Four Questions To Ask Yourself When Funding Your Startup

You have the perfect business idea. Maybe you’ve designed the best widget ever or you’ve developed a new process that could revolutionize an existing product or service. You’ve received encouragement from friends and colleagues. You’ve carefully crafted a clear and concise business plan, but you’ve determined you may need funding. What do you do?

Issues related to startup funding can be numerous and complex. If only there was a simple, straightforward solution that would let you get on with it. Unfortunately, there really are no true shortcuts. There are a number of initial questions, however, that you should ask yourself. Their answers should get you moving toward the best solution to your funding needs. Here are four that every entrepreneur should address.

How Will I Utilize the Startup Funding?

Most startup experts advise entrepreneurs to make a list of financial needs, the likely amounts needed, and the priority of the need in achieving overall success. Then, working from the bottom of the list, is there anything that you can actually do without? This exercise will give you the best idea of your real needs.

How Soon Will You Be Profitable?

If you project profitability in relatively short order, that may raise the question of whether you need startup funding at all. Understanding the profitability timeframe may at least help you determine the nature of the investment that you should go after. For example, if the profit line is relatively short, a loan may be best, since it won’t dilute your interest in the business.

How Much Control Are You Willing to Give Up?

This is one of the most difficult issues most entrepreneurs face. The more funding you get, the more control you may have to give up. Don’t expect a funding source to share your passion and optimism. They are likely to have that same level of passion about their cash, so expect some candid negotiations in this regard.

Can You “Play in Groups?”

Just as outside funding brings with it a loss of at least some level of control, it also brings the need to work well with others. Can you communicate? Are you stubborn or volatile? Can you take constructive criticism? You may have been the first with the “aha moment,” but funding brings either partners/shareholders or creditors. If you can’t cooperate with others, you may find that your funding issues come at too great a cost.

You May Decide Startup Funding is Appropriate or Perhaps You’ll Resort to Bootstrapping

Armed with the answers to these initial questions and, assuredly, many others, you may have a clear path for your startup funding or you may decide that bootstrapping is the preferred alternative. Either way, you are likely to need the experience and dispassionate counsel that is available through a seasoned group of attorneys.

The law firm of CKB VIENNA LLP provides legal and business consultation to nearly every type of business, from large to small – even startups. We have helped entrepreneurs identify and face funding issues and we have provided broad counsel in other related areas. And while the firm is skilled in all forms of litigation, our attorneys also provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA has a long history of representing clients in all types of business matters. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Recent CashCall “True Lender” Decision Has Broad Implications for Lenders

In a decision that may have far-reaching ramifications for other lenders, a judge in the U.S. District Court for the Central District of California recently held that high interest consumer loans originated by a tribal lending entity formed by the Cheyenne River Sioux Tribe were actually made by California-based, CashCall, Inc., and as such were subject to regulation by the Consumer Financial Protection Bureau (CFPB). Since CashCall – and not the Indian tribe – was the “true lender,” the consumer lending laws of the borrowers’ home states, which prohibited the high-interest loans, applied, indicated the court. As a result, CashCall’s servicing and collection efforts were deemed to have violated the Dodd-Frank Act ban on unfair, deceptive, or abusive acts or practices (see CFPB v. CashCall, Inc., Aug. 31, 2016, Walter, J.).

Totality of the Circumstances Test Used By Court

Judge Walter reached his decision using the so-called “totality of the circumstances” test to determine which party actually had the “predominant economic interest” in the transaction. Legal experts note that other courts have utilized different standards to who is the “true lender.” For example, some courts merely look to what entity is designated as lender in the loan agreement papers. Others have centered their focus on an examination of which party engages in the three non-ministerial acts:

•  The determination to extend credit

•  The extension of credit itself

•  The disbursement of funds resulting from the extension of credit

CashCall Controlled the Entire Lending Scenario

Judge Walter found that it was CashCall and not the Tribe that controlled the entire business process. For example, CashCall “purchased” the loans prior to the first payment due date. It covered most of the Tribe’s operating costs and agreed to indemnify the Tribe against any civil, criminal, or administrative claims. While consumers used the Tribe’s website and telephone number to initiate the loan process, CashCall hosted servers on which the online applications were made. CashCall serviced the loans and, if a loan went into default, the loan was transferred to a CashCall entity for collection purposes.

Decision May Affect Marketplace (Peer to Peer) Lending

The CashCall decision offers at least indirect support for the CFPB’s recent proposal to subject non-bank marketplace lenders to its supervision. While the Dodd-Frank Act directed the CFPB to supervise various categories of lenders (e.g., mortgage lenders and services, private education lenders, and payday lenders), it also allows expansion of CFPB’s supervision in other consumer markets. Reports indicate the Bureau has its sights on marketplace lenders, such as the Lending Club.

There is also some question, in light of Judge Walter’s ruling, about the continuing ability of a community bank to “export” the interest rate of its home state without regard to the varied usury laws of the 50 states.

Lending Practices Continue to Face Scrutiny at State and Federal Levels

Today, lenders face a host of disparate legal and regulatory rules. The legal landscape can appear like a minefield. Maneuvering through that minefield can best be accomplished by retaining experienced, skilled attorneys and litigators. The law firm of CKB VIENNA LLP has provided legal and business consultation to commercial and consumer lenders, mortgage originators, mortgage servicing companies, and other lending entities for years. We have extensive experience with FCRA and Truth in Lending rules. We are conversant in the sort of “techno speak” found in Dodd Frank. Our firm is also skilled in all forms of litigation, should that need arise. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Be Careful With 401(k) Rollovers as You Reach Age 70

Salting away funds in a 401(k) plan is not only prudent; it’s psychologically satisfying. But the IRS doesn’t intend for you to keep funding your plan and deferring the taxes forever; there are special rules that mandate that you begin taking required minimum distributions (RMDs) in the year that you reach 70 ½. Calculating the RMDs can lead to hair pulling; you may even need to hire a professional. Bear in mind that as you reach the age of 70, if you intend to rollover your 401(k) into an IRA account, special rules apply and caution is advised. Here are some points you should keep in mind.

First, IRS is Serious About Required Minimum Distributions

Regardless of a taxpayer’s financial need, the IRS generally requires owners of traditional IRAs, 401(k) plans, simplified employee pensions, and other retirement accounts to begin taking RMDs – and paying the resulting tax – by April 1 of the year after they reach age 70 ½. Failure to do so results in a 50 percent excise tax on the RMD amount not distributed.

Second, In the Year You Turn 70 ½, Take Your RMD from 401(k) Before the Rollover

If you still have the 401(k) account on the first day of the year in which IRS rules require you to take a distribution, you must take that distribution from the 401(k) account before you roll the account over to your IRA account. If you rollover and then take a distribution, it won’t count as an RMD and you’ll be penalized. In the years after the rollover, you will only have to make the RMD withdrawal from the IRA.

Third, Multiple Plans Require Aggregation of RMDs

If you are a participant in more than one ERISA qualified plans, your RMD must be determined for each plan separately, and each RMD amount must be distributed from that particular plan. RMD amounts for qualified plans cannot be distributed from an IRA. If you have multiple IRA accounts (or multiple 403(b) accounts), you may aggregate the RMD for all similar plans and then take that amount from one account in each type of plan.

