California Federal Court: Paypal Data Breach Press Release Not Securities Fraud As we have discussed on this blog, the federal Security and Exchange Commission ("SEC") has advised that data breaches and cybersecurity are issues that must be disclosed in required corporate filings. This is logical, of course, since data [...]

Data Security and M&A Due Diligence: Lessons From Marriott/Starwood In September 2016, Marriott International, Inc. bought Starwood Hotels & Resorts Worldwide, Inc. The acquisition was approved by the shareholders of each company respectively. Starwood shareholders received 0.8 shares of Marriott including $21 per Starwood common stock. In the last [...]

San Diego Ice Cream Franchising: There Must be Strict Compliance with Disclosure Laws Around the country, there are differing legal frameworks and schemes for business franchising. California law is one of the most protective for the franchisees and requires registration of the franchise with the California Department of Business [...]

San Diego Franchises, Territories, and Non-Traditional Venues Many franchise agreements provide and specify an exclusive geographic territory for the franchisee's operation. This protects the franchisee from competition from another franchisee in the "system" and prevents abusive tactics and/or retaliation by the franchisor. It would be easy enough, for example, [...]

California Business Contracts: What is the Frustration of Purpose Defense? If your San Diego business finds itself defending a lawsuit claiming breach of contract, one possible defense to the case is the legal doctrine of Frustration of Purpose. This is one of several legal doctrines that will excuse performance [...]

New California Law: Time to Revise Your San Diego Nondisparagement Clauses Given the importance of business reputation, many employers have been insisting on nondisparagement clauses in their employment contracts. Many others have promulgated nondisparagement policies and have included them in their Employee Handbooks. Without such clauses, there are many [...]

Anti-Secrecy: National Labor Relations Board Says "No" to Litigation Gag Order We recently wrote about new laws taking effect here in San Diego and California that are attempting to prevent secrecy with respect to settlements and testimony in sexual harassment, discrimination, and retaliation cases. See California Senate Bill 820 [...]

California's New Sexual Harassment Anti-Secrecy Statutes Effective with the new year, San Diego and California companies and businesses dealing with sexual harassment cases should be aware of new anti-secret-settlement and anti-confidentiality laws. This article will discuss two new laws - Senate Bill 820 ("SB 820") and Assembly Bill 3109 [...]

The Palm Restaurant Case: Family Businesses Must Treat Family Shareholders Fairly A recent case decided in New York involving The Palm steakhouse restaurant chain is a good reminder that, even in family-owned and run businesses, minority shareholders must be treated fairly. See news report here. Family-run businesses sometimes forget [...]

Workers’ Compensation and San Diego Small Businesses Any San Diego business with employees must obtain and keep current workers compensation insurance. This is required by California law and there are substantial financial and potential criminal penalties for willfully failing to have workers compensation coverage. Even if you only have [...]

Effect of Statutory Conversion of California Corporate Forms For various good business reasons, it is not uncommon for businesses to seek to shift their corporate forms. As an example, a business owner might start out as a limited liability company ("LLC") but want to convert the LLC into a [...]

Corporation Not "Doing Business" in California for Owning Only A 25% Passive Non-Managing Member Interest in an LLC Doing Business in California The California Office of Tax Appeals recently issued a decision that might spur corporate investments by non-California corporate entities. See In the Matter of the Appeal of [...]

California Supreme Court on Employee Meal Breaks and Waivers In California, laws and regulations with respect to employees are governed by various statutes enacted by the California State Assembly and what are called Wage Orders issued by the California Industrial Welfare Commission ("IWC"). Occasionally, California courts are required to [...]

Practical Guide for Using and Protecting Your San Diego Trademark Trademarks and service marks are common throughout the business and commercial marketplace. A trade/service mark is any symbol or mark that identifies a product or service as having a unique commercial source. The symbol or mark can be words, [...]

Asset Purchases and Successor Liability: California’s "Merely a Continuation" Doctrine As a general rule, if your San Diego business buys the assets of another company in an asset purchase/acquisition, your business does not automatically assume the liabilities of the seller. In fact, that is one of the reasons to [...]

