Emergency Rule of Court 1 temporarily prohibits evictions of all types in California. But that prohibition will end sometime. It has to because landlords are still facing mortgages regardless of whether tenants pay or not. If tenants don’t pay, the property may well be foreclosed.

California is considering a number of measures to avoid the potential onslaught of evictions. That includes a freshly amended, leadership-backed Senate measure that generally bars landlords from evicting tenants during a state of emergency, allows landlords and tenants to negotiate payment plans that could give renters years to repay and lets property owners claim future tax credits for unpaid rent.

One alternative seemingly not considered by most large law firms analyzing “Acts of God” or “Impossibility of Performance” defenses to rent payment for tenants, is that of bankruptcy. If you can get past your perceptions of stigma, you may recognize this as a viable and possibly preferred solution.

If you are a tenant, bankruptcy can offer you a respite not only from rent, but many other obligations as well as you reorganize your business affairs.

If you are a tenant

If you are a tenant, bankruptcy can offer you a respite not only from rent, but many other obligations as well as you reorganize your business affairs. By sheer happenstance, a new Subchapter V of Chapter 11 of the Bankruptcy Code was enacted Fall of 2019 to make reorganizations easier and less costly for smaller business enterprises. And, some bankruptcy courts have already considered the issue of “Acts of God” as landlords seek payment of rent as a condition to the tenant staying in the premises during reorganization. Tenants may well rather be in front of a bankruptcy judge than a state court judge who may have come from the ranks of district attorneys or a large law firm, and who may not fully understand or be sympathetic to excuses from paying rental obligations.

If you are a landlord

If you are a landlord, you may face the bankruptcy issue from two perspectives: either you may consider it as a method to avoid a non-judicial foreclosure from your lender; or you may have to deal with bankruptcy if your commercial tenant files for bankruptcy and wants more time to make up past rent through a multi-year reorganization plan.

Law Offices of Brian Irion is a debt relief agency that helps businesses and people under the Bankruptcy Code. We also help creditors dealing with debtors and trustees in bankruptcy!

The post As Eviction Controls Ease, Consider the Possibility of Bankruptcy appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

Do you have a small business that is severely impacted by the COVID-19 Shelter In Place orders?
Have your PPP, EIDL or other SBA loans been held up or denied?
What will happen to your business when the stay on evictions is lifted?
Should you be using personal funds or retirement funds to support your business?
Are your negotiations with your landlord not going well?

If you are pondering these questions for your business you might consider whether a reorganization bankruptcy might help. Why?

Right now and for the short-term future, California has implemented a “no eviction” emergency order by way of an emergency rule of court that prohibits the issuances of summons for eviction of all types, residential or commercial. Other laws make it unlawful for landlords to begin a residential eviction during an emergency (Cal. Penal Code § 396(f)).

This safe harbor for tenants will not last forever. It can’t. Landlords continue to be pressured by their lenders to pay mortgages while at the same time tenants are not paying rent.  Large law firms are offering to throw matters into litigation, at your cost.

This safe harbor for tenants will not last forever. It can’t. Landlords continue to be pressured by their lenders to pay mortgages while at the same time tenants are not paying rent. Large law firms are offering to throw matters into litigation, at your cost. There has been talk recently, of raising the stay on evictions. When – not if – that happens, it is likely there will be an onslaught of eviction lawsuits, which under California law can be brought to conclusion in as little as two weeks to several months. Commercial tenants who might consider bankruptcy “down the road” will have missed a precious opportunity to plan ahead of time.

In Bankruptcy, Timing is Everything

The truth is that some businesses should be contemplating bankruptcy now. Bankruptcy planning, like tax planning, should occur in the months leading up to the filing, not on the eve of filing. A reorganization bankruptcy is a complex mechanism that comes with powerful tools to help the debtor in possession, but it is not something that should be thrown together last minute. With proper planning, a commercial enterprise might even avoid filing bankruptcy, but that sometimes depends on whether creditors view the potential bankruptcy as a credible threat. And frankly, a commercial tenant ought to consider whether it might be advantageous to be in front of a bankruptcy court rather than a state court arguing for excuse from performance on a lease or contract. State courts are often faced with a variety of cases including criminal and family disputes, whereas federal bankruptcy judges are experts in financial matters and how to get a reorganization accomplished successfully.