Fourth, Death or Divorce Do Not Affect Current Year’s RMD Calculations

If the taxpayer is married on January 1, he or she is treated as married the entire year for purposes of RMD. Therefore, if you divorce or if your spouse dies later in the year, the RMD must be calculated without regard to the change in marital status.

Takeaway: Be Careful As You Near 70 Years of Age

The points noted above are not an exhaustive listing of all the factors that come into play with RMD calculations, roll-overs, and the like. Your situation may be unique. It’s always good to check with a professional advisor. As they say, “Better safe than sorry.”

Wealth Management and Asset Preservation

The law firm of CKB VIENNA LLP has a long history of representing high-net-worth individuals, substantial closely held and family businesses, and others with all sorts of wealth management issues. Our attorneys provide counsel on estate, gift and generation-skipping transfer tax planning, sophisticated charitable giving, tax controversies, using life insurance as a planning tool, business succession planning, asset protection, charitable organizations and private foundations. We don’t stamp out cookie-cutter solutions; we first gain a true understanding of the client’s goals, concerns, and unique issues. Then we work with the client to achieve success. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Is California’s “Ban the Box” Law Effective in Promoting Minority Hiring?

On July 14, 2014, California joined at least a dozen other states in banning most public and private employers from inquiring about a job applicant’s criminal record on the initial job application. While, in most cases, employers are allowed to inquire about convictions later in the hiring process, they are not allowed to treat criminal convictions as an automatic “disqualifier.” The laws became known as “ban the box” [BTB] laws, since many job application forms historically had required the applicant to check off if he or she had any convictions.

Critics Say Lack of Information Leads to “Guessing” on Part of Prospective Employers

The goal of the laws is to improve employment outcomes for those with criminal records, with a secondary goal of reducing racial disparities in employment. Critics of the laws argue that without prior conviction information at their disposal, all too many prospective employers try to “guess” which applicants may have a criminal record, and avoid interviewing them. Some critics contend the result of this “guessing game” is that many young, low-skilled, black, and Hispanic men are systematically excluded from the hiring process.

New Study: Ban the Box May Have Unintended Negative Consequences

A new study published by the National Bureau of Economic Research (NBER), an American private nonprofit research organization, says the critics may be right: BTB legislation may actually be hurting the segment of society that it is designed to help.

In the study, researchers sent some 15,000 fake online job applications to employers in New Jersey and New York City both before and after those jurisdictions enacted their versions of BTB laws. Each employer was sent two applications containing identical qualifications. The only difference: One was from a man whose name is most commonly found within the white community, while the other included a name most often found among blacks. According to the study, prior to the BTB rules, a “white” applicant was 7 percent more likely to receive a callback than a “black” applicant. After passage of the BTB rules, the disparity jumped to 45 percent.

The researchers further found that BTB policies didn’t just reduce callbacks; they decreased the probability of being employed by 3.4 percentage points for young, low-skilled black men, and by 2.3 percentage points for young, low-skilled Hispanic men. The researchers conclude that the findings support the hypothesis that when an applicant’s criminal history is not available, employers statistically discriminate against demographic groups that are likely to have a criminal record.

Human Resource Departments Should Exercise Care in Processing Applications

HR officials should obey not only the letter, but also the spirit of the BTB legislation. Employers that systematically refuse to interview applicants who “appear” likely to be from one demographic or another can lead to severe legal issues and charges of discrimination. Discrimination is a serious matter – one that costs the employer, both financially and in prestige. Prudent employers monitor hiring practices and assure themselves (and others) that discriminatory practices are not being followed.

Many businesses determine that having experienced, outside counsel is a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Will Recent SCOTUS “Spokeo” Decision Help Mortgage Lenders?

On May 16, 2016, in an action originally filed under the Fair Credit Reporting Act (FCRA), the Supreme Court of the United States held that a plaintiff’s injury must be both “concrete and particularized,” casting at least some doubt on whether the flurry of “no injury” class actions filed in recent years against mortgage lenders and others can stand [see Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 194 L. Ed. 2d 635, 2016 U.S. LEXIS 3046, 84 U.S.L.W. 4263 (May 16, 2016)].

While it isn’t totally clear what the Ninth Circuit will do with the case after remand, the majority of the Supreme Court, in its 6-2 decision, appears to have erected important and real hurdles for primary plaintiffs who seek to sue mortgage lenders. Those same barriers may also make it more difficult for plaintiffs to gain class certification.

The Spokeo Case

Spokeo is one of a number of search engines that provide personal information (e.g., age, address, telephone number, marital, and occupational status). Plaintiff Thomas Robins filed suit against Spokeo after he learned his personal information was inaccurate. Spokeo had apparently reported that Robins was in his 50s, employed, married, and affluent. Instead, he is younger, unemployed, unmarried, and of modest means. Spokeo countered that Robins had not been harmed in any way by the error.

Robins alleged nevertheless that the inaccuracies violated the FCRA and that the violations had been “willful,” entitling him – and the other members of a putative class – to statutory damages plus attorney’s fees and costs. The federal district court dismissed his claim, finding that he had not sustained “an injury-in-fact.” The Ninth Circuit reversed and the Supreme Court granted certiorari in order to answer that question for itself.

What Does This Have to Do With Mortgage Lending?

In recent years, numbers of plaintiffs have alleged that their mortgage lender (or its servicing agent) has violated FCRA through erroneous paperwork. Quite often, the alleged violations have amounted only to inconsequential matters, such as incorrect zip codes or transposed characters in a phone number, but plaintiffs have maintained that errors are errors and that they support class actions against the lenders.

Spokeo Decision’s Implications

Spokeo may have a profound effect on how “no injury” class actions are litigated since the decision erects hurdles not only for those who wish to state a claim against a lender, but also for those seeking certification of a class. Justice Alito, speaking for the majority, indicates at one point that styling a case as a class action “adds nothing to the question of standing” [Opinion at n.6].

Attorneys for some mortgage lenders have said that if named plaintiffs must prove that they have experienced concrete and particularized harm in order to state a claim for statutory damages, it should also follow that the plaintiffs must prove that unnamed plaintiffs have been damaged as well in order to obtain certification. This may take the teeth out of some new filings.

Mortgage Lenders Still Face Difficulties

Even after Spokeo, mortgage lenders still face a number of difficulties. In addition to the general market/business issues, there is the maze of governmental rules and regulations that must be successfully maneuvered. Having an experienced, skilled attorney and litigator at the helm can be a true advantage. The law firm of CKB VIENNA has provided both legal and business consultation to mortgage lenders and others in commercial lending for years. We have drafted core loan documentation and have assisted lenders in managing the risks associated with the FCRA and Truth in Lending rules. Our firm is skilled in all forms of litigation. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Employee Stock Ownership Plans May Be Effective in Succession Planning

Many business enterprises find succession planning to be a significant challenge. Business owners often confess that it is difficult to concentrate on “what’s next,” when most of one’s time and energy is concentrated on current performance. In closely held businesses, the challenge can be even more daunting.

