These agreements are not only key to establishing the rights and responsibilities of each partner, but they additionally serve as a guide throughout the relationship. And, should things eventually turn toward a breakup, proper expectations for the division of property and assets are already laid out within them.

Domestic partnership attorneys can assist in making the cohabitation agreement a legal, binding document. It will designate property, assign assets as the couple sees fit, and establish roles for parenting and child custody should that be relevant. The agreement will also define how property and assets will be divided should a separation or death occur. Essentially, same sex couples are creating the equivalent of a premarital or prenuptial agreement with the cohabitation document, and many LGBT couples are wise to have this agreement in place before registering their domestic partnership with the state.

A cohabitation agreement is also a fantastic way to have an open conversation about finances. Some partners might bring certain debts or big assets to the relationship that need to be discussed. A frank conversation about how credit cards will be handled, how money should be set aside for savings, and whether to keep accounts separate or joined is relevant to have. Goal setting is appropriate too, so any future property purchases and business ventures should be discussed. Domestic couples will most likely want to update the cohabitation agreement should a big step like this occur to protect each other’s rights.

In tandem with the cohabitation agreement, it’s wise to create estate planning documents so a couple can actually transfer property and assets should death occur. A will, living trust and power of attorney can be easily created by the same attorney in California.

Without these key agreements and documents, your life’s work could wind up in court and your partner could have to engage in a courtroom battle to keep assets, oftentimes ending up in the middle of a family squabble too. Creditors could also come after the surviving spouse for debts.

Each partner is advised to hire a separate California domestic partnership lawyer to create, review and sign the cohabitation agreement. Los Angeles domestic partnership lawyer Anthony Spotora commonly counsels same-sex couples to create cohabitation agreements, estate plans, and qualified domestic relationship orders. The Law Offices of Spotora & Associates, P.C., is skilled in making sure the financial issues, tax concerns, and each partner’s rights are upheld. Their expertise will safeguard your wishes during the partnership and the livelihood of your estate and heirs.

For more information:
www.spotoralaw.com
Law Offices of Spotora & Associates, P.C.
1801 Century Park East, 24th Floor
Los Angeles, California 90067-2302

P (310) 556.9641
F (310) 556.9642
Toll Free: (877) 4U-EZ-LEGAL

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

Big music acts and up-and-coming stars can rake in quite a bit of income playing at festivals such as the upcoming Coachella Music Festival in southern California. Especially when backed by ample marketing budgets and social media, it is no wonder the festival sold out one week after the lineup was announced this year. Now it remains to be seen if the 2011 festival tops last year’s numbers of 225,000 fans and $21.7 million gross revenues.

Behind the scenes, one of the most important players for musicians and bands is an entertainment lawyer. With big festivals and large venues, bands will want to be prepared to sign performance agreements and oftentimes need an experienced entertainment attorney to ensure they understand the agreement and that their rights are being upheld. An attorney can be vital to negotiating the payment terms, merchandising agreements, cancelation clauses, permissible video and audio recording equipment, and ensure the band will not be liable for any and all damages that could occur while performing in the venue.

Most musicians might not love this side of the business, so that is why getting legal counsel early on can leave the business of entertainment to the attorney and the band can continue focusing on its creative output. Legal counsel shows everyone a band deals with that they are professionals and are serious about what they do. Attorneys are great at looking over the necessary agreements and any side contracts for loopholes and further enforcing contract terms when other parties decide not to meet the stipulations agreed to beforehand.

Beyond big festivals and concerts, entertainment attorneys can provide guidance on management agreements, recording contracts, copyright and trademark matters, licensing and royalty agreements, and endorsements and partnership contracts, just to name a few. Some entertainment attorneys can also give clients business planning and career advice. The music business is full of horror stories about bad promoters, shoddy venues, and broken promises, so a good entertainment lawyer can help a band through the complex music industry.

A hands-on entertainment lawyer is a key part of a band’s success. It takes a team approach to make it big in the music industry, so having a lawyer who will be proactive with all the other team players – agents, booking agents, record labels, and other key contacts – will only increase a band’s buzzworthiness and chances of financial success.

In California, Los Angeles entertainment lawyer Anthony Spotora has many years of experience with bands, musicians, songwriters, record companies, and music publishers. The Law Offices of Spotora & Associates has extensive music industry contacts and a reputation for individualized attention and dedication to helping creative individuals thrive in the music business.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

In February, the Ninth Circuit Court of Appeals denied the U.S. District Court for the Northern District of California’s analysis of the Trademark Dilution Revision Act (“TDRA”), thus allowing Levi Strauss another chance to debate its claims that Abercrombie is trying to mimic Levi’s famous arch design on the jean back pocket.

The Ninth Circuit asserts that the Trademark Dilution Revision Act does not only mandate that a design must be “identical or nearly identical”, but for a dilution claim to be valid, the plaintiff must show six factors, including the prevalence of similarity and that a junior mark is “likely to impair the distinctiveness of the famous mark.” Soon enough, the District Court will be hearing the case again since the Ninth Circuit deemed Levi’s has enough of a claim.

Levi’s has been selling blue jeans since the 1870s and its trademarked “Arcuate” back pocket design with two connecting arches has always been a strong visual identifier for the brand and its wearers. Jeans with this back pocket design equal an estimated 95 percent of Levi’s sales and in the last 30 years raked in $50 billion in revenue. In 2006, Abercrombie began using a “Ruehl” design with two less-pronounced arches that Levi feels dilutes their stitching mark.

Apparel companies and businesses in general spend tons of money and lots of creative effort to have their brands stand out from the competition. The lawsuit brings up questions of how the courts will rule for similar design and logo concepts. In this instance, will the courts allow all jean companies to use arches, therefore diluting this identifier in infinite ways? Some say it is akin to letting other computer companies use the sign of the bitten apple, diminishing the power of a visual cue that a company has cultivated for its own benefit in the public’s consciousness.

The TDRA requires that a company alleging dilution by blurring of the designs show an overwhelming degree of dilution. The ruling can compensate for likely, not necessarily actual, dilution and separately, injunctive relief.

The six factors include the:

– degree of similarity between the mark or trade name in question and the famous mark

– degree of inherent or acquired distinctiveness of the famous mark

– extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark

– degree of recognition of the famous mark

– whether the user of the mark or trade name in question intended to create an association with the famous mark

– any actual association between the mark or trade name in question and the famous mark

The Ninth Circuit court drew a line in the sand to follow the rationale of the TDRA and not any pre-TDRA rulings that required marks to be substantially similar to seek dilution decisions.

“The degree of similarity between the Ruehl and Arcuate marks may be insufficient to support a likelihood of dilution, but that conclusion can come only after consideration of the degree of similarity in light of all other relevant factors and cannot be determined conclusively by application of an ‘essentially the same’ threshold,” said Kenneth F. Ripple, Senior Ninth Circuit Court Judge.

In California, Los Angeles intellectual property attorney Anthony Spotora is paying close attention to how the case will be decided. This case as well as other business needs show that legal counsel is crucial early on for a brand. From trademarks, copyrights, product launches, and contractual agreements, an experienced attorney can help protect a company’s rights from the start-up stages to ensuring its assets are safeguarded each and every day.

The Law Offices of Spotora & Associates defends clients’ intellectual property rights throughout California, the U.S., and abroad. They are known for their senior-level counsel and personalized attention to give each client exceptional results.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

Two common grievances include businesses being accused of dishonest practices and discrimination. Competitors and unhappy individuals are usually the ones blamed for trying to undermine the business’ reputation on online chatrooms, Facebook, “protest websites”, and mass e-mails. But to show that a business is a victim of defamation, it must show that the published statement was false and resulted in a loss.

As soon as a business realizes that the unflattering material is on the Web, it is advised to keep thorough records of what is being posted. Compile a list of all websites that have the defamatory statements. This will be useful evidence in the courtroom or for takedown letters that reputation management services create. Also, keep records of sales numbers from before and after the harsh content appeared on the Web. This will help show the loss incurred and aid the court in calculating damages.

And do not fall into the knee-jerk reaction of trying to threaten the author, publisher or website. A lawyer can help get the bad content removed, but not if you are threatening them and have the police at your door to calm you down. Section 230 of the Communications Decency Act does protect webmasters and hosting companies from being held liable for what another user posts on their website unless it can be proved that the specific individual was responsible for its publication. An Internet company that permits criminal acts or intellectual property infringement may still be held liable, so it is advised to get an experienced attorney early on when an issue occurs.