Law Offices of Brian Irion is a debt relief agency that helps businesses and people under the Bankruptcy Code. We highly recommend – and will require all possible debtors who are our clients to review – among other things – the disclosures required by 11 USC § 342, ,11 USC § 527, and 11 USC § 528.

The post The Bankruptcy Question for Small Businesses Affected by the COVID-19 Shutdown appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

In many smaller companies, corporate formalities are adhered to with less stringent measures. Yet, it is often the smaller companies where shareholder disputes erupt over time, and the failure to adhere to corporate formalities and obligations can result in lawsuits that can cause damage to the company and the relations between shareholders that can sometimes be irreparable. Sometimes, shareholders may feel the board of directors has acted in a manner that benefits the board and not the company as a whole. So, it is best for members of a board of directors to understand their duties.

Generally, the corporate powers, business, and property of a corporation must be exercised, conducted, and controlled by its board of directors. Lisle v. Shipp (1929) 96 Cal. App. 264. A corporation does not act through individual directors; rather, it acts through its board of directors. Lomes v. Hartford Financial Services Group, Inc., (2001)105 Cal.Rptr.2d 471. …but it is generally intended that the officers as a group shall be person who execute the decisions of the board of directors and who are always subject to the control of the board. Because of this power in the board and officers, they are held to the highest degree of care and loyalty toward the corporation and its shareholders.

California Corporations Code section 309 states in part:

A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

As one court has stated:

This Court has traditionally and consistently defined the duty of loyalty of officers and directors to their corporation and its shareholders in broad and unyielding terms: Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. . . . A public policy, existing through the years, and derived from a profound knowledge of human characteristics and motives, has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. The rule that requires an undivided and unselfish loyalty to the corporation demands that there be no conflict between duty and self-interest.

Cede & Co. v. Technicolor, 634 A.2d 345 (Del.1993)

A corporation’s attorney acts on behalf of the corporation, not on behalf of any subset of the corporation. Skarbrevik v. Cohen, England & Whitfield (1991) 231 Cal. App. 3d 692. Even where counsel for a closely held corporation treats the interests of the majority shareholders and the corporation interchangeably, it is the attorney-client relationship with the corporation that is paramount for purposes of upholding the attorney-client privilege against a minority shareholder’s challenge. Hoiles v. Superior Court (1984) 157 Cal. App. 3d 1192.

Where a corporation’s board of directors, or officers and managers, breach these duties, they can be held liable to the squeezed out shareholders, or to the corporation for their wrongful conduct.

The post Duties of Members of the Board of Directors, Officers and Managers appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

It helps to have a level playing field when litigating or arbitrating. The playing field is often set when the parties sign the contract. Once a business relationship has gone sour, it is too late. In short, it pays to closely examine the contract you are signing before you sign it. The “boilerplate” you agree to may place your company in a ballpark you won’t want to be in, or playing by rules you won’t like. At a minimum, consider the following:

Arbitration Agreements

Before blithely signing an agreement that contains an arbitration clause, consider carefully whether that is really in your company’s best interests. Arbitration is a different animal, with different costs, risks and benefits. Different arbitration companies have differing rules, locations, and other provisions.

Attorneys’ Fees

Under the American system of law, the loser at trial usually does not pay for the winner’s attorney fees unless a contract or public policy statute provides otherwise. Sometimes, an attorneys’ fees clause can keep a miscreant party from acting up, but sometimes, these provisions can cause disputes to erupt into litigation. A contract provision requiring the losing party to pay the other’s attorneys’ fees can cause the parties to be less likely to settle because they think they will win and recover their fees, although statistics show (and logic reasons) that this only happens half the time at best. Attorneys’ fees clauses should be considered and worded carefully both in scope and conditions under which fees would be awarded.

