, who could open your computer or Facebook account or enter your home?

Especially if you live alone, consider informing a friend how to locate a list of your important information in an accessible hiding place: "If I am hit by a truck, look behind the sock drawer". That paper (or DVD) could remain private and be updated, moved, or destroyed at will -- without visiting a lawyer!

2. Jack-in-the-Box Coffee

Historically, vehicle occupants injured by another's negligence could sue for all resulting damages. A few years ago, voters adopted Proposition 213 prohibiting uninsured motorists from collecting "pain and suffering damages".

A drive-through Jack-in-the-Box customer received coffee so hot that she was horribly injured when some spilled on her lap. Had she been insured to drive the vehicle, a jury would have decided if the coffee was "dangerous". The Court ruled, however, that Proposition 213 prevented her from recovering any pain and suffering damages arising from the "operation" of a motor vehicle.

3. Umbrella Insurance Is More Than "Excess"

A recent case affirmed that "primary insurance" is payable immediately upon a covered occurrence, "excess insurance" pays only after the primary limit is consumed, but "umbrella insurance" may include risks not covered by the primary policy at all and whether or not the primary limit is exceeded.

Word to the wise: Difficult as it is, try to read all of your insurance policies and obtain written confirmation from your insurer or broker describing exactly the coverage you have. When policyholders wait until after a claim occurs, these lawsuits arise.

4. Scuba Liability

A diver rented equipment from a company which required customers to release it from liability if they were injured. When a renter ran out of air underwater and died, his family sued the company for wrongful death, but lost on a pretrial motion based on the release.

The case was reversed on a technicality even though such releases are typically enforced because this release referred only to "boat dives or multiple day rentals." This decedent rented for only a day and entered the water from the beach, not a boat.

5. Employee Harassment

State law prohibits employers from harassing or discriminating against employees. In one case, a worker developed an anxiety disorder which allegedly affected her attendance. Her boss began to belittle and reprimand her in front of colleagues and was overtly rude. She was eventually fired for poor attendance [a legitimate personnel management decision], but she sued anyway, claiming harassment and discrimination based on her "disability."

A Court ruled that evidence of insults and rudeness was relevant and should have been considered, not excluded, by the trial court.

6. Highly Technical Eviction Rules

Forcibly removing a tenant is a drastic remedy. Several months after a restaurant notified its landlord that its business office was relocated to an offsite location, it failed to pay rent and eviction notices were delivered to the restaurant. When the landlord sued for unlawful detainer, the tenant objected that the notices were not delivered to the offsite business office. Since the landlord had not complied with the change of address notice, the case was dismissed.

7. Real Estate Brokers

California law prohibits rendering real estate brokerage services without a license, but certain activities, such as raising business financing, are not clearly defined as requiring licenses.

In a case where one company assisted another in obtaining a large credit line in exchange for a promised 2% fee, the borrower refused to pay until it actually collected money from the lender, and was sued for the 2%. The borrower refused to pay when it learned that its "broker" was unlicensed. The Court held that though the defendant was unlicensed, a jury should decide if this service required a license or constituted merely business consulting.

8. Who Is The Employer?

An agricultural grower sold its products to distributors who received commissions. They also provided financing, tools, personnel training, and other services. When the grower stopped paying the workers, they sued it and its distributors.

Only an "employer" is liable for unpaid wages. An employment relationship is strictly defined by law. Here, the distributors did not know the workers were unpaid and could not have prevented them from working without paychecks even if they had.

Although the grower went bankrupt, the Court held that the distributors were not responsible since they did not exercise sufficient control over the workers to be deemed "legal employers."

9. Licensed Software

A technology company licensed anti-pirating software to DVD manufacturers who signed contracts with blank space where secret specifications were later inserted. When a licensee produced nonconforming equipment, the tech company sued but the manufacturer claimed the specs were not part of the blank agreement.

The Court enforced what it found to be the "mutual intention of the parties ... at the time of contracting": that the secrets were revealed on the condition of confidentiality and it was reasonable to sign blank forms before secrets were filled in. Impliedly, the manufacturer promised to follow "later provided" specifications.

Sincerely,

HARMON SIEFF

July 2010

RECENT LEGAL DEVELOPMENTS

1. Employee Texting Is Not Private

The United States Supreme Court has ruled on a local case which has been litigated for several years following the issuance to police officers of "texting pagers." The Department was charged higher fees by a private paging service for messages in excess of a monthly limit. When the Department was surcharged for a particular officer's usage, the Chief reviewed the officer's text records and learned that many messages were not only unrelated to work, but very personal and sexually explicit. When the policeman was disciplined, he sued the City for an "unlawful search."

The Supreme Court ruled that there is a right to privacy against government searches, but when the government is coincidentally the employer, the operational workplace realities must be considered. Here, the warrantless review of the text messages by the Department in its role as an employer trying to contain costs was a legitimate work related purpose and did not violate the Constitution.

2. Limits to Uninsured Motorist Insurance

A class action challenged common form insurance policies providing "uninsured motorist" protection and "medical payments" reimbursement. Insurers commonly prohibit "double dipping" by reducing the payout for UM by the amount of "medical payments".

Such offsetting has been customary for several decades and this challenge to the rule was denied just as many others have been.

3. Acceptable Spam

It is unlawful to transmit email advertisements accompanied by false "header information." A private citizen sued a phone company for sending him unsolicited "spam" from eleven different screen names on the theory that the advertiser was trying to evade "spam filters." In a rare advisory opinion, the California Supreme Court found that an email is not unlawful so long as it has an accurate and traceable domain name. Even if the claimant was misled into opening emails from an unknown sender, he had no right to recover damages.

4. Earthquake Injuries

The survivors of women killed in a building which collapsed in an earthquake sued the building's owners for negligently failing to retrofit the structure seismically. The families relied on a City ordinance which required "hazardous buildings" to be retrofitted before 2018. The owners won because they complied with existing law.

Property owners must use ordinary care in operating buildings to avoid personal injuries. Nonetheless, the adoption of a statute requiring retrofitting in the future did not, in itself, render the owners negligent a decade in advance.

5. Piercing the Corporate Veil

A wealthy family controlled several corporations. The family "leader" guaranteed a large loan to one of the companies, and when the debt was not repaid, the lender sued the guarantor and the "related" corporations on the basis that all were "alter egos" of the "leader" and not, as they claimed, separate legal entities insulated from cross-liability.

We strongly urge all family enterprises to limit personal liability by forming corporations, limited liability companies, or similar entities to insulate the assets of individual owners from company creditors. In this recent case, the guarantor co-owned and managed three "separate" corporations, financed them, paid salaries to family members, and dominated their operations. Because several company contracts happened to have been consummated without his personal approval, he sought a prejudgment dismissal, but the case was ordered to trial to determine if the various companies and individuals were legally separate or merely "veiled" identities for the same person.

Company owners should protect their private assets by maintaining legal formalities and arms-length practices to make it clear that the entities (and individuals) are separate. Not doing so leads to this sort of litigation and the possibility that the owner's personal assets may be seized.

6. Termite Inspector Liability

A guest was seriously injured when the balcony on which he stood collapsed due to dry rot damage. He sued the latest termite inspector for failing to identify the dangerous condition.

The inspector won because any duty to discover and disclose the balcony's condition was owed only to the property owner who had hired it to decide if fumigation was necessary. Although there are many exceptions to the general rule of duty, this particular inspector was not responsible for the injured visitor because even if a proper inspection had been conducted, the owner could have ignored the recommendations.

7. After Recorded Deed

A deed conveying real estate to a trust is not void merely because the trust did not exist when the deed was signed. A court holds that the deed became valid when the trust was formed in the future so long as it was executed with a reasonable expectation that the trust would be formed.

8. Billboard Bans

Large format signs attached to and sometimes almost concealing buildings of all sizes have proliferated in Los Angeles even though there are specific statutes banning oversized ads promoting offsite businesses, prohibiting "freeway facing" signs, and otherwise regulating billboards.

In recent years, the City has legislated a few exceptions to these laws in the name of enhancing the appearance of neighborhoods and other "civic" purposes. Major outdoor advertisers sued the City to prohibit enforcement of these statutes as unconstitutional limitations on free speech. A federal court has now ruled that it is constitutional to regulate outdoor advertising and the legislated exceptions do not infringe speech or discriminate.

This practice has long endeavored to serve as a "lawyer of first resort". If we can be of any assistance to you with your legal or business affairs, consider calling or writing proactively as soon as an issue is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

June 2010

RECENT LEGAL DEVELOPMENTS

We hope these recent legal developments are interesting and/or useful.

1. Underinsured Motorist Coverage

Several cases passed through the office last year which emphasized the importance of "underinsured motorist" automobile insurance. This is often called "UM/UIM", a combination of uninsured/underinsured motorist protection. Especially at a time when many consumers are cutting back on expenses, there is a temptation to minimize costs and coverages.

The Risk: Two of our clients do carry only minimum auto insurance and are being sued by accident victims demanding six-figure settlements and threatening to seize the assets (and residences) of the "underinsured" drivers. For a relatively small cost, the two defendants could have raised their protection from $15,000 to enough to protect their assets, and for an even smaller amount, the victims could have insured themselves against "underinsured motorists." [Although the client-defendants are considering bankruptcy, we expect to be able to protect them through out-of-court settlements for affordable sums.]

The Protection: Three other clients were victims of violent automobile collisions and required surgery. The third party insurance did not cover even the medical bills, let alone the surgical and rehabilitation costs, pain and suffering, lost earnings, and related expenses. These clients, however, carried large underinsured motorist policies and during litigation, we recovered over a million dollars from the victims' own carriers and covered all damages.

Some estimate that a third of California drivers are totally uninsured and much of the rest are inadequately covered in light of rising medical costs.

Word to the Wise: Carry sufficient uninsured/underinsured motorist coverage for your own automobile policy and, if you are injured, do not be discouraged if the other party cannot pay.

2. Employment Litigation

A local case may greatly impact California's employment discrimination laws. Under current state law, if a worker can prove that unlawful discrimination was a "motivating factor" [even if not the only factor] behind a termination or demotion, he can recover damages even if there were other valid reasons for the employer's action, such as poor performance, insubordination, incompetence, unacceptable tardiness, or excessive absence.

Federal law is different and has long accepted the "mixed-motive defense" and denied damages if an employer was justified by any valid reason. A fired pregnant bus driver claims she was terminated due to her pregnancy. State law strictly forbids employment discrimination based on race, religion, sex, age, or pregnancy. The defense insists the driver was fired for bad job performance, not pregnancy, and that she would have been fired even if she had not been pregnant.

The U. S. Supreme Court will soon decide if the federal defense can be applied to California court cases. If it does, hundreds of claims will be affected.

3. Government Crackdown on Misclassifying Employees

Seemingly every month there are court decisions pertaining to the classification of workers as independent contractors or employees. The Los Angeles Daily Journal recently noted that up to 30% of employers illegally classify employees as independent contractors creating a $15 billion tax shortfall. Since governments at all levels are enduring financial crises, it is not surprising that many are cranking up their enforcement efforts to collect additional payroll taxes as well as to compel compliance with laws prohibiting discrimination and promoting health, safety, and workers' compensation, and guaranteeing overtime pay and minimum wages.

The State of California has begun vigorously prosecuting several industries. One government audit last year collected $140 million in additional tax revenue and millions more in penalties and fines from companies which had "misclassified" over 70,000 workers.

Word to the Wise: If considering adding personnel as business improves, beware. It is tempting to hire contractors because the relationship is less costly and much simpler to begin and end, but keep in mind the heightened level of government enforcement.

4. Dissolved Corporations

Although different jurisdictions have different rules, a corporation is essentially a non-natural person created and operated pursuant to state law. In California, a dissolved corporation continues to exist for purposes of winding up its affairs and completing litigation. A dissolved corporation may even be sued after it dissolves for a claim which arose before the dissolution. If the dissolved corporation loses, the judgment can be enforced against the former shareholders to the extent they did or could receive corporate distributions from the dissolution. [ Corporations Code §§2010-2011].

Delaware is considerably more business friendly. A corporation formed there is protected from defending any lawsuit after three years from dissolution. A recent California suit against a dissolved Delaware corporation was dismissed because the California law which favored the creditor could not be used against a Delaware corporation.

5. Debt Collection

People who owe money are often pursued by frustrated and aggressive creditors. Although criminal loan sharks have resorted to violence for generations, in fact, strict laws protect debtors.

The Federal Fair Debt Collection Practices Act actually empowers a debtor to sue and collect damages from a creditor which has utilized unlawful collection methods.

In the recent Rouse case, a debtor filed such an action against his creditor but lost and was initially compelled toreimburse his creditor for the creditor's legal expenses.

The case was reversed on appeal so that the losing debtor will be required to pay the creditor's court expenses only if the creditor can prove the losing case "was brought in bad faith and for the purposes of harassment . ." Based on the evidence, the debtor still received nothing, but was not required to reimburse the creditor.

If we can be of any assistance to you with your legal or business affairs, consider calling or writing proactively as soon as an issue is identified. Preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

May 2010

RECENT LEGAL DEVELOPMENTS

We hope these recent legal developments are interesting and/or useful.

1. Automobile Insurance

It is important to read the fine print. A Court recently allowed an insurance policy to include, within a mass of fine print, a reduction of its liability limits for "permissive users" of the insured vehicle, i.e., less coverage when driven by a non-owner.

Although the disappointed policyholder claimed it was unenforceable because not "conspicuous, plain, and clear" enough to attract the reader's attention, he lost. Lesson: Read the fine print.

2. Independent Contractors

Although this seems compellingly unfair, it is effectively a penalty for the violation of a consumer protection statute.

3. City Business License

Los Angeles and other communities have responded to the economics of the day by increasing enforcement of the laws requiring the payment of business taxes. Sometimes enforcement efforts go too far.

A City resident collected books for his personal use and did not resell them. He wished to rent "exhibitor's tables" at festivals and conventions, but police ordered him to obtain a permit for his collecting activities.

The collector filed a proactive lawsuit seeking a court's declaration that just renting booths or tables did not make him a "secondhand book dealer" under City law. He won because the law only applies to commercial activities providing products to others. Since this man only intended to buy items for his personal enjoyment, his activity was not legally a "business", he was not a "dealer", and no license was required.

4. Internet Gossip Liability

Forwarding email gossip has become an international obsession. Be careful what you forward.

In a case involving foreign veterans, a man received and forwarded an email accusing another person of past military misconduct. The accused sued him for defamation of character.

Under federal law, providers of information are immune from liability for merely repeating what they have received from third parties unless they have materially contributed to the illegality of the message. Here, the forwarder's only statements were "look at this" and "the truth will come to light." He did not say the message was true, so he remained immune from liability.

5. Police Overtime

A group of officers sued their municipal employer for unpaid overtime compensation for the time they spent dressing for work. For a policeman, this includes not just a uniform but a lot of weapons and equipment. It takes awhile.

Nonetheless, the court defined "work" as "exertion" controlled or required by an employer and pursued primarily for its benefit. Since the policemen needed to dress anyway, and could have done so at home, the City won.

6. Health Insurance Rescission

Part of the national debate on health insurance reform includes allegations that many companies retroactively cancel coverage after learning a customer has submitted a false policy application. An HMO is entitled to "rescind" on discovering material misrepresentation, but only if the customer did so intentionally and the company made reasonable efforts to verify the application before issuing coverage.

Such a canceled customer recently won a pretrial motion to have her "day in court" where a jury will decide if she intentionally concealed her fertility treatments and pregnancy when she applied for coverage just seven months before childbirth. The HMO should have done more to screen her, but the jury may yet rule she lied.

7. Partition of Real Estate

A co-owner has an absolute right to have a court split ("partition") a property - or its sales proceeds - among all co-owners in order to end the co-ownership. It is always preferable to have a contract among owners in anticipation of disagreements.