A common problem grows from the fact that while the current generation of owners has all the passion and interest in the world, that commitment to the business isn’t always shared by the next generation. The owners would like to sell the business to a new group of committed individuals. What can the owners do?

Answer May Be Right Before the Owner’s Eyes

Recognizing that the answer to succession issues might be right before the owners’ eyes, some of the most astute are turning to employee stock ownership plans (commonly called “ESOPs”). A firm’s employees may be the perfect “new owners,” since they know the business and they have a strong vested interest in its long-term success.

ESOPs: What Are They?

An employee benefit plan is a popular, formalized arrangement that allows employees to take an ownership interest in the company. From a management standpoint, an ESOP can be a very useful tool for aligning key employees’ interests with those of the owner. Properly crafted, an ESOP can allow owners to cash out of the business, either gradually or in one fell swoop. One key advantage: By selling the business over time, owners can gradually transition control to a new management group.

Advantages of ESOPs in Succession Planning

Not only do ESOPs help transition management, they can offer other advantages, including the following:

•  ESOPs can permit transfer of control without the need of borrowing significant sums to purchase all of the owners’ shares. ESOP arrangements usually allow the company to maintain its commercial lines of credit.

•  The ESOP may create a means of selling the owners’ interest where no market exists.

•  The firm’s employees can receive an ownership interest in the firm, yet the ESOP benefits are not generally taxed until the employee receives a distribution.

•  The ESOP can be structured so that it can borrow to purchase shares to fund itself.

•  The ESOP can also be so structured that if an employee retires or leaves the company, his or her interest is repurchased at an appropriate valuation. For key employees, this arrangement can be coordinated with life insurance to fund the repurchase.

•  In some situations, the owners can achieve significant tax savings through the use of trusts, including charitable remainder trusts and charitable remainder unitrusts.

ESOPs Aren’t For Every Business

ESOPs are not for everybody. For example, one obvious limitation: They cannot be used if the business structure is that of a partnership. The same is true for most professional corporations. Since an ESOP is generally a qualified plan for purposes of ERISA, the costs of creating and maintaining such a plan must be carefully weighed. Owners should check with legal and financial advisers as to whether the particular ESOP arrangements they contemplate will result in unwise dilution of the owners’ interest. The costs of running the plan and implications of diluting the owner’s share of the company will need to be weighed against the tax and diversification benefits.  

Succession Planning Is Serious Business

There’s an old adage: If, while you’re running, you concentrate too closely on the ground just in front of your feet, you’ll never see the cliff until you run off its edge. The same applies for succession planning. Prudent business owners don’t just concentrate on execution; they plan for tomorrow. Succession planning involves a host of financial and legal issues that must be carefully considered.

The law firm of CKB VIENNA provides legal and business consultation to nearly every type of business, from large to small – even to startups and nonprofits. We have crafted succession plans of all shapes and sizes and stand willing to assist you and your business with virtually any legal need. While the firm is skilled in all forms of litigation, our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has a long history of representing clients in all types of business issues and disputes. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

One Year After Fatal Balcony Collapse, California Apartment Owners Assess Liability Issues

Many Californians recall the tragic June 2015 balcony collapse at the Library Garden apartment complex in Berkeley, which took the lives of five Irish students and a California resident, and resulted in severe injuries to others. Following the incident, at least 13 lawsuits were filed against the apartment owners and various other parties involved in the design and construction of the apartments and their balconies.

Dry Rot and Inadequate Materials May Have Played a Role in Collapse

Several lawsuits allege that the suspect balcony was poorly constructed, sustained dry rot, and that various parties knew or should have known about the problems, but failed to take any steps to address the dangers. Some reports also indicate that the suspect apartment balcony may actually have been constructed according to building codes, but that poor workmanship in the waterproofing of the balcony resulted in water damage that caused the balcony to rot and eventually collapse.

Other Apartment Owners Are Assessing Their Own Vulnerability

Prudent apartment owners around the state have begun to review their own construction and maintenance records to determine if they are vulnerable to claims. Some apartment owners (and owners of commercial properties) are also trying to determine if they have potential claims against suppliers and contractors who may have used substandard techniques or materials during the construction process.

Berkeley Apartment Builder May Have Had Earlier Undisclosed Problems

As litigation regarding the Berkeley balcony collapse moved forward, various parties discovered that the firm that constructed the Berkeley apartment complex had faced other claims and, in previous years, had paid out some $26.5 million dollars in construction defect settlements. Legal experts point out that while California law requires architects and engineers to disclose any settlements or judgments related to their professional capacities, there is no such requirement for construction contractors. Currently, therefore, one can be dealing with a contractor whose past practices have been called into question and never know it.

Proposed Law Would Require Disclosure of Settlements

All that may soon change. State senators Jerry Hill and Loni Hancock have introduced SB 465 which, among other things, would require disclosure of settlements and adverse matters by construction contractors. On August 10, 2016, one of the survivors of the balcony collapse testified in front of a California legislative committee regarding the proposed law. According to one report, she tearfully noted that she and her friends had been celebrating her 21st birthday on the day of the tragedy. Now, instead of a day of joy for her, the date now marks the anniversary of the death of her friends.

Real Estate Ownership Requires Ongoing Vigilance

As recently reported, some municipalities now require regular inspection of apartment balconies and other areas on a regular basis. Owners of commercial structures should be concerned as well. All landlords have a responsibility to maintain their rental properties in reasonably safe condition and good repair for their tenants. The time to act is before the next tragedy, not after it.

Construction Defects Often Involve Complex Legal Issues

Any dispute related to construction defects will likely involve one or more complex legal issues. Having experienced, aggressive legal counsel on your side is ordinarily a key to success in any such dispute. For years now, CKB VIENNA LLP has represented landowners, property owners, construction contractors, construction professionals, and others in all sorts of disputes related to California properties. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Businesses Must Exercise Caution When Classifying Workers as Independent Contractors

At the heart of the American economic and legal system is the relative freedom given to parties to contract with each other regarding the purchase and sale of goods and the delivery of services. For example, firms have historically been free to create business models that utilize independent contractors instead of employees – think Uber, Federal Express, delivery services, construction companies and trucking firms. The goal of the business is often to save employment taxes, overtime pay, workers’ compensation insurance premiums, and other employee-related expenses.

California Regulators Say Independent Contractor Designation is Often Unfair to Worker

In recent years, a number of states – particularly California – have determined that in all too many situations, the business firm is taking unfair advantage of the worker. The headlines have been filled with class action lawsuits and regulatory intervention. New laws have been passed. One California law now makes it clear that cheerleaders for professional athletic teams must be classified as employees; they are not independent contractors. Settlements in the millions of dollars have been negotiated with firms such as Uber and FedEx.

