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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. 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 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 WiseWhether 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 daysto 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. Unlawful Spam
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 bodily injury. 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 byits "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, it had 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. Inpractice, 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 loved one 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, butit 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 established common 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. 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. 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 and needed 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 ifthat 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 allowlines 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 cell phones, 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 passage is 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 on any 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 couple of 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 the student 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 showvarying 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 to be 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. March 2008 AVOID PROBLEMS – KNOW THE LAW My continuing legal education efforts has informed me of some interesting court decisions which may be of interest to you. Value of Preventative Lawyering A recent Appellate Court case is perhaps an extreme example of how litigation can become ruinously expensive. Preventing, avoiding, or curtailing litigation is generally preferable. A policeman sued a City for discrimination. A five year lawsuit followed which resulted in a jury verdict of $11,000. The victorious policeman requested $871,000 for attorney’s fees. Although the trial judge thought this amount was outrageous, and denied the request, the policeman appealed, won a reversal, and was awarded reimbursement of all legal bills. 2. Fraternizing With Employees Although “marrying the boss” has always been common in America, the world has, as most of you know, changed. Although any office romance can create trouble for a company, a manager dating a subordinate can cause operational problems or even sexual harassment lawsuits for which the company is liable. In the past year, a couple of powerful CEO’s have been forced to resign from major international corporations for various degrees of office “romancing”. Remember that Bill Clinton’s “impeachment” began with Paula Jones suing Clinton, as governor, for sexual harassment. To keep workers happy, and the company protected, some employers enter “love contracts” with the paramours in which the employees acknowledge that the relationship is consensual and release the company from responsibility for future harassment, discrimination, and related claims. 3. Premises Liability In the 1970s, I was part of a law firm that was general counsel to a supermarket chain which was always getting sued by injured customers. The rules of liability became, for a while, increasingly anti-landowner before the trend changed again to be more pro-business. Some new cases raise increased concerns for landowners. (a) In one case, an apartment tenant in Inglewood sued her landlord after she was raped by a stranger who entered her open ground level window. Although the landlord won a pretrial motion, his victory was appealed and reversed. The appellate court held that a jury, not a judge, should determine if the landlord was negligent for failing to maintain the shrubbery beneath the window sill and replace a burned out porch light. (b) An elderly apartment tenant sued her landlord when she tripped over an embedded drain in the walkway to the trash bin. The trial judge dismissed her case ruling that the drain, only a quarter inch lower than the pavement, was only a “trivial defect” and plainly “open and obvious” to any pedestrian, especially one who lived there. This case too was appealed and reversed so that a jury, not a judge, will decide whether the drain is legally trivial. (c) In another new case, an appellate court ruled that only a jury could decide if a gymnasium was liable to a customer who fell off a treadmill when her foot got “stuck” to a “substance” on the moving tread-belt (probably a glob of chewing gum left by another user). The court ruled that a jury could find that the gym was obligated to re-inspect its equipment for sticky globs before allowing each customer to use the machine. (d) Although most of you are insured for cases like this, California law authorizes awards of punitive damages in cases where negligent property owners have demonstrated “conscious disregard for the safety of others”. Had any of the businesses mentioned above been previously aware of the so-called “dangerous conditions”, whether by personal observation or notice from someone else, their failure to correct the dangers could have resulted in punitive damage awards which would not have been insured . 