Exculpatory Clauses or Liquidated Damages Clauses

Contracts often limit the type or amount of damages that may be awarded to the non-breaching party. Sometimes these clauses are enforceable, sometimes not. California and other states have laws that restrict when a party may avoid liability for wrongful acts. Agreements avoiding liability, fixing damages, eliminating punitive or consequential damages, or shifting responsibility need to be crafted carefully.

Indemnity Clauses

Often, one party will seek to have the other agree to indemnify it if suit is brought by a third party. This often occurs in contracts such as work-for-hire contracts, consulting agreements and software licenses. The idea is that the party less responsible should not be the first to pay damages. These agreements can be constructive, but can be onerous unless carefully crafted, and take into account each party’s ability to indemnify.

Mediation Clauses

Once in a while, a contract requires the parties to mediate disputes before proceeding to litigation or arbitration. These types of clauses can be found, for example, in consulting agreements, real estate agreements and in some AIA contracts.

The post “Boilerplate” Contract Provisions in Business Transactions Need Careful Review appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

Copyright Law protects original works of authorship fixed in any tangible medium, and derivative works springing from those original works. This definition is interpreted broadly to include protection for recorded songs, software programs and musical or theatrical performances, as well as art and literary works such as books.

The 1976 Copyright Act gives the owner exclusive rights to perform, reproduce, adapt, distribute or publicly display the work throughout the United States and its possessions. The duration of a copyright for works first created in or after 1978 is the life of the author plus 70 years, or 95 years from the date of first publication of a work for hire. Unlike trademarks which require registration before the symbol ® may be used, a copyright owner may use the copyright symbol © immediately upon creation of a work in a tangible medium. Presence of this mark on the work may help to show intentional or willful infringement in the event copying is shown.

Certain limitations exist to the author’s list of exclusive rights. For example, portions of a work may be reproduced or discussed in a “fair use” for criticism, parody, comment, educational uses or reporting. Also, the First Sale doctrine permits the owner of a copy of a work to transfer that copy without restriction by the original author. However, the first sale doctrine does not permit the owner of a copy to make additional copies. This “limitation on a limitation” fueled massive amounts of litigation involving what the RIAA and BSA claim is cyber piracy and file-sharers such as Napster contended is a legitimate use.

The rights afforded a copyright owner are transferable and may be licensed. The right to license has provided a burgeoning industry to lawyers, who regularly draft licensing agreements for software. Many large law firms have entire teams of lawyers devoted to “licensing law.”

Exceeding the scope of a license can have serious consequences, including not only breach of contract damages, but also damages for copyright infringement. These damages can include injunctive relief, actual damages measured by the owner’s actual damages and the infringer’s profits, statutory damages of up to $30,000 or even up to $150,000 for willful infringement, destruction of the illegal copies and molds, seizure of infringing articles by customs officials, and attorneys’ fees and costs (17 USC §501 et seq.) In extreme circumstances, criminal penalties can be imposed.

The post Copyright Basics appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

Trademark law is often subdivided into trademarks, service marks, trade dress and trade names, although all have some features in common.

• Trademarks are words, symbols, phrases or designs, or combinations of these that distinguish the source of goods of one person from those of another (such as the famous Coca-Cola script lettering over the wavy red band.)
• Service marks are similar to trademarks except that the words, phrases or designs distinguish the services of one business from those of others (such as the AT&T mark for broadband data services.)
• Trade dress refers to the total image of a product and includes such features as size, shape, color combination or graphics provided they are non-functional (such as the appearance of certain model of sports car like a Lamborghini Countach.)
• Trade names are simply names used by a business to identify its business or vocation.

Trademark law is really an amalgamation of laws that protect a company’s name, products, and services from unfair competition, and protect consumers from false advertising. Trademarks, service marks and trade dress are protected under both federal law by the Lanham Act (15 USC §1051 et seq.) and under California law by the California Trademark Law (Cal. Bus. & Prof. Code §14200-14352). And, certain common law rights protect against the unfair competition of “palming off” one’s goods as another’s.

