Orange County Business & Commercial Law Attorney Blog

Lindsay Lohan countersued in contract dispute by clothing company

2013-05-23T03:18:01Z

Lindsay Lohan sued DNAM Apparel Industries in January, claiming the clothing company owed her more than $1 million in sales and royalties. DNAM has filed a countersuit, however, alleging Lohan did not hold up her end of the 2008 contract due to her repeated legal issues. The contract dispute lawsuit was filed in federal court in Los Angeles.

The lawsuit claims the first collection from Lohan's clothing line, 6126, was received well by buyers, but that reception didn't last long. Lohan's time spent in jail for violating her probation and subsequent rehab made it difficult to find interested buyers for her clothing line.

]]> In the fall of 2010, DNAM claims many of the major department stores refused to carry the 6126 line, choosing instead to see what would happen next. Lohan met with buyers from Bloomingdales, but DNAM says it did not make any difference. The apparel company said Lohan's continued legal problems made it so no major buyer would touch the brand. They simply did not want to be associated with Lohan's name.

By February 2011, DNAM says customers were cancelling orders. In Las Vegas, a major trade show refused DNAM's application for space at the show, because of the "bad image of the 6126 brand," according to DNAM.

DNAM is seeking both punitive and compensatory damages from Lohan, who is currently in the Betty Ford clinic on a court-ordered, 90-day drug treatment. Lohan was in court earlier this year to plead no contest to charges of reckless driving and lying to police about a car accident that happened last June. Her attorney says the lawsuit by DNAM is frivolous and nothing more than a transparent maneuver by the defense. He alleges there is no morals clause that would prevent the payment of royalties to Lohan.

If you are involved in a contract dispute, contact a California business attorney to ensure your rights are protected. Your attorney will discuss your options and provide you with the advice you need to hopefully move forward towards a positive outcome.

Source: nydailynews.com, "Lindsay Lohan counter-sued by clothing company behind actress' 6126 line" Nancy Dillon, May. 21, 2013

Disciplinary action order rescinded against JPL employees

2013-05-16T12:43:00Z

A judge on the National Labor Relations Board has ordered the disciplinary action taken against five NASA Jet Propulsion Laboratory scientists to be rescinded. The employment law case involved disciplinary action that stemmed from emails sent on JPL computers. In the emails, scientists expressed their views on a presidential directive about background checks for employees who worked on government and other similar projects.

The Supreme Court ruled in January 2011 that when it came to projects worth billions of dollars, it was reasonable for the government to question the trustworthiness of the people working on those projects. One of the emails sent had the names of two of the scientists on it, as well as a third person, and ended up in the inboxes of 773 people.

]]> JPL placed disciplinary letters in the files of the five scientists, saying that the emails were offensive, unsolicited and unrelated to work. The judge, however, said that there were many other emails sent out to JPL employees that were not work-related. Some examples include emails notifying when Girl Scout cookies were for sale, a local restaurant's lunch specials or ice cream social information.

The administrative law judge said the emails qualified as "protected speech" and as such, JPL could not label the emails as political in nature. The attorney for the scientists said the disciplinary action taken by JPL was the first step towards firing the scientist, who otherwise had "impeccable records." Officials from JPL have not commented on the judge's ruling.

If you find your company is targeted by a current or former employee in a California employment litigation matter, it is important to contact an experienced business attorney as soon as possible. This will help ensure your best interests, and those of your company, are protected as the case moves forward.

Source: latimes.com, "Judge orders JPL to drop discipline over scientists' email" Louis Sahagun, May. 13, 2013

Garden Grove Hospital and Medical Center Named Among Top 100 Nationwide

2013-05-09T04:57:26Z

Garden Grove Hospital and Medical Center has been named among the "100 Top Hospitals" in the nation by Truven Health Analytics (formerly Thomson Reuters), based on quality of care and patient satisfaction. Truven Health Analytics is a leading provider of information and solutions to improve the cost and quality of healthcare.

This is the second year in a row that Garden Grove Hospital and Medical Center has been recognized as a Top 100 Hospital.

