January 2011 Archives

Letter of the Law: January 2011

IN THIS ISSUE:

Delayed Discovery Rules

3 Easy Steps to Manage the Risk of Products Liability

Top 10 Reasons to Settle

Delayed Discovery Rules

By: Brendan J. Coughlin

There is a very funny line in an old Woody Allen movie in which a deposed South American tyrant is brought before a revolutionary tribunal. The strongman is asked how he pleads to accusations of his prior criminal exploitation and subjugation of the peasantry. After the laundry list of these acts is read to him at length, his equivocal response is simply, "Guilty ... with an excuse."

In a way, that is how delayed discovery rules tend to operate under California law. Generally, each type of civil action, be it based upon property, contractual, or personal rights, has a specific statute of limitations relating to it. The statute of limitations can also be called a limitation of action, because it states how much time a plaintiff has to bring a civil lawsuit based upon a particular claimed harm or injury. However, exceptions to these strict rules are sometimes made where there is a reasonable "delayed discovery" of the harm and/or its cause.

Most of California's statutes of limitation are contained in Code of Civil Procedure, Section 312, et seq. As one might imagine, the statute is a large one, since there seem to be so many types of claims that may be brought in civil litigation between parties.

For example, delayed discovery can be an important issue in a claim for personal injuries caused by exposure to hazardous materials or toxic substances. This might be an allegation of injury caused by mold or other unhealthy materials in a home or business structure. This particular claim is addressed in Code of Civil Procedure Section 340.8. And as one might expect, the issue of "discoverability" becomes as important as the time of discovery. In other words, a question of fact in the case can arise as to when a reasonable person would have been put on inquiry notice that injury was caused by the wrongful act of another. Otherwise, the case could be dismissed by the Court if it was filed too late.

Obviously, delayed discovery can be an issue in other types of personal injury claims, such as those involving medical negligence, minors, and some claims against governmental entities. But delayed discovery can also play into property and business claims.

Code of Civil Procedure Section 337.15 is often regarded as the be-all, and more importantly, the end-all, of construction defect litigation. This is because the statute provides a general limitation of ten (10) years for actions brought to recover damages relating to construction of real property and improvements to real property. There are in fact other important limitations and exceptions relating to construction claims. But subsection (2)(f) plainly states that the section shall not apply to actions based on willful misconduct or fraudulent concealment. Again we see a possible exception to a statute of limitation based upon delayed discovery.

Indeed, Code of Civil Procedure Section 338 states that the three (3) year limitation for an action based upon fraud or mistake is not deemed to have accrued until the discovery by the aggrieved party, of the facts constituting the fraud or mistake.

The oft-expressed proviso that these are general rules and comments, that each case is different, and that parties should speak to an attorney regarding their own specific situation, is nowhere as true as with statutes of limitation and exceptions. The attorneys at Kring & Chung are experienced with the in's and out's of delayed discovery issues, and can assist with your questions in both responding to, and enforcing, limitations of actions. The outcome of each situation will often depend upon the very specific facts relating to the harm, the discovery of the injury, the discoverability of the injury, and the discoverability of the identity of the responsible party. These issues can be especially important at the outset of a case, when pleading the correct causes of action, and affirmative defenses, can determine the ultimate adjudication of a delayed discovery concern.

Brendan J. Coughlin is an Associate with Kring & Chung, LLP's Irvine, CA office. He can be contacted at (949) 261-7700 or at bcoughlin@kringandchung.com.

3 Easy Steps to Manage the Risk of Products Liability

By: Laura C. Hess

Every manufacturer must plan for a product liability lawsuit. A product liability case can result in tangible losses, such as lost sales, lost market share, and legal costs; and intangible losses, such as lost reputation, and lost productivity from employees dealing with the lawsuit rather than daily operations.

Here are three easy ways that you can plan ahead to manage the risk of a product liability lawsuit:

Step 1: Designate the person who will be the "face of the company" in a crisis.