The procedures to perfect rights in a mark and remedies for infringement or dilution differ somewhat. Under the Lanham Act, a person with a bona fide intent to use a mark in commerce can file an application to register the mark. Under the California Trademark Law, a person must have used the mark in commerce in order to perfect rights in it. Registration provides constructive notice to potential users, protection to the registrant, and protection to the consumers who depend on the association between the mark and origin of goods.

The Lanham Act prohibits use of counterfeit or unlicensed marks in connection with marketing goods and services, but it also prohibits a much broader array of wrongs. It protects against dilution of famous marks, it protects domain holders from deceptively similar names (for example, ebay.com is entitled to protection against a domain entitled perfumebay.com.) It protects consumers against the “palming-off” of fake Gucci purses and handbags. And, it protects consumers against false designations of origin such as “Napa Wine.”

Certain marks may not be registered, or may be registered only under certain conditions. A mark that is generic may not be registered in the Patent and Trademark Office’s principal register (e.g., “muffin” is generic.) A descriptive mark, like “Napa Valley Wine” may achieve protectable status when a “secondary meaning” attaches such that consumers equate the product with a particular source or origin. A suggestive term (such as “Slickcraft” when applied to boats) may be entitled to protection without secondary meaning. An arbitrary or fanciful mark such as “Black & White” applied to whisky is inherently distinctive and will be afforded the broadest protections under trademark law. Lastly, one cannot register a mark already in use by another for the same or confusingly similar services or products.

Before a mark is registered in the U.S. Trademark Office’s principal register, the user of the mark may not use the symbol “®” (which is reserved for a registered mark) but may use “”. Once a trademark is acquired, it may be transferred with the goodwill of a company. It may also be lost by abandonment, failure to maintain quality control in licensees, through a showing that it was fraudulently acquired, by showing that others were using the mark in commerce before the registrant used it, and by other means.

Remedies for trademark infringement can include injunctions, destruction of infringing goods, impoundment of infringing goods, treble profits, damages and attorneys’ fees. Successful plaintiffs in “cybersquatting” domain name cases can also obtain the domain name wrongfully used the defendant.

While the United States Patent and Trademark Office has self-help pages in its website, care needs to be taken in the registration, classes of goods and services selected, and ownership, licensing and assignment of marks, as well as steps to maintain and enforce an owners’ rights, or those rights may be lost.

The post Trademark Basics appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

Trade secrets law evolved from a common-law understanding that things like customer lists, specialized knowledge or processes were part of the goodwill of a company. Many states have enacted versions of the Uniform Trade Secrets Act, which has been held to supersede certain common law understandings.

Trade secrets generally are defined as information, methods or processes that have independent economic value, are not being generally known in the business, and have been the subject of efforts to maintain their secrecy. A trade secret can include, for instance, a pattern or algebraic formula (for example one that predicts stock trends), a method of doing business (for example layout of assembly lines to be more efficient), a compilation (such as a customer list) or a technique or process (like the recipe for making Coca-Cola®).

Publication or dissemination of the “secret” destroys it. So while it is sometimes advisable to seek protection of a piece of intellectual property by protection under patent or copyright laws, the publication requirement for patent or copyright issuance generally makes those protections mutually exclusive of protection under trade secrets law. On the other hand, a trade secret can last indefinitely if protected properly and technological advancement does not make it obsolete, whereas a copyright or patent has a limited lifetime.

Damages for trade secret misappropriation can cripple a new business and often are tools of competition in industry. It is not uncommon to see claims of trade secret theft when a highly placed employee leaves one company to work at another. A court may order injunctive relief to restrain continued misappropriation, monetary damages for the loss caused by misappropriation or the improper profits, and royalties. If a plaintiff can prove a defendant misused a trade secret willfully and maliciously, exemplary (punitive) damages can be awarded. In some instances, attorneys’ fees may also be recovered.