Two parties owned equal shares of a vacation home. They had entered a right of first refusal contract so if one got an offer to buy his half, the other owner could buy on the same terms. Such anoffer was received and offered to the co-owner who refused to buy. The outside buyer's escrow fell through and the would-be seller sued for partition.

The co-owner opposed partition by claiming the would-be seller waived its right by offering the refused contract. The court disagreed. A refusal right does not affect partition rights. The property will be sold at auction if it cannot be physically divided.

Sincerely,

HARMON SIEFF

April 2010

RECENT LEGAL DEVELOPMENTS

1. Personal Injury Damages

Generally a negligent driver must compensate his victims for all damages sustained, including medical expenses. If a victim pays doctors $10,000, he is entitled to recover it from the negligent party (plus lost earnings, "pain and suffering", and other damages). When health insurance became more common, the courts developed the "collateral source rule" by which victims can, in effect, "double dip." Even if a health insurer pays all medical bills, the driver is still required to pay compensation to the victim so that he does not benefit from the victim's "foresight" in buying insurance.

In recent years, with more complicated health plans, many insurers require doctors to discount their bills and require patients to reimburse the insurer if a "third party" eventually pays compensation. In a recent case, a victim sued for the full amount of medical bills even though the doctors had agreed to treat him at the insurer's reducedrate. Although some recent cases have held otherwise, this court ruled that the discount was a "collateral source" and the victim was entitled to reimbursement of the full pre-discounted bills.

2. Doctor versus Doctor

The Department of Consumer Affairs is considering a proposed regulation to permit optometrists (eye doctors without medical degrees) to treat glaucoma after passing a specified training course. A group representing ophthalmologists (trained surgeons with medical degrees) are vociferously opposing the proposed rule. Interestingly, "in 43 other states, optometrists can independently manage and treat glaucoma patients" according to an optometric spokesman. With the cost of healthcare continuing to be a major social issue, we can anticipate more debate over similar proposals.

3. Trust Beneficiaries

A couple's family trust contained a "spendthrift provision" to protect beneficiaries from themselves. This common estate plan prohibits using trust assets to pay even valid claims from heirs' creditors. In a recent case, one of the beneficiaries was also the trustee who had embezzled or mishandled the trust fund. The court ordered him to repay the loss out of his personal share because, although also a beneficiary, he was not protected from co-heirs for his own misconduct.

4. Overtime Claims

A factory foreman complained that his work group was entitled to overtime pay. The company audited "time clock" reports, determined there was no overtime, and fired him even though he apologized for being "confused" by subordinates and offered to repay overpayments from his own pocket.

A court ruled that public policy protects the foreman from a "good faith but mistaken overtime pay claim" which is not grounds for termination.

5. More on Restaurant "Tip Pools"

An employer can pay a "tipped" employee less than minimum wage so long as it "tops up" to the minimum if the worker is under-tipped, discloses the "tip credit" policy, and either allows employees to keep their own tips or maintains a valid tip pool for a defined class of workers (e.g., servers, cooks, hosts, and/or busboys). There have been several recent challenges to this practice, but policies have been upheld so long as the owner takes nothing.

6. Save the Polar Bears

In some circumstances Federal law allows oil companies to harass, capture, or kill otherwise protected marine mammals. Animal advocates challenged the rule, but the court upheld it because the law is sufficiently narrow to permit only "negligible" impact on wildlife.

7. Curfew Law

San Diego's curfew against minors in public after 10:00 P.M. has been ruled unconstitutionally "overbroad" in most cases.

8. Real Estate Appreciation

Remember that? Back then, two parties contracted to sell a home for $14 million with a non-refundable deposit of $620,000. The buyer cancelled, the home sold for $15 million, and the would-be buyer sued for a refund. The court found no contract term specifying that the deposit was a reasonable "liquidated damage" and ordered the refund. There was no actual damage since the seller received more from the new party than expected from the old.

9. Usury

Two men agreed to buy a property together. For the down payment, one loaned the other about $1 million at 12%. Ordinarily, the California Usury Law limits private party interest to 10%. When the borrower did not repay his note, the lender foreclosed. The borrower then sued for wrongful foreclosure since the loan was usurious.

Here, the court ruled that the Usury Law did not apply because both parties were self-identified "partners"; the foreclosure was upheld.

10. Injured Worker

A college hired a general contractor to remodel a dormitory. The general hired a plumbing subcontractor which hired a man who was hurt by a pipe. Workers compensation laws prevent employees from suing the boss (plumber) for negligence and collecting jury-determined damages for pain, suffering, and other losses. Therefore, the man sued the college and the general for having a dangerous work area. He lost because jobsite safety had been delegated to the plumber and neither the college nor general retained control of the pipes.

11. Baseball Cards

Major League Baseball recently sued a major card producer for infringement because it sold cards after its league permission expired. The cards showed player photos, with player consent, but did not identify any team names. Still, the company agreed to settle by promising to pay $2.4 million for 2009 cards, even more for 2010 cards, and to stop making anything else displaying "logos, uniforms, trade dress, or club color combinations.". And to think some of us used to put them in our bike wheel spokes!

Sincerely,
HARMON SIEFF

March 2010

RECENT LEGAL DEVELOPMENTS

1. Car Accident Liability

When an employee is using the boss's vehicle on a service call, liability for the worker's actions is obvious. All employers, however, should carefully review insurance policies if there is any use of "non-owned vehicles" for company purposes.

In one case, a working truck driver caused a collision which seriously injured another. Although the company admitted it was "vicariously" liable, it was also sued for negligently hiring (and retaining) the employee despite knowing that he had been discharged from a previous job for causing several vehicle collisions. The substantial size of the verdict suggests that a "runaway" jury was inflamed by the company's willingness to hire a "dangerous" driver.

In fact, many insurers refuse to cover such a person. It is recommended that before anyone is hired to a position which might involve driving, their background should be carefully reviewed and honestly reported to carriers.

2. Another Traffic Case

In another case, a driver exited his company's parking lot, collided with a squad car, and killed a sheriff whose family sued the company (a "deep pocket.")

As in the previous case, an employer is generally responsible for its workers' actions in the course of employment. This company defended that the worker was going home in his own vehicle.

"Course of employment" does not usually include events while "going and coming" from a job unless the employer derives a special benefit from the circumstances. Here, the company required its employee to have his car at work so he could, on occasion, visit customers. The driver was routinely reimbursed for using his car to benefit the boss. Though this collision happened "going home", having the car there was a job requirement and the company was liable.

This office recommends an insurance review even for individuals with domestics who occasionally drive on family errands. Such workers typically have only token insurance, but "non-owned auto" coverage is commonly available to protect the employer-family.

Years ago, a Beverly Hills celebrity sent her maid to the grocer in the maid's car. A person was seriously injured, the maid under-insured, and the celebrity was successfully sued.

3. Real Estate Law

The bad economy has cut profits in real estate. In better times, routine transactions often did not involve lawyers for every technicality. Lately, however, lawsuits have proliferated as buyers seek "scapegoats", according to the Los Angeles Times, especially regarding buyer representation (i.e. brokers), inadequate disclosure of property conditions, and improperly drafted "as is" clauses.

4. When Discrimination is Not

If there are valid reasons for an employment decision (like termination), it may not matter if there are also improper reasons. A City employee claimed she was fired for being pregnant; the City asserted valid reasons for termination. Although the jury returned a huge verdict, judges overturned it because the jury was not instructed that the termination may have been proper if there was also non-discriminatory justification (the "mixed motive affirmative defense.")

5. Health Insurance

The family of a deceased HMO member claimed that the decedent died from substandard care due to the HMO's contractual arrangements which created financial incentives to doctors to deny care. The HMO won because the reimbursement plan complied with federal law.

6. Non-Compete Contracts

Several tech employees agreed to non-compete agreements which prohibited them from using confidential company information to benefit competitors. When several quit and joined competitors, the agreements were successfully challenged as void .

California has some of the most pro-worker laws in the nation. Contracts which restrain anyone from engaging in a lawful trade are unenforceable except in very limited circumstances. Even requiring workers to sign a void contract is itself illegal.

Although no money was awarded, this case is a reminder: contracts can protect property (including "trade secrets"), but California law seldom limits an individual's right to work.

7. Right of First Refusal

Whenever two individuals co-own something, especially if they are not married to each other, some sort of "buy-sell" agreement is strongly urged. One common term is the "right of first refusal" by which one co-owner can match an outsider's offer to buy out the other. Such contracts are enforceable and courts do not appreciate trickery.

In a pharmacy case last year, one owner owed his co-owner the "right to refuse" an outsider's offer to buy his half for supposedly $70,000. The right was exercised and the offer accepted. Nonetheless, the co-owner sold to the outsider anyway - for $24,000 - and the other co-owner sued and won.

Apparently, the seller lied about the offered amount and breached his buy-sell obligation and fiduciary duty to his co-owner. These agreements are necessary, in my opinion, because most co-owners want to control who will be their future business partners.

8. Waterfront Property

Adjoining neighbors with "river" frontage disputed the right of one to moor a houseboat in front of its lot and blocked the neighbor's frontage. Real estate law includes "littoral rights" which protect access to waterways.

The court ruled that the boat was a de facto "wharf" blocking the neighbor as determined by defining the property boundary as "fixed by a line drawn into the water perpendicular to the shoreline," instead of extending the non-perpendicular land boundary into the water. So much for neighborliness.

Sincerely,
HARMON SIEFF

February 2010

RECENT LEGAL DEVELOPMENTS

Dear Client:

We hope these recent legal developments are interesting and/or useful.

1. Updating Title Insurance

Existing real estate title insurance policies may be affected by a recent Appellate Court case denying coverage where the original owner had "transferred" his own real estate from one form of ownership to another without updating his coverage.

Title claims are rare, but they do occur. Coverage may end upon transfer to any separate entity like an LLC, corporation, or family member even if the original owner retains control. When transfers occur, or have occurred, owners should consider contacting their title insurers to assure that the current "owner" is insured. In some instances, a policy "endorsement" may be required, but they are nominally priced and routinely issued.

2. Unlicensed Contractor

A corporate building contractor can operate only through a qualified individual who is licensed and actively engaged in licensed work. In a case where the individual relocated to Peru in 2004, a dispute developed over a 2006 project resulting in a mechanic's lien. The court ruled that the homeowner was entitled to dissolve the lien and collect a full refund. Without a qualifying individual, the corporation was unlicensed and ineligible to be paid for its work.

3. Mad Librarian

A disagreement between a librarian and her supervisors led to the librarian dispatching a mass email to all library employees complaining of "ill treatment" by the supervisors and calling them names. After she was fired for "insubordination" and serious misconduct, she sued, but lost, because her rant was not protected by the First Amendment. She sent the emails in the course of working, but against her bosses' directions, which is "insubordination."

4. Divorce and the Family Business

Marriage affects business ownership. A new spouse becomes a part owner by simply being married to an active owner who exerts time and energy ("community effort") to increasing the value of what is nominally a separate property enterprise. Such couples should consider a prenuptial agreement especially if there are co-owners. A "postnuptial" contract may also help define the rights of the parties in the event of divorce. How romantic.

5. Roadside Traffic Collision

Our office is increasingly representing seriously injured victims of traffic collisions. Sometimes, the victim loses.

A recent case (not ours) involved a grocery truck which had been parked off a highway in "an emergency area." Thereafter, a motorist was killed when he collided with the rear of the grocery vehicle. The court ruled that the grocer breached no duty to the decedent just because there was no "emergency." Parking off of the road did not pose an unreasonable risk to others, and the connection between the parking and the collision was "too attenuated."

6. Proving Sexual Harassment

An office worker sued her company for a "hostile work environment," including her boss's inappropriate conversation, scheduling a business meeting at his home, and refusing to reimburse claimed expenses. The company won because she could not prove that the "harassment" was sufficiently "pervasive", reasonably serious enough to affect the workplace, abusive, or even "sexual".

7. Health Insurer Can Rescind

Cancelling a contract ends it as of the time of cancellation; rescission ends it as if it never existed. When health insurance is rescinded, coverage is terminated, in effect, retroactively.

In many cases, rescissions are quite proper and legitimate as noted in the recent Nieto case. In a suit to reinstate rescinded coverage, the insurer won because Nieto had lied in her policy application about recent doctor visits and concealed pre-existing back and hip problems. Although she alleged the misstatements were unintentional, the court did not accept, or believe, the excuse.

8. Avoid Employing Illegal Immigrants

A new law requires companies to use the government's voluntary employer verification system ("E-Verify") to be eligible for government contracts. This system compares workers' I-9 forms to government databases. E-Verify has long been recommended as a safe harbor for employers since it is difficult to prosecute a company for hiring E-Verified workers.

9. Adverse Condemnation

"Squatters rights" are often asserted but seldom litigated. Still, if a non-owner actually occupies real estate for five years, and pays its property taxes, then the "true" owner is legally presumed to know of the "open, notorious, hostile, and adverse" possession and must sue the squatter within five years or lose his rights forever.

In a recent case, a cabin owner moved to Europe in the early 90's leaving her non-owning father to "sell" it for her. In 1997, he alone signed a conveyance deed and left the country. The "buyers" moved in and paid the taxes. After the daughter died, her heirs sued to claim title, but the court ruled that the right to sue ended in 2002 -- five years after the buyers moved in.

10. Recent Awards and Settlements

A Metrolink collision victim accepted a $2.9 million settlement for injuries. A gun club's neighbor was awarded $2.3 million because stray lead slugs polluted his land. Starbuck's agreed to pay $225,000 to three California counties which prosecuted it for failing to honor gift cards with balances under $10.

Sincerely,

HARMON SIEFF

January 2010

NEW LAWS FOR A NEW YEAR

Dear Client:

Once again, the legislature haggled all year over budget issues. Nonetheless, dozens of new laws were enacted, including the following:

1. Disclosure of Email

The Electronic Discovery Act allows litigating parties to compel the disclosure of electronically stored information and allows court motions to enforce such "discovery demands". Many of the most high profile cases of recent years were based on emails. Remember, electronic letters never disappear.

2. Evictions for Contraband

In many parts of the State, including Los Angeles, prosecutors can evict tenants for unlawful activities regarding firearms, ammunition, and controlled substances.

3. Counterfeit Merchandise

Prosecutors or private citizens may sue to declare a building to be a "public nuisance" if used for willfully manufacturing, selling, or possessing counterfeit merchandise for sale. The person causing the nuisance can be ordered to pay damages and to stop the conduct.

4. Jury Service

Courts may impose fines for failure to appear for jury duty.

5. Television Video

Visual displays are now allowed in the vehicle's front seat if designed to prevent the driver from viewing the images.

6. Nooses

It is now a misdemeanor to hang a noose at a school, park, or workplace for the purpose of terrorizing an owner or occupant.

7. Graffiti Costs

Any government entity responsible for restoring defaced property may recover restitution for economic losses from anyone convicted of the crime.

8. Plastic "Brass" Knuckles

Hard plastic, wooden, or composite "knuckles" are illegal to sell or import.

9. School Weapons

It is a crime to have box cutters or razor blades at school.

10. Ammunition

It will soon be a crime to sell ammunition without obtaining thumbprints and buyer information and maintaining on-site records, or to sell to minors or certain criminals, and it is a crime to possess ammunition while associating with a "street gang" if subject to a prior court order.

11. Nitrous oxide

It is a misdemeanor to furnish a minor with this chemical or any compound including it. At mid-year, courts may suspend business licenses for certain persons who do so.

12. Animal Abuse

It is now a misdemeanor to sever the "solid part" of a cow's tail.

13. Dog Fighting

Property interests acquired through dog fighting is subject to forfeiture.

14. Counterfeit to Charity

Courts can now order that confiscated counterfeit merchandise (CD's, designer jeans, branded purses, etc.) be donated to charity in lieu of destruction.

