As Green Buildings Grow in Sacramento, Sacramento Landlords Should Revise Commercial Leases to Allocate Costs

September 22, 2011,

The City of Sacramento was selected to receive an infusion of money from PACE Commercial Consortium to retrofit commercial buildings to green energy. Next week, the City of Sacramento will consider a contract giving the green light to the City's participation in the PACE program.

solar panels.jpgUnder the PACE program, commercial property owners are loaned the money to complete upgrades recommended after an energy audit performed by Lockheed Martin. The loans are backed by long-term bonds that are sold to institutions like public pension funds. The loan payments will be paid over the course of 20 years and are attached to the building's property taxes. The property owners will be reimbursed for the difference between the monetary savings due to the upgrades and the the payments on the loan.

As more and more buildings turn to green energy, landlords will need to revamp their lease agreements to deal with the allocation of costs. For instance, the cost to improve or build a green building is substantially higher than conventional building costs; while operating costs will be lower in green buildings. Landlords should determine how these costs and savings will be allocated. While a gross lease, which allows the landlord to offset capital expenditures for green building improvements by capturing the savings of the operating cost savings, may be preferable; a modified gross lease may best suit both landlords and tenants. In using a modified gross lease, the base rent will include base operating costs and will pass through any annual increase of the base operating costs. Landlords should also consider who benefits from tax credits from carbon off-sets,

Sacramento Landlord Sued: Lease Goes Up In Smoke

September 15, 2011,

Since the passage of Proposition 215, medical marijuana dispensaries are popping up all over Sacramento County. Throughout Sacramento County, businesses operating medical marijuana dispensaries are leasing commercial premises. These businesses are not licensed to dispense medical marijuana and are leasing space in areas not zoned for such dispensaries. What is a landlord to do when it receives a Notice of Violation from the County that one of its tenants is illegally operating a medical marijuana dispensary on its property? That is exactly the situation faced by a local commercial landlord who is being sued by the County of Sacramento and is facing a judgment for the sum of the County's attorney's fees and costs of the litigation. FiftySeven Madison, LLC is being sued by the County of Sacramento for nuisance and various code violations. The County is seeking to collect monetary damages and attorneys' fees and costs incurred by the County. FiftySeven Madison, LLC is also a party to an administrative action and could be assessed substantial fines and penalties.

Up In Smoke.jpgReceiving such a Notice of Violation puts a landlord in a precarious situation. There are no great options when a landlord faces exposure to a lawsuit, with the attendant costs to defend versus the expenditure of valuable monetary resources to give notice of breach of the lease to the tenant and risk a loss of rental income. Either way, the landlord's rental income from this tenant will go up in smoke.

Under current law, the tenant operating a medical marijuana dispensary in Sacramento County will be shut down. Typically, the tenant vacates the leased premises and re-opens under another name in another location. Since the vacating tenant is usually an under-capitalized business entity, the landlord will more than likely never collect the rent owed under the lease. Of course, if the lease was guaranteed by a person with assets, the landlord may be able to file a lawsuit and ultimately collect the sums owed under the lease. But, the landlord will still have a vacancy to fill and will have to expend resources on the hope of collection in the future.

Landlords are wise to minimize their risk in these situations. Whenever a landlord receives a Notice of Violation from the City or County about one its tenants, or it has knowledge that a tenant is conducting illegal activities on its property, the landlord should immediately serve the tenant with a Notice to Perform (i.e. stop the illegal activity) or quit the leased premises. If the tenant fails to stop the illegal activity, the landlord should follow through with an unlawful detainer to remove the tenant from the premises.

Data Breaches Now Require Expanded Notification to California Consumers

September 1, 2011,

Thumbnail image for computer data.jpgOn August 31, 2011, Govern Jerry Brown strengthened California's Computerized Data Security Breach laws by signing into law Senate Bill 24 (Simitian). SB 24 was enacted in response to recent data revealing that over 500 million sensitive records have been breached since 2005 and that individuals receiving notice of the breach do not understand the consequences of these security breaches. SB 24 sets forth detailed steps for notification and lists the exact information that must be provided to California residents affected by the security breach.

SB 24 applies to any person or entity conducting business in California that owns or licenses computerized data that includes personal information. If any personal information was, or is reasonably believed to be, taken by unauthorized means, California residents must be immediately advised of the security breach with a detailed notice. The new law also requires that the California Attorney General be notified of any security breach that affects more than 500 residents.

