If you sign a commercial lease for your San Diego business, the lease will state that it is in force for a certain amount of time -- three years, five years, or whatever has been negotiated. Very likely there is also what is called a "holdover clause" that will vary in terms of the words used and the intent of the parties.
The costs of hacking, malicious data breaches, and accidental data leaks can be extensive and potentially fatal to a business enterprise. For example, Equifax had a massive data breach in 2017. Since then, Equifax has spent -- or is projected to spend -- $439 million through the end of 2018. Only $125 million of that cost is covered by insurance.
Aside from a method of reaching customers, pop-ups have become a marketing product or service launch tool coupled with social media and influencers. Pop-ups are supposed to be "fun" and "interesting," but there are still a host of legal issues that must be navigated if your San Diego business is considering the idea.
If you are running a successful business, you need to have solid and enforceable contracts. Some business owners think that a handshake deal or an oral agreement is all that is needed. And, sometimes that can be true. If the transaction is a "one-off" or in the nature of pay-as-you-go, maybe nothing formal is needed. But, mostly it is important to have written contracts.
With the new year approaching, now is the time to finally create a corporate entity for your business. Here are the top four reasons why NOW is the time:
In general, California courts will enforce contracts as written and based on the intent of the contracting parties as expressed in the contract. Rarely, a contracting party tries to make the argument that the contract is void for abusive sales practices or what is legally called "undue influence." California courts will only entertain the defense in the most abusive and aggressive circumstances.
In general, if two or more people are operating a business for the purpose of making a profit, they are operating a partnership. But, once the same people form a corporation to operate the business, then, by operation of California law, the partnership comes to an end and the former partners are now merely the joint owners of a corporation. In general, this is the "supersession doctrine."
One of the abuses that commonly occurred in the past was the use of different franchise agreements for different franchisees. As an example, a franchisor could negotiate a 10% royalty fee with one franchisor and then negotiate a 15% royalty fee with a different franchisee. Through the use of confidentiality and nondisclosure provisions, the franchisees would be prohibited from discussing the material terms of their respective agreements and, thus, the franchisor's unequal treatment would remain secret.
In general, San Diego businesses are permitted under California law to monitor employee workplace communications such as business phone calls and internet usage. More particularly, employers have the right to access employee business-use voicemail, email, texts, and other social media activity.
A good corporate lawyer will be able to read and review the private placement memorandum and provide some advice and counsel on various red flags that might be raised. Red flags are raised not only by what might be contained in the private placement memorandum, but by what might be missing.
San Diego Contract Defenses: Doctrine of Economic Duress If you are sued in California for breach of contract, there are some defenses that your San Diego business can raise that might win the case. The doctrine of duress is a general defense when the claim is made and evidence [...]
Contractual Notice Provisions: What is the Notice Prejudice Rule? Many San Diego business contracts contain provisions or clauses requiring various types of notice. For example, in a commercial lease -- a type of contract -- the tenant might be required to give 60 days’ notice to the landlord of [...]
Strategies for Terminating a Business Contract That has "Gone Bad" It happens sometimes: You are doing your part, but your contracting partner is doing a bad job. Problems might include: Delivery is behind schedule Service is no longer top-notch Product quality is less-than-desired And more These unfortunate situations present [...]
Avoiding Unexpected Business Closure: Five Quick and Easy Steps for Business Succession Planning With small-to-medium sized San Diego businesses, an unexpected tragedy or personal accident can put the business in danger. The key person is often busy running the business and is not always careful to neatly file and [...]
Can San Diego Consumers be Bound by "Shrink-Wrap" Contracts? As a consumer, you have probably purchased a product -- often software or small electronic devices -- where a contract or licensing agreement is located inside the box. These types of agreements go by the name “shrink-wrap” agreements. As a [...]
False Advertising in California: "One-A-Day" is False if the Dosage is Two-A-Day Occasionally, the way a product is branded -- its name and trademark -- can cause problems with respect to claims of false advertising. For example, we recently wrote about a US Ninth Circuit Court of Appeals case [...]