15. Gay Marriage

Same-sex couples lawfully married out-of-state before November 11, 2008 are considered validly married in California. If married after that date, the couple shall have all rights of marriage except for the designation (label).

16. Stolen Valor Act

Any elected official convicted of falsely claiming to have been awarded a military decoration shall be removed from office.

17. Ignition Locks

In certain counties, including Los Angeles, the DMV may require interlock devices on all vehicles owned or operated by one convicted of DUI.

18. Off-Road

It is unlawful for any adult to allow a child under 14 to operate an off-road vehicle if the child cannot reach the controls safely.

19. Killing Birds

The Fish and Game Code now allows the "removal of species" by airports to promote air safety.

20. Trans Fats

Restaurants may not store or sell foods containing more than half a gram of trans fat per serving. Violations are punishable by fine. Beginning next year, the law applies to bakeries.

21. Football

Certain environmental protection laws shall not apply to the stadium proposed for the City of Industry.

22. Mortgage Law

It is now a misdemeanor to commit "mortgage fraud" by making "any misstatement, misrepresentation, or omission during the mortgage lending process" intending it to be relied upon.

23. Gambling

Participation in informal betting pools has been reduced from a misdemeanor to an infraction punishable by a fine of up to $250.

24. Paparazzi

Yes, it is now illegal to photograph someone or someone's "personal or familial activity". The victim can sue the photographer for up to $50,000 for constructive invasion of privacy.

25. Water Softeners

Local governments can now ban these devices if they find it necessary to protect recycling or sewer systems.

26. Plastic Surgery

Elective cosmetic surgery is prohibited absent a prior competent medical examination and clearance.

27. Political Spouses

Candidates can no longer hire domestic partners or spouses to work on a campaign if it enriches their joint household.

28. Teen Voting

Seventeen year-old Californians can now pre-register to vote.

29. Snake Food

Pet stores can use only "humane" means to kill small animals used to feed other animals.

If we can be of any assistance to you with your legal or business issues, consider calling or writing proactively as soon as a question is identified. Preventative lawyering is the most effective kind.

Have a safe, healthy, and lawful year.

Sincerely,

HARMON SIEFF

December 2009

RECENT LEGAL DEVELOPMENTS

(Employment Issue)

1. Disabled Worker

An employer is required to "reasonably accommodate" an employee's known physical disability. A court recently ruled that despite a consistent pattern of letting a cashier with a bladder control problem take unplanned bathroom breaks, a single refusal by an uninformed supervisor - resulting in involuntary urination at the check stand - was a compensible violation. In this case, one incident was too many and not "trivial".

2. Sexual Harassment

Recently, a restaurant chain paid the U.S. Equal Employment Opportunity Commission $685,000 to settle a suit filed by the agency for the company's failure to remedy sufficiently sexual harassment in the workplace. In most cases, employers can escape monetary penalties by adequately and reasonably investigating alleged violations and administering appropriate discipline, warnings, or workplace adjustments.

3. Age Discrimination

Federal law forbids employment discrimination based only on age, but to win damages, a worker must prove that the adverse decision (termination, demotion, etc.) would not have occurred "but for" the worker's age. In an opinion written by Justice Clarence Thomas, the United States Supreme Court ruled that the law does not forbid the "consideration" of one's age unless it is the "controlling reason" for an employment decision.

4. Whistleblower Law

Federal law prevents publicly traded companies from discriminating against workers who publicize frauds against shareholders. After a merger, a worker was fired after revealing that a significant company patent was really invalid. Since he reasonably believed he was reporting a fraud, he is entitled to his day in court to contest the termination.

5. Overtime Work

The Lojack Company pays traveling repairmen to fix cars and keep careful electronic records. The repairmen are instructed to see customers all day and then upload the work data to the central office only when they get home to their company-provided modems.

Typically, a company is not required to pay workers for insignificant after-work times such as changing clothes or showering. Here, however, the Lojack workers were required to spend at least 15 minutes a day at homes working on company modems and their claims for compensation were not dismissed.

6. Firefighter Loses

After an 11-year veteran complained in public that he disapproved of the Department's transferring of two individuals, he claimed that their replacements retaliated against him for expressing his opinion, reprimanded him for insignificant criticisms, and transferred him to undesirable locations. He sued the County for failing to investigate the "retaliation."

An appellate court applied a "rule of reason" and declared that the Department's employment policy did not require all claims of retaliation (especially outlandish ones) to be investigated. Still, the litigation consumed several years and enormous expense.

7. Accommodating the Disabled

A physician and sickle cell anemia sufferer applied to a medical center for a position as an independent contractor. He was not hired because the center said it could not adjust the job to fit his particular limitations, especially since the applicant would not literally be an "employee". The Ninth Circuit ruled that he is entitled to sue under the standards of the Americans with Disabilities Act even though he sought to be only an independent contractor.

8. Return to Work

A market worker was hurt at work and required surgery covered by workers' compensation. Thereafter, on several occasions, he offered to resume his job but the market would not accept him because it did not believe he could perform his duties. The Labor Code does prohibit discrimination against workers' compensation claimants, but to win a such a suit, the worker must show that the boss treated him differently than similarly injured workers who had not sought workers' compensation.

Here, the evidence showed that all injured employees were treated the same whether hurt on the job or elsewhere, and the market won.

9. Death without Dependents

When a worker dies, her dependents - usually children and/or spouse - are entitled to certain death benefits. In the recent case of an unmarried childless LA firefighter killed in action in 2004, death benefits were paid by the City to her mother as her non-dependent "heir". The State of California sued the City anyway demanding that the death benefit should have "escheated" (been delivered") to the State as a "Death without Dependents" benefit. The court ruled that the mother was entitled to be paid under new legislation and refused to compel the City to make a "double payment".

10. New Law - Genetics

Effective November 21, 2009 the federal "Genetic Information Nondiscrimination Act" [signed by President Bush last year] prohibits employment or health insurance decisions based on a person's "genetic" information. Anticipate claims and interpretive court rulings soon.

11. Word To The Wise

Whether you employ two hundred people or only two, take ALL complaints about labor conditions, work injuries, and civil rights violations very seriously. It is the legal - and human - thing to do. Also be sure to create and maintain appropriately clear, accurate, and timely written records. Whether the claim is sexually-based harassment; an industrial injury; or discrimination based on race, religion, age, gender, pregnancy, disability, family leave, national origin, or, now, genetics, ignoring - or worse yet - demeaning or trivializing complaints, can lead to major personnel and legal disasters.

If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

November 2009

RECENT LEGAL DEVELOPMENTS

(HOLIDAY SPIRITS ISSUE)

1. Social Hosts

a. Whether you work for a company, or own one, this is the season when many of us gather to celebrate. Often alcohol is part of these celebrations, and there are some important legal considerations in this regard.

When I was a new lawyer, California courts often held social hosts responsible for injuries inflicted by their drunken guests. (I suspect that many states still do.) For the most part, those rules and precedents were largely overturned by legislation passed at the urging, no doubt, of the liquor and insurance industries.

The basic judicial rule is currently that the consumption of alcohol, rather than the serving of it, is the proximate cause of injuries caused by an intoxicated person.

Nonetheless, there are several exceptions to the general rule and, of course, we should all act safely no matter what the courts say.

b. Under California law, it is a misdemeanor, punishable by jail time, to furnish alcohol to a person under 21 (not 18). Interestingly, although the conduct is considered criminal, the defendant is not, for the most part, civilly liable to any person for injuries or damages resulting from the underage intoxicant.

c. One can be held liable for selling alcohol to an obviously intoxicated minor whose negligence causes death or injury to another. In this narrow context, "obvious intoxication" is defined by a person's appearance as opposed to their true physical condition.

d. Another exception is where one furnishes a guest with alcohol knowing that the particular individual has some exceptional physical or mental susceptibility. This exception is based on a highly controversial court ruling and I have never seen it applied.

e. Current law can impose liability on a tavern owner who is deemed to have assumed a "special duty" to third persons whose safety may be at risk. Thus, in a case where a tavern owner held the car keys of a drinking customer, he recognized that a risk to third persons existed. Knowing this, by returning the keys anyway before the customer was actually able to drive safely, a tavern owner was held to have "assumed a duty" to potential victims of the customer's driving. (A commercial server has no duty to arrange other transportation for a drunk customer.)

f. A social host can also be held liable to victims of a drunken guest if he provides not only the alcohol, but a vehicle for the drunken guest to drive home. In such a case, the host would be guilty of "negligently entrusting" the vehicle to the intoxicated guest. (Use common sense. Keep the keys. Call a cab.)

g. A commercial establishment providing alcohol has a duty to provide a safe premises for its patrons knowing that they will be drinking on the premises. "Reasonable security precautions" are necessary to protect occupants from drunk customers causing fights or injuring others at the location. (This is sometimes extended to parking lots.)

2. Drinker's Liability

a. Obviously, an intoxicated person is liable for his own negligence in injuring himself or others. In addition to liability to compensate victims, the intoxicated person can also be held responsible for the expense of a public agency's emergency response to an incident caused by his intoxicated actions with a vehicle, vessel, or aircraft. Although financial liability is limited, police, rescue, or other public costs are technically recoverable by the government.

b. An intoxicated driver can also be held responsible, in limited cases, for punitive damages which are assessed as a punishment over and above the damages suffered by a victim. In certain cases punitive damages are awarded to victims as a deterrent to socially unacceptable behavior. Punitive damages cannot be covered by insurance as a matter of public policy, and the amount of such damages are determined by the ability of the violator to pay based on his degree, or absence of, wealth or assets. [That is why you hear about these cases involving celebrities but not poor people who are seldom assessed significant punitive damages.]

3. Employer Liability

The annual holiday party on company time must be very carefully conducted in a safe and reasonable manner. Especially since companies usually have "deeper pockets" than their workers, they are commonly targeted by victims of employees who became intoxicated "within the scope" of employment. Cases differ as to the definition of "scope," but closing the workplace a couple hours early on Christmas Eve for an office party almost certainly qualifies since the company is not really a "social" host. Liability is based on the theory that a principal is responsible for the actions of its agents and no legal immunity exists.

Other circumstances are open to judicial determination, such as if an event is not on company time, not at the workplace, or not treated as part of the job. Interestingly, if one is a victim of a co-worker who gets drunk at a company party, that victim may be limited to workers' compensation benefits as the exclusive remedy for the injuries, even if the injury occurs in a vehicle after leaving the party premises. Factors such as "the encouragement of management" can be significant.

4. Illegal Drugs

The above examples involve the consumption of alcohol by adults which is, in most cases, totally lawful. However, furnishing illegal substances leading to intoxication, negligence, and injuries are subject to different rules because the furnishing of the substance, whether social, commercial, or at work, is independently prohibited by drug laws. Arguably, drugs at the company party render the company responsible if illegal substances are provided, consumed, or distributed at a company-supervised event which result in damage to anyone.

5. Intoxicated Victim

The fact that a victim of an intoxicated driver is also an intoxicated driver is not generally a defense. A drunk driver driving safely does not automatically surrender his rights to recover from another drunk driver who is driving negligently, running a stop sign, reckless, or speeding.

However, the intoxicated victim is very likely to be considered as a possible "contributor" to the totality of the causation of the incident. Such "contributory negligence," if it can be demonstrated, will not only make the drunk victim less sympathetic to the judge or jury, but his conduct will also be compared to the behavior of the other drunk driver. In many cases, the "fault" for the injury may be apportioned between two or more parties depending on the evidence of their relative culpability.

6. Workplace Harassment

Everyone has heard a story about "bad behavior" at company parties. The cautious company should have one or two "designated "grown ups", if not private security, to ensure that the mistletoe is not abused. Better yet, forget the mistletoe altogether. Sexual harassment at office parties, or resulting from employer-provided alcohol, is no longer acceptable socially or legally. Remember that most employers have no insurance for the defense of such claims.

7. Company Drivers

It is crucial for those who drive for work (sales, deliveries, jobsites, conferences, etc.) to maintain good driving records. Whether you drive for work or hire those who do, a DUI can affect the insurance of an entire fleet and may, in some cases, require termination. A worker required to drive may not be able to perform his or her job at all, let alone be insured, with a suspended or revoked driver's license.

8. Conclusion

The season to be jolly is approaching. Insurance rates, rules of law, and fear of financial responsibility are all important considerations, but nothing can replace common sense. Everyone should be careful all year long.

If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word. Have a safe and lawful holiday season.

Sincerely,

HARMON SIEFF

September - October 2009

RECENT LEGAL DEVELOPMENTS

1. Boss Liable for Worker's Driving

An executive of a global corporation flew home from a business meeting and then, driving home from the airport, caused a collision injuring several people. The victims sued the employer.

The company's defense was the "going and coming rule" which exempts employers from liability for workers' actions commuting home. On appeal, however, the Court ruled that the corporation was liable under the "special errand doctrine" by which a company is responsible for workers performing a "special errand" for the company.

Since the company sent the executive to the meeting for its own benefit, his travel was a "special errand" which did not end until the he arrived at his home or workplace.

2. Victim of Stolen Vehicle Sues Owner

A tow truck left in its tow yard with its ignition key in place was stolen by a drunk thief. A block away, he drove through a crowd, killing and injury many.

The victims sued the yard for leaving the truck unattended with an accessible key. The general rule is that an owner has no duty to third persons injured by his vehicle's thief, but the victims won because the Court found an exception. A tow truck, unlike a sedan, is an extraordinarily dangerous and "powerful vehicle" requiring special security from underskilled drivers.

3. Process Server

It is common these days to rent commercial post office boxes to conceal one's location or obtain an address which "appears" professional. In response to this trend, the law now allows "substituted service" at such postal stores.

In a recent case, a defendant's stationery bore an address which was really a mail drop. Following the law, a messenger visited the address three times, did not find the defendant present, and delivered the papers to the attendant. Although the location of delivery was not literally the defendant's "workplace," a court ruled that the delivery was sufficient and entered a default judgment.

4. Homeowners Associations

A neighborhood of detached houses included "common areas". Its HOA demanded one owner to repair an eroded ditch which had developed on her lot. The owner refused, since the CC&R's held the HOA responsible for the "landscape maintenance area" which was described, inconsistently, to include the same land.

The Court ruled for the owner. "Where two provisions appear to cover the same matter, and are inconsistent, the more specific provision controls over the general provision." The Court was influenced by evidence that the HOA had consistently enforced these conflicting provisions for over 20 years.

5. Nazi Stolen Art

Normally, sovereign nations are immune from foreign lawsuits. Recently, the descendent of a Holocaust victim sued the Kingdom of Spain. His grandmother had fled Nazi Germany even though she was prevented from taking her art collection and was forced to sell a masterpiece for a token amount. Sixty years later, the grandson traced the painting to a government-affiliated museum in Madrid. Spain's defense to the California lawsuit was the Foreign Sovereign Immunities Act which ordinarily immunizes foreign governments from the jurisdiction of U. S. courts. This one, however, ruled there was no immunity since the painting was obtained in violation of international law even though Germany, not Spain, committed the violation.

6. Native American Sovereignty

A woman lost in the mountains of an Apache reservation started a fire to signal rescuing helicopters. Unfortunately, the fire burned 400,000 acres and the Tribe sued her for the damage in Tribal Court. The woman sought protection from a "real" court, but lost.

Federal law allows "non-Indians" to sue in federal court only after "Tribal Court remedies have been exhausted." Accordingly, the woman is subject to the Apache system (which is a "real" court) until she litigates and appeals to its highest forum.

7. Recreational Injuries

A rancher invited his lawyer to a barbecue to celebrate a court victory. The lawyer asked to ride one of the horses known to be gentle and calm. As soon as the lawyer mounted the horse, it broke and threw off the lawyer who, naturally, sued her own client for choosing an inappropriate horse and failing to instruct her properly.

