Newsletter Archives

The Letter of the Law: January 2013

IN THIS ISSUE:

REAL ESTATE: Marijuana Dispensaries Blowing Up in Smoke

CONSTRUCTION: Can an Intervening Insurance Company Sue for Breach of Contract?

REAL ESTATE: California Court Finds Deed of Trust Enforceable Despite Failure to Name a Trustee

Marijuana Dispensaries Blowing Up in Smoke

By: Anna Greenstin Kudla

The medical use of marijuana is a hot topic in California. The regulation of dispensaries has generated numerous land use regulations, and landlord-tenant disputes now before the California Supreme Court. Dispensary regulation creates a mechanism for local government oversight of medical marijuana cultivation and distribution. Local state government enforcement includes zoning and conditional use permitting under the purview of the City Council. There are a number of legal issues that arise for landlords, tenants, employers, dispensaries, growers, and individual users of medical marijuana. Although the sale of marijuana is legal in California for medical purposes per the Compassionate Use Act, the sale and use of marijuana is a federal offense. Business and property owners have found that legal assistance is required in maneuvering through the conflict of state versus federal law.

Legal History

In 1996, California voters approved Proposition 215, the Compassionate Use Act (CUA), allowing medical patients in California the right to obtain and use marijuana. The intent of the CUA was to provide patients with terminal illness and sever health conditions access to the use of medical marijuana, which is not to be confused with recreational use. However, the CUA did not address specific issues of enforcement. In 2003, the California legislature passed Senate Bill (SB) 420, establishing the Medical Marijuana Program clarifying some of these issues, including the establishment of a voluntary state medical marijuana identification card (MMIC). The MMIC identifies the cardholder as a person protected under the provisions of Proposition 215 and SB 420. It is used to help law enforcement identify the cardholder as being able to legally possess certain amounts of medical marijuana under specific conditions. Dispensaries must require customers to maintain a MMIC. Controversy arises as to whether the MMIC is valid, and whether the dispensaries strictly sell to MMIC holders.

Landlords Beware

Landlords must protect themselves with a proper lease agreement when leasing to a dispensary. While the sale of marijuana (for medical purposes per the CUA) is legal in California, the sale and use of marijuana is a federal offense. United States Attorneys in California have targeted medical marijuana cooperatives on the grounds that they are selling marijuana to the public, as well as MMIC holders. The prosecutors target dispensaries by threatening property owners with civil forfeiture of their property if they continue to allow it to be used to further a federal crime. In fear of losing ownership, landlords are forced to evict tenants. Abrupt lease cancelations, if not permitted in the lease itself, result in unlawful eviction lawsuits. Many local courts have held that landlords may not evict a tenant based on a section of California law that provides for terminating a lease when the tenant has used the property for an "unlawful purpose." ( California Code of Civil Procedure §1161(4).) Courts have held that "unlawful purpose" must be understood solely with respect to state law, not federal law. If the tenant-dispensary complies with the provisions of the Compassionate Use Act, its activity is not "unlawful" under state law and the eviction is not upheld. Landlords should be educated about ordinance, zoning, and permitting restrictions in specific areas before allowing the operation of a dispensary. A standard lease agreement is not enough to protect the landlord from the dichotomy of state verses federal law. The landlord should insist to have the right of eviction based on a violation of any law, federal included. As discussed below, even though a tenant may have a valid business permit, a local ordinance may prevent that specific business operation.

Tenants Beware (City Ordinances Can Be a Nuisance)

Just as City ordinances differ from county to county, so do court orders regarding operating a medical marijuana facility. For example, the City of Temecula was successful in stopping a dispensary from operating in commercial zoning area, while the City of Lake Forrest was defeated in similar circumstances.

Cooperative Patients Services, Inc. ("CPSI") operated a "Therapeutic Cannabis (Medical Marijuana) Patients' Resource Center," for a couple of years before Temecula filed a complaint to abate CPSI's dispensary. The City of Temecula claimed that CPSI is a public nuisance and sought to prohibit the landlord, Evergreen Ventures, Inc. ("Evergreen") from continuing to allow the dispensary to operate. The trial court issued a temporary restraining order prohibiting CPSI and Evergreen from operating a business without a valid business license or certificate of occupancy.

On October 9, 2012, the Court of Appeals, (in a case that has yet to be published, City of Temecula v. Cooperative Patients Services, Inc., 2012 WL 4788107 (Cal. App. 4 Dist)), confirmed the trial court's ruling. The Appellate Court issued a ruling prohibiting CPSI from operating a medical marijuana dispensary. The court upheld zoning and city ordinances which prohibit medical marijuana dispensaries in commercial zoning districts. A violation of any provision of the Municipal Code shall be deemed a public nuisance which may be abated by the city attorney in a civil judicial action. Since, CPSI's property is located in the Service Commercial Zone, they were forced to stop doing business. CPSI appealed arguing that the municipal ordinance on which Temecula relies is preempted by state law. The court held that Temecula's city ordinances trumpeted the Medical Marijuana Program Act (Health & Saf.Code) and the Compassionate Use Act of 1996 (CUA).

