Saturday, March 3, 2012
Darwin Bustarde is Pleased to Join Mayfield & Associates
Darwin Bustarde is pleased to announce that he will join the firm Mayfield & Associates as of March 5, 2012. He will join that firm's partners, Gayle Mayfield-Venieris and Melissa Bustarde, to continue serving those in need of professional legal services regarding their business matters. Please visit Mayfield & Associates by clicking on the hyperlink here. For your information, this website will be maintained to help orient prior visitors, and past and current clients, to Mr. Bustarde. The information contained in this blog and the website bustardelaw.com may not be current as a result of this change in Mr. Bustarde's professional affiliation.
Tuesday, August 2, 2011
Plan Ahead! Business Relationships (usually) Don't Last Forever!
Many times the excitement of a new business venture and the desire not to cause waves prevents people from taking that one little extra step to ask, "Okay what happens if I want to end the deal?"
Asking that little question and engaging the other side in an open discussion about what each side expects from each other at termination can avoid unnecessary headaches in the future.
Many contracts simply contain a venue/jurisdiction and perhaps an attorney's fees provision as the answer to addressing what will happen if a party wants to end (probably breach) the contract. A jurisdiction/venue/fee clause will set the basics for any future litigation, but litigation is usually not the most desirable or cost effective resolution.
Other provisions should be contemplated, like a liquidated damages provision, where a party willingly accepts that if he or she breaches the agreement that a monetary fee will apply. A required mediation provision can force people to talk the situation through, and since the great majority of lawsuits settle without resort to trial, contractual mediation can avoid wasting resources and time in the future.
Many of my business acquaintances here in north San Diego County comment that the days of the hand-shake deal are over, and how it was great in the past when if the relationship wasn't going the way it was foreseen the parties would just walk away. Those types of relationships are wonderful, but do not necessarily address risk management concerns.
Talk to a properly licensed attorney regarding how you can propose, draft or negotiate for contract terms that will help business relationships end in a predictable and hopefully peaceful way. Remember, ending a business relationship in a businesslike and agreeable way means preserving it for the future.
Asking that little question and engaging the other side in an open discussion about what each side expects from each other at termination can avoid unnecessary headaches in the future.
Many contracts simply contain a venue/jurisdiction and perhaps an attorney's fees provision as the answer to addressing what will happen if a party wants to end (probably breach) the contract. A jurisdiction/venue/fee clause will set the basics for any future litigation, but litigation is usually not the most desirable or cost effective resolution.
Other provisions should be contemplated, like a liquidated damages provision, where a party willingly accepts that if he or she breaches the agreement that a monetary fee will apply. A required mediation provision can force people to talk the situation through, and since the great majority of lawsuits settle without resort to trial, contractual mediation can avoid wasting resources and time in the future.
Many of my business acquaintances here in north San Diego County comment that the days of the hand-shake deal are over, and how it was great in the past when if the relationship wasn't going the way it was foreseen the parties would just walk away. Those types of relationships are wonderful, but do not necessarily address risk management concerns.
Talk to a properly licensed attorney regarding how you can propose, draft or negotiate for contract terms that will help business relationships end in a predictable and hopefully peaceful way. Remember, ending a business relationship in a businesslike and agreeable way means preserving it for the future.
Friday, July 29, 2011
Is Your Indemnification as Strong as You Intended it to Be?
Indemnification clauses are generally classified as Type I, II or III. (See Bustarde Law's post on the topic by clicking here.)
However, if not drafted carefully your indemnification provision in your contract may not have the effect intended. Also, you should carefully analyze an indemnification provision that you may be subject to, to determine when it may be triggered.
The case Edmondson Property Management vs. Kwock (2007) 156 Cal.App.4th 197 provides a good example of when one party believed they had a Type I provision but was actually determined to be a general indemnity provision.
A Type I provision, that would require someone to indemnify another for their active negligence, must be clearly set forth. Otherwise, a court may interpret the provision to be a Type II which would only require an indemnitor to indemnify the other for passive negligence.
If you are the party who is demanding another to indemnify you, you most likely want your indemnification clause to be as strong as possible to cover you even where you are actively negligent. The opposite is true if you might have to pay for the losses of another person.
As you can see, indemnity clauses can be confusing. The indemnity provision in Edmondson stated, in part:
"Owner shall indemnify and save the Agent harm-less from any and all costs, expenses, attorney's fees, suits, liabilities, damages from or connected with the management of the property by Agent, or the perfor-mance or exercise of any of the duties, obligations, pow-ers, or authorities herein or hereafter granted to Agent."
The Appellate Court only found this to be a general indemnity provision. The lesson is that you may not be able to rely on simply saying that someone has to indemnify you for "all" harm or conduct. If a Type I indemnity provision is intended, it should be properly worded.
