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.

Dealers Should Know California’s Song-Beverly Consumer Warranty Act

For California businesses, particularly those who sell automobiles and small trucks, the legal landscape can be a proverbial mine field, with multiple consumer law provisions – some of which sometimes appear to conflict with each other. Step on one incorrectly, and it explodes.

Retail businesses must be particularly familiar with the Song-Beverly Consumer Warranty Act (“Warranty Act”). While the Warranty Act isn’t just limited to the sale of motor vehicles – it applies to all consumer goods sold at retail in the state of California that are covered by express or implied warranties – it seems to impact auto dealerships more than other types of businesses.

Warranty Act’s General Provisions

The Warranty Act does not apply to all auto sales. There are some specific requirements:

•  Generally, there must be a written warranty. The automobile manufacturer may provide the warranty. It can also be provided by the dealer itself, particularly with regard to used cars.

•  The vehicle must generally have been purchased for “personal, family, or household purposes.” The dealer should recognize, however, that many small vehicles that are used in businesses still fall within the terms of the Warranty Act. A dealer ordinarily cannot defend a Warranty Act claim on the grounds that the vehicle has been used for some business purposes.

•  The consumer must have given the manufacturer, or the manufacturer’s representative, a “reasonable number” of opportunities to fix the problem(s) with the vehicle. The “reasonable” number depends upon the circumstances. Generally, where the alleged defect involves safety equipment, such as the brakes, fewer attempts to resolve the issue are allowed. Some experts say that the dealer gets two chances to fix a safety issue; there is no such legal rule, however. Where the problem is less serious, “reasonable” could mean multiple attempts to fix the issue.

•  The number of days that the vehicle has been out of service is also important. If the vehicle was out of service by reason of warranty repairs for a total of 30 days within the first 18 months or 18,000 miles, whichever comes first, then there is a presumption that that the vehicle is defective under the terms of the Warranty Act.

•  The warranty issue must substantially impair the vehicle’s use, and value of safety.

The Dealer May Have to Repurchase Vehicle

If the purchaser establishes that the vehicle does not meet the standards of the Warranty Act, the manufacturer, or its representative, may be required to replace the vehicle or return the purchase price to the buyer (or lessee). “Purchase price” must include the price paid for manufacturer-installed items. It need not include the price paid for non-manufacturer items installed by the dealer.

The Buyer May Be Charged For Use of Vehicle

Under the Warranty Act, the buyer (or lessee) may be charged for the use of the vehicle, regardless of whether the vehicle is replaced or the purchase price is refunded. Generally, that charge is based upon the percentage of miles that the vehicle has traveled before it was first brought in for correction of the problem. Vehicles are assumed to have a life of 120,000 miles. Thus, if the car had been driven 10,000 miles before it was first brought in for correction of the problem, the buyer could be charged 1/12th (10,000/120,000 = 8.333 percent) of the purchase price for usage.

Warranty Act Has Other Important Provisions – Legal Counsel is Key

The Warranty Act has a number of other important provisions that should be considered by any automobile dealership. For example, it allows an award of attorney’s fees to the consumer, in some instances. While California law is generally “consumer friendly,” particularly when an aggressive consumer’s attorney represents the consumer, your business is not without power of its own. CKB VENNA LLP has a long history of representing clients in all phases of business litigation, including vigorous representation of dealers and other automotive businesses regarding alleged violations of the Song-Beverly Consumer Warranty Act and California’s Consumer Legal Remedies Act. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us today by telephone at 909-980-1040, or complete our online form.

Four Misconceptions About Succession Planning in Business

According to information released by the Small Business Administration, more than half of all small business owners are 50-years-old, or older. Financial planning experts say that more than three-quarters of all small business owners intend to sell their operations, in order to fund retirement; yet, less than a third have an actual written succession plan. As Ben Franklin once said, “Failing to plan is planning to fail.”

One reason why so many business owners fail to plan is that they share common misconceptions about succession planning. While the list is endless, here are four of the most common.

No. 1: The “Scarlett O’Hara Thought Process”

At one of the primary junctures of “Gone With the Wind,” Scarlett says to herself, “I can’t think about that right now. If I do, I’ll go crazy. I’ll think about that tomorrow.” All too many business leaders are like “Miss Scarlett.” Business owners avoid succession planning, like other clients avoid estate planning. Both remind one of one’s mortality. Both sometimes involve having to make tough decisions. In a business, succession issues never resolve themselves. They never go away. Don’t procrastinate. Plan now.

