Video Recording on Private Property in California

Over the years, clients have inquired about the legality of installing video cameras on their privately owned commercial real estate or business premises. The short answer is that such recordings are legal in California. However, a more complete answer requires that legal counsel for the client determine whether such recordings violate (or may foreseeably violate) a person’s constitutional right or reasonable expectation of privacy in the recorded area.

Volumes of legal authority have been written about whether a reasonable expectation of privacy exists in various situations. Therefore, one should not undertake to install video recording equipment until a knowledgeable business attorney has been consulted and given the green light. However, in California, we can also look to Penal Code § 647 for guidance. The relevant section of that statute provides:

• 647. Except as provided in subdivision (l), every person whocommits any of the following acts is guilty of disorderly conduct, amisdemeanor:

“…(j) (1) Any person who looks through a hole or opening, into, or

otherwise views, by means of any instrumentality, including, but not

limited to, a periscope, telescope, binoculars, camera, motion

picture camera, camcorder, or mobile phone, the interior of a

bedroom, bathroom, changing room, fitting room, dressing room, or

tanning booth, or the interior of any other area in which the

occupant has a reasonable expectation of privacy, with the intent to

invade the privacy of a person or persons inside. This subdivision

shall not apply to those areas of a private business used to count

currency or other negotiable instruments.[emphasis added]

(2) Any person who uses a concealed camcorder, motion picture

camera, or photographic camera of any type, to secretly videotape,

film, photograph, or record by electronic means, another,

identifiable person under or through the clothing being worn by that

other person, for the purpose of viewing the body of, or the

undergarments worn by, that other person, without the consent or

knowledge of that other person, with the intent to arouse, appeal to,

or gratify the lust, passions, or sexual desires of that person and

invade the privacy of that other person, under circumstances in which

the other person has a reasonable expectation of privacy.

(3) (A) Any person who uses a concealed camcorder, motion picture

camera, or photographic camera of any type, to secretly videotape,

film, photograph, or record by electronic means, another,

identifiable person who may be in a state of full or partial undress,

for the purpose of viewing the body of, or the undergarments worn

by, that other person, without the consent or knowledge of that other

person, in the interior of a bedroom, bathroom, changing room,

fitting room, dressing room, or tanning booth, or the interior of any

other area in which that other person has a reasonable expectation

of privacy, with the intent to invade the privacy of that other

person.”

Interestingly, while the right to privacy was clearly of paramount concern to the drafters of this legislation, it explicitly exempts areas in which currency is counted. However, this language should not be read to grant the unfettered right to record employees, customers, or others in an area where currency may be counted IF individuals in that area otherwise have a reasonable expectation of privacy, since it does not usurp a person’s federal or state constitutional rights.

Be aware, too, that there may be other local or municipal statutes which apply depending on your location. And if your video equipment also records sound, then there is a separate analysis for determining the legality of the audio recordings. For the sake of brevity, suffice it so say that California does not typically permit audio recordings unless all parties being recorded provide their consent.

Consent for various types of recording may be obtained contractually, such as in areas where employees are located, or guests of a vacation rental property. However, if it is foreseeable that other individuals may be recorded, it is imperative that notice of the recording be provided in a conspicuous location AND that the area being recorded does not involve a place, such as a bedroom, bathroom, locker room or other location where one may have a reasonable expectation of privacy.

If you have questions concerning the legality of placing recording equipment in your privately owned business location, contact the knowledgeable business attorneys at Gehres Law Group, P.C. We’re happy to assist our business community and your initial evaluation is always free.

The post Video Recording on Private Property in California appeared first on Gehres Law Group.

from Gehres Law Group http://ift.tt/2hdysnH
via IFTTT

Arbitration Agreements Including Emergency Relief Provisions

There are many sorts of business disputes where “emergency relief” may be called for.  One common example is where trade secrets are stolen, often by employees or former employees.  In view of that possibility, it is common for employment agreements to not only require the employees agree not to divulge company trade secrets, but likewise authorize the employer to seek emergency, “injunctive relief” to stop the use of stolen trade secrets.

Injunctive Relief – What is it?

Injunctive relief is where a party is ordered to do, or not to do, something.  This is opposed to monetary relief, for example, where a party is ordered to pay money, or declaratory relief, where the ongoing rights and obligations of a party are confirmed by a decision of a judge or arbitrator.

Continuing with our trade secret example, if a former employee is using company trade secrets, the employer will typically want both monetary relief, to compensate for lost profits, and injunctive relief, i.e. an order directing the employee to STOP using company trade secrets.  If, however, the parties need to go through a long legal process, either in Court or arbitration, before the former employee is finally ordered to stop using company trade secrets, the damage to the company may be beyond remedy. It is for such situations that emergency injunctive relief, usually in the form of a “Temporary Restraining Order”, or “TRO”, may be sought.

In California, the authorizing statute is Code of Civil Procedure §527.  Under that section a party can file a complaint and go to Court immediately, even before the other party has been served, and on a proper showing of proof, including declarations under oath and other evidence, that emergency relief is necessary to prevent “irreparable injury”, the Court may issue a TRO.  The TRO is, by definition, “temporary”, usually just long enough to give the opposing party an opportunity to come forward in a hearing for “Preliminary Injunction”, with any opposition papers and evidence to dispute the requested relief. If the TRO is confirmed and a Preliminary Injunction is granted, the injunctive relief may remain in effect until the case is resolved, and may become part of a final judgment.

Injunctive Relief in Arbitration

There are various organizations which provide arbitration services. The biggest and most well-known is probably the American Arbitration Association (“AAA”), but there are many others.  Some industries, such as the securities industry, for example, require their members resolve disputes using the services of the Financial Industry Regulatory Authority “FINRA”. The various arbitration organizations have different rules which apply, and sometimes various sets of rules which parties can select from, but almost all of them include injunctive relief among the available remedies in arbitration.

Traditionally, however, emergency injunctive relief, of the sort one can obtain by filing a lawsuit and immediately appearing before a Court to ask for a TRO, was unavailable or ineffective through arbitration. The process of initiating arbitration usually involves the parties selecting and agreeing on a neutral arbitrator, or panel of arbitrators, and there was no process for one party to immediately file an arbitration claim and seek an immediate TRO.  Accordingly, it was not uncommon for a party to an arbitration contract to file a regular lawsuit in State or Federal Court, simply to obtain a TRO and preliminary injunction, and then to file a claim in arbitration.  While it may be a cumbersome multiplicity of effort, it was the only option for preventing irremediable harm from occurring while a claim was arbitrated.

Today this has changed.  Now most of the major arbitration organizations are offering procedures for seeking immediate TROs. This makes arbitration an option that should be considered by every business owner, both in employment contracts with its employees, and in its various commercial contracts with customers and suppliers, in an effort to avoid the expense and delays common in court proceedings.

Advantages to Including Emergency Relief In Arbitration Provisions

While we used the example of “trade secrets” in this brief article, emergency relief can become necessary or desirable in a wide variety of business disputes. We recommend mandatory arbitration clauses in most (not all) business and employment contracts, because the costs of actual Court litigation are so prohibitive. Additionally, Court litigation is also much more public than private arbitration. We likewise typically recommend that the arbitration clause specifically identify the arbitration organization that will be used, and that emergency injunctive relief will be authorized. This need NOT be exclusive, depending on how the contract is drafted. In other words, an injured party may have the option of seeking a court ordered TRO and preliminary injunction or seeking such injunctive relief through arbitration, whichever is determined to be most advantageous.

Business Owners Should Have Their Arbitration Provisions Reviewed

The business law attorneys at Gehres Law Group understand how arbitration clauses can and should be drafted to benefit the unique interests businesses. An ounce of prevention is worth a pound of cure. If you have not had your business and employment contracts recently reviewed by competent business attorneys, contact us to discuss your legal needs. There is no cost or obligation to do so.

By Stephen Lux, Of Counsel Litigation Attorney to Gehres Law Group, P.C.

from Gehres Law Group http://ift.tt/2fE8VIt
via IFTTT

REQUIRED NOTICES FOR TERMINATING EMPLOYEES IN CALIFORNIA

REQUIRED NOTICES FOR

TERMINATING EMPLOYEES IN CALIFORNIA

These lists of notices are grouped by federal requirements and California requirements, with links to applicable notices, laws, and forms. There are other additional documents which may be recommended or required under specific circumstances, such as an employee separation agreement. Please consult with an employment law attorney before determining which notices and documents should be used in any particular situation.