Not Much is Needed to Prove Trade Secret Misappropriation in California Trade secrets are valuable business assets, and trade secrets are not the dramatic stuff of Hollywood action movies locked up in high-tech vaults. Under the California Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code § 3426.1(d), trade secrets [...]

Helping Your Family Business Survive: Family Business Charters and Family Councils A recent trend with family-run businesses is the use of Family Business Charters and Family Councils to help smooth ongoing business functioning and to help increase the chances of a successful transition from one generation to the next. [...]

San Diego Business Contracts: When Mistake in Fact Will Allow Rescission With respect to San Diego business contracts, there are some circumstances in which a party can rescind a contract if there has been a mistake about material facts related to the contract. Avoiding mistakes of fact is one [...]

Franchise Agreements: Tips on Negotiating the Marketing Fund Contribution Requirement Almost every franchise agreement contains provisions with respect to marketing or advertising funds. Sometimes the provisions are called "brand building funds" or "brand awareness funds." In general, the provisions require that the franchisee to contribute monies into a fund [...]

Revisiting "Impossibility" as a Contract Defense: It is Not Impossible if There is a Suitable Replacement or Alternative In general, under California law, "impossibility" is a defense to a breach of contract claim. There are two types of impossibility - legal and factual. A legal impossibility might exist or [...]

San Diego Business Contracts: Tips for Ensuring Enforceability of Arbitration Provision A stand-alone arbitration agreement or an arbitration provision contained within a larger agreement is a useful technique for managing downside risk associated with litigation. Lawsuits are expensive and time-consuming. Admittedly, arbitration is not exactly cheap, but arbitration is [...]

California’s Slack Fill Law is Amended Here in San Diego, if you manufacture or package consumer products, your business must be aware of federal and California's slack fill laws. A good corporate attorney can help you stay current with ever- changing legal requirements. Slack fill is empty space in [...]

Does a California Social Purpose Corporation Have to do Charity Work? Social purpose corporations formed here in San Diego and elsewhere in California have to engage in some socially beneficial activity, but that activity does not have be "charity work" in the traditional sense; or even giving money to [...]

What Constitutes “Doing Business” in California Under the Tax Code? For years, the California Franchise Tax Board has imposed tax liability on any out-of-state corporation or LLC that was "doing business" in California. See Cal. Rev. & Tax Code, § 23151. Section 23151 allows the taxation of foreign LLCs [...]

California Corporations and the Third-Party Beneficiary Rule Mostly, contracts are between two persons or businesses. Even with something as complicated as a building construction project, the contracts are bilateral -- owner with architect, owner with general contractor, general contractor with subcontractors, etc. In general, only the parties to a [...]

Lately, there has been quite a bit of law enacted and cases decided with respect to class action lawsuits and waivers. Some have been mystified at all the effort and attention. But limiting class action lawsuits can be significant for San Diego and California businesses. Class action lawsuits are very expensive to defend and they can result in millions of dollars of liability.

Recently, the California Supreme Court held that employees must be paid for off-the-clock work even if the work only takes a few minutes. The case involved a worker at a Starbuck's coffee shop in Los Angeles.

What is not so often recited is that the acceptance must include the idea that the person intends to be bound by the agreement and that he or she or the business entity understands that legal consequences are intended. It is this intent to be bound that often distinguishes legally enforceable contracts from social obligations.

In California, even though the "main" contract/loan might be with the corporation or limited liability company, a personal guaranty allows the creditor to sue the guarantor if the contract is breached or the loan becomes past due. Under California law, the creditor can sue the guarantor immediately without having to pursue a lawsuit first against the principal party to the contract.

A loan out company is a corporate entity that is created to handle the details of contracting for performances by an artist, musician, or other performer. The loan out company hires the artist, musician, or performer as an employee and then "loans out" the employee for performance tours or for roles in movies or plays or whatever the particulars.

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.

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.

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.

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.

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 [...]

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 [...]

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 [...]

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 [...]

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 [...]

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 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, [...]

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 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. [...]

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 [...]