Articles Tagged with “California small business attorney”

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Start the year strong – ensure your business is legally compliant.  California corporation law requires all corporations and limited liability companies to comply with certain requirements to remain legally complaint.  Forgetting a deadline or missing a filing will prevent your company from legally operating.   To ensure your business stays compliant, take steps now by creating a log of all compliance dates and actions that need to be taken.  Your log should include:

  1. Annual Meetings and Minutes: Your By-Laws and California law requires all corporations to hold an annual Shareholders and Board of Directors Meeting.  These meetings should include a discussion on the condition of the company and a ratification of actions taken.  Shareholders are required to annually appoint the Board of Directors and the Board of Directors elect the officers for the next year.  Ensure that the minutes from these meetings are in writing and added to your corporate records.
  2. Update By-Laws or Operating Agreement. Each business should review its By-Laws or Operating Agreement.  Laws sometimes change and business operations evolve with the growth of the business.  Your By-Laws or Operating Agreement should remain compliant with current law and your business operations.
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Law Office of Kristina M Reed selected for 2017 Sacramento Small Business Excellence Award

Sacramento,CA – November 30, 2017 — Law Office of Kristina M Reed has been selected for the 2017 Sacramento Small Business Excellence Award in the Lawyers classification by the Sacramento Small Business Excellence Award Program.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2017 Sacramento Small Business Excellence Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Sacramento Small Business Excellence Award Program and data provided by third parties.

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A typical commercial lease in California requires a commercial tenant to maintain and repair the leased property and not commit “waste.” For legal purposes, waste is defined as permanent harm done to real property by a person or persons in legal possession of that property, such that the property’s value is diminished. If the tenant breaches the maintenance requirement, the landlord may provide a notice of default. If the tenant does not cure the breach, the landlord may terminate the lease and sue to recover the cost of repairs for damage to the property. But, what happens if the tenant does not cure the breach, and the landlord does not terminate the lease or the lease has not expired? Can the landlord sue to collect the cost of repairs for damage to the property? A recent decision by the California Court of Appeals for the Fourth District answers this question.

In Avalon Pacific-Santa Ana v. HD Supply Repair & Remodel, 192 Cal. App. 4th 1183 (2011), the Appeals Court held that a commercial landlord could not recover from a tenant the cost of repairs for damages where the parties continued to perform under their lease agreement, which had neither expired nor been terminated. The facts of the case are instructive.

HD Supply Repair & Remodel leased vacant warehouse and office space from Avalon Pacific-Santa Ana, intending to convert the space into a retail facility. The 10-year lease was set to expire in 2017, but included an option to extend. After demolishing the office space, HD Supply stopped renovations because of the economic downturn. HD Supply unsuccessfully attempted to sublease the property. The property eventually fell into disrepair, was vandalized, burglarized, and became home to vagrants. Avalon sued HD Supply for breach of the maintenance and repair obligations of the lease and for waste; however, Avalon never terminated the lease and HD Supply continued to pay rent of $50,000 per month. The case proceeded to trial, where a jury found in favor of Avalon, awarding $677,000 in damages for breach of the lease and $561,000 in damages for waste.

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Gawker Media, LLC is an online media company and blog network based in New York City. Last summer, three former interns sued the online publisher in Manhattan federal court, alleging that it violated minimum-wage laws by requiring interns to work at least 15 hours per week without pay. The complaint, which was filed on behalf of all of the company’s unpaid interns and seeks unpaid wages and overtime under the federal Fair Labor Standards Act (FLSA), alleges that “Gawker employs numerous other ‘interns’ in the same way, paying them nothing or underpaying them and utilizing their services to publish its content on the Internet, an enterprise that generates significant amounts of revenue for Gawker.”

Last week, PandoDaily reported that Gawker has begun filing documents in response to the lawsuit, many of which paint the company in a very hypocritical light. In several affidavits, Gawker employees, including managing editors, avert that the interns were rewarded with valuable experience that was all part of an informal training process: “Simply observing what it is like to work at a place like Gawker is valuable, and internships at Gawker sites are good for a person’s resume.” The hypocrisy: Last August, Gawker castigated Facebook COO Sheryl Sandberg for having one of her employees advertise for an unpaid assistant to help Sandberg on her book tour.