In order to protect the business, a company will want to get legal counsel and serve the wrongdoer with a civil action alleging defamation and libel. Many businesses do not know who harmed them as oftentimes the degrading postings are by anonymous authors. Businesses are advised to provide a notice in whatever medium the original posting was made to make the anonymous author aware of their wrongdoing before any subpoena is enforced. The case will initially be against a “John Doe” defendant and through the discovery process, ISP records and other pertinent information will reveal their true identity.

Good attorneys will help their client win monetary compensation and an injunction that forces the author or website to remove the offending material and refrain from defaming the business in the future. Otherwise, the author could be fined or jailed for contempt of court.

The Law Offices of Spotora & Associates has decades of experience representing individuals and businesses in defamation cases from sole proprietorships to major international corporate entities. Their clients are actively involved in various industries including technology, marketing, communications, pharmaceuticals, retail sales, manufacturing and distribution, as well as restaurants and nightclubs, film, television and multimedia productions. Their lead Los Angeles business lawyer, Anthony Spotora, is one of the area’s top attorneys who is well versed in both business and Internet law.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

A business should protect its website and all the content, design and graphics by copyrighting it. This way, it protects all the original works of authorship as well as the look and feel of the website. Be sure to request ownership of the copyright in a written agreement if an outside company creates the website. This could increase the fees from the graphic design company but then later on the business could have the authority to use the same graphics and content on promotional materials such as brochures and mailings.

Copyright protection starts when the work is fixed in a tangible medium. Use the copyright symbol to inform others that the business has control over the display of the website, its production and distribution. State in the fine print that the business has created the website and is copyrighted. By copyrighting a website, it will be easier to seek court enforcement of the copyright should a copycat come along.

“A business and its employees work hard to create and maintain an Internet presence that will generate revenues and continue the marketing efforts,” said Anthony Spotora, Los Angeles business and intellectual property lawyer. “A good lawyer will help their clients protect their Internet business assets through copyright protection services.”

Copyright infringement is a very serious matter and should a programmer even copy code from another website, a business could be on the wrong side of the law. Websites can be shut down without notice as a part of the Digital Millennium Copyright Act and “blacklisted” from Google. Google will remove sites that infringe on another’s intellectual property, program its spiders to avoid the site, and ban it from its Adwords and Adsense programs.

It pays to hire a business and intellectual property attorney to assist with trademarks for domain names and unique business phrases, copyrights for the website, and contractual agreements for creative services done both for the website and with vendors used during daily business transactions.

Spotora & Associates has more than a decade of experience representing clients from start-ups to established national corporations with their website and intellectual property concerns. They are skilled in researching, registering, and protecting intellectual property rights throughout the United States and abroad.

To learn more, visit http://www.spotoralaw.com/.

Many lawsuits apply the legal theory of the “alter ego” wherein the corporate entity is shown to be a sham and/or an alter ego of one or more individuals that have brought on injurious conduct and who essentially utilized the entity as a blanket to hide behind. Oftentimes this allegation comes into play when a corporation’s assets or insurance are inadequate to pay debts or claims. The shareholders can become personally liable.

In California, two requirements must be met to pierce the corporate veil:

1)     Unity of Interests – the shareholders in question must have treated the corporation as their alter ego; and

2)     Inequitable Result – the shareholders sanctioned fraud or injustices.

A step-by-step process is commonly used to examine and ultimately determine if alter ego liability is appropriate in a lawsuit. The landmark case of Associated Vendors Inc. v. Oakland Meat Packing, Co. spells out the steps to determine the severity of their actions:

1) Did the individual(s) act in bad faith?

2) Did the individuals contract with one another with the intent to avoid performance by using a corporate entity to shield against personal liability?

3) Did the individuals divert assets from a corporation by or to a stockholder, other person, or entity to the detriment of creditors?

4) Is the corporation dominated by a few key individuals?

5) Is the same office or business location used by the individuals and corporation?

6) Did the individuals and the corporation employ the same attorney?

7) Did the individuals use the entity to procure labor, services and merchandise for another person or entity?

8) Did the individuals fail to adequately capitalize the corporation?

9) Did the individuals fail to maintain minutes or adequate corporate records?

10) Will there be an inequitable result if the court fails to pierce?

A plaintiff has the burden of establishing alter-ego liability. Courts do not typically make a distinction between different forms of corporations, whether they are non-profit or for-profit, so alter-ego liability is evaluated equally.

If a corporation is properly created and maintained, shareholders will not be liable for corporate debts or exposed to lawsuits. Shareholders must uphold corporate formalities and avoid any misuse of corporate funds, property and means of manipulation.

The keys to making sure an entity stays separate from its shareholders are:

1) Documentation and Formalities: Ensure that all letterhead, business cards, and corporate signs include the words “Inc.” or “Incorporated”, for example. Shareholders who sign contracts or documents should sign them in a corporate capacity indicating their corporate position. Create by-laws, issue stock, maintain corporate minutes, have separate account books, file annual reports, and have regular board meetings with all directors.

2)  Avoid Co-mingling: Never co-mingle corporate assets with those of the shareholders. Corporations should have their own separate bank account. If you borrow from or lend to the corporation, record an appropriate resolution, sign a promissory note, charge a fair market rate of interest, and make regular payments.

3) Capitalization: Capitalize the corporation sufficiently and purchase adequate liability insurance.

4) Employment Agreements: Establish one between you and the corporation.

5) Multiple Corporations: Avoid identical stock ownership of several corporations along with similar officers and directors. Use different business addresses, telephone numbers and employees.

This valuable advice is critical to minimize a corporation’s exposure to litigation and help them manage their operations. Small and big companies need to understand the importance of having a lawyer to help them with increasing complexities in today’s business environment.

The Law Offices of Spotora & Associates has decades of experience for both businesses and the shareholders that run them. Their services range from counseling individual and corporate clients domestically and internationally, to assisting in business management and maintaining corporate records.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

What is an LLC?

A “Limited Liability Company” (LLC) is a hybrid between a partnership and a corporation. It has the operating flexibility and “pass through” tax treatment of a partnership with the limited liability for its “members” accorded to corporate shareholders. “While an LLC is a business entity, it is best to think of it as an unincorporated association,” said Anthony Spotora, a Los Angeles-based business attorney. “Although sometimes incorrectly referred to as Limited Liability Corporations, they are in fact not corporations.”

Further Benefits

LLCs are highly attractive to some because of the flexibility in tax choices. LLC business ventures qualify for a single layer of taxation, which prevents ownership from being double-taxed under the corporate tax structure.

“However, LLCs may also elect to be taxed under a corporate tax structure if they wish,” Spotora said. “In fact, the full list of taxation choices for LLCs are as a sole proprietor, a partnership and either an S- or C- Corporation.”

LLCs also often require much less administrative paperwork and record-keeping than do corporations. The laws also allow LLCs to customize the rules for how the LLC is best operated.

Drawbacks

Some people feel that LLCs do have disadvantages, however.

In California and a handful of other states, LLCs must pay a franchise or capital values tax on the business.

LLC’s in California must pay an annual tax to the state’s Franchise Tax Board. The fee is $800 per year, though if the LLC’s net annual income exceeds $250,000, then there will be an additional fee that must be paid, too.

Also, some people believe LLCs have a more difficult time raising financial capital because investors may be more comfortable investing funds into corporate firms.

If a person is considering making their new business venture a Limited Liability Company, it is important for them to speak with an experienced attorney.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

Music is everywhere in the world of entertainment: Movies, television, radio advertisements and commercials. There is always a need for top-notch songs and artists.

“For an upcoming composer, licensing music is a vital step in growing a career,” said Anthony Spotora, a Los Angeles-based entertainment and business lawyer. “Licensing music means that your creation is not only protected from illegal use but can also bring a source of income and bigger name recognition. If the people behind a commercial or feature film like your composition, for instance, they will request a music license for the piece.”

While music licensing can be lucrative, it is important to become educated about the process and to receive adequate representation to secure the best deals for oneself.

There are several options for music licensing. One of the best-known options is to register and become a member of ASCAP, BMI or SESAC, which are also known as performing rights organizations (“PRO”).

Such companies collect millions of dollars annually for composers and publishers for so-called performance royalties, but you must be registered as a member to see this income.

