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

Johnmohammadi v. Bloomingdale's, Inc.

Docket: 12-55578
Opinion Date: June 23, 2014
Judge: Watford
Areas of Law: Arbitration & Mediation, Class Action, Contracts, Labor & Employment Law

Plaintiff filed a class action suit to recover unpaid overtime wages from her former employer, Bloomingdale's. The district court granted Bloomingdale's motion to compel arbitration, determining that shortly after being hired by Bloomingdale's, plaintiff entered into a valid, written arbitration agreement and that all of her claims fell within the scope of that agreement. The court concluded that plaintiff had the right to opt out of the arbitration agreement, and had she done so she would be free to pursue this class action in court. Having freely elected to arbitrate employment-related disputes on an individual basis, without interference from Bloomingdale's, she could not claim that enforcement of the agreement violated either the Norris-LaGuardia Act, 29 U.S.C. 101 et seq., or the National Labor Relations Act, 29 U.S.C. 151 et seq. The court concluded that the district court correctly held that the arbitration agreement was valid and, under the Federal Arbitration Act, 9 U.S.C. 1 et seq., it must be enforced according to its terms. The court affirmed the judgment of the district court.

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Ramona Equip. Rental v. Carolina Casualty Ins. Co.

Docket: 12-55156
Opinion Date: June 20, 2014
Judge: Paez
Areas of Law: Construction Law

Candelaria, CCIC, and Otay (collectively, defendants) appealed the district court's judgment in favor of Ramona, the supplier of rental equipment, in Ramona's action under the Miller Act, 40 U.S.C. 3131-3134. The court held that Ramona's notice of demand was timely as to rental equipment furnished more than ninety days before the notice. The court joined its sister circuits and held that if all the goods in a series of deliveries by a supplier on an open book account are used on the same government project, the ninety-day notice is timely as to all the deliveries if it is given within ninety days from the last delivery. Concluding that there was no risk of double liability to Candelaria, the court affirmed the district court's award in damages, holding that all amounts due for all the rental equipment furnished to Otay for construction of the project were properly in the ninety-day notice. The court affirmed the district court's ruling not to award damages for invoices submitted on or after June 10, 2008, where Ramona had commercially reasonable justifications for choosing not to mitigate its damages prior to that date. Defendant's claim that Ramona waived its right to collect service charges was waived. Accordingly, the court affirmed the judgment of the district court.

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