"This recognition reflects the outstanding hard work, dedication and excellent patient care that our hospital provides," said Hassan Alkhouli, M.D., Chief Medical Officer at Garden Grove Hospital and Medical Center. "We are proud to be acknowledged as a leader in health care with this prestigious award."

]]> Garden Grove Hospital and Medical Center is part of Prime Healthcare Services. Eight of the eleven California community hospitals that earned this distinction were Prime Healthcare hospitals. Prime Healthcare hospitals have earned this recognition 21 times.

"Garden Grove Hospital is committed to quality patient care, and this unbiased and peer-reviewed study recognizes that effort," said Prem Reddy, MD, FACC, FCCP, Chairman, President and CEO of Prime Healthcare Services. "I congratulate the physicians, nurses and staff at Garden Grove Hospital for their deep devotion to the highest standards of quality care in the county."

"Receiving this prestigious award two years in a row is a testament to Garden Grove Hospital and Medical Center's climb to the top of the profession. This is the result of the love and concern for patients demonstrated every day by the Prime Healthcare team," commented Kermit Marsh, a member of the Governing Board and former Chairman of Garden Grove Hospital and Medical Center.

According to Truven Health Analytics, award winners demonstrate that high-quality patient outcomes can be achieved while improving efficiency.

If the nearly 3,000 hospitals across the nation performed at the same level as the 100 Top Hospitals award winners:

More than 164,000 additional lives could be saved.
Nearly 82,000 additional patients could be complication free;
$6 billion could be saved;
The average patient's hospital stay would decrease by nearly half a day.

"The winners of the 100 Top Hospitals award have driven the national benchmarks higher every year for 20 years. This year's winners have brought even higher value to their local communities - better quality, higher efficiency and high patient perceptions of care, while confronting the challenges of massive industry-wide transformation to implement healthcare reform," said Jean Chenoweth, senior vice president at Truven Health Analytics. "The key to success in a tumultuous environment is visionary leadership that develops and maintains a hospital-wide culture of excellence that cuts across everything, from patient care to housekeeping to administration."

Senate passes internet sales tax legislation

2013-05-08T02:51:01Z

For California, entrepreneurs just starting out who plan on using the Internet to sell products, might want to keep an eye on the Marketplace Fairness Act. The U.S. Senate just passed the legislation on Monday, May 6, 2013, and now it heads to the House. According to a spokesman for the White House, the legislation has the support of President Obama.

The Marketplace Fairness Act would change the way online retailers handle the issue of sales tax on goods they sell over the Internet. Up until now, consumers have typically not had to pay sales tax on items they bought online. This is because the older laws only required retailers to collect sales tax if they shipped an item they sold to a state where the retailer had a physical address, such as a store or warehouse.

]]> The reason why the older laws haven't changed before is because it would have been too complicated to keep track of all the different laws in the various states. There are five states that do not have a sales tax, but for the other 45 states, trying to keep track of the various tax rates for different items was seen as a burdensome task.

With the latest computer software, though, that task is no longer considered a burden. In fact, advocates for the task say collecting sales tax will be easily automated, although state governments that want to participate will need to provide business owners with free software to do so. In addition, each state will need a revenue department created specifically to receive the sales tax payments.

Opponents to the tax say that it will hurt businesses who solely conduct business online. Some want exemptions for companies with out-of-state revenues of less than $10 million annually or fewer than 50 employees.

Should the legislation become law, the earliest states could begin compelling businesses to collect sales tax on online sales is October 1, 2013.

Source: 5newsonline.com, "Internet Sales Tax: What You'll Pay and When" No author given, May. 07, 2013

Biggest landlord in downtown Los Angeles soon to be New York firm

2013-05-02T21:29:01Z

In a deal worth $430 million, a New York commercial real estate company has agreed to purchase four of the most well-known buildings on the Los Angeles, California, skyline. Brookfield Office Properties, Inc. already owns one of the tallest skyscrapers in the city and the deal will bring that number to five, including the Wells Fargo Tower and the Gas Company Tower.

The deal has been labeled a "game changer" by many in the Los Angeles real estate market, with many comparing it to combining the three largest U.S. auto makers into one company. The properties included in the deal will end the rule of MPG Office Trust, Inc., which once was at the top of the list of office building developers. For several years, though, the company has been mired in debt and has sold off its properties or simply let them go into foreclosure. Last month, MPG sold the U.S. Bank Tower in Los Angeles to investors from other countries. That building was one of MPG's jewels as it is the tallest building in the West.