Steep Fines and Other Sanctions

All businesses should carefully examine their employment/contracting practices to make certain they are within the law. Violations can be expensive. Under current California law, the misclassification of employees as independent contractors can result in steep fines and other sanctions, including:

•  Stop orders and penalty assessments pursuant to California Labor Code § 3710.1

•  Tort liability for injuries suffered by employees when the business entity has failed to secure workers’ compensation insurance (see Labor Code § 3706)

•  Exposure for unfair business practices

•  Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code

•  Liability for additional taxes and penalties

•  In some cases, criminal liability under Labor Code § 3700.5

Factors Generally Considered in Determining the Legal Nature of the Employment Relationship

Business owners should recognize that the issue of employee vs. independent contractor is an extremely fact-driven matter. No two businesses are identical. There is no single factor that governs the situation. Just because you have a contract that designates the workers as an independent contractor, it does not necessarily follow that a court or regulatory body will agree to your characterization. There are a number of issues that should be considered, including the following:

•  Is the work of the so-called contractor integral to the business? If so, the worker is likely an employee and not an independent contractor.

•  Does the worker operate a stand-alone business, with his or her own tax identification number, business bank account, business address, etc.? If so, he or she may be an independent contractor. If not, the situation points to an employee relationship.

•  Is the worker to be paid by the job or the hour? If payment is made on a time basis, that points to an employee relationship.

•  Does the contract work have a fixed beginning and ending date? If not, this tends to point toward an employee relationship.

•  Does the worker require a specialized license? If so, that usually points toward independent contractor status. If not, the worker may be designated as an employee.

•  Is the worker free to work for someone else? If so, that may point to an independent contractor relationship.

•  Does the worker supply his or her own tools of the trade? If so, that points to an independent contractor relationship. If the business leases the tools to the worker, that points instead to an employee relationship.

•  Does the work require skill? If so, that may point to independent contractor status.

•  Is the worker’s job closely supervised? If so, that points to an employment relationship.

Employee Misclassification is Serious

As noted above, the penalties for misclassifying an employee can be serious and expensive. Many businesses determine that they need the counsel provided by an experienced lawyer to maneuver within the maze of employment regulations and laws. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Four Ways in Which the Recent U of Texas Affirmative Action Case Will Affect Businesses

Attorneys and legal scholars are still sifting through the intricate 4-3 decision reached by the United States Supreme Court earlier this summer in Fisher v. University of Texas. The majority’s decision essentially put down a challenge to the race-conscious admissions program that has been in place at the Longhorn State’s flagship university for more than a decade. Drawing criticism and praise from the usual suspects, one law professor at Harvard indicated that it is the most important educational case since Brown v. Board of Education. The sharply divided decision will likely have broader impact, however. Since it affirms some rather broad social ideas related to diversity within our society, the decision will likely affect American businesses in at least four ways. Here are some takeaways.

Takeaway One: Diversity of Thought Churns Creative Juices

As pointed out recently in a Forbes magazine report, business that embrace diversity tend to be the sort of incubators within which creativity bubbles and churns, with new ideas, new problem-solving methods, and innovation being the positive by-products.

Takeaway Two: Company Diversity Sets Appropriate Tones With Customers and Suppliers

When a business is too monolithic, that lack of diversity can cause tensions with customers and suppliers. Often, these tensions are suppressed; they aren’t overtly communicated. But the tensions are still there. If your business seems closed to diverse persons, thoughts, and/or ideas, your customers and suppliers may decide that your business seems closed to them as well. A diverse business is generally much more appealing to customer or supplier that operates internationally.

Takeaway Three: Diversity Shouldn’t Be Seen as a Way to Stay Off the Radar Screen

All too many businesses view the push for diversity only in terms of avoiding legal risk – of staying on the “good” side with regulators. Most studies say diversity with a company’s workers results in lower turnover, reduced recruitment and training costs, and improved worker attitudes. In short, better performance is usually the result. For example, in one report from a few years ago, researchers discovered that companies with the highest representation of women board directors actually performed better financially than those with the lowest representation of women on their board of directors.

Takeaway Four: Diversity Isn’t Just an Issue at Hiring

While the Fisher case dealt with the “front door” to the University of Texas, businesses should not view diversity merely in terms of hiring practices. Diversity efforts have much broader implications. Should the firm be more open to alternative work schedules that cater to growing families? Should the business bear in mind the changing attitudes and needs of employees as they age within the firm?

Diversity Planning: A Mixture of Business, Social & Legal Concerns

The issues facing today’s business decision-makers usually don’t come neatly packaged as “legal,” “financial,” or “operational.” Instead, challenges are usually a mixture of complex questions, with a myriad of alternative “opportunities.” The law firm of CKB VIENNA LLP provides employment/labor counseling, business consulting, and litigation services to nearly every type of business, from large to small – even to startups and nonprofits. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation, including compliance with laws in the areas of hiring, promotion, discipline, termination, compensation, harassment, substance abuse, wage and hour, affirmative action, and independent contractor arrangements. CKB VIENNA LLP has a long history of representing clients in all types of business issues and disputes. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

Five Things You Might Not Know About Life Insurance for Estate Planning

Because of its flexibility, life insurance is a component within virtually every estate plan. It can provide cash and other support for a host of interests, including:

•  The cost of college and graduate school

•  Liquidity to pay for estate or inheritance taxes

•  Cash to fund business buy-sell agreements

•  Investment options to fund the retirement years

Unfortunately, the landscape is littered with misinformation about life insurance. Here are five things you might not know about the operation of life insurance in estate planning.

Tip Number One: A Policy Has Four “Players”

A life insurance policy typically has four “players” or components:

•  The owner: Generally the person or entity responsible for paying the premiums.

•  The insurer: The insurance company that is responsible for paying out the benefits under the terms of the policy.

•  The insured: The person whose life is being insured.

•  The beneficiary: The person, trust, or other entity that will receive the proceeds of the policy at the death of the insured.

While the owner is sometimes the insured, this need not be the case. Having a different owner and insured can offer significant tax advantages in some instances.

Tip Number Two: Terms of Your Will Do Not Usually Control Life Insurance Payouts

Some persons are surprised to hear that the carefully crafted will that they have in force will likely have no effect on how (and to whom) your life insurance is paid. Generally speaking, unless your estate is the beneficiary of the policy, the life insurance proceeds will not pass through probate. They will generally flow to your beneficiary without income tax ramifications. There are three situations in which the proceeds are included in one’s estate:

1. The proceeds are payable to the estate or to the estate’s executor.

2. The decedent possessed an “incident of ownership” in the policy at the time of death.

3. There was a transfer of ownership of the policy within three years prior to the date of death.

Tip Number Three: Transferring Ownership of Policy Early in the Policy’s Life Can be Inexpensive

As noted in tip number one, you can avoid having the life insurance taxed as part of your estate by transferring (subject to the three-year rule) the policy to another (usually a trust). That transfer may be subject, however, to gift tax if the cash value of the policy exceeds the annual exclusion (currently $14,000). Transferring a policy early in its “life” can, therefore, often be done without incurring liability.

Tip Number Four: Insurance Should Be Used to Manage Risk

While there are exceptions to this rule, insurance policies are not usually used as investment tools. They are more appropriately designed to manage risks. If someone looks to you or relies upon you for financial needs and stability, you likely need life insurance. Note that the list is much longer than you may think. In addition to spouse and children, you may have dependent parents or siblings. If you are a partner in a business, the others are almost always dependent in some form upon you. It goes without saying, therefore, that once you are stably retired or financially independent, or otherwise at a point where no one would suffer financially if you were to die, your need for insurance is substantially less.