However, on February 29, 2012, in the case of The City of Lake Forest v. Lake Forest Wellness Center (2012 WL 676644 (Cal. app. 4 Dist) also an unpublished case), Orange County lost its fight against the medical marijuana dispensaries. The Lake Forest Wellness Center successfully appealed a trial court's order granting a preliminary injunction enjoining their medical marijuana activities in this nuisance abatement proceeding. Lake Forest Wellness Center and the Independent Collective of Orange County argued that medical marijuana dispensaries are authorized by Health and Safety Codes. The California Appellate court held that the City's asserted blanket, per se ban on medical marijuana dispensaries contradicts state law and furnishes no valid basis to obtain a preliminary injunction. Rather, the City must show a dispensary did not grow its marijuana on-site, or otherwise failed to comply with applicable state medical marijuana law or permissible local regulations.

Conclusion

Whether you are a landlord seeking legal advice regarding the enforcement actions against commercial property owners for tenant activities, or a tenant dealing with evictions based on ordinance violations, Kring & Chung's knowledgeable counsel can assist you. Our attorneys have many years of experience in drafting lease agreements, and resolving landlord tenant disputes. Should you need assistance in preparing, negotiating or revising a lease agreement or simply need legal assistance with obtaining a business permit, please do not hesitate to contact us.

Can an Intervening Insurance Company Sue for Breach of Contract?

By: Michelle L. Wiederhold

A recent case questioned the legal basis for an intervening insurance company, on behalf of its suspended developer insured, to directly sue subcontractors for various causes of action including: indemnity, breach of warranty, declaratory relief, negligence, and most notably breach of contract for failure to obtain additional insured endorsements and duty to defend. In the case, the insurance company is not the contracting party - as in most cases - yet is suing as though it is a direct party to the contract. This gives rise to the question:

Does an intervening insurance company have any legal basis for bringing breach of contract causes of action against subcontractors?

The short answer, Yes. An intervening insurance company has a legal basis for bringing a breach of contract cause of action against subcontractors. Although there are no cases directly on point, Western Heritage Ins. Co. v. Superior Court, (2011) 199 Cal.App.4th 1196, does provide insight into the rights and remedies of an intervening insurance company. Western Heritage involved claims of negligence and breach of contract against Grateful Home Care, Inc. (GHC) and its employee (Reyes) which resulted in the death of GHC resident. Western Heritage Insurance Company (WHIC) insured GHC and its employees. Upon tendering the case to WHIC, WHIC proffered a defense for both GHC and Reyes. Reyes' counsel filed an answer on her behalf. However, it was later stricken and default entered against Reyes because it appeared she permanently left the country.

A defaulted party, like a suspended corporation, has no legal rights or remedies before a court until the default is set aside or the suspended corporation pays its taxes. ( Mackie v. Mackie (1960) 186 Cal. App.2d 825; Cal. Rev. & Tax Code § 23301.) Since a default was entered against Reyes, WHIC requested to intervene on Reyes' behalf to protect its own interests as insurer of GHC's employees. The trial court denied WHIC's motion to intervene on the theory that a defaulted party is unable to contest liability. Therefore, the insurance company is not permitted to defend its insured's liability, but is allowed to litigate damages assessed against the insured.

The Court of Appeal overturned the trial court's denial. It did so on the following basis:

"It is therefore apparent that an intervening insurer is not limited to those defenses to which its insured might be restricted due to the procedural default. The entire purpose of the intervention is to permit the insurer to pursue its own interest, which necessarily include the litigation of defense its insured is procedurally barred from pursuing."

Accordingly, an intervening insurance company may utilize the same defenses available to its insured had the insured not been procedurally barred. This leads to the subsequent question:

Is a breach of contract cause of action considered a "defense?"

The answer is dependent on the terms of the insurance policy. Many insurance policies commonly use commercial general liability forms regarding assignments. If a policy contains a broad assignment of rights, an insurance company may stand in the shoes of its insured and sue for breach of contract (including failure to obtain additional insured endorsements, and breach of a duty to defend). The breach acts as a defense to any potential liability the insured may face, and thus the potential liability of the insurance company itself.

On the other hand, if an insurance policy does not contain a broad assignment of rights, a determination as to whether the breach of contract claim is a defense would be necessary. We turn to Bramalea and Patent Scaffolding for guidance. These cases ponder and suggest if a windfall or affirmative recovery will occur, then the claim must cease. In addition, should the claim being sought by the insurance company not be directly and contractually linked to the damages sought by plaintiffs, it would be unjust to allow the insurance company to bring such a claim. ( Bramelea California, Inc. v. Reliable Interiors, Inc. et al.(2004) 119 Cal.App.4th 468; Patent Scaffolding Co. v. William Simpson Const. (1967) 256 Cal.App.2d 506, 511.)

Suppose the intervening insurance company sues for 1) Breach of Contract - Additional Insured Obligations, 2) Breach of Contract - Duty to Defend, and 3) Breach of Express Warranty. Where the breach of contract action can be directly linked to the damages sought by plaintiffs (i.e. breach of express warranty), this is considered a defense, and allows an intervening insurance company to continue the claim. Otherwise, it would prevent the intervening insurance company from arguing but for the breach of express warranty by the subcontractor, it would not be defending against plaintiffs' claims for damages to their property.