Corporate Governance: What is a Quorum Requirement? In general, corporations in San Diego and in California are governed by the votes of the shareholders (owners) and by the votes of the board of directors. Once a year or so, the shareholders or owners meet and they vote to elect [...]
San Diego Employers: Does Your Employee Handbook Address Age Discrimination? Age discrimination is not allowed by employers in California under both federal and California laws. If your business does not already have policies and procedures in place to prevent discrimination based on age, you should move quickly to rectify [...]
The Importance of Contract Language: An Insurance Case In California, courts will enforce contracts as they are written. Thus, the language used in the contracts is crucial if you want the contract to reflect your expectations. This is among the many reasons to hire a good San Diego corporate [...]
Invalidity of "No Poach" and Non-Solicitation-of-Employee Agreements California is strict when it comes to protecting the rights of individuals to seek employment and conduct their trade or business. In many states, employers can obtain agreements from their employees whereby the employee agrees not to work for a competitor in [...]
Forming Partnerships and Joint Ventures in California Under California law, general partnerships and joint ventures are created by the agreement among two or more persons/entities to run a business and share the profits. California statutes read as follows: "the association of two or more persons to carry on as [...]
Corporations Law: What Corporate Actions Require Board Approval? In general, corporations are run by their boards of directors. The California Corporations Code says, for example, that "the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of [...]
Top Three Legal Issues Concerning Medical Corporations California has corporate forms specifically designed for medical and healing arts professionals. Medical corporations differ from regular corporations in many ways, and as such, some legal issues are more important when establishing and running a medical corporation. In this article, we discuss [...]
Buying or Selling a Business: Options for Handling the Inventory If you are buying or selling a business here in San Diego or elsewhere in California, often one of the more challenging aspects of the transaction is how to deal with the inventory. This is particularly true when the [...]
Taxation and Legal Issues Concerning Founders' Shares Founders' shares are shares or ownership units of a company that are initially provided to a startup corporation or LLC. A person is considered a "founder" if he or she is one of the individuals who originally forms the company. These individuals [...]
Top Three Legal Issues for Continuing the Family Business After a Death If tragedy strikes a small-family run business, a host of legal questions arise about how to continue the business. When something like this happens, after the funeral, grieving is important and due time must be given for [...]
$1.8 Trillion Raised Via Regulation D Offering in 2017 In August, the Securities and Exchange Commission ("SEC") issued its annual survey and statistical research regarding Regulation D. The annual report is compiled by the SEC’s Division of Economic and Risk Analysis (“DERA”) and this report provides data regarding unregistered [...]
Uber Gets a Win: Drivers' Claims Must Go to Arbitration The Federal Court of Appeals for the Ninth Circuit recently gave Uber Technologies, Inc. a victory. Following the US Supreme Court's decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), the court held that arbitration agreements [...]
More Lessons For San Diego Businesses On Protecting Trade Secrets Many times, trade secrets are a key piece of intellectual property that can "make or break" a small business and it is crucial for San Diego businesses to protect them. An experienced San Diego corporate attorney can help. Under [...]
Will California Adopt the "Entire Fairness Doctrine" for Corporate Mergers and Acquisition? It is often instructive to keep apprised of case decisions and laws from our sister states. Of particular interest for San Diego corporate lawyers is to watch developments in Delaware law with respect to corporations and entity [...]
San Diego Hospitality Industry: New Law Requires Mandatory Training Regarding Human Trafficking In late September 2018, Governor Brown signed into law Senate Bill 970 ("SB 970") which mandates training on what are the signs and indications of slavery and human trafficking for workers in the hospitality industry. See report [...]
Key Lease Terms When Your Commercial Landlord is Doing a Build-Out With respect to San Diego commercial leases, it is not unusual for the landlord to do some build-out for the new tenant. A "build-out" is an agreed upon remodeling or retrofitting of the tenant lease space for the [...]
Owner Buy-Sell Agreements, Charges of Fraudulent Inducement, and Parol Evidence A recent California case provides some lessons with respect to owner buy-sell agreements and claims of fraud in the inducement. See IIG Wireless, Inc. v. Yi, 22 Cal. App. 5th 630 (Cal App. 4th Dist. 2018). In general, California [...]