You should consult with an attorney regarding any questions you might have about indemnity provisions.
However, if not drafted carefully your indemnification provision in your contract may not have the effect intended. Also, you should carefully analyze an indemnification provision that you may be subject to, to determine when it may be triggered.
The case Edmondson Property Management vs. Kwock (2007) 156 Cal.App.4th 197 provides a good example of when one party believed they had a Type I provision but was actually determined to be a general indemnity provision.
A Type I provision, that would require someone to indemnify another for their active negligence, must be clearly set forth. Otherwise, a court may interpret the provision to be a Type II which would only require an indemnitor to indemnify the other for passive negligence.
If you are the party who is demanding another to indemnify you, you most likely want your indemnification clause to be as strong as possible to cover you even where you are actively negligent. The opposite is true if you might have to pay for the losses of another person.
As you can see, indemnity clauses can be confusing. The indemnity provision in Edmondson stated, in part:
"Owner shall indemnify and save the Agent harm-less from any and all costs, expenses, attorney's fees, suits, liabilities, damages from or connected with the management of the property by Agent, or the perfor-mance or exercise of any of the duties, obligations, pow-ers, or authorities herein or hereafter granted to Agent."
The Appellate Court only found this to be a general indemnity provision. The lesson is that you may not be able to rely on simply saying that someone has to indemnify you for "all" harm or conduct. If a Type I indemnity provision is intended, it should be properly worded.
You should consult with an attorney regarding any questions you might have about indemnity provisions.
Monday, December 6, 2010
Considerations to Voluntarily Dissolve a Corporation in California
A corporation can be dissolved by the shareholders or directors without any court proceedings. (California Civil Code Section 1900)
Either shareholders representing 50% or more of the voting shares can vote to dissolve it or through written consent. Or the Directors can vote to wind up and dissolve the corporation where: 1. If the corporation is subject to a Chapter 7 bankruptcy order, has disposed of its assets and has not conducted business for the preceding 5 years before the election to resolve; or 2. if the corporation issued no shares.
To do this a certificate has to be filed with the secretary of state. However, no certificate needs to be filed of the shareholders agree to the dissolution. Also, proper notice has to be given to the shareholders.
The corporation must cease business, except for business necessary to preserve good will or benefit the corporation's going-concern value.
The election to dissolve can be revoked by vote.
While the court does not have to be involved, certain interested parties can petition the court to take jurisdiction of the proceedings. For example, if a dispute arises concerning the value of the shares or the company.
The corporation or the other shareholders can elect to buy-out the shareholders seeking dissolution. The purchase has to be for cash at fair value. But watch out, if the dissolution proceedings is initiated in violation of a contractual arrangement, then any damages suffered by the remaining share holders is deducted from the cash paid to the moving party. This is just one example of a consideration that must be analyzed before initiating voluntary dissolution proceedings. Though it is relatively less complicated than pursuing an involuntary dissolution action (assuming one is appropriate) improper or incomplete analysis of the affect of the dissolution on the business or the value of the interests could lead to a less than favorable result.
Consult with an experienced attorney to analyze all your options.
Either shareholders representing 50% or more of the voting shares can vote to dissolve it or through written consent. Or the Directors can vote to wind up and dissolve the corporation where: 1. If the corporation is subject to a Chapter 7 bankruptcy order, has disposed of its assets and has not conducted business for the preceding 5 years before the election to resolve; or 2. if the corporation issued no shares.
To do this a certificate has to be filed with the secretary of state. However, no certificate needs to be filed of the shareholders agree to the dissolution. Also, proper notice has to be given to the shareholders.
The corporation must cease business, except for business necessary to preserve good will or benefit the corporation's going-concern value.
The election to dissolve can be revoked by vote.
While the court does not have to be involved, certain interested parties can petition the court to take jurisdiction of the proceedings. For example, if a dispute arises concerning the value of the shares or the company.
The corporation or the other shareholders can elect to buy-out the shareholders seeking dissolution. The purchase has to be for cash at fair value. But watch out, if the dissolution proceedings is initiated in violation of a contractual arrangement, then any damages suffered by the remaining share holders is deducted from the cash paid to the moving party. This is just one example of a consideration that must be analyzed before initiating voluntary dissolution proceedings. Though it is relatively less complicated than pursuing an involuntary dissolution action (assuming one is appropriate) improper or incomplete analysis of the affect of the dissolution on the business or the value of the interests could lead to a less than favorable result.
Consult with an experienced attorney to analyze all your options.
Wednesday, December 1, 2010
Be Careful Using the Web and Social Media
A business that uses social media or websites to attract customers should be careful to use proper Disclaimers and state where appropriate Terms & Conditions for visiting its website. This will help control liability on the business' part.
Further, care should be taken in using social media, like Twitter, Facebook, Myspace or others. The benefit of having immediate connection with your potential or actual clients could backfire if you make unintended representations to your clients.
