WAIVER OF UNKNOWN CLAIMS UNDER CALIFORNIA CODE §1542

Introduction

In settlement agreements, one or more parties may waive their right to pursue recourse against other parties to the agreement in return for some form of consideration, such as a payment of money. However, what if a party is unaware of certain claims they may have against the party they are releasing–could they then accept the described consideration and still turn around and pursue legal action against the released party once they become aware of the grounds for their claim? Is a waiver of “unknown” claims enforceable in California? We explore the answers to these questions in this article.

California Civil Code §1542

A good place to begin our analysis is by reviewing the language of Section 1542, which reads:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” 

In short, this section of the Code creates rights—the right of a releasing party’snon-waiver of unknown claims. In other words, a releasing party is presumed NOT to have waived claims which are not known. Therefore, California courts will interpret a general waiver of claims as not waiving unknown claimsof the releasing party.

Enforceable Waivers of Unknown Claims

However, it is well established that a general release that explicitly covers unknown claims and specifically waives the provisions of California Civil Code §1542 is “completely enforceable and act[s] as a complete bar to all claims (known or unknown at the time of the release) despite protestations by one of the parties that he [or she] did not intend to release certain types of claims.” San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1053.

At the same time, waivers of unknown claims are not absolute, but are subject to attack like many other contractual provision. Some of the more common grounds for challenging the enforceability of such waivers includes, fraud in the inducement, duress, and mistake. The scope of the release must also be fairly definite to ensure enforceability. As the Court noted in Kaufman & Broad-S. Bay v. Unisys Corp., 822 F. Supp. 1468, 1474 (N.D. Cal. 1993):

“California Civil Code section 1542 provides that a general release does not extend to unknown or unsuspected claims. The parties to a release may be bound by a waiver of the section’s protection if they understand and consciously agree to the waiver. However, if the parties have not dealt at arms’ length and the releasor has relied on fraudulent statements or misrepresentations by the releasee, then the release is binding only to the extent actually intended by the releasor. In order to void the release, the releasor must show that its entry into the release was induced by fraud, undue influence, mistake or deceit.”[Emphasis Added].

Conclusion

While specific and express waivers of unknown claims are generally enforceable in California, since they may be subject to legal challenges by a releasing party, it is wise to consult with a business or civil litigation attorney to ensure any specific release, taken together with the contract as a whole, is likely to be enforced. Your attorney will apply contract principles when drafting your contract that many laypersons are simply unaware exist, and which can help ensure your intentions are clearly and expressly enunciated and enforced if they become the subject of a dispute.

The business litigation lawyers at Gehres Law Group, P.C. have decades of experience representing clients in business-related disputes and work diligently to protect the interests of clients above all else. Contact us today for a free evaluation of your business-related matter.

NOTE: Articles on this website are provided as a convenience to users as general legal information only and do not constitute legal advice or a substitute for legal advice.  Do not rely on this information.  Contact a California litigation attorney to discuss your case.

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Considerations in Settling a California Dispute

In a prior Blog Article published here Dec. 8, 2015 (“Filing a Lawsuit to Secure a Prompt & Enforceable Settlement”), we discussed the advantages of filing a lawsuit, even where you know from the outset that the other party will likely agree to settle, so you can use a “Stipulated Judgment”, under CA Code of Civ. Procedure § 664.6 to aid in collection efforts if the settlement is not timely paid.  Section 664.6 authorizes a Court to enter Judgment based on the stipulation of the parties, i.e. in accordance with their settlement.

Since most settling parties prefer to avoid having a judgment on record, it is not uncommon for parties to sign, but not file, a Stipulated Judgment, while providing in their settlement agreement that, upon any failure of payment, the Stipulated Judgment can be filed and enforced forthwith.  One important note of caution regarding this technique of “securing” a settlement with an unfiled Stipulated Judgment:  The Court must agree to retain jurisdiction following the settlement and keep the case open pending payment of the settlement.  If the case is dismissed following the settlement, but before the settlement is paid or the Stipulated Judgment is filed, it cannot be enforced unless the Court is persuaded to reopen the case.  Viejo Bancorp, Inc. v. Wood, 217 Cal. App. 3d 200, 265 Cal. Rptr. 620, 1989 Cal. App. LEXIS 1360 (Cal. App. 4th Dist. 1989)

Having a Stipulated Judgment won’t solve all the problems of collecting an unsecured debt, but it WILL give you important enforcement powers such as 1) the right to conduct a debtor’s examination under oath to seek information that might help locate the debtor’s assets; 2) place judgment liens on properties of the debtor; 3) garnish debtor’s wages; and, 4) file orders of attachment against debtor’s bank accounts.

Planning to Contest Defendant’s Bankruptcy Filing

One of the most intractable problems in trying to collect money from a financially stressed or insolvent party is the possibility they will file for bankruptcy.  Unfortunately, most legal claims for money are presumptively dischargeable in bankruptcy. In addition, settlement agreements where the defendant “waives” the right to seek bankruptcy are often found to be unenforceable in California. If you anticipate a bankruptcy filing, be flexible and negotiate to get paid quickly, or insist on security or guarantors when possible.

In appropriate cases where the factual basis for the claims against defendant would, if proved, bring the matter within an exception to the rule of presumptive dischargeability, you might try to include a detailed stipulation as to the agreed and undisputed FACTS supporting defendant’s liability. In such cases, the Settlement Agreement and/or the Stipulated Judgment should include a detailed recitation of defendant’s wrongdoing, essentially an admission of facts which would support the non-dischargeable liability of defendant.

Most settlement agreements, however, contain language to the effect that “the parties to this settlement deny all wrongdoing and are not hereby admitting any liability.”   You can anticipate great resistance in getting a defendant to formally admit wrongdoing, even when Stipulating to Judgment. If you have sufficient leverage and the defendants are appropriately motivated to settle, they may agree to such language.

CONCLUSION

As the old saying goes, “you can’t get blood from a turnip”.  In any settlement try to include solvent parties, with assets to secure the settlement. If you are settling with an entity, try to insist that the settlement be guaranteed by the individuals who control that entity.  And again, generally speaking, if you are settling with an insolvent and untrustworthy party, for any significant amount of money, you are better off filing a lawsuit and settling by means of a Stipulated Judgment.

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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.

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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.

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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.

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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.

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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.

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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.

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