Tip Number Five: Life Insurance Can Be Effective in Long-Term Charitable Giving

Utilizing life insurance for a charitable giving program involves some complex issues, but structured correctly, life insurance can be a great tool to honor or endow universities, religious organizations, and other charitable enterprises.

Life Insurance & Estate Planning: Skilled, Experienced Legal Counsel is Key

The law firm of CKB VIENNA LLP has a long history of providing legal and business consultation to individuals to nearly every type of business. We have represented entrepreneurs both in their early, creative years and later as well, when their interests have moved toward managing their legacy. We are skilled in drafting and coordinating all sorts of estate planning documents, from wills to trusts to buy-sell agreements and succession planning arrangements. While the firm is skilled in all forms of litigation, our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

Five Mistakes to Avoid in Your Distributor Agreements

Distribution agreements have been an important force within the American economy for well over a century. The agreements, which are generally entered into between a supplier (or manufacturer) of goods and a distributor of those goods, operate so as to take advantage of each firm’s assets or skills. The supplier or manufacturer may be skilled at crafting the product, but lack the local expertise to sell it in numbers. The distributor may have skills in moving products and making sales, but not in the design and crafting of it initially. Properly drafted, a distribution agreement can push both the supplier/manufacturer and the distributor to performance beyond their usual limitations. Improperly drafted, the agreements can lead to headaches, loss of business for one or both parties, and bitter litigation. We have identified five common mistakes to avoid in drafting your distributor agreements.

Mistake One: Falling in Love With Legal Terminology

Many businesses become so caught up with current business buzzwords that either (a) they demand that the words be used within an agreement – even when inappropriate – or (b) they become easily satisfied with an agreement’s language just because it has the “correct” labels and headings. Many in business are familiar with terms such as “strategic partnering” and even “joint venture.” They forget that the terms have no actual legal meaning outside the meaning given them in an agreement. Remember: Substance over form.

Mistake Two: Poor Drafting of Termination Clauses

The parties to a distribution arrangement should view the arrangement in a somewhat similar fashion to prospective spouses, both of whom come to the marriage with significant assets. Both parties want things to work out; indeed, both expect them to work out. Sometimes, however, they don’t. Since neither side to the distribution agreement wants to be viewed as a pessimist, and since each side is so sure of its own performance, the parties will sometimes agree to allow termination only for cause. Remember this, if the parties can’t agree on whether one side or the other is performing, they likely aren’t going to agree about whether the accused party has committed a serious enough breach to warrant termination. The alternative: Select an annual or semi-annual date for the agreement to terminate automatically. This gives both parties an incentive to perform.

Mistake Three: Failing to Distinguish Between an Agent and Principal Relationship

Is the distributor’s role to find and service buyers or customers without actually taking ownership of the goods? If so, in most situations, such a relationship would be characterized as one of agency. An agency relationship has a specific set of business and legal risks about which the manufacturer would want to be aware. Alternatively, if the distributor “takes title” to the goods, the shoe is on the other foot. The distributor should consider the business, insurance, and legal ramifications of its choice.

Mistake Four: Failing to Consider Antitrust Issues

Since distributor agreements often allow for exclusive territories and rights, the parties must be aware of any antitrust implications. Will regulators view the agreement as a restraint of trade? Where a manufacturer is negotiating with a group of distributors, this antitrust issue can be particularly problematic.

Mistake Five: Failing to Handle Judicial Jurisdiction Within the Agreement

Since both parties enter the agreement with optimism and hope, there may be a tendency to avoid any issue that leads to a potential business divorce. This can be a huge mistake, however. Just as the distributor is likely to be more familiar with local customs, trade policies, and the like, it also will be most familiar with local courts and regulatory bodies. The supplier/manufacturer should carefully consider the legal implications of any particular jurisdictional clause (or the implications of omitting the clause from the agreement).

Distribution Agreements: Skilled, Experienced Legal Counsel a Key

The law firm of CKB VIENNA LLP provides legal and business consultation to nearly every type of business, from large to small – even to startups and nonprofits. We have crafted distribution agreements for manufacturers and distributors alike. While the firm is skilled in all forms of litigation, our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has a long history of representing clients in all types of business issues and disputes. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

Penny-Wise & Pound Foolish: Skimping in Branding Can Cause Legal Problems

For Meghan Trainor, Grammy Award winning music performer, it may indeed be “all about that bass,” but in the modern business world with its short attention span, page view counters, and widespread social media, “it’s all about that brand.” Entrepreneurs and established business alike are search for their brand. Even those businesses that have one already are spending enormous amounts on keeping it before the eyes and ears of customers.

There is a lot to consider as one contemplates building one’s brand. Properly prepared and run, a branding campaign can spell success. Skimp on your program, and your business could flounder. Moreover, it could easily run into legal trouble. We offer four special insights into how skimping can be legally deadly to your future.

Insight One: Branding Requires Deliberative Work

Branding isn’t a web site; it’s much more than a logo. It cannot be captured by the 500 business cards for $10 offering at the local office supply store. It’s your story and only you can really tell it. What’s more, if you can’t tell your story, no one else will be able to do so. Recognize, therefore, that branding is deliberative work. Yes, it requires creativity, but it requires focus and research. Will your brand conflict with existing trademarks in the current market? Will it conflict with trademarks in markets that you have not yet contemplated? Skimp on trademark research and could face expensive litigation in the future.

Insight Two: Don’t Skimp on Domain Names

Every brand should be intertwined with an Internet presence. Attorneys circulate stories of businesses that spent thousands of dollars on a slick logo and brand campaign only to discover that the Internet domain name is unavailable. Check this out before you’ve written the first check for branding. Moreover, if you’ve settled on a domain name, don’t stop just with the “dotcom” or the “dotorg” domains; tie up misspellings, singular and plural versions of your brand, and phonetically similar domain names. This will cost you extra in the beginning; it will save in the long run.

Insight Three: Don’t Try Registering Your Trademark on Your Own

Many in business think that a trade name must be identical to another in order to be problematic. It isn’t true. In a significant segment of trademark litigation, the issue is whether there could be a likelihood of confusion between your brand and another in the consumer’s mind, not in your mind.

Insight Four: Failing to Enforce Your Brand Trademark

Once you have your trademark – your brand – you need to guard it. Following federal trademark registration for your brand, you can stop others from using it in the marketplace. You can waive the right to do so, however, if you fail to monitor and enforce your trademark. You must regularly spend some time (and usually some money) to find infringements, and then take action to stop the infringement. Once you have allowed one business to infringe, it becomes difficult – sometimes impossible – to enforce your brand in the future.

Distribution Agreements: Skilled, Experienced Legal Counsel a Key

The law firm of CKB VIENNA LLP provides legal and business consultation to nearly every type of business, from large to small – even to startups and nonprofits. We have helped with branding issues and have assisted numbers of businesses in trademark research, due diligence research, and in various forms of associated litigation. And while the firm is skilled in all forms of litigation, our attorneys also provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA LLP has a long history of representing clients in all types of business issues and disputes. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

Department of Labor Releases Final Version of Overtime Exemption Rules

On May 18, 2016, the federal Department of Labor (DOL) announced the publication of its new final rule regarding overtime exemptions. Some estimates indicate that the new rule will extend overtime pay protections to as many as 4 million U.S. workers during the rule’s first year.

Many may recall that two years ago, President Obama penned a memorandum that directed the DOL to update its regulations so as to define more clearly which white collar workers were protected by the terms of the Fair Labor Standards Act (FLSA), which sets the federal minimum wage and defines overtime payment standards.

Some within and without the federal government had become concerned that a growing number of employees were working more hours and yet were not being compensated for them. Others pointed out that the initial white-collar exemption level was set in 1975 and had not been changed since. In response to these and other pressures, 11 months ago, the DOL published proposed rules and invited responses from interested parties. According to government data, the DOL received more than 270,000 comments. The DOL advises that some of those comments were reflected in the final rule.

Key Provisions

The primary effect of the new Final Rule is to update the salary and compensation levels required for executive, administrative, and professional workers to be exempt from being paid overtime. As such, the Final Rule:

•  Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region – currently, the South ($913 per week; $47,476 annually for a full-year worker)

•  Sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004), and

•  Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles, and to ensure that they continue to provide useful and effective tests for exemption.

The Final Rule throws a bone at employers; allowing them to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Women and Minorities May See Additional Overtime Benefits

Some employment experts say the DOL’s Final Rule could significantly benefit women and minorities in the workplace. They contend that the “gender gap” now places many women in middle management firmly within the salary range that would now be covered by the salary exemption increase. In other words, since female managers on average earned $981 per week in 2014, according to DOL data. Their male counterparts earned $1,346 weekly. Many of those men would be exempt from overtime pay, whereas the women would not be.

Rules Affect Both Small and Large Businesses

The DOL’s new rules are pervasive in their affect on businesses, both large and small. Many businesses have found the rules confusing. They worry whether their human resources practices are in sync with the new requirements. For years now, CKB VENNA LLP has represented businesses in all types of legal issues, from litigation to employment-related matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

“A Room With a View”: Government’s Action Obstructing Owner’s View Not Actionable

In the classic 1908 novel (and 1985 film), A Room With a View, the female protagonist laments the fact that while she has been promised hotel accommodations in Florence that feature a view of the beautiful River Arno, she instead finds herself housed in a room that overlooks a meager courtyard. Alas, she must make do.

In a recent decision out of the Court of Appeal of California, Second Appellate District [see Boxer v. City of Beverly Hills, 246 Cal. App. 4th 1212 (Apr. 26, 2016)], disgruntled owners of real estate learned a similar lesson. Not only did they lose their unobstructed views from their backyard when the defendant municipality planted a stand of coastal redwood trees in a nearby park, the owners lost their lawsuit for inverse condemnation. The impairment of their view did not alone amount to “a taking” or damaging of their property under California condemnation law.

Inverse Condemnation Differs from Eminent Domain

While most California real estate owners have heard of eminent domain, many fewer understand the related, but decidedly different legal rules involving inverse condemnation. With eminent domain, a governmental entity has the right “to take” one’s property for a public good, but must pay fair value for that taking. Inverse condemnation occurs, on the other hand, when – in the eye of the real estate owner – the government has taken, acquired, or otherwise appropriated property without following the required eminent domain procedures. Inverse condemnation can even occur when the landowner’s right to use his or her property has been detrimentally affected by regulation or some other burden.

Landowners Contended the Planting of Trees Affecting Their View was “a Taking”

In Boxer v. Beverly Hills, the landowners contended that the government’s action in planting the trees (and spoiling their view) amounted to an inappropriate taking without compensation. The appellate court held that obstruction of view did not constitute a taking. The court went on to say, however, that if the landowners had otherwise proven a taking by the government, then (and only then) the loss of the view might have been considered by a California court in assessing the appropriate diminution in value of the property.

Eminent Domain and Inverse Condemnation Are Complex Legal Issues

Both eminent domain and inverse condemnation involve complex legal issues. Having experienced, aggressive legal counsel on your side is generally a key to success in any struggle with a government entity. Have you or your business been contacted by a governmental entity regarding a planned condemnation of all or part of your property? Has a governmental action amounted to a burden or a taking of your property interests? For years now, CKB VENNA LLP has represented landowners, homeowners, lessees, and others who have an interest in real property in California as they face the harsh reality of a governmental condemnation proceeding. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Mortgage Servicers Anticipate Additional Lawsuits in Light of California High Court’s Yvanova Decision

The California mortgage community is abuzz with comment and speculation following the February 18, 2016 decision by the California Supreme Court in Yvanova v. New Century Mortgage Corp., 365 P.3d 845 (Cal. 2016), in which the Court held that, at least in some circumstances, a borrower who had suffered a nonjudicial foreclosure had standing to sue for wrongful foreclosure based on an allegedly void assignment of the mortgage. In at least one news article published by the American Bar Association on the heels of the decision, a California law professor was quoted as saying that the Yvanova decision could “open the courthouse doors to people in Yvanova’s situation.”

Yvanova Holding Strengthened, Some Say, By Subsequent Sciarratta Decision

Indeed, that Yvanova might offer borrowers a new weapon to fight foreclosures appeared buttressed by a decision out of California’s Fourth Appellate District some three months later. In that case, Sciarratta v. U.S. Bank Nat’l Ass’n, 2016 Cal. App. LEXIS 399 (May 18, 2016), the appellate court held that foreclosure by an entity with no power to foreclose is, by itself, the tort of wrongful foreclosure.

Is Yvanova Really an “Open Sesame” for California’s Courthouse Doors?

Are borrowers’ rights advocates correct? Does the Yvanova decision really amount to “Open Sesame” when it comes to liability claims filed against mortgage lenders and servicers for wrongful foreclosure in California? Put another way: Is wrongful foreclosure law substantially different after Yvanova?

Many Unanswered Questions

Some mortgage law experts allow that while Yvanova may have opened a door, once one runs through the door, all you’re left with is a dark cave. That is because so many questions were left unanswered. The Yvanova court admits as much, indicating its decision is “a narrow one.” Here are just a few of the issues left hanging by the Court’s February decision:

•  In terms of mortgage assignments, what constitutes a void assignment vs. a voidable assignment?

•  Does an assignment need to be recorded to effect the transfer of a loan?

•  What legal difference does it make if a mortgage loan is assigned considerably after the original closing date?

•  How did New Century’s 2007 bankruptcy affect, if at all, the alleged assignment of the Yvanova mortgage?

•  What statute of limitations applies to “Yvanova”-like causes of action?

•  Does Yvanova apply to pre-foreclosure claims?

•  Must a borrower tender the full amount of the loan in order to set aside a wrongful foreclosure? (Language in Yvanova seems to say tender rules still apply.)

•  Assuming that a bare allegation that the purported assignment was void is insufficient to state a cause of action, what additional facts must be alleged?