Federal Requirements

1. For employers with 20 or more employees, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to provide an election notice to employees who are enrolled in the employer’s group health plan.This notice may be obtained from the employer’s health insurance provider.
2. For certain employers with 100 or more employees, the Worker Adjustment and Retraining Notification (WARN) Act, mandates that notices be sent out to employees 60 days prior to termination in the event of mass layoffs or plant closings.
3. The IRS requires notice to terminated employees within certain time frames for the purpose of advising the employees with regard to retirement benefits, if any.

California Requirements

1. The California Employment Development Department (EDD) requires employers to provide their published unemployment benefits pamphlet, For Your Benefit, DE 2320, to all discharged or laid off employees on or by the date of termination or layoff.
2. California Unemployment Insurance Code §1089 requires employers to provide a writtenNotice to Employee as to Change in Relationship to all discharged or laid off employees upon termination. No written notice is required if the employee voluntary quits, is promoted or demoted, experiences a change in work assignment or location, or if work ceases due to a trade dispute.
3. The Department of Health Care Services requires employers with 20 or more employees to provide a Notice to Terminating Employees, DHCS 9061, to certain employees covered under the Health Insurance Premium Payment (HIPP) program.
4. Employers with 2-19 employees (and employers whose employees are initially covered by federal COBRA laws when their 18 months of COBRA coverage expires) must notify any covered, terminated employees of their Cal-COBRAcontinuation rights. An employer’s health insurance provider may provide such notices.
5. California Labor Code §2808(b) requires employers to provide notification to employees of all disability extension and conversion coverage options under any employer-sponsored planunder which the employees may remain eligible following termination of employment.
6. For certain employers with more than 100 employees, the California Worker Adjustment and Retraining Notification (WARN) Act requires employersto provide written notice to affected employees at least 60 days in advance of any plant closing or mass layoff.

Free Evaluation

The employment law attorneys at Gehres Law Group, P.C. are pleased to offer a complementary evaluation to employers and employees who may be affected by these notice requirements or have other questions concerning an employee termination. Contact us today. You’ll be glad you did.

from Gehres Law Group http://ift.tt/2eawo0o
via IFTTT

TRADEMARKING A NAME OR A LOGO OR BOTH?

In establishing a new business, owners often seek legal advice in connection with branding their business by developing and securing their company’s intellectual property.  Part of this inquiry typically involves the question, “Should we seek trademark registration of the named business brand or the company’s design logos, or both?”The short answer is “both”. However, registering multiple trademarks with the U.S. Patent and Trademark Office is sometimes not feasible for new business owners working within the confines of a tight budget. So which trademark registration should take priority?

Differences Between Design Marks and Word Marks

Most businesses will not only have a company name brand, but also a design logo identifying the company.  In the trademark world, we refer to the company name brand as a standard character mark or “word mark,” and the design logo as a “design mark”.  These two trademarks are unique in their analysis and examination at the U.S. Patent and Trademark Office and they require two separate filings.  When you apply to register your company name “word mark,” you are protecting the name itself,separate from any font, coloring, or other styling. In other words, you are seeking protection from third parties using your company name or a similar one, with like or similar goods or services.

On the other hand, when you apply to register your logo or “design mark,”you are seeking protection over the very specific shape, orientation, stylization, and/or color in the mark. Your company name may or may not be a part of the logo, but you are seeking protection from third parties using the specific design of your logo, or something similar, without regard to the company name.

Which Type of Mark Should Take Priority?

Since each type of trademark registration provides different protection and rights, it is not surprising that thebroadest level oflegal protection is achieved by registering both a “word mark” and a “design mark”.  However, where cost is an issue, you must determine which is the most important.  First, look at your company name and ask how unique is it?  Is it unique enough to guarantee that it will qualify for trademark registration, or does it contain generic or descriptive terms?  If it is unique enough,you should typically apply for registration ofthe company name, the business “word mark,” rather than a logo, a “design mark.”The reason for this result is that the applicable laws offer broader protection for word marks than design marks.

As suggested above, when you register a logo, you are getting protection only over that exact representation of your business brand, and that protection does not typically extend to the actual name of your company, even if the name is included in the logo. In contrast, when you register your company name as a word mark, you can effectively prevent other businesses from using your company name, or anything confusingly similar. Your company name is protected regardless of what kind of styling is added to it or how it is presented to consumers—the words themselves are protected—which is often how customers identify a company.

Except for larger companies, a logo generally has less brand recognition for a business than the actual name. Therefore, if you were to register only your company’s logo, you wouldreceive the protective benefit of registration only if someone used the same logo, or something similar. However, if it is determined that your business name contains words that render the mark generic or descriptive such that trademark protection at the U.S. Patent and Trademark Office is not possible, it is generally recommended to register your logo so that you still gain some protection over your trademark, even though that protection is somewhat limited.

***************************************

There are many exceptions to these general principles, so it is critical to have your company’s intellectual property reviewed by a trained professional who knows the applicable laws. The trusted and experienced trademark attorneys at Gehres Law Group work to secure the broadest protection for our clients’ intellectual property.We are committed to providing the highest quality service available at affordable rates.  Contact us today for a free evaluation of your company’s intellectual property.

from Gehres Law Group http://ift.tt/2elPCPM
via IFTTT

TAKING STEPS TO CORRECT NEGATIVE REVIEWS ON YELP

We previously published an article here titled “Negative Reviews On Yelp Hurting Your Business?” in which we explained that, under appropriate circumstances, a business owner may want to consider filing a suit for defamation against persons publishing false negative reviews on Yelp or similar consumer review websites.

THE YELP CASE

Now the issue of defamatory content on Yelp is all over the news, especially here in California, as Yelp has gone all the way to the California Supreme Court protesting an order directing it to remove a negative consumer review.  The appellate decision now up for review by the California Supreme Court is Hassell v. Bird, 247 Cal. App. 4th 1336 (Court of Appeal Case No. A143233).

Dawn Hassell is an attorney who sued a former client, Ms. Ava Bird, for posting allegedly false and defaming comments in a review on Yelp.  Ms. Hassell got a judgment against Ms. Bird, who defaulted in the case, but Ms. Bird then failed to comply with the Court order directing her to remove her defamatory review from Yelp.

Hassell had not included Yelp as a defendant in the case, but when Bird failed to remove her review, Hassell sought an order from the Court directing Yelp to remove the defamatory review, which was granted.

One might think that Yelp would be happy to comply in removing consumer reviews that have already been determined, in a legal proceeding, to have been defamatory.  But that is NOT so. Instead, Yelp appealed the order to the First Appellate District of the Court of Appeals.  Yelp argued that it should not be bound by a judgment in a case in which it was not a party, especially an uncontested default judgment.  Yelp also argued that the order interfered with the freedom of the Internet, and the First Amendment Free Speech, and the Federal “Communications Decency Act”, which protects Internet Companies from liability for the content consumers post on their websites.  And Yelp lost again!

Now the California Supreme Court has agreed to hear Yelp’s appeal, and it’s a big to-do, with lots of publicity and comment.  The defenders of unbridled free speech on the Internet are all worked up and are rooting Yelp on.  It will be interesting to see how the California Supreme Court rules.

TAKEAWAY FOR THE DEFAMED BUSINESS OWNER

In the meantime, Business Owners who are considering filing a defamation lawsuit based on false and defamatory postings on Yelp, or similar Consumer Review websites, should think very carefully before proceeding against a fictitious (DOE) defendant,  or a potentially indigent defendant.  You certainly don’t want to have to litigate against Yelp, and if you don’t have a real defendant, with sufficient assets that they will have to participate in trial, and obey Court judgments, you are probably better off not suing.   Instead, you are probably better off just filing appropriate responses on Yelp, or wherever, explaining your side of the story.

The business attorneys of Gehres Law Group will follow this appeal and comment again in this Blog when the California Supreme Court decides the case.

from Gehres Law Group http://ift.tt/2eofkGg
via IFTTT

California’s New Overtime Exempt Minimum Increases to $41,600 and Minimum Wage Set to Increase to $15 per Hour

Many of our business clients are still adjusting to the new California minimum wage, which increased to $10.00 per hour as of January 1, 2016. This state-wide increase has also resulted in a surge in the annual amount California employees must earn to satisfy the “salary test”—the first of two prongs in the test to determine whether an hourly employee is exempt from applicable overtime laws–to $41,600 annually. If both prongs of the test are met, then the employee may be paid a flat salary, without overtime pay. For information on the various exempt classifications which set out the requirements for the second prong of thetest, called the “duties test”, click here.