]]> Brookfield already owns a lot of real estate in downtown Los Angeles, including Bank of America Plaza and 777 Tower. These acquisitions will give the company 8.3 million square feet of office properties in downtown Los Angeles. The company should be able to make these new acquisitions appealing to renters, whereas MPG was unable to maintain the properties or upgrade them to keep up the demands of their renters.

The deal still needs to be ratified by MPG’s shareholders this fall; however, that is not expected to be a problem.

Those who are involved in commercial real estate deals in many areas of California, such as Orange County, need effective legal representation by an experienced attorney. This protects their interests and makes it easier to favorably resolve property disputes.

Source: latimes.com, "New York firm soon to be downtown L.A.’s biggest landlord," Roger Vincent, April 26, 2013

Federal lawsuit filed against Fisker Automotive over mass layoffs

2013-04-23T04:48:05Z

Just hours after Fisker Automotive laid off 160 of its 210 employees, the company was served with a notice that a federal employee lawsuit was filed in the U.S. District Court in Santa Ana, California. The suit accused the hybrid automaker of breaking a federal law that requires companies to advise workers ahead of time before issuing such a massive layoff.

The U.S. Worker Adjustment and Retraining Notification Act, which is commonly referred to as the WARN Act, requires at least 60 days' notice to employees before such large layoffs. The suit also states that Fisker is required to pay the wages and benefits those workers should have earned had they been given the 60 days' notice.

]]> Labor laws in the state of California were also violated according to the lawsuit, such as notifying elected officials in Orange County and Anaheim as well as the Employment Development Department.

The damages sought in the case are unspecified, but it is also seeking judgments for wages, bonuses, and benefits equal to 60 days for each worker affected by the layoff.

Fisker has not commented on the lawsuit, but there may be exemptions that allow the auto maker to skirt the 60-day notification requirement. These are for "unforeseeable business circumstances" and a "faltering company."

Fisker has been in trouble financially for quite some time and is near the deadline to repay a portion of a U.S. Department of Energy loan of $193 million. Even if Fisker can avoid losing the federal lawsuit, there is little sign that production on their vehicles will resume any time soon, and they are very few employees left at the company now.

Employees are protected by state and federal employment law. It's important to understand your rights and how these laws protect you. An experienced employment law attorney is the best place to start.

Source: autonews.com, "http://www.autonews.com/apps/pbcs.dll/article?AID=/20130406/OEM/130409907/fisker-faces-suit-alleging-failure-to-give-advance-notice-of#axzz2PraEiLuq," Ryan Beene, April 6, 2013

The Inland Empire is a real empire when it comes to industrial property

2013-04-18T16:33:41Z

While the real estate market as a whole has seen its share of difficulties over the last decade, in Southern California, one market has remained robust throughout the turmoil. The industrial property market is strong and demand shows no signs of diminishing. The Inland Empire counties of Riverside and San Bernardino are seen as such valuable real estate that according to an article in the Los Angeles Times, 16 million square feet of warehouse space is under construction on speculation, with the expectation that they will be sold or leased before construction is complete.

The industrial and commercial real estate market in the Inland Empire has been driven by the synergistic presence of the location, close to the massive consumer retail market of Southern California, and to the ports of Los Angeles and Long Beach, an enormous hub of for both the shipping and receiving of international goods.

]]> The huge warehouses, used by online retailer Amazon.com Inc., and brick-and-mortar stores such as Kohl's Corp., some of which are described in the LA Times article as being larger than 30 football fields, would not have been possible a short time ago, as the logistics management of such vast spaces did not exist.

Today bar-coded, machine-readable product marking, warehouse robots and computerized inventory control allows these massive buildings to function efficiently. The available real estate for development in Riverside and San Bernardino counties has made it the largest center of industrial property in the nation. With in excess of 1.65 billion square feet of industrial property, the Times article notes it is twice the size of Chicago, which is second.

Source: Los Angeles Times, "In the Inland Empire, an industrial real estate boom," Roger Vincent, April 12, 2013

Email security and the IRS--just who is reading your email

2013-04-12T21:22:48Z

Privacy rights regarding the U.S. Mail are well developed and the law is settled that in order for law enforcement to read your mail, they need a warrant. This means they have to present a judge with "probable cause" that you are engaged in some form of wrongdoing. While use of the mail to send correspondence and communicate has diminished, use of electronic communication has exploded.

And most people rarely give their email much thought. They probably believe that email is just like mail sent via the U.S. Postal Service, and that they have the same reasonable expectation of privacy in their email accounts as with postal letter. They would be wrong. Your business and personal communication that travels via email can be examined with little effort on the part of law enforcement.

]]> Electronic Communications Privacy Act (ECPA), which dates from 1986, (who even had email in 1986?) allows email that has been opened or has been in your inbox for 180 days to be obtained by a much lower standard than probable cause.

Even worse, all location information, where emails are sent and where they originate from, is available essentially on request from the ISP. The content-free information is treated as a pen-register, and the requests are routinely approved, and unless you are ultimately prosecuted, you will never know you were under surveillance. This also applies to your cell phone location information.

A greater problem is that under the ECPA, is that content from email is stored by third parties, such as Google, Yahoo, Microsoft or your ISP. The law has long presumed that when you reveal information to a third party, you lose your expectation of privacy and your Fourth Amendment protection.

This is currently the IRS's posture and they state in the Criminal Tax Division's search warrant handbook, that there is no Fourth Amendment protection for your email stored on a server.

Keep that in mind as you type your next email.

Source: Ars Technica, "Like rest of the feds, the IRS can get your e-mails with no problem," Cyrus Farivar, April 10, 2013

Zygna's CEO salary drops from $1.7 million to $1 in 2013

2013-04-06T00:04:25Z

In a new company, compensation might not be much of an issue. Many principals in a new business may work for no salary, as they build the business. Nevertheless, few people would devote the time and effort necessary to create and operate a business if they were told that 10 years down the road they would still be earning little or nothing in salary.

Sometimes, you may have to drop your compensation to meet the contingences of the market. Zynga's SEC filing indicates that Mark Pincus, the company's chief executive has chosen to accept a salary this year of $1 and will not be paid any cash bonus.

While we hope you are not forced into this position, when you put together you business plan with your attorney, you may want to develop a mechanism that would allow adjustments to compensation packages within the business. This would ensure that if it were to become necessary to reduce pay for all members of your business, it would be perceived as fair and not seen as punishing anyone.

]]> Compensation, especially for highly compensated individuals, can be a very touchy subject. Even if you currently are working for nothing, if your business is successful, pay increases will arrive, and it may be easier to work out the details when substantial compensation may be an abstraction.

Your business law attorney can be a valuable resource in drawing up business plans and developing processes and procedures before in becomes necessary to use them. Not only does it reduce potential disagreements, but also it can help prevent small problems from festering and becoming large disputes.

Source: Reuters, "Zynga CEO Mark Pincus decides 2013 salary will be $1, with no cash bonuses," April 4, 2013

Yoga pant recall is a lulu of a lemon for Lululemon

2013-03-29T23:30:49Z

When you build a better mousetrap, it is said, the world will beat a path to your door. Well, sometimes. In business, imitation is not the sincerest form of flattery, but instead an attempt to take market share. And typically, you do not want to help others along in that enterprise. In fact, there is a whole branch of business litigation that deals with those issues via patent, copyright and trademark infringement.

One element of trade dress, the overall look and feel of a product, like an iPhone, may even extend to a style and characteristic of a store. One of the most successful recent store concepts has been that of Lululemon Athletica, a seller of expensive yoga clothing. The stores have features like yoga classes and running clubs, and have been very profitable, selling $100 a pair yoga pants.

]]> Competitors, like California's Athleta, now owned by the Gap, and other athletic clothing manufacturers, like Under Armour, Nike have been attempting to replicate Lululemon's success.

Unfortunately, it appears Lululemon has given its competitors an opportunity for gaining some of the lucrative market share. They have recalled all of their yoga pants made with a luon fabric because of customer complaints and returns, caused by the fabric being too sheer during yoga practice.