One person should be designated as the face of the company for all purposes in handling a products claim, even before a lawsuit is filed. This person is the only corporate spokesperson who deals with the media and the claimant. Other employees' involvement can undermine a crisis management situation.

If it is a clear liability situation, the designated representative should quickly express regret and take responsibility on behalf of the corporation. He or she should also express the company's recommitment to safety and how the company intends to do so. Keep in mind that juries tend to award punitive damages when they perceive a corporation as unsympathetic to a person's injury, or "sweeping things under the rug" rather than responding proactively. When the litigation comes, a properly handled message will cause the event to be viewed as an unfortunate but understandable mistake rather than a forum for public outrage.

Step 2: Send a consistent and accurate message.

Frequent and accurate communications with the claimant, media, customers, and governmental agencies are essential. Reporting should be candid and presented in a positive way, focusing on the proactive measures being taken. This lays a good foundation for the defense of the inevitable lawsuit. It shows that the company is "on the case." Never speculate about what could have happened, but rather fully disclose all facts that are known at the time. Provide regular and thorough updates as information becomes available. Stay focused on the message and talking points previously developed. Avoid attempts by others to draw the company into a version of events it did not develop.

Manufacturers usually know what kinds of liability cases they may likely face at some point, even before they occur. You can develop messaging in response to those events before they happen.

The legal course of a products liability case is fairly predictable. A manufacturer can plan for it in advance. Executive level management should have a clear understanding of legal issues, such as development of effective product warnings and when the company must initiate a product recall. This will help them make appropriate choices for preventing a crisis and responding when a crisis occurs. The lawyers at Kring & Chung, LLP can brief you on the relevant products liability law affecting your company.

Step 3: Get early legal analysis of likely types of products cases.

Laura C. Hess is a Partner with Kring & Chung, LLP's Irvine, CA office. She can be contacted at (949) 261-7700 or lhess@kringandchung.com.

Top 10 Reasons to Settle

By: Judge Thomas Thrasher (Ret.)

1. Prevent adverse publicity

2. Clients avoid emotional trauma

3. Uncertainty of jury verdict

4. Cannot depend on witness availability or testimony

5. Loss of time involved in the preparation and in the trial itself

6. Substantial cost involved

7. Settlement is final, no appeal

8. Avoid risk of adverse judgment

9. Money is paid now

10. Only way to control the outcome of the case is for the parties to settle themselves instead of letting 12 jurors do it for them

"As a peacemaker the lawyer has a superior opportunity of being a good man." - Abraham Lincoln, Notes for a Law Lecture, July 1, 1850

Hon. Thomas Thrasher (Ret.) is a mediator and arbitrator with JAMS in Orange, California.

Attorney Advertising. This client newsletter is a periodical publication of Kring & Chung, LLP and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. Any tax information or written tax advice contained herein (including any attachments) is not intended to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

Short Sale Disclosure

The duty of a listing broker and agent to a buyer has changed in light of the onslaught of short sales. On October 6, 2010, the California Appellate Court in the case of Holmes v. Summer, 4th Appellate Dist., 3rd Div. 2010, extended the listing agents' duty to a buyer, requiring disclosure of financial obstacles affecting title. Specifically, if the listing agent or broker is aware that monetary liens and encumbrances exceed the sale price of a residential property, requiring the seller to either undergo a short sale or deposit a substantial amount of cash into the escrow to obtain a release from the lender, there is a duty to disclose this state of affairs to the buyer.

New IRS Guidelines for Flexible Spending Accounts

Many companies today offer flexible spending accounts (FSAs) as part of their health care packages for employees. On September 3, 2010, the IRS issued new guidelines to help employers interpret the rules put in place by recent health care reform changes, relating to over-the-counter medicines and drugs. These changes will take effect as of 2011.