Failure to pay overtime pay to an employee who does not qualify as exempt can be costly, even if the employee works just an hour of overtime per day. Say an employer mistakenly misclassifies an hourly worker as exempt from overtime.If that misclassified employee works just an extra 60 minutes per day at $40,000 a year, he or shewill accrue an overtime amount due of $7,500 per year. Given that California law permits employees to reach back four years under the applicable statute of limitations, an employer’s liability for just one misclassified employee could reach $30,000 over four years for this one hypothetical worker.

If the same mistake is repeated for other employees, an employer could face a potentially devastating judgment against them for overtime pay owed, not to mention the costs of defending such a claim. The applicable statutes provide for a recovery of attorneys’ fees and costs from an employer if an employee prevails on an overtime claim, which: a) provides ample incentive for employees and attorneys to pursue such claims, resulting in a proliferation of such claims against employers; and, b) significantly heightens the exposure of employers to liability.

Minimum Wage Increases Yet to Come

As one of our employment law attorneys discussed in a previous article titled, Economic Justice or Economic Devastation: What Does the Proposed Minimum Wage Hike to $15 an Hour Mean to Your Business?, a recent bill signed into law by California Governor Jerry Brown will continue to raise the state minimum wage until it reaches $15 per hour. The potential cost to employers for misclassifying a worker makes it imperative that employers remain informed as to any corresponding increases to the “salary test” amount for determining exemption from overtime pay as the minimum wage rate continues to escalate under this law.

The additional increases to the minimum wage for employers who employ 26 or more employees are:

1. On January 1, 2017, the minimum wage will increase to $10.50 per hour.
2. On January 1, 2018, the minimum wage will increase to $11 per hour.
3. On January 1, 2019, the minimum wage will increase to $12 per hour.
4. On January 1, 2020, the minimum wage will increase to $13 per hour.
5. On January 1, 2021, the minimum wage will increase to $14 per hour.
6. On January 1, 2022, the minimum wage will increase to $15 per hour.

There is a short respite for employers with fewer than 26 employees; the scheduled increases are delayed at each step by one year for such employers.[1]

Conclusion

Given that overtime claims have continued to proliferate, it is critical for business owners of all sizes to ensure they are compliant with applicable overtime laws. Whether you are an employer or an employee, the attorneys at Gehres Law Group have the knowledge and experience to assist in protecting your employment law interests. Contact us for a complementary evaluation to discuss how we can help, or browse our website for more information.

[1] This article does not discuss minimum wage laws applicable to public employers, which must abide by a more complex set of rules than private employers.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2cCxJyU
via IFTTT

California’s “Good Faith Settlement” Law: An Example From a Recent Case

Lawsuits are expensive, as we all know, and as experienced business law litigators, we frequently find ourselves advising our business clients to settle their claims, usually at some reduced value, rather than pursue expensive, distracting litigation.  But sometimes, even where your adversary is willing to agree to pay a reasonable settlement amount, filing a lawsuit may be advantageous.  One reason for doing so, as we have discussed in a prior article on this blog, (“Suing for an Enforceable Settlement”), is that once you have lawsuit on file, you can secure any settlement involving payment over time with a stipulated Judgment which, if payment is not made as promised, you can immediately move to enforce.

Another reason for preferring a lawsuit, whether you are a plaintiff or defendant, is to take full advantage of California’s “Good Faith Settlement” statute, Code of Civil Procedure Section 877.6, (CCP § 877.6).  This statute provides a procedure to assure a settling party that they will not be dragged back into litigation on indemnity or contribution claims by another party sued for the same claim.  From the plaintiffs’ prospective, this can help encourage defendants to settle, knowing that they can be relieved of possible cross-claims for indemnity by Court order affirming their “good faith” settlement.  From the defendant’s point of view, likewise, it allows for certainty that they will not be dragged back into the matter by a non-settling party.

CCP § 877.6 applies both to contract and tort claims, as is clear from the initial paragraph of the statute:

a)(1) Any party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors, upon giving notice in the manner provided in subdivision (b) of Section 1005. Upon a showing of good cause, the court may shorten the time for giving the required notice to permit the determination of the issue to be made before the commencement of the trial of the action, or before the verdict or judgment if settlement is made after the trial has commenced.

The effect of a finding of “Good faith settlement” is set forth in paragraph 2(c) of the statute:

1. c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.

A REAL LIFE EXAMPLE:

THE PEST CONTROL COMPANY SETTLEMENT

Our firm was recently approached by a husband and wife who were traumatized when an employee working for a pest control fumigation company was found to have engaged in lewd acts in their bedroom, captured in ugly detail on their home security camera.  They felt violated and fearful, and wanted compensation and retribution, but also desperately hoped to avoid the embarrassment and public spectacle of a lawsuit on such sensitive matters.  We agreed to take the case.

Aside from the deviant employee, there were two separate pest control companies potentially liable to our clients, i.e. the prime contractor and a subcontractor.  The prime contractor (Company “A”) was eager to settle promptly, while the subcontractor (Company “B”) was stubbornly refusing to make any significant settlement offer.  Both Company “A” and Company “B” had potential liability for negligence, and if they were both found liable for negligence after trial they would be considered “joint tortfeasors”, and would be entitled to have their liability apportioned based on their proportionate degree of fault.  Thus, if our clients’ damages were found to be $150,000, and both company “A” and “B” were found equally liable, and they both were solvent, they would each have to pay $75,000; and if one paid more than $75,000, they would be entitled to pursue the other to contribute their fair share.

Company “A”, as noted, wanted to settle promptly. We finally agreed to accept their offer, in a significant compromise of our initial demand, based on some strong technical defenses they had as the prime contractor not responsible for the subcontractor’s employee.  But Company “A” also wanted,as part of the settlement agreement, a guarantee that, after paying that settlement, they would not be dragged back into litigation on a cross-complaint for indemnity, if and when we actually filed suit against Company “B”.  This was a problem because, without a “good faith settlement” ruling by a Court, we could not guarantee that Company “B” would not later come after Company “A” to indemnify Company “B” for any liability they might incur.  Since we had not yet filed a lawsuit, we could not get a “Good Faith Settlement” ruling from any Court.  And our clients strongly preferred, if at all possible, to settle with both Company “A” and Company “B” without filing a lawsuit, which is a matter of public record.  This complication delayed our settlement negotiations with Company “A” for several weeks, but we finally convinced them to settle without the finding of “Good Faith Settlement”.

It should be noted, however, that even though we refused to make our settlement with Company “A” contingent on a finding of “Good Faith Settlement” under CCP § 877.6, Company “A” could still ask a Court for such a finding, if and when a lawsuit was filed and Company “B” brought them in on a cross-complaint.  As a practical matter, moreover, the Courts tend to be very lenient in finding that settlements have been made in good faith under CCP § 877.6.  If we had ultimately pursued a lawsuit against Company “B”, and they cross-complained against Company “A”, the very strong likelihood is that Company “A” would prevail on having that cross-complaint dismissed on a finding of “Good Faith Settlement” under CCP § 877.6.

CONCLUSION

The protections afforded settling parties under CCP § 877.6 are very significant and must be considered when determining settlement strategy in any matter which may involve multiple wrongdoers/possible defendants.  The statute applies both to tort and contract claims, including many tort and contract claims which arise in the business context.  A knowledgeable business litigation attorney can help your business evaluate the best strategy for settling such claims, whether you are the claimant or the target of the claim.

At the Gehres Law Group, our litigation attorneys are knowledgeable and experienced in such matters, and we look forward to helping you and your business.Contact us today for a complementary evaluation.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2deQqpd
via IFTTT

GUARDING AGAINST PERSONAL LIABILITY FOR RENTAL PROPERTY OWNERS IN CALIFORNIA

Big rewards can be reaped by owning investment properties, but so too can big risks. One common threat real estate investors wish to avoid is personal liability for judgments resulting from a lawsuit. Even the most conscientious owner may one day find him or herself embroiled in a costly legal battle. While it is impossible to prevent lawsuits from being filed—from slip and fall claims to dog bites, environmental contamination claims, and many others–it IS possible for investors to mitigate the costs of such perils. Some of the more common methods of limiting such threats are explored in this article.