“Performing rights organizations act as middlemen, essentially,” Spotora said. “When a song is  ‘performed’ – this includes usage in commercials, airplay, etc. – the user pays the PRO rather than the copyright holder directly. The copyright holder is then paid a royalty by the PRO.”

A separate option is to connect with a publishing company. The publisher will handle issues such as music licensing, collecting royalties and negotiating licensing figures. If your publisher works hard and is well-connected, it can generate serious income for you as a composer and catapult your career to new heights.

If you are a composer, it is important you understand how to properly protect your music as well as secure the most desirable music licensing deals. For questions about legal matters pertaining to music licensing, contact an experienced entertainment attorney.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

But what can also be profitable are strategic “carve-outs,” which occur when assets are “scooped out” of an ailing company. You may be able to purchase just the piece of the company that you are interested in, or you may be able to buy the entire company and then sell off the assets that you don’t care to keep.

There is more inherent risk with carve-outs because you are dealing with something that is currently troubled financially. The flipside is that these assets often come at a reduced price.

When looking to purchase a carve-out, it is imperative to look at every piece of the company’s financial puzzle and be sure the asset can be turned around successfully. Thorough analysis is paramount.

Some of the questions you want to ask yourself:

-From the ground up, what problems did the asset or company face?

-What does the expense structure look like?

-How long will it take to make the necessary adjustments for the company or asset to become profitable?

-Is the risk worth the potential reward?

Just because an entire company or asset is not performing well doesn’t mean it is worthless. Perhaps the asset simply needs a shift in its business strategy or a minor restructuring of its finances to put it in the black.

When looking for a carve-out, the best bets are within industries that you have experience with or carry the potential for “synergy” with your current business. This can save a lot of money and make the deal more profitable in the end. For example, if you manufacture household goods, you would do best to purchase a product that can be easily integrated into your current operation. Because you are purchasing a troubled asset, it makes little sense to take more risks than necessary.

While companies seeking carve-outs usually look to their local competition, sometimes it makes sense to go beyond your own borders, too, particularly in today’s challenging economic climate. To stay competitive and to diversify in tough times, it may make sense to expand to a global market. Of course, that carries with it a whole host of added legal requirements.

If you are a company looking to “carve-out” a competitor’s assets, it is important to speak with an experienced attorney.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit Spotoralaw.com.

S corporations are unique in that they don’t pay federal income taxes. The incomes and losses are divided among the corporation’s individual shareholders instead. Unlike C corporations, S corporations are not double-taxed through the company’s profits and shareholder dividends, which is perhaps the most important part of S corporation status. Predictably, this can result in substantial income savings.

There are a variety of other benefits a corporation can gain from electing to be treated as an S corporation, including the ability to offset losses against taxable income from other sources. Also, some corporate penalties and the federal alternative minimum tax do not come into play for an S corporation.

It is important to note that while S corporations have many advantages, there are other operational matters that should be considered. Firstly, there are other costs associated to S-Corp election, such as filing an annual S corporation tax return and quarterly and annual payroll tax paperwork. Individual and corporate assets also need to be separated.

Regardless, S corporations are becoming ever-popular in the United States. There were about 725,000 in the United States as of the mid-1980s, yet these numbers grew to more than 3 million by the early 2000s. They are currently the number one type of corporate entity.

But the Internal Revenue Service has had ongoing problems with S corporations, only 25 percent of which are believed to be in compliance. The IRS in recent years has worked to increase the number of taxes collected for S corporations.

The complete S corporation rules are contained in Subchapter S of Chapter 1 of the Internal Revenue Code (sections 1361 through 1379). It is a good idea to consult an experienced attorney to learn the ins and outs, advantages and disadvantages, of becoming an S corporation.

To learn more, visit http://www.spotoralaw.com/.

Oftentimes, individuals have only one or two quick legal questions to ask and wish they could get a simple yet reliable answer from an experienced attorney without going through the hassle of making an in-person appointment or worse, tendering a large retainer and formally establishing a long-term attorney-client relationship. The problem is, the Business & Professions Code, along with most State Bar Ethics Rules, including California, can prohibit and/or heavily warn against lawyers from lending legal advice in the absence of an attorney-client relationship. To resolve this dilemma, Spotora & Associates created their Virtual Lawyer program. The program provides potential clients with a simple means of establishing a temporary attorney-client relationship and meeting with an attorney face-to-face using videoconferencing technology, at an extremely affordable price.

Don’t like videoconferencing or don’t have it available? No problem. Once the temporary attorney-client relationship has been formed via Spotora & Associates’ website (www.spotoralaw.com/virtual-lawyer), the legal advice needed can be provided over the phone! Users can have their legal questions answered in a timely fashion, no matter where they are in the world.

It was the firm’s CEO and Managing Attorney, Anthony Spotora, who developed the concept. When interviewed on the thought process that led to such a method, Mr. Spotora shared, “After 10 years in business, one issue that consistently presented itself was callers seeking an answer to only one or two legal questions. Time and time again, we explained like a broken record that we were governed by laws and rules that limited the extent to which we could assist them in the absence of an attorney-client relationship. Even the infamous “Free Consultation” offered by most firms is intended to stop short of actually offering legal advice. Alternatively, up to the point of establishing a formal attorney-client relationship, free consultations are meant to only determine the issues raised by the facts presented, qualify that the lawyer or law firm is competent to handle the matter, and see if the parties are a good “fit.” I decided it was time to develop a solution to this repetitious issue and fortunately, the technology was available to do so. Hence, our ‘Virtual Lawyer Program.’”

To participate in the service, Virtual clients fill out and submit a short meeting request form on Spotora & Associates’ website (www.spotoralaw.com/virtual-lawyer) that details the topic they’d like to discuss, their preferred meeting time, and the video chat format that works best for them (unless they elect to be advised by telephone only). Virtual clients can then choose a 20 minute, 40 minute or hour long meeting package and, if their meeting request is accepted by the firm, they can make a payment through a secure payment gateway that will be provided to them by e-invitation. Based on the information provided, Virtual clients will then be able to chat with a senior-level attorney who has the experience and expertise to answer their legal questions.

Spotora & Associates’ Virtual Lawyer program is intended to give users the peace of mind necessary to make sound decisions in their personal and professional lives. This cost-effective legal service is ideal for those who have limited legal needs and do not require full-service representation. Users can proceed with confidence, knowing that they have consulted an experienced attorney without ever having to leave the comfort of their own homes.

Should Virtual clients decide to extend their relationship with the Law Offices of Spotora & Associates at the end of their Virtual Lawyer session, they have the option of requesting that their Virtual Lawyer payment be applied to the first hour of in-person, full service work.

Spotora & Associates primarily offer legal advice based on the laws of the state of California.

To learn more, visit http://www.spotoralaw.com/.

On October 13, 2009, Governor Arnold Schwarzenegger vetoed SB 641, which would have extended the California State Bar’s authority to collect annual membership dues through 2010. Schwarzenegger explained in his letter to Senate that he was returning the measure by Sen. Ellen Corbett, D-San Leandro, without his signature “because the State Bar cannot continue business as usual.”

While the State Bar has enough funds to continue functioning through 2009, Los Angeles attorney Alan Insul, who is limiting his practice to business, corporate, and real estate cases, says that the veto “seems a bit like overkill” and that a “compromise between the Legislature and Governor,” should be worked out soon.

The governor opined that “inefficiencies remain unaddressed” and that the State Bar maintained a “political agenda.” Governor Schwarzenegger also alluded to Sharon Elyce Pearl, the State Bar’s former director of real property, who was charged in April 2009 with one count of embezzlement and six counts of filing false tax returns in the Alameda County Court. She faces up to nine years in prison if convicted on all counts. The governor went on to reference the media leak of the Fifth District Court of Appeal Justice Charles Poochigian’s “not qualified” rating by the State Bar’s Judicial Nominees Evaluation Commission. Poochigian, a former Republican state senator representing the Fresno area, was nominated August 20, three days after the MetNews reported his rating in a column by Editor Roger M. Grace. Schwarzenegger said the commission “by failing to follow the law, damaged its reputation for impartiality and, in turn, the State Bar’s.”

“Some of the points made by Governor Schwarzenegger are difficult to argue with, and certainly possess merit, but the fact is, the State Bar should not be prevented from functioning as normally as possible next year,” Insul asserts, “while scrutiny of the State Bar is essential, so is the State Bar’s role in the state’s justice system, as the governor himself has acknowledged.”