It is unknown whether the horse discriminated against lawyers, but a judge dismissed the case since the lawyer had assumed the risk of injuries which are "inherent" in the sport of riding horses.

It was significant that this was a party and the horse owned by the social host. (A commercial stable offering rides for money would have a higher duty of care.)

8. Beware What You Write

Lawyers for a middle-aged man received an "anonymous" envelope containing an email from the client's company: "[He is] 64 years old . . . I think I can get him to retire. Let me work on him." A jury found this to be blatant age discrimination and awarded $26 million in mostly punitive damages. Emails last forever.

9. Severance Agreement

A County labor negotiator had an affair with the union's president, technically her "adverse party". The County insisted she resign over the "conflict of interest". Her severance agreement prevented either party from disclosing why she left. When the press learned of her relationship anyway, she sued the County for breaking its promise; it defended on the basis that governments are required to publicize conflicts of interest like her affair. The court ruled for the worker because the "transparency law" does not compel the County to disclose the specific details of the conflict, and therefore the worker is entitled to enforce the non-disclosure agreement.

If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

August 2009

RECENT LEGAL DEVELOPMENTS

1. Personal Liability
In a remarkable decision by the Federal Appeals Court, former employees of a bankrupt hotel corporation have been allowed to file suit to recover unpaid wages against three individual corporate officers under the Fair Labor Standards Act. Typically, officers and shareholders are immune from such suits, but the court held that the individual defendants "controlled" the employment relationship of the wage earners, and therefore are considered "employers" under the law. Although two of the officers were the primary shareholders of the bankrupt corporation, the third was the Chief Financial Officer whO owned no part of the company. Nonetheless, they can be held liable for underpayment of wages.

If you are in a position where you suspect you may be considered as "controlling" the employment relationships of your co-workers, beware.

Incidentally, the IRS also has a history of pursuing individuals who are responsible for the mechanical preparation of paychecks and making payroll tax deposits, even a bookkeeper who merely signs checks.

2. Pregnancy Discrimination
A few weeks after a female deckhand on a party yacht told her boss she was pregnant, she was laid off because her male boss was "concerned" about her working on a boat while pregnant. She filed a claim with the Department of Fair Employment and Housing and, after appeal, the employer was held liable for pregnancy discrimination.

3. Bad Check Penalties
California law allows the recipient of a bounced check to sue not only for the amount of the check, but in some instances, for service charges and treble damages up to $1,500.

For one collection agency suing a grocery store customer over a bounced check, that was not enough and it asked the Bankruptcy Court to award prejudgment interest. The Supreme Court recently decided that service charges and treble damages are allowed by the statute instead of, not in addition to, interest on the check amount.

4. UnlawfulSpam
A federal law prohibits unsolicited email messages with deceptive headings or inappropriate content [Non-Solicited Pornography Act.]. Internet access service providers are entitled to sue such spammers, but a federal court recently ruled that an individual merely receiving such communications has no right to sue.

5. Indirect Discrimination
A female engineer complained that her supervisor frequently made negative remarks about women in the workplace. After a few years, she asked for a transfer because she felt "mistreated" by male co-workers. Eventually, she complained that the "hostile work environment" was affecting her performance and she was involuntarily transferred to a different department (requiring skills she did not possess) from which she was eventually laid off.

The engineer sued the company for sex discrimination, claiming she was intentionally transferred to a job for which she was obviously unqualified to "set her up" to be fired. The court ruled this was gender discrimination.

6. New Good Samaritan Law
This week, the Governor signed Assembly Bill 83 to protect people who are not medical, law enforcement, or emergency personnel from being sued after assisting someone at an accident scene unless their actions amount to "gross negligence or willful or wanton misconduct." This diminishes the fuller immunity of the old law ("thrown into question" by a recent court case) which protected such non-emergency volunteers from "ate civil damages."

7. Emotional Distress of Pet Owner
A dog died at a veterinary hospital and the owner sued for her emotional distress. Since animals are considered property under the law, the owner could not sue for wrongful death, but she alleged veterinary malpractice.

The court ruled the hospital was not liable for the owner's distress. The owner might have won had she seen her dog killed (which she did not) or if she had had a "special relationship" with the hospital which created a legal duty of care to protect the owner's health. Here, the court found no such relationship, ruled that "severe harm" to the owner was not foreseeable, and declined to create a duty to pet owners.

8. Right to Privacy
A company director "learned" that someone was using a clerk's private office computer to view pornography after business hours and installed a hidden camcorder pointed at the workstation. The clerk sued for invasion of privacy.

The Supreme Court ruled that while the worker had a reasonable expectation of privacy in her private office, the intrusion was not sufficiently serious or unwarranted to constitute an "egregious breach of the social norms." The Court noted evidence that the camera was turned on only when the employee was expected to be away and for the legitimate purpose of catching a trespasser. The company won.

9. No Insurance for Assault
One man hit and kicked another who sued him for bodilyinjury. The kicker's homeowner's insurance refused to cover him, so he assigned his claim against the insurer to his victim who sued the company for coverage of his injuries.

The insurer won because it only covered "accidents" which are defined as "an unexpected, unforeseen, or undesigned happening or consequence." The court refused to impose liability just because the kicker believed he was under attack and defended himself reflexively. The court ruled that his actions were intentional, and therefore not insurable, regardless of what the fighters believed.

If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

July 2009

RECENT LEGAL DEVELOPMENTS

In a declining economy with business and financial reversals occurring all around us, certain legal issues are arising which many have not confronted for a long time. If you are encountering such issues, the following may be helpful.

1. Persuading Bankrupt Tenants to Clean Up
When a bankrupt commercial tenant rejects its lease, the landlord's rent claim is limited to "the rent reserved by such lease for the greater of one year, or 15%, not to exceed three years of the remaining term . .." In Saddleback v. El Toro, a bankrupt tenant rejected its $28,000 monthly lease and left behind a million tons of mining equipment, wet clay, industrial mess, and a $23 million clean up job -- over 70 year's rent.

Here, the astute landlord-creditor sued not just on the lease, but for the torts of "waste, nuisance, and trespass." The Court held that such tort damages resulted not from the ended lease but from the mess. Therefore, the statutory limit did not apply and the landlord could claim all cleanup costs.

Of course, if a bankrupt tenant has no assets, this won't help, but in many cases, it does. This new rule can be used by landlords to "encourage" tenants to clean up their messes before departing.

2. Cutting Payroll
a. Furloughs - Employee furloughs and shortened work weeks have become more common. Employers need to be careful, however, not to violate employment laws in implementing these policies.

For "at will" wage earners who are not exempt from overtime laws, there is no guarantee of any future employment, let alone specified hours. Their schedules can be freely modified, but they get paid extra for overtime, if any.

Exempt salaried employees, however, have an entirely different set of rules. As recently detailed in the Daily Journal, exempt employees are entitled to a full week's salary if they work at all during the week; cutting hours doesn't reduce costs unless consensual and implemented according to a carefully designed plan to avoid numerous legal minefields. Most recently publicized furlough programs do follow such plans. I urge any employer contemplating any of these changes to proceed only with the advice of counsel or a qualified HR consultant.

b. Salary cuts - Distressed employers are also reducing compensation to avoid layoffs. Generally, salary reductions can be imposed at anytime so long as not retroactive or precluded by contract, and the employee receives advance notice. Of course, any cut may inspire disgruntled employees to file labor claims, valid or not, so companies should be careful in any event.

c. Vacation Cash-Outs - Some companies are requiring workers to redeem accrued vacation time when no work is available despite legal and tax consequences. Vacation pay is not mandated, but if it is part of a contract, it cannot be ignored. Such payments may be taxable when offered whether accepted or not. Know the technicalities before acting.

d. New Hires - A broken promise to hire can be expensive. Damages can be awarded even if the job would have been "at will" if a would-be worker incurs expenses, quits a job, or relocates in reliance on an accepted offer. In rare cases, an employer can be assessed penalty damages, and misleading a worker to relocate out-of-state can be a misdemeanor. The consequences of withdrawing any accepted job offer should always be scrutinized in advance.

e. Bonuses and Commissions - Absent a contract, these pay programs can always be changed for future work, but not for labor already performed. "Accrued bonuses" and "earned commissions" must be paid.

3. Independent Contractors
Many companies "outsource", but when an employee is terminated and immediately retained as an independent contractor for the same work, the relationship can be deemed a statutory misclassification and the company held liable for overtime, penalties, payroll taxes, back wages, and other costs.

Vacation pay can be conditioned on completing a length of employment and the employee handbook so provided. The lawsuit was dismissed.

4. Delayed Benefits For New Hires Is Permissible
In a recent case, a terminated employee from a merged competitor sued her "new boss" for unpaid accrued vacation pay. The employer considered her a new employee subject to a six-month delay before vacation pay would accrue.

Vacation pay can be conditioned on completing a length of employment and the employee handbook so provided. The lawsuit was dismissed.

5. Whom to Layoff
Be careful in deciding whom to fire. If a company discharges its "least productive" employees, it is important to be sure they really are. If a worker produced less due to a guaranteed leave of absence, his termination could be considered an unlawful penalty for having taken the leave.

6. Avoid Age Discrimination
Some companies cut costs by firing the most highly paid. While usually permissible, employers must be careful to avoid inadvertently discriminating against older workers (over 40). Many lawsuits result when senior (usually better paid) workers suffer "indirect age discrimination".

7. Severance
Severance pay, optional absent a contract, is often used to buy off a fired worker's employment claims. However, certain claims are considered fundamental rights and cannot be waived with standard releases. (A discharged worker can, however, be asked for an uncoerced statement confirming that as of the final day of employment, she is unaware of any factual basis for any such claim.)

8. Conclusion
Parties negatively affected by the current economy are more likely to have time to consider, discover, and enforce their rights. Before taking drastic steps adversely impacting others, be sure to perform a thoughtful legal analysis.

If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

June 2009

RECENT LEGAL DEVELOPMENTS

1. Limited Insurance Coverage
A contractor accidentally broke a pipe in a customer's home and caused substantial water damage. Although the contractor was unquestionably responsible, he was not able to pay for the repairs, so the owners filed a claim with their homeowners insurance carrier.

The claim was denied because their policy specifically excluded coverage for water damage caused by a third party. The insurance company won. (If the homeowners could have proven that the damage did not result from a third party, the decision might have been different.)

As boring as it sounds, reviewing and understanding your insurance policies can avoid unnecessary surprises and sometimes allow you to purchase "add on" coverage not automatically offered. If not, you can change insurers.

2. Americans with Disabilities Act
A quadriplegic who rented a boat slip sued the marina for failing to provide wheelchair access to the entire facility. The private marina claimed it was exempt from the law because it was not a "place of public accommodation." The court ruled that it was.

The ADA is intended to prevent discrimination against disabled people and covers several categories of properties, including "sales or rental establishments." Since the private marina rented to the public, it was required to provide handicap access.

3. Condominium Association
A corporate condo owner complained of smoke odor in its unit which was traced to holes in the foundation provided for pipes. Apparently, the holes were too big and constituted fire hazards, so the unit owner sued the owners association which controlled the common area.

The unit owner won because a landowner is required to maintain its property in a safe condition. In this high-rise building, the fire hazard was in the common area and the association responsible for its repair.

4. Loan Brokers
Real estate licensees are authorized to arrange real estate loans. In one case, a developer hired a non-licensed corporate consultant to secure financing, monitor expenses, and provide marketing and financial advice, but the consulting contract only mentioned a flat fee payable by the developer based on the amount of investment funds the consultant actually secured. Unfortunately for the "consultant," it did everything but find investment money, and eventually the developer found his own and then refused to pay the consultant any fee at all.

The consultant sued for the reasonable value of its services rendered and the developer defended on the grounds that the consultant was not licensed to perform much of the work. The court ruled that while a non-licensee cannot be paid for services requiring a license, this consultant was entitled to be paid the reasonable value of its other work (that not requiring a license) despite the wording of the contract.

5. Rights of Corporate Directors
A corporate director is normally entitled to full access to all company records. However, a California court recently ruled that an exception exists when the director is suing (or has other conflicts with) the corporation. Since such a director is not totally loyal to the corporation, it is reasonable for the company to withhold certain documents created by lawyers in defending the director's lawsuit.

6. Shopping Center Leasing
A shoe store was a long time tenant of a shopping center. Monthly rent was calculated by adding to a base of about $5,000 a percentage of gross sales and common area maintenance expenses. The lease also required the tenant to pay a "liquidated [agreed] damage" of ten cents ($.10) per rented square foot if the tenant failed to operate continuously during the lease term. Eventually the shoe store closed and the landlord demanded the liquidated damage -- about $100,000 - but the store refused to pay and the center sued.

Although the store claimed that the demanded amount was an unenforceable penalty, the center won because the Civil Code was amended in 1977 specifically to legalize such contract provisions which are not explicitly proven to be "unreasonable". Here, the landlord showed that the ambience, goodwill, and synergy of the entire shopping center would indeed suffer very real financial damage from an empty store in its midst even though it would be extremely difficult to calculate the precise value of the loss. The court agreed that this particular "agreed penalty" was not an unreasonable estimate and ordered the store to pay.

7. Amending Lawsuits
When a complaint is first filed with a court, all facts are not necessarily known to the parties. Therefore judges routinely allow a litigant to amend filed claims or defenses "to conform to proof" based on the "same general set of facts as those . . . originally pleaded" PROVIDED THAT the other party is not unfairly prejudiced. This is not, however, an unlimited opportunity. An appellate court ruled this month that a plaintiff cannot "materially reverse his position" to unfairly prejudice a defendant who could not oppose the new claim since a necessary witness had died in the interim.

We should all try to get it right the first time.

8. Costly Karaoke
A trial judge recently awarded a major music publisher $11 million from the maker of a karaoke machine for copyright infringement. Singers beware.

9. Amusement Park
Another trial judge just declined to award anything to a person whose wrist was broken on a bumper car ride. Riders beware.

10. Employment Discrimination
A college professor whose schedule was cut to part time (reducing his compensation and benefits) accused the school of discriminating on the basis of his being HIV-positive and therefore "disabled". His suit was denied because the court ruled that the employer had sufficient and believable justification for its action since plaintiff had failed to obtain a required graduate degree and received low performance scores even as student enrollment declined so much that fewer courses were needed. The professor did not prove that these reasons were merely excuses ("pretexts") and that the school's true intention was discrimination.

11. More re Restaurant Tips
Another newsletter, another restaurant case. Starbucks was sued by its "baristas" who were forced to share with their "supervisors" the contents of the "collective tip boxes" maintained on counters. Ordinarily, management cannot accept any share of tips, but the appellate court ruled that at this company, the "supervisors" performed only limited supervision and basically had the same general duties as the direct servers.

This ruling saved the company almost $100 million. Might we see cheaper lattes?

12. Motorcycle Tragedy
Several multimillion dollar injury verdicts were reported this month involving paralyzed victims of negligence. Eight million dollars ($8 million) was awarded for the future care of a recreational biker who sustained massive brain damage when he collided with the carcass of a wild boar on a highway section known to Cal Trans as a regular animal migration route. Please, be careful out there.

13. Conclusion
If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

May 2009

RECENT LEGAL DEVELOPMENTS

1. No Privacy on the Internet
A college student kept a "MySpace" journal at the popular web site. In one lengthy entry, she seriously criticized her hometown and former neighbors. A few days later, for whatever reason, she removed the entry, but not before her high school principal forwarded it to the local community newspaper which published it. The family received death threats, was shot at, left town, and, together with their daughter, sued the newspaper and others for invasion of privacy.

A public disclosure of private facts does, in many circumstances, violate historical legal rights of privacy if the disclosure would be offensive or objectionable to a reasonable person and is not of legitimate public concern. Here, however, the court dismissed the case outright since the student herself publicized her opinions on the Internet and, for at least those few days, the article was viewable by anyone in the world. (She had no "reasonable expectation of privacy".)