Conversely, where the breach of action is for failure to provide additional insured endorsements (AIE) to the contractor, or a breach of contractual duty to defend (we are presuming here a duty to defend is inherent and taken as a given), we believe a court will find this claim to be an affirmative recovery action and not a defense. This leads into a two part question on whether the court will determine the claim an affirmative recovery or a defense.

Is there a link to the damages sought by plaintiffs and the claim, and under what theory does the insurance company claim it has a right to bring such a claim?

On one hand, the argument may stand if an insurance company is entitled to sue, and later receives a judgment for breach of contract for a subcontractor's failure to provide an AIE to the contractor and/or its failure to defend the contractor, it could be considered unjust and a windfall to the insurance company. An insurance company is paid a premium to defend its insured against losses. Based on the above-mentioned theory of recovery, the insurance company is now recouping those loses and keeping the premiums paid (i.e. a windfall). On the other hand, an insurance company may have an argument it is a third party beneficiary to the contract in that it is excess to any AIEs and a subcontractor's duty to defend the claims. These arguments as a third party beneficiary would be speculative and challenging. Either way, it will be a question for the trier of fact.

What should a subcontractor do if sued by an intervening insurance company for breach of contract?

A subcontractor should ensure the intervening insurance company does have a legal basis for suing under the theory of breach of contract. Although it appears an intervening insurance company does have the right to bring breach of contract causes of action, some may be outside the rights afforded to the insurance company.

California Court Finds Deed of Trust Enforceable Despite Failure to Name a Trustee

By: Lance A. Adair

Can there be a trust without a trustee? If the trust instrument is a California deed of trust, the answer is now yes.

In Shuster v. BAC Home Loans Servicing, LP (2012) WL 5984222, the plaintiff/borrowers had borrowed the sum of $670,000, executing a deed of trust as security for the loan. The deed of trust failed to name a trustee. After the borrowers defaulted, the beneficiary recorded a substitution of trustee "substituting" a new corporate trustee. The substituted trustee held a non-judicial foreclosure sale of the property. The borrowers then filed suit, seeking to set aside the sale. The borrowers argued in their lawsuit that the failure to name a trustee in the deed of trust converted the deed of trust to a mortgage and, therefore, the beneficiary could foreclose, if at all, only by means of a court-supervised judicial foreclosure. The trial court and the Court of Appeal disagreed, finding that "the naming of the trustee is irrelevant to the creation of the deed of trust, so long as a trustee is named prior to the foreclosure."

The Shuster decision is consistent with prior California case law and commentary adhering to the view that a deed of trust is nothing like an ordinary, express trust. In fact, the California courts previously have held that the trustee under a deed of trust is not a true trustee at all and, therefore, is not subject to the general legal principles governing express trusts. (See Lupertino v. Carbajal (1973) 35 Cal.App.3d 742, 747.) Among other things, a trustee under a deed of trust does not act in a fiduciary capacity and is considered the common agent of both parties. Other courts and commentators have characterized the duties of a trustee under a deed of trust as being purely ministerial in nature. ( See Pro Value Properties, Inc. v. Quality Loan Servicing Corp. (2009) 170 Cal.App.4th 579, 583.) Moreover, as a matter of convenience, the appointed trustee is typically the title company whose form document is being used to create the deed of trust, even though the title company typically has not consented to being named as trustee. It makes sense, then, that the court in Shuster would find the parties' initial failure to appoint a trustee to be without legal consequence, so long as a trustee was properly named prior to the foreclosure proceedings.

The Shuster decision is also another example of the courts' general willingness to uphold a non-judicial foreclosure sale against a legal challenge, perhaps in recognition of the fact that the borrowers defaulted after all and, in many cases, would likely default again if the sale were set aside. In short, it is only the rare defect of substance, and not mere form, that will justify the remedy of setting aside an otherwise properly-conducted sale.

Michelle A. Philo Becomes Associate at Kring & Chung

Kring & Chung is pleased to announce that Michelle A. Philo has joined its Irvine, CA office as an Associate attorney. Ms. Philo practices general civil litigation, business transactions, and probate. She is an active member of the Orange County Women Lawyers Association, the Orange County Bar Association Young Lawyers Division, and the American Bar Association Young Lawyers Division.

The Letter of the Law: December 2012

IN THIS ISSUE:

CONSTRUCTION: Court of Appeals Weighs in on Contribution Actions Between Insurance Carriers in Construction Defect Actions

EMPLOYMENT: Employer Obligations Under Disability Laws

LAND USE: Unused Easements and the Sanctity of Property Rights

Court of Appeals Weighs in on Contribution Actions Between Insurance Carriers in Construction Defect Actions

By: Paul T. McBride

A recent insurance law decision by the California Court of Appeals, St. Paul Mercury Insurance v. Mountain West Farm Bureau Mutual Insurance, (2012) 210 Cal.App.4th 645, clarifies the role and obligations of insurance carriers for subcontractors involved in construction defect litigation. This decision potentially sounds a very ominous note for both subcontractors and their carriers as it makes clear the peril inherent in refusing the general contractor's demand for a defense at the outset of a case.