Please view the blog post linked here, for a more detailed informal discussion of this issue.
Further, care should be taken in using social media, like Twitter, Facebook, Myspace or others. The benefit of having immediate connection with your potential or actual clients could backfire if you make unintended representations to your clients.
Please view the blog post linked here, for a more detailed informal discussion of this issue.
Tuesday, November 23, 2010
Recording a Phone Conversation is Likely Illegal in California, But....
Recording a telephone conversation without the other party(ies)'s consent is likely a violation of the Penal Code. See California Penal Code Section 632 et seq.
Under California law, recording a conversation without consent carries with it potential monetary penalties and imprisonment.
Additionally, a person "injured" by the recording can bring a civil action to recover, the greater of, $5,000.00 per violation (recording), or three times actual damages, if any, suffered. Notably, there is not a prerequisite showing that a person actually suffered actual damages in order to recover the $5,000.00 penalty.
However, not all recordings are illegal, for example, a recording to obtain evidence related to a commision by one of the parties to the communication a crime like extortion, kidnapping or bribery. Calif. Civil Code Section 633.5. Also, while there is a general prohibition on the use of illegal recordings at a court proceeding, California has created certain exceptions to this rule (for example, potentially for impeachment purposes, or to use to discover other admissible evidence).
One other general point to consider is that not all states treat surreptitious recordings the same as California. In New York, for example, only one party's consent is needed to record a conversation.
The question arises whether an unauthorized recording with an out-of-state person is illegal. Here in California it is. The case, Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal 4th 95 dealt with a situation where the conversations between California residents/clients were recorded by a company's Georgia office without their consent. In Georgia, that type of recording was lawful. The Californians sued for invasion of privacy. The California Cour of Appeal determined that even though the recording was lawful in Georgia, that application of section 630 et seq. was proper.
Many times in business, real property or any other transaction, for whatever reason, one party might feel compelled to secretly record a conversation. Even though California law provides for potentially substantial recoverable civil penalties in favor of the victim, it should be noted that discrete exceptions in the law exist that might allow the introduction of the statements into evidence despite their illegal origin. Conversely, though a party may be willing to risk that civil penalty and secretly record a conversation to develop evidence, generally such evidence may likely be subject to exclusion.
Whether you are a victim of a secret recording or you have secretly recorded a conversation in order to develop some kind of claim of your own despite the potential for a counter-claim against you, good investigation, analysis, law and motion, and discovery by an experienced attorney can aid you in determining what the legal ramifications might be of a potential illegal recording.
Under California law, recording a conversation without consent carries with it potential monetary penalties and imprisonment.
Additionally, a person "injured" by the recording can bring a civil action to recover, the greater of, $5,000.00 per violation (recording), or three times actual damages, if any, suffered. Notably, there is not a prerequisite showing that a person actually suffered actual damages in order to recover the $5,000.00 penalty.
However, not all recordings are illegal, for example, a recording to obtain evidence related to a commision by one of the parties to the communication a crime like extortion, kidnapping or bribery. Calif. Civil Code Section 633.5. Also, while there is a general prohibition on the use of illegal recordings at a court proceeding, California has created certain exceptions to this rule (for example, potentially for impeachment purposes, or to use to discover other admissible evidence).
One other general point to consider is that not all states treat surreptitious recordings the same as California. In New York, for example, only one party's consent is needed to record a conversation.
The question arises whether an unauthorized recording with an out-of-state person is illegal. Here in California it is. The case, Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal 4th 95 dealt with a situation where the conversations between California residents/clients were recorded by a company's Georgia office without their consent. In Georgia, that type of recording was lawful. The Californians sued for invasion of privacy. The California Cour of Appeal determined that even though the recording was lawful in Georgia, that application of section 630 et seq. was proper.
Many times in business, real property or any other transaction, for whatever reason, one party might feel compelled to secretly record a conversation. Even though California law provides for potentially substantial recoverable civil penalties in favor of the victim, it should be noted that discrete exceptions in the law exist that might allow the introduction of the statements into evidence despite their illegal origin. Conversely, though a party may be willing to risk that civil penalty and secretly record a conversation to develop evidence, generally such evidence may likely be subject to exclusion.
Whether you are a victim of a secret recording or you have secretly recorded a conversation in order to develop some kind of claim of your own despite the potential for a counter-claim against you, good investigation, analysis, law and motion, and discovery by an experienced attorney can aid you in determining what the legal ramifications might be of a potential illegal recording.
Tuesday, November 16, 2010
Does Your Business Have Important Confidential Information It Wants to Protect From Others?
If so, you may have a Trade Secret.
California Civil Code Section 3426.1 defines a trade secret as:
"information, including a formula, pattern, compilation, program, device, method,
technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally
known to the public or to other persons who can obtain economic value from its disclosure
or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy."