Banks, Mortgage Lenders, and Servicers Should Review Internal Procedures

While the Yvanova decision may not open the floodgates of wrongful foreclosure litigation in the way that some alleged experts are saying – or, perhaps hoping – one thing is really clear: Real estate closing documents, assignment documents, and mortgage servicing documents are being put under the legal microscope. Are you prepared? The best, first step is the retention of experienced, knowledgeable attorneys to advise you. For years now, CKB VENNA LLP has represented lenders, mortgage companies, mortgage servicers, and others in foreclosures and other types of real estate disputes. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

New TRID Rules Are “Good News-Bad News” for Mortgage Industry

Effective October 1, 2015, federal financial regulatory bodies put in place significant changes in mortgage and real estate closing documentation associated with home sales. The TILA-RESPA Integrated Disclosure Rule, sometimes called TRID (also known as “Know What You Owe”), is geared at making mortgage loan transactions not only more transparent, but easier for consumers to understand.

Old Forms Out, New Ones In

TRID jettisons four old forms and supplants them with two primary documents, wherein the purpose is to allow borrowers to compare costs and other differences in lending offers. The first form, a Loan Estimate, must be given or mailed to the consumer no more than three business days after receipt of the loan application. The second, a Closing Disclosure, must be provided to the consumer at least three business days prior to the consummation of the loan.

The Loan Estimate form combines the “old” Good Faith Estimate and the Truth in Lending Disclosure into a shorter form that should be easier to understand. The new Closing Disclosure combines the “old” final Truth-In-Lending statement and the HUD-1 settlement statement into a consolidated form that provides a detailed account of the entire real estate transaction, including terms of the loan, fees, and closing costs.

Unintended Consequences

As with almost any government program created to protect, TRID’s new requirements have produced some unintended consequences. Here are some of them:

•  Sure, TRID’s use of two forms, instead of four, is overall an improvement. But some borrowers are saying that the rules actually cost them money, inasmuch as lenders feel that they must now lock in an interest rate for a longer period of time. A 60-day lock is usually more expensive than a 30-day lock. For some loans, the difference can be more than $1,000.

•  Closing documents may be clear, but if some types of changes are required, the changes can result in postponing the closing for three additional days while the borrower ponders over why things are taking so long. True, minor changes don’t trigger a new three-day period, but lenders and services may be reluctant to take the risk that an entirely new three-day disclosure period isn’t called for, so buyers and sellers should beware.

•  Violations of TRID are costly. According to some reports, the Consumer Financial Protection Bureau can impose penalties that range from $5,000 to $1 million per day, depending upon the violation.

•  In some situations, where two closings are tied together (a buyer must sell his or her property before being able to close on the new purchase), the new TRID rules can produce a domino effect, where one party thought that his or her closing was progressing well, only to discover that something in the “other” closing now causes delay in the related transaction.

TRID Rules Can be a Legal Maze

In spite of the fact that more than six months have passed since the new forms and closing procedures became effective, many realtors, lenders, and others are still trying to work out the kinks. TRID rules are quite complex, and the penalties for violating them are severe. Most lenders, servicers, and real estate firms have retained strong, experienced legal counsel to assist in this transitional phase. For years now, CKB VENNA LLP has represented lenders, mortgage servicing firms, borrowers, and others in all phases of real estate transactions. Our team of attorneys understands the complexity of the new TRID rules and stands ready to represent you intelligently and aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Four Keys to Avoid Business Litigation

“I’ll sue.”

Those words are all too common these days. Run through the channels on your television, and chances are high that you’ll find at least one episode of a courtroom reality show. People can’t seem to get along. Business enterprises are no less feisty. Some argue that California is the most litigious state in the Union. “Show your strong side,” some argue. With all that said, are there reasons to avoid litigation?

Some of the most successful California businesses are doing just that – they are staying out of court. Here are four reasons why your business might want to invest in policies and programs to avoid business litigation.

Benefit Number 1: You’ll Save Money

Financial officers point out that it’s difficult enough to project costs related to ordinary business operations, even those that a business undertakes on a regular basis. The costs of litigation are even more unmanageable. Whether the business has in-house counsel or not, lawyers can be expensive gladiators. While you usually don’t want to be identified as a floor mat, avoiding litigation often saves money.

Benefit Number 2: You’ll Stay Focused

Not many business plans include significant time spent discussing nagging litigation. Litigation is, at best, a distraction. In this competitive world, a business must not only do battle with other similar firms in the area, but all too often it must go head to head with others from around the world. The shortest path to success is a straight line; it usually doesn’t involve the distracted zigzags brought about by litigation. Avoiding litigation will allow attention to remain where it should be: On your business.

Benefit Number 3: You’ll Preserve Business Relationships

A cordial relationship with a person or business is difficult to craft, and even more difficult to maintain. If a dispute with a customer or supplier arises in your business, being “right” isn’t always the issue. Is the loss of that customer or supplier really worth it? The old saying, “he won the battle, but lost the war” comes to mind. Winning can be quite shortsighted. If you or your business is always right, then perhaps you need not ever avoid litigation. If you are less than perfect, it might be appropriate to allow others some measure of imperfection, as well.

Benefit Number 4: You’ll More Likely Maintain Good Will Among the Public

Litigation can have a negative effect on your business reputation. Court battles are, by their very nature, public displays. It is difficult, if not impossible, to manage all aspects of a court battle. Your opponent may cast harsh light upon your enterprise. Industry groups may not always take your side. If you are suing a customer, you may lose others. If you sue a supplier, you may find it more difficult to work with another.

Bottom Line: Sometimes Litigation Isn’t Good for Your Bottom Line

Are you considering business litigation? Have you looked at all sides of the dispute? Recognize that seeking advice from experienced, aggressive attorneys does not always land you in court, that sometimes – even often – it is best to avoid litigation, rather than seek it out. CKB VENNA LLP has a long history of representing clients in all types of business disputes. If litigation is best for you or your firm, we have a team of attorneys that can take your case as far as necessary. We also have the judgment and skill to provide counsel where litigation is not in your best interests. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Employers Walk Tightrope When it Comes to Post-Injury Drug Tests

New OSHA Rule May Prohibit Blanket Drug Tests Following Work Injuries

On May 12, 2016, the Occupational Safety and Health Administration (OSHA) published its final rule on electronic reporting of workplace injuries and illnesses. While the new rule makes no direct mention of post-injury drug testing, occupational experts analyzing OSHA’s commentary to the rule have voiced concerns that employers may no longer be able to seek broad-based drug testing of injured employees following work-related injuries. Others argue that the new rule contradicts OSHA’s oft-stated commitment to a safe workplace.

The New Rule Purportedly Promotes Accurate Reporting of Injuries

Beginning August 10, 2016, employers in California and around the nation that are subject to OSHA (i.e., employers with 11 or more employees) must establish “a reasonable procedure” for employees to report work-related injuries and illnesses.

The rule says that the employer’s reporting procedure may not deter or discourage a reasonable employee “from accurately reporting a workplace injury or illness.” Here’s the rub: Some employee groups contend that blanket alcohol and drug testing after workplace accidents does just that – it deters some injured workers from reporting their injuries.