“I’m sure that our State Bar will be reexamining the problems that the governor has noted, but we’re all hopeful that his veto has not placed our very system in any jeopardy,” Insul concludes.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

It’s tough out there, even for lawyers. From major law firms to small firms, excess is being trimmed in order to better facilitate a nouveau climate urging more cautious business expenditures for legal advice. “The nation’s businesses are pulling in their collective horns beneath the juggernaut of our longest and deepest recession since the Great Depression,” asserts Alan Insul, a Los Angeles lawyer limiting his practice to business, corporate, and real estate cases, “I find that many clients are shedding large law firm representation and looking toward smaller firms for efficient and more cost-effective legal representation.”

A survey of the nation’s top 250 law firms bears out what Insul is saying. During the past year, these apex firms have shed 5,259 lawyers from their payrolls, a drop of 4%. This is the largest lawyer retention downturn since the National Law Journal began collecting such information in 1928 – just prior to the dismal Great Depression. Two other distinct declines, both in the neighborhood of 1 percent, were recorded during the early 1990s. One firm, Fried, Frank, Harris, Shriver & Jacobson lost 168 lawyers, a decline of 26.4%.

Other firms are cutting billing rates and pay for associates by up to 20%, primarily in response to clients’ concerns about cutting the costs of legal services.

“It’s a challenging marketplace we’re in now, and a changing one. Clients, in looking toward smaller firms, while not willing to sacrifice on quality, nevertheless are coming to appreciate that the smaller more nimble firm is by definition more flexible, and can very often handle most, if not all, of the same matters previously handled by larger firms,” Insul explains.

During the early 1930s and especially in mid-1937 during the so-called “second wind” of the Great Depression, lawyers too were embroiled in a bleak scenario featuring bread lines and soup kitchens, and a chronic lack of steady employment even for the most qualified and best trained among them. Nowadays, the outlook is more positive for lawyers, especially those willing to make some adjustments. “Making some of these adjustments can even lead many firms and their clients to a stronger business position overall,” Insul concludes.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

In the case of Nancy A. Schmidli et al. v. Rodney K. Pearce et al. recently decided by California’s Court of Appeal in the Third Appellate District (San Joaquin), the plaintiffs sought to extinguish a lien of deed of trust held by defendants against their property. Schmidli et. al. claimed that the defendants’ lien had expired under a 10-year statute of limitations triggered by defendant’s recording of a notice of default employing as a rationale that the “record” from which to determine the maturity date of the obligation secured by the trust deed included any recorded document that disclosed the debt’s maturity date, including a notice of default.Defendants countered that a 60-year statute of limitations applied if the last date fixed for payment of the debt is not expressly set forth within the recorded trust deed. With this line of reasoning intact, their notice of default did not trigger the 10-year statute, and their lien remained viable under a 60-year statute of limitations.

Two previous appellate decisions addressed this issue and reached different results. Slintak v. Buckeye Retirement Co., L.L.C. LTD. (2006) concluded a notice of default triggered a 10-year statute. Ung v. Koehler (2005) determined a notice of default did not trigger a notice of default where the notice was recorded after the 10-year period had expired and the trust deed failed to provide the maturity date of the debt, and therefore, the 60-year statute applied.

The trial court relied upon Slintak and granted a summary judgment in favor of the plaintiffs. Although the notice of default in this case was recorded before the 10-year period expired, the court concluded that Ung’s precedent was the better reasoned authority, and so reversed the judgment.

Because of this decision, a split between appellate districts on whether a 10 or 60 year statute of limitations applies to a lender’s recorded trust deed against real estate where that trust deed fails to provide for a maturity date of the loan. Although the California legislature has changed the statute to clarify 60 years as the term of maturity in the event that the trust deed failed to state a maturity date and regardless as to whether or not a subsequent notice of default so indicates, a significant number of trust deeds still recorded prior to the change are in existence which must be interpreted based upon the district where recorded unless there is further clarification from the California Supreme Court.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

The October 29, 2009, decision rendered by the California Court of Appeal, Sixth Appellate District, in the case Berg & Berg Enterprises, LLC versus John Boyle et. al. concluded that Berg failed to plead a cognizable claim for breach of fiduciary duty against the individual directors (John Boyle et. al.) of Pluris Inc. being sued.

The Berg case was born out of a dispute between Berg & Berg, a real estate developer, and Pluris, a Silicon Valley-based start-up company engaged in the business of developing advanced network routers. Pluris dissolved in 2002, a victim of a depressed sector economy as its financing efforts and product development efforts “tanked.” Berg alleged that it became Pluris’s largest creditor when its predecessor-in-interest, MWP, agreed to build and then lease two office buildings in San Jose, California, to Pluris and Pluris allegedly repudiated the lease agreement and subsequently made an assignment of its entire assets for the benefit of its creditors. Berg retaliated initially by attempting to file an involuntary bankruptcy proceeding against Pluris to try to exploit approximately $50 million in net operating losses. When the involuntary bankruptcy proceeding was dismissed, Berg litigated, claiming in state court that Pluris’s directors had breached fiduciary duty, alleging that the directors had failed to conduct a reasonable probe into the proposal to pursue the Berg bankruptcy plan for the intent of preserving the net operating losses. After several additional challenges, the actions were dismissed due to Berg’s “failure to state a cause of action for breach of fiduciary duty” and Berg appealed.

On appeal, Berg raised the theory that directors of a corporation owe a fiduciary duty to the corporate creditors even before the corporation is actually insolvent and merely in the “zone of insolvency” so as to vitiate the normally singular duty owed to shareholders. The rule was originally posted in a Delaware Chancery court in the case of Credit Lyonnais Bank Nederland N.V. v. Pathe Communications Corp., 1991 Del. Ch. Lexis 215 (Del. Ch. Dec. 30, 1991). In rejecting the invitations to expand directors duties before actual insolvency, the court instead reaffirmed California’s “Trust Fund” approach which rejects a fiduciary duty to creditors and merely fasten liability where the assets which otherwise could have been used to satisfy creditors is in some way diverted, dissipated or put at undue risk.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Your business has been doing so well you are amazed. For the last couple of years it has continued to grow despite the severe recession. You’re rather proud of the fact that you ran it on a shoestring budget too, and kept just enough employees to do marketing and fill orders. Now that business is beginning to show a profit and you can actually take money out of it instead of plowing it back into the venture, you are beginning to worry about the fact you’ve been doing business under a fictitious business name. It’s time to make a call to a business attorney and find out how personally exposed you are and what you may do to protect yourself from business liabilities.

The first thing you find out is that you have been running the business as a sole proprietor despite having registered a fictitious business name. What that means is you have personal liability for all the obligations and other liabilities of the firm. It gets worse yet. The debts you’ve shouldered are business rather than personal or consumer debts. Your lawyer explains many of the protections you enjoy from consumer debts like credit cards or installment purchases don’t apply when you incur the debt in connection with operating your business.

Not without some trepidation, you ask the attorney if there is anything you can do to change the situation because you don’t want to start all over since you have a success on your hands. Fortunately for you the answer is there are a number of options that will let you change your company from a sole proprietorship to a business vehicle like a corporation or limited liability company. If this is done correctly, you can change the form of doing business tax free as well.

The attorney explains incorporating a going business or organizing it into a limited liability company is permitted in California and if properly done, neither the IRS nor the California Franchise Tax Board will see it as a sale from you to the business. Specifically, you may be able to contribute the assets of your business to the limited liability company in exchange for your membership interest without it being viewed as a taxable sale between you and your limited liability company.

What do you choose? You find out that corporations are an older form of business entity with less flexibility of operation over the limited liability company, the more modern form of business entity. On the other hand, when you do business in California in a limited liability form, it may be subject to a gross receipt tax which can be significant for a small business – if gross income attributable to California is more than $250,000, the fee will be imposed from a low of $900 to $11,790 if the total gross income exceeds $5,000,000.

Both entities are in common enough use that for most small businesses, institutional lenders are available to provide financing. For many tax professionals, the potential gross receipts tax is reason enough to opt for the use of a corporation which elects to Sub-Chapter S status. The advantage of an S election is that it avoids taxation at the corporate level, permitting items of income and loss to flow through directly to you, the shareholder. What is most important about either form of doing business is that it affords protection against personal liability.

Your lawyer says that as a practical matter, many lenders and landlords require personal guaranties by the shareholders or members of small business corporations or limited liability companies. Finally, in order to transfer the business into the selected business entity, your lawyer will work through each of your business assets and liabilities transferring title from you personally to the new entity.

