Businesses Must Be Mindful of New Restroom Access Law

Businesses Must Be Mindful of New Restroom Access Law

Legal Aspects of Bathroom Access Laws for California Businesses

On March 1, 2017, California’s Equal Restroom Access Act went into effect and many businesses are scurrying to determine if the new law covers their facilities and, if so, what must be done to ensure compliance.

New Law Applies to All Single-User Toilet Facilities

Under the new law, all single-user toilet facilities within a business establishment, place of public accommodation, or state or local government agency must be identified as all-gender toilet facilities. Specifically, a single-user toilet is:

•  A toilet facility with no more than one water closet and one urinal

•  With a locking mechanism controlled by the user

Any restroom that has those characteristics must now have a sign outside indicating that the restroom is for all genders. If a business has two restrooms, both of which are single-user toilets, then both such restrooms must be identified and labeled as all-gender toilet facilities.

California Law is Consistent with OSHA Rules

Employers and businesses should recall that OSHA’s Sanitation standard requires employers to provide their employees with toilet facilities. The standard is part of a larger health concern – that employees who have inadequate access to restrooms are subject to serious health issues, such as urinary tract infections and bowel and bladder problems. Not only must access to restrooms be available under OSHA rules, such availability must be prompt and sanitary. Moreover, employers may not impose unreasonable restrictions on employee use of toilet facilities.

Unrestricted Restroom Access is Not a New Idea

While the issue has become controversial in some parts of the country, providing unrestricted restroom access is no new idea. Anyone who has traveled on a commercial airplane recognizes that the restroom facilities are not restricted by gender. The same is true generally for restrooms in homes and many small businesses. Portable restrooms that are required for most construction projects are not gender specific.

Restricted Restroom Access Causes Other Problems

State officials have noted for some time now that placing too many restrictions on restroom access cause significant issues for the public. For example, when out in public, children of a different gender than their caretakers and people with disabilities who rely on caretakers of a different gender often have no choice but to break social norms when the only available restroom is designated to a specific gender. The new California law is designed to reduce the problems associated with this issue.

California Law Should Benefit Everyone

While much of the publicity surrounding the new Access Act relates to transgender and gender nonconforming persons, most experts indicate the new law will promote bathroom equity for everyone, regardless of gender.

CKB Vienna LLP – Experienced Attorneys and Advisors

Some business owners worry that the regulatory world is just too confusing and that the changing maze of rules that must be followed takes too much time and attention. Many turn to experienced attorneys for assistance. For years now, CKB VIENNA LLP has represented all sorts of businesses in many types of legal and regulatory environments. As attorneys, we keep up with the latest requirements so that the business owner can keep his or her attention on 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.

California Employers Should Be Wary of Using Job Abandonment to Terminate Workers

California Employers Should Be Wary of Using Job Abandonment to Terminate Workers

Attorneys Discuss Rights to Terminate in California

Terminating an employee for excessive absenteeism is a relatively common practice in California. HR officers often feel that terminating an employee for, say, five days of unexcused absences is an objective decision, whereas firing the employee for “poor performance” is subjective and more difficult to document. A recent California appellate decision shows, however, that where the employee’s absences are potentially linked to medical leave, the employer must be very careful, lest it open itself to a claim that it has violated the California Family Rights Act (“CFRA”).

The Bareno Case

According to the employer in the case, San Diego Community College, Bareno had a history of unexcused absences. It reprimanded her on numerous occasions; in 2013, it imposed a three-day suspension for excessive absenteeism. On the Monday she was supposed to return to work, she called her supervisor and advised that she would be absent while she sought medical attention. Later that day, she followed up with an email indicating she would be out that workweek. She provided a medical authorization note. Later that week, she emailed her supervisor’s boss, indicating she wanted to appeal the three-day suspension and further indicating that she was out on medical leave.

On that same day, she sent her supervisor a new medical form using the email system at a UPS Store. The employer claimed it did not receive the “UPS” email and, after five days of what it said was unexcused absence, it sent Bareno a termination letter. During the time that letter was in transit, Bareno emailed another medical verification form, indicating she needed more leave. By this time, the employer told her she’d been fired and refused to reconsider its decision.

Bareno sued the community college, saying she had been terminated in retaliation for taking medical leave – a personnel action that violates the CFRA. The trial court granted the college summary judgment and Bareno appealed.

Appellate Decision

On January 13, 2017, the appellate court reversed the trial court, noting that if the evidence was viewed in the light most favorable to Bareno, she had stated a CFRA claim. The court said Bareno’s email indicating she was appealing the three-day suspension and that she “was on medical leave” was a sufficient notice to the employer that she needed medical leave. The college had an obligation to ask Bareno for additional information regarding her leave request if it thought such was necessary. It could not merely sit back and wait the five days, and then terminate her.

Employer Takeaways

The case provides a number of important takeaways for employers. Among them are the following:

•  Proceed with caution when an employee mentions being out of work for medical reasons.

•  The courts will generally give the employee the benefit of the doubt; so don’t just rely upon an employment contract provision that says the employee is deemed to have “voluntarily resigned” after a specified number of unexcused absences.

•  Recognize that spam and email filters can prevent delivery of important messages from an absent employee. Keep in contact with the employee during any period of absence.

•  If the employer feels that verification for an absence is wanting, it has a burden of moving forward with employee contact. If there is any reason to believe the employee is absent for a CFRA-protected medical reason, the employer should not assume the employee has resigned.

CKB VIENNA LLP: Experienced Legal Counsel in Employment Law

In light of the Bareno case, all California employers should review their HR policies to determine what changes, if any, need to be made. Many employers determine that having experienced, outside counsel is a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Joint Trusts: Are They a Good Idea?

Joint Trusts: Are They a Good Idea?

Many couples take pride, and appropriately so, for the bond they share. They have no secrets; they share responsibilities. They have similar goals, likes, and predispositions. They view the marriage as a special partnership within which everything is shared. When it comes to estate planning, they may see the benefits that can flow from revocable trust arrangements, both in terms of the overall management of assets and the avoidance of at least some of the headaches of probate administration. They’ve always had a joint checking account, so why not a joint trust arrangement? But is a joint trust really a good idea?

What Does the Joint Trust Look Like?

Generally speaking, with a joint trust (particularly a joint revocable trust), the spouses create one trust, into which their assets are contributed during their lifetimes. Typically, the joint trust document provides that all assets contributed are deemed to be owned 50 percent by each spouse, usually as tenants in common. Upon the first death, the assets are segregated into a “Decedent’s Trust,” and a “Survivor’s Trust.” The provisions of each of these segregated trusts are different so as to take advantage of desired estate tax objectives.

The Goal is Convenience – the Result Can Be Confusion

While a joint trust can – particularly for small estates – be convenient, more often than not, any convenience is outweighed by the complexity. Often, the initial goal with the joint trust is to avoid the division of the couple’s assets, with some going to one spouse’s trust and other assets going to the separate trust of the other spouse. In many cases, however, the only thing that is accomplished is the postponing of the required division to a time that coincides with the first death. Many trustees, particularly if they do not have legal or accounting backgrounds, find their duties become truly complicated as they wrestle with the needs – and requirements – of the Decedent’s Trust and the Survivor’s Trust. What assets go where? When, and at what tax consequences, are the transfers made?

Errors in Administration Can Be Expensive

Some survivors and trustees find that errors are easily made in the administration of a joint trust. Remedying those errors can be costly. What seemed at first to be a plan to save time and money ends up more costly than if two separate trusts had been created in the beginning. Most legal experts agree that the administration of separate trusts is more straightforward and much less prone to error.