Word to the wise: posting anything on the Internet is like erecting a billboard in Times Square. Information is only private if you treat it as such.

2. Trade Secret Misappropriation
A jury recently awarded almost $40 Million to a company whose employee had been hired away by a transnational competitor who used the employee's knowledge to access the databases of his former company in violation of the Trade Secrets Act. This will probably be appealed, but certainly the big company should have known better.

3. Age Discrimination
A process which discriminated against them in favor of workers who were younger but not better qualified. The cases of most of the workers were dismissed because they could not prove they had been doing good jobs. [One was told his specific services were not needed during winter; another discharged the day he caused $10,000 in company property damage.] One worker was awarded a jury trial because he had not received a sufficient explanation as to why he "in particular" was laid off when other workers were retained. Just telling him that the agricultural business is "seasonal" was not legally enough.

In our current economic environment where reductions in force are increasingly common, companies should be prepared to justify how they select who stays and who goes. Otherwise, they may have to explain their reasoning to a jury, especially if sued by an "older" worker or one who may claim discrimination by race, religion, gender, or nationality.

It is critically important to avoid even the appearance that a discharge, or layoff, is stated to be for one reason but is really based on unlawful discrimination.

4. Restaurant Tip Rules
Who keeps the money you leave on a restaurant table? In some places, the table server keeps it all; in others, the money goes into a jar which is split among many workers who may include all waiters, dishwashers, and others who never see a customer.

Two waiters recently sued their employer for maintaining a "mandatory tip pool" alleging that it violated the Labor Code provision that "every . . . gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for . . . ."

The court dismissed the case by interpreting the law to allow tip pools. Who really knows who the customer intended to receive the money on the table? It may well reflect the totality of the dining experience and be intended for everyone "in the chain of service."

While this is good for dishwashers, it remains illegal for the employer to take any part of a tip.

5. No Strict Liability Against Gym
Most injury cases are filed by those claiming they were hurt by another's negligence, which must be proven. However, in some circumstances, liability is automatic, or "strict".

A retailer, manufacturer, distributor, or any party in the "stream of commerce" can be held "strictly liable" to a consumer when it distributes a defective item knowing that it is to be used without inspection and the defect causes injury. [No one looks inside a soda can for broken glass or has it analyzed by a lab before drinking it.]

A person was injured exercising on a step machine at her membership gym which she sued for strict product liability. She lost.

The court held that the gym was in the business of providing fitness services, not distributing exercise machines, since it allowed members to use its machines only as part of a package of purchased services. (The case might have been different if she had simply rented the one machine.)

6. Suing the PPO
Blue Shield was sued for compensatory and punitive damages for the alleged "bad faith" refusal to pay for an optometric visit.

Although the patient had experienced many bureaucratic errors, there was a substantial quantity of medical services provided for many health problems. The court ruled Blue Shield was not responsible for actions of the gatekeeper medical group which actually refused to authorize the visit (and which settled with the patient for $150,000). Medical insurers are responsible for their own actions, but not for those of contracting medical groups or doctors. Although the patient was looking for a big verdict, Blue Shield was held liable for only $65 - the cost of the visit for which it had not paid.

7. Wages versus Salary
California has very complex rules defining who is entitled to overtime compensation. Merely identifying a worker as "salaried" does not avoid these rules. A major title company recently settled a claim filed by its escrow officers for $15 million for alleged failures to pay overtime.

8. A Toxic Waste
Environmental laws are very strictly enforced. Due to the public health threats of hazardous chemicals and toxic waste, government agencies will generally clean a polluted site as soon as possible and seek reimbursement later. "Potentially responsible parties" are not limited to the actual polluter. In a recent case where the government had spent $8 million for clean up, it sought reimbursement from, among others, a railroad which rented land to a polluting chemical distributor. The US Supreme Court ruled that the costs should be apportioned among all responsible parties and there was "a reasonable basis for determining the contribution of each cause to a single harm."

Here, although the railroad owned only part of the land and had no role in the chemical spills, it was required to pay 9% of the costs.

9. Easement by Necessity
In most cases where adjacent properties were once commonly owned, and there is no reasonable access to a property other than through another, a court will award a right-of-way over the neighboring land. Remarkably, when the federal government is the landowner, the rule is different.

In a recent case, a landlocked owner sued his neighbor to use an access road to the nearby state highway. However, since the federal government had not reserved a right-of-way at the time it sold the roadside property, the later buyer of the inside property had no right of access.

This is seldom an issue in urban areas, but title should be carefully examined if there is any doubt as to whether a property is a "flag lot" which includes the flagpole, or merely the flag - a lot not legally connected to a public roadway.

10. Conclusion
If you find these Newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

April 2009

RECENT LEGAL DEVELOPMENTS

1. Shopping Center Tenants
Many of you either own or occupy a space in a retail shopping center and may pay or collect so-called "common area maintenance [CAM]" expenses as part of the rent. In a recent California case, a landlord was "passing through" to its tenants, as a CAM, what the court held was really a cost of conducting its business in the form of a limited liability company. Several tenants sued the landlord for improperly charging them the cost of its LLC taxes, fees, and other costs. The court held that while the lease allowed the collection of costs "relating to the ownership and operation" of the center, the expenses attributable to conducting business as an LLC were not related to maintaining the premises.

This is a common practice in Southern California and tenants in this belt-tightening time should carefully review the periodic itemizations of CAM charges.

2. Parking Spaces
In a different shopping center, a grocery store used several parking spaces behind it to store racks and carts for receiving deliveries of merchandise. Frustrated drivers complained to the shopping center owner about inadequate parking. The owner sued the grocer.

The court decided that temporary usage of the parking spaces at times of actual deliveries was acceptable and reasonable, but permanently covering the parking spaces with equipment effectively excluded tenants, customers, and others from parking in those spaces and violated the provisions of the grocer's lease. Permanent storage was prohibited.

In some neighborhoods where only minimal onsite parking is available and spillover visitors park on public streets, this is an especially serious problem. In some jurisdictions, the commercial property owner can be penalized by local government parking enforcement or zoning agencies for violating laws, covenants, or conditional use permits and operating a business without sufficient off-street parking for visitors.In traffic-choked Los Angeles, this is a big issue, and landlords have an even greater incentive to keep parking available.

3. Landlord Liability for Assaulted Tenant
When a criminal assaults someone in a parking lot, is the unknowing property owner responsible? Sometimes it is.

A young family with a small child looking for an apartment specifically asked the rental agent/property manager if the neighborhood "was safe." The agent explained that there was "no crime" in the area and that the security gates and other measures protected the complex. The family moved in, but soon thereafter, one of them was mugged in a common area, shot in the neck, and rendered quadriplegic. The family sued for negligence and fraud.

First, the court recognized the rule that liability for negligence is determined by balancing the foreseeability of the criminality against the burden of providing extra security. In this case, the court determined that simple measures, like moving one security gate and adding another, could have prevented the assault at a minimal cost to the owner. The court also ruled that because there had been three prior, vicious criminal assaults nearby in the previous two years [not disclosed to the tenants], that the attack on the plaintiff was reasonably foreseeable. The case was sent to a jury to decide the amount of damages which would probably be covered by liability insurance.

A greater problem for the owner, however, is that the court also held that the manager should not have told the family, before it moved in, that the area was free of crime. If the case does go to a jury, as expected, the verdict against the owner could be staggering, including not only negligence damages (pain, suffering, medical, loss of earnings, lifetime care for the quadriplegic, etc.), but also punitive damages from the owner for misleading the tenant about safety. [A jury may decide that the family would have moved in anyway, did not rely on the safety statement, and did not really care about safety, but such a verdict is unlikely.] excess of the compensatory negligence damages - and punitive damages are not covered by insurance.

4. More Property Owner Liability
In another recent case, an innocent person was stabbed in a strip mall parking lot. Allegedly, security guards watched but did not intervene and the property owners eventually paid $300,000 in damages.

5. More Commercial Lease Issues
Many stores and offices are rented by the square foot. A standardized lease form commonly used throughout California was recently interpreted by a court as allowing landlords to be sued for misstating the precise size of a premises, even though precision was disclaimed, and the lease entitled all tenants to see the "backup" documentation used to calculate common area maintenance charges.

In the McClain case, the lease recited that the unit was "approximately 2,624 square feet", and the tenant was discouraged from conducting its own measurement and assured that the dimensions were accurate. For that reason alone, the would-be tenant should have been very suspicious. Why would the landlord discourage investigation?

Nonetheless, the tenant moved in. Eventually, the premises were measured to be only 2,438 square feet. Since the space was rented by the foot, the incorrect calculation was on course to generate a $90,000 overpayment of rent over the term of the lease, and ligation resulted. The court ruled that this amounted to fraud even though the tenant had signed the "standard" wording of the rental documents acknowledging that it had received a full opportunity to examine the unit, which, of course, ithad not.

WORD TO THE WISE: A LANDLORD SHOULD NEVER RECITE AN EXACT MEASUREMENT UNLESS IT IS SURE IT IS ACCURATE. "Positive assertions of fact" are submitted at one's peril. Such representations must be truthful, especially where the other party is likely to rely on it. [This dispute could have been avoided if the landlord had simply allowed the tenant to take its own measurement.]

The same court considered the tenant's right to a "reasonably detailed statement" of information used to calculate CAM charges. The court ruled that the lease contained an implied covenant of good faith and fair dealing which imposed on the landlord a duty analogous to a fiduciary duty. Because the landlord had exclusive control and access to the calculations, it was required by law to share that information with the tenant since tenant obligations (CAM charges) are determined from such data. The implied covenant prevents either party from taking secret profits or undue benefits at the expense of the other.

In practice, many landlords simply provide a one-page summary of expenses. In most cases, such summaries are now subject to audit by the tenant whether audit rights are spelled out in the lease or not.

6. Seller's Duty to Disclose
In a case similar to one currently in the office, the appellate court ruled last month that a real estate seller is required to disclose to a perspective buyer the existence of previous lawsuits alleging defects in a condominium. That seller did not mention prior litigation over flooding problems and was later sued for the omission. The court ruled that the prior lawsuits might have materially affected the buyer's willingness to buy. The case was sent to a jury which, if it finds that the omission was a fraudulent misrepresentation, can award compensatory and punitive damages.

Remember that fraud judgments are not insured with or without punitive damages. WORD TO WISE: Disclose everything. This is difficult when buyers are hard to find, but honesty really is the best policy. Tell the truth, the whole truth, and nothing but the truth and you will not be guilty of fraud. And you will also have followed the Golden Rule.

7. Construction Managers Must Be Paid
A landowner hired a project manager to develop 12 acres. On completion, the owner refused to pay the manager because it was not a licensed building contractor. Readers of this Newsletter know that there have been many cases in which an owner was not required to pay an unlicensed contractor even though good work was performed. Such contracts were considered illegal and the value of the work performed uncollectible.

The court in the Fifth Day case, however, ruled that "construction management services" in a "privately owned real estate development" is not included in the contractor's law, did not require a license, and the owner must pay. If you are an unlicensed "designer" or "superintendent", and you know who you are, be extremely certain that your contracts comply with the requirements of this narrow precedent and be very sure this applies to you before you start such a project. Few of us enjoy working for free.

8. Sellers Beware
A toymaker recently paid $75,000 to settle a product liability claim from a three year old who stuck a replacement battery up her nose. The parent claimed that the toy was unsafe. Proper warnings, labeling, or tagging (e.g., "SMALL PARTS CAN BE DANGEROUS TO SMALL CHILDREN") might have avoided the injury and the litigation. In the context of real estate liability, if you have a children's daycare room on your premises for employees, or even a waiting room where children are allowed and expected to be present, be forewarned. Kids do the darnedest thing - let's protect them.

9. Easement Extinguished
An owner of a hillside residential lot (Sommer) co-owned the adjacent lower lot with Dunham. The upper lot included an easement for a view over the lower lot, preventing owners of the lower lot from blocking the upper lot's view. Eventually, Dunham sold his interest to Sommer who then owned both parcels as one big property. When Sommer sold his interest in the upper lot, he kept the lower one. The upper lot was re-sold a couple of times, and a later buyer sued to enforce the easement to prevent future "view-blocking" development of Sommer's retained lower lot.

Sommer won. The court ruled that once the two lots had the same owner, there was no purpose for an easement benefitting one part of his property over another, and the easement was "extinguished by the merger" of the ownership and could not thereafter be enforced.

10. Conclusion
If you find these newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

March 2009

PREVENTATIVE LAWYERING IN DIFFICULT TIMES

The current economic season is certainly not proceeding like business as usual. Budgets are tighter; uncertainty is greater. The clientele of this firm is comprised primarily of private businesses and individuals, and although most continue to thrive, most are maintaining a newly found wariness and sense of caution as to the changing business climate. Nonetheless, the usual variety of legal issues confronts them all just as often,or even more often, as during more typical business environments.

1. An Ounce of Prevention
Recently, and increasingly, lawyers are noticing that clients are reluctant to consult legal counsel (which is totally understandable) unless there is an urgent problem or one in which someone else will pay the cost (e.g. compelling an insurer to defend a lawsuit; prosecuting claims for serious personal injury; or contract disputes where the winner is reimbursed for legal expense.)

It is important to recognize, however, as a matter of good business judgment, when one reaches the point of becoming penny wise but pound foolish, or, to mix a metaphor, when a stitch in time can save nine. Here are some recent examples of "preventative lawyering" which is more important than ever in difficult economic times. Just as it might be cost effective to have a medical checkup during a community epidemic, soliciting a legal opinion before entering a transaction or addressing a legal dispute can often avoid problems and expense in the long run.

2. Discovered Document Technicalities
In one current case, we represent the seller of a residence. Real estate agents routinely generate dozens of pages of fine-printed forms which they are legally authorized to "fill out" on behalf of buyers and sellers. We were retained to review a set of documents and were able to discover several disadvantageous terms and omissions before our client committed to the transaction. For example, the forms failed to protect the seller adequately from exposure to potential legal liability and, surprisingly, even misdescribed the legal title. We were able to draft some mutually acceptable amendments which corrected the technical title errors and avoided complications with the title company which would have delayed the escrow, and possibly lost the buyer. More importantly, the amendments created valuable "insurance" for our client against being sued in the future.

3. Undiscovered Details
In another instance, a supplier to an international retail chain had been presented, a few years ago, with a bundle of finely printed pages in connection with a very large order. High volume customers are sometimes hard to find, and the contract was eagerly signed without legal counsel. Two years later, the customer's lawyers asserted several contract rights which our client's management believed to be unsupported.

Our "after-the-fact" analysis, however, revealed that the customer's position, based on the contract language drafted by its own legal department, was actually very well supported by several specific phrases deeply buried in the paperwork like so many needles in a haystack. The potential significance of these buried details had been either misunderstood or overlooked by our client's management at the time of agreement. Had the phrases been identified before acceptance two years earlier, the client may well have negotiated a different agreement, also acceptable to the customer, which would have obtained the same benefits for the client without the unfavorable technicalities which, in our current situation, may prove to be quite costly.

4. Layoffs
We have received a few calls already this year from "downsizing" clients interested in avoiding claims arising from layoffs. We commonly tailor written release forms for departing employees. This can not only avoid employer exposure to future liability, but can discourage dishonest competition or trade secret theft.

5. Releases Upheld
The use of similar releases was recently upheld by the California Court of Appeal which interpreted Labor Code section 206. That law requires an employer to pay unconditionally, and on time, any wages due to a worker despite questions as to offsets or calculations. Pay first; argue later. An employer which withholds payment, even in a good faith belief it is acting properly, does so at its peril. If its interpretation of the wage dispute is eventually adjudicated to be inaccurate, penalties, costs, and interest may be assessed under state law.