The company claims that the fabric met it quality specifications, but nonetheless failed their customer's quality check. The company has had other difficulties that may be related to increasing production capacity to meet customer demand.

The recall and lost sales from the absence of the yoga pants is expected to result in up to a $67 million loss this year for the company. And their competitors hope that isn't all they lost.

Source: The New York Times, "Recall Is Expensive Setback for Maker of Yoga Pants," Stephanie Clifford, March 21, 2013

How to avoid a discrimination lawsuit in your hiring process

2013-03-22T23:38:02Z

If your business is growing and you need to hire additional staff, you may think it is a relatively simple process. You place an ad for the skill set you would like for the position, review the applications, set up some interviews and hire the best candidate. Ignoring the complex determinations that go into hiring, such as whether the person has the proper skills, education and personality that will mesh well with your organization, there are other concerns.

The hiring process is also governed by a broad set of laws, both California and federal, that determines what questions you can ask and how the process needs to function. The U.S Equal Employment Opportunity Commission (EEOC) is responsible for enforcing the anti-discrimination provisions of federal law, and in California, the Fair Employment and Housing Council is responsible for overseeing the Fair Employment and Housing Act (FEHA), which controls many aspects of the hiring and employment process.

]]> A recent news release from the EEOC highlights the dangers to an employer who fails to understand their responsibilities under the law during the hiring process. It involves and a job applicant and Toys "R" Us, Inc. The woman who applied is alleged to have been otherwise qualified for the position, that of "team member."

She is also deaf, and communicates via "by using American Sign Language, reading lips and through written word," according to the EEOC. When she attended the first group interview, she requested an interpreter, which Toys "R" Us denied, saying if she wanted to interview, she would need to supply an interpreter.

Her mother accompanied her and interpreted during her interview, and she was not hired, in spite of her other qualifications for the position. The EEOC release noted that, "Federal law requires employers to provide a reasonable accommodation during the interview process, including providing an American Sign Language interpreter, unless the employer can show it would be a significant difficulty or expense to do so."

You should have your hiring process reviewed by an attorney experienced with employment law issues, to ensure you comply with federal and California law, as this can avoid the significant expense down the road of defending an EEOC or FEHA lawsuit.

Source: Equal Employment Opportunity Commission, "EEOC Sues Toys "R" Us for Disability Discrimination," March 19, 2013

A new handshake for Silicon Valley

2013-03-15T23:18:25Z

A handshake is a uniquely human gesture. It conveys a multitude of meanings. It is both the signifier and sometimes the signified, both conveying the trust and fidelity we expect in the business deal and, more generally, all human relationships. The trust embodied in the firm handshake both seals the deal and permits the deal to occur in the first place.

In Silicon Valley, as with many business environments, using a handshake to seal a deal is standard practice, but sometimes (perhaps all times?) you want something more. Business transactions are the glue that holds the economy together, but sometimes you need more than just a handshake to hold them together.

]]> Paul Graham, a co-founder of Y Combinator, has suggested that for startups and their funders, something more is necessary. He recommends using an email that has a fill-in-the-blank statement of "I'm in for X," a reply of "OK, you're in for X," and a pair of confirmation replies.

Of course, this seems commonsensical, as it is basically a stripped down form of first year law school contract law. "Offer and acceptance" are fundamental building blocks any contract. Writing it down, on paper or in an email, provides a memorialization of an agreement.

This is necessary, because as Graham comments, "Many participants in the funding market are noobs, and some are dishonest."

Contracts can be simple or complex, but before you bet your next deal on one, checking with a business transaction attorney can provide that additional piece of reassurance, which allows you to trust that handshake.

Source: Upstart Business journal, "Paul Graham replacing the handshake at Y Combinator," Cromwell Schubarth, March 15, 2013

How to succeed in business by really, really trying

2013-03-06T22:53:59Z

As attorneys who handle California commercial real estate transactions, business transactions and business litigation, we work with many businesses, from well-established companies to brand new startups. And we work with many of the principles and founders of some of these businesses. There are many truisms in business, distillations of what makes a successful businessperson or entrepreneur.