As you can tell, the definition is very broad. A trade secret can comprise many things from the tangible or intangible like a software program/source code, recipe, or a compilation of even publicly client or customer list. A customer list is a simple example of what any business might have that could constitute its trade secret. Some of the characteristics/information that establish that a customer list might be a trade secret include:
• Customer information that is not “readily ascertainable” to competitors;
• Customers’ particular requirements/preferences;
• Customers particular habits; and
• Key contacts of the client (if an entity).
Many businesses or persons might have a trade secret without even knowing it. However, merely something calling a trade secret is not sufficient, though it is a starting point. Businesses must identify its potential trade secrets and then examine what if anything it has done, does or should do to make sure it remains a secret. A business should also examine how it has treated and potentially distributed the trade secret material in the past. Frequently, a business will disclose its trade secret as a necessary part of providing its services, or as a marketing tool. That type of disclosure could destroy its status of a trade secret if done improperly.
Businesses should therefore take care in how they treat their confidential materials. Some points to consider include the following.
• Identify important materials that you believe to be your trade secret.
• Analyze the value of the material and whether it is valuable because it is secret.
• Have you disclosed the material that is potentially a trade secret to others who are not
under an obligation to keep its secrecy? For example, have you disclosed to employees
without a effective employee agreement; clients without a client agreement; on the web or in
marketing materials, etc.? If so, it might not qualify as a trade secret.
• Potential trade secrets that have been disclosed in a piecemeal fashion may not qualify as a
trade secret.
• What have you done to try to keep the information secret?
- Implement and enforce confidentiality agreements with clients, employees, etc.
- Keep the material under physical lock and key.
- Limit access to the material to just those who need to know it.
- Inform employees what materials are trade secret so that everyone in your business
knows to help protect the materials’ secrecy.
Businesses should work to protect its valuable information. It is advisable to consult with an attorney to help determine whether you have a trade secret, whether the business has taken adequate steps to protect its secret information, and whether its confidential secret information has been stolen. If you have a trade secret, call Darwin Bustarde to speak with an attorney extremely knowledgeable in trade secret/misappropriation law to help you protect your trade secrets or to help prosecute your rights if someone has stolen or is threatening to improperly use your trade secret, i.e. a former employee at his or her new employer/competitor.
California Civil Code Section 3426.1 defines a trade secret as:
"information, including a formula, pattern, compilation, program, device, method,
technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally
known to the public or to other persons who can obtain economic value from its disclosure
or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy."
As you can tell, the definition is very broad. A trade secret can comprise many things from the tangible or intangible like a software program/source code, recipe, or a compilation of even publicly client or customer list. A customer list is a simple example of what any business might have that could constitute its trade secret. Some of the characteristics/information that establish that a customer list might be a trade secret include:
• Customer information that is not “readily ascertainable” to competitors;
• Customers’ particular requirements/preferences;
• Customers particular habits; and
• Key contacts of the client (if an entity).
Many businesses or persons might have a trade secret without even knowing it. However, merely something calling a trade secret is not sufficient, though it is a starting point. Businesses must identify its potential trade secrets and then examine what if anything it has done, does or should do to make sure it remains a secret. A business should also examine how it has treated and potentially distributed the trade secret material in the past. Frequently, a business will disclose its trade secret as a necessary part of providing its services, or as a marketing tool. That type of disclosure could destroy its status of a trade secret if done improperly.
Businesses should therefore take care in how they treat their confidential materials. Some points to consider include the following.
• Identify important materials that you believe to be your trade secret.
• Analyze the value of the material and whether it is valuable because it is secret.
• Have you disclosed the material that is potentially a trade secret to others who are not
under an obligation to keep its secrecy? For example, have you disclosed to employees
without a effective employee agreement; clients without a client agreement; on the web or in
marketing materials, etc.? If so, it might not qualify as a trade secret.
• Potential trade secrets that have been disclosed in a piecemeal fashion may not qualify as a
trade secret.
• What have you done to try to keep the information secret?
- Implement and enforce confidentiality agreements with clients, employees, etc.
- Keep the material under physical lock and key.
- Limit access to the material to just those who need to know it.
- Inform employees what materials are trade secret so that everyone in your business
knows to help protect the materials’ secrecy.
Businesses should work to protect its valuable information. It is advisable to consult with an attorney to help determine whether you have a trade secret, whether the business has taken adequate steps to protect its secret information, and whether its confidential secret information has been stolen. If you have a trade secret, call Darwin Bustarde to speak with an attorney extremely knowledgeable in trade secret/misappropriation law to help you protect your trade secrets or to help prosecute your rights if someone has stolen or is threatening to improperly use your trade secret, i.e. a former employee at his or her new employer/competitor.
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