Estate Planning: Skilled, Experienced Legal Counsel a Key

The law firm of CKB VIENNA has extensive experience in the drafting and creation of trusts of all types. We have helped individuals establish both revocable and irrevocable trusts and have given our insight into all facets of estate planning and wealth management. We are skilled in drafting and coordinating all sorts of estate planning documents, from wills to trusts to buy-sell agreements and succession planning arrangements. While the firm is skilled in all forms of litigation, our attorneys offer guidance designed to avoid the consequence and cost of litigation wherever possible. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

For California Mechanic’s Lien Filing Purposes, When is a Project Complete?

For California Mechanic’s Lien Filing Purposes, When is a Project Complete?

Cal. Civ. Code § 8412 provides, in relevant part, that a general contractor has 90 days from “completion” of its work to record its mechanics’ lien claim. That sounds simple enough, but in recent years, questions have often arisen as to when work on a project is considered “complete.”

“Substantial Completion” isn’t Enough to Start the Clock

For example, is work complete when the owner receives a certificate of occupancy (COO)? Those who are familiar with construction industry practices recognize that the issuance of a COO doesn’t necessarily mean all punch list items have been completed. In recent years, some California trial courts took the position that the 90-day clock began to tick upon “substantial completion” of the contractor’s work. In 2016, the California Court of Appeal clarified the rule, however, finding that “completion” – for purposes of the 90-day filing window – only occurs upon “actual completion” of the work of improvement.

Three Other Factors Can Trigger 90-Day Mechanic’s Lien Filing Requirement

In addition to actual completion of the improvement, three other events detailed in Cal. Civ. Code § 8180 can trigger the running of the 90-day time period for filing one’s lien:

•  Occupation or use by the owner accompanied by cessation of labor

•  Cessation of labor for a continuous period of 60 days

•  Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days

Special Rules May Apply to Construction of Separate Residential Units

Contractors should bear in mind that special rules apply to mechanics’ liens associated with projects to construct separate residential units. Cal. Civ. Code § 8448 provides that if improvement work consists of the construction of two or more separate residential units:

•  Each unit is deemed a separate work of improvement, and completion of each unit is determined separately for purposes of the time for recording a claim of lien on that unit.

•  Material provided for the work of improvement is deemed to be provided for use or consumption in each separate residential unit in which the material is actually used or consumed, but if the lien claimant is unable to segregate the amounts used or consumed in separate residential units, it has the right to a mechanics lien against the entire property.

Mechanic’s Liens Provide Important Protections

California’s mechanic’s lien laws provide important equitable protection for those supplying materials and/or labor to a construction project. Generally speaking, courts have determined that strong public policy requires that mechanics’ lien laws be construed for the benefit of the potential lien claimants.

Attorney’s Fees and Costs Can Sometimes Be Recovered by Lien Claimants

While mechanic’s liens are generally limited to the reasonable value of the work provided by the claimant, or the price agreed upon by the claimant and the person who contracted for the work (less any payments received), where the lien claimant forecloses its lien, it may be able to recover its costs for recording the lien, as well as attorney’s fees.

California Law Regarding Mechanic’s Liens is Complex

California’s mechanic’s lien law is quite complex. Failure to file appropriate lien documents can be fatal to a claim. Most contractors and suppliers have discovered that the risks of proceeding without solid, experienced legal counsel are great. Most agree that the costs associated with retaining a good legal team are small compared to the risks of filing faulty paperwork on their own.

The law firm of CKB VIENNA has provided both legal and business consultation to contractors, developers, landowners, landlords, and others for years. We have extensive experience in both filing and defending mechanic’s liens in California. We have assisted a range of parties in assessing and managing the risks associated with construction projects. While we are skillful settlement negotiators, we are also experienced in all forms of litigation. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Los Angeles Employers Face Important New Hiring Practice Rules

Los Angeles Employers Face Important New Hiring Practice Rules

On January 22, 2017, an important new Los Angeles employment provision – the Fair Chance Initiative Ordinance – took effect within the city. The new ordinance, passed last December, adds significant restrictions on the types of questions that area employers can ask prospective employees, and it also prohibits many employers from conducting a criminal background check prior to making a provisional offer of employment.

New Ordinance’s General Provisions

Los Angeles employers should familiarize themselves with the new ordinance. Generally speaking, it:

•  Applies to all private employers with more than 10 employees located or doing business in the City of Los Angeles

•  Covers employees who generally perform “at least two hours of work on average each week” in the City

•  Allows exceptions for city and local government departments, state or federal government units, and any employers that are required by law to inquire about past criminal convictions

•  Provides additional exceptions for employment positions that are required by law to be held by persons without specified criminal convictions

•  Provides exceptions for positions requiring the person employed to possess or use a firearm in the course of the employment

•  Covers any individual who submits an application for work performed in the City, including temporary, seasonal, commission, contracted, and even unpaid training positions

Employers Must Take Certain Affirmative Actions

The new ordinance also requires that employers modify their employment advertising and job posting in particular ways. For example, after the effective date of the ordinance, covered employers must:

•  Indicate in all advertisements and solicitations, whether they be internal or external, that the employer will consider qualified applications that reveal criminal histories in a manner that is consistent with the ordinance

•  Post a notice calling attention to the new ordinance in a conspicuous spot within every workplace and job site in the city

Conditional Offers of Employment

Perhaps the most important part of the new ordinance is the requirement that covered employers refrain from asking applicants about their criminal history until after a conditional offer is made. Once that conditional offer has been made, a covered employer is permitted to perform a criminal background check. If such a background check discloses criminal history information unfavorable to the applicant, the employer is not permitted to withdraw the offer until and unless the employer has completed a written assessment that effectively links the specific aspects of the criminal history with risks inherent in the job sought by the applicant. In making its determination, the employer must consider various factors, including the following:

•  The nature and gravity of the offense

•  The time that has elapsed since the conviction

•  The nature of the job that is sought by the applicant

“Fair Chance Process”

Before the covered employer takes any adverse action against the applicant, they must also engage in the “Fair Chance Process.” Generally speaking, that process includes:

•  Providing the applicant written notification of the adverse employment action

•  Providing a copy of the written assessment described above

•  Providing such other and further documentation that would support the proposed adverse employment action.

As to this last step in the process, the employer must allow the applicant five business days to respond and provide additional information or documentation regarding the accuracy of the criminal history results and to detail any important mitigating factors. If the applicant provides correcting or mitigating information, the employer must conduct another written assessment and inform the applicant of its decision with a copy of that new written assessment.

Employers Should Review Their Existing Policies

In light of these new requirements, all Los Angeles employers should review their HR policies to determine what changes, if any, need to be made. The penalties for non-compliance with the new law do not kick in until July 1, 2017, but they will be monetarily punitive: $500 for the first violation, $1,000 for the second, and $2,000 for subsequent violations.

CKB VIENNA LLP: Experienced Legal Counsel

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

Mortgage Firms and Real Estate Agents Shouldn’t Get Too Cozy

Mortgage Firms and Real Estate Agents Shouldn’t Get Too Cozy

Many prospective homeowners see the residential real estate market as a maze of red tape, paperwork, and endless bargaining. It’s no surprise, therefore, that California real estate agents are often called upon to give prospective buyers advice. The questions don’t just concern housing values, the quality of local school districts, and the levels of area property taxes; they often relate to mortgage lending. While real estate agents often have a wealth of information about current mortgage conditions and practices, both the agent and the mortgage firm can get into deep trouble if they maintain anything less than an arm’s length relationship. Mortgage firms and real estate agents shouldn’t get too cozy with each other.