Some of your liabilities, such as bank loans, may not be so easily converted into company obligations, at least without an accompanying personal guaranty. The good news is that once completed and all customers, vendors and other creditors are given notice of the change, future obligations or liabilities should belong to the company and will not be yours. Unfortunately, you learn that the legal and accounting costs are significantly more when incorporating a going business, or contributing the assets of a going business to a new limited liability company.

It is easy to see that our friend would have been better served had he spent a little more in the beginning to save significant legal and accounting outlays later, not to mention the time he may have to devote to gathering critical business information so that the process can be completed……at least that is what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

There was optimism that the real estate market was making a comeback and then – experts said it was looking really bad for commercial property owners and getting worse. This doesn’t sit well with you when you realize that the vacancies in your 100 unit apartment building have soared upwards from 5% to 15%.

It’s no small wonder then that you have also been forking over more money every month to make the mortgage payments on both the first and second mortgages. One night while reviewing the dismal situation, you decide to quit throwing good money after bad and make a resolution to let the lender take the property in foreclosure.

Being a smart businessperson you make a call to a lawyer first to ask what your personal liability is if the first or second lender forecloses on the property. Your lawyer gives you the “it depends” answer and you’re thinking you’d rather have a straight answer instead. The straight answer only comes when she has the history of the loans in question.

When you bought the building, it was financed with a loan from your local bank with the second one provided by the building’s seller. Three years after the purchase, you refinanced loan number one for a better interest rate. The seller who held loan number two agreed to subordinate his loan to the new first loan so long as the principal of the first wasn’t greater and the interest rate was lower than the original loan.

While doing that was a smart move, the property currently can’t support either the first or the seller’s carry-back second loan. The straight answer from you lawyer, based on those facts, is that you could be personally liable to the lender holding the first trust deed but not the second. That revelation startles you and you discover that it is because the current first was securing a loan that was not used to buy the property – it was a refinance situation.

On the other hand, the seller carry-back second was used to buy the property and the refinance and subordination to the new first did not change the nature of what the seller originally financed with his second. As such, the law would not change the rule that as a purchase money loan, you had no personal liability.

In a 1991 case, Thompson v Allert (1991) 233 Cal. App. 3d 1462, the facts were quite similar to what we have discussed to this point. In that case the court outlined that the subordination to a new loan for the same amount at the same or lower interest didn’t alter the purchase money character of the loan. Under the California Code of Civil Procedure §580b, the holder of the second isn’t entitled to get a personal judgment against our apartment owner in this story – even if the first forecloses before the second and wipes out the second. Put another way, the second becomes worthless, leaving the holders with no ability to recover any of the unpaid loan amount.

By comparison, Wright V Johnston (1988) 206 Cal. App. 3d 333 provides a contrasting situation where the seller subordinated their loan to a new loan that was for a significantly greater amount then the original first trust deed so as to remove it from the borrower protections of California Code of Civil Procedure §580b. In other words, it lost its purchase money character by virtue of the changed nature of the financing risk with the refinance. Other situations which could trigger a seller carry-back losing its purchase money character are increased interest rates, balloon payments not in original first, and substantial cash-out loans.

If you’re knee deep in a commercial, industrial or multi-residential real estate property and thinking about letting it go to foreclosure, seek legal advice well in advance of letting the property go into default. This is an extremely complicated area of law where mistakes can be costly, and the need to think through the consequences of a default strategy is crucial to obtain the best possible result. At least that’s what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

AB 33 would create the Department of Financial Services (“DFS”), including an Office of Financial Consumer Advocacy, transfer the Department of Financial Institutions (“DFI”) to the DFS as the Division of Financial Institutions, transfer the Department of Corporations (DOC) to the DFS as the Division of Corporations, effective 2011, and transfer limited licensing and regulatory authority from the Department of Real Estate to the DFS in the Division of Corporations effective 2012.

While it may not seem like a ground breaking bill, or one that would ruffle feathers, it is a bill that has met with opposition from the Financial Institutions Committee, Business Law Section of the state Bar Association of California. This committee argued that the proposed changes would lead California’s banks and credit unions to move towards national charters, and thereby negatively impacting the health of the state chartered bank system.

The Financial Institutions Committee asserted that preserving dual banking is substantially benefited from an independent Department of Financial Institutions (DFI). The committee reasons that state bank policy makers, legal advisors and examiners are a major benefit to California banks and that suggested changes to Financial Code section 200(b) would greatly diminish their effectiveness. Furthermore, the committee feels that by blending the DOC and some parts of the Department of Real Estate and their various staff would result in a loss of current focus to the detriment of the dual banking system.

Another very real concern is the committee foresees that California state banks don’t have that much exposure as federally regulated institutions to consumer and commercial real estate, making them less subject to market risks. This in turn is attributed to the extremely knowledgeable DFI staff. It is that very knowledge and skill that has seen many of the banks self-reporting as they have an established a solid working relationship with the existing department. Changes to the existing structure would bring about bureaucratic delays and a loss of the existing candor with a possible loss of the successful regulatory stewardship.

Commercial banking in California is under a great deal of stress give the economic climate.
If during staff reassignments and downsizing the expertise to oversee the banks was lost or administratively distracted, then this too could spell disaster. With pending economic recovery for the banks just around the corner, any loss of guidance and expertise could slow this recovery down.

Further concerns deal with the observation that the proposed changes do not streamline the existing structure, but rather add to the bureaucratic layers, thus resulting in more money being spent to change the existing structure which would not improve it. It if isn’t broken, why try to fix it could prove to be a challenging question for the proponents of this bill.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Alan Insul, an expert Los Angeles business attorney, consulted on this latest version of Continuing Education of the Bar’s Ground Lease Practice in the complicated area of the rights between the parties in the event of a total or partial destruction of the improvements in situations such as a fire or earthquake. Continuing Education of the Bar is a joint enterprise of the University of California and the State Bar of California.

Commercial ground leases are when the owner of the land leases unimproved land to another party who will build and then own that commercial development. Leases for projects like this may run from 25 to 99 years. Unless the parties agree right up front in a ground lease agreement, the land owner winds up owning the improvements – a rather awkward state of affairs. “The transactions are very complex often involving the land owner, developer, lender and sometimes a large commercial user such as a major department store,” outlined Insul.

Drafting and negotiating solid, long-term ground leases may sound like a fairly straightforward issue. It is anything but straightforward and requires an expert attorney with a fine imagination and vision for the future. The future meaning the ability to balance the short-term goals of a client against a plethora of “what if” issues and conditions that may crop up in a real estate project 30 to 50 or more years down the pike.

It isn’t easy going in the beginning either when the attorney needs to be able to co-ordinate and keep track of the parties, title and interests involved; make sure there is a complete premises description; provide for term, termination and options to extend or buy and deal with issues pertaining to rent, security and other types of payments. “The issues are even more far reaching than that and will also include the not insubstantial matters of construction, maintenance, ownership of improvements, financing, subordination, encumbrances and problems relating to condemnation,” added Insul.

It’s interesting to note that there is the distinct possibility that a major project in Beverly Hills may possibly have more residual value at the end of a ground lease situation as compared to a project developed to provide commercial support for the re-development of a blighted community which may or may not succeed in the long-term.

“A project in Beverly Hills may be more likely to have residual value at the end of the ground lease rather than a project developed to provide commercial support for a redevelopment of a blighted community which may or may not succeed over the long-term,” said Insul.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

While it might be “the in thing to do,” expanding a business into foreign countries and hiring manufacturers and suppliers right on the spot, you need to watch that you do not exploit local labor. If you do, and insist they follow “your” notions of minimum labor standards, working conditions and health benefits; chances are you might wind up as a party to a nasty lawsuit later, just the very thing that happened to retail giant Wal-Mart, Inc.

Now you may think it odd that U.S. lawyers are representing plaintiffs in foreign exotic countries, however it appears to be a growing legal trend. They are doing this because the foreigners can sue U.S. companies in the United States. Perhaps this is the wave of the future; the legal industry relying more on imports over domestic sources to stay in business.

Just the Facts Ma’am!

The plaintiffs are workers of foreign companies that sell goods to Wal-Mart Stores, Inc. They collectively brought claims against the retail giant based on working conditions in each of their employer’s factories. The basis of the claims was that a code of conduct included in Wal-Mart’s supply contracts with these foreign companies stated that the suppliers had to meet basic labor standards.