No. 2: My Successor Will Be Ready to Take the Reins When I’m Ready to Give Them Up

Many business owners are so used to making decisions, so accustomed to determining when and where and how a business issue is to be determined, that they forget one important factor in succession planning: Timing. If you are going to turn the reins over to someone, he or she has to be available and competent to accept that responsibility. Particularly if taking on new responsibility means longer hours or a geographic move, the new leader needs some flexibility. Does the “target” have small children whose needs must be considered? Are there other concerns that need to be addressed? Just because the business owner is finally ready, it doesn’t always follow that everyone else is, too.

No. 3: The Family Will Always Buy Into My Plan

As noted above, many business owners are insular in their methods. They “think” that they have involved others in the overall operations of the business. They may have withheld all important decisions for themselves, however. These sorts of “leaders” are often surprised when the rest of the family doesn’t see eye-to-eye with the succession plan. If one child has been involved in the operation of the business and another has remained on the outside, a plan that calls for equal ownership of stock between the two may fall flat with the insider. Succession planning needs to be discussed among all those who will be affected. The owner may have been used to having his or her way. In succession planning, that needs to change.

No. 4: Financing the Buy-Out Will Be Manageable

It is one thing to decide to turn over the reins. It is often another to have in place a mechanism that balances the needs of the owner to “cash out,” and the needs of the new business successors to stay invested in the day-to-day operation that has made for success. The value of the business wasn’t built overnight. Pulling retirement funds out may be easier said than done. Here, it ordinarily pays to retain experts: Insurance people, business operations specialists, CPAs and, most particularly, skilled attorneys. While the business owner may have “gone it alone” in building the business, now is not the time for a solo. Build a solid transition team.

CKB Vienna LLP Has the Expertise to Assist in Succession Planning

CKB VENNA LLP has the experience necessary to help any California business with its succession planning issues. We can combine your need to address business concerns with your family’s needs for long-term estate planning. We have represented small to mid-size businesses and their owners in many situations. We work well with other experts, and can help you guard the important assets that have been accumulated through a life of hard work. Our team understands that complex legal issues often go hand in hand with personal, family concerns, and we strive to give you the sort of representation that you deserve. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Bill in Congress Would Limit Arbitration Rights for Many California Businesses

Companion bills have now been introduced in both the U.S. House and Senate that would exempt most individuals and small businesses from the Federal Arbitration Act (FAA), a piece of 1925 legislation that currently allows contracting parties to avoid the courts and have their disputes informally resolved. The legislation, known as “Restoring Statutory Rights Act,” was introduced in the Senate by Senator Patrick Leahy (VT) and in the House by Representatives John Conyers, Jr. (D-Mich.) and Henry C. “Hank” Johnson, Jr. (D-GA).

FAA Currently Has a Broad Application, Even to Consumer Agreements

Under the FAA, commercial enterprises, such as auto manufacturers and dealerships, may include clauses in their consumer sales agreements that require arbitration of any disputes. The sales agreements may also contain provisions in which the consumer waives his or her right to participate in a class action lawsuit against the businesses. Consumer organizations have argued that the FAA was never intended to cover most consumer agreements, but the federal courts, in virtual unanimity, have said that such limitations are valid.

One recent decision by the United States Supreme Court, DIRECTTV, Inc. v. Imburgia, 136 S.Ct. 463, 193 L.Ed.2d 365 (2015), arose in California, where state courts have not been friendly to those who draft consumer rights waivers. The U.S. Supreme Court, however, again reiterated that the FAA is the law of the land; it preempts inconsistent California law.

Leahy’s Bill Responds to New York Times Series of Articles

According to a press release from Senator Leahy’s office, the bill was in reaction to several articles critical of the federal arbitration process in The New York Times. According to those pieces, the FAA has been used by many large corporations to bar consumers from initiating or participating in class actions. Consumer activists claim that class actions are an important consumer tool, since one consumer with a defective fuel pump is hardly in a position to go to war with General Motors.

In particular, the bill would amend the FAA, so as to make it inapplicable to forced arbitration of claims brought by individuals or small businesses, “arising from the alleged violation of a Federal or State statute, the Constitution of the United States, or a constitution of a State.” The bill would also require court determination as to whether the FAA applied in a given setting.

With Passage Uncertain, Consumer and Commercial Disputes Continue

While the passage of the bill is uncertain, Leahy and others argue that there needs to be a restoration of consumer and small business rights in the country. According to some consumer advocates, the threat of litigation and the power of public opinion are both important mechanisms to safeguard consumers’ health and property interests. The advocates add that the same can be said about small businesses. Business interests counter that the freedom to contract is at stake, and that the arbitration and class action waiver clauses should not be viewed in a vacuum. They argue that consumers enjoy broad protections within American society.