Consumer Financial Protection Bureau Levies Steep Fine Against California Mortgage Lender

On January 31, 2017, the Consumer Financial Protection Bureau (CFPB) reported that it had taken action against a major California mortgage lender for paying what it labeled “illegal kickbacks” for mortgage business referrals. Under the terms of a CFPB consent order, the lender will pay a $3.5 million civil penalty and various real estate brokers, and a mortgage loan servicer will pay a combined $495,000 in consumer relief and penalties.

CFPB’s Allegations Were Far-Reaching

The CFPB alleged that the California lender used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. It alleged, for example, that the lender established marketing services agreements with some companies, which were framed as payments for advertising or promotional services, but which were created to disguise payments for referrals. The CFPB also contended that the lender:

•  Paid for referrals through agreements with more than 100 real estate brokers

•  Paid brokers to require consumers – many of whom were already prequalified with another lender – to prequalify as well with the lender

•  Split fees with a mortgage servicer in order that the lender might obtain consumer referrals

CFPB Actively Pursuing Many Other Cases

According to the CFPB, the agency has helped recover more than $11.7 billion since its creation, assisting more than 27 million consumers, and resolving more than one million complaints. According to the government entity, it makes sure banks, lenders, and other financial companies treat American consumers fairly. Quite a few lenders and others argue that CFPB’s methods are often heavy-handed.

CKB VIENNA LLP: Experienced Attorneys

Because the attorneys at CKB VIENNA LLP have such a broad financial services practice, the firm has the experience to provide lenders, servicers, and others with in-depth advice regarding the CFPB and its practices. Our firm has been active in monitoring developments at the CFPB and other government agencies. We have helped financial clients with compliance with the Dodd-Frank Act, with Truth in Lending issues, and with other important legal matters related to mortgage lending.

We can provide financial entities with an important, dispassionate perspective when it comes to potential CFPB exposure. We can examine your practices and advise what changes, if any, ought to be made to strengthen your position in regulatory matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Alert to Commercial Landlords: New Access Law Disclosure Requirements Are Now Effective

Alert to Commercial Landlords: New Access Law Disclosure Requirements Are Now Effective

In recent years, the California legislature has echoed the state’s strong public policy in fostering access to public and commercial properties by persons with disabilities. In 2012, for example, the legislature passed a bill that codified California Civil Code § 1938. Under that bill, every commercial lease agreement executed on or after July 1, 2013 must contain a provision indicating whether the property being leased has undergone inspection by a Certified Access Specialist (CASp), and, if so, whether the property has or has not been determined to meet all applicable construction-related accessibility standards.

AB 2093 Adds Additional Disclosures in Commercial Leases

Late in 2016, the Legislature passed AB 2093, which amends § 1938 by adding additional requirements. Landlords should alter their business practices in light of the following:

•  If the leased premises has not undergone a CASp inspection, or if the property has been altered or modified between the date of an inspection and the date of the lease agreement, the landlord must inform the tenant of its right to request a CASp inspection. Special language for this purpose is now contained in Cal. Civ. § 1938(e).

•  If the landlord has obtained a CASp inspection report that indicates the premises meets applicable construction-related accessibility standards, the landlord must also provide the tenant with a copy of the report within seven days following the execution of the lease.

•  If the landlord has obtained a CASp inspection report that indicates there is a need for modifications or repairs, the landlord must provide the CASp report to the tenant prior to the execution of the lease agreement. If the report is not provided to the tenant at least 48 hours prior to lease execution, the tenant may rescind the lease agreement within 72 hours after lease execution.

Delivery of the CASp report by the landlord to the tenant or prospective tenant may be conditioned upon the latter’s covenant to keep the contents of the report confidential.

AB 2093 Presumes Responsibility for Repairs Remains With Landlord

Under the amended version of Cal. Civ. § 1938, any repairs or modifications necessary to correct violations shown in the CASp report are presumed to be the responsibility of the landlord. The landlord or tenant may specifically agree otherwise, of course.

Landlords Are Not Required to Obtain CASp Reports

Passage of AB 2093 does not change existing law with regard to the need for commercial landlords to secure CASp inspections and reports. Such inspections still are not required.

Prospective Action Needed by Many Commercial Landlords

In order to be in compliance with the new law, California commercial landlords should immediately review current lease agreements and determine if they are in line with the new requirements. Lease agreements should clearly indicate which party is responsible for any repairs or modifications to the premises that are made necessary in the event that the leased property is determined to be in violation of accessibility standards.

Commercial Real Estate Leasing Calls for Experienced Legal Counsel

The law firm of CKB VIENNA LLP has provided both legal and business consultation to commercial landlords for years. We have reviewed and drafted all types of commercial leases and have assisted both landlords and prospective tenants in assessing and managing the risks associated with the letting and renting of commercial real estate. If commercial disagreements arise, our firm is also 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 has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Advertising: When Does “Puffing” Become False and Misleading?

Advertising: When Does “Puffing” Become False and Misleading?

We’re all familiar with “puffing,” even if not by name. Puffing (a/k/a “puffery”) consists of advertising that states, in general terms, that a product or service is superior to others. Classic product slogans come to mind:

•  BMW: “the ultimate driving machine,”

•  Maxwell House: “good to the last drop,” or

•  Miller Lite: “Taste great, less filling.”

It isn’t that BMW is promising that you’ll never find a better car, or that Maxwell House is saying that its coffee is the absolute best; U.S. law considers the statements to be sufficiently general in nature as not to be misleading.

Some Product Statements Are Misleading

There is sometimes a fine line, however, between puffing – which is allowed under U.S. law, and making misleading statements in advertising, which is not. A recent decision by the Federal Trade Commission (FTC) concerning a California product is illustrative.

In a mid-December, 2016 decision, the FTC held that promotional advertising by California Naturel, Inc., promoting its “all natural” sunscreen on the company website as containing “only the purest, most luxurious and effective ingredients found in nature” violated Section 5 and 12 of the FTC Act. During the litigation, California Naturel admitted that eight percent of its sunscreen formula was dimethicone, a synthetic ingredient.

Clarifying Statements in Web Site’s Fine Print Often Isn’t Enough

The company contended that it included an accurate product ingredient list and a disclaimer on its web site, but the FTC said it wasn’t enough. It noted that the use of dimethicone was buried within a list of more than 30 ingredients and that nothing identified the ingredient as synthetic. The FTC was particularly critical of the disclaimer, since it was positioned at the bottom of the web site. The FTC contrasted that inconspicuous location with the prevalence of “all natural” advertising elsewhere on the site and on the product packaging. In light of the situation, the FTC issued an order prohibiting California Naturel from advertising its products as “all natural” and making other similar misrepresentations.

“Catch-22” in Advertising

There is somewhat of a Catch-22 when it comes to advertising. Under the “80/20 rule,” 80 percent of all advertising is ignored. So, if your advertising campaign is too bland, no one will pay any attention to it. On the other hand, if you stretch things too far, you could be in trouble with a claim of misrepresentation. How can your advertising land within the 20 percent that is effective and yet still be safe (or relatively so) from FTC and other claims? One smart response: Don’t just engage a marketing team; make sure that team engages with knowledgeable, skilled attorneys at CKB Vienna.

CKB Vienna LLP: A Full-Service Consulting and Law Firm

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 advertising and 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. At CKB VIENNA, we use our collective resources to address every detail of your complex business and legal demands. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Waivers in Connection with Insurance Settlement Offers

Waivers in Connection with Insurance Settlement Offers

California Lawyers 

Negotiating with your property insurance insurer concerning a business claim can be time-consuming. And, since “time is money,” it can also be expensive. If you or your California business is negotiating (arguing) with your insurance insurer, you know that at least one fact is true: It can usually afford a delay in resolution of the claim much better than can your business. It has deeper pockets. What you really want is a reasonable settlement offer, and sooner rather than later would be nice.

In California, the Carrier May Demand a “White Waiver”

Within the settlement process, however, there is sometimes a hitch. Before it communicates an offer of settlement to you, your insurance company may demand that you and/or your business sign a special waiver acknowledging that its communication of an offer cannot be later used to establish bad faith against the insurer. Sometimes referred to in California litigation circles as a “White waiver,” the special waiver gets its name from a 1985 decision by the California Supreme Court [see White v. Western Title Ins. Co., 40 Cal. 3d 870, 710 P.2d 309, 221 Cal. Rptr. 509 (1985)], in which the Court said that the contractual relationship between an insured and its insurer does not end when litigation begins. Accordingly, if the insurer makes a “low-ball” offer, the offer itself can be used by the insured as evidence of bad faith on the part of the insurance company.

Should You Sign Such a Waiver?

Faced with a “White waiver,” the answer of whether to sign it is the same as is offered for many legal questions: “It depends.” Generally speaking, if the communication between you and the insurer has been friendly and positive, if the discussions that you have had with the adjuster or insurance executive show a reasonable attitude by the insurer toward the claim, it may be in your best interest to execute such a White waiver. One suggestion here, however: Have the waiver expire in a reasonable, stated, time period. That way, you aren’t waiving the right should the insurer turn out to be negotiating in bad faith. After all, the White decision was never intended to allow an insurance company to withhold performance until the policyholder waived its contract rights.

If the insurer declines to talk unless a White waiver is provided, then signing it may not be a good idea. Refusal to talk is itself a showing of bad faith. Signing the waiver allows the insurer to act in a fashion that is contrary to insurance law.

When the insurer demands a White waiver, it is asking the policyholder to take on faith that the offer that is about to be communicated is a reasonable one. If that were so clear, particularly if the negotiations have turned to acrimony, why would it need the waiver?

What if the Insurer Does Not Require a Waiver?

If no such White waiver is required, and if the insurer’s offer is patently unreasonable, a policyholder should consider using the White decision to hold the insurer accountable in a bad faith claim. One should always expect the insurer to offer a rigorous defense.

Takeaway

The White decision was never intended to place a shield around all communications between an insurance company and its insured. The requirement that it act in good faith continues after a dispute arises over coverage or a claim. If your insurance company shows signs of making a reasonable offer or shows signs of moving up significantly from its prior settlement offers, you may want to consider signing the White waiver. If, on the other hand, there is any doubt that this is going to happen, perhaps you should consider whether:

•  To condition the waiver on the carrier’s making an offer at or above some minimum confidential number, and/or

•  To consider making the waiver apply only for a short period.

Insurance Negotiation Involves Complex Legal Issues

While some businesses choose to negotiate insurance claims without the aid of a skilled, experienced attorney, many find that in doing so they fail to come out ahead. As the saying goes, they “often leave money on the table.” Negotiating takes skill and patience, particularly where there is any question that the insurer may not be dealing in good faith. Are you or your business involved in an insurance claims dispute? Have you been presented with a White waiver? Having experienced, aggressive legal counsel on your side can be crucial to protect your interests. For many years now, CKB VIENNA LLP has represented business, large and small, in all sorts of insurance disputes in California. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Four Pointers to Comply With Recent California Supreme Court Rest Break Decision

Four Pointers to Comply With Recent California Supreme Court Rest Break Decision

Just prior to Christmas, the Supreme Court of California, in a split decision [see Augustus v. ABM Security Services, Inc., 2016 Cal. LEXIS 9627 (Dec. 22, 2016)], held that it was a violation of Cal. Lab. Code, § 226.7 and Industrial Welfare Commission (IWC) wage order No. 4-2001, subd. 12(A), to require that security guards keep their pagers and radio phones on and that they remain vigilant and responsive to calls when needs arose during their rest periods. The high court added that under California law, employers relinquish any control over how employees spend their break time; a rest period must be a period of rest.

California’s Rest Break Requirements

While rest breaks aren’t actually addressed in California’s Labor Code, the state’s IWC’s industry-specific Wage Orders require employers to authorize and permit their non-exempt employees to take a net 10-consecutive-minute rest break for each four hour work period or major fraction thereof. Insofar as it is practical, the rest breaks should be taken in the middle of each four-hour work period.

Some HR officials say that rest and meal breaks make scheduling difficult. For example, if a business has just one person working at any given time, it is impossible to keep the business open and allow a complete break in duties for the employee. In the past, some businesses have allowed the employee to take breaks (if business allowed), subject to being called back to the job if necessary. That practice runs afoul of the Augustus decision.

Your Business May Inadvertently Violate the New Augustus Rule

Legal experts caution that the HR practices at many businesses may now violate this new Augustus rule. Here are four pointers to help you comply with the Augustus decision.

Pointer 1: Review all Employee Handbooks

The Augustus majority stresses that the plain meaning of the word “rest,” as well as other language in the Wage Order and Labor Code, caused it to conclude that rest breaks need to be off-duty. Employers may not require an employee to work during any meal or rest period. Make certain your employee handbooks reflect this.

Pointer 2: Relieve Employees of all Duties During Breaks

All too many employers have one policy in print and another in practice. Having the appropriate language within your employee handbooks is useless if your practices are inconsistent with the rules that you have set. During breaks, relieve employees of all duties. Discontinue the use of on-call duties during rest breaks. Recognize that you may have to shift work schedules to accommodate this requirement.

Pointer 3: Allow For Rest Break Premiums if There is No Alternative

If the demands of work are such that employees cannot take the required rest break, employers should have a system in place to compensate the employee the applicable “wage premium” of one hour of pay (at the employee’s regular rate of pay) for any violations.

Pointer 4: Counsel Supervisors Not to Disturb Employees During Breaks

Many employers need to have short training sessions with supervisors to make certain they understand the implications of the Augustus decision. In Augustus, the trial court awarded the class of aggrieved employees $90 million in statutory damages, interest, and penalties. Take the time to train those in charge that the new rules are strict and must be followed.

Augustus is a Significant Decision

Legal experts agree that the Augustus decision is a significant one. Employers who have questions about its ramifications may wish to consult an attorney for clarification. If your firm has historically utilized “on-duty” or “on-call” rest breaks, you should consult an expert to evaluate strategies to avoid potential liability.

For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters, including those related to wage and hour issues. 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.

What is “Fair Value” in Statutory Buyout of Minority Shareholders?

What is “Fair Value” in Statutory Buyout of Minority Shareholders?

California is among the states that allows for a kind of shareholder “divorce” when a corporation is hopelessly deadlocked due to shareholder disagreement. As long as the minority can assemble a coalition of at least one-third of the outstanding corporate shares, that minority can sue for an involuntary dissolution of the company.

In turn, however, the holders of 50 percent or more of the voting stock of the company have the statutory right to avoid the dissolution by purchasing for cash the shares owned by those seeking the involuntary dissolution at their “fair value” [see Cal. Corp. Code § 2000]. The statute defines “fair value” as the liquidation value as of the valuation date but taking into account the possibility, if any, of sale of the entire business as a going concern in a liquidation [§ 2000(a)].

A recent California Court of Appeals decision [Goles v. Sawhney, 2016 Cal. App. LEXIS 1010 (Nov. 22, 2016)] provides new guidance in determining the “fair value” of the minority’s interest. The Appeals Court for the Second Appellate District indicated:

 The determination of “fair value” should include an assessment of the value, if any, of any pending derivative claims. These can be quite common where one block of shareholders blocks the actions of another.

 § 2000 does not permit a “lack of control discount” in determining “fair value.”

 Where a trial court appoints three appraisers and then proceeds to determine “fair value,” it should not simply average those appraisals in determining the correct value.

“Fair Value” Versus “Fair Market Value”

Minority shareholders are often disappointed in learning that within the context of an involuntary dissolution, the concept of “fair value” is not the same as “fair market value.” Had the legislature intended the court to determine “fair market value,” it would have said so. And so, in determining the value of the minority’s interest, the Court need not make the evaluation on the basis of a going concern. True, the Court can consider a firm’s going value, but need not do so. It may alternatively consider what a piecemeal sale of the firm’s assets might bring.

Lack of Control Discount

The Court of Appeals clearly indicated the minority’s interest should not be discounted by the fact that the minority, by definition, lacks any effective control of the corporation. This is an incredibly important point. Consider the following hypothetical:

Assume a corporation has two shareholders, one with a 51 percent interest, and another with a 49 percent interest, that it is valued at $1 million. If the value of the minority owner’s interest were determined as the value of his or her proportionate interest in the corporation, the minority owner would receive $490,000. Many valuation experts say, however, that the minority interest should be discounted for lack of control at as much as 33 percent. Were that to be applied, it would result in a final evaluation of the minority’s shares factored in, and the value of the minority owner’s shares could conceivably be reduced by 33 percent, to $323,400. That’s a difference of $166,600.

Averaging the Appraisers’ Valuations

Equally important is the Court’s indication that a trial judge should not merely average the evaluations offered by the three appraisers.

CKB VIENNA LLP: A Full-Service Consulting and Law Firm

The law firm of CKB VIENNA has a long history of representing shareholders of closely held corporations. Our firm has offered valuable advice to those involved in family businesses, particularly when members of the family cannot agree on the future direction of the company. Our attorneys provide counsel on sales of corporate stock and other appreciated assets. We have helped settle business disputes and have designed special client plans to foster estate planning. We don’t stamp out cookie-cutter solutions; we first gain a true understanding of the client’s goals, concerns, and unique issues. Then, we work with the client to achieve success. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

California Employers Have “Take-Home Exposure” Duty to Employees’ Families

California Employers Have “Take-Home Exposure” Duty to Employees’ Families

For some time now, California businesses that expose employees to hazardous chemicals and materials – such as asbestos – have known that they can be liable to those employees for significant workers’ compensation benefits in the event the employee contracts an occupational disease, such as mesothelioma. The employer’s duty to members of the employee’s family, who may suffer from “take-home exposure,” has been less clear.

Employees Can Be “Vectors” Carrying Harmful Materials

In a decision released December 1, 2016, the Supreme Court of California offered some clarity to the issue, holding that employers (as well as premises owners in some instances) have a duty that extends to “members of a worker’s household” to exercise ordinary care to prevent take-home asbestos exposures. The Court indicated that where it is reasonably foreseeable that workers, their clothing or personal effects will act as “vectors carrying asbestos from the premises to household members,” employers have a duty to take reasonable care to prevent this means of transmission.

The high court’s decision struck down two earlier California Courts of Appeal cases that held employers and premises owners owe no duty of care to household members for take-home exposure to asbestos and other toxic chemicals. The Supreme Court said an employee’s return home from work was an unusual occurrence. The Court added that preventing injuries to members of the workers’ household due to asbestos exposure imposed no greater burden on the employer than preventing exposure and injury to the workers themselves.

No Duty, However, Owed Beyond the Employee’s Household

The Court indicated, however, that the duty extends only to members of the worker’s actual household; not to others who claim they also were exposed to the hazardous materials by contact with the employee, or his (or her) clothing or personal effects.

Supreme Court Struck a Balance

While not altogether pleased with the Court’s decision, some employer groups do acknowledge that the Court may have struck an appropriate balance. An employer’s potential tort liability should not be endless and the Court agreed on that point, holding that the employer’s duty to protect persons did not extend, for example, to the worker’s other relatives, friends, acquaintances, service providers, babysitters, neighbors, carpool partners, fellow commuters on public transportation, and laundry workers. Indeed, the Court was attempting to strike a workable balance. It is one thing to allow compensation for reasonably foreseeable injuries of family members; it is an altogether different matter to burden the courts and the defendants with the costs associated with litigation of disproportionately meritless claims.

Premises Owners Have Duty to Contractors and Their Families

Another important part of the decision affects premises owners. Whether the owner hires out work to an independent contractor or has it performed by an employee, the owner has a duty to provide reasonable protection from exposure to hazardous materials, both to the worker and to his or her family. Premises owners may need to examine their practices in this regard.

California Businesses Have Far-Reaching Obligations

California businesses have far-reaching obligations. Some extend even to members of an employee’s household or to the household of contract workers. If it’s been some time since your business reviewed its practices, it might be time to consult with a firm that can provide broad legal and business advice. For years now, CKB VIENNA LLP has represented businesses in all types of legal issues, from litigation to business structure, from best practices to personnel matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

Entrepreneurs Should Recognize Differences in Short and Long-Term Borrowing Needs

Entrepreneurs Should Recognize Differences in Short and Long-Term Borrowing Needs

Just as there are different tools for different tasks – one cannot use a screwdriver effectively to pound a nail – there are also different financial tools to assist an entrepreneur as he or she works to fulfill a creative business dream. Business experts allow, however, that the principals in all too many business startups fail to account for important differences – and choices – in financing their enterprises. Choosing an inappropriate financial tool can lead to headaches and needless expense. The entrepreneur should be particularly aware of the differences between short and long-term borrowing needs.

Addressing the Entrepreneur’s Short-Term Needs

Working Capital Loans

Most short-term borrowing needs relate to the need for adequate working capital – having sufficient funds on hand to operate the immediate and short-term needs of the business. Properly crafted, a working capital loan can help an enterprise deal with the fact that day-to-day expenses must be covered, yet often there is a lag in the company’s revenue related to those expenses.

A working capital loan usually has a number of common characteristics, including the following:

•  It is a short-term (one year or less) line of credit from a bank or other lender

•  It most usually comes with a variable rate of interest that is tied to some specific, identifiable, short-term interest rate

•  It is usually set up as a “draw” against a maximum amount of principal

•  The borrower generally pays interest only at the specified (variable) rate, often with a provision that the outstanding balance be zero for at least 30 days during the period of the short-term loan

Advantages of Working Capital Loans

Working capital loans have some advantages over other, longer-term borrowing, including:

•  Funds are available quickly

•  The entrepreneur maintains control over the day-to-day operations (this may not be the case, for example, if working capital is obtained through the sale of capital stock)

•  Depending upon the amount of the loan and the credit-worthiness of the entrepreneur, the funds may be made available on an unsecured basis

Addressing the Entrepreneur’s Long-Term Needs

Where the entrepreneur must purchase real estate, machinery, and other durable goods in order to operate the business, a short-term, working capital loan may be insufficient. In those circumstances, there is a need for long-term borrowing. Long-term borrowing usually has a number of common characteristics, including the following:

•  The term of the loan is generally for much longer than a year

•  The loan is often offered at a fixed rate of interest (often somewhat higher than the rate of interest charged for short-term borrowing)

•  The borrower pays both principal and interest in equal installments over time

•  The payout may be based on a long-term amortization schedule

•  Alternatively, the equal monthly payments may extend for some time, with a “balloon” payment due to pay the loan off fully.