4. Shopping Center Liability In 1979, the Supreme Court held that shopping centers were public forums equivalent to public property where free speech was protected by the First Amendment. This rule has long justified soapbox orators, leaflet distributors, and signature gatherers. In one recent case, several national chains were sued by two individuals who had been excluded from these activities in front of several store entrances which they argued were public property. The appellate court ruled, however, that free speech activities near a store entrance was not protected activity since the specific locations were designed for the safety of exiting and entering pedestrians which the speech activities could impair. Promoting safety is more important than the First Amendment. 5. Good News for Managers A man sued his corporate employer and its manager for gender discrimination and retaliation. Although the jury ruled in his favor, the appellate court reversed the judgment as to the manager. As summarized in the Daily Journal : “Specifically, it is bad policy to subject supervisors to [the] threat of [a] lawsuit every time they make a personnel decision. Thus, an employer may be held liable for retaliation [or discrimination],but non-employer individuals [i.e. managers] are not personally liable . . . .” 6. Hiring Felons A jury recently awarded $12,000,000 to the family of an apartment-dwelling murder victim against the building’s owner who had hired the murderer, a convicted felon and registered sex offender, as a custodian. In these days of readily available computerized background checks, not to mention the online list of registered sex offenders, this kind of hiring is totally avoidable. 7. Overtime Compensation A court recently awarded almost $300,000, plus costs and legal fees, to a salary-paid motel manager who, the court ruled, should have been paid extra for missed meal periods and overtime hours. If you are paying a fixed salary to a “manager” but less than fifty-one percent of his work hours (as legally defined) are management or supervisory activities, he is not exempt from wage and hour laws and must be paid as an hourly, not salaried, employee. 8. Parking Location As Employee Benefit The Supreme Court has ruled that the location of an employee’s workplace parking space is a valuable benefit subject to a union contract. Citing precedents which ruled that factory vending machine prices and employee parking fees were also “terms and conditions” of employment, Cal State University was ordered to bargain with its unions over who gets preferred locations. 9. Remember Old Judgments Although many a collection case results in the pyrrhic victory of an uncollectible judgment, it is not a bad idea to keep track of the paperwork. California law allows a judgment to be enforced for ten years after it is entered. Even then, the judgment may be renewed for another ten years. In my practice, we have been collecting on one judgment for over twelve years, slowly but surely, as funds and assets are discovered. In October 2006, Fred Goldman renewed his judgment against O.J. Simpson for another ten years. Nearly six months later, Simpson filed a motion to cancel the renewal. The court denied his motion and O.J. Simpson appealed. Several days ago, an appellate court ruled in favor of Goldman, allowing him to enforce the judgment for another ten years and refusing to excuse Simpson’s “late objection” on the grounds that he is living in Florida. 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. 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. February Federal law allows companies to favor an older person over a younger person even if the younger person is over 40. The EEO-1 form is used by the U.S. Equal Employment Opportunity Commission (EEOC) and the Office of Federal Compliance Programs (OFCCP) to monitor compliance with race, gender, and national origin discrimination laws. Covered employers (those with 50 or more employees and government contracts in excess of $50,000; or those with 100 or more employees regardless of whether they have government contracts) must file the form by September 30 each year. 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. January 1, 2008 NEW LAWS FOR A NEW YEAR Dear Client:
During 2007, the Legislature enacted nearly 90 bills of general interest to the legal and business communities (More than 100 laws which were enacted in 2007.) Most of this new legislation is effective January 1, 2008 unless otherwise noted We have also identified a few recent court decisions which are now legal precedents (“judge-made” law). 1. Minimum Wage Without any legislative action in 2007, the Minimum Wage Law, previously amended, automatically adjusts to require $8.00 per hour for 2008 The law applies not only to wage-only workers, but to “tipped” employees as well, like waiters and bellhops, who collect tips and minimum wage. 2. Family Leave AB 392 requires employers with at least 25 employees to allow workers up to ten days unpaid leave when a spouse is on leave from military deployment. 3. Workers Compensation Enforcement SB 869 helps, in a small way, to level the playing field for businesses who “play by the rules” while competitors flaunt labor laws State Code Enforcers are now required to cross-check payroll records to ensure that all workers are covered. 4. Evicting Drug Dealers Existing law is expanded to allow additional prosecutors to evict drug dealers and users from certain rental properties. 5. Court Privacy Certain court papers will no longer be required to contain a creditor’s social security number since doing so becomes a public record available for abuse. 6. Tanning Salons It is now unlawful for a person under 14 to use a tanning device and others under 18 from using tanning facilities except with parental consent. 7. Name Changes Marriage license and domestic partnership forms must now allow either party to indicate a change of name as of 2009 (Traditionally, only the woman’s name was changed upon marriage). 8. Foreign Language An English translation of a written instrument written in a foreign language may receive official verification by the County Clerk if properly translated. 9. Bicycles Illuminated lamps and reflective devices are now required in more places and circumstances. 10. License Plates It is now illegal to use a device to obstruct or defeat the use of official electronic plate scanners used to identify violators of traffic, toll road, or diamond lane laws It is also illegal to sell such devices. 11. Unsigned Traffic Tickets In certain circumstances, citations can be prosecuted even if not signed by an alleged violator. 12. Vicarious Liability for Cell Phone Use The strong public policy against the use of communication devices while driving is likely to expand Lawyers for traffic accident victims are now investigating phone records to learn not only if a driver was using a device at the time of a collision (to argue that the driver was distracted), but also to identify the person communicating with the driver who may also be held responsible. For instance, if, at the time of a collision, a vacationing driver is talking to his boss about his next work day, the driver is arguably acting in the course of employment rendering the company vicariously liable. 13. Reemploying Soldiers There is also a strong public policy of promoting military service by protecting the jobs of temporary soldiers After finishing a tour as a reservist, an employee was told he was no longer needed by his employer and accepted a severance package in consideration of releasing the company of all liability for wrongful discharge. The worker sued anyway and won because the “Uniformed Services Employment and Reemployment Rights Act” prohibits termination based on military service and supersedes any contract to the contrary. 14. Landlord Liability for Rape A victim can sue her landlord for failing to take adequate precautions to secure her safety in her apartment given the common knowledge of violent crimes in the area. 15. Sworn Insurance Claims Common insurance policy language now requires policyholders to be questioned formally (like a deposition) under penalty of perjury A claimant can be compelled to take a “court witness” oath making lying about details not just a breach of contract, but a crime Although seldom used, expect insurers to consider this procedure more often especially in total loss cases, as resulted from the recent wildfires, where little physical evidence remains. 16. Unsigned Employee Handbooks A disgruntled worker was not denied a jury trial (and compelled to arbitrate) even though the company handbook required all employment disputes to be resolved by binding arbitration The unsigned handbook referred to a “signed arbitration agreement” Absent a separately signed document, there was no enforceable agreement to arbitrate. 17. Defamation In an appellate court case decided just before Christmas, a policyholder was sued for telling people, and internet posting, that another man gambled, used drugs, and molested his own eight year old son. The court ruled that the insurance company did not have to defend the claim because the defamation was allegedly “willful” Intentional actions are not insurable. 18 Civil Procedure Litigation expenses often include paying lawyers to travel to courthouses for pretrial proceedings This includes not only fighting traffic congestion on crowded roads, but also waiting in the courtroom itself for a case to be called by the judge. Ten minute arguments often require four hours of a lawyer’s time. A new law facilitates and expands the current practice of allowing certain “court appearances” to be implemented by telephone conference call. 19. Immigration
Local governments may not force landlords to ask or tell about the immigration status of a tenant or to consider such status in rental decisions. 20 Tenants with Illegal Weapons A new statute facilitates evictions in certain counties of tenants involved with unlawful possession or use of illegal weapons. 21. Illegal Dumping New criminal fines can now be imposed for illegal dumping. 22. Meter Maids It is now a misdemeanor to assault, even orally, a parking control officer. 23. Kangaroos The Legislature has temporarily repealed the criminal penalties for importing and selling kangaroo products in California. 24. Burros Animal control agencies may now remove, in certain circumstances undomesticated burros from private land or public roadways. (I had no idea). As you may know, I am now practicing in an office with eleven other lawyers who have differing expertise, experience, and specializations My personal practice continues to emphasize the representation of closely held companies, individuals, civil litigants, and real estate owners and renters involved with business, trust, estate, or other transactions, disputes, and general operations. 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. 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.
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