Never Hold Investment Property in Your Own Name

Smart investors know that owning rental property in their own name is not the wisest choice when the threat of personal liability is involved, as istypicallythe case with investment properties. It is critical to form and maintain a separate entity to hold title to the properties. While there are many options for holding real estate, including corporations, general and limited partnerships, and limited liability companies (“ LLC’s”), LLC’s are often the preferred choice for a variety of reasons.

A general partnership does nothing, by itself, to protect the owners against personal liability. In contrast, limited partnerships do provide such protection, but only to the limited partners. All limited partnerships must have at least one general partner who is exposed to personal liability for partnership obligations. Although the general partner may be an LLC or C Corporation, this is a more costly method for guarding against personal liability than using an LLC or C Corporation to hold the property since multiple entities must be formed and maintained. However, in some instances, such as when annual revenues exceed $250,000.00, a limited partnership may very well be the best option for investors, in order to avoid the annual LLC fee and franchise tax[1] imposed by the state of California.

For individual investors who anticipate annual revenues below this threshold, a limited partnership is not as attractive as an LLC, which protects all its members against personal liability for company obligations, including lawsuits and judgments, and is generally less expensive to set up and maintain than multiple entities or a C Corporation. LLC’s also have the advantage of avoiding the double taxation which comes with owning a C Corporation.

Many small real estate investors also hold real estate in a trust. Although living trusts are very useful for succession planning and may help protect an owner’s privacy, such trusts do not protect the owner from liabilities arising from ownership of the property, which is the focus of this writing. However, setting up a trust in conjunction with an LLC to hold real estate should be considered since it does add value to the owner in most instances.

What if You Own Multiple Rental Properties?

Real estate investors who own more than one rental property often ask our business law attorneys whether they should hold each of their properties in one LLC, or form a new LLC for each property they own. Although each set of circumstances is unique, our lawyers often advise forming an LLC for each property the client owns.

Here’s why: If someone is injured on just one of the properties owned by an LLC and thereafter sues the company, all of the assets held by the LLC are at risk to satisfy any resulting judgment. For example, ifan LLC owns three properties with estimated values of $500,000.00 each, that’s $1.5 million in assets put at risk by a lawsuit arising from any of the properties, making the LLC a more attractive target to litigants and needlessly exposing all three properties to liability in a lawsuit. By contrast, if each property were held by a separate LLC, only the property held by that particular LLC is generally put at risk, assuming there are no grounds for the injured party to argue that the companies were not properly set up and maintained.[2]In the first example, if a litigant were to obtain a judgment against the LLC, they could place a lien against all three properties until the judgment is satisfied. In the latter situation, where each property is held by a separate LLC, only the property owned by that LLC could be encumbered. As is obvious from this example, the benefit of forming separate entities for each property increases as the value of the properties held by the companies grows.

Another advantage of holding multiple properties in separate LLC’s involves a situation where the investor wishes to obtain a loan against one of the properties. Banks and other lenders often find the prospect of lending to an LLC which owns multiple properties less attractive than separately owned properties since their secured interest (the property being borrowed against) has much more exposure to liability than if they were held separately. In such instances, lenders will often seek a secured interest against all of the properties held by the LLC to ensure their interest in being repaid is well protected.

Conclusion

Owning investment property can indeed be very rewarding. However, smart investors know there are perils to consider before deciding on how to hold such property. With some thoughtful preparation and educated decision-making, investors can reap the rewards of their investment efforts while guarding against the risks.

At Gehres Law Group, P.C., our business law attorneys generally recommend a three pronged approach to limiting personal liability for activities related to investment properties. This approach includes: a) forming an entity or entities to hold title to the properties as discussed above; b) preparing well-drafted contracts in order to shift the burden of any threats to others where possible; and, c) obtaining sufficient liability insurance.

For more information, browse our website, call us locally at (858) 964-2314 or toll free at (877) 333-2420, or contact the author of this article at info@gehreslaw.com.This article does not constitute legal advice, nor does dissemination of this information, which we offer as a courtesy to our users and clients, by itself, establish an attorney-client relationship.

[1]Franchise taxes and fees imposed on LLC’s in California (in addition to any income tax withholding): $800 for LLCs with total gross income of less than $250,000; $1,700 for LLCs with total gross income of at least $250,000 but less than $500,000; $3,300 for LLCs with total gross income of at least $500,000 but less than $1,000,000; $6,800 for LLCs with total gross income of at least $1,000,000 but less than $5,000,000; $11,790 for LLCs with total gross income of $5,000,000 or more.

 

[2]See our article on Piercing the Corporate Veil: Avoiding Personal Liability for Company Debts at http://ift.tt/2cISIAw for more information on the importance of setting up and maintaining an entity properly in order to avoid personal liability for company debts.

 

 

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2cfcbqe
via IFTTT

YOU CAN STOP TRADEMARK INFRINGMENT

You have gone through the painstaking process of starting a business, developing a brand for your business, namely, your business’ trademark, invested significant time and resources into this development, and suddenly you discover another business is using your exact trademark or a similar one. What can you do?

What are the Elements of a Trademark Infringement Claim?

When a competing business is using an established trademark or a confusingly similar one, that business is engaging in unlawful trademark infringement.  Because branding is such an important part of a business’ identity to consumers, the law provides a venue for trademark owners to seek recourse against infringers.  A trademark owner who believes its trademark is being infringed may file a civil lawsuit in either state court or federal court for trademark infringement, depending on the circumstances.  In most cases, trademark owners choose to file federal infringement cases. To support a trademark infringement claim in court, the trademark owner must prove:

1) that it owns a valid mark;

2) that it has priority (its rights in the mark(s) are “senior” to the defendant’s rights); and

3) that the defendant’s mark is likely to cause confusion in the minds of consumers about the source or sponsorship of the goods or services offered under the parties’ marks.

When a plaintiff owns a federal trademark registration with the United States Patent and Trademark Office, there is a legal presumption of the validity and ownership of the mark, as well as of the exclusive right to use the mark nationwide on or in connection with the goods or services listed in the registration, which simplifies the owner’s burden of proof in infringement cases.

What Factors do Courts Consider in Determining Whether Infringement has Occurred?

Courts will typically consider evidence addressing various factors to determine whether there is a likelihood of confusion among consumers. The key factors considered in most cases are:

1) the degree of similarity between the marks at issue; and

2) whether the parties’ goods and/or services are sufficiently related that consumers are likely to assume (mistakenly) that they come from a common source.

Other factors courts may consider include: a) how and where the parties’ goods or services are advertised, marketed, and sold; b) the purchasing conditions; c) the range of prospective purchasers of the goods or services; d) whether there is any evidence of actual confusion caused by the allegedly infringing mark; e) the defendant’s intent in adopting its mark; and f) the strength of the plaintiff’s mark.

Remedies for Trademark Infringement

If the trademark owner is able to prove infringement, available remedies include the following:

1) a court order (injunction) that the defendant stop using the accused mark;

2) an order requiring the destruction or forfeiture of infringing items;

3) monetary relief, including defendant’s profits, any damages sustained by the plaintiff, and the costs of the action; and

4) in rare cases, an order that the defendant, pay the plaintiffs’ attorneys’ fees.

*****************************************

If you believe someone is infringing your trademark, the experienced and dedicated trademark attorneys at Gehres Law Group have the tools to stop this unlawful behavior. We are committed to providing the highest quality services at affordable rates. Contact us for a complementary evaluation. You’ll be glad you did.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2cAAfBS
via IFTTT

AN ODE TO HONESTY IN BUSINESS PRACTICES

As a trial lawyer, there is nothing I enjoy more than an honest client with a righteous case.  Hallelujah!  So many people use lawyers as henchmen, to bully their enemies and competitors, with lies.  But when I have a client who has been cheated or harmed, and is truly a victim, a victim of lies!!!!….that is the case I want.  That is, usually…a winning case!

 

The truth is powerful.  It is a powerful advantage.

 

But let’s not be too pollyanish. People can and will lie and prevaricate impressively, especially when they are motivated by money, or spite. And liars DO win in Court, often enough, especially if they have the advantage of more money and better lawyers.

 

As they say, “Court is where people go to lie”.