OSHA seems to agree with the employee groups. In its commentary accompanying the final rule, the agency says the following:

Although drug testing of employees may be a reasonable workplace policy in some situations, it is often perceived as an invasion of privacy, so if an injury or illness is very unlikely to have been caused by employee drug use, or if the method of drug testing does not identify impairment but only use at some time in the recent past, requiring the employee to be drug tested may inappropriately deter reporting.

What is an Employer to Do?

According to OSHA representatives, only narrowly tailored post-accident testing – testing in situations in which drug use likely contributed to the accident and that accurately tests for impairment – will be considered immune from OSHA’s enforcement action. This seems to go against OSHA’s earlier pronouncements that employers should have the ability to promote a safe workplace, and that drug testing was one means of assuring that the workplace was drug free.

Here are a few suggestions for employers:

•  Blanket post-accident drug testing policies should be carefully reviewed. Referrals for post-accident testing should be tied to those situations in which it appears that the employee caused or contributed to the accident, or those situations in which there is a reasonable suspicion that the employee had been using drugs.

•  Employers who must conduct post-accident testing in order to comply with, for example, U.S. Department of Transportation regulations, should continue to do so.

•  Be aware that most drug tests only identify recent drug use; they do not prove that the accidental injury was caused by drug use. Because the OSHA rule appears to prohibit blanket testing following incidents, random testing of all employees might still be authorized.

Does Your Business Have a Post-Injury Drug Test Policy?

Does your business have policies regarding drug testing following work-related injuries or apparent accidents? Are you concerned that your policies may be impacted by the new OSHA rule? Have you recently reviewed your post-injury policies? Have you considered random drug testing? Prior to establishing or modifying your policies, it would probably be advantageous to consult with an experienced attorney.

The law is complicated and unsettled. Don’t wade through these choppy waters alone. For many years now, the attorneys at CKB VENNA LLP have provided employment/labor counseling and litigation services to nearly every type of business. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

Judicial Versus Non-Judicial Foreclosures in California

As is the case in a number of other states, California law provides two methods through which a lender can foreclose on real property:

•  Non-Judicial Foreclosure

•  Judicial Foreclosure (via the state court system)

What differences exist between the two procedures? Does one have an advantage over the other?

Non-Judicial Foreclosure

Used more frequently than the alternative, non-judicial foreclosure can be utilized as long as the deed of trust securing the loan transaction contains a “power-of-sale” clause. Under the power of that clause, the trustee may – at the request of the owner of the note and deed of trust, and after a default by the borrower – sell the real estate to pay off the balance of the loan. Usually, the default is a failure to pay the monthly installments due under the terms of the note that is secured by the deed of trust. Default can occur due to other circumstances, however. Ordinarily, if the borrower has failed to pay designated taxes or has failed to insure the property, that constitutes default and could result in a non-judicial foreclosure.

Judicial Foreclosure

If the mortgage or deed of trust does not contain a power-of-sale clause or if, for other reasons, the note holder determines that a non-judicial foreclosure is not advisable, it can proceed against the borrower in a judicial foreclosure. As is implied in the procedures name, this type of foreclosure involves the filing of a lawsuit against the borrower alleging the original debt, the default on the part of the borrower, and a “prayer” that order be issued requiring the sale of the real estate for the benefit of the lender.

Which Procedure is Favored?

There are many more non-judicial foreclosures than foreclosures that proceed through the courts. One reason, of course, is that virtually all deeds of trust contain power-of-sale clauses. While non-judicial foreclosures in California can appear to move at the speed of an overweight tortoise, they are actually much quicker than judicial foreclosures. Non-judicial foreclosures have one particular disadvantage: The lender gives up the right to any deficiency judgment against the borrower if the property is worth less than the outstanding debt. Most lenders give up that right to save the time. After all, what good is a deficiency judgment against a borrower who has so little that he or she (or they) cannot afford the monthly installments to save the residence?

Judicial foreclosures have one significant disadvantage themselves: “The right of redemption.” For a period of one year after the judicial foreclosure sale, the borrower has the right to buy the real estate back. Again, the chances of that happening are slim. If the borrower could get the kind of funds to repurchase the real estate within one year, the borrower would likely have been able to avoid the foreclosure in the first place.

Expert Legal Counsel is Key to Foreclosure Processes

Whether a lender chooses the non-judicial or the judicial route for foreclosure, it is advisable to retain the services of an experienced, competent attorney who is skilled in real estate law. For years now, CKB VENNA LLP has represented lenders, mortgage companies, mortgage servicers, and others in foreclosures and other types of real estate disputes. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.

California Supreme Court Looks to Resolve Important Issue Regarding State’s Right to Repair Act

Must a California homeowner always provide the builder with notice of alleged defects and give the builder an opportunity to repair pursuant to the California Right to Repair Act (“RRA”) [Civil Code § 895 et seq.], prior to filing a lawsuit? For some time now, the answer has not been clear.

Inconsistent Decisions in Two Court of Appeals Districts

The confusion is due to a conflict in decisions between two districts of the state’s Court of Appeals. One decision from the 4th District [Liberty Mut. Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98], held that the notice and pre-litigation procedures in the RRA applied only where the defects had not resulted in actual property damage. Where actual damage had occurred, the 4th District’s Court said that the homeowner could file a lawsuit alleging common law causes of action without first complying with the RRA’s pre-litigation procedures.

In a later decision, McMillin Albany LLC v. Superior Court of Kern County (2015) 239 Cal. App. 4th 1132, the 5th District Court of Appeals rejected Liberty Mutual and held generally that where the homeowner filed a civil action alleging deficiencies in construction that would constitute violations of the RRA, the homeowner must comply with the Act’s pre-litigation procedures, even if the lawsuit did not allege a cause of action under the RRA. McMillin is now before the California Supreme Court, and a decision is expected later this year.

The Right to Repair Act’s Aim is to Reduce Litigation

One of the important purposes of the RRA is to reduce the amount of litigation in California’s courts. The legislature determined that, wherever possible, the builder should be allowed an opportunity to fix a defect, rather than spend what could be years in the civil court system. The RRA applies to new residential construction sold after January 1, 2003.

The general RRA pre-litigation procedure is as follows:

•  The owner provides the builder with a notice outlining, at least in general terms, the alleged defect

•  The builder has the right to perform an initial inspection of the premises within 14 days of the builder’s acknowledgement of the notice

•  Within 30 days of the initial inspection, the builder may make a written offer to repair

•  Upon receipt of the offer to repair, the homeowner has 30 days within which to authorize the builder to proceed with the repair

•  Alternatively, the homeowner may request the names of up to three alternative contractors who are independent of the homebuilder, and who regularly conduct business in the area

•  The builder has 35 days after receiving the request for additional names within which to provide the homeowner with a choice of alternative contractors

Facing Repair Demands?

Does your construction business face any outstanding repair demands? Have you received a notice under California’s Right to Repair Act? Has a homeowner filed a civil action against you or your business for alleged construction defects? Because the law is currently so unsettled, it would be prudent to retain the services of a law firm that is experienced in representing California construction companies. CKB VENNA LLP has a long history of representing clients in all types of construction disputes. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909-980-1040 – or complete our online form.