Warranty Act Has Other Important Provisions – Legal Counsel is Key

Arbitration clauses and class action waivers are among many types of clauses that should be considered by any business that sells consumer goods, particularly those that sell new or used automobiles. California law is generally “consumer friendly.” Your operation needs a team of attorneys who are “business friendly.” CKB VENNA LLP has a long history of representing clients in all phases of business operation and litigation. We offer vigorous representation of dealers and other automotive businesses in all aspects of their operation. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form to speak with us today.

Arbitration Clauses: An Appropriate Tool for Many California Auto Dealers

It is sometimes said that, “Americans are a litigious sort.” We do seem to take all sorts of disputes, large or small, to court. In fact, some of the most popular reality television shows in syndication – “The People’s Court,” “Judge Judy,” and others – are courtroom based. The mantra seems to be, “We’ve been wronged, and we want a judge.” A look behind the TV shows discloses, of course, that the Judge Judy’s courtroom isn’t real, nor is she currently a sitting judge. She is instead an arbitrator and the parties have agreed to let her determine their dispute.

Arbitration: It Makes Sense for Many Business and Consumer Disputes

More and more, businesses are turning to arbitration to resolve disputes. Arbitration offers a number of advantages of battling the issues out in court:

•  Often, arbitration is less expensive than traditional litigation. While the costs of arbitration have grown in recent years – a qualified arbitrator can charge several thousand dollars per day for his or her services – arbitration is usually cheaper than airing the issues in court. The arbitration procedure can be streamlined, saving valuable time, which means saving money.
 

•  Arbitration usually results in a quicker resolution of the issues. It seems that delay is built into the traditional litigation system. Recent studies show that the average time from filing to decision in arbitration is one-third that of traditional court battles.
 

•  Scheduling arbitration is much more flexible. There are no competing cases; there is no crowded docket. Where it is convenient for the parties, arbitration can even occur on weekends or in the evening. Try talking the judge into Saturday morning court!
 

•  Arbitration can be more private. Courtrooms, of course, are public forums. Arbitration need not be open to the public at all.
 

•  Arbitration can be final. In traditional litigation, with multiple appeals, sometimes it seems that the dispute can never actually be resolved. It is possible to structure a contract such that disputes are subject to binding arbitration. A dispassionate arbitrator hears the dispute, reviews the evidence, and makes a decision. Putting the matter behind a party can have positive results, no matter what the actual outcome.

Arbitration Clauses Should Be Considered For Automobile Sales Contracts

Has your automobile dealership reviewed its sales contracts lately? Does it utilize arbitration to resolve consumer disputes? If not, should arbitration be incorporated into your standard sales agreements? Do your sales agreements incorporate class action waivers? While California law embodies a host of provisions designed to assist and protect the consumer, particularly when that consumer is in the hands of an aggressive consumer’s attorney, your business is not without power of its own.

CKB VENNA LLP has a long history of representing clients in all phases of business litigation, including vigorous representation of dealers and other automotive businesses regarding alleged violations of the Song-Beverly Consumer Warranty Act and California’s Consumer Legal Remedies Act. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Auto Dealers Must Understand Consumer Legal Remedies Act

Since 1970, California’s Consumer Legal Remedies Act (“CLRA”) has protected consumers, particularly those who lack commercial sophistication, from unethical businesses practices. Often referred to as the state’s “Lemon Law,” the CLRA has most often been used against used car dealers.

Typical CLRA Allegations

Typical allegations have included claims that the dealer sold:

• Accident-damaged vehicles without appropriate notice to the purchaser
• Vehicles at prices greater than advertised
• Rental cars without disclosing the vehicles’ rental histories
• Sold what were classified as “certified” pre-owned vehicles, which did meet qualifications for the “certified” designation

Written Notice of “Violation” Required

In order to take advantage of the CLRA, the consumer must give the dealer written notice of the particular violation or violations. If the consumer prevails in his or her claim, the court is required to award attorney’s fees and costs to the consumer.

30-Day “Safe Harbor”

It is important to note that the CLRA provides the dealer with a 30-day “safe harbor” period to correct the alleged violation. Under the Act, if the seller provides “an appropriate correction, repair, replacement, or other remedy” within 30 days of receiving the written notice, the consumer cannot recover monetary damages.