Six Hallmarks of Good Company Board Minutes A California corporation acts through its board of directors. The shareholders -- the owners -- meet once a year to elect the board. The board then makes all the important decisions for the company. The board is required to meet at least [...]
Discussion of Alternative Contract Termination Provisions When a San Diego business signs a contract, almost always there is some provision or clause in the contract that relates to its termination. This is particularly true with any contract that relates to an ongoing obligation such as a supply contract, a [...]
Another Reason for M&A Due Diligence: Ignorance of Contract Provision is No Excuse for Non-Performance
Another Reason for M&A Due Diligence: Ignorance of Contract Provision is No Excuse for Non-Performance There is a well-established principle of California law that "ignorance of the contents of a contract" does not excuse performance. The idea that one might not know what is in a contract might seem [...]
Ownership Valuation (Part II): Discounts for Minority Interests and Lack of Marketability In part I of this series on ownership valuation, we discussed the premium that an appraiser might add for a controlling ownership interest. In this article, we discuss two of the main discounts - minority ownership interests [...]
Valuing Ownership Interests in a San Diego Business: What is a Control Premium? Valuation of a person's ownership interest in a San Diego business is important in several contexts including: Personal net worth statements Lending and other financial transactions Personal divorce proceedings Probate proceedings Individual and business bankruptcies Voluntary [...]
Good Corporate Legal Services are Essential to San Diego Small Businesses If you are running a San Diego business, you need an experienced corporate attorney to help. Legal services are not only necessary, but are essential and can actually help your business succeed. Here are a few of the [...]
Law Firm Engagement Agreement Void as Against California Public Policy: Sheppard Mullin (Part II) Generally, contracts entered into by San Diego businesses will be enforced by the California courts. However, a few exceptions exist to this general rule. One exception includes situations in which the contract is contrary to [...]
Truckers, Arbitration, and Independent Contractors: SCOTUS Hears Oral Arguments in New Prime Inc. v. Oliveira
Truckers, Arbitration, and Independent Contractors: SCOTUS Hears Oral Arguments in New Prime Inc. v. Oliveira The legal battles continue over arbitration and over how to define "employee" versus "independent contractor" -- this time at the federal level and with respect to commercial truck drivers. In early October 2018, the [...]
Ninth Circuit Affirms a General Partnership Interest is a "Security" A recent decision from the US Ninth Circuit Court of Appeals provides yet another window into how a "security" will be defined by the courts here in California. See Securities & Exchange Comm'n v. Schooler, Case No. 16-55167 (US [...]
Protecting Trade Secrets Via Federal Law Almost every business -- even small businesses -- have trade secrets that should be legally protected. California law protects a business' trade secrets, such as a client list, under the California Uniform Trade Secrets Act ("CUTSA"). See Cal. Civ. Code §§ 3426, et. [...]
Web Accessibility Case Dismissed Title III of the federal Americans With Disabilities Act ("ADA") requires that businesses be accessible to those with disabilities. Of late, one of the thorny legal questions is whether the ADA requires that websites be accessible to those who are sight impaired and hearing impaired. [...]
Can Mandatory Arbitration be Avoided if the Underlying Contract is Illegal? If a contract calls for arbitration but the contract itself is void (or large important parts of the contract are void) then the arbitration provision is also void. The general rule in California is that arbitration provisions and [...]
Sexual Harassment Claims: Can I Make My Employees Take Polygraph Tests? Polygraph tests have been in the news lately. We were recently asked whether an employer -- a private company in the case we discussed -- could require its employees to take a polygraph test. Under current California law, [...]
Gender Quotas for Company Boards is Law Now in California Governor Brown recently signed Senate Bill 826, which required that publicly-traded companies headquartered in California must have women as members of their corporate board of directors. See USA Today report here. The final version of SB 826 requires that [...]
M&A Transactions: What is a Material Adverse Change Clause? When contemplating a merger and/or acquisition, one important consideration to be negotiated up front is what happens if there is a significant deterioration in the target company's business between signing and closing. The purchase/sales agreement might be signed in, say, [...]