 

But still, I tell you: there is nothing like the truth.  Righteous truth.  Give me the truth, and I don’t care how fancy a lawyer the liar hires…my client will prevail most often.  The truth is powerful, and hard to hide.  It is consistent.  It resonates, and is recognized.  Jurors and Judges can usually feel it intuitively.

 

Life is complicated, of course, and truth is often subtle, or depends on one’s perspective, one’s point of view, or even philosophy.  Rarely, in any rancorous business dispute, is either side completely“innocent” of prevarication.  People are not, by nature, impartial.  They tend to see the world through their own particular lenses, and this is especially so when it comes to a contentious dispute with someone else.  People tend to see the truth and justice in their side of the argument, and are often blind to the other point of view.  But there are liars and then there are LIARS….capital letter LIARS who know they are lying and trying to cheat and get away with it.  As a business owner, YOU KNOW when you have been cheated by a LIAR. As a trial attorney, those are the ones I want to cross-examine!  I like to catch them in their lies; I feel as though it is my contribution to “justice” in my community.

 

Clients don’t like it sometimes, at the beginning of a case, when I tell them they are going to have to testify honestly and reveal harmful information, if questioned, rather than lie.  But I know from experience that there is nothing more harmful to your case than being caught lying.  At the outset of any case, I like to evaluate it impartially, with my client, acknowledging the weaknesses and building a litigation strategy from there: on the bedrock of “the truth” as we know it, and as we can prove it.

 

By: Stephen Lux, attorney at law

Of Counsel for Gehres Law Group, P.C.

 

***************************************************************

If you are looking for a trusted and highly-experienced trial attorney who handles business litigation matters, look no further. The lawyers at Gehres Law Group, P.C. have excellent reputations for integrity in the legal community. Many judges and other attorneys know this, which is a vital benefit to our clients. Contact us today for a complementary evaluation. You’ll be glad you did.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2c6QpFx
via IFTTT

Purchasing a Business with Seller Financing

It is often the case that a purchaser of a business does not have the resources for a full cash sale and will request that the seller finance some of the purchase price. This can be advantageous for both parties, but requires that the parties consider a number of issues, as we highlight in this article.

Advantages to the Seller

While many sellers are initially reluctant to consider financing the sale of their business due to the risk that the purchaser will not pay as agreed, sellers who do engage in self-financing deals typically find that they can obtain a higher price for their business. In addition, by financing a percentage of the purchase price, a seller increases the pool of potential purchasers, making it easier to locate a buyer for their business. Finally, some sophisticated buyers will refuse to consider the purchase of a business without some level of seller financing because they want the seller to have some “skin in the game”, which indicates to the buyer that the business is viable.

Advantages to the Buyer

The advantages to the buyer are generally more obvious. First, a seller-financed sale permits the buyer to consider purchasing a business valued at a price point beyond their own immediate resources. If the buyer negotiates a reasonable interest rate, they can avoid unattractive sources of financing, such as use of credit cards or lines of credit to purchase the business. Finally, if the buyer is seeking a bank or small business loan to cover some of the purchase price, the lender will often desire seller financing of some percentage of the costs, which indicates to the lender that the seller believes in the soundness of his or her company.

What Terms do Sellers Typically Desire in Exchange for Financing?

While each situation is unique, a seller’s note often carries an interest rate which is at or below current bank rates, depending, in part, on the perceived level of risk or other assurances that the loan will be paid in a timely manner. In addition, sellers will usually require some or all of the following terms as conditions of seller financing:

• Resumption of control of the business for default on the loan;
• Buyer assets as security, such as real estate;
• Buyer’s personal guarantee.

Since the seller’s obligations are typically fulfilled upon execution of a note, his or her greatest concern when providing seller financing is that of the buyer defaulting on the loan. In order to mitigate the impact of such a situation on the seller, he or she will typically wish to include terms permitting him or her to retake control over the business in the case of default by the buyer. This typically occurs within 30 to 60 days of an uncured default. The seller may also require periodic reports from the buyer with regard to the financial stability of the company until the loan balance is satisfied. For companies which utilize a substantial amount of inventory, sellers sometimes seek provisions requiring that the buyer maintain those inventories at or above specific levels.

When it comes to collateral to secure the loan, sellers are typically most interested in using the buyer’s real estate as security, which allows the seller to foreclose on the property in the event of the buyer’s default. However, if the buyer does not own real estate or has little equity in their property, then stocks, inventory or other assets held by the business are all commonly used as security in seller financed transactions. Some seller financed transactions do not include any assets as security, but may include the owner’s personal guarantee, meaning that if the company defaults on the loan, the owner’s personal assets can be reached to satisfy the debt.

Whether any of these or other conditions are required by the seller will often depend on a number of factors, including the relationship between the parties, the amount of financing being provided by the seller, the length of the loan, and the level of risk to the seller if the buyer defaults. If the seller is financing a fairly small amount of the purchase price, which is scheduled to be paid within a relatively short time frame, and the level of risk of default is fairly low, then the seller may simply rely on his or her remedies at law, such as a breach of contract claim, which could be brought if the buyer defaults. This, along with a provision providing that the buyer pay the attorneys’ fees and costs to pursue such a claim are typically quite effective in preventing a buyer from defaulting on a loan. In general, there are many methods which may be utilized to ensure timely payment on the loan.

Common Legal Documents in a Seller-Financed Transaction

Depending on the circumstances, there are several legal documents that should be drafted in a seller financed sale of a business, including:

• Letter of Intent setting forth the preliminary framework for negotiating terms of the sale;
• Purchase or Sales Agreement including the final negotiated terms of the sale;
• Promissory Note;
• Security Agreement or Deed of Trust if real property is used as collateral;
• Any applicable lease or transfer documents, such as vehicle and real estate title documents;
• Bill of sale transferring title of other business assets to the buyer;
• Non-Compete Agreement if not included in the Purchase or Sales Agreement;
• Bulk Sales documents if inventory is included in the sale; Click here for information on California Bulk Sales Laws;
• IRS Form 8594;
• Employment Agreement if owner remains a consultant or employee of the company following closing of the transaction.

Conclusion

In summary, buyers and sellers both stand to benefit from seller financing. However, it is important for each party to retain experienced business lawyers to assess their situation independently and advise them on how to best protect their interests in such transactions. Even for a simple sale without security, there are many issues to consider which an experienced professional can identify and address. Don’t go it alone, our trusted and knowledgeable business attorneys offer a complementary evaluation for most legal services and work diligently to protect each clients’ interests. Contact us today, you’ll be glad you did.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2bPhoqD
via IFTTT

When Must an LLC Membership Interest be Registered as a Security in California?

Most business owners and investors refer to corporate stock when discussing “securities”. However, other types of ownership interest fall under the definition of securities pursuant to California law, including a membership interest in a limited liability company (“LLC”). However, not all LLC membership interests fall within the definition of a security, in which case registration of the interest is not required in California. Therefore, it is important to understand if and when your LLC’s interests are subject to registration requirements.

California Corporate Securities Law

The California Corporate Securities Law, § 25019a “security,” in relevant part, as follows:

“‘Security’means any note; stock; treasury stock; membershipin an incorporated or unincorporated association; bond; debenture;evidence of indebtedness; certificate of interest or participation inany profit-sharing agreement; collateral trust certificate;preorganization certificate or subscription; transferable share;investment contract; vertical settlement contract or a fractionalizedor pooled interest therein; life settlement contract or afractionalized or pooled interest therein; voting trust certificate;certificate of deposit for a security; interest in a limited liability company and any class or series of those interests(including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company…” [Emphasis Added].

A plain reading of this Section of the statute makes it clear that an LLC membership interest is indeed a security, making it subject to registration with the state, unless ALL of the members of the LLC are actively engaged in the management of the LLC. Therefore, where an LLC is manager-managed and not member-managed, or where some, but not all, of its members manage the company, registration of its securities is mandatory.

California Commercial Code

In additional to the Corporate Securities Law, the California Commercial Code also governs whether a membership interest in an LLC is treated as a security. Section 8103(c) of the Commercial Code provides:

“An interest in a partnership or limited liability company isnot a security unless it is dealt in or traded on securitiesexchanges or in securities markets, its terms expressly provide thatit is a security governed by this division, or it is an investmentcompany security. However, an interest in a partnership or limitedliability company is a financial asset if it is held in a securitiesaccount.”