Employees departing from a company to start their own business in the same field should seek competent legal advice before taking any steps, or missteps. Employers thinking of hiring a competitors’ employee should have in place policies and procedures to ensure the potential new employee will not also bring a lawsuit.

The post Trade Secret Basics appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

In 1988, Ashton-Tate filed a lawsuit against Fox Software claiming that FoxBase unlawfully mimicked the look and feel of Ashton-Tate’s dBaseIII. In 1991, Phillip Morris took out a full-page ad in the Wall Street Journal that depicted the logos of its brands of cigarettes. Under the logos was a warning: “If you’re using any of these symbols in your business without our permission, we’ll see you in court.” In 1995, the United States Seventh Circuit Court of Appeals ruled that PepsiCo, Inc. could restrain a former executive officer from even working for Quaker Oats Company’s beverage division on the fear that the former employee might “inevitably disclose” PepsiCo’s trade secrets.

Intellectual Property Law is comprised of four separate subcategories:

• Trade Secrets;
• Trademarks;
• Copyrights; and
• Patents.

Trade secrets, trademarks, copyrights and patents protect a company’s assets in different ways. The various types of intellectual property can work independently or interdependently. In some cases, using one method of protecting an asset compromises the ability to protect it by another.

Intellectual property lawsuits figure prominently in the strategies to restrain what companies believe is unfair competition from their competitors. It is a mistake for any business to fail to recognize and protect its intellectual property through proper documentation, filings with appropriate offices (such as the patent and trademark office), and best practices in company procedures and handbooks. It also is a mistake to be unprepared for intellectual property lawsuits from competitors. Even interviewing and hiring a competitor’s coveted employees can get a company sued.

The post Intellectual Property Overview appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

Litigation

Litigation is broadly defined as “to carry on a legal contest by judicial process” (Webster’s Ninth New Collegiate Dictionary, p. 698 (Merriam Webster 1988.) The typical process under which disputes are resolved is through a lawsuit, and while every lawsuit will have its own special characteristics, most lawsuits have a similar general roadmap involving pleadings, discovery, pre-trial motions, settlement efforts, and trial.

If one side loses too severely at trial, the case may go on to appeal. Many trial lawyers define an appeal as “a process by which the opposing side tries to take away all that was earned at trial.” Think about this when you are dead set on having your day in court against the proverbial intransigent defendant or unreasonable plaintiff.

Similarly, a party that cannot pay a judgment might consider bankruptcy to frustrate the judgment creditor.

All this litigating usually costs a lot of money. Collection cases typically involve pre-judgment attachment or restraining orders; business disputes between former business partners or shareholders often seek an accounting by appointment of a special master, and real estate and personal injury cases almost always involve retention of experts to opine on the cause and amount of damages. I often advise clients who are considering litigation to try vigorously to settle the matter before suing, and try vigorously to make a fair settlement offer as soon as being sued.

Arbitration

Contractual arbitration is just like litigation, only it is done before a private fact finder who usually is an experienced attorney or retired judge who charges from $350 to $600 per hour to hear your case. The touted advantages are speed, confidentiality and finality. This is because some courts are clogged with criminal matters, which take priority over civil disputes (speed), because arbitrations are conducted not in “open court” but in conference rooms (confidentiality), and because there are very few grounds on which an arbitration award can be overturned (finality).

Detractors argue that many state and federal courts in California can bring a case to trial nearly as quickly under “fast track” laws, that an open court trial and the possibility of appeal creates a fairer hearing, and even many defendants would rather trust their chances to twelve jurors or a judge who must follow the law than an arbitrator who doesn’t have to.

While arbitration clauses used to be strongly favored, they have come under increasing scrutiny. For example, arbitration agreements between employers and employees have been strictly construed and invalidated in many cases where they are deemed to be unfair or in derogation of public rights (such as the right to resort to the DFEH or EEOC). Also, where arbitration of only part of a multi-party dispute will disrupt the remainder of the proceeding and does not involve interstate commerce, the California Arbitration Act allows a court to refuse to enforce it.