The notice to California residents must "be written in plain language" and contain, at least, the following information:

• The date of the notice and the name and contact information of the person or business whose computerized data was breached.
• A list of the types of personal information that was breached.
• To the extent known, the actual or estimated date or date range of the breach.
• A general description of the breach incident.
• If the breach exposed a Social Security number, driver's license number, or California identification card number, the toll-free telephone numbers and addresses of the major credit reporting agencies.

Although not required, a noticing person or business may include information about what the person or business has done to protect individuals whose information has been breached and advice on steps that the person whose information has been breached may take to protect himself or herself.

Substitute notice can be used in limited circumstances. Substitute notice can only be used if the cost to provide the required notice exceeds "two hundred fifty thousand dollars ($250,000), or that the affected class of subject persons to be notified exceeds 500,000, or the person or business does not have sufficient contact information." Substitute notice must be sent via e-mail, posted in a conspicuous place on the website, and by provided the Office of Privacy Protection.

Entities covered by HIPAA are excluded from the requirements of the new law so long as the entities have complied with the breach notification provisions of the federal HITECH Act.

SB 24 will become effective January 1, 2012. Individuals and business subject to the new law are advised to review their current notice letter and make revisions necessary to ensure that the information provided in their notice letters complies with the new law.

Sacramento Developers In Limbo While Waiting For A Supreme Court Ruling on Whether Redevelopment Agencies Will Be Dismantled

August 12, 2011,

In an effort to balance its budget, the California legislature recently enacted new legislation (ABX1 26 and ABX1 27) dismantling California redevelopment agencies, unless the agency agrees to allocate a portion of it's tax increment funds to specific government entities, such as school districts, fire protection agencies, and transit agencies.

Litigation (California Redevelopment Assn. v. Matosantos) was filed by the California Redevelopment Association (CRA) and the League of California Cities challenging the constitutionality of this recent legislation. On August 11, 2011, The California Supreme Court issued an Order to Show Cause, halting the State's plan to dismantle redevelopment agencies. Redevelopment Agencies were granted a temporary reprieve; but, the agencies are prohibited from starting any new projects, issuing bonds or disposing of real property by sale, lease, or otherwise. The Court is expected to decide the issue some time after January 15, 2012.

Where does this legislation and litigation leave Sacramento developers?

Which Way.jpg In limbo - waiting. Prior to the legislation, redevelopment agencies had the authority to issue debt, own and lease property, and enter into other long-term contractual obligations. Now, redevelopment plans and requirements remain in effect and are applicable to current redevelopment projects, but the agencies' powers to act are stalled. Developers fortunate enough to have a binding obligation in place will eventually see their developments completed - so long as no contract changes, new property transfers, or further agency funds are necessary for its completion. But, developers in negotiations with agencies are now dealing with agencies that cannot formalize the negotiations into contracts and cannot fund the expenditures negotiated.

CALIFORNIA COURTS CRACKED THE CORPORATE SHIELD GIVING JUDGMENT CREDITORS A BETTER CHANCE OF COLLECTION

August 10, 2011,

In today's climate, California judgment creditors are finding that debts of business entities are uncollectable and that the debtor is nothing more than a shell business entity. Facing the frustration of collecting against a company with marginal assets, creditors have been abandoning their judgments. Recently, the appellate courts cracked open the corporate shield giving judgment creditors a better chance of collection. Cracked Window.jpgTwo recent Court of Appeal cases opined on the tactics for collecting against business owners evading financial responsibility through the use of shell companies.

In Misik v. D'Arco, 197 Cal. App. 4th 1065, as modified by 2011 Cal. App. LEXIS 1028 (Cal. App. 2d Dist., Aug. 9, 2011), the appellate court cracked the corporate shield, increasing a judgment creditor's chance of collection. The appellate court held that a trial court, using its general powers under Code of Civil Procedure Section 187, can amend a judgment to add a judgment debtor who is found to be an alter ego of the business defendant. In Misik, the plaintiff filed a motion to amend the judgment to add a corporate officer, D'Arco, as a judgment debtor. Unbeknownst to Misik, he made a loan of money to a shell company owned by D'Arco. After D'Arco's company defaulted on the loan, Misik sued D'Arco and his company for breach of contract and fraud. Misik did not prevail on the fraud claim against D'Arco and ended up with a judgment against D'Arco's company only.

Unable to collect against D'Arco's worthless company, Misik filed a motion to add D'Arco to the judgment based on the alter ego doctrine. Whether the business is an alter ego of an individual is a factual question. First, there must be sufficient unity of interest and ownership between the individual and the business such that their separate personalities no longer exist. Secondly, treating the business as separate will sanction a fraud, promote injustice, or cause an inequitable result. The Misik court found D'Arco to be an alter ego of his company. The Court relied on the facts that D'Arco was the only officer and employee of his business, that he made all decisions for the business, and that he even paid some business debts with personal checks. The Misik court futher noted that D'Arco participated in and controlled the litigation filed against his company by Misik.

The court in Phillips Spallas & Angstadt LLP v. Fotouhi (197 Cal. App. 4th 1132) approved of the use of charging orders to grab corporate assets to satisfy a judgment against an individual shareholder. There, the court approved a charging order, finding that a new corporation was merely a continuation of a partnership. Phillips Spallas & Angstadt, a law firm, obtained a judgment against Fotouhi, a departing partner, for breach of the partnership agreement. Fotouhi left the firm with its major clients and formed a new partnership with several associates of the firm. The firm won an arbitration award against Fotouhi. Fotouhi attempted to discharge the award in bankruptcy, but was unsuccessful when his bankruptcy was discharged for fraud. He then swore that the firm would never collect a dime. He formed a law corporation which "bought" the assets of his new law partnership.

Continue reading "CALIFORNIA COURTS CRACKED THE CORPORATE SHIELD GIVING JUDGMENT CREDITORS A BETTER CHANCE OF COLLECTION" »

Hope for Sacramento Homeowners - Lenders Accepting Short Sales Can Not Pursue Homeowners for the Defiency

July 18, 2011,

For release:

July 15, 2011

CALIFORNIA ASSOCIATION OF REALTORS® applauds Gov. Brown on signing SB 458 into law

LOS ANGELES (July 15) - The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) applauds Gov. Jerry Brown on signing SB 458 (Corbett) into law. SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans.

Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

"The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference," said C.A.R. President Beth L. Peerce. "SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders - those in first position and in junior positions - will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property."

SB 458 contains an urgency clause making it effective upon signing.

Sacramento Real Estate Developers Get Relief From the Ongoing Building Downturn - Governor Brown Signs AB 208 Extending The Expiration Period Under The Subdivision Map Act

July 15, 2011,

Governor Brown announced today that he has signed into law AB 208, extending the expiration period for two years for all tentative and vesting tentative maps that are set to expire between July 15, 2011 and January 1, 2014. AB 208 expands the Subdivision Map Act by creating Government Code section 66452.23, which notes that this two year extension is in addition to all other extensions granted under the Subdivision Map Act (i.e., Government Code Sections 66452.6, 66452.11, 66452.13, 66452.21, 66452.22, and 66463.5). subdivision  map.jpg Property owners and developers should verify the expiration dates of their tentative maps to ensure that the expiration of their maps will be extended by the latest change in the Subdivision Map Act time periods.

The Risks and Liabilities of Third Party Content on the Web

June 7, 2011,

Recently, I was contacted by a company - we will call it Web Co. - that operates a website with a rating and review system that allows users to provide feedback on user generated content. Like most companies operating in the technology age, Web Co. wanted to know what liability risks it faced when negative reviews were posted on its site. With the increased use of websites, blogs and social media, every company operating a website, blog or otherwise hosting third party content on the Internet is concerned with liability from third party content posted on their site. The good news for Web Co. and all the other companies doing business in the technology age: Congress has virtually eliminated liability stemming from content posted by third parties.

With the 1996 enactment of the Communications Decency Act ("CDA") by Congress, liability for third-party content posted on the web has largely been eliminated. Section 230 of the CDA provides that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." Section 230 further states that "No cause of action may be brought and no liability may be imposed under any state or local law that is inconsistent with this section." This section grants broad immunity to website owners, internet service providers, chat room hosts, bloggers, or other hosts of online forums from liability for content posted by a third party that is defamatory, offensive, violates individual rights of publicity or privacy, or otherwise would trigger a claim under State law. Good news for Web Co. - but, what if Web Co. wants to screen and edit the third party content?