Corrective Offer Can Deflate CLRA Civil Action

The power of an appropriately framed “corrective offer” became clear in a Court of Appeals decision late last summer. In the Benson case, the customer contended, among other things, that he had been sold a vehicle with undisclosed frame damage, and that the vehicle’s price exceeded the advertised price. The customer sent the required written notice, and also filed a lawsuit against the dealer. Before the expiration of the 30-day safe harbor time period, the dealer offered to “unwind” the transaction completely and to pay $2,500 in attorney fees. The customer refused and continued with the lawsuit. Later, the case was actually settled, but the issue of attorney fees still hung like a cloud. The trial court denied the request for attorney’s fees and the Court of Appeals affirmed.

CLRA Has Two Purposes, Not Just One

The Court said that the CLRA had two purposes. Its first purpose, of course, was to protect consumers. Second, the CLRA provided efficient and economical procedures to secure that sort of protection. To allow the consumer to engage in protracted litigation, and to run up attorney fees when an appropriate correction had been offered at the outset, was against the very purposes of the CLRA.

Bottom line: As was the case in Benson, where the defense to the CLRA allegations may not be strong, unwinding the transaction may be the least expensive way out for the dealer.

Facing CLRA Allegations?

Does your automobile dealership face CLRA allegations? Recognize that, while the CLRA is a powerful weapon in the hands of an aggressive consumer or consumer’s attorney, your business is not without power of its own. Under all circumstances, your business needs to conduct an early and aggressive investigation of the facts. Just as important, you need skilled, experienced legal counsel who are familiar with the CLRA, its defenses, and who are also skilled in negotiations.

CKB VIENNA LLP has a long history of representing clients in all phases of business litigation, including vigorous representation of dealers and other automotive businesses regarding alleged CLRA violations. Our team understands the complexity of the issues, and stands ready to assist your business. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

California Businesses Should Be Careful in Classifying Workers as Independent Contractors

Historically speaking, when a business owner only desired a particular result – e.g., sheetrock erected in a residence according to established building codes – and did not need control over the details of how the work might actually be carried out, the owner could contract with an independent contractor and avoid the taxes and financial responsibilities of the employer-employee relationship.

California Generally Disfavors Independent Contractor Distinction

In recent years, however, some states – particularly California – have instituted policies that disapprove of the independent contractor relationship. Recent news reports note that firms, such as FedEx, Uber, or Lyft, have paid millions of dollars to settle allegations that they misclassified employees as independent contractors. Under a new law passed last year [AB 202], cheerleaders for professional athletic teams must be treated as employees.

Independent Contractor or Employee: What Factors Control?

What factors control whether the California worker can be properly classified as an independent contractor, rather than an employee? While the following list is not exhaustive, here are five factors to consider:

Work Performed is Integral Part of “Contractor’s” Business

In most instances, when a business “sub-divides” its core business operation, the persons who do that work are considered employees, whether or not they are so designated. This was the rationale for California’s position that FedEx Ground drivers are employees and not independent contractors. As one expert noted, when the company can tell you what color socks that you can wear to work, it’s your employer.

Who Supplies Equipment or Tools?

Generally speaking, where the worker supplies his or her own equipment or “tools of the trade,” that is an indication that the worker is an independent contractor. Where those items are supplied by the business, there is a strong notion of a true employer-employee relationship.

Is the Work Performed Skilled or Unskilled?

True contractors ordinarily possess specialized skills (e.g., plumbers, electricians, interior designers, and the like) that they utilize with little or no supervision. Where the work is of an unskilled nature, chances are high that the workers will be categorized as employees.

How Are Workers Paid by the “Contractor?”

Payment on an hourly basis almost always results in an employee designation. Where payment is on a project basis, and where there is an end to the service being provided, this may show independent contractor status.

Have You Entered into a Formal, Written Agreement?

If the parties have entered into a formal, written agreement that characterizes the worker as an independent contractor, that is a factor that can be considered. Note, however, that too many firms rely upon this factor. A court has no trouble looking past “the form,” if the practice contradicts it. If control over the worker exists to a significant degree, the designation of contractor status will not control.

Does Your Business Utilize Independent Contracts?

If your business routinely utilizes workers whom you classify as independent contractors, be aware that if (i) your intentions do not always control, (ii) you exert control over the activities of the worker, or (iii) the type of work being performed is covered by a special law, then you may be subject to fines and other damages for inappropriately classifying the workers as contractors. The guidance of an experienced legal team is a key to avoiding unpleasant and expensive surprises. CKB VIENNA LLP has a long history of representing clients in all phases of business operations. We can advise you if the designation of your workers is appropriate or risky. Our team understands the complexity of the issues, and stands ready to assist with your long-term needs and goals. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or or complete our online form.

