Articles Posted in General Counsel

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Who says the economy is stagnant? California’s commercial construction industry shows the highest level of activity since 2001, and further growth is expected over the next three years, according to an article published in L.A. Biz.

This promising news originated in a study conducted by Allen Matkins, a California law firm, and UCLA’s Anderson School of Management. The study examined seven of California’s major markets for indicators of future commercial construction. More easily accessible financing and low cap rates, along with increased demand from technology, advertising, media and information companies has helped spur the commercial construction growth.

With Commercial Construction Growth Comes Increased Risk of Litigation

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Appeals handled by the Consumer Financial Protection Bureau (CFPB) present issues one should be concerned with whether one works in real estate or business. Back in March of this year CFPB Director Cordray presided over the oral arguments in the first appeal hearing of an administrative action. In the case heard on appeal two companies were alleged to have given and received millions of dollars in payments through a “captive” mortgage reinsurance agreement. The argument was that these payments constituted kickbacks that violated the Real Estate Settlement Procedures Act. The facts of the case itself are not that important for those not involved in the case. Rather, what is important is the way the appeal is handled.

CFPB’s Rules of Practice for Adjudication Proceedings

The rules for these appeals are laid out in the CFPB’s Rules of Practice for Adjudication Proceedings. Specifically the appeals in question are appeals of an administrative law judge’s recommended decision to the CFPB director. A party who wants to appeal a recommendation must go through this process if it wants judicial review even though the recommendation does not become final until after the director approves it. The rules also provide for strict and short timelines in this appeals process. This may seem like a positive aspect as many parties wish the legal process did not typically take so long. However, it is possible that these short turnaround times will ultimately favor the agency over other parties. Other rules also appear to favor the agency fairly heavily. This is mainly because they grant the CFPB director broad discretion in reaching a ruling.

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Business owners have many obligations. They have to consider their obligations to customers, to employees, to vendors, and sometimes even to law enforcement. One set of obligations that sometimes gets overlooked, however, is a business’s obligations to the public at large. One such obligation may come in to play when a business is considered a public forum. So the question becomes, when is a California business obligated to allow other members of the community to do things like solicit donations at their business? A recent court decision addressed that very question.

Shopping Center Policy on Solicitation

The Court’s decision was in a case called Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach. The realty group controls the Fig Garden Village shopping center, which is an outdoor shopping center with about sixty retailers. The shopping center has a policy that prohibits the solicitation of donations on shopping center property. Other forms of expressive activity, like collecting signatures for petitions, are allowed but only in a designated “public forum area.” One day, back in 2013, two solicitors for Nu Creation Outreach went to the shopping center and solicited donations for their organization on sidewalk areas adjacent to store entrances within the shopping center. The next day six to eight solicitors from the organization showed up and started soliciting donations. Shopping center representatives explained the policy and asked the solicitors to leave, but they refused. The shopping center then called the police, but the police refused to arrest the solicitors without a court order.

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Some small businesses in California are getting an extra year to comply with the requirements of the Affordable Care Act, which is also colloquially known as “Obamacare.” Radio Station 89.3 KPCC is reporting that a bill signed by Governor Brown this week will give the smallest mom and pop businesses in the state an additional year before they are required to comply with the requirements of the Act.

Requirements Under Federal Law

Federal law requires that employer-offered health insurance plans must cover essential health benefits. There are ten specific essential health benefits listed in the act. These are listed on the federal government’s website, HealthCare.gov:

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Building a small business is hard work. Even with a great idea and a stellar work ethic, multiple hurdles will come up along the way. Some of those challenges, like how to organize your business or obtain the proper real estate for your business can be made easier through the assistance of a licensed attorney. But there is one other big hurdle: funding. For years, entrepreneurs have had to negotiate the often difficult landscape of obtaining loans or finding private investors to keep their doors open in those early days before the business makes a profit. In order to expand, small business owners have faced the same hurdles. But now there may be a new, easier way to get needing funding more quickly: a cash advance.