It is totally up to Web Co. to decide how and whether to edit its users reviews. If Web Co. decides to edit content posted by a third party for accuracy, obscenity or civility, the edits must not substantially alter the meaning of the content such that it turns otherwise non-defamatory content into defamatory content. In doing so,Web Co. then becomes the author of the content and is no longer protected by Section 230 of the CDA. Otherwise, Web Co. can be as passive or as aggressive as it sees fit in performing editorial functions.

But, what if during screening of third party content Web Co. discovers what it believes to be copyrighted material? The CDA will not protect Web Co. against claims for copyright infringement based on something posted on its website by a third party. But, the Digital Millennium Copyright Act ("DMCA") will provide a safe harbor from copyright liability if Web Co. has complied with the the conditions of the DMCA.

Most importantly, Web Co. should have carefully drafted terms and conditions of use of its site. The terms and conditions of use should, at a minimum, include terms that protect Web Co. by making posters warrant 1) ownership of their posted content; 2) that their content is not defamatory; and, 3) that it does not violate the privacy, publicity, or other rights of the individual or company about whom they are posting. Further, the terms and conditions should require users to hold Web Co. harmless from claims and indemnify Web Co. from losses. Web Co.'s terms and conditions of use should also protect Web Co.'s content from use by third parties.

You Don't Own My Mortgage So You Can't Foreclose - California Court Says Yes They Can

June 6, 2011,

It is a basic premise in the world of foreclosures in California, that to stop a non-judicial foreclosure, the borrower must tender, or pay, the full amount owed. Well, many borrowers have successfully argued that a tender is not necessary if the company that foreclosed on the property is not the holder of the original promissory note and, thus, not entitled to be paid. But, a recent California appellate court opinion, Ferguson v. Avelo Mortgage, LLC (Cal.App. 2 Dist. Jun. 1, 2011) --- Cal.Rptr.3d ---, 2011 WL 2139143, held that if the Deed of Trust assigns the right to foreclose to another company and its successor or assigns, that assignment is valid and any company that has been assigned the right to foreclose may do so. Essentially, the original holder of the promissory note may grant the right to foreclose to another company who in turn can pass on their right to foreclose.

In Ferguson, the plaintiffs attempted to avoid the tender rule by arguing it did not apply because neither the company that foreclosed, Avelo Mortgage, nor its predecessor, Mortgage Electronic Registration Systems (MERS), owned the original note for the property. This argument fell flat. The original note specifically stated that the mortgage holder assigned its right to foreclose to MERS, its successors or assigns. So, when MERS assigned its right to foreclose to Avelo, Avelo was acting with full authority to foreclose.

Pay Money.jpgBut, what about the tender - if the foreclosing company does not hold the original promissory note, do you still have to pay? The court noted that "it does not follow that a beneficiary may initiate non-judicial foreclosure proceedings under a deed of trust without the original promissory note, but cannot seek tender from a defaulting borrower attempting to set aside the foreclosure." In essence, the plaintiffs still had to tender to Avelo full payment of the amount due to stop the foreclosure proceedings.

The Ferguson's court's decision, which is consistent with several recent federal court decisions, essentially cut off the argument that plaintiffs have been making in courts throughout California to avoid the tender rule. The rule of thumb - property owners will have to tender to stop a foreclosure regardless if the company foreclosing owns the note.

Sacramento Landlords Make Smart Use of Limited Resources - Hiring A Licensed Process Server To Serve Pay or Quite Notices Win Unlawful Detainer Actions

May 30, 2011,

With occupancy rates slowly rebounding and rental rates still low, many Sacramento commercial landlords are closely watching the bottom line. This is especially true when valuable resources must be spent to evict a non-paying tenant. To save the cost of a paying a registered process server, property managers and landlords will often decide to personally serve, or serve by mail, a pay or quit notice. Unfortunately, this cost saving method often causes the landlord more expense in the end.

Pay or quit notices are only valid and enforceable if the landlord strictly complies with California Code of Civil Procedure section 1162. Absent strict compliance, a landlord is not entitled to possession of the premises. With respect to service of a pay or quit notice, the burden is on the landlord to prove service of a pay or quit notice. Many a landlord's unlawful detainer action has been defeated by a tenant claiming (truthfully or not) that they never received the pay or quit notice; despite the landlord producing at trial an affidavit of service signed by an employee of the property manager or, an often illegible, signed return receipt. (See Liebovich v. Shahrokhkhany (1997) 56 Cal.App.4th 511). If the landlord used a registered process server, however, the tenant's mere claim that they never received the notice will fall on deaf ears.

Recently, in Palm Property Investments, LLC v. Yadegar (2011) 194 Cal. App. 4th 1419, a California appellate court specifically held that a proof of service of a pay or quit notice by a registered process server is valid, admissible proof of service of the pay or quit notice. In Palm, the tenant asserted in their verified answer to the complaint that they never received the pay or quit notice. The trial court refused to admit the proof of service signed by a registered process server as evidence of service. On the basis of lack of service, the trial court found for the tenant and dismissed the landlord's unlawful detainer. The appellate court overruled the trial court's finding that the process server's proof of service was inadmissible. The appellate court noted that an affidavit of service signed by a landlord or employee of the property management company is inadmissible proof of service of the pay or quit notice. But, Evidence Code section 647 specifically states that a proof of service signed by a registered process server creates a presumption that service is valid. The court, therefore, held that the proof of service signed by the registered process server should have been admitted by the trial court as proof of valid service of the pay or quit notice.

process_servicepic_copy_1.jpgThe lesson learned from the Palm Property case - landlords should always spend the money to have the pay or quit notice served by a registered process server. The cost of the registered process server is far less than the cost of an unlawful detainer trial that is dismissed for lack of proof of valid service of a pay or quit notice.

Wait! You Are On My Property....I Think?

May 23, 2011,

You know the boundary lines of your property and everything else there is to know about your property. You know that tree in the back corner of your yard is on your property because it is on your side of the fence. You are sure the driveway coming up to your house is on your property because, after all, it is your driveway. But, if you had to, could you calculate precisely where your property begins and ends? What about who has the right to come onto your property and why?

Now, you might have a sneaking thought - "Hmm, maybe I do not know everything there is to know about my property." Before the placement of your new fence or the construction of a new addition to your house, you should invest in a professional survey of your property. A professional survey will settle common property description issues before they become problems and give you important information about what is buried on your property and who has the legal right to enter your property to maintain anything buried there.

Below are some common reasons to get a professional survey:Thumbnail image for survey equipment.jpg

Boundary Lines. One of the most common reasons a landowner seeks the assistance of a surveyor is to determine the location of your property boundary lines. The location of boundary lines and other lines of occupancy or possession, like rights-of-way or easements, is a critical piece of information to have before you build a fence, add a sunroom, or pave your driveway. All too often the survey shows that you and your neighbors were operating under the wrong assumption about the placement of the boundary line between your properties. Before you have that fence erected, make sure it will be built on your property, not your neighbor's. The boundary line certification will also tell you whether the legal description of your property is accurate or if the legal description on your deed needs to be corrected.
Gores, Overlaps, and Gaps. The survey will include a statement about whether there is or is not any discrepancy between the boundary lines of your property and the adjoining property. This is especially important if your property is next to an alley, road, highway, or a street.
Rights-of-Way, Easements, and Abandoned Roads. A survey will show all the conditions imposed by law that are reflected in your property's title report and other agreements. If your property blocks your neighbor's access to the road, for example, there could be an old agreement that gives your neighbor the right to use your property to get to the street.
Joint Driveways, Party Walls, Rights-of-Support, Encroachments, Overhangs, or Projections. If you share a drive-way with your neighbor or if your driveways are connected in some way, you may have an obligation by law to support your neighbor's driveway by maintaining your own.
Existing Improvements. For better or worse, the surveyor typically certifies whether or not the existing buildings and other improvements, alterations, and repairs to your property violate any laws or other codes, such as those regarding height, bulk, dimension, frontage, building lines, set-backs, and parking.
Water, Electric, Gas, Telephone and Telegraph Pipes, Drains, Wires, Cables, Vaults, Manhole Covers, Catch basins, Lines, and Poles. A survey will show the location of any underground cables and drains and report on a utility company's rights to enter your property to maintain both underground and above ground wires/cables. This information is important for two reasons: 1) A utility company may have the right to use a portion of your property for upkeep of utility lines, and may have a say in how you landscape your yard; and, 2) you need to know the exact location of all underground utilities before you start any excavation or construction on your property.
Cemeteries. While it is probably unlikely that unbeknownst to you, an old family burial ground is in your back yard, a survey will show the exact location of any old cemeteries if they do exist.
Access, Ingress and Egress. A survey will note whether there is any physical vehicular ingress and egress to an open public street and will comment on the adequacy of access for a particular purpose, such as delivery trucks, emergency vehicles such as fire trucks, and driveways for tenants.
Zoning Classification. You probably know whether your property is zoned for residential or light industrial use. But, you may be surprised to discover that your zoning classification puts specific restrictions on how you use your property. This part of the survey simply reports your zoning jurisdiction and classification.

A consultation with a knowledgeable real estate attorney can answer your questions about whether you are using your property in conformance with zoning ordinances and give you advice about the legal ramifications of your property survey.

Sacramento Businesses Using Independent Contractors Can Avoid Penalties For Misclassifying An Actual Employee

May 16, 2011,

The use of independent contractors in the Sacramento area has grown dramatically over the past decade. Many businesses rely on independent contractors to supplement their workforce and to provide specialized services. Much to the woe of Sacramento businesses, the classification of workers as independent contractors has come under increased scrutiny by both federal and state governments. In the Fall of 2010, The United States Department of Labor published an agenda outlining a plan to work with the IRS to crack down on misclassified employees. Just recently, legislation was introduced in Congress on the issue of misclassification.

The Payroll Fraud Prevention Act (S. 770), introduced to Congress on April 8, 2011 is now in committee. This bill, if enacted, would expand the federal Fair Labor Standards Act (which currently addresses minimum wage, overtime, and child labor laws) to cover misclassification of employees as independent contractors. It would create a new definition of workers called "non-employees," impose upon businesses the obligation to provide a classification notice for both "non-employees" and "employees," make the misclassification of "employees" as "non-employees" a new labor law offense, and expose businesses to fines of up to $5,000 per worker for each violation of the law.
Despite that the laws are complex and multiple government agencies are involved, Sacramento businesses can avoid mistakes in this area. The IRS uses 20 highly subjective guidelines to determine whether the person is an employee or independent contractor.

Here are some biggies that a business should follow:

Continue reading "Sacramento Businesses Using Independent Contractors Can Avoid Penalties For Misclassifying An Actual Employee" »

Sacramento Business Owners Protect Their Businesses: The Smart Use of Non-Disclosure Agreements

May 9, 2011,

Every entrepreneur starts with an "idea" for their business. Many of these "ideas" are revolutionary to their industries; but, without protection, an entrepreneur's "idea" can quickly become someone else's "idea." So, if you have a truly unique "idea" that is not known to the general public, how do you protect it? Well - you could keep silent and say nothing; but, that makes developing your "idea" impossible. You will have to disclose your idea to a varied number of people and businesses to get your "idea" developed, marketed, sold, and so on. But, how do you maintain that competitive edge? Through the use of well thought out confidentiality and non-disclosure agreements (NDAs).Sshhh.jpg

Non-Disclosure Agreements prohibit others from disclosing a new design, idea, or unpatented concept, private financial records disclosed for a due diligence review, or other confidential trade secrets. The purpose of the NDA is to create a confidential relationship between the owner of the confidential information and others to whom the information must be disclosed to further some potential business interest. Should one of the parties to an NDA use the confidential information, or threaten to use the confidential information, without the owner's permission, a court can issue an injunction to stop the thief from any further use of the confidential information and may even award you monetary damages.

So, how do you know when to use a NDA? Here are some guidelines:

1. You invite another person to "partner" with you in creating your business or developing your idea.
2. You will be presenting a non-patented invention or idea to a potential investor, business partner, or manufacturer to develop a prototype.
3. You will be giving sensitive financial, and other, business records and information to a prospective purchaser or investor in your business,
4. You will be presenting a new product that is not yet available to the public to a prospective customer, buyer or licensee.
5. You will be giving independent contractors or other outside businesses access to sensitive business information that will be providing you a service.
6. Whenever you hire an employee.

But, beware. NDAs are not a one-size-fits-all form contract. In fact, most NDAs are negotiated agreements. A NDA should be specifically drafted for each particular situation. A well drafted NDA will include the exact type of information to be disclosed, to whom it will be disclosed, how the information will be disclosed, the intended use of the disclosed information, for how long the confidential information will be available, and what protections the receiving party must take to protect the information. Lastly, the NDA should provide remedies in the event the agreement is breached.

Turning 18 - A Visit To A Sacramento Estate Planning Attorney Is A Must

May 2, 2011,

Amidst all the planning for their future and the excitement of turning 18, estate planning for your recently turned adult child is the last thought on a parent or child's mind. But when a child turns 18, this is one meeting that must be scheduled. Why? Because once your child reaches age 18, you no longer have the legal authority to make medical decisions on your child's behalf, or to manage your child's finances.

Part of your child's new independence is the responsibility to make responsible decisions about their future. For example, what would happen if he or she were in an accident and suffered a debilitating injury that prevented them from making their own decisions? Before the parent (or any other person) could communicate with the doctors, make decisions concerning medical procedures, or access bank accounts to make sure that your child's bills are paid; you would have to petition the court to be appointed as a guardian or conservator. This process loses valuable time in a situation where your child often needs you act quickly on their behalf. Without the legal authority to act on your child's behalf, these important life decisions will be made by medical staff and other unrelated third parties. Do not leave these important decisions to strangers. Your child should make decisions now on who will be responsible for communicating with doctors, making medical decisions on their behalf, and handling their finances.

A visit to an estate planning attorney will prevent the delay by ensuring that the parent has the power to step in and make decisions in the event the child ever faces a situation where he or she can't make their own decisions. This is done through an incapacity plan, a set of documents that pre-authorizes the person designated by your child to take certain actions on their behalf. An incapacity plan generally includes the following documents:

• A Medical Power of Attorney: This is a document with which your child names you as her agent for purposes of making health care decisions. With a Medical Power of Attorney in place, you have the power to direct your child's care in the event of a debilitating injury or illness.
• A HIPAA Authorization: This is a document that permits your child's doctors to communicate with you concerning her medical records and medical care. Absent a HIPAA Authorization, you can be faced with a number of hoops to jump through before you can talk to your child's doctors.
• A Financial Power of Attorney: This is a document that pre-authorizes you to access your child's bank accounts, pay bills on her behalf, and, if the need arises, even apply for government benefits on your child's behalf.

Your estate planning attorney can help your child prepare for an emergency, and ensure that you have the power to be there for her if she needs you.

Sacramento Businesses Protect Their Confidential Electronic Data From Theft By Former Employees

April 25, 2011,

Often Sacramento employees who are on their way out the door take with them information for use in their new jobs. For instance, the departing employee may download their Outlook Contacts, save documents they created, take a client list, or even more insidious, take technology created specifically for the former employers' business. Taking the information could be a theft of a company's trade secret information. A recent federal court of appeals ruling here in California enforces the importance of Sacramento businesses having appropriate safeguards in place to protect their business in the event that trade secrets and other confidential data are pilfered by a departing employee. The Ninth Circuit Court of Appeals held that, so long as the employer placed restrictions on an employee's use of electronic information, the employer can take action against a departing employee under the Computer Fraud and Abuse Act (CFAA) for misappropriating company data for the benefit of a competitor. U.S. v. Nosal, No. 10-10038, 2011 WL 1585600 (9th Cir. April 28, 2011).

In Nosal, the Ninth Circuit determined that an employee exceeds authorized access to an employer's electronic information when he or she violates the employer's computer access restrictions -- including use restrictions. The Court found that if the employer has no restrictions in place that limits an employee's access and use of electronic information, then the employer has no claim for misappropriation of trade secrets under the CFAA.

harddisc.jpgViolations of the CFAA can result in recovery of damages, injunctive relief and even criminal penalties, making it a valuable tool for combating misappropriation of competitively sensitive electronic data. The California Uniform Trade Secret Act ("UTSA") contains similar damages provisions, also making the UTSA an effective tool for protecting confidential information in the event of a misappropriation by a former employee (or any third party). Each of these statutes - the CFAA, and the UTSA - require that certain steps be taken to protect confidential information.

Businesses should have an attorney audit their policies, practices and agreements with their employees to identify ways in which the safeguards designed to protect valuable trade secrets and other confidential information can be improved. Getting the right legal advice before and after misappropriation of confidential assets is key to taking full advantage of available laws and remedies.