The case against Gawker was filed shortly after a federal judge ruled in favor of plaintiffs in a class-action lawsuit filed against Fox Searchlight Pictures in federal court in New York. In that case, two former interns who worked on the film “Black Swan,” claimed that Fox violated federal and state minimum wage and overtime laws. The plaintiffs alleged that they had the duties and responsibilities of regular employees, but did not receive adequate training and supervision, as required by the FSLA (an employer using unpaid interns must provide training and gain “no immediate advantage” from the interns, such as displacing a regular employee by performing his/her duties).

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The startup community has been hearing a lot lately about net neutrality. What is net neutrality? Why is it making headlines? Why should should startups be worried? In the following paragraphs, we will address these questions.

Net neutrality, also known as network neutrality or Internet neutrality, is the principle claiming that Internet service providers (ISPs) and government should treat all data on the Internet equally, meaning that Internet users should be able to access any web content they choose and use any applications they want, without their ISP imposing limitations or restrictions. Net neutrality regulations were first approved by the U.S. Federal Communications Commission (FCC) in December 2010. In January 2011, telecommunications giant Verizon filed suit against the FCC, challenging the net neutrality rules. In particular, Verizon argued that the FCC does not have enforcement authority.

Net neutrality is making headlines because, last month, in Verizon v. FCC, No. 11-1355 (D.C. Cir.), the U.S. Court of Appeals for the District of Columbia Circuit finally issued a ruling in the case, striking down the FCC’s net neutrality rules. The court ruled that because ISPs are not classified as traditional telecommunications services, or “common carriers,” the FCC cannot impose on them its anti-discriminatory regulations. The FCC has decided not to appeal the ruling; instead, the agency will examine the possibility of drafting new net neutrality rules. Yesterday, The New York Times reported that the FCC already has unveiled a new proposal that would “discourage Internet service providers from charging companies to stream their movies, music and other content through a faster express lane.” Although the FCC has not written the formal rules, it has begun accepting public comments on its newest proposal.

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This year, California small businesses and the legal community will be keeping a close eye on how the State Supreme Court rules on major disputes over arbitration agreements. An arbitration agreement is a written agreement between two parties, designating an arbitrator — instead of a court of law — to resolve any disputes that may arise out of their business relationship. Companies often require employees to sign arbitration agreements as a means of limiting the costs associated with any disputes that may arise out of the employment relationship.

Legality and History of Arbitration Agreements

As far as the legality of arbitration agreements, the Federal Arbitration Act of 1925 (FAA) provides that arbitration agreements are “valid, irrevocable and enforceable, and entitled to the same respect as other contracts.” Despite this, several years ago, the California Supreme Court struck down an arbitration clause in a consumer agreement because the arbitration agreement did not permit the consumer to bring a class action arbitration. In a 5-4 decision, the United States Supreme Court reversed that ruling, holding that state law cannot interfere with an arbitration agreement’s elimination of the class action mechanism to resolve disputes. In AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Court held that, “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration…. We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe Congress would have intended to allow courts to force such a decision.” Accordingly, the Court found that the FAA preempts California state law and ruled that states may not enact special rules that disfavor arbitration, even in the interest of public policy. The decision effectively made it much more difficult for employees to file employment-related class actions, and led to California courts issuing very conflicting and often confusing decisions in employment cases involving arbitration agreements.

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A contract is an agreement between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. Contracts are widely used in commercial law and form the legal foundations for countless business transactions around the world. Common examples include construction contracts, purchasing contracts, employment contracts, merchandise supply contracts, as well as software licensing contracts. One of the most common provisions in a commercial contract is a forum-selection clause, or choice of law or forum clause. A forum-selection clause is a contractual provision that specifies where the parties to a contract will fight out any disputes that arise between them. The clause may refer to a particular court in a jurisdiction agreed upon by the parties; a particular kind of dispute resolution, i.e., arbitration, mediation; or, it may refer to both.