What is a cash advance?

The term cash advance sometimes has a bad connotation, because it is usually associated with cash advances from credit cards. This is a system where an individual uses his or her credit card at an ATM machine to receive cash directly, rather than using the credit card directly at a merchant. This sort of transaction can carry very high transaction costs–interest without a grace period plus associated ATM fees. Plus, in personal finances, it can contribute to the cycle of credit card debt. That is not the type of cash advance we are talking about here, though.

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Many business owners, particularly start-ups, remain unaware of the complex legal issues involved in employer-employee relationships. It is critical to have guidance on these matters, to understand your risks, rights, and obligation as an employer. Consider employer duties to accommodate employees with disabilities.

For example, a case recently passed through the federal district court system regarding an employer’s failure to accommodate an employee with a disability. The Americans with Disabilities Act (ADA) states that an employer must make reasonable accommodations for an employee with a disability, if such accommodations are possible and do not cause undue hardship. Common accommodations include providing wheelchair accessible offices or meeting spaces, modifying work equipment or schedules, and adapting training procedures or specific job duties. Reasonable accommodation must be made to allow employees to complete the interview process, training programs, and regular job duties.

Gooden v. Consumers Energy Co.

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Last year, we featured several articles about California’s ride-sharing startups. Ride-sharing companies, such as UberX, Lyft, and Sidecar, are in the business of providing vehicles-for-hire. Using apps and other online programs, the companies connect those in need of rides with non-professional drivers driving their own cars. Two of the companies are making headlines, and the news is not so good. According to PandoDaily — the site of record for Silicon Valley — last month, a San-Francisco based Uber driver, Daveea Whitmire, allegedly verbally and physically assaulted one of his passengers who recorded some of the incident on his iPhone. Uber refused to investigate the matter, and insisted that Whitmire had passed the company’s standard background checks. Whitmire’s account has since been deactivated by Uber and evidence has emerged that Whitmire was a convicted felon.

Since Uber entered the market, its drivers have been accused of improper conduct at least three other times. The most recent incident involving an Uber driver occurred on New Year’s Eve, when an Uber driver hit and killed a 6-year-old girl who was crossing the street with her mother and brother. Uber instantly denied culpability. According to PandoDaily, “[i]n nearly all of [the] cases, Uber has responded in the same way, saying it’s not responsible for the conduct of its drivers.” In response to its decision not to investigate, Uber states that “we’re a technology platform that connects riders and providers, so it’s not our job to investigate.” Several Lyft drivers also have been accused of improper conduct, but, unlike Uber, the company apologized to its passengers and promised to investigate the situations; however, just like Uber, Lyft contends that it is not liable because it is merely a “technology platform.”

Uber and Lyft contend that they cannot be held liable for the drivers’ actions because their drivers are not employees but independent contractors. Last August, two Uber drivers filed a class-action lawsuit against the company, claiming that it is stiffing driver’s on tips. The suit addresses the very issue of worker misclassification and seeks recognition that Uber drivers are employees rather than independent contractors. Are Uber and Lyft correct when they say that they cannot be held liable for the actions of the drivers? Can they be sued for negligent hiring or vicarious liability? Even though we will not know the answers to these questions until a court rules, the headlines discussed above raise very important issues for startups and small businesses regarding the classification/misclassification of workers as employees or independent contractors and the importance of properly screening individuals before hire.

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For years, California has been plagued by abusive lawsuits aimed at business establishments for alleged violations of the Americans with Disabilities Act (ADA). On September 19, 2012, California Governor Jerry Brown signed into law, Senate Bill 1186, which is an attempt to curb the abusive lawsuits based on the ADA and related state laws, requiring that places of public accommodation be accessible for persons with disabilities. The law went into effect in January of 2013.