•  Most often, these loans are fully secured. In the case of real property, the loan is secured by a mortgage or deed of trust. In the case of equipment and machinery, the lender generally holds a security interest in the property.

Advantages of Working Capital Loans

Long-term borrowing may offer some advantages over working capital loans, including:

•  They may be made in very large amounts

•  As with short-term borrowing, long-term borrowing allows the entrepreneur generally to maintain control of the business; there is no dilution in ownership that would result from the sale of capital stock

•  Access to even large sums can be accomplished in a relatively short period of time

•  Depending upon the circumstances, the long-term borrowing allows for the preservation of working capital that can be used for short-term matters

Should You Review Your Borrowing Needs with an ExperienceD Attorney?

Every entrepreneur’s financial needs are different. Cookie-cutter approaches can be expensive and inefficient. Many entrepreneurs find that it helps to discuss business concerns with an experienced, capable attorney. Banking loan officers can be tied to particular products or terms. Having the counsel of an attorney who can offer dispassionate advice can help you craft a plan for the future. For years now, CKB VIENNA LLP has represented all sorts of businesses in all sorts of business issues. From startups to established businesses, we understand the issues and we stand ready to represent you skillfully. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

California Employers: Are You Ready for New Employment Laws?

California Employers: Are You Ready for New Employment Laws?

During 2016, the California legislature passed a number of significant laws that affect most Golden State employers. Virtually all the changes take effect January 1, 2017 and it is, therefore, important that California businesses review their employment policies and procedures to make certain that they comply with the new law. While there may be additional laws and regulations that affect your particular service or industry, the following is a brief review of five important employment-related provisions.

Increase in Minimum Wage

While the national debate as to the appropriate level of the minimum continues, California has jumped out ahead with a multi-step increase. SB 3 increases the state’s minimum wage each January 1 from 2017 through 2022 (or 2023 for employers with less than 26 employees). Effective January 1, 2017, the new minimum wage is $10.50 per hour. Employers should also recognize that this increase has other effects, as well. For example, in California, in order to qualify as an “exempt” employee, the worker must earn at least twice the state minimum wage for full-time employment (40 hours each week). The new threshold for exempt employees is now $43,680.

Expansion of California’s Equal Pay Act

Two separate bills passed by the 2016 Legislature – AB 1676 and SB 1063 – work together to expand the California Equal Pay Act so as to: (i) Eliminate prior salary as a bona fide exception to equal pay based on gender, and (ii) prohibit employers from paying employees of a different race or ethnicity different rates for substantially similar work.

Out-of-State Arbitration

Employee groups point to the passage of SB 1241 as one of the most important pieces of worker legislation in years. Generally speaking, the new law provides that employees who work and reside primarily in California may not be required to adjudicate employment-related claims outside the Golden State, nor can they be required to adjudicate claims using the law of another state even if the claim is filed in California. Employers should take care that their post-January 2017 employment agreements comply with the new law. The law specifically applies to arbitration clauses.

Workplace Smoking

ABx2 6 expanded workplace smoking restrictions so as to expand the definition of “smoking” to include “the use of an electronic smoking device that creates an aerosol or vapor, in any manner or in any form, or the use of any oral smoking device for the purpose of circumventing the prohibition of smoking.” E-cigarettes are, therefore, now viewed on the same basis as actual tobacco cigarettes.

All-Gender Rest Rooms

AB 1732 requires all single-user toilet facilities in any business establishment, place of public accommodation, or government agency, be clearly identified and designated as all-gender toilet facilities. The provision actually takes effect March 1, 2017.

Is it Time to Review Your Employment Practices?

Leaders in many California businesses are making New Year resolutions that include a serious review of the firm’s HR practices. There is no time like now to assure yourself and your business that your personnel policies are adequate and up to date. Retaining experienced outside counsel is generally a key to best practices in personnel law. For years now, CKB VIENNA LLP has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone – 909.980.1040 – or complete our online form.

What Prop 64 Means for California Employers

What Prop 64 Means for California Employers

While the recent presidential election has appropriately garnered lots of interest and discussion in the Golden State, passage of Proposition 64 – the voter initiative to legalize the recreational use of marijuana – is also the talk of the town. Apparently a lot has changed since a similar initiative was voted down six years ago. Various pundits have voiced opinions about the probable effects of legalizing weed in the most populous state in the country. Many employers are voicing concern about the viability of their existing drug-free workplace policies. What does Prop 64 really mean for California’s employers?

Widespread Legal Recreational Use May Not Be Immediate

While Californians over 21 years of age or older may now legally smoke marijuana legally, they must do so privately. They may have up to 28.5 grams of marijuana and up to 8 grams of concentrated marijuana (e.g., hash) in their possession, at least according to the Official Voter Information Guide that was published in connection with the proposition.

Appropriately aged adults may also grow up to six marijuana plants at a private home. Under the proposition, they may not:

•  Smoke marijuana while driving a motor vehicle

•  Smoke it in a public place, or in any location in which smoking tobacco is prohibited

•  Possess marijuana on the grounds of any school, day care center, or youth center while children are present

Unless you have your own plants, you may find it difficult to purchase marijuana legally. People without a medical marijuana card may not be able to purchase the product from dispensaries until a separate provision of Prop 64 goes into effect on January 1, 2018. The state has until then to set up a dispensary system.

Prop 64 was not Crafted so as to Affect Employer’s Workplace Drug Policies

Employment law experts note that Proposition 64’s primary component is the decriminalization of recreational marijuana use; it does not ban or restrict a California employer’s ability to regulate marijuana usage within the workplace. In fact, the proposition explicitly allows public and private employers to enact and enforce workplace policies pertaining to marijuana.

Employers are generally allowed to set rules regarding productivity within the workplace. One’s ability to be stoned at home does not, therefore, translate into the right to show up for work in such a condition.

Testing is Not an Exact Science

One problem with marijuana testing: It can observe the presence of marijuana within a person’s system. Since the chemicals associated with marijuana can remain in body cells for days – some argue weeks – after pot use, there is no direct correlation between testing positive for marijuana, on the one hand, and being impaired by it, on the other. As law enforcement officials note, “There is no equivalent of .08 BAC for marijuana.”

Marijuana Remains a Schedule I Drug Under Federal Law

Employers and pot smokers alike should reflect upon the fact that under the federal Controlled Substances Act, marijuana remains a Schedule I drug. That designation is reserved for substances that are prone to abuse and psychological/physical dependence. Because of that federal law, employers can still refuse to hire applicants who test positive for marijuana use.

Employers Should Review Their Drug Policies

In the aftermath of Prop 64’s passage, employers will find it important to review existing drug policies to ensure that existing employees understand employer policies regarding marijuana use. They should also make sure those positions are clear for new hires. Navigating through the post-Prop 64 time frame can be difficult. Many prudent employers are seeking the counsel of experienced attorneys like CKB VIENNA LLP. Our firm has represented all sorts of businesses in employment law matters. Our team understands the complexity of the issues and stands ready to represent you aggressively. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

 

“Just Walk Away Renee:” Consequences of a Seller’s Breach of a Commercial Real Estate Contract

“Just Walk Away Renee:” Consequences of a Seller’s Breach of a Commercial Real Estate Contract

It happens more often that one might think: The owner of a commercial real estate tract or parcel enters into a contract with a prospective buyer and the owner gets cold feet. Perhaps the owner realizes that the prospective buyer is getting the better side of the bargain. Perhaps the owner decides that it can best utilize the property for its own purposes. Can the owner take the advice of the classic 1967 song by The Left Banke: “Just Walk Away (Renee)?” If the owner does so, what can the shunned purchaser do?