Jacobsen Construction was the general contractor on a condominium project in Jackson Hole, Wyoming. Teton Builders was the rough framing subcontractor. Jacobsen was insured by St. Paul Mercury ("Mercury.") Teton was insured by Mountain West. Mountain West issued an additional insured endorsement to Jacobsen, agreeing to defend Jacobsen from any claims arising from Teton's work.

Jacobsen completed 90% of the project and then was fired by the developer. Jacobsen sued the developer for breach of contract. The developer cross-complained against Jacobsen for construction defects at the project. The developer's expert filed a report citing numerous construction defects, many of which involved the framing. Jacobsen cross-complained against Teton and other subcontractors in the construction defect action. Jacobsen tendered its defense to Mountain West as an additional insured on Teton's policy. Mountain West refused to accept the additional insured tender. However, it did retain defense counsel to defend Teton and did participate in settlement negotiations in the case.

The construction defect case eventually settled for $3,070,000. Of this total amount, Jacobsen (through Mercury) contributed $2,265,000. Teton contributed only $100,000. The settlement agreement released all claims by and between Jacobsen and Teton, but reserved all claims by Jacobsen's insurer, Mercury, against Teton's insurer, Mountain West. Mercury spent $1,780,000 defending Jacobsen in the action.

Mercury filed an equitable contribution action against Mountain West, contending that both it and Mountain West were jointly obligated to defend Jacobsen, and that Mercury paid more than its fair share of both defense costs and indemnity costs for Jacobsen. Accordingly, it demanded that Mountain West reimburse Mercury for a portion of defense and indemnity costs Mercury incurred in the case.

At a bench trial, the Court found:

1) That Mountain West had a duty to participate in the defense of Jacobsen and failed to do so.

2) That Mountain West's fair share of the $1,780,000 spent by Mercury in defending Jacobsen was 43%, or $731,000.

3) That Mountain West fair share of the $3,070,000 total paid to settle the case was also 43%, or $1,320,000.

The trial court's assessment of 43% as Mountain West's fair share of both defense and indemnity was based on evidence produced at trial by Jacobsen's expert showing that a large percentage of the construction defect claims in the case related to the framing.

On appeal, the court sustained the trial court's finding, reasoning as follows:

1) Mountain West claimed that, by retaining defense counsel to defend Teton in the case, it defended the framing allegations and discharged its defense obligation to Jacobsen. The Court rejected this argument, stating that the additional insured endorsement issued by Mountain West to Jacobsen required Mountain West to directly participate in the defense of Jacobsen, which means paying a fair share of Jacobsen's attorney and expert fees.

2) Mountain West claimed it was unfair to saddle it with 43% of Jacobsen's defense costs when it was one of 18 subcontractors who were named as cross-defendants. The court rejected this argument because equitable contribution requires a co-insurer to pay its fair share, not its pro rata share. Given how much of the claim was based on alleged framing defects, it was fair for the trial judge to allocate 43% of the settlement and of defense costs to the framer's insurance company.

3) The court held that, by failing in its duty to defend Jacobsen, Mountain West was precluded from challenging the reasonableness of either the settlement amount paid by Jacobsen's insurance carrier, or the amount of defense costs incurred and paid by Jacobsen's insurance carrier.

The lessons to be drawn from this case by subcontractors and insurance carriers are:

1) If you are an insurance carrier who has issued an AI endorsement, you refuse a tender of defense from the general contractor at your own peril;

2) If you are a subcontractor who has been issued a Crawford tender of defense from the general contractor, put pressure on your insurance carrier to honor its AI endorsement if it issued one, since developer will use this case, in combination with Crawford, to come after you for your "fair share" of its defense costs at the end of the case;

3) If you are an insurance carrier who has issued an AI to the general contractor, simply hiring a defense counsel for your subcontractor insured will not discharge your defense obligations to the general contractor, even though your defense counsel is defending the allegations relating to your insured's work. You must also pay your fair share of the developer's attorney's fees;

4) If you are a subcontractor who has retained your own defense counsel to defend the case, it is unclear whether doing so will allow you to satisfy your Crawford defense obligation to the general contractor. The general contractor will use this case to argue that you must also pay your share of its defense costs. You will argue back that you are not an insurance carrier and that this case only interprets the obligations of insurance carriers;

5) The fair share of the general contractor's defense costs to be borne by any particular subcontractor will be determined by evaluating the plaintiffs' defect report and cost of repair estimate and determining how much of the claims and costs relate to a particular subcontractor's work. The framer may be required to pay the most; and

6) Finally, if you are an insurance carrier who has refused an AI tender, be mindful that a settlement of the case which reserves AI issues not only leaves you open to a suit for defense costs, it can also leave you open to a suit for reimbursement of indemnity costs.

Employer Obligations Under Disability Laws

By: Nami E. Chun

The laws governing employers' obligations with respect to disabled employees are complex, and employers should tread carefully when faced with a disability-related request by an employee. The following covers some basic employer obligations under both federal and state laws with regards to disabled employees.

The Americans with Disabilities Act ("ADA") applies to all employers with 15 or more employees. However, the California Fair Employment and Housing Act ("FEHA,") which provides broader protection than the ADA, applies to employers with 5 or more employees. Both the ADA and FEHA were enacted to protect employment opportunities for individuals with disabilities. They prohibit discrimination on the basis of disability by employers. They also require employers to make reasonable accommodations to enable disabled individuals to perform their job.