Prior to the Bill’s enactment, unscrupulous law firms devised a scheme where they would send disabled clients to as many business establishments as possible until an ADA violation was found. Once a violation was encountered, the disabled clients would repeatedly visit the guilty business establishment to encounter the same accessibility violation. Under California civil rights law, each violation triggers a minimum statutory penalty of $4,000 The law firms would then send to the guilty business establishment/property owner/lessor a “demand for money” letter or the firm would file a lawsuit on behalf of the disabled client, requesting damages for each violation (“stacked claims”). Instead of fighting an expensive legal battle, the business establishment would quickly settle. In one notorious case, an illegal immigrant and convicted felon, who also happens to be a paraplegic, filed over 500 lawsuits against businesses, and earned $165,000 in settlements, for ADA violations.

The Bill has five main provisions. The first and most important provision of the Bill is that it ends “demand for money” letters from attorneys. Attorneys may still send letters to business establishments alerting them of potential violations, but the letter may not include a demand for money. The letter must contain several items, including, identification and location of the alleged violation; an explanation of how the alleged violation interfered with the disabled person’s access; and, the date of the alleged violation/interference. The law firm must send a copy of the California State Bar and the California Commission on Disability Access.

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On September 21, 2013, California Governor Jerry Brown signed into law the California Revised Uniform Limited Liability Company Act (commonly known as the RULLCA), codified at Cal. Corp. Code §§ 17701.01-17713.13. The law is scheduled to take effect on January 1, 2014. The RULLCA will entirely replace the Beverly-Killea Limited Liability Company Act (referred to for purposes of this article as the “old law”), which has governed California limited liability companies (LLCs) since 1994. An LLC is a hybrid legal entity that has both the characteristics of a corporation and of a partnership. An LLC provides its owners — referred to as “members” — with corporate-like protection against personal liability, but it is treated as a noncorporate business organization for tax purposes.

The RULLCA will apply to all existing LLCs and LLCs formed under the laws of California after January 1, 2014, as well as to all foreign LLCs registered with the California Secretary of State as of January 1, 2014. The law revises certain rules governing the formation and operation of LLCs in the state of California. Below, we will highlight some of the significant changes promulgated by the new law.

While much of RULLCA is similar to existing law, it includes some important changes. First, while the “operating agreement” still serves as the foundational contract between LLC members, under RULLCA, the operating agreement does not need to be in writing. Additionally, unless specifically expressed in the operating agreement, an LLC will, by default, be managed by the members; if an LLC wishes to establish management by a manager or managers, it must be expressly stated in the operating agreement.

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It is important for owners and operators of commercial real estate to stay current with applicable laws and ordinances, including the Nonresidential Building Energy Use Disclosure Program (the “Disclosure Program”). The Disclosure Program — better known as Assembly Bill 1103 or AB 1103 — requires owners, brokers, and property managers of commercial real estate, i.e., “nonresidential buildings in California,” to disclose energy use or “benchmarking data” to potential buyers, lessees, and financiers prior to the sale, lease, or financing of a whole building. The purpose of the Bill is to promote energy efficiency in California.

AB 1103 requires nonresidential building owners and operators to input energy consumption and other building data into the Environmental Protection Agency’s ENERGY STAR Portfolio Manager System, which generates an energy efficiency rating for the subject building. Ratings are from 1 to 100, with 100 being the most energy efficient. A building achieving a score of 75 or higher can apply for ENERGY STAR certification. ENERGY STAR Portfolio Manager is an online tool created by the EPA and used to measure and track energy and water consumption, as well as greenhouse gas emissions. It can be used to benchmark the performance of one building or a whole portfolio of buildings.

AB 1103, passed in 2007, was scheduled to go into effect on September 1, 2013, for buildings of 50,000 square feet or more, however, this summer, the California Energy Commission announced that it was delaying implementation of the program until January 1, 2014, because of ongoing technical issues with the Portfolio Manager tool. Beginning on January 1, 2014, the owners and operators of commercial buildings are required to disclose to potential buyers, lessees, and financiers, the building’s energy data and rating of the previous year. The Implementation Schedule is as follows: