You may just have set up your business' website, or maybe you are considering transacting business with a company with an on-line presence. In either case, you should perform an objective risk management analysis to determine your potential liabilities and conversely what your potential avenues of remedy might be if a dispute arises. A couple of questions that you want to ask include:
Is There A Terms & Conditions Or Disclaimer Provision On The Website?
Most small businesses look to the internet to help generate business. However, without adequate control your marketing plan or potential client intake procedures could create unforeseen liability.
For example, a small local San Marcos, California business’ website is viewable anywhere. Without a Disclaimer or Terms & Conditions provision, that small business owner might be opening him or herself to be sued by someone in New York or other place the person never thought he or she would ever do business. If a small business decides to use a website, it should take care and perform a risk management assessment on itself. A website that clearly delineates its target audience, and if appropriate explains that nothing in it is to be taken as a guarantee (unless you actually intend to make a guarantee) can help avoid confusion and unjustified reliance in the future.
Businesses want to establish a connection with their potential client by inviting an on-line inquiry/application. Businesses should take care to analyze the potential risks in doing so, by asking questions like:
- Is your invitation for an application intended to create a formal contractual relationship?
- Are you guaranteeing that services will be provided?
A properly worded Terms & Conditions or Disclaimer can help you control your risk in the future.
From the consumer's standpoint, reviewing a company's Terms & Conditions or Disclaimer can help give you a sense of how the company treats disputes with its customers.
Is There a Forum Selection Clause in the Contract/Website?
Probably included in the Terms & Conditions or Disclaimer is a Forum or Venue Selection Clause.
A contract that specifies what law is to be applied and what jurisdiction any future potential legal dispute should be litigated or arbitrated in can predetermine whether an action even gets filed. A forum selection clause will specify that any legal action has to be filed in a particular jurisdiction. Frequently, the state law to be applied will be the same state where jurisdiction is agreed to by the parties. However, it is possible to specify a particular jurisdiction as the venue but also another state’s laws will be applied. This type of clause will not stop someone from filing a lawsuit in contravention of the contract (in another state for example). However, it will help control how and where a matter is determined.
Other important considerations should be considered that might affect what law and jurisdiction applies: did you actively solicit or do business in another state, does your business implicate federal statutes, etc. While a forum/venue selection clause could help you mitigate your risk, you should consult with an attorney for more specific direction or advice concerning your business dealings.
Again, from a consumer's standpoint a forum or venue selection clause should be analyzed from a risk management prospective. For instance, if you foresee the possibility of a dispute arising between you and the business, transacting with that potential out-of-state business may not be advisable.
Business and contract attorney Darwin Bustarde can help you analyze your contracts and websites from a legal/risk management perspective. As a solo-practitioner and small business owner himself, he knows first hand the important considerations in marketing and conducting business on-line. Contact him for reasonable hourly rate, flat-fee, or maximum fee legal services to help you control your costs in order to make your business more efficient from a business and legal standpoint.
Tuesday, November 30, 2010
Monday, November 29, 2010
Is the Warranty of Habitability/Tenability Waivable?
In California, the answer is a qualified "no."
In summary, sections in California's Civil Code generally prohibit such waivers. See section 1942.1 et seq. for example.
For a more detailed post on the subject, visit Bustarde Law's Legal Blog on Real Property, Landlord-Tenant, HOA and other Real Estate Law matters by clicking here, or the title above.
Attorney Darwin Bustarde can provide landlords and tenants inexpensive consultation, litigation and other services to help you understand your rights.
In summary, sections in California's Civil Code generally prohibit such waivers. See section 1942.1 et seq. for example.
For a more detailed post on the subject, visit Bustarde Law's Legal Blog on Real Property, Landlord-Tenant, HOA and other Real Estate Law matters by clicking here, or the title above.
Attorney Darwin Bustarde can provide landlords and tenants inexpensive consultation, litigation and other services to help you understand your rights.
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 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
Identify and Protect Your Business' Trade Secret Confidential Information
Does your business have important confidential information that 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 that establish that a customer list is a trade secret include where the list might 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 evening 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.
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 that establish that a customer list is a trade secret include where the list might 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 evening 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.
Monday, November 15, 2010
Unlawful Detainer/Evictions: The Three (3) Day Notice, The Landlord's Concerns
A Three (3) Day Notice is required to initiate a Unlawful Detainer (Eviction) action as described in California Civil Code Section 1161, including:
- tenant's failure to pay rent;
- tenant's failure to abide by the lease terms;
- nuisance by the tenant;
- waste by the tenant;
- unlawful use of the property by the tenant; and
- the property has been sold pursuant to a sale under execution, mortgage or trust deed.
Depending on what acts or omissions the tenant has committed, a 3-Day Notice to Pay or Quit, and a 3-Day Notice to Cure or Quit (also may be termed something like-3-Day Notice to Perform Covenants or Quit) may be served on the tenant together. For example, if the tenant has failed to pay rent and is committing a nuisance on the property, both notices may be proper.
The landlord must take care when filling out the required information on the notice(s). If the notice is incomplete, incorrect or contains extra information or allegations that are not allowed by law, then the notice may be defective. A defective notice may cause the landlord to lose his unlawful detainer case.
Examples of defects/issues that the landlord should be aware of include:
- not stating the name of the actual tenants;
- not identifying the address/property;
- failure to state the exact amount of rent owed (or a reasonable calculation/approximation as may be allowed by law);
- overstating the amount (including claims for unpaid utilities, late fees, interest, etc.)
- including a claim of rent beyond a years time;
- failure to state that the tenant has 3 days to pay the amount at a particular day and time or the tenant must move out;
- say what the tenant did or failed to do to break the lease and alternatively state that the tenant has 3 days to fix the problem or move out;
- and simply sign and date the notice.
Landlords should carefully review the terms of the lease. For example, some leases might specify that a late fee is deemed to be "rent" under the lease, thereby creating the potential to claim the late fee as part of the rent owed in a 3-Day Notice to Pay or Quit.
Bustarde Law can help analyze your situation with your tenant to determine the correct notices to serve, the correct information to provide, and the correct procedure to serve the notices and thereafter file an eviction action. Oftentimes, an attempt to evict someone is delayed or fails unnecessarily because the notice contained a seemingly minor discrepancy.
An eviction action is a complicated process based on specific statutory requirements. The foundation of the action is the notice. If the notice is defective then the action will likely be too.
The California Court system provides a helpful website containing general information (including that summarized above) concerning unlawful detainer actions on its website, click here. Also, Mr. Bustarde offers extremely reasonable hourly and flat rate fees to help landlords, especially non-professional landlords, evict tenants to make their properties money generating resources again.
Friday, November 12, 2010
Contracts to Indemnify: The Duty to Defend May Arise Independent from the Duty to Indemnify
Contracts between parties frequently contain indemnification provisions. Potential indemnitors should carefully review indemnification provisions to understand when and for what they may be held liable for. UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10 provides an example of how misunderstanding the effect of an indemnity agreement could lead to a serious miscalculation of a party's potential liability.
In UDC v CH2M Hill an engineering consultant contracted with a developer to provide professional services for a condominium developement. The HOA to thenew development sued the developer. The developer filed a cross-complaint against the consultant and others involved in the project.
The consultant agreed to indemnify the developer for losses connected with any negligent act or omission by the consultant. The provision went on to specify that the consultant agrees to defend any action (pay for the litigation and attorney fees) brought against the developer at the developer's written request.
The consultant refused to pay the developer's defense fees and successfully established at trial that it was not negligent. Based on that finding it argued that it should not be responsible for paying the developer's costs of defense. The court disagreed and found that the duty to defend arose when the developer cross-complained against the consultant. Again, this is despite the jury's finding that the consultant was not negligent.
Even though the consultant was ultimately not responsible for general indemnification of the damages paid for by the developer, as you may already know, the costs of litigation can frequently exceed the alleged actual damages in a case.
The message of this case is that contracting parties must avoid broad indemnity language whenever possible. The potential indemnitor should search for such broad language and at the very least address the danger of it by attempting to limit the scope of indmenification by cleary linking the duty to defend to an adjudication of liability or other finding acceptable to the potential indemnitor.
If you are presented with a contractual provision whose scope of affect is uncertain that you want reviewed, please feel free to contact Bustarde Law to speak to an attorney experienced in contract review, drafting, negotiation and litigation.
In UDC v CH2M Hill an engineering consultant contracted with a developer to provide professional services for a condominium developement. The HOA to thenew development sued the developer. The developer filed a cross-complaint against the consultant and others involved in the project.
The consultant agreed to indemnify the developer for losses connected with any negligent act or omission by the consultant. The provision went on to specify that the consultant agrees to defend any action (pay for the litigation and attorney fees) brought against the developer at the developer's written request.
The consultant refused to pay the developer's defense fees and successfully established at trial that it was not negligent. Based on that finding it argued that it should not be responsible for paying the developer's costs of defense. The court disagreed and found that the duty to defend arose when the developer cross-complained against the consultant. Again, this is despite the jury's finding that the consultant was not negligent.
Even though the consultant was ultimately not responsible for general indemnification of the damages paid for by the developer, as you may already know, the costs of litigation can frequently exceed the alleged actual damages in a case.
The message of this case is that contracting parties must avoid broad indemnity language whenever possible. The potential indemnitor should search for such broad language and at the very least address the danger of it by attempting to limit the scope of indmenification by cleary linking the duty to defend to an adjudication of liability or other finding acceptable to the potential indemnitor.
If you are presented with a contractual provision whose scope of affect is uncertain that you want reviewed, please feel free to contact Bustarde Law to speak to an attorney experienced in contract review, drafting, negotiation and litigation.
Monday, November 8, 2010
The Deferrence Given to HOA Maintenance Decisions is Not a Blanket Immunity
A homeowners association ("HOA") of a common interest community enjoys "judicial deference" concerning ordinary maintenance decisions. Individual owners who might believe their HOA caused or failed to prevent a problem, like a burst pipe in a common area, flooding, termite infestation, etc., should educate themselves and consult an attorney regarding the viability of the potential claim and anticipated defenses.
A court will defer to the ordinary maintenance decisions of an HOA, where the HOA selects from various means a method to maintain or repair a development's common areas. This deference is an affirmative defense that the HOA can assert to protect itself from liability. To do so, the HOA must show that it performed a reasonable investigation, in good faith and with regard for the best interests of the community and members, pursuant to its authority under the law and CCRs. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253.
Last month, the Court of Appeal, Fourth Appellate District, held that the judicial deference does not shield an association from liability for ignoring problems and explained it protects an HOA's good faith decisions to maintain and repair common areas. Affan v. Portofino Cove Homeowners Association, et al. (2010) 2010 DJDAR 16702. In Affan, owners in a condo complex complained of sewage backups over the years. The HOA discussed possibly hiring someone to clean the sewage lines but never actually took action. Eventually, it hired a pluber to clean the linem, however by that time the lines were so clogged that a special method of cleaning was required but was not used. As a result, after the cleaning, a serious "sewage eruption" occurred.
The Court of Appeal found that the HOA in responding to the sewer line issue did not make a "maintenance decision." Therefore, it could not avoid liability for the sewage problems under the judicial deference doctrine. As an aside, the Appellate Court also described that the HOA's managing agent could not rely on the judicial deference doctrine because it was not an HOA.
Affan v. Portofino provides an instructive example for HOA Board Members and owners, of the type of conduct an HOA will be expected to perform. If you are involved in an HOA or common interest development feel free to contact me and I would be happy to discuss the law and concerns that regard defects like that addressed above and other issues.
A court will defer to the ordinary maintenance decisions of an HOA, where the HOA selects from various means a method to maintain or repair a development's common areas. This deference is an affirmative defense that the HOA can assert to protect itself from liability. To do so, the HOA must show that it performed a reasonable investigation, in good faith and with regard for the best interests of the community and members, pursuant to its authority under the law and CCRs. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253.
Last month, the Court of Appeal, Fourth Appellate District, held that the judicial deference does not shield an association from liability for ignoring problems and explained it protects an HOA's good faith decisions to maintain and repair common areas. Affan v. Portofino Cove Homeowners Association, et al. (2010) 2010 DJDAR 16702. In Affan, owners in a condo complex complained of sewage backups over the years. The HOA discussed possibly hiring someone to clean the sewage lines but never actually took action. Eventually, it hired a pluber to clean the linem, however by that time the lines were so clogged that a special method of cleaning was required but was not used. As a result, after the cleaning, a serious "sewage eruption" occurred.
The Court of Appeal found that the HOA in responding to the sewer line issue did not make a "maintenance decision." Therefore, it could not avoid liability for the sewage problems under the judicial deference doctrine. As an aside, the Appellate Court also described that the HOA's managing agent could not rely on the judicial deference doctrine because it was not an HOA.
Affan v. Portofino provides an instructive example for HOA Board Members and owners, of the type of conduct an HOA will be expected to perform. If you are involved in an HOA or common interest development feel free to contact me and I would be happy to discuss the law and concerns that regard defects like that addressed above and other issues.
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