Covered Employees

The ADA defines a disability as (1) a physical or mental impairment that substantially limits one or more major life activities, (2) a record of such an impairment, or (3) being regarded as having such an impairment.

Under California's FEHA, it need only be shown that a condition "limits" (not "substantially limits") a major life activity. The following are examples of impairments that consistently meet the definition of "disability": deafness, blindness, intellectual disability (mental retardation,) partially or completely missing limbs, mobility impairments requiring use of a wheelchair, autism, cancer, cerebral palsy, diabetes, epilepsy, HIV/AIDS, hepatitis, multiple sclerosis, muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder and schizophrenia.

The individual must also be "qualified" for the position, i.e., possess the requisite skill, experience, and other qualification standards, and be capable of performing the "essential functions" of the position with or without a reasonable accommodation. If the employee or applicant lacks the requisite skill or other job-related requirements, the employer need not make a reasonable accommodation.

Discrimination Prohibited

Employers must not discriminate against a qualified individual on the basis of a disability in regards to the job application procedures, hiring, advancement, discharge of employees, compensation, job training, and other terms, conditions and privileges of employment.

Acts constituting discrimination include, but are not limited to, the following:

  • improper job standards or qualifications
  • failing to accommodate disability
  • improper preemployment medical exams
  • improper preemployment inquiries

Duty to Provide Reasonable Accommodation

Employers must provide "reasonable accommodations" to enable an employee with a known disability to perform a position's essential functions. Examples of reasonable accommodations include:

  • making facilities readily accessible to disabled individuals
  • job restructuring
  • part-time or modified work schedules
  • transfers or reassignments
  • modified equipment or devices
  • medical leaves of absences

Undue Hardship Exception

The employer's duty, however, does not extend to accommodations that "would impose an undue hardship on the operation of the business." Undue hardship is an action requiring significant difficulty or expense when considered in light of the following factors: the nature and cost of the accommodation needed; the overall financial resources of the employer; the overall size of the business; and the type of business operations.

Duty to Engage interactive Process

The employee generally has the initial duty to notify the employer of the disability and request a reasonable accommodation. The request for an accommodation need not mention the ADA or use the phrase "reasonable accommodation." Although it is generally the employee's duty to request an accommodation, if the employer learns from any other source that the employee has a potential disability, the employer is under a duty to initiate discussions concerning the need for an accommodation.

Once an accommodation has been requested or the employer becomes aware of its necessity, the employer must initiate an informal, interactive process to determine the nature of the accommodation necessary to enable the individual to perform the position's essential functions. The interactive process requires communication and good faith exploration of possible accommodations between the employer and employee. The duty to accommodate is a continuing duty that is not exhausted by one effort. The obligation continues where the employee asks for a different accommodation, or where the initial accommodation is failing and further accommodation is needed.

Remedies

Discriminating against, failing to provide reasonable accommodations, or refusing to engage in the interactive process with disabled employees can subject the employer to liability for loss of wages, emotional distress damages, punitive damages, and the plaintiff's attorneys' fees and costs.

Unused Easements and the Sanctity of Property Rights

By: Lance A. Adair

Can an unused private easement be extinguished to accommodate a desirable plan of development? Not according to the California Court of Appeal in a recent published decision. In Cottonwood Duplexes, LLC v. Barlow, (2012) WL 5492890, the court held that a developer's need for land burdened by a previously-granted roadway and utility easement did not trump the easement holder's property rights, even though the easement holder arguably had no need for the easement.

In the Cottonwood case, a developer-actually, a foreclosing lender stepping into a developer's shoes-sought to proceed with plans for a 16-lot subdivision, the success of which partially hinged upon the extinguishment of a previously-granted 60-foot roadway and utility easement. The easement had been granted by a previous owner in the chain of title. Having failed in its efforts to re-purchase the easement, the developer, Cottonwood, boldly went to court seeking to obtain from the court what the easement holder would not relinquish.

The case went to trial, where the developer put on evidence that (1) the previously-granted easement area was critical to the developer's plans for development of its property; (2) the easement holder was not using the entirety of the easement, and did not need the utility easement at all; and (3) the easement holder had full access to his property by means of existing public roads. The trial court agreed and granted the requested judgment, finding that the easement holder's requirements for the reasonable use of the easement did not require the full size and scope of the original easement. In its judgment, the court reduced both the width and length of the easement, and altogether eliminated its use for purposes of utilities.

Viewing the case as an assault on property rights, the Court of Appeal reversed. As the court pointed out in its decision, parroting the argument in the defendant's appellate brief, "no recognized rule of law authorized [the trial court] to terminate [the defendant's] property rights by reducing the size of his easement, no matter what the evidence showed." The court further noted that, under California law, an easement obtained by grant deed is not lost by mere non-use, without more. In fact, some prior California court decisions have required a showing of three elements to justify the extinguishment of an unused easement: (1) non-use; (2) an intention to abandon the easement; and (3) damage to the owner of the servient estate from the continued existence of the easement. The better-reasoned cases, however, require only a showing that the easement owner has stopped using the easement (or perhaps never used it at all) with the intention of abandoning the right to any future use.