“I’ll Sue, I’ll Sue”

In this litigious world, the quick retort of the jilted purchaser might be, “I’ll sue, I’ll sue.” Yet another legitimate question is, "Sue for what?” The purchaser wanted the tract or parcel of real estate, not a lawsuit.

Aggrieved Party Ordinarily Has Responsibility to Minimize its Damages

Within the American system of laws, an aggrieved party to a contract indeed can generally sue to recover the damages caused by the other party’s breach, but the aggrieved party may not merely sit back and watch the damages accumulate; it must mitigate them. For example, if two parties agree to the purchase and sale of 1,000 bushels of wheat at a specific price and the seller refuses to move forward with the sale, prospective buyer must mitigate its damages by completing the purchase with some other party. If the purchaser has to pay more to secure the 1,000 bushels of wheat, it can recover the difference in a civil action against the original seller.

Wheat is Wheat; Real Estate is Unique

American law, in general – and California law, specifically – recognizes that while wheat is wheat, one parcel of real estate is not like any other; real estate is considered unique. Under the law, no two parcels are considered exactly the same, even if they adjoin. If a shunned buyer is to be made whole, it generally cannot accomplish its original goals by merely buying another tract of real estate. The legal system, therefore, has crafted a special remedy that may, under appropriate circumstances, be used: Specific performance.

Specific Performance

Since each parcel or tract of real estate is unique, the only way an aggrieved purchaser can be made whole is to fulfill the terms of the original contract. Accordingly, California law (and the law of virtually every other state) provides a special remedy: Specific performance. Following a hearing or trial, a court orders the owner to deliver a valid deed to the buyer (upon the payment of the agreed sales price).

 

Note that specific performance only applies in an action against the seller in a breach of contract action. California courts ordinarily are resistant to the specific performance argument unless money damages are incapable of providing relief. Since sellers generally receive money in the purchase and sale transaction, specific performance is rarely ordered against a defaulting purchaser.

Breach of Real Estate Contract Involves Complex Legal Issues

Any alleged breach of a real estate contract can involve one or more complex legal issues. Having experienced, aggressive legal counsel on your side can be crucial to protect your interests, whether you are an aggrieved buyer or seller. For many years now, CKB VIENNA LLP has represented landowners, leaseholders, property owners, and others in all sorts of disputes related to California real estate. 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.

How Secure is the “Lock” on Your Business Web Site Door?

How Secure is the “Lock” on Your Business Web Site Door?

California Legislature Amends Data Breach Notification Rules

With all the attention given to state and national political contests and to state-specific initiatives such as California’s Proposition 64, which paves the way for recreational marijuana use within the state, some other important amendments to state law have received less emphasis than perhaps they deserve. One recent change that many California businesses (and some agencies) can ignore only to their detriment relates to Assembly Bill 2828, which amends California’s breach notification laws. Under the new law, approved by the Governor on September 13, 2016, and which becomes effective January 1, 2017, designated businesses must notify affected account holders and others that a breach has occurred, even if the breach only involves encrypted data. How secure is your web site door?

Existing Breach Notification Rules

Under existing law, notification is required when a California resident’s personal information was, or is reasonably believed to have been, acquired by an unauthorized person, and that personal information was unencrypted. In other words, if such an unauthorized person acquires encrypted personal information, notification is not required.

New Rules

Beginning next year, notification will be required for breaches of encrypted personal information of California residents if:

 

 Encrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person;

 The encryption key (confidential key or process designed to render the data readable) or security credential was, or is reasonably believed to have been, acquired by an unauthorized person; and

 There is a reasonable belief that the encryption key or security credential could render that personal information readable or useable.

 

Encryption generally refers to a process that converts data into a form that makes it “unreadable” by an unauthorized person. The California data breach notification law generally defines “encryption key” as the confidential key or process designed to render the data readable.

Some Out of State Businesses Are Also Affected

The amended law is applicable to all persons and businesses that own or license computerized data and conduct business in California, as well as state agencies that own or license computerized data. It is possible, therefore, for a non-California business that conducts business within the state to come under the law.

California Was First State to Require Notification

California was the first state in the country to require notification of security breaches. The original law became effective in 2003. The law has been amended numerous times. The last such amendment (prior to AB 2828) was in October 2015, when the definition of “encrypted” was modified and the definition of “personal information” was expanded.

Number of Breaches has Grown in Recent Years

According to organizations such as the Information Systems Audit and Control Association (ISACA), breaches have become all too common. In 2015, for example, more than 150 million personal records were exposed across the country. In 2016, there have been more than 800 significant data breaches. Ransomware attacks, where a hacker encrypts data until the victim agrees to pay a ransom to obtain the encryption key, have increased by more than one-third. Recent studies indicate that the cost to companies of dealing with data breaches continues to increase, with estimates of more than $150 per lost or stolen record.

Many Businesses Don’t Know They Are Vulnerable

If your California business electronically maintains personal information about personnel or customers, you may be vulnerable to a data breach. Your current business practices may not conform to California law. Failure to follow the data breach law can have expensive consequences for your business. The law firm of CKB VIENNA LLP provides commercial legal advice and counsel to nearly every type of business, from Fortune 500 corporations to startups and nonprofits. Our attorneys provide specialized legal/business consulting services and offer guidance designed to avoid the consequence and cost of litigation including compliance with laws such as those amended by Assembly Bill 2828. CKB VIENNA LLP has a long history of representing clients in all types of business issues. We have offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Is Trustee in Deed of Trust Bound by Debt Collector Rules?

Is Trustee in Deed of Trust Bound by Debt Collector Rules?

In an important decision affecting California loan maintenance and foreclosure practices, the Ninth Circuit Court of Appeals, in Ho v. ReconTrust Co., N.A., 2016 U.S. App. LEXIS 18836 (9th Cir., Oct. 19, 2016), recently held that actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect debt as that term is defined by the Fair Debt Collection Practices Act (FDCPA). Nor is the trustee who sends the borrower such notices a “debt collector” under the FDCPA. The Ninth Circuit’s decision, to which one Judge dissented in part, is not in line with several decisions in other circuits, particularly the Fourth and Sixth.

California Lenders Had Been Monitoring the Case

Lenders in the Golden State had been anxiously awaiting a decision from the Ninth Circuit. In the underlying case, the trustee had initiated a non-judicial foreclosure on the plaintiff’s residence under California law. The only actions taken by the trustee were to record and send the legally required notices to the plaintiff/borrower. The plaintiff filed suit, however, alleging that the notice of default and notice of sale violated the FDCPA by misrepresenting the amount she owed on the mortgage loan. The district court granted the trustee’s motion to dismiss, and the plaintiff appealed.

Trustee’s Action Was Not to Recover Money

The majority of the Ninth Circuit panel found, however, that the trustee’s actions had not been an attempt to recover money, but merely had been initiated to retake and resell the property serving as collateral for the underlying loan. The majority pointed out that in California, a non-judicial foreclosure extinguishes the entire debt and does not allow for recovery of any deficiency. The important point: The trustee could recover only the security interest itself. The trustee had no right to recover any money if the security interest did not otherwise cover the balance of the unpaid loan. The majority acknowledged that a trustee’s foreclosure notice might induce a debtor to pay the debt owed the lender, or at least that portion of the debt in order to bring the debt to current status, but “that doesn’t make the guy with the tow truck a debt collector.”