However, employers and employees may voluntarily choose to settle wage disputes in good faith, with or without discontinuing the employment relationships. In the Chindara H. case, six workers claiming overtime compensation accepted specific dollar amounts pursuant to a settlement agreement which provided that the payments were accepted "in full and complete satisfaction of all issues and claims . . . for unpaid overtime." The court held that the releases were binding on the workers and prevented them from participating in a future class action against the company.

6. Gift Card Alert
Several "household name" retailers have filed for bankruptcy this year. Some reorganize (Chapter 11) and live on, but many liquidate (Chapter 7) and disappear. Remember that the holder of a gift card is essentially "loaning" money to the store to be "paid back" when the card is redeemed for service or merchandise. If you hold a gift card at the start of a bankruptcy proceeding, you are technically an unsecured, non-priority creditor standing near the end of a very, very long line. My advice: Spend them now and think twice before buying them in the future.

7. Liability Insurance Limits
Periodically I warn my clientele to review their liability coverages and consider "umbrella" policies. The standard "million dollar umbrella" is now totally inadequate to owners of businesses and property.

In a recent traffic case, a driver fell asleep and collided head on with another vehicle. The victim was massively injured and the case settled before trial for $4.2 million. If the defendant, who apparently believed that settlement was a better option than risking an unpredictable jury verdict, had a million dollar policy, she was personally responsible for paying the remaining $3.2 million from her personal assets.

8. Hidden Injury
A client's CEO once complained casually that his insurer refused to pay all his repair bills after an old traffic collision. Despite sporadic treatment for a sore neck, he was told it would improve eventually but that a legal claim was impractical because the other party was uninsured.

After we obtained insurance reimbursement for the repairs, we encouraged the CEO to seek a second medical opinion and he eventually received successful spinal surgery. We also filed a personal injury claim (late but not too late) based on a policy provision we discovered which led to a half milliondollar recovery. Had the repair bills not been mentioned, this story would have ended differently.

9. Cemetery Liability
Finally, a court held last week that compensation for emotional distress is recoverable from a cemetery because it bears a duty of care to the decedent's family when it accepts custody of the human remains. In this case, a family bought four adjacent plots 30 years ago intended for four specific family members. After only two had died, one of the survivors was "horrified" when he visited his parents' final resting place and saw that the spot reserved for him contained a stranger.

He sued the cemetery for, among other things, the negligent infliction of emotional distress. The court ruled that such horror, and the ensuing emotional distress (nightmares, etc.), was legally foreseeable, obligating the cemetery to pay damages.

In this remarkable decision, taken to trial and then appealed over an award of only a few thousand dollars, one member of the three-judge panel objected to part of the result on the basis that the precedent would:

" . . [extend the concept of] liability from mishandling [human] remains to mishandling real estate. [We] have broadened liability of cemeteries and mortuaries to include mishandling the deceased remains of a lovedone or burying the wrong person in a family plot. . . . [M]y problem is I don't see where it will stop."

If not reversed, this precedent may very well affect the cost of cemetery liability insurance, which will be passed through to consumers, which will, indirectly, increase the cost of dying itself.

In the next issue of this Newsletter, we will search energetically for more optimistic developments.

For now, if we can be of any assistance to you with your legal or business affairs, consider calling or writing proactively as soon as a legal issue is identified. As a "lawyer of first resort" for over thirty years, I strongly believe that preventative lawyering is the most effective kind.

Sincerely,

HARMON SIEFF

February 2009

LEGAL FORMALITIES OF BUSINESS RECORDS

Specific statutes require California corporations to conduct regular Meetings of the Shareholders and Board of Directors and/or take certain actions by unanimous consent pursuant to Corporations Code §307. Corporations are also required to create and maintain a formal written record of such meetings and/or actions.

As a matter of caution, I recommend that similar procedures be followed for limited liability companies and certain partnerships. With the deadline for preparing certain tax returns looming, this may be an opportune time to complete these formalities.

If record keeping is ignored, the IRS and Franchise Tax Board can disallow many advantages afforded by the tax codes.

In our current economy, many creditors are becoming more aggressive at collecting company debts. Although individual owners generally enjoy limited liability from company debts, a creditor may "pierce the veil" and hold owners individually responsible if their companies are not operated and documented as truly separate entities.

If you are interested in having this office assist you with these formalities, please advise. Enclosed is a summary sheet to report "significant" transactions for the year which most recently concluded. Please complete the sheet and return it to us as soon as possible.

We strongly urge you to comply with these requirements before you hear from a creditor or tax collector.

Sincerely,
HARMON SIEFF

January 2009

NEW LAWS FOR A NEW YEAR

As many of you know, the California State Legislature spent much of calendar year 2008 bickering over budget issues and failing to agree. Still, over 100 bills were enacted into law. Here is a sampler of some new statutes of interest and a few recent court decisions:

1. Unnecessary 911 Calls - Monetary Fines

Monetary fines can now be imposed for "abusing" the emergency telephone system.

2. Music Piracy

Persons convicted of "stealing" music shall be required to pay restitution to the economic victims of their piracy.

3. Involuntary Blood Tests

Courts can now force an arrested person to submit to a blood test if there is good cause to believe that an emergency personnel employee has been exposed by the arrested person to an infectious disease. This may not stop crooks from biting police officers, but it will help our first responders obtain proper medical treatment if needed.

4. Pet Trusts

Animals have rights, too, and there are now more protective laws to enforce the wishes of those who bequeath money for the care of pets who outlive their owners. Trust funds for animals were once discouraged, but courts are now required to liberally construe the provisions of such trust instruments to carry out the general intent of the human decedent. Any person interested in the welfare of the benefited animal, including an animal charity, can now petition a court to enforce such arrangements. Accountings can be waived for amounts under $40,000. Courts will also enforce the right of a designated charity or individual human to examine the pet-beneficiary and its home and audit its accounts.

5. Canine Cops

It is now unlawful for hotels or places of public accommodation to discriminate against a canine peace officer assigned to out-of-town duty due to a declared emergency. Such public places shall not be allowed to impose extra charges or deposits for the service animal.

6. Weapons Control

It is now unlawful to sell or export an "undetectable knife," import or manufacture "hard wooden knuckles," or display or expose imitation firearms at public schools and other places.

7. Printed Wills

A higher burden of proof will now be applied to proving that certain printed wills can be enforced by probate courts.

8. Don't Text and Drive

Driving while using a cell phone was outlawed last year. Now it is illegal to use any electronic wireless communications device to write, send, or read a "text-based" communication.

9. Counterfeit Merchandise

In my career, I have been required to defend retailers accused of intentionally selling counterfeit purses, toys, and other items. It can now be a felony to willfully manufacture, sell, or possess for sale any counterfeit registered trademark. "Intent" can be found in the eye of a jury, so be sure you know your wholesale sources.

10. Homeowners Associations

Disputed assessments can now be paid under protest and recovered in Small Claims Court.

11. Endangering Children

Paparazzi beware. It is a misdemeanor to publish a child's physical description, appearance, or location to facilitate a crime against the child by another person.

12. Fire Hydrants

It is illegal to buy or receive, even for salvage, stolen fire department connections or components thereof.

13. Hybrid Cars

It is now illegal to sell fraudulent "clean air stickers" or resell valid ones.

14. Identity Privacy

Specific laws have been enacted to criminalize the remote examination of a person's identification documents and information using radio frequency technology (think video-spying at an ATM).

15. Liability for "Sport Court"

The owner of a front yard volleyball court with string-supported net poles is not required to eliminate the risks of volleyball, but must not increase "the risk of harm beyond what is inherent in the sport." The duty of a game organizer is higher than that of a mere co-participant. A jury will now decide if the trip hazard over which a neighbor child fell resulted from the homeowner's negligence or was just a part of the game.

16. Gun Control Lives

This summer, the United States Supreme Court decided a landmark case ("Heller") which held that the Second Amendment protects the right to possess a firearm for private use. It was the first such case in U.S. history to address this issue directly. The handgun ban in Washington, D.C., and its limits on storing rifles and shotguns, was overturned. Common sense, however, was not repealed.

The same Court approved reasonable gun regulation including "a non-exhaustive list of presumptively lawful regulatory measures." A few weeks ago, a California felon tried to use the Heller case to overturn his own conviction for carrying a loaded concealed firearm in public. The California court ruled that the felon was properly prohibited from carrying a gun notwithstanding the Heller decision.

17. Beware Good Samaritan

By long establishedcommon law, no one has a duty to rescue any other person. However, California's so-called "Good Samaritan" statute protects rescuers who volunteer to provide "emergency" care. Still, the state Supreme Court recently ruled (by splitting hairs?) that this protection is limited to providers of "medical" care and does not include dragging an injured victim from a crashed car. In the Van Horn case, the paralyzed victim was allowed to sue the rescuer for "negligent dragging".

18. Native American Immunity

Otherwise unlawful "Internet payday lenders" owned by a federally recognized Indian tribe have been ruled immune from California law, even though their commercial conduct is "off-reservation" on non-tribal lands, so long as the businesses are sufficiently related to the tribe to constitute "arms of the tribe".

19. Electronic Harassment

It is now a crime not only to telephone (or electronically contact) the home of another person repeatedly with the intent to annoy , but also to make such intentional communications regardless of where the messages are received.

20. Academic Researchers

is a misdemeanor to publish information about an academic researcher or her family, or to disclose their locations with the imminent intent to commit a violent crime against such persons. This should apply to sometimes unpopular birth control and stem cell scientists.

21. Contraband

It is now a misdemeanor to possess khat, a mild narcotic.

Have a safe, healthy, and lawful year.

Sincerely,
HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

November - December 2008

RECENT LEGAL DEVELOPMENTS

1. More Employment Litigation

When times get tough, the tough start suing. Whatever the reason, there is an undeniable increase in employment litigation this year with more cases seemingly reported every month. Recent examples include: (a) a policeman's million dollar verdict from his suit to increase his pension (he had not been paid for time at home caring for his police dog); (b) several class actions against major corporations awarding millions of dollars to thousands of employees claiming denial of compensation for rest breaks and mealtime; and (c) the usual assortment of discrimination, harassment, and other individual suits.

2. Off-the-Clock Update

Earlier this year, a court ruled that companies are not required to compel workers to take breaks and rest periods, and that workers can sue only if management should have known they were working "off the clock."

That case was, as expected, accepted for appeal by the Supreme Court which will re-decide the case sometime next year. The Appellate Court decision, which we reported as "good news for employers", is no longer part of California law.

3. Newspaper Distributors

An Orange County trial is now underway to decide if a major newspaper owes up to $100,000,000 to what some of us used to call "paperboys." At issue is whether the carrier-distributors are "employees" entitled to benefits and overtime, or "independent contractors" who are not. There are also issues of child labor and minimal wage. [NOTE: While this Newsletter was being printed, the case settled for $22 Million.]

4. Small Business Burden

Common sense and lawful conduct are not always enough to protect an employer from expense and aggravation. A nine-employee client fired its receptionist for being late 70% of the time over six months. [They should not have waited so long, and should have issued periodic written warnings.] When the boss learned she had filed for unemployment, he filed an objection, believing termination was for "good cause". In response, the receptionist filed a claim for sexual harassment, contending that the male managers regularly shared "off color and sexually explicit" jokes and stories with the office staff which embarrassed and damaged her. Confronted with a time-consuming state agency investigation, and inevitable civil litigation, the company instructed me to end the proceedings by paying her up to four months salary ("severance" or "extortion" depending on one's viewpoint).

5. Indian Casinos

Continuing a long line of precedent, a Federal Appeals Court recently decided that a Native American tribe was not responsible to a severely injured motorcyclist run down by a casino customer who had been served free alcohol long after becoming intoxicated. Typically, a business which fails to "cut off" an obviously drunk drinker is responsible for the consequences. However, this particular casino was owned by a tribal corporation organized by a recognized Native American tribe. Such a tribe is a sovereign entity and its employees acting on its behalf are immune from state and federal laws. (The same principle explains why foreign ambassadors and their agents often ignore parking tickets and most traffic citations.)

6. Workers' Compensation

A retail clerk was murdered by a deplorable racist who, though possibly insane, admitted that he had simply decided one day to "kill a black person." The workers' compensation insurance company denied death benefits to the clerk's family on the theory that the death was attributable to the victim's race, not employment, which supposedly exempts the event from workers' compensation coverage.

This appalling position will no doubt be eventually challenged by a judge unless clearer heads prevail sooner.

7. Fair Recruitment Practices

A Court recently ruled that a company hiring a competitor's employee is not automatically guilty of "interference with contract." The Court explained that there is a legal right to compete in business so long as no "unfair methods" are utilized. The Court considered testimony that the job-changer did so because she was insecure about her first employer and doubted its viability. (It was, apparently, sufficiently viable to sue her new boss and litigate for five years.)

8. Easements

A homeowner in a luxurious private community owned an exclusive easement over a neighbor's property to transport garbage and ride horses. The neighbor planned construction of a walled driveway along the easement. The easement's owner objected and sued.

The neighbors claimed that they could use the driveway on their own property so long as they did not interfere with the horses or trash collection.

Although the general rule of law is that a land owner retains the right to use the granted easement, here, the Court upheld the document which specified that the easement was "exclusive".

9. Consumer Law

Although unrelated to my personal practice, I note with interest that Verizon Wireless has agreed to pay $21 Million to a class of customers who were charged certain cancellation fees.

10. Matchmaker Law

The Gender Tax Repeal Act and other state civil rights laws prohibits gender-based price discrimination in all businesses. An online matchmaker was sued because it offered free services to female customers because it had too many male customers andneeded to balance things out (remember "free ladies' nights"?)

An unhappy would-be male subscriber sued the service under these laws, but lost because he never subscribed, joined, or paid anything to the company. No harm, no foul.

11. Medical Marijuana

The State Supreme Court has taken a strong stand against medical marijuana, holding that being a "primary caregiver" to ill patients with medical permission to use is not a legal defense to selling marijuana. A defendant was arrested and convicted of growing and possessing marijuana for sale, but defended on the basis that he was the primary caregiver to medically eligible users. The court ruled that such a defense is effective only if the defendant can prove a record of previous caregiving to each ill patient unrelated to marijuana use.

12. A Deal Is A Deal

An individual can be bound to a contract he never signed. A legal journal recently discussed how contract liability can result where the non-signer is a "third party beneficiary" or if the signer is the "agent" of the non-signer.

A non-contracting third person who accepts the benefits of an agreement between other parties intended for her benefit also consents to its burdens so long as she should have known the terms.

An example is a policy holder's employee seeking insurance coverage to defend a claim against her. Though she had never signed her boss's insurance application, she was required to arbitrate her request for coverage (arbitration was part of the policy) because she had sought the policy's benefit and accepted its defense.

"Agency" can be implied from conduct. When a person's actions or omissions create a reasonable belief in the minds of others that he is authorized as another's agent, and if such others reasonably rely on those beliefs, a court can bind the "agent's" non -signing partner (or principal, boss, or co-venturer) to all terms of the contract.

That which appears to be is sometimes held to be. This concept has even been applied to traveling companions, where only one signs the travel documentation, because it can be implied that the unknowing companion had authorized the signer and had an opportunity to learn the terms of the arrangements. Both travelers were bound by the contract whether both knew the details or not.

It is important to read not only what you are signing, but what is being signed and agreed by others on your behalf.

13. Conclusion

If you find these Newsletters helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word. Have a wonderful and lawful year.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

October 2008

RECENT LEGAL DEVELOPMENTS

1. Criminal Tax Evasion

The obligation to withhold and remit payroll taxes to the IRS is taken extremely seriously. Even a non-owner of a company can be held responsible for non-payment if that individual routinely and mechanically writes or signs paychecks for which payroll tax is levied.

A nursing home operator regularly failed to pay the full amount of payroll taxes which were periodically due and he was convicted of a felony even though he claimed that he "lacked the financial ability to comply with tax requirements."