In the Cottonwood case, according to the appellate court, there was no evidence that the defendant easement holder had intended to abandon any part of the easement (which perhaps explains why he refused the developer's rather generous offer of compensation.) According to the court, the developer's case was simply premised on an argument that "the owner of the servient tenement can . . . compel the extinguishment of [an] easement against the will of the dominant owner."

The lesson for property owners? Think twice before granting an easement that could impact your successor's future development plans, or your own. Once created, an easement granted for a specific purpose may be very difficult to extinguish.

It should be noted, however, that the law of easements is somewhat complex. Not mentioned in the Cottonwood case, for example, is California case law holding that, where the original easement was created only in general terms, and thereafter used only on a limited basis, the future use of the easement may at least be limited to its past use. On that subject, it would be advisable to consult a qualified real property attorney.

Kring & Chung Welcomes New Family Law Partner

David L. Miller has joined Kring & Chung as a Partner to manage the Family Law Department at the firm's headquarters in Irvine, CA. Mr. Miller operated his own successful family law firm for nearly 16 years before joining the firm. His practice was focused on representing federal, state and local peace officers who face the all-to-common occupational hazard of divorce that comes with such a demanding and stressful profession.

Mr. Miller's clients have included, but are not limited to, employees and relatives of municipal police departments (PD's), the Federal Bureau of Investigation (FBI), the Department of Homeland Security (DHS), the Immigration and Customs Enforcement (ICE), the California Highway Patrol (CHP), the Los Angeles Police Department (LAPD), the Los Angeles Sheriff's Department (LASD), the Orange County Sheriffs' Department (OCSD), and the State of California Department of Corrections and Rehabilitation (CDCR).

Mr. Miller has practiced in the Superior Court and for the counties of Orange, Los Angeles, San Bernardino, Riverside, San Diego, and Kern. Mr. Miller has developed a solid reputation for being able to negotiate when it benefits his clients and to aggressively advocate for his clients in a trial setting if negotiations are unsuccessful.

The Letter of the Law: November 2012

IN THIS ISSUE:

BUSINESS: Commercial & Retail Leases - What Tenants Need to Lookout For!

CONSTRUCTION: Land Use Laws Affecting California Wineries

Commercial & Retail Leases - What Tenants Need to Lookout For!
By: Kenneth W. Chung

Leasing a retail or commercial space to start up a new business requires a significant investment of money and time. Regrettably, many new business owners speed through the leasing process and discover later the harmful lease provisions to which they had unknowingly agreed. The following are some of the important lease provisions and issues that should be identified and carefully negotiated:

  • Rent Commencement Date: In leasing commercial space, the tenant often needs time to complete construction and tenant improvements from the date that the lease is signed. In most situations, a tenant should be provided a reasonable period of time (i.e. 90 to 120 days) to complete such improvements. The tenant should negotiate a reasonable term and confirm in the lease that the tenant is not obligated to pay rent during this construction period. Leases may often provide that Base Rent is abated during the construction period. This means that the tenant is still required to pay NNN expenses (i.e. tax, insurance and maintenance charges). Tenants should seek to abate all Rent, including NNN expenses, during the construction period.
  • Tenant Improvements: When tenant improvements are required, a tenant improvement allowance should be requested to help pay for necessary construction or remodeling.
  • Common Area Maintenance Fees: In addition to rent, a commercial tenant pays a share of the maintenance fees for the shopping center or office building. The fees are generally calculated based on the pro rata occupancy percentage of the tenant. Some points to consider are: (1) imposing a cap on the annual increase in CAM charges, (2) including a right to audit CAM charges, and (3) when calculating CAM, exclude certain charges such as landlord's administrative overheard charges, landlord's reserve account payments, and other unreasonable charges.
  • Amortize Capital Improvement Charges: If the landlord decided to build a parking garage or replace the roof during the last year of the lease, you would be required to pay your pro-rata share of the entire expense even though your tenancy will be expiring soon. For such reasons, and also to avoid significant increases in CAM charges when capital improvements are made, the lease should state that capital improvement expenses should be amortized over the useful life of the improvement which would significantly decrease the expense payable by the tenant for such costly capital improvements.
  • Gross-Up Provision: Tenants are required to pay pro-rata NNN expenses. If there is a 50% vacancy in the shopping center, each of the remaining tenant's NNN expenses may nearly double since the same expenses would then be payable by a fewer number of tenants. A gross-up provision should be inserted stating that tenant's pro-rata payment will be calculated as if the shopping center is 100% occupied regardless of the actual vacancy rate.
  • Co-Tenancy Agreements: The success of many smaller retail tenants is dependent upon the amount of traffic generated by anchor tenants in a shopping center, such as a supermarket. With a co-tenancy agreement, you would have the right to terminate your lease or trigger a pre-negotiated reduction in your rent in the event that anchor tenant vacates the shopping center.
  • Exclusivity Clause: The placement of a competing business in the same shopping center will likely decrease your sales. To protect sales revenue, obtaining an exclusivity provision would ensure that no other competing business will be permitted in your shopping center.
  • Personal Guarantee: Although personal guarantees are required by most landlords, the nature and scope of the guaranty may be negotiated. For example, the guarantee may be limited to the first 5 years of a 10 year lease, or the extent of the personal guarantee may be reduced by 10% each year so as to reduce your personal exposure.
  • Lease Transfer: Unreasonable limitations and restrictions to the tenant's right to assign or sublease must be removed or minimized. It is crucial to state that the landlord will not unreasonably withhold, delay or condition its consent. Otherwise, a landlord may deny your request to assign your lease, thereby effectively restricting your ability to sell your business.
  • Options to Extend Must be Transferrable: Many standard form leases state that options to extend are personal to the original tenant. This means that even if the landlord authorizes the assignment of the lease to your buyer, the option to extend the lease term does not automatically transfer to the buyer. Such a situation may significantly impede the ability to sell your business.
  • Relocation: A relocation provision allows the landlord to relocate your business from the current location to some other less desirable location in the shopping center. These provisions often allow the landlord to pay nominal relocation costs to the tenant. If the landlord will not remove the relocation provision during lease negotiations, then the tenant should attempt to negotiate and identify the specific spaces in the center to where the tenant may be relocated. The tenant should also reserve the right to terminate the lease if the tenant is not satisfied with the proposed new space or the terms of the relocation.