Understanding the Role of the Experts in Family Law

By: Evan D. Schwab

The typical family law proceeding in the Clark County, Nevada Family Court involves a judge, attorneys and the litigants. What many family law litigants are not completely familiar with is the role of the expert in a family law matter. Understanding the role of the experts and how they can be useful can assist clients in achieving the most favorable result possible.

Product Liability Prevention Programs

Manufacturers should adopt an internal Product Liability Prevention ("PLP") program. The first step in developing a PLP is to select a team leader. Larger companies should create a team to help this person deal with overall issues, especially in multi-plant organizations.

Employee or Independent Contractor?

For businesses, classifying workers as independent contractors versus W-2 employees is a dangerous trap for the unwary. It is tempting for businesses to do so because they do not have to carry worker's compensation insurance, pay payroll taxes, take tax withholdings, pay overtime, etc., for independent contractors.

Duration of a Mechanic's Lien in Nevada

Nevada Revised Statutes ("NRS") Chapter 108 primarily governs a lien claimant's legal rights to file and enforce a mechanic's lien claim in Nevada. There are many deadlines and timeframes that must be adhered to in order to protect a lien claimant's legal rights. It is particularly important that a lien claimant in Nevada is aware of the duration of a lien, and the timeframe in which to bring an action to enforce a lien in a proper court. NRS 108.233(1) mandates the relevant duration of a lien as follows:

Borrower Rights During the Foreclosure Process

According to the California Foreclosure Report, the number of foreclosure sales has almost doubled from last year. In April 2010, it was reported that foreclosure sales increased 92.3% from 2009, when lenders had voluntary moratoriums in place while awaiting the implementation of the Administration's Home Affordable Modification Program (HAMP).

What is a Franchise?

When we say, "franchise," we think of the traditional franchise empires like McDonald's and Starbucks. Lately, there has been a surge of new and eclectic trendsetting franchise businesses entering the franchise arena, including frozen yogurt shops with a contemporary flair and self-help stations, gourmet tea shops, and seasoned fried chicken restaurants. Franchising is no longer a business structure that is reserved for "large franchises" that have a long operating history and business track record. It actually has become a popular business structure that business owners can elect to set up even in the earliest stages of their respective businesses. What is necessary is the right product and business concept, and the financial means to support its franchise program, in order to propagate the business quickly in a growing market or industry.

Protecting Customer & Client Lists

By Allyson K. Thompson

When preparing Employee Handbooks, we frequently are asked by clients, "What can I do to protect my client and customer lists from being taken by departing employees?" Client and customer lists are often a company's most important asset. Legally protecting that asset in California can be difficult.

Which Model is Best for Your Divorce?

By: Jill L. Barr

The end of a marriage is often equated with death. There are various stages of mourning one undergoes upon a "death" of a marriage. The dissolution of a marriage is also a termination of a partnership and thus, in many respects, a business transaction. It is often difficult to competently enter into a business transaction while undergoing the grieving process. Stresses in marriage do not always equate to dissolution of the marriage, but when it appears that dissolution is inevitable, there are various models one can utilize when going through the dissolution process.

Additional Insurance Coverage

By J. Christopher Bennington

In an effort to spread the cost of construction defect litigation, many carriers for general contractors and subcontractors have begun requiring their named insureds to obtain "additional insured" coverage from the named insureds' subcontractors. For example, the policy issued to a general contractor may demand that the general require his or her electrician, plumber and other subcontractors to have the general named as an additional insured on each of the policies issued to those subcontractors. In this way, there are likely to be several policies covering the general contractor against any given claim, which can dramatically reduce the exposure for the general contractor's own liability carrier.

Contractor Not Liable for Independent Contractor's Safety Failures

By Brendan J. Coughlin

Early November 2005, at San Francisco International Airport, mechanic Anthony Verdun pulled his injured arm from the moving parts of a baggage conveyor belt. The conveyor had no shields or cover, in alleged violation of Cal-OSHA regulations. Verdun was required to be in a tight, cramped space with little light to perform an inspection on the conveyor while it was in operation.

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