Business Litigation Archives

Stricter Interpretation Required: The Strategic Lawsuits Against Public Participation Statute Requires Analysis of Both Content and Context

On May 6, 2019, the Supreme Court of California published an opinion drastically altering the way strategic lawsuits against public participation ("SLAPP") statutes are interpreted. The anti-SLAPP statute allows for a "special motion to strike meritless claims early in litigation - but only if the claims arise from acts in furtherance of a person's right of petition or free connection with a public issue." (pg. 1) The case setting this in motion, Inc. v. Doubleverify Inc., deals with two for-profit companies who are disputing how one company was portrayed in a confidential report. The trial and appellate courts both held Doubleverify, Inc's reports were protected under the anti-SLAPP statute. They further held context was irrelevant in analyzing whether an anti-SLAPP statute was applicable. However, the Supreme Court of California reversed this decision, holding "the context of a defendant's statement is relevant, though not dispositive, in analyzing whether the statement was made 'in furtherance of' free speech 'in connection with' a public issue." (pg. 2)

9th Circuit Holds Minimum Wage Compliance May Be Based on Workweek as a Whole

In Douglas v. Xerox Bus. Servs., LLC, 2017 U.S. App. LEXIS 22967 (9th Cir. Nov. 15, 2017),the Ninth Circuit Court of Appeal considered whether compliance with the Fair Labor Standards Act's ("FLSA") minimum-wage provision should be determined based on the workweek as a whole or each individual hour within the workweek. Under the compensation plan at issue, employees were paid flat and variable rates for certain defined tasks, while other tasks had no specific designated rate. At the end of the workweek, the employer added the amounts earned for the defined tasks and divided the total by the number of hours worked that week. If the resulting hourly wage fell below minimum wage, the employer provided subsidy pay to ensure that, in the context of the workweek as a whole, the employee received the appropriate minimum wage. The employees argued that this payment plan did not comply with the FLSA because there were individual hours within the workweek for which they did not receive the minimum wage. The Court rejected this argument, finding that the relevant unit for determining compliance with the FLSA is the workweek as a whole and, therefore, the employer's practice was permissible.

Ninth Circuit Upholds California Tax Appeals Process as Providing a Plain, Speedy, and Efficient Remedy

In Hyatt v. Yee, the plaintiff disputed the California Franchise Tax Board's ("FTB's") determination that he owed $7.4 million in unpaid taxes for the 1991 and 1992 tax years on the ground that he moved to Nevada in 1991. Under California law, a plaintiff contesting an assessment may not litigate in state court until exhausting administrative remedies set out in Cal. Rev. & Tax Code § 19381. Generally, a plaintiff must first pay the disputed tax before seeking a refund. Cal. Rev. & Tax Code § 19382. Under this "pay-then-protest" scheme, if the FTB does not mail a notice of action on the claim within six months, the plaintiff may sue in state court. Cal. Rev. & Tax Code § 19385. However, if a plaintiff is contesting an assessment solely based on residency, he may instead opt to "protest-then-pay" a tax by seeking reconsideration in front of the FTB, appealing to the State Board of Equalization ("SBE"), and then suing in state court. See Cal. Rev. & Tax Code §§ 19044 & 19381.

California Corporations - Virtual Shareholder Meetings

A "Virtual Shareholder Meeting" is one in which the shareholders not physically present in person or by proxy participate in a meeting through electronic transmission or electronic video screen. California permits all or partial Virtual Shareholder Meetings, subject to numerous limitations and requirements.

Americans with Disabilities Act Compliance Update

Starting July 1, 2013 California Civil Code § 1938 requires commercial property owners to disclose in every lease whether or not the property has been inspected by a "Certified Access Specialist" ("CASp"). CASps are individuals certified by California as qualified and knowledgeable regarding construction related access to public accommodations.

California Court of Appeal Signals Availability of Reverse Veil Piercing Doctrine Against LLCs

In the context of a creditor which had for five years sought enforcement remedies against an individual who had created an elaborate web of trusts, partnerships, and an LLC to evade payment, the California Court of Appeal distinguished prior case law in holding that, under certain circumstances, an LLC may be held liable to its members' debts. The prior case was Postal Instant Press, Inc. v. Kaswa Corp., 162 Cal. App. 4th 1510 (2008), which held that corporations should not be held liable to its shareholders' debts because exercising such equitable powers would necessarily harm innocent shareholders and creditors when there are remedies at law available, i.e., creditors assuming direct control over debtors' shares. Here, the Curci Investments court noted that, unlike in the corporate context, a creditor of an LLC member may only obtain a charging order to divert an LLC's distributions. However, as was the case here, because the LLC membership retains ultimate control, it may simply halt any further distribution.

California Cities and Counties are Poised to Substantially Increase Assessment of Documentary Transfer Taxes on Stock Transfers in Corporate Entities

In an opinion handed down on June 29th, the California Supreme Court held that notwithstanding the legislature's decision against localities imposing excise taxes on transfers in ownership of stock, it did, however, intend for localities to impose documentary transfer taxes on stock transfers in property-holding entities. In particular, the Court held that Cal. Rev. & Tax. Code §§ 64(c) and (d) applied to transfers for consideration resulting in more than 50% ownership of voting stock in any partnership, LLC, or other entity where the stock transfer effectively changes the owner of the beneficial interest in real property. Unless the stock transfers concern an entity federally-taxed as a partnership and the transfer does not result in a technical termination of that partnership, a city or county is empowered to ignore the corporate form, reassess the underlying real property, and impose documentary transfer taxes for every property held therein. While documentary transfer taxes can be de minimis in amount in cases concerning an individual property, this decision could have a substantial impact on the purchase of large entities, both in and out of bankruptcy. Practitioners who oversee the purchase and sale of business concerns should take note that cities and counties are poised to assert documentary transfer taxes on a range of stock transactions in the future. A copy of the published opinion 926 North Ardmore Avenue, LLC v. County of Los Angeles is available by hyperlink here.

Attorneys at Borders - What to Do to Protect Confidential Client Information

Every California attorney knows that he/she owes a duty of confidentiality to the attorney's client. According to Rule 3-100(A) of the California Rules of Professional Conduct, an attorney cannot reveal client information, and the attorney has a duty to "maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." But not every attorney may know how to uphold this duty in a situation where he/she is coming back from a trip and has his/her electronic device(s) that contains confidential client information seized or is subject to inspection by a U.S. Customs and Border Protection ("CBP") agent; especially since the law is not clearly settled on this issue yet.

The first thing to do when defending a lawsuit

There's a reason why companies send demand letters whenever they feel like their legal rights are being violated: no one likes being in a lawsuit. Besides the natural animosity that comes with bringing suit against an entity, the costs of litigation can be annoying at the lightest and devastating at the greatest.

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