The Bright Line Business Law Blog

Sandra Day O'Conner resigns

Supreme Court Justice Sandra Day O'Conner submits her resignation. It was not much of a surprise that she is resigning as she has reportedly sufferd from back pain for a numebr of years. It is a little surprising that she beat Rhenquist out the door. I wish her the best in retirement.

Legal pundits in the know will have more colorful, and possibly more accurate, speculation on a potential successor that I will.  I do predict a nomination that will bring howls from the liberal side of politics and the focus will be Roe v. Wade.  There won't be much focus on how a new justice will deal with important business related legal issues.

I think that's unfortunate.  The Supreme Court should be a model of  the "bright line"  philosophy.  Not very many cases can make it to the Supreme Court, and the the most valuable role the Court can play is establishing bright lines in the law to increase predictability for all citizens.

The recent pair of Ten Commandments cases are a good example of a failure to enunciate a claer principle.  What's the bright line? How can any public entity know what to do after reading two 5-4 decisions that got to different results?

My ideal Supreme Court justice would probably be conservative, humble, adhere to stare decisis as a positive legal value and favor finality and clarity in the decision making process. Don't look for too many of these qualities to be discussed in the pre-nominaiton politicking and the confirmaiton process, though.

Small Business Scam

A small business client of our firm received an “official notification” that his corporate formalities are not being observed. If he immediately sends in $175 before it’s too late, he can avoid sanctions “including audits, lawsuits and summons.” If that wasn’t enogh to generate a little anxiety, there is a “Personal Liability” section, in bold type, stressing that failure to follow corporate formalities will expose shareholders to personal liability.

The form then emphasizes that  action must be completed within 20 days to ensure “timely processing” of the corporate miunutes.  Upon receipt, miuntes and resolutions will be prepared just in the nick of time, before anything bad happens. There is no justification for the urgency set out in the form, or why “timely processing” is so important. Our firm’s turnaround time on the same documents is less than one day.

I think this mailing is deceptive advertising. Don’t fall for it. It implies there is an impending emergency and the corporation is actually out of compliance.  Why else would a company get a mailing from “Board of Minutes and Resolutions/ Compliance division in Sacramento?

Oh, and the “real address of the sender is a UPS STORE

915 L ST # C

SACRAMENTO, CA 95814-3707

You can verify that by calling 916-444-3214.

It appears to be deceptive advertising under the California False Advertising Act, California Business and Professions Code § 17500 et seq., and the Unfair Business Practices Act Business and Professions Code § 17200 for at least following reasons:

1. The form is intended to be confused with official state government correspondence.
2. The language pressures the recipient into acting quickly because of an assumed violation of law.

3. The corporate ID number gives the impression the form is government generated
4. The apparent Sacramento location indicates a government office when a post office drop is actually used.

5. The use of the terms “compliance division,”  “notice date,” and “enforcing” infer that the recipient is under official investigation.

If you are a small business corporation, made a point to have your attorney review corporate minutes and resolutions and ensure formalities are observed. Often there are significant matters that should be in the minutes, yet this solicitaiton makes no effort to ensure the preparation of accurate and legally effective minutes. Many law firms provide this minutes and resolutions  as a maintenance service at minimal charge, and others include this service in a package annual legal checkup provided to small businesses.  Most attorneys wouldn’t charge $175 for a simple review of and preparation of routine small business annual minutes.

Thanks to our client for the heads up.  And see them for all your yachting needs.

 

Proposition 64 Passes, Good News for Small Businesses

Election results show California Proposition 64 passing. Proposition 64 made relatively minor changes to Business and Professions Code Section 17200 and 17500, the California Unfair Business Practices Act and Unfair Competition Act.

Prior to the Initiative, any person could file a complaint against any business entity for unspecified "unfair business practices." Nearly anything could be characterized as unfair competition or unfair business practices. Typically an unscrupulous lawyer "plaintiff" would sue an unsuspecting business under the act and then offer to dismiss the suit for a "reasonable" sum of money, usually $5,000 or so. They would count on the defendant's own lawyer telling the defendant that extortion settlement was cheaper than litigation. Most settled.

Now, the initiative has changed the standing requirement. Any City attorney, district attorney or the Attorney General's office can file suit under the Unfair Business Practices Act, as they always could. However, private citizens who also could previously sue under the act, can now sue only if that private citizen has "suffered injury in fact and has lost money or property" as a result of any unfair business practices. This modest change in the law will allow defendants who are unfairly sued to have non-meritorious cases economically dismissed very early in the proceedings.  I predict that the rampant abuses under the law will dramatically decline.

Here is the text of the Inititative, with additional information.

Tort reform measures in various states

Upcoming tort reform measures in several states

Next Tuesday's election has various tort reform measures on several state ballots. In California the only tort reform measure is Proposition 64, partially circumscribing the Unfair Business Practices Act. I think that's a good measure--some restraint of outright abuses is needed and the opponents of the proposition don't appear to be willing to acknowledge the widespread abuse, even extortion, of small business owners.

Cracks in the Plaster: Construction Defect Litigation Run Amok

Cracks in the Plaster: Construction Defect Litigation

I think CD litigation is a general scam. In the numerous cases I have worked on, exactly one was meritorious. That one involved concrete pads slowly sinking out of site in marshy residential lots. The rest are bogus and benefit only plaintff's lawyers, developer's lawyers and a few members of an expert's cottage industry. Notice I specifically did not mention plaintiffs as beneficiaries. I'll explain why later.

"You put up these buildings. Even though no one has noticed anything wrong, no one has been injured, nothing has been damaged; by virtue of the fact that you put them up, there must be defects in them. Therefore we will sue."

This is accurate. I'll be follwowing up with a history and critique of the construction defect sytem and recommendations for reform in the next few weeks. Visit often!