The conviction was upheld on appeal. Notwithstanding several old federal court decisions which held that the nonpayment of tax was not "willful" if the taxpayer lacked the ability to pay, the court in the Easterday case affirmed his conviction because it found that the fact that the taxpayer had used the money for other expenses was not relevant. Since he did not pay, he was guilty. Word to the wise: In these times of dramatic budget deficits, tax collectors are working harder than ever.

2. Liability of Evicting Landlord

Although most commercial landlords seldom perform physical inspections, especially while evicting a tenant, it is now important to do so. Based on a recent court case, landlords are now required by law to conduct reasonable periodic inspections of premises even if the tenant has been adjudged evicted by a court, but has not yet been physically removed by the Sheriff.

Landlords have long been obligated to correct defects they knew or should have known about, but now they have affirmative duties to inspect until the evicted tenant is physically removed.

In the Stone case, the court ruled that a restaurant's landlord is responsible for a customer's personal injury even though the evicted tenant was refusing to move out and objecting to the inspection.

This new legal duty imposed on landlords is greater than the duty to inspect during a normal tenancy, but less than the duty of a landlord who has actually removed the tenant. You can expect premises liability insurance rates for landlords to increase slightly unless the Supreme Court overrules this decision.

3. Condominium Owners Associations

Living in a condominium is a lot different than having your own house and, no matter how many owned units there are, rules must be established and followed.

When a person bought a condo and offered it for rent, the owners association tried to pass a rule prohibiting rentals, but could not achieve a two-third majority as required by the CC&R's. The Board of Directors then petitioned the Superior Court to change the CC&R's to make a simple majority vote sufficient. The Board's action was upheld as properly following the statute which allows a court to change private CC&R's under certain circumstances

Buying real estate of any kind is a serious matter, and condominiums are generally more extensively documented than other kinds of property. Though it is tempting, do not simply "approve" title reports and recorded instruments, but force yourself to read and understand all paperwork, or pay someone else to do it for you.

4. Broker Commissions

In the current economy, it is not unusual for escrows to "fall through" for many reasons, but that does not necessarily mean that no real estate commission is owed.

In a recent case where a would-be "flipper" refused to complete his purchase because the property value had not increased during a lengthy escrow, the court held that the real estate broker was entitled to collect his commission anyway since the buyer failed to close for an unacceptable reason.

I have represented many real estate brokers over time who are often reluctant to pursue commissions. This case may embolden brokers to become more proactive.

5. Landlord Liability for Animals

Generally, a property owner is not required to inspect rented premises to look for dangerous animals, but when an owner had actual knowledge that two hostile dogs were kept on the rented property, he was liable to an attacked workman.

Having been warned, the landlord could have removed or controlled the dogs with little effort and easily avoided a foreseeable risk of injury to the workman.

6. Home Schooling is Legal

Sometimes courts change laws. In February, an appellate court required all children to be taught by credentialed teachers. An uproar resulted from the advocates of the approximately 166,000 home schooled Californians. The ruling was reconsidered and reversed, with the court ruling that although no state law allows home schooling, it will be allowed unless the Legislature passes a specific law prohibiting it.

7. Winery Law

In July, a new law was enacted to clarify liquor licensing rules applicable to wine tasting and picnics at wineries. Alcohol control laws define where wine can be tasted and what constitutes a "taste" (traditionally a single ounce). Effective January 1, 2009, wine makers are authorized to sell full glasses or bottles for consumption onsite or elsewhere if "leftovers" remain.

Prohibition was repealed 75 years ago, and every state has its own rules regulating alcohol. Here, the powerful California wine industry has lobbied for greater flexibility regarding tasting rooms, picnic areas, age restrictions, and other bureaucratic regulation. Cheers!

8. Software Licenses

Those of you who buy or sell software, take heed. A man named Gagnon was an independent contractor developing custom software for a private company. After he delivered six programs for the customer's specific needs, he asked the customer to sign a non-exclusive, unlimited license, but the customer insisted it already owned it.

The parties sued each other and the court ruled that the company had already received an implied irrevocable license because the developer had installed the programs on the company's computers before submitting the paperwork. (The developer's counter-suit for copyright infringement was denied.)

Obviously, it is better to sign contracts before they are performed.

9. Good News for Employers

A restaurant was sued for denying its workers rest and meal breaks and requiring off-the-clock work. The court ruled that employers need not force workers to take breaks, and breaks do not have to be offered in the middle of a work period. Also, cases like this can not be certified as class actions.

Although an appeal is predicted, for now, as stated in The Daily News, "employers should continue to provide paid ten minute breaks for every four hours worked and a 30 minute meal period before an employee completes five hours of work."

10. Independent Contractors

Small companies must classify workers as either employees or independent contractors. The more the worker is controlled by the company, the more likely the person will be considered an employee entitled to a different set of benefits, protections, and treatment.

A company hired an individual to perform certain inspection work for its client with a writing providing that either party could terminate at any time, which the company eventually did.

Here, the court ruled that the individual was a contractor, not an employee, even though his agreement included a so-called "at will" provision. The evidence showed that the company had little control over the worker and provided him with no equipment, material, uniform, or tools. Therefore, his suit for breach of implied contract of continued "employment" and wrongful "employment" termination was denied.

11. Credit Lines

Many small businesses are dependent on credit lines to smooth out seasonal or irregular cash flow. In light of current credit industry conditions, I urge those businesses to review their credit documentation right now. Many bank forms allow lines to be cancelled without notice. Know your risks, plan accordingly, and consider a back-up line or amending your current bank agreements.

12. Independent Contractor Part 2

The Labor Code includes a legal presumption that a construction worker is an employee unless he has his own contractor's license. In a recent case against a shopping center, an injured worker sued the owners of the center where he had fallen off a ladder. They did not carry workers' compensation insurance. The worker claimed damages for wrongful termination, failure to provide the insurance, and other employment claims.

The worker lost because he had told the owners that he was a painting contractor, bid competitively for the contract, brought his own equipment, and had not informed the owners that his contractor's license had been revoked. Therefore, they were entitled to take him at his word that he was licensed.

To be safe: Consider carrying workers' compensation insurance anyway. Many homeowners and property owner policies already include coverage for incidental or temporary employees for a small cost. Had the defense of these owners been a little less strong, they would have been responsible for substantial damages.

13. Conclusion

If you find these newsletters helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

September 2008

Corporate Formalities

As you probably know, the California Corporations Code (attached) requires all corporations to maintain formal records which must be regularly updated. Although shareholders are ordinarily not liable for corporate debts, a creditor may "pierce the corporate veil" and hold shareholders individually responsible if the corporation is not operated and documented as a truly separate entity.

Also, if a corporation ignores statutory operating formalities, the IRS and Franchise Tax Board can reduce or disallow certain tax deductions.

Your board of directors and shareholders should hold regular meetings. Significant business transactions should be reflected in your corporate minute book. Contracts, retirement plans, loans, dividends, leases, officer compensation, and similar transactions should be formally approved and reflected in the corporate minute book. Similar records should be maintained for limited liability companies.

If this office can be of any assistance to you, feel free to call. Many clients provide us with an informal list of major transactions, including the elections of officers and directors, with pertinent names and dates, and we do the rest. We strongly urge you to do this before you hear from a claimant or tax collector.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

August-September 2008

RECENT LEGAL DEVELOPMENTS

1. Employee Non-competition Covenants are Void

The California Supreme Court just ruled that the part of an accountant's employment agreement preventing him from working for his employer's clients violated California law as a contract restraining an individual from engaging in lawful business. Such "non-competition" contracts, long disputed, are now clearly void.

Thousands of these contract provisions have been executed, and this Newsletter has discussed this subject before. Any question of validity which may have existed before last week, however, has now disappeared.

[The case involved the once super-accounting firm Arthur Andersen, then-indicted for Enron involvement, which used the contract to try to prevent a CPA from taking a new job unless the CPA released Andersen from all of his potential claims against Andersen. This would have included his right to reimbursement from Andersen if he were later sued (as many CPA's eventually were) for the firm's Enron work. No matter what is signed, no worker can waive the right to indemnity for losses which are the "direct consequence of the discharge of . . . duties, or . . . obedience to the . . . employer . . . . "]

2. Clarification of Business Reporting Law

As mentioned in last month's Newsletter, the California Secretary of State requires a Statement of Information to be filed every other year for California limited liability companies to provide public notice of the official company address and the identities of managers and agents for service of process.

An almost identical form has been required for California domestic stock corporations for decades, but corporations are required to file EVERY YEAR with similar information.

It is very important to comply with the schedule applicable to your particular business entity to avoid being suspended by the Secretary of State. If you have any questions about these requirements, call our office at no cost.

3. E-Verify Update

Hiring illegal aliens violates the law, but with so many fake identification cards around, how does a company know who is eligible? Enroll with "E-Verify." This is a new name for a federal pilot program of Social Security and immigration agencies. It allows an enrolled company to verify the legal eligibility of individuals for employment in the U.S. The system now includes photo-screening to minimize mistakes.

If this is an issue for you, consider this free program---optional, for now, in California, but mandatory in some states--- as a no-cost insurance policy against government penalties since a confirmation is evidence that an employer tried as hard as it could to screen out illegals. Homeland Security can still raid an enrolled worksite, and must be provided with warrantless access to "verified" employment records, but using the program should avoid fines.

4. If You Promise To Mediate, Then Do

Many contract forms, including the standard house purchase agreement used by brokers, contain provisions requiring disputes to be submitted to non-binding mediation before filing suit. In a recent case a court ruled that a party who sued first, and won, was still denied the right to recover contractually authorized legal expenses which would otherwise have been awarded. Failing to mediate forfeited that right to reimbursement.

5. Employer Not Liable

A company is not always responsible for what its workers do. An AutoZone customer whistled at the manager (and former juvenile delinquent) while pointing to a product. The manager took umbrage and insisted that the customer say, "Excuse me." The customer told the manager "[You] shouldn't have come in if [you] didn't want to work," after which the manager whacked the customer with a metal pipe.

The customer sued. The court held that AutoZone did not necessarily owe the customer a duty to train employees about provocation or investigate their criminal records. (Juvenile records are often unavailable anyway.) The manager's history was not the cause of the injury, but a jury will decide if the violence resulted from the customer's remark (listening was a part of the job) or the whistle (a demeaning personal insult is not).

6. Consider Umbrella Insurance

Often confused with "excess" policies which raise coverage limits, "umbrella insurance" is fundamentally different because it covers certain claims which are otherwise not covered at all. Countless options are offered. An example is a policy which covers claims for "emotional distress" which, to one recent client's chagrin, are not covered by the basic commercial general liability policies which most of you carry.

Some umbrellas also provide "cost of defense" coverage of otherwise uncovered claims. The stress of a lawsuit imposed on a corporation's individual owner-operator can be staggering, and better insurance can provide dramatic relief to the policyholder.

7. Illegal Hospital Bills

Many popular health care insurers reduce their costs -- and theoretically, their premiums -- by entering contracts with hospitals which agree to discount the bills of the insurers' policyholders. Most hospitals agree to the discounts because they do not want to lose patients to hospitals who do offer the discounts.

A deal is a deal, and if the hospital agrees with the insurer to write down its bills, it cannot later sue patients to recover those discounts. Some have tried, but the Supreme Court ( Parnell v. Adventist ) has ruled that a hospital paid pursuant to its contract with an insurer is not entitled to the difference between that payment and its "usual and customary" charges.

8. Conclusion

If you find these newsletters to be helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

July 2008

RECENT LEGAL DEVELOPMENTS

1. Reading Workers Electronic Messages?

Most companies feel entitled to see and examine any data on their electronic systems, including worker communications, but on June 18, a federal court granted new privacy rights to workers who use company cellphones, pagers, and computers to send personal messages. If an employer contracts with an outside service for messaging, it does not have the right to ask the service for the messages even if it pays the bills.

Although this case may well be appealed to the Supreme Court, and there are many technical limitations to the application of this decision, for now, anticipate that texting is probably considered private and future cases may rule that email, a subtly different type of message, may be monitored on company computers only for well defined "legitimate" business purposes (like investigating trade secret theft) which are clearly disclosed to personnel.

This case is a warning that even private employees may be protected by a Fourth Amendment "expectation of privacy." Whether this will inspire a new wave of employment litigation for invasion of privacy remains to be seen.

2. Bank Communications

The Daily Journal quotes a recent case ruling that a depositor, who wrote checks based on a bank manager's specific assurances that a deposit had "cleared" could sue the bank for negligent misrepresentation after several important checks bounced anyway.

The customer claimed monetary losses and damage to his reputation and credit rating. BEWARE: A customer listens to his banker's advice only at his peril.

3. Unlicensed Subcontractors

Once again, a court has refused to award a subcontractor any money at all for good work well performed because the subcontractor was not licensed during the entire time of performance. The subcontractor worked for many months beginning on August 28, but its license did not issue until October 29. There is a strong public policy to protect the public from unscrupulous and incompetent contractors, and this kind of decision is intended to deter unlicensed persons from engaging in the building trades.

4. Fashion Knockoffs

Although companies are always suing each other for trademark infringement, copying designs, and pirating products, in this country clothing designers have no rights to protect their "designs". While most other industrialized nations grant copyright protection to "fashion design," in the United States, clothing "designs" are considered "utilitarian," not "creative," and knockoffs are permitted.

Congress is currently considering a law to change this. Hillary Clinton, representing America's fashion capital in New York, is sponsoring this proposal, but its passageis doubtful. For now, clothing designs introduced by runway models on Monday can be photographed, digitized, manufactured, and sold the same week without fear of legal reprisal.

5. Parking Lot Liability

In a case involving a man mugged in a parking lot, a California appellate court explained the law of premises liability. As reported in the Daily Appellate Report, there is usually no duty to protect another from third party criminal acts absent a special relationship (like a commercial customer). Businesses are required to maintain their premises in a reasonably safe condition which includes protection against foreseeable criminal acts of third parties.

In a new case, the injury was held to be unforeseeable. Although the business had received numerous complaints about transients and false burglar alarms, and had been asked by neighbors to install a fence, there had never been a violent crime at the location. Without notice of previous violence, the parking lot owner was not responsible for this first-time assault.

6. Non-Solicitation Agreements

In most California cases, a business seller's promise to avoid soliciting its workers after the sale is generally enforceable. However, in the Strategix case, the court said such restrictions must be limited to workers and customers of the sold business. A general promise not to solicit was considered too non-specific to be enforced. This is the kind of "loophole" with which a lawyer can be helpful.

7. Compliance Forms

Many of you own or manage corporations or LLC's which were formed more than two years ago. Statement of Information forms are required to filed with the California Secretary of State every two years, and blank forms are usually sent to you by the Secretary of State a few months in advance.

For years, these courtesy "reminders" were routine, but for some reason, this system has become unreliable. Several of our clients were accidentally "suspended" this year for failure to file.

This can be a big problem because suspended companies cannot appear in court proceedings. Recently, I was retained to defend a company from a civil suit, but during due diligence noticed it was suspended. Fortunately we had been called just in time to expedite a late filing and reactivate just in time to respond to the lawsuit. A more observant plaintiff might have used this oversight to obtain a default.

8. New Marriage Law

With the avalanche of weddings occurring following the new landmark law, many legal questions are being presented for the first time in a new context.

We are retained to assist a multinational same-gender couple to marry and reside in California. A spousal visa is unlikely to be issued under current federal law, so, in coordination with a certified immigration practitioner, we are applying for a "transferred employee" visa.

9. Conclusion

If you find these newsletters helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

June 2008

RECENT LEGAL DEVELOPMENTS

1. Liability of Limited Partner

Many of you are investors in limited partnerships which were formed for the specific purpose of limiting the liability of investors. This is usually, but not always, effective, and you should be very careful before entering a limited partnership without proper counsel.