The guidance of an experienced real estate attorney may help tenants to avoid the significant consequences of harsh provisions lurking in many leases. Since many of the above identified terms should be negotiated at the letter of intent stage, the best time to consult with an attorney is prior to finalizing the letter of intent. For tenants who are purchasing a business and therefore assuming an existing lease, it is equally important to have an attorney review the lease as the existence of certain provisions may impact the value of the business being purchased.

Using ASTM Standard E2128-12 to Defend Window Leak Claims
By: Paul T. McBride

Consider two typical scenarios in construction defect litigation:

Scenario A: In a 35-home construction defect lawsuit arising from a large project in Sacramento, plaintiffs' expert picks six windows at six separate homes for spray testing. Our insured is the stucco subcontractor. Our expert attends plaintiffs' testing. Our expert reports that none of the windows selected for testing showed any evidence of water leakage in the past. There are no stains on the window sills or on the drywall below the windows. When the plaintiffs' expert removes the drywall below the windows, there are no stains on the framing. The plaintiffs' expert runs the spray test. At two of the six homes, water from the spray rack enters into at least one of the stud cavities below the window. Plaintiffs' expert uses this result to claim that 1/3rd of the windows at the litigated homes will require repair, due to the 1/3rd "failure rate" observed during investigative testing.

Scenario B: In a 40-home construction defect lawsuit arising from a large project in Fresno, plaintiffs' expert picks ten windows at ten separate homes for spray testing. Our insured is the stucco subcontractor. Our expert attends plaintiffs' testing. Our expert reports that none of the windows selected for testing showed any evidence of water leakage in the past. There are no stains on the window sills or on the drywall below the windows. When the plaintiffs' expert removes the drywall below the windows, there are no stains on the framing. The plaintiffs' expert runs the spray test. None of the windows leak. However, at each window, plaintiffs' expert sees unsealed staple penetrations through building paper. He also sees reverse laps of sill flashing paper at two of the windows. He uses these observations to claim that 100% of the windows at the litigated homes will require repair due to "defects in building paper installation" observed at 100% of the windows inspected.

In defending against either claim, you will of course argue that the absence of water stains on the drywall and framing below the windows means the windows do not leak in a real rainstorm and therefore do not require repair. This common sense argument may be bolstered by referring to ASTM (American Society for Testing & Materials) Standard E2128-12, "Evaluating Water Leakage at Building Walls." This standard was first published in 2001 and most recently updated in 2012. It is a 36-page page technical manual which details how to carry out a window leak investigation. Of most immediate importance to construction defect practitioners, the standard states that investigative testing, such as the spray testing described in our two scenarios, should not be carried out absent evidence of prior leaks at the window to be tested. ASTM E2128-12 provides, at paragraph 8.1.1.1:

"The primary purpose of investigative testing is to recreate leaks that are known to occur. Investigative testing is not intended to demonstrate code compliance or compliance with project documents unless such deviations are actually related to the leakage problems."

In our two scenarios, there is no evidence that prior leaks have occurred at any of the windows tested. Rather, the plaintiffs' experts conducted blind experiments to see if they could make the windows leak or, at the very least, uncover technical violations of building code or project standards. ASTM E2128-12 states, however, that "investigative testing is not intended to demonstrate code compliance." It should only be used to recreate leaks "that are known to occur." Accordingly, in defending against plaintiffs' claims in this case, we would argue that the investigative testing carried out by the plaintiffs' expert violated ASTM E2128-12.

ASTM standards are considered the gold standard for building investigation. For instance, plaintiffs' window experts typically testify at deposition that they conduct their window spray testing in "strict compliance" with ASTM Standard E1105, "Standard Test Method for Field Determination of Water Penetration of Installed Exterior Windows." However, ASTM Standard E1105 merely explains how to conduct spray testing. It does not discuss when to conduct it. ASTM E2128-12 makes clear that spray testing should not be conducted absent evidence of prior leaks at the window to be tested. Accordingly, in both scenarios described above, defense counsel may wish to file a motion in limine to prevent the plaintiffs' expert from testifying as to the results of his investigative testing on the grounds that the investigative testing violated ASTM E2128-12.