Ninth Circuit Majority Drew Humorous Analogy

The majority drew a humorous analogy to the vehicle owner with a stack of unpaid parking tickets. The majority allowed that one might reasonably fear that one’s car would be impounded due to the accumulation of unpaid parking fines, but that did not turn the "the guy with the tow truck [into] a debt collector.”

Foreclosure Law Still Fraught With Difficulties

Maneuvering through the veritable ocean of state and federal rules and laws related to non-judicial foreclosures is still a daunting task for both the lender and the trustee. Having an experienced, skilled attorney and litigator at the helm can be a true advantage. The law firm of CKB VIENNA LLP has provided both legal and business consultation to mortgage lenders, trustees, and others in commercial lending for years. We have assisted lenders in managing the risks associated with the FDCPA and other complex financial rules. Our firm is skilled in all forms of litigation. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VIENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

 

Fixed or Floating: Which Type of Rate is Best for Commercial Real Estate?

Fixed or Floating: Which Type of Rate is Best for Commercial Real Estate?

When it comes to arranging financing for the acquisition of commercial real estate, many borrowers are immediately struck by how different the process is when compared to residential real estate lending. That difference is due, at least in part, to the fact that commercial real estate loans, unlike the vast majority of residential mortgages, are not ordinarily backed by any government entity, such as Fannie Mae or Freddie Mac.

 

Commercial real estate rates tend, therefore, to be somewhat higher and many banks and commercial lenders want to scrutinize not only the details of the real estate purchase, but the underlying business itself. One issue that is surely to come up: Fixed or floating rates? Which is best for commercial real estate? As with many situations, the devil is in the details.

Fixed-Rate Commercial Mortgages

Many commercial enterprises are drawn to fixed-rate mortgages because the risk is easier to calculate and the number of variables is somewhat less. The primary advantage to fixed-rate financing, of course, is the lack of volatility. It is easier to budget the cash outflow. Depending upon the situation, the fixed-rate mortgage might even be offered on a non-recourse basis – there is no personal liability involved. Fixed-rate financing has some disadvantages, however, including:

 

 Since the lender takes the risk of rising interest rates, and not the borrower, the rate tends to be somewhat higher than in floating-rate situations.

 Many fixed-rate commercial mortgages have pre-payment penalty clauses; the lender, after all, is looking to lock in a rate of return for a fixed number of years.

 To counter the pre-payment penalty problem, you may be able to negotiate a “new buyer assumption” provision. Usually, however, the lender will want to approve of any person or firm that purchases the commercial property from you.

Floating-Rate Commercial Mortgages

In years past, floating-rate commercial mortgages were looked down upon. The notion was “why would a borrower take the risk of rising rates?” The truth of the matter is that someone must take that risk, either the lender or the borrower (or sometimes both). If the borrower is willing to assume some, or all, of that risk, the dividend can be some important savings in interest costs, particularly in the first few years of the mortgage. Floating-rate mortgages are particularly attractive for borrowers who do not intend to hold the property for a long period of time. For a sophisticated borrower, particularly one who has a sense of where long-term rates are moving, the floating-rate commercial mortgage can be quite attractive.

The Takeaway

The takeaway here is that floating-rate commercial mortgages are not the “dumb moves” some investors have historically thought and, conversely, fixed-rate mortgages can have disadvantages, depending upon the borrower’s circumstances. Commercial real estate borrowers should make careful assessments of interest rate risk, the stability of the local real estate market, and other factors that are likely to be unique to the borrower’s needs. If a euphemism ever truly fit a lending situation, it does here: When it comes to commercial borrowing related to real estate, one size does not fit everyone.

Commercial Real Estate Lending Calls for Experienced Legal Counsel

The law firm of CKB VENNA has provided both legal and business consultation to commercial mortgage lenders and borrowers for years. We have drafted core loan documentation and have assisted both lenders and borrowers in assessing and managing the risks associated with the commercial real estate. Our firm is also skilled in all forms of litigation. Our attorneys provide preventive training and offer guidance designed to avoid the consequence and cost of litigation. CKB VENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.

Don’t Forget Tax Benefits Related to Qualified Small Business Stock

Don’t Forget Tax Benefits Related to Qualified Small Business Stock

Many Californians are familiar with the tax-favored treatment allowed under some conditions with regard to the sale of their principal residence. In many cases, married sellers can exclude up to $500,000 of the gain on the sale. But are you familiar with another important tax benefit called the “qualified small business stock” (QSBS) exclusion? If you are involved in a small business, you should be.

IRC § 1202

Internal Revenue Code § 1202 allows the seller of a “qualified small business” to exclude up to 100 percent of the gain attributable to the sale or exchange of qualified small business stock from taxation. In order for the “stock” to qualify for the favored tax treatment, it must have the following characteristics:

 

 The stock must have been originally issued by a “qualified small business.” Generally speaking, such a business must be a “C Corporation” that did not have $50 million or more in assets at the time when it was formed.

 The taxpayer must have acquired the stock at its original issue in exchange for money, property, or as compensation for services provided to the corporation.

 During the time when the taxpayer owned the stock, at least 80 percent of the corporation’s assets must have been actively used to conduct one or more qualified businesses. Generally, any active trade or business qualifies – except certain excluded businesses such as health, law, and engineering financial businesses including banking, insurance and financing, and certain other businesses (farming, mining, and hotel or restaurant operation).

 The corporation must be an “eligible corporation” within the meaning of the statute.

 The corporation must not have redeemed more than a de minimus amount of stock from the taxpayer (as well as certain related parties) during the four-year period beginning two years prior to the issuance of stock to the taxpayer.

Exclusion Percentage Depends on Date When Stock Was Acquired

Those sellers who have held QSBS for more than five years may be eligible to exclude the gain on a sliding scale, depending upon acquisition dates. For example:

 

 QSBS acquired after September 27, 2010 is eligible for the 100 percent exclusion

 QSBS acquired before February 18, 2009 is eligible for a 50 percent exclusion

 QSBS acquired after February 18, 2009, but before September 27, 2010, is eligible for a 75 percent exclusion

 

Under any circumstances, however, the excluded gain is limited to the greater of $10 million or ten (10) times the taxpayer’s adjusted basis in the QSBS.

Favorable Tax Treatment Would Have Expired

The favorable tax treatment allowed under § 1202 would have expired this year, but Congress extended it in December 2015 by passage of The Protecting Americans From Tax Hikes Act. Anyone contemplating the sale of an interest in a small business should consult with a business law expert to determine if the transaction can be crafted so as to take advantage of the exclusion.

CKB VIENNA LLP: A Full-Service Consulting and Law Firm

The law firm of CKB VENNA has a long history of representing high-net-worth individuals, substantial closely held and family businesses – many of which qualify for QSBS favorable tax treatment. We help others with all sorts of business and wealth management issues. Our attorneys provide counsel on sales of corporate stock and other appreciated assets. We have designed special client plans to foster estate, gift, and generation-skipping transfer tax planning and sophisticated charitable giving. We have counseled others regarding complex tax controversies. We don’t stamp out cookie-cutter solutions; we first gain a true understanding of the client’s goals, concerns, and unique issues. Then we work with the client to achieve success. CKB VENNA has offices in Rancho Cucamonga, San Bernardino, and Los Angeles. Contact us by telephone at 909.980.1040 or complete our online form.