Just Because There is a Force Majeure Does Not Mean There is No Breach of Contract Many business contracts contain force majeure clauses. For clarity, these might be better called "disaster clauses" or "big-things-beyond-our-control clauses." The general idea is that performance under the contract is suspended or excused in [...]
The Four Stages of Buying a San Diego Business There are many methods of finding a business - brokers, word-of-mouth, various advertising/listings in industry journals/magazines, Craig's List. If you find a business that interests you, as with any purchase, do your research. Once you have located the business that [...]
Gov. Brown Vetoes Ban on Mandatory Arbitration in Employment Contracts, Kentucky Supreme Court Goes Other Way
Gov. Brown Vetoes Ban on Mandatory Arbitration in Employment Contracts, Kentucky Supreme Court Goes Other Way The California General Assembly sent AB 3080 to Governor Brown for his signature, which would have prohibited employers from requiring mandatory arbitration agreements with respect to their employees. However, Governor Brown vetoed the [...]
Uber Moves to Comply with Dynamex, but Wants California to Pay Uber’s Chief Executive Officer, Dara Khosrowshahi, recently gave a talk that offered some interesting hints that Uber is moving to comply with the new rules established by Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (Cal. [...]
Officers can be Liable for Violations of California Wage and Overtime Laws One of the key advantages of incorporating your business is to shield yourself and your personal assets from liability with respect to business-related events and issues. This is true, normally, concerning employment issues. If an employee claims [...]
Compensation/Expensing Structures When Buying into a California Medical Corporation California law permits healing arts practitioners to create corporations intended for the unique needs of doctors, nurses, psychologists, veterinarians, etc. See the Moscone-Knox Professional Corporation Act, Cal. Corp. Code, §§ 13400-13410. As a practical matter, medical corporations often function like [...]
Post-Closing Escrows (Part Two): What Happens if There is a Disagreement? We recently wrote about post-closing escrows for mergers and acquisitions and other complex transactions. See here. In this follow-up article, we discuss legal issues with respect to what happens if there is a dispute about the money or [...]
Employee Handbooks: Advanced Legal Lessons Many San Diego businesses have simple employee handbooks. Often, they are a simple compilation of various company policies and various notices that must be given to employees along with a few tax and immigration forms. However, beyond a certain size, often five or more [...]
M&A News: Use of "Weinstein Clauses" Becoming Routine If you are contemplating a San Diego business merger and/or acquisition, be prepared to discuss, review, and possibly include "Weinstein clauses" in the purchase and sale agreements. These clauses are intended to protect the purchasing company from the reputational and financial [...]
No-Poach Agreements Revisited: Jimmy John's Antitrust Class Action Case Proceeds In late July 2018, a US federal judge in Illinois refused to dismiss a class action antitrust lawsuit against sandwich maker Jimmy John's. See Butler v. Jimmy John’s Franchise LLC, Case No. 18-cv-0133-MJR-RJD (US Dist. Court, SD Illinois 2018). [...]
What is a Power of Attorney? A power of attorney is a legal document that allows one person to appoint another to officially and legally act on the first person's behalf. Attorneys, for example, often are granted a power of attorney by a client to sign contracts and legal [...]
FAQs About Stock Dividends If you are starting a new San Diego corporation and issuing shares of corporate stock, at some point when revenue, profits, assets, and retained earnings allow, your company is going to be faced with the decision about whether to approve "dividends." If you are investing [...]
San Diego Startups: Structuring Corporate Stock to Satisfy Investors and Owners (Part III) If you are in the process of starting a new San Diego business, consider issuing different classes of stock -- voting vs. economic -- as a vehicle for enticing investors without losing control of your new [...]
Buy-Sell Agreements Should Contain a Right of First Refusal A buy-sell agreement governs the terms and conditions under which a business owner can sell -- or be forced to sell -- his or her ownership shares/units in the business. In general, a buy-sell agreement is an attempt to plan [...]
Five Keys to Using Negotiations to Resolve a Breach of Contract As we have said many times on this site, businesses run on their contracts. Hopefully, all of those contracts run smoothly, and all contracting parties end up getting the benefit of their respective bargains. Unfortunately - and inevitably [...]