On December 3rd, 2013, the United States Supreme Court decided Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, et al., 571 U.S. ____ (2013), which concerned the interpretation of a forum-selection clause in a commercial contract, and will have important ramifications for all commercial contracts. In Atlantic Marine, the Court reversed the Fifth Circuit Court of Appeal’s refusal to enforce a forum-selection clause in a commercial contract, holding that a forum-selection clause may be enforced by a motion to transfer under 28 U.S.C. § 1404(a), which provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought to any district or division to which all parties have consented.” The Court further held that when a defendant files a § 1404(a) motion to transfer, a district court should transfer the case unless “extraordinary circumstances unrelated to the convenience of the parties” support denial of the motion to transfer.

In the case, Atlantic Marine Construction, a Virginia company, under contract with the United States Corps of Engineers to build a child-development center, entered into a construction and labor subcontract with J-Crew Management, Inc., a Texas corporation. The subcontract included a forum-selection clause, providing that any disputes arising under the subcontract would be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division. When a dispute arose, J-Crew filed suit in the Western District of Texas. Atlantic filed a motion to dismiss. The court denied the motion, holding that 28 U.S.C. § 1404(a) is the exclusive mechanism for enforcing a forum-selection clause, and that the burden was on Atlantic to establish that a transfer was warranted, by establishing public and private interests. Atlantic then appealed to the Fifth Circuit for a writ of mandamus. The Fifth Circuit denied the writ and directed the District Court to dismiss the case or transfer it to Virginia. The Fifth Circuit held that the proper vehicle for enforcing a forum-selection clause is a motion to transfer under § 1404(a), not a motion to dismiss, and that the District Court improperly placed the burden on Atlantic to prove that transfer was appropriate where the contract specifically provided a forum-selection clause. The Supreme Court reversed, essentially holding that a forum-selection clause be given “controlling weight in all but the most exceptional cases.” The Court also clarified the proper procedural route when a party is seeking dismissal or transfer of a case filed in a court different than the one provided in the parties’ contract.

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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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We have written several posts in the past about some strategic choices faced by a person or persons who are establishing a limited liability company. These include important considerations such as the method of taxation, the manner in which the constituent members are paid, and the things to be addressed in the company charter or operating agreement. There is one choice, however, that some LLC novices neglect to consider until the choice is laid before them by a California business lawyer: Should the limited liability company be managed by its constituent members, or should it appoint people for the express purpose of handling the managerial duties?4774087006_f73cd99ea1.jpg

The short answer is the same frustrating answer that business clients will often hear from attorneys: “It depends.” What does it depend on exactly? More often than not, it depends on the size of the company (the number of members), the aptitude of the individual members to perform managerial tasks, and, distinctly, the desire of an individual member to perform managerial tasks.

For most LLCs, the size of the company is the chief deciding factor. The vast majority of LLCs are comprised of one or two members. Many others are comprised of only a handful of members. When the company size is so small in terms of membership, the individual members are more likely to want a stake in the management of the company. The classic case is that of a small business. Suppose two best friends open a restaurant. Both friends are almost always going to want a stake in the management and direction of the company (such as organizational structure, addition and subtraction of members, or acquisition of company assets) as well as in the day-to-day operations of the business (e.g. employees, recipes, menus, advertising). Although there are two distinct categories of company operations, a team of two members is likely to want to be involved in both.

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On September 21, 2012, Senate Bill 323 was signed into law by Governor Jerry Brown. Sponsored by Senator Juan Vargas, the bill will be designated as the California Revised Uniform Limited Liability Company Act (RULLCA). On January 1, 2014, it is slated to replace the Beverly-Killea Limited Liability Company Act, which was signed into law in 1994. California joins a growing minority of states that have rewritten their limited liability company laws in recent years, and now California business lawyers are left to decipher how the new laws will affect small business owners and entrepreneurs who wish to incorporate their small businesses as limited liability companies.Law-books.jpg

Some people that have studied the new law worry that it may open the door to a number of constitutional challenges. Portions of the law are written so as to be made retroactive to limited liability companies that were organized under the existing laws. The United States Constitution states at Article 1, Section 10, Clause 1:

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”