Most LLC’s which operate as a small or family-owned business will not be required to register their membership interests as a security. However, it is important to consider both the Corporate Securities Law and the Commercial Code when determining whether your LLC is subject to registration with the state of California in order to avoid potential penalties and/or legal action by investors.

California Securities Exemption Pursuant to Corporations Code §25102(f)

If the membership interests in an LLC are subject to registration in California because they fall within the definition of a “security” under the Corporate Securities Law, most will qualify for an exemption from federal registration because the interests are not issued through a public offering. In addition, such an issuance will typically qualify for a securities exemption in California under Corporations Code §25102(f). This Section of the Corporations Code provides:

“Any offer or sale of any security in a transaction (other thanan offer or sale to a pension or profit-sharing trust of the issuer)that meets each of the following criteria:

(1) Sales of the security are not made to more than 35 persons,including persons not in this state.

(2) All purchasers either have a preexisting personal or businessrelationship with the offeror or any of its partners, officers,directors or controlling persons, or managers (as appointed orelected by the members) if the offeror is a limited liabilitycompany, or by reason of their business or financial experience orthe business or financial experience of their professional adviserswho are unaffiliated with and who are not compensated by the issueror any affiliate or selling agent of the issuer, directly orindirectly, could be reasonably assumed to have the capacity toprotect their own interests in connection with the transaction.

(3) Each purchaser represents that the purchaser is purchasing forthe purchaser’s own account (or a trust account if the purchaser isa trustee) and not with a view to or for sale in connection with anydistribution of the security.

(4) The offer and sale of the security is not accomplished by thepublication of any advertisement. The number of purchasers referredto above is exclusive of any described in subdivision (i), any officer, director, or affiliate of the issuer, or manager (as appointed or elected by the members) if the issuer is a limitedliability company, and any other purchaser who the commissionerdesignates by rule. For purposes of this section, a husband and wife(together with any custodian or trustee acting for the account oftheir minor children) are counted as one person and a partnership,corporation, or other organization that was not specifically formedfor the purpose of purchasing the security offered in reliance uponthis exemption, is counted as one person. The commissioner shall byrule require the issuer to file a notice of transactions under thissubdivision…”

 

Our business law attorneys will provide more information on this California exemption in future articles. For purposes of this writing, it is important to note that while this exemption will apply to most LLC’s, it does not relieve an LLC from the requirement to register their securities. Rather, a Limited Offering Exemption Notice (“LOEN”) must be filed with the California Department of Corporations within 15 days of the issuance of such securities in order to avoid potential penalties from being assessed by the state.

**********************************************

The business and commercial law attorneys at Gehres Law Group advise and represent clients on a vast array of laws affecting businesses in California. If you are a business owner, contemplating a new business idea, or have questions about a California company, contact us today for your complimentary evaluation, or feel free to browse our website.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2bsPJto
via IFTTT

CALIFORNIA’S REAL ESTATE TRANSFER DISCLOSURE STATEMENT

If you are selling or leasing your home, you must comply with the Real Estate Transfer Disclosure Law. That law requires that sellers provide the prospective buyer with a Real Estate Transfer Disclosure Statement (“TDS”). The obligation to provide a prospective purchaser with a TDS is imposed on all owners of real property who enter into contracts to sell, exchange or lease residential property. The residential property subject to this requirement is residential property “improved with or consisting of not less than one nor more than four dwelling units.” California Civil Code §1102 (a). The statute also applies to mobile homes and manufactured homes, as well as to typical residential structures. See California Civil Code §1102 (b).

Specific Requirements of a Real Estate Transfer Disclosure Statement

Section I of the TDS simply requires the seller to provide the buyer with copies of any reports of inspections conducted on the property. Section II of the TDS that the seller make certain representations to the buyer concerning specified aspects of the property. Part A of Section II requires the seller to state whether the property has certain specified items, such as range, dishwasher, smoke detector, oven, trash compactor, satellite dish, and a host of other specified items which cover virtually any appliance or amenity one can think of. The seller must also state whether any of these items are, “to the best of Seller’s knowledge,” not in operating condition.

Part B of Section II requires the seller to state whether he is “aware” of any significant defects/malfunctions in a number of areas of the property, such as interior walls, exterior walls, windows, slabs, ceilings, doors and several other specified items. If the seller is aware of any such defects or malfunctions, he or she must provide an explanation of the nature and extent of the defects/malfunctions.

Part C of Section II of the TDS requires the seller to state whether he or she is “aware” of certain additional items, such as whether there are any environmental hazards on the property, walls or fences adjoining other properties, easements, unpermitted room additions, fill, CC & Rs, flood, drainage or grading problems, and several other conditions affecting the property.

Legal Effect of a Real Estate Transfer Disclosure Statement

The TDS is not a guarantee or warranty with respect to the items the seller must disclose. Rather, it is a tool to enable prospective buyers to decide whether they wish to purchase the property. The TDS requires the seller to disclose only specified things of which the seller is “aware.” Consequently, if, for instance, the property is built on fill, or the walls have lead-based paint on them, and the seller is not aware of these facts, the seller has not violated the law by failing to disclose these conditions.

Purchase and Sale Agreements often include a provision that the property is sold “as is” and with no warranties. Sellers have often attempted, unsuccessfully, to defend themselves from buyers’ lawsuits for failure to disclose significant problems with the property, by arguing the buyer agreed to purchase the property “as is,” meaning, with all its faults.  However, the courts have ruled that an “as is” provision in a Purchase and Sale Agreement is not a defense to a claim of violation of the transfer disclosure law. And importantly, a buyer may not waive his or her right to receive the disclosures mandated by the transfer disclosure law. Any such waiver violates public policy and is void.

So long as the seller discloses problems of which he or she is aware, an “as is” provision will protect him or her from any claims by the buyer that the property contained certain significant defects. That is true not only with respect to defects the seller disclosed, but also with respect to defects the seller did not disclose, so long as the seller was not “aware” of those defects. In addition, if a prospective buyer makes an offer to purchase a property before the seller provides him or her with the TDS, the prospective purchaser may withdraw his or her offer within three days after the TDS is personally delivered to him or her, or five days after the TDS is delivered to him or her by deposit in the mail.

Finally, the fact that a seller has failed to disclose an item he or she is aware of and is required to disclose, does not in and of itself entitle a buyer to rescind his or her purchase of the property. However, it does give the buyer a right to sue the seller for damages. The measure of damages is the difference between what the buyer paid for the property and the fair market value of the property. By this measure, if the value of the property, even with the defects/malfunctions not disclosed to the buyer, is the same as or greater than the purchase price, the buyer will have no damages.

Other Remedies for Misrepresentation by a Seller

The Real Estate Transfer Disclosure Law is intended to add to, and not supplant or change previously existing law. Thus, if the seller, for instance, makes intentional misrepresentations to the buyer concerning the property, and these misrepresentations are material, and not simply minor, the buyer may rescind the purchase contract, so long as he or she does so promptly upon learning of the misrepresentation.

**************************************

The attorneys at Gehres Law Group are experienced in real estate litigation as well as business litigation, and provide a free initial consultation to those who have been sued, or are contemplating filing a lawsuit concerning a real estate matter. Browse our website for more information about our San Diego business lawyers or contact us today for your complimentary evaluation.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2aJu2lc
via IFTTT

California Successor Liability

If you are purchasing an existing business or even the assets of a business in California, it is important to consider to what extent your business will have exposure to successor liability following the purchase. California successor liability laws are significantly broader than those in some states, so being informed and taking steps to mitigate your company’s exposure beforehand is critical, especially in higher risk industries.

What is Successor Liability?

Successor liability simply involves the imposition of liability against a successor company for the debts and liabilities of a predecessor. This usually occurs following the sale of a business or a merger of two entities. For example, if your new or existing business purchases the equity interest (shares or LLC membership interest) of a target company, or merges with a target company, the surviving entity will typically be liable for the target company’s past and future debts and other liabilities. See Corporations Code Section 1107(a). While a successor’s liability to creditors can be mitigated in some instances through compliance with California bulk sales laws, most of the obligations of a predecessor will remain with the successorfollowing these transactions. Click here for our discussion on California bulk sales laws.

Ways to Avoid Successor Liability

A purchasing business owner may consider one of several options to avoid the imposition of successor liability, including:

1) The owner of an existing business may create a separate subsidiary to purchase the target business. This option places the acquired liabilities in the subsidiary to avoid exposure to the parent company. This option is, of course, available only for existing companies, not new businesses, and does nothing to prevent successor liability from being imposed on the subsidiary; or,

2) The purchasing company may include certain legal provisions in the purchase agreement which shifts liability back to the seller. This choice is feasible where the selling entity survives the purchase or where a selling company’s owners have the financial ability (and are willing) to indemnify or otherwise compensate the purchasing entity should any predecessor liabilities arise following the sale or merger; or

            3) A purchasing business might also avoid the imposition of successor liability by purchasing only the assets of a target business. However, this is not a foolproof solution as discussed below.

Imposition of Successor Liability Following a Sale of Assets

While the general rule is not to impose liability on a successor business following an asset sale in California, there are a number of exceptions, as explained by the Supreme Court of California in Ray v. Alad Corp. (1977), 19 Cal.3d 22:

            “[T]he rule states that the purchaser does not assume the seller’s liabilities unless

(1) there is an express or implied agreement of assumption,

(2) the transaction amounts to a consolidation or merger of the two corporations,

(3) the purchasing corporation is a mere continuation of the seller, or

(4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller’s debts.”

In the Ray case, the Court added a fifth basis for imposing successor liability–strict tort liability for a defective product. In the context of an asset sale, California courts have been somewhat creative in finding ways to impose liability against a successor where a party has clearly been injured and there is no available remedy against the predecessor, so it is not safe to assume that a purchase of assets alone will provide adequate protection against successor liability.

Successor Liability to Governmental Authorities

Successor entities in California can also be held liable for obligations of the predecessor with regard to various governmental authorities debts, if not already paid by the predecessor. Following are examples of amounts the purchaser may seek todeduct from the purchase price as reimbursement for payments to the appropriate governmental entities.

• Contributions to the California unemployment fund, employment training fund and unemployment compensation disability fund, plus any interest and penalties.
• Franchise and income taxes, plus any interest and penalties
• Sales and use taxes

As an alternative, the purchasing business may seek to obtain, prior to closing of the sale or merger, confirmation from these governmental entities that the predecessor’s obligations have been fulfilled.

Conclusion

In conclusion, individuals or entities who are contemplating the purchase or merger of an existing business must be aware of the real potential for successor liability being imposed on their company following the acquisition of a business or its assets. Often, a combination of the options discussed here will provide the best protection for a purchasing business against the imposition of successor liability. Assessing the level of risk and determining which of the available avenues are ideal in any given situation should be done by an experienced professional. The business law attorneys at Gehres Law Group, P.C. are adept at identifying these risks and mitigating them as much as possible in a variety of situations. Contact us today for a free evaluation or browse our website for more information.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2aNrKq9
via IFTTT

Maximizing Your Business Profits by Licensing Your Intellectual Property

So you are an entrepreneur who started a successful business by bringing to life an idea that resulted in an amazing product or service. Congratulations! As part of your success, you have likely developed intellectual property and associated goodwill for these products or services.  However, are you maximizing your profits from these assets? Intellectual property is often the most valuable asset of your business.By licensing these assets, you can generate new revenue streams without investing a great deal of time or expense.Licensing agreements grant permission to otherbusinesses to use your company’s intellectual property in exchange for royalty payments.

If you are considering offering your products or services through a license agreement, your first step is to determine whether you own works which are protectable by copyright, trademark, patent, or some other legally recognized form or protection that can be licensed. For example, a trademark brand may not be registerable as a federal trademark unless it meets certain requirements. Without trademark protection, licensing may not be an option since most businesses will not enter into a licensing agreement with a party who does have protected or protectable intellectual property.A knowledgeable intellectual property attorney can assist you in making this initial assessment, without spending a great deal of time or money.

Once you determine that your business indeed has protected intellectual property to license, you will then seek out third party businesses who may be interested in licensing your product or service (assuming your target businesses haven’t found you already). After you find a suitable business or group of businesses, the next step will involvenegotiating and entering into the licensing agreements.  This is a crucial step to insure your business and intellectual property are protected by the specific terms of the agreement.  The most important terms of focus are: a) duration, b) exclusivity, and c) royalties.

Duration concerns the length of time the third parties will have the right to promote and sell your products and services. Licenses are not intended to be permanent, but endure for a limited period of time in which the licensee may promote and sell the product utilizing your intellectual property. Based on the success of the product, most licenses offer the parties the possibility of renewing the license at the expiration of the initialterm.

Exclusivity of use of the intellectual property is another critical provision to consider in the negotiations process. Exclusivity addresses whether you, as the licensor, will have the opportunity to grant licenses in the work to other companies, or whether you will be limited to licensing your product or service to one party.  Most commonly, the parties will agree that the license will be exclusive, but only within a limited geographic area, such as a country, region, or state, or for a specific industry.

Finally, the parties must agree on the payment provisions. The most common form of compensation in return for a license is a royalty, which is a percentage of the net sales of the goods or services that utilize the license. The calculation of royalties depends on numerous factors, including the type of products or services sold, as well as the costs involved in promoting and selling them, and typically requiressound negotiation skills by counsel on your behalfin order to reach a fair price.

If you are interested in maximizing your profits by licensing your intellectual property, be sure to consult with an experienced San Diego intellectual property law attorney. Gehres Law Group prides itself at hiring lawyers who are exceptional at what they do, have proven results, and are dedicated to obtaining the best results possible for each client. Browse our website for more information about our San Diego trademark and copyright lawyers or contact us for a free evaluation of your case.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2aqNN37
via IFTTT

Anti-SLAPP Motions in Connection with Employment Law Claims

Employers and employees alike should be aware of the not-so-new litigation device known as the anti-SLAPP motion to strike. This motion, typically filed in the early stages of a case, is designed to strike a Complaint before it gets off the ground.

SLAPP refers to “Strategic Litigation Against Public Participation.”  An anti-SLAPP motion is one asking the court to strike down a Complaint (or Cross-complaint) whose effect, if left standing, would chill a defendant’s exercise of his right of free speech or right to participate in a matter of public interest.

A claim against a person arising from any act in furtherance of the person’s rights of petition or free speech under the United States or California Constitutions in connection with a public issue is subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim. Code of Civil Procedure §425.16(b)(1). The purposes of this legislation include:

1. a) to encourage continued participation in matters of public significance without that participation being chilled through abuse of the judicial process, and
2. b) to eliminate meritless litigation at an early stage.

Section 425.16 (b) (1) contains a two-part test to determine whether an action is a SLAPP suit subject to a special motion to strike. The first part of the test is whether the action is a SLAPP suit; the second part decides whether, if it is a SLAPP suit, it may nonetheless survive the motion to strike because the plaintiff has established a probability of prevailing on the complaint. Once the court determines the first prong of the statute has been met, the plaintiff must provide the court with sufficient evidence to permit it to determine whether there is a probability the plaintiff will prevail on the claim.

As used in CCP Section 425.16, an act in furtherance of a person’s right of petition or free speech in connection with a public issue includes:

(1) A written or oral statement or writing made before a . . . judicial proceeding;

(2) Any written or oral statement or writing made in connection with an issue under consideration or review by a . . .  judicial body . . .  ;

(3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; or

(4) any other conduct in furtherance of the exercise of the constitutional right of petition or free speech in connection with a public issue or an issue of public interest.

In Greka Integrated, Inc. v. Lowrey (2005) 133 Cal. App. 4^th 1572, the Court of Appeal affirmed the trial court’s granting of an anti-SLAPP motion and dismissal of the complaint.  In that case, Greka Integrated, Inc. (“Greka”) sued a former employee, Gary Lowrey (“Lowrey”) for breach of contract and conversion. Specifically, Greka asserted that Lowrey had breached a Nondisclosure Agreement he had signed when he came to work for Greka, by taking and providing to other third parties confidential information of Greka, and converting that confidential information to his own use and benefit.  Lowrey moved to strike the complaint as an anti-SLAPP action, claiming that Greka’s causes of action arose out of Lowrey’s protected speech and that Greka had not shown a probability of prevailing on the merits.

Greka hired Lowrey to work as a safety manager. Approximately a year later, unable to continue his employment due to stress, Lowrey took medical leave.  He claimed Greka had refused to correct unsafe conditions Lowrey had brought to Greka’s attention, causing him to experience debilitating stress. He further contended that he had permission from Greka to take home the e- mails and other documents Greka accused him of converting and providing to other third parties, and retained them only because he never returned to work. He further asserted that Greka never asked for return of the documents and e- mails.

Lowrey testified on behalf of employees of Greka who sued Greka for injuries resulting from an explosion allegedly due to unsafe conditions maintained by Greka.  Lowrey also cooperated in investigations of Greka by the District Attorney, and provided the district attorney, and his own attorney, with the e- mails and documents he retained after leaving his employment at Greka.

The trial court granted Lowrey’s motion and dismissed Greka’s complaint. The Court of Appeals affirmed, noting:

A cause of action “arises from” protected activity where the act underlying the plaintiff’s cause of action, or the act which forms the basis for it was itself an act in furtherance of the right of petition or free speech (Citation omitted). In deciding whether Lowrey has met the “arising from” requirement, we consider “the pleadings and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Citation omitted).

Id. at 1578.

The court noted that Greka’s complaint did not identify the specific statements or documents disclosed by Lowrey that constituted a breach of the nondisclosure agreement or conversion.  Id. at 1579.  Further, in his declaration, Lowrey denied possessing or disclosing any of Greka’s confidential information.  Id.  He stated Greka authorized him to take the documents at issue, and that he disclosed information related solely to Greka’s non-compliance with the law to the district attorney, various public agencies and his own attorney, and to family and friends to explain why he could no longer work for Greka.  Id.

The Court of Appeal ruled that disclosing documents to these individuals, including Lowrey’s own counsel, were all protected activities, because they constituted statements made before a judicial proceeding or any other official proceeding authorized by law.  Id. at 1580.  Accordingly, ruled the Court, Lowrey had met his burden of showing that Greka’s complaint arose from protected speech.  Id.

The Court noted that the burden then shifted to Greka to show a probability it would prevail on the merits at trial, and that in making this determination, the court must again consider the pleadings and the supporting and opposing declarations stating the facts on which the claims are based.  Id. at 1580-1581.  The Court further noted that the only evidence that Lowrey disclosed any information about Greka (other than to state agencies and his own attorney, which admittedly constituted protected activity) was his admission that he told family and friends why he was leaving his job at Greka.  Id. at 1581.  However, Greka submitted no admissible evidence that the information Lowrey had provided family and friends contained any confidential or proprietary information. Consequently, Greka failed to sustain its burden of proving that its breach of contract claim had merit.  Id.

A different result was reached in World Financial Group, Inc. v. HBW Ins. & financial Services, Inc. (2009) 172 Cal. App. 4^th 1561. World Financial Group (“WFG”) was the prior employer of certain individual defendants who joined defendant HBW, a competitor of WFG. WFG alleged in its Complaint that its former employees had breached a Nondisclosure Agreement they had signed when they first came to work for WFJ, and had provided confidential information and trade secrets to their new employer, HBW.  WFG also asserted claims against the defendants for violation of the Uniform Trade Secrets Act, the Unfair Competition Law, and asserted claims for interference with prospective economic advantage.

Defendants filed an anti-SLAPP motion to strike the Complaint, arguing that WSG’s claims were based on defendants’ speech and conduct in furtherance of the exercise of the right of free speech in connection with a public issue, namely, “the pursuit of lawful employment,” as well as “workforce mobility and free competition,” all of which they contended were matters “a public interest and protected public policy.”

WFG successfully argued that the defendants had failed to satisfy the first aspect of the anti-SLAPP statute because, among other things, “[the] complaint involves private conduct, done in a non-public forum, resulting in the violation of a private contract and unfair misappropriation of WFG’s confidential trade secret information.” The trial court denied the motion to strike, and the Court of Appeal affirmed, agreeing that the defendants failed to show that WSG’s complaint was based on acts in furtherance of defendants’ free speech rights. The Court of Appeal ruled that, “the anti-SLAPP law applies to claims ‘arising from’ speech or conduct “in furtherance of the exercise of the constitutional right of free speech in connection with a public issue or an issue of public interest.”

The Court of Appeal noted that all of the allegedly wrongful conduct and speech were committed in a business capacity, and were directed at a competitor (WFG) and its customers for the sole purpose of promoting a competing business.

The difference between the Greka case and the World Financial Group case, is that in Greka, the conduct of the defendant which formed the basis of the complaint was itself an act in furtherance of the right of free speech or petition, whereas in World Financial Group, the conduct which was the basis of the Complaint was not such an act, but rather, was simply a breach of contract and an act of unfair competition.

*   *   *

When employers and employees part ways, their parting is oftentimes less than amicable. It is not uncommon for one to sue the other. Whether it is the employer suing the former employee for breach of an NDA, unfair competition, misappropriation of trade secrets, breach of the duty of loyalty, or the like, as in the Greka and World Financial Group cases, or the employee suing the employer for wage and hour or other Labor Code violations, as has occurred with considerable frequency of late, counsel for the parties must consider whether an anti-SLAPP motion is available to nip the lawsuit in the bud.

If you are sued in the context of an employment law dispute, be sure to consult with an experienced San Diego employment law or business litigation attorney, to see if an anti-SLAPP motion, or other legal strategy will help disentangle you at the outset of what could otherwise be very expensive and protracted litigation. Gehres Law Group prides itself at hiring lawyers who are exceptional at what they do, have proven results, and are dedicated to obtaining the best results possible for each client. Browse our website for more information about our San Diego business lawyers or contact us for a free evaluation of your case.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/2a0IdqB
via IFTTT

BUSINESS LITIGATION: Swinging a Bigger Stick

Everyone knows that litigation is an expensive distraction from the true mission of any business.  Good management, with well drafted contracts and employee supervision, go a long way to minimize lawsuits. However, despite the “best laid plans”, things happen.  Even well-managed businesses sometimes find themselves involved in a lawsuit.  When that happens, it is often advantageous to bring a big stick…and be prepared to swing it–which involves hiring an aggressive litigation lawyer and experienced trial attorney.

PLEADING THE RIGHT CLAIMS

Lawsuits typically begin with a “complaint”: the legal document which sets forth the particular facts and legal claims of your case. Proper drafting of the complaint and other initial pleadings, including all appropriate claims, is critical to maximizing the strength of your position at the outset. Pleadings establish the framework of the entire lawsuit and control what discovery can be taken, as well as what money damages or non-monetary relief can be awarded following a trial. A savvy litigator will understand how, based on the facts that exist, to best plead his or her clients’ case.  He or she will know how to plead a claim so that it more likely will, or will not, be covered by the opposing parties’ insurers. The knowledgeable business litigation lawyer will also know how to plead, when appropriate, so that punitive damages might be recovered, which generally creates more leverage to negotiate a prompt settlement. In sum, there is simply no substitute for experience.

INCLUDING ALL RESPONSIBLE PARTIES

Less experienced lawyers often overlook strategic advantages that can result in including parties who, on first consideration, may seem unrelated or uninvolved. If suing a closely held corporation, for example, the strength of one’s case might greatly be enhanced, in appropriate circumstances, by also naming as defendants the principal shareholders, on the theory that the corporation is merely their “alter ego” where it seems likely that “piercing the corporate veil” may be successful. Likewise, the experienced business litigation attorney will investigate and consider the viability of including as named defendants, other individuals and business entities who may have “conspired” with the principal wrongdoer, or who may have some duty of indemnity. To the experienced eye, there are myriad of factual scenarios and legal theories which could support including defendants laypersons or even other lawyers may not otherwise consider.

TRIAL EXPERIENCE IMPROVES NEGOTIATING POSITON

The more your opponent fears going to trial, the stronger your settlement position.  Your bargaining position is based on their perception of the case, including their perception of your attorney.  When you have an experienced, persuasive trial attorney, you increase your bargaining position. Overall, approximately 90% of all cases settle before trial. However, the amount of compensation you might be able to recover in a settlement is often significantly impacted by the perceived strength of your case and experience of your trial lawyer, both of which make choosing a business litigation attorney extremely important. In addition to being skilled at trial, the effective trial lawyer must also be a good negotiator, in order to maximize results for the client.

Gehres Law Group prides itself at hiring attorneys who are exceptional at what they do, have proven results, and are dedicated to obtaining the best results possible for each client. Browse our website for more information about our San Diego business lawyers or contact us for a free evaluation.

from San Diego Business Lawyer – Gehres Law Group http://ift.tt/29rCtDs
via IFTTT