Sophisticated Charitable Giving Can Be an Important Estate Planning Tool

Sometimes Success is Penalized!

All too often these days, it seems that success is penalized. The entrepreneur comes up with the idea, takes significant risks in launching a business enterprise, fields off competitors, and then works countless hours for several years building the model, the cash flow, and the brand. He or she is finally at the magic point at which a sale of the business will produce a significant return. Only, because the entrepreneur started with almost nothing, his or her tax basis in the company is virtually nothing. A big tax bite on the capital gain seems inevitable.

Sophisticated Help for Those Who Are Philanthropically Inclined

There may be some alternatives to the big tax bite. One that may work well, particularly for entrepreneurs that are philanthropically inclined, is the charitable lead annuity trust (“CLT”). It sounds sophisticated; it is. But CLTs can also produce some very sophisticated results.

Charitable Lead Annuity Trust: What Is It?

Generally speaking, a CLT is a type of irrevocable trust that makes payments to charity for a specified time period (crafting that time frame involves the weighing of a number of factors), after which the balance in the trust either reverts to the trustor/settlor or passes to (or in trust for) other individual beneficiaries, such as children and grandchildren. Attorneys sometimes refer to CLTs as “wait a while” trusts, since the final beneficiaries wait a while before receiving the full benefit of the principal.

Benefits of a Charitable Lead Annuity Trust

For an entrepreneur who is naturally unwilling to part forever with assets that have been so carefully created, a transfer to a CLT, if properly drafted, can:

• Allow the entrepreneur, via a “grantor CLT,” to offset capital gains with a nice tax deduction in the year of the sale, and pay the bulk of the capital gain taxes owed over several years. This amounts to income averaging. Because of special provisions found in IRC § 7520, a grantor CLT can be much more effective than some other forms of remainder trusts. Yet, like the remainder trust, the CLT allows the entrepreneur to reclaim most of the property when the trust terminates.

• Allow the entrepreneur, via a “non-grantor CLT,” to pass assets down a generation to children – or even skip a generation to grandchildren – at little or no gift tax cost.

• Maneuver around existing percentage limitations on income tax charitable deductions where the entrepreneur is already giving substantial amounts to charity and, therefore, cannot fully deduct additional gifts.

Does Your Estate Plan Have Room for a Charitable Lead Trust?

While great care must be taken in structuring a charitable lead trust, such a vehicle can accomplish a number of important objectives for the individual or entrepreneur who is facing what investment counselors refer to as “a liquidity event.” Experienced legal counsel is a key to a successful plan. CKB VIENNA LLP has a long history of representing clients in all phases of wealth management and estate planning. We would be honored to assist you, and can help you to achieve your long-term goals. Our team takes the time to understand your goals and your long-term needs. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

Sale-Leaseback Arrangements Can Be Powerful Tools For Many Businesses

In California and other states, specialty manufacturing businesses and high tech firms sometimes face a difficult dilemma. In the early days of crafting their business model, they may have acquired one or more tracts of improved real estate that they utilize to produce their products or services. At the time of the acquisition, this seemed to make sense; the firms needed control over their location and processes. They likely financed the real estate purchase with an infusion of cash – obtained either through the sale of common stock, or through mezzanine financing – and a traditional mortgage.

Owning Real Estate Can Actually Be Expensive

In hindsight, they may now realize that they have too much valuable capital invested in their real estate. They find themselves in the business of owning real estate, when the original plan was to produce the high tech item or service that the public needs or wants. For such businesses, a sale-leaseback arrangement might be the answer.

Sale-Leaseback: What Is It?

Generally, a real estate sale-leaseback is a carefully crafted two-step transaction. In step 1, the owner-occupant sells the land and improvements used in its business operations to an investor. In step 2, the former owner-occupant leases the land and improvements back from the investor, under terms that are favorable to both parties.