The standards insisted foreign suppliers adhere to local laws and local industry standards relating to working conditions like discrimination, child labor, forced labor, hours and pay and something called a right of inspection. The right of inspection clause stated: “Wal-Mart or a third party designated by Wal-Mart will undertake on-site inspection of production facilities, to implement and monitor said standards. Any supplier which fails or refuses to comply with these standards or does not allow inspection of production facilities is subject to immediate cancellation of any and all outstanding orders, refuse [sic] or return [sic] any shipment, and otherwise cease doing business [sic] with Wal-Mart.”

Wal-Mart promotes itself to the public as a corporate entity that improves the lives of its suppliers’ employees and won’t stand for any violations of their standards. The plaintiffs argue that Wal-Mart doesn’t properly monitor the suppliers and that standards are honored more in the breach than in actuality. They further alleged inspectors are coerced to produce positive reports for those not in compliance and that the short deadlines and low prices of Wal-Mart’s contract conditions forces suppliers to violate the standards to meet the agreements.

And the Contentions Are

The plaintiffs offer four legal theories that attempt to establish that Wal-Mart’s standards and California common law provides obligations that may be enforced by foreign workers against Wal-Mart. Those theories are that the plaintiffs are third-party beneficiaries of the standards contained in Wal-Mart’s supply contracts; Wal-Mart is the plaintiffs’ joint employer and they negligently breached a duty to monitor the suppliers and protect plaintiffs from the suppliers’ working conditions and finally that Wal-Mart was unjustly enriched by the plaintiffs’ mistreatment.

And the Court Said

Re: Third-party beneficiary contracts: the Court set out the oft quoted rule that a person will be entitled to sue on a contract as “an intended [third party] beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties.” Furthermore it is accepted that “contract interpretation is a question of law that the court reviews de novo.”

The court felt that Wal-Mart’s supplier agreement didn’t obligate them to inspect and a workplace’s standards violation has no consequence if there were no inspection. Therefore, Wal-Mart didn’t obligate itself with a duty owed to the supplier’s workers as 3rd party beneficiaries of the supplier contracts between Wal-Mart and its foreign based suppliers.

Re: Wal-Mart was the direct employer of the foreign based supplier’s employees. The court stated that “in order to be a direct employer, they must be determined to have the right to control and direct people’s activities or the manner/method used to perform those activities.” In addition any finding as to the right to control workers requires a comprehensive and “immediate level of ‘day to day’ authority over employment decisions.”

The agreement that Wal-Mart could monitor the work environment was already determined not to create a duty to carry that out. Therefore, this can’t rise to the level of control over method or manner necessary since Wal-Mart didn’t assume the obligation.

Re: Wal-Mart is liable in tort to the workers for negligently supervising the supplier’s facilities and their working conditions.

The court said that “Negligence requires a duty owed by defendant to plaintiff which is alleged to have been breached.” And further that “Wal-Mart did not owe the plaintiffs a common-law duty to monitor Wal-Mart’s suppliers or to prevent the alleged intentional mistreatment of the plaintiffs by the suppliers. Without such a duty, the plaintiffs’ negligence theories do not state a claim.”

Re: Wal-Mart was unjustly enriched because it knowingly profited from their suppliers substandard labor practices.

The court’s response to this contention was that “A person who has been unjustly enriched at the expense of another is required to make restitution to the other.” California’s approach to unjust enrichment is consistent with this general understanding. And in addition, “The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust [emphasis added] for the person to retain it.”

The lack of any prior relationship between Wal-Mart and its supplier’s employees precludes the application of the unjust enrichment theory to recover. As you can see, this case was very nearly a case of no good deed goes unpunished and is a warning shot fired at other entrepreneurs and large corporations to watch their step when dealing in foreign countries.…… at least that’s what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

While the lessons may sound rather drastic, it is unfortunately true that if you wish to do business as a contractor you must be licensed at all times without any lapses. At least that’s what building contractor Terry Criddlebaugh found out the hard way.

The facts are a bit boring, perhaps even laughable when you examine them deeply. Terry was not licensed and had actually been trying to use the license of another contractor that was out of the country; a contractor that had assigned his license to Terry. Now on the surface that sounds like it would work, but it didn’t.

The actual registered owner of the company Terry was representing was Robert Diani. However he’d been an absentee officer and had turned over the work responsibilities to Terry. Diani left the country in 2004 and only returned to the U.S. twice and only had active control of the building company prior to leaving the country. Terry had never held a California contractor’s license. Because Diani was absent, he let Terry use his contractor’s license under the auspices of Diani’s company.

The problem was that when Diani’s company got its contractor’s license it had to qualify through a responsible managing officer (Diani) or a responsible managing employee who was eligible to get the same license.

If the managing officer isn’t associated with the licensed company, it has 90 days to replace the person. If the person is not replaced the contractor’s license is suspended automatically. In this case, the Diani company wasn’t qualified for a contractor’s license because Diani wasn’t actively in the construction business after 2004, Terry didn’t have a contractor’s license and there was no replacement put into Diani’s position.

So, here was a home built and one that exceeded the White’s expectations, but that didn’t matter. White was happy but he nonetheless sued Terry to recover all monies invested in the home because he found out that Terry had no contractor’s license.

This particular case is another in a series since 1990 and the Hydrotech Systems, Ltd. v. Oasis Waterpark, supra, 52 Cal.3d at p. 997 case. California courts have been interpreting the California Contractor’s law to say that the importance of licensing for a contractor is similar to other professionals like lawyers and accountants.

The California Supreme Court broadly interprets section 7031: “it bars a person from suing to recover compensation for any work done under an agreement for services requiring a contractor’s license, unless proper licensure was in place at all times.” In essence, the statute’s position that justice be done regardless of the equities is justified by how important it is to deter violations of licensing requirement. (WSS Industrial Construction, Inc. v. Great West Contractors, Inc., supra, 162 Cal.App.4th at p. 596.)

Section 7031 (b) deals with people who use unlicensed contractors regularly whether or not they have paid for the unlicensed work. People who have not paid are protected from lawsuits. On the other hand those who do pay may recover all they paid under this 2001 addition to section 7031.

Before the White vs. Criddlebaugh case, a lawyer recovered $3.5 million in paid fees in a similar case, MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 419. The White case goes one step further and says even if the construction job was the most outstanding in the world and the material will last 50 years or more, an unlicensed contractor will not be reimbursed for it. To put this another way, the White case extends the consequences of the Business and Professions Code 7031b’s disgorgement to even prevent the unlicensed contractor from recovering out-of-pocket costs expended on the job – in this case material.

This case also raised the question of whether or not compensation under section 7031 (b) may be reduced by offsets for “materials and services or by claims for indemnity and contribution.” The court concluded unlicensed contractors must return all compensation received without reductions or offsets for the value of material or services provided. (Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 856.)

While this may seem nitpicky in the extreme there is sense in the decision. It’s a fact of life that there are cases where unlicensed contractors perform substandard work which ultimately may mean demolition of what was initially built by the unlicensed contractor in order to correct it.

The harsh results express a strong public policy intended to send a message. The message being that if you are unlicensed at any moment from the time you sign a contract to do work for which a contractor’s license is required through the time of completion of the job, you just gave the client free material and labor and built them their dream house as a gift – and even if they knew all along you were unlicensed. So, be aware that if a contractor is unlicensed, even for a fleeting moment, the same kind of decision may apply.

Wait, there’s more. Fight in court and you also get to pay the property owner’s legal fees and costs. On the other hand, if you are licensed, contractors have a formidable array of weapons they can bring to bear in order to get paid for their efforts.

While there are sometimes clearly inequitable results from such a harsh rule, it is more than offset against the circumstances where the contractor has never been licensed and has little clue on how to build a doghouse let alone a custom Beverly Hills chateau. At least that’s what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Choosing a business entity is difficult enough as it is and the choices include an LLC, partnership, corporation, etc. Choosing a name for the business, while exciting and challenging, is even more difficult if the rules laid out by the Secretary of State (SOS) are not followed.

It would behoove those who are serious about launching a business that requires filing with the California SOS to do some homework and check the newest changes to the regulations before picking a company name and finding out it is not acceptable.