A federal court recently held that a limited partner may be liable for the debts of a partnership if that limited partner is a "participant in the control of the business and the third party reasonably believes that the limited partner is a general partner."

If you are a limited partner, don't act like a general partner.

2. Age Discrimination

A 52 year-old Google engineer was allegedly known as an "old fuddy-duddy" whose ideas were "too old to matter." He was fired for failing to be a "cultural fit."

Even the biggest corporations with the most expensive lawyers do not always follow the rules. Here, the engineer was entitled to a jury trial to determine if he was a victim of age discrimination or was, as the company claims, merely laid off.

3. Importance of Credit Applications

Businesses generally rejoice when a good order is received, but, especially in a fluctuating economy, all customers are not created equal. However, a detailed credit application, obtained in advance of a sale, can be an invaluable insurance policy.

For one thing, a signed application, often a "routine" sales form, can include many important contract terms even if finely printed on the back side but incorporated by reference on the front signature side. Although many sales, especially phone, email, website, or customer-generated purchase orders, contain no written promises at all, written terms onany paper signed by a customer can be a critical tool if collection problems develop.

A credit application can be an unobtrusive form which a customer will complete without objection. A comprehensive application will identify credit, bank, business, and personal information; seizable assets (bank accounts, warehouses, inventories, etc.); and even other responsible parties, all to demonstrate that the customer is creditworthy. Even in paranoid times of privacy protection, such data is often provided.

Obviously, such pessimism seldom co-exists with the optimism of a salesman's triumph, but lawyers are retained to plan for an uncertain future and to protect clients in the long run. There are a number of legal procedures available to unpaid sellers, and most benefit from good credit applications.

Consider as an example a company which delivers valuable products or services on common thirty day terms. After delivery, little or nothing is paid. Must the company endure years of litigation and eat the court costs? Maybe not.

4. Collection Cost Provisions

Attorney's fees are not recoverable in an ordinary California contract case unless the parties so agree in writing . (Other countries and a few states have different rules.) In the absence of a formal written agreement, a signed credit application can include such a term and be enforceable against a non-paying customer. The form can also require the customer to pay all imaginable collection expenses, including investigators, pre-lawsuit lawyer bills, and agency fees incurred due to nonpayment.

5. Prejudgment Attachment

For many contracts, there may be a right to a prejudgment attachment (court seizure) of money or other assets adequate to cover the bill. In a case where I was furnished a detailed credit application, I knew which bank held the payroll funds. The day before pay day, I filed a court complaint, argued an emergency motion for attachment, received a court order, obtained a writ, and served the payroll bank on the same day . This froze the account, and a lot of angry workers persuaded the boss to pay my client the full balance plus court and legal costs.

To succeed, a creditor must prove - by sworn written statements - that it is probably going to win if the case goes to trial, but that the assets may disappear in the meantime. If there are reasons for nonpayment, real or believably invented, such as non-delivery, defective merchandise, offsetting claims, etc., a prejudgment motion will probably fail. However, most people avoid perjury, many cases have no such defenses, and quick action is often available.

6. Prejudgment Repossession

If tangible objects have been sold, and if enough money is at stake, it can be cost effective to file suit and seek, often simultaneously, a prejudgment order for the repossession of the item (usually implemented by a sheriff) until a trial determines whether it should be returned or not. As with attachments, the creditor must post a bond.

7. Guarantees

A credit application can also be an opportunity to obtain a personal guaranty of a corporate debt. If the guarantor (co-signer) executes a properly drawn guaranty, the co-signer (whether a human or another company) can be sued at the same time as the customer and the co-signer's assets attached. Although many business owners and their friends are reluctant to provide personal guarantees (and I certainly recommend against it for my buying clients), when I represent sellers, I think guarantees are a great idea.

Consider requesting guarantor information in the credit application. A customer can always say no and you can consider whether it is worth risking nonpayment, requesting a larger deposit, or passing the sale.

8. Sales Contracts

For substantial transactions, it is usually cost effective to utilize a customized sales agreement which has been carefully drafted to include as many vendor-friendly provisions as the buyer will accept, including not only rights to collection costs and guarantees, but also late fees, shipping expenses, restocking charges, disclaimers, limitations on warranties, interest, insurance obligations, and even the allocation of risks of loss.

Any number of legal terms can be included in a written agreement signed by two commercial merchants, be it a counter-signed credit application or a seller-provided purchase order. (Special and protective laws apply to many consumer contracts.)

In almost all cases, a party must actually sign a writing before the writing can be enforced against the party. Personally, I prefer blue-ink initials on each page and a blue-ink signature at the end. Signed papers can mean the difference between a vendor being paid or not. The very existence of such terminology is often enough to persuade a recalcitrant buyer to pay up and is almost always invaluable to the seller's lawyer.

9. Newsletter Update

A coupleof years ago, this Newsletter reported that a coffee company was required to pay a percentage of its profits to a male model appearing on its jar label. The coffee company waited 12 years before using the model's photograph, but never obtained his consent or paid him. The jury not only awarded the model the value of his services and the use of his likeness, but also the coffeemaker's profits earned with his face on the label. A belated $15 million payday.

Recently, an appellate court reversed this verdict because the model had failed to prove at trial that the specific characteristics of his personal appearance on the label had been the reason the profits were earned. One handsome face is apparently no better than another, and this one just lost 98% of his judgment.

10. No Defamation By Lawyer

In a heated legal dispute between brother and sister, certain papers were delivered by the sister's lawyer directly to the brother. The unincluded lawyer left an angry voicemail accusing his opponent of engaging "in a conspiracy [with the sister] to defraud my client [the brother]." The sister sued the voice mailer for slander since the voice accused her of fraud.

In the Rohde case, the court dismissed the slander case since the accusation was protected by the "litigation privilege" in that it was made by the voice mailing lawyer "in anticipation" of litigation.

11. Conclusion

If you find these newsletters helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

May 2008

RECENT LEGAL DEVELOPMENTS

1. Defamation by Fax

The law does not always keep up to date with the development of technology. Copyright laws, for instance, are still based on a time of bound books and vinyl records.

Recently, a language school in California terminated a foreign student because, it believed, she unlawfully accepted employment in violation of her visa.

The student was a niece of a California lawyer and objected to her termination by correspondence typed on her aunt's office stationery. The school replied with an allegedly defamatory letter transmitted to the fax machine identified on the aunt's stationery. The student sued the school for "publishing untrue statements" to a machine which was accessible to all law firm employees.

The school won. Defamation requires that false information be "published" to a third person. Here, the school sent a letter to the same fax machine thestudent had identified, thus "inviting correspondence" to that fax machine.

Word to the wise - do not distribute a fax number unless you are prepared for it to be utilized and know who has access to the papers it receives.

2. Native American Casinos

Although many "Las Vegas style" casinos have been constructed nationwide in the past several years, do not forget that the reason the tribes are given exemptions from the gambling laws which apply to everyone else is because they are entitled, by federal law, to impose and follow their own laws.

This is similar to the difference between suing an individual and suing a government. For accident claims, private citizens can be sued under state or federal law. Pursuing a government is different, and a Native American tribe has a kind of government.

If you are run over by a UPS truck, state law will apply. If you are run over by a postal truck, you are subject to a different set of rules contained in the Federal Tort Claims Act which include different time limits, procedures, and standards. This all began about a thousand years ago when, even though King John signed the Magna Carta, the court system presumed for centuries that the "King could do no wrong," and you could not sue the King without his permission.

Accordingly, modern-day governments, and their "servants", can be sued only in the ways the government allows. The State of California has its own Tort Claim Act which must be followed precisely to enforce claims against state personnel and agencies. Not surprisingly, the Morongo Gaming Agency in Cabazon has published a brochure about its own "tort claims procedures." According to the Agency:

"Our policy requires that you complete a claim form . . . obtained by contacting the Safety and Risk Management Department of the Morongo Gaming Agency."

When you enter the casino parking lot, you are submitting yourself to what amounts to the laws of a foreign government. The Tribe has its own Tort Liability Ordinance and Tribal Disputes Resolution Process. These laws differ from California civil law.

3. Health Club Liability

&nbSomeone finally found a way to sue a gym. Although a member signed a detailed release of liability for using the facilities, she sued nonetheless after she fell when her foot stuck to a gooey substance (probably gum) on a treadmill. The court granted her a jury trial. While the release protected the club from victims hurt by other members, the gym, like any public place, has a duty to maintain its premises in a reasonably safe condition. The court ordered a jury to decide if whatever caused the fall should have been noticed and fixed (or roped off) by health club personnel.

In law school, we learned about saving the banana peel for evidence. If someone slips on a fresh yellow peel, it can be inferred that it was recently dropped and store personnel did not have time to notice and remove it. If the peel is already black, it was probably there long enough so it should have been noticed.

The gym case is notable because for a long time, California courts have considered the context of liability releases, not just the words, in light of the activity which caused the injury. Courts often refused to release some businesses like banks with ATMs, escrow companies, and car repair shops.

In contrast, recreational activities are not generally considered important enough to invalidate releases, and there is precedent for enforcing liability releases to protect health clubs, horseback riding facilities, and car race promoters. Maybe this is changing.

4. Apartment Owner Liability

A City condemned a building as unsafe and ordered everyone to move out. The landlord eventually rented the units to different tenants and refused to allow the old ones to return. Dozens sued the landlord for breach of lease.

Not only did they win, but the landlord had to pay their $125,000 legal expenses even though each tenant had lost only a small amount for rent and relocation. The court found no lawful excuse for the landlord not allowing them to return.

5. Violent Workplace

A worker complained to management of an unsafe working environment because a supervisor was literally slapping him on the head every other day or so. The supervisor was not counseled and the worker was fired after complaining. Although he was never seriously injured, a jury recently awarded him $65,000.

6. Employer Duties

Employment discrimination is often based on whether a company breached a duty to a worker. Certain laws establish duties. The Fair Employment and Housing Act creates a duty to reasonably accommodate the disabled, transfer a disabled person (who is otherwise qualified) to an open job, grant an extended leave of absence under certain circumstances, prevent and remedy harassment and discrimination by coworkers, and ensure that any dispute resolution system among workers is fair.

7. Insurance Checkup

I always recommend to my clients that they take their insurance coverage extremely seriously. Liability insurance is especially problematic because the details of such policies are seldom well explained by vendors and the language is so overwhelming that hardly anyone reads them. No contract can foresee every possibility, and therefore we often try to "find" coverage by cookie-cutter policies for unusual claims against our clients.

The law is also not always perfectly clear. Most commercial insurance covers injuries to victims of a policyholder's ordinary negligence, but there is uncertainty as to the differences between ordinary negligence and other conduct. Several terms are used imprecisely to show varying degrees of wrongfulness or culpability. Consider:

(a) When a waiter spills boiling coffee on a customer, it is probably an accident considered ordinary negligence . (b) If the coffee were carried and splashed from a wide shallow dish, that might be considered gross negligence because that is obviously hazardous. (c) If the spill happened while the server was having a food fight and throwing vegetables, he would be considered reckless . (d) If the waiter tells a patron the tip was too small and pours the coffee on the patron's head, that would probably be considered intentional , constituting a civil battery which may even be prosecuted as a crime .

Somewhere between recklessness and intentional actions are willful actions , and depending on a particular judge and jury, these cases can be decided either way. How the court decides is extremely important because more culpable forms of conduct may result in a judgment for punitive damages which is usually not covered by insurance. (Many cases include insurable sub-claims which require insurers to pay defense costs.)

Your periodic review session with your insurance agent should include discussions of these types of liability if they are at all foreseeable in your business.

Conclusion

If you find these newsletters helpful, please let us know and share them with colleagues. If you prefer to unsubscribe, just say the word.

Sincerely,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

April 2008

GOOD NEWS FOR BUSINESSES

Although I know there is a lot of anxiety among small companies which hear stories about employees or visitors suing companies for various claims, suing is not the same as winning. Several recently decided cases are good examples.

1. No Overtime

A manager of an Internet company sued his employer for overtime wages, claiming he was entitled to such additional compensation because he should not have been classified as an "administrative" worker, but as a "production worker". The employer won.

California law draws a "gross distinction" between salaried administrators and wage earning production workers whose duties are considered "routine and unimportant." In this case, a small startup company followed a "flat" organizational chart where everyone worked together. This manager's job included "specialized functions" considered "administrative" and was held exempt from wage, hour, and overtime laws.

2. No Discrimination

A municipal waste water station manager sued the City for racial discrimination after being suspended. The City won.

The Court noted that the City proved that it had "legitimate, non-discriminatory reasons" for the suspension by establishing that the action was taken because the worker had misinterpreted an emergency alarm which had been signaling that a massive sewage spill was imminent. The City's action was held to be justified without regard to race.

3. No Discrimination Again

A non-white office worker returning from a medical leave was denied an opportunity to "cross-train" for a cashier job in favor of a

younger white coworker. The Plaintiff was also denied a promotion which went to a different younger white worker. This Plaintiff sued for discrimination, but also lost.

Here, the company showed that the two whites selected for advancement were better qualified. The new cashier had a college degree in accounting and five years of related work experience, and the promoted worker had already learned part of the new position and was selected because she required less training. There was no illegal discrimination because the actions were justified by legal reasons.

4. On-Call Employees

A married couple was hired as resident managers of a retirement home to live on the premises. Although they were free to do as they wished while "on-call", they were required to stay within hearing distance of the fire and security alarms in case of emergency.

Immediately after retiring, the couple filed a class action lawsuit against the employer for compensation for all the unpaid time they spent on-call. If successful, they would have recovered damages, penalties, court costs, and substantial legal expenses on behalf of all past and current residential employees.

The Appellate Court ruled that the workers were not entitled tobe paid for "being available" since they could do what they wanted during "off hours", even though restricted to the premises. I would not be surprised if this decision, decided on March 18, 2008, is appealed to the Supreme Court since it restricts the workers' activities without compensation.

5. Landlord Liability

A residential community owner has a duty to protect tenants from "foreseeable" criminal assaults. A trailer park resident was hit by a stray bullet and sued the park. The court allowed the victim to present his case to a jury to decide if the assault was "foreseeable." If it was, the park would be liable. Evidence which was important to the court included: previous unheeded complaints to the manager of gang activity; units covered with graffiti; illegal drug sales observed weekly; two prior gang assaults near the park; and no effort to increase security.

I represented a shopping center with similar problems where I recommended adding a security patrol service. That relatively inexpensive response placated the tenants and neighbors, and probably would have saved this trailer park from the judgment.

6. Company Fleet Insurance

In a case published yesterday, a truck company owner was denied insurance coverage for injuries inflicted by an underinsured motorist. The truck company did insure its vehicles, ten employed drivers, and "any person" driving a "temporary substitute" for a disabled insured vehicle. Unfortunately, the owner had saved a few dollars by not naming herself as a regular "driver" and she was hurt driving a borrowed truck which the court ruled was not a covered substitute.

7. Private Roads

A man injured in a traffic collision at the intersection of a highway and a farm road sued the farm. He claimed the farm was obligated to post signs to warn drivers of the approaching intersection. His large jury verdict was reversed on appeal because the court recognized that so many farm roads cross highways that it would be legally unreasonable to require them all to erect signs to warn short cutting trespassers.

8. Liability Release

A public horse stable was sued by a rider injured during a guided trail ride. She fell off her rented horse, but blamed the stable even though she had signed a release. The court ruled for the rider because the wording of the release form was legally "not clear enough".

Although a series of recent court cases has discouraged challenges to releases, and encouraged the use of increasingly technical release forms, here, the writing was still ruled legally insufficient and the customer allowed to sue. If your business relies on releases to limit your exposure to liability, consider obtaining professional assistance instead of copying an old paragraph.

Feel free to call with any particular questions about any of the above. If these newsletters are helpful, pass them around and let us know. Preventative lawyering is the best kind.

Very truly yours,

HARMON SIEFF

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

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