Mediation

Mediation is one tool in the arsenal of alternative dispute resolution (“ADR”) procedures utilized by courts and attorneys to try to get the parties to agree to resolve their differences without going all the way to trial. Mediation (similar to settlement conferences) is a non-binding conciliatory process in which the mediator hears all sides, discusses the pros and cons of each party’s case with that party (sometimes confidentially) and then tries to get each party to adopt a less strident stance in the hope that if each party gives a little, a resolution can be reached. Many attorneys will agree that if the parties reach a settlement no one is happy with, it is a good resolution. This is because the cost to go to trial often is higher and less predictable or enforceable even if one wins. Mediation is not, however, a process by which a party can be forced to agree to anything.

Other tools of ADR include non-binding judicial arbitration and early neutral evaluation in which the parties put on a “light” version of their evidence to an independent fact finder who may issue a non-binding award in favor of one or another party and the party who has had unrealistic expectations gets a proverbial “wake-up call” to be a little more reasonable in settlement discussions.

The post Differences between Litigation, Arbitration and Mediation appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.

The media bombards you with ads from debt counseling agencies telling you to consolidate or reduce your debt without resorting to bankruptcy. The FTC warns people to be wary of many of these companies that promise to remove debt for pennies on the dollar. Most cannot and the consumers are the victims.

The US Department of Justice, the FTC and the majority of attorney generals found that less than 10% of consumers complete these programs successfully and most end up further in debt! NACBA (the National Association of Consumer Bankruptcy Attorneys) explains that the “debt relief agency” system is inherently flawed. Many of these debt relief agencies are fronts for credit card companies seeking to get borrowers to pay credit card debt by shifting debt to other creditors. This can be very dangerous for anyone who is financially troubled. Here’s why.

Credit card debt typically can be discharged in bankruptcy. Yet some credit counseling agencies recommend getting new loans secured by a home or other collateral to pay down the credit card debt. Or they negotiate a reduced payoff in return for securing the debt. But the new loan (or restructured loan) used to pay off the credit card debt is secured debt that invades otherwise exempt assets such as the homestead, which can provide an exemption protecting up to $150,000 for California homeowners. Alternatively, you are required to invade other exempt property such as a retirement plan. The credit card companies get all or most of their money paid back and the borrower is stuck with secured, rather than unsecured and dischargeable debt.

Another method debt consolidators use is to create a repayment plan with the creditors in a workout outside of bankrutpcy. This plan is similar to a Chapter 13 repayment plan, but may lack some significant safeguards and usually is more expensive. You pay the debt management planner a single check for two to five years and the company then redistributes your payment to the creditors, less a commission. Over the life of the plan, the debtor usually pays 30% to 60% of the credit card debt. The fee for this typically is based on your total debt rather than the repayment plan amount, and usually is higher than a Chapter 13 trustee’s fees, which are capped by statute. Moreover, if you default on your payment plan during this period rather than complete your plan, you again find yourself facing bankruptcy and have only delayed, but not eliminated the debt. On the other hand, if your total debt is relatively small so that there is no justification to spend the money on a Chapter 13 bankruptcy (or you cannot qualify for a Chapter 13 bankruptcy and face the more expensive Chapter 11 process,) this may be right for you. Still, be careful of the debt management planner you choose. Not all are alike.

If you want to consider financial counseling before seeing a lawyer about your financial troubles, the US Department of Justice has a list of qualified and approved, non-profit financial counseling agencies. And, since they are approved, you needn’t wonder about their competence or hidden agendas.

As to the credit counseling companies that advertise, here is a simple rule: if they play on your guilt or the shame of bankruptcy, or have large up-front fees, or counsel you to default on a debt, you probably don’t want to use them. They are not your fiduciary who must place your interests first (as a lawyer must), what you tell them is not confidential, and if they are advertising, they probably are for profit — which means they are not approved by the Department of Justice. They are not in your corner, but their own.

The post About Credit Counseling Advertisers appeared first on The Law Offices of Brian Irion | Bankruptcy Attorney, Business Law, Real Estate Law, Litigation.