Advantages of a Typical Sale-Leaseback

Carefully crafted sale-leaseback transactions can offer a number of important advantages:

•  Costs of “financing,” i.e., the lease payments, are often considerably cheaper than mezzanine financing.
•  The purchaser/lessor is usually interested in an income flow, not in being a landlord. The lease agreement is generally a net-net-net lease, with the “old owner” maintaining virtual control over the land and improvements.
•  Depending on the situation, there can be considerable tax savings for the “old owner.” The full lease payment is deductible, whereas before, the interest expense and depreciation were the only available deductions. This can be particularly important when the original down payment for the real estate was provided by proceeds from common stock.
•  Generally speaking, a sale-leaseback arrangement amounts to 100 percent “financing,” whereas the original transaction required that valuable capital be tied up to meet the lender’s requirements.
•  Ordinarily, since the sale-leaseback transaction is not a loan, there is little need for the type of covenants that a bank or other lender would require.
•  Sale-leasebacks typically free up capital for growth.
•  Sale-leasebacks can be particularly helpful if the principal shareholders/owners of the former owner-occupant – now the lessee – is trying to “package” the business for sale to private equity groups. Whether they admit it or not, most private equity groups base their willing purchase price on some multiple of the business’ earnings before interest, tax, depreciation, and amortization (“EBITDA”) Generally speaking, removing the real estate from the equation – i.e., through a sale-leaseback arrangement prior to the packaging of the underlying business for sale – will improve the business’ EBITDA.

Have You Considered the Benefits of a Sale-Leaseback?

CKB VIENNA LLP has a long history of representing clients in all phases of real estate ownership, including contract negotiations and drafting original acquisition transaction, in the arranging of mezzanine financing, and in the crafting of sale-leaseback arrangements that can provide value and flexibility to any business. We would be honored to assist you. Our team makes it a point to understand your business structure, your needs, and your long-term goals. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909-980-1040, or complete our online form.

California's New Paid Sick Leave law (AB 1522)

Effective July 1, 2015, nearly all California employers will be required to provide at least three days of paid sick leave per year to their employees. The new law, AB 1522, also known as the “Healthy Workplaces, Healthy Families Act of 2014,” was approved by the California Legislature on August 30, 2014 and signed into law by Governor Jerry Brown. 

The majority of employers will be required to provide paid sick leave under AB 1522 to all employee,  including part-time, per diem, and temporary employees. However, the new law provides exceptions for: 

1. Providers of In-Home Supportive Services (IHSS);

2. Flight deck or cabin crew members of air carriers subject to the Railway Labor Act; and

3. Employees working under collective bargaining agreements, provided certain minimum requirements are met.

An employee qualifies for paid sick leave by working for an employer for at least 30 days within a year in California and by satisfying a 90 day employment period. The 90 day period works like a probationary period.  Although you begin to accrue paid sick leave on July 1, 2015, or your first day of employment if you are hired after July 1, 2015, if you work less than 90 days for your employer, you are not entitled to take paid sick leave.

Employees will earn at least one hour of paid leave for every 30 hours worked. That works out to a little more than eight days a year for someone who works full time. But employers can limit the amount of paid sick leave you can take in one year to 24 hours.

The new law establishes a minimum requirement, but an employer can provide sick leave through its own plan or establish different plans for different categories of workers.  However, each plan must satisfy the accrual, carryover, and use requirements of the law or put the full amount of leave into your leave bank at the beginning of each year in accordance with the Paid Time Off policy.  If an employer provides a policy which exceeds the minimum requirements, including providing a specific cap, the policy must be clear as to the additional terms that apply to their employees.

DOES YOUR BUSINESS HAVE A SICK LEAVE POLICY?

Does your business have policies regarding sick leave? Are you concerned that your policies may be impacted by the new  rule? Have you recently reviewed your sick leave policies?  Prior to establishing or modifying your policies, it would probably be advantageous to consult with an experienced attorney.

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.

Davis v. Nordstorm, Inc.

Docket: 12-17403
Opinion Date: June 23, 2014
Judge: Smith
Areas of Law: Arbitration & Mediation, Class Action, Contracts, Labor & Employment Law

Plaintiff filed a class action suit alleging that Nordstrom violated various state and federal employment laws by precluding employees from bringing most class action lawsuits in light of AT&T Mobility LLC v. Concepcion. Nordstrom, relying on the revised arbitration policy in its employee handbook, sought to compel plaintiff to submit to individual arbitration of her claims. The district court denied Nordstrom's motion to compel. The court concluded that Nordstrom satisfied the minimal requirements under California law for providing employees with reasonable notice of a change to its employee handbook, and Nordstrom was not bound to inform plaintiff that her continued employment after receiving the letter constituted acceptance of new terms of employment. Accordingly, the court concluded that Nordstrom and plaintiff entered into a valid agreement to arbitrate disputes on an individual basis. The court reversed and remanded for the district court to address the issue of unconscionably.

Download Opinion Here