This isn’t an easy process and when a company is launched, the choosing of a name is a critical part of the whole process of being a “business.” In addition, the choice of entity and its name may have long-term tax and economic ramifications, respectively. “This is one of the major reasons speaking to a Los Angeles business attorney familiar with the SOS guidelines will assist a serious entrepreneur in ‘getting it right’ the first time when they go to register,” outlined Alan Insul, a noted Los Angeles business attorney with years of corporate experience behind him.

Perhaps the most important section that business entrepreneurs want to pay attention to is the “same or deceptively familiar names” section. In essence, it makes reference to the fact that if a name being proposed for filing with the SOS is highly similar to one that already exists, that name will be declined.

The name is too close to being the same if the name being suggested and an existing name are identical; if the differences between the suggested name and one that already is in existence merely rest on differences in use of letters and other graphical touches, or if the difference boils down to the presence or absence of a business entity ending. The SOS regulations provide good examples of what to avoid when choosing an entity name.

As with many areas of law, there are exceptions to virtually every regulation and it only makes sense to speak with a Los Angeles business attorney to get the full sense of how the regulations affect the launch of a proposed business. “In the meantime, it’s a good idea to do some pre-launch research to find out what pitfalls to avoid,” said Insul.

One other place a serious business entrepreneur may find solid information backed by years of experience is Chapter 3 in the 2009 edition of Selecting and Forming Business Entities. The two volumes will be available soon and also have a forms CD included. Respected Los Angeles business attorney, Alan Insul, authored Chapters 3 and 7 in this year’s edition. The material is specifically designed for California business lawyers working with their clients to help them choose the “best” entity for their business.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship.

June was a busy month in the offices the governor of California with some landmark legislation making its way onto the floor of the house. “Signed into law was an innovative act that will assist California homeowners in keeping homes facing foreclosure,” said Alan Insul, a well-known and respected Los Angeles business and real estate attorney.

Called the California Foreclosure Prevention Act, this legislation’s intention is to ensure affordable loan modifications for homeowners up to their ears in debt and about to lose their house. Governor Schwarzenegger proposed this particular act and it made its way into the state budget in February.

It’s interesting to note the strong “community minded” orientation of this act in addressing the needs of every Californian for a place to call home without fear of losing the core of their existence. “Foreclosures do a great deal of damage economically, not just to the family caught up in that desperate struggle, but to the neighborhood as a whole. Cumulatively speaking, the rate of foreclosures also depresses California’s economy and drastically affects their budget. It is hoped that this step will stabilize the downward spiral in housing, but only time will tell,” indicated Insul.

Without reinventing the wheel, the act bars a lender or mortgage service provider from filing a notice of sale for a further 90 days in addition to the current time limits, unless there’s a comprehensive loan modification program approved by regulators. The emergency regulations to get this act rolling were brought into play in June as well, and they outlined the criteria for the loan program.

The application process states lenders and service providers get a 30-day grace period from the 90-day foreclosure halt when they get a substantially complete application. If the loan modifications are approved, the person applying gets the 90-day foreclosure stay provided they follow the terms of the approved loan program.

Simply put, the loan modification act modifies the borrower’s loan terms by doing such things as changing the principle loan amount, changing the interest rate or amortization schedule, etc; things that get results – like a 38% debt-to-income ratio for the borrower. “The one fly in the ointment is that if the lender proves modifying the loan gives them a bigger loss than foreclosure would, the lender doesn’t have to offer a loan modification,” added Insul.

To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship.

Let’s take a quick look at a major case that deals with non-competition agreements in the employment area.

CPA Ray Edwards (Edwards), a tax manager, was hired by a Los Angeles accounting firm – Arthur Andersen LLP (Andersen) in 1997. Edwards had to sign a noncompetition agreement that prohibited him from working for or seeking Anderson clients for limited periods upon his termination.
The agreement Edwards signed stated: If you leave the Firm, for eighteen months after release or resignation, you agree not to perform the professional services you provided clients you worked with during the eighteen months prior to release or resignation. This does not prohibit you from accepting employment with a client.
For twelve months after you leave the Firm, you agree not to solicit any client of the office(s) to which you were assigned during the eighteen months preceding release or resignation.
Edwards worked for Andersen for six years and was promoted to senior manager with an eye to becoming a partner. The United States government indicted Andersen in connection with Enron Corporation.
In May 2002 Andersen internally announced that HSBC USA, Inc. would purchase a portion of Andersen’s tax practice, including Edwards’s group. HSBC offered Edwards a job. Before hiring, all Andersen employees were required to execute a “Termination of Non-Compete Agreement” (TONC)
The TONC required employees to (among other things): release Andersen from “any and all” claims, including “claims that in any way arise from or out of, are based upon or relate to Employee’s employment by, association with or compensation from” defendant and continue indefinitely to preserve confidential information and trade secrets except as otherwise required by a court or governmental agency, etc.
In exchange, Andersen agreed to accept Edwards’s resignation, agreed to Edwards’s employment by HSBC, and released Edwards from the 1997 noncompetition agreement.
HSBC demanded Andersen provide a completed TONC signed by every employee before the deal went through. Andersen would not release Edwards, or any other employee, from the noncompetition agreement unless they signed the TONC.
Edwards signed the HSBC offer letter, but he did not sign the TONC. Andersen terminated Edwards’s employment and withheld severance benefits. HSBC withdrew its job offer. Edwards refused to sign the TONC because he didn’t want to give up his right to indemnification. He felt some of Andersen’s clients may sue them and name him as a defendant.
When all was said and done the California Supreme court decided that Andersen’s noncompetition agreement was invalid because the agreement restricted Edwards from working for Andersen’s Los Angeles clients after his separation from Anderson, and therefore restricted his ability to practice accounting – his profession. This violated express California law.
Said the court: An employer “cannot lawfully make the signing of an employment agreement, which contains an unenforceable covenant not to compete, a condition of continued employment. [A]n employer’s termination of an employee who refuses to sign such an agreement constitutes a wrongful termination in violation of public policy.”
Put another way, the agreement Andersen made Edwards sign in 1997 was invalid because it didn’t allow him to practice his profession for a period of time once he left his employment with Andersen. The court added that under the circumstances of this case, what was illegal was restraints that precluded one from engaging in a lawful profession, trade or business. Indeed, California courts are clear in their expression that section 16600 of the Business & Professional Code demonstrates a strong public policy of the state which “should not be diluted by judicial fiat.”

In reference to Edwards not signing the TONC because he didn’t wish to waive his right to indemnity, the bottom line was that the Labor Code says that right can’t be waived.

To say that this case was a landmark decision would be a major understatement, and even today it is still being discussed for the ramifications it has on non-competition agreements in a whole host of contexts beyond just employer-employee relationships. The court seemed to make clear that section 16600 expresses a legislative decision to invalidate non-competition agreements to be entered into by a seller of a business so long as its limiting scope is reasonable.

If you find yourself facing a situation where you are required to sign or want to get someone to sign a non-competition agreement, speak to a knowledgeable business attorney first before you sign or ask for anything. The Court in Edwards seemed to suggest that asking for a non-competition agreement beyond what you are entitled to do may expose you to liability. So don’t take a chance or you may wind up not being able to compete after the person from whom you wrongfully extracted that non-compete gets a big judgment against you. At least that’s what this lawyer thinks.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

Roni Balint writes for the Law Office of Alan M. Insul. The content contained within this feature is not intended as legal advice and does not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.

“Within a few weeks, the 2009 edition of Selecting and Forming Business Entities will be available,” said Alan Insul, Los Angeles business attorney and respected author of Chapter’s 3 and 7 in this year’s edition. The two looseleaf volumes along with a forms CD are specifically designed for California business lawyers working with their clients to assist them in choosing the “best” entity for their business.

The material covers the basics and more of how to go about choosing the entity, how and where it needs to be organized and also how to manage it once it is set up. The companion CD is especially crucial, as it contains annotated operating agreements that attorneys are able to use.

“This is not a lightweight publication by any means and covers evaluating entity choices, general partnerships, limited partnerships, limited liability partnerships, S&C corporations, close corporations, professional corporations and limited liability companies,” outlined Insul.

Insul’s contributions this year, Chapter 3 and Chapter 7 cover, limited liability partnerships and selecting a business names. Insul’s experience as a business attorney precedes him and he is highly regarded in Los Angeles as someone who is able to get to the heart of any legal matter, paring it down to the bare bones to deal with it. Many of Insul’s clients appreciate his ability to take a complex legal subject and sum it up in a nutshell.
“Being the CEO of a major corporation doesn’t mean they don’t appreciate the clarity of succinct advice on legal matters that affect their bottom line. This is why I strive for language that makes sense and good common sense when dealing with my areas of expertise,” explained Insul.