Starting a new business is a complex alchemy, where you assemble many different pieces to form a productive whole. In an article, Jim Price lists some traits of successful entrepreneurs. He states you need to be passionate and resilient, decisive and fearless, among other traits. He suggests you need to be financially prepared and we would like to expand on that.

]]> You need to be prepared to run for 18-24 months without a viable income from your new venture. He suggests that you keep your day job, or go to a part-time status, to insure you have some steady flow of income.

Another element of financial preparedness is to understand your financial liability, both your personal liability and your business entities' liability. You should have these discussions with your attorney, as you determine the legal form of organization for your business.

A partnership has very different liability ramifications than a limited liability company. Do you understand the tax implications of a corporate formation? Do you understand the legal significance of maintaining corporate formalities?

These questions all have financial implications for you and your business, and an experienced business law attorney can go over all of them, to ensure when you are decisive, you are making that decision from a position of knowledge.

Source: Business Insider, "10 Personality Traits Every Successful Entrepreneur Has," Jim Price, Feb. 15, 2013

Slow growth provides a winning recipe for Sriracha Hot Sauce

2013-03-02T00:43:18Z

One line of thought in American business is that in order to be successful, you have to grow. The thought is often captured as "If you're not growing, you're dying." Of course, growing a business is fraught with risk, as you cannot predict the future, and your large expansion into commercial land development could happen weeks before the great recession begins.

Sometimes a business may grow too fast or the growth may be structured in a manner that is unsustainable, as with the explosive growth of Krispy Kreme donuts and its equally spectacular implosion and collapse. The market has a means of punishing inauthentic or overly speculative growth; it is called Chapter 7 liquidation.

]]> At the other end of the spectrum is Huy Fong Foods in Los Angles. The manufacturer of Sriracha Hot Sauce is the epitome of slow and steady wins the race. The business, begun in 1980s by David Tran, he created the recipe and made the product himself, grinding the peppers and garlic. He sold it to fellow Asian immigrants; he never expected to sell it to Americans, not believing they would eat it.

The company has never advertised in the U.S. and its website was last updated almost a decade ago in 2004. But his hot sauce now sells 20 million bottles a year and he is just completing a 650,000 square foot headquarters and manufacturing plant in Los Angles.

He has had to deal with some business problems, such as copycats, and has needed to employ an attorney to sue the infringing parties, but his success comes from the underlying business precept, that to truly grow you must produce a product that people want.

Source: Bloomberg Businessweek, "Sriracha Hot Sauce Catches Fire, Yet 'There's Only One Rooster'," Caleb Hannan, February 21, 2013

Criminal charges filed in salmonella-contaminated peanut butter incident

2013-02-23T04:52:27Z

A cautionary tale. The federal government has filed a 76-count indictment against the former CEO and other employees of a peanut-processing plant related to salmonella contaminated peanut butter that left nine people dead and caused hundreds of cases of illness across the country. The charges include "conspiracy, wire fraud, obstruction of justice and introducing adulterated food into the market."

Prosecutors allege that the company knowingly and intentionally shipped contaminated peanut butter and fabricated test results indicating the peanut butter was salmonella-free when they knew it was contaminated. Criminal prosecutions of businesspersons are rare. Typically, when a business or individual associated with the company violate a law, the sanctions are often fines and other civil penalties. But not always.

]]> Financial fraud, as with Enron, World Com and some activities related to the mortgage loan crisis of the last few years are the most obvious examples. However, business owners and their management and employees need to be aware of increasing use of criminal charges in connection with violations of state and federal statutes and regulations.

Here the defense will attempt to show there was no criminal intent on the part of those charged. Many statutes and regulations contain penalties that do not require a showing of intent. If you import prohibited items, mere possession is sufficient to secure a conviction, similar to drug possession charges.

Politicians and legislatures often respond to problems by "cracking down" on the topic, frequently creating criminal liability, whether it is financial, health, safety, environmental or natural resources. When you begin a new area of business, discussing potential liability, civil and criminal, with your attorney is a good idea. It is better to know of possible violations in order to protect yourself from sanctions that are far worse than simply being sued for a breach of contract.

Source: Wall Street Journal, "Four Accused of Salmonella Coverup," Brent Kendall and Devlin Barrett, February 21, 2013