Shulman Hodges & Bastian LLP

Business Litigation Archives

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 Academy goes to court to protect its brand

In today’s marketplace, establishing and maintaining a brand is almost as important as the product or service itself. Consumers know that BMW is the ultimate driving machine for a reason. Same thing with the familiar jingles that identify and distinguish Farmers Insurance from State Farm Insurance.

Chobani under fire for allegedly misleading consumers

Who would have thought that the advertising landscape for yogurt producers would get so heated? Indeed, competition in this industry can be fierce, with many producers touting their brand's attributes and how they fit into healthy diets. However, federal advertising rules put limits on what a producer may say about its products, as well as others in the same industry.

Hacking lawsuit between rival ride sharing companies intensifies

In 2015, stories about corporate data breaches where customers’ personal information were lost or stolen dominated headlines. As we turn to 2016, it appears that data hacks may continue despite business’ best efforts.

Should you have an initial meeting before mediation?

If your business is embroiled in a legal dispute, you have likely been counseled on the process of mediation. With this being a form of alternative dispute resolution, the mediator (at the beginning of the session) will likely have a joint conference before breaking into individual caucuses where the mediator goes back and forth between rooms.

Goals that a successful merger should meet

As we have noted in prior posts, the trend of a strong market for mergers and acquisitions is expected to continue in 2016. The latest increase in interest rates will likely have an adverse effect on transactions in the short term. With that, companies that look to strengthen their market positions through acquisitions must still scrutinize deals so that they make sense both in the short term and the long term.

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