In a world gone complex with the intricacies of today’s business transactions, having a complete set of well written, informative and easy to understand how-to instructions makes eminent sense. “Business law isn’t getting any easier to understand, and when something like this is available for attorneys who practice in this area, it’s usually in high demand,” added Insul.

To learn more about Los Angeles business attorney, Los Angeles corporate lawyer, California corporate lawyer Alan M. Insul of The Law Office of Alan M. Insul, visit Insullaw.com.

Being creative and thinking beyond the usual parameters has stood Los Angeles attorney Alan Insul in good stead for over 30 years. His personal and incisive touch when it comes to business and real estate law has gained him the reputation as the “go to” guy in the City of Angels.

Insul is noted for his deft handling of various transactional matters or adversarial proceeding in litigation. Insul is a tough and business savvy corporate management expert that takes the time to see all sides of an issue prior to proceeding.

This same tough and yet laid back approach is something that permeates Insul’s personal style when handling his clients affairs as well. He’s known to have a flair for taking some really nasty legal concepts and being able to explain them in plain English. A rare gift for an attorney, and one that will come in very handy for Insul’s newest appointment to Chairperson and Managing Editor of the Business Law News.
“We’re pleased to be making a concerted effort to reach out to and be more accessible to smaller law firms and solo practitioners. After all, the information we have is useful to everyone, no matter what the size of their firm,” outlined Insul.

The Business Law News (BLN) is the official news periodical of the California State Bar’s Business Law section – the largest section of the State bar. This periodical publishes articles that deal with, among other things, ex parte communications in a transactional law practice, the unfair competition law and how it is evolving, what commercial landlords need to understand about bankruptcy and intellectual property issues that need to be taken into consideration when doing due diligence for a merger or acquisition.

While the various topics that business lawyers handle may be as exciting as watching paint dry for the average reader, those in business who rely on attorneys with this kind of skill have a vested interest in their attorney being intimately familiar with various concepts that affect businesses of all sizes. No issue is too small when its eventual applicability may affect a major corporation sometime later.

This is something that Alan Insul is quite conversant with and as an attorney who makes the law look and sound easy, his appointment to Chairperson and Managing Editor of the Business Law News will continue to improve on the long tradition of excellence of delivering the latest developments and insights in business law to California business attorneys.

“I try to meld the advice I give as a lawyer with the actual situations that clients face, simply because giving legal advice in a vacuum just doesn’t cut it in today’s legal arena. Clients are looking for advice that is clear cut, straight forward and to the point in order to make decisions,” said Insul.

The Business Law News is responsible for publishing four quarterly periodicals featuring content written by experts in various areas of business law. The BLN also produces an annual review which is a retrospective of major developments in the area of business law during the previous year.

To learn more about Los Angeles business attorney, Los Angeles corporate lawyer, California corporate lawyer Alan M. Insul of The Law Office of Alan M. Insul, visit Insullaw.com.

Just because you go into partnership with another person, with all of the best intentions in the world, doesn’t mean that at some point in time you may not have a falling out over – well, over any one of a number of things that happen when trying to run a company and stay friends and partners. No matter whether the form is a partnership, limited liability company or corporation, making sure the principals have properly prepared buy-sell arrangements is critical.

Think that will never happen? Think again. It’s a far too common occurrence and many people have made the mistake of not dealing with this eventuality in a buy-sell agreement, and have lived to regret that decision. The essential parts of this type of contract must be outlined in detail by your corporate lawyer and include an evaluation method for the business and how to pay out in the event of the big four – death, disability, disillusionment and transfer of the interest in the business on retirement.

If you’re having trouble imagining what kinds of situations would make you have a dust up with your business partner, speak to your lawyer. Most corporate lawyers have seen it all and been there and done that. That’s what they’re paid for, to craft a buy-sell agreement that will withstand any of the above-mentioned eventualities.

The importance of having a buy-sell agreement in place cannot be underestimated. It is a crucial document that will ultimately ensure the continuation of your business and allow your family a return on a lifetime of your hard work. Caution: this will only happen if there is money behind this agreement. No cash can end up in a major disaster, as the agreement may obligate more than the signing parties. It may obligate family, heirs and partners. Without cash, no one will be able to carry on the empire or have any security.

These issues need to be discussed in great detail prior to signing anything and they need to be resolved to the satisfaction of both partners. If something does happen and one party wants to pack it in because they fell out of “love” with their partner, they need to be covered for this possibility.

Of course, before getting that far into drafting an agreement, the crucial question of where will the money come from to fund it needs to be asked, along with how much will you need and whether or not, realistically, you are able to afford it. Remember, that without money in the background, a buy-sell agreement is potentially worthless. A worthless contract without money backing may have serious consequences; just ask your lawyer to fill you in.

In the meantime, while you are waiting to have that buy-sell agreement drafted, make a list of important questions to ask your lawyer such as “How much money in before tax dollars do we need?” “Where does the money come from?” “How much money in total is required to live up to the terms of the agreement?” Make the list a substantial one, because these kinds of agreements need to be discussed in great detail. Your lawyer knows this and will walk you through the sticky parts.

To learn more about Los Angeles business attorney, Los Angeles corporate lawyer, California corporate lawyer Alan M. Insul of The Law Office of Alan M. Insul, visit Insullaw.com.

So in late in 1996, “The Bank of Real Estate” made you a real estate loan to go buy that 100 unit apartment complex. You thought you would spend the rest of your days soaking up the sun and drinking Kona coffee on your very own beach in Maui.

Fast forward. It is 2009, you’re a running 10% higher vacancy, the loan has reset (higher of course), and you, and your dream, are in serious trouble. Try as you might, the lender is not willing to recast your loan.

The next thing you know, the lender has gone ahead and notified you that it intends to sell all the furniture in your furnished units in one commercially reasonable sale. But they do not foreclose on the apartment complex.

You think back quickly to your college days and business law class and realize that perhaps “The Bank of Real Estate” made a major mistake. You recall something about a secured real property lender having but one action within which to foreclose against real estate security or risk losing its lien on the property. You decide to call your real estate lawyer confident in two things, the lender lost its lien on your 100 units and you have been saved from a life of burnt day old coffee and crowded beaches.

In your call, you find out that they don’t call your lender “The Bank of Real Estate” for nothing. Counsel explains that your lender took a secured interest in both the real estate and personal property used with the real estate – i.e. the furniture used in your furnished units. This is the so-called “mixed collateral” situation and lenders face it all the time.

Empathetically, your lawyer explains that when it comes to dealing with mixed collateral loans, sometimes there is confusion about how a lender is to proceed in the event of a borrower’s default. First off, the term “mixed collateral” refers to those situations where the loan is secured by some combination of real and personal property. For example, a trust deed against the building together with a security interest in accounts receivables, fixtures, furniture and equipment.

The confusion stems from the general differences in the way a lender forecloses on a loan secured by real property versus personal property. California, like most jurisdictions, provides a set of rules to reconcile the differences in requirements for foreclosing personal versus real property.
In your case, when you defaulted, “The Bank of Real Estate” had the right to pick and choose which property (real versus personal property) to foreclosure and in which order.

California’s Commercial Code §9401 provides the primary rules for dealing with these mixed collateral situations. It, and the cases interpreting it, hold that the lender gets to pick the order in which the collateral is foreclosed and may sell its security in a series of sales without violating the one action rule that you remembered from your business law class. So, for example, “The Bank of Real Estate” could choose to foreclose against the furniture, as it did, and then the real property ….. or the other way around. That’s the easy part.

As for our friend and his fleeting dreams of Kona coffee on Maui, he should have considered contacting his trusty real estate lawyer before he took the adjustable loan and perhaps he’d be riding the waves to no where instead of the Amtrack to his new no where job….. at least that’s what this lawyer thinks.

This is an unlikely scenario but designed to make an illustrative point.
2 Nothing in this article is intended to nor should it be construed as legal advice. Situations involving mixed collateral can be quite complex and you should consult with your legal professional regarding your particular situation.

To learn more about Los Angeles business attorney, Los Angeles corporate lawyer, California corporate lawyer Alan M. Insul of The Law Office of Alan M. Insul, visit Insullaw.com.