Copies of ASTM E2128-12 may be downloaded for $59 here.

Laura C. Hess attends 10th Annual Bar Leaders Conference and the Presiding Justice Breakfast
Kring & Chung Partner, Laura C. Hess, attended the 10th Annual Bar Leaders Conference in Monterey, CA on October 11, 2012, presented by the State Bar of California. This conference teaches attorneys in leadership positions in their local bar associations how to effectively lead their Board of Directors, how to manage finances of nonprofit organizations, and management of staff. The current and incoming Presidents of bar associations from around the state all attended. Hess will be the President of the Orange County Women Lawyers Association in 2014.

Hess also attended the Presiding Justice Breakfast with Orange County Superior Court Presiding Justice Thomas Borris and Assistant Presiding Justice Glenda Sanders on October 16, 2012. The purpose of the meeting was to provide local bar leaders with information regarding some of the current challenges the Orange County Superior Court is facing, and to engage in a round table discussion regarding how those challenges have effected lawyers and their clients. The justices also discussed the court's conversion to e-filing, which will become mandatory effective January 1, 2013.

Michelle Philo Awarded OCWLA's Bar Stipend Award
On October 23, 2012, Michelle Philo was awarded the Orange County Women Lawyers Association's Bar Stipend Award. Each year, OCWLA recognizes outstanding law school graduates who represent the advancement of women, give to their communities through community service and have a commitment to Orange County. Ms. Philo is devoted to seeing more women in leadership positions. She was recognized for her many leadership roles in law school, including two terms as Student Bar Association President at Whittier Law School and the Vice Chair Student Bar Associations for the American Bar Association Law Student Division. Through these positions she was able to coordinate philanthropic activities such as an annual toiletry drive benefitting Mercy House, volunteering at Hope 4 Hanna benefitting autism research, and fundraising for breast cancer research. Ms. Philo also served for over two years as the Whittier Law School representative to the OCWLA Board of Directors, assisting OCWLA with its programming throughout the year. This past summer, Philo took the July 2012 California Bar Exam. She is currently working as a law clerk at Kring & Chung, LLP while she waits for her results.

Kring & Chung 4th Annual Thanksgiving Food Drive
November 12th - 20th
In the spirit of Thanksgiving, our firm is collecting donations for our 4th annual Thanksgiving Food Drive benefiting the families of the South Orange County Family Resource Center. The South Orange County Family Resource Center is committed to improving family and community life. Their Family Resource Center brings together services and activities that educate, support and provide resources to families with children. We will be putting together Thanksgiving meal baskets with all of the items donated and would greatly appreciation your contribution. We hope to provide 40 families with a complete Thanksgiving dinner.

Click here for more information about the organization and their partners.

Items needed: Stuffing, mashed potatoes, gravy, cranberry sauce, yams, marshmallows, an assortment of canned vegetables, sparkling cider, rolls, pies and $20 gift certificates to a major grocery store for turkeys. Please bring perishable items on the final day of the food drive (Tuesday, November 20th).

There will be a place to drop off items on the first floor of our office building at 38 Corporate Park, Irvine, CA 92606.

Contact Courtney Kring at ckring@kringandchung.comif you have any questions.

Thank you!

The Letter of the Law: October 2012

IN THIS ISSUE:

BUSINESS: Governor Signs ADA Access Law Reform

LAND USE: Land Use Laws Affecting California Wineries

INSURANCE: Horizontal Stacking of Excess Coverage

Governor Signs ADA Access Law Reform
By: Shane Singh

We are pleased to report that during the week of September 17, 2012, Governor Brown signed a bill reforming Americans With Disabilities Act (ADA) access law. The measure, Senate Bill (SB) 1186, will curb lawsuit abuse regarding the ADA while promoting increased compliance with building codes addressing disabled access.

This new legislation is a culmination of a multi-year, bipartisan effort that included leadership from the state level, Senator Pro Tem Darrell Steinberg (D-Sacramento,) and Senator Bob Dutton (R-Rancho Cucamonga,) as well as federal support from United States Senator Dianne Feinstein (D-CA.)

SB 1186 is being hailed as a comprehensive and significant reform to California's ADA Law. It passed the legislature by a two-thirds vote in the wee hours of Friday night. California currently has 40 percent of the nation's ADA lawsuits, but only 12 percent of the country's disabled population.

Among its provisions, this measure prohibits pre-litigation "demands for money" by unscrupulous attorneys; puts into place new provisions to prevent "stacking" of multiple claims to increase statutory damages; reduces statutory damages and provides litigation protections for defendants who correct violations; and establishes priorities for the California Commission on Disabled Accessibility that promote and facilitate disability access compliance. Other features of this new law include:

  • If a business is in a location that was completed after January 1, 2008, or for any business in California that has received a Certified Access Specialist (CASp) inspection, that business will have 60 days to fix a violation, and its statutory damages may be reduced from $4,000 to $1,000 - a 75 percent reduction.
  • Small businesses with 25 or fewer employees that have not had a CASp inspection will have 30 days to fix a violation, and can see their statutory damages reduced from $4,000 to $2,000 - a 50 percent reduction.
  • SB 1186 ends "demand for money" letters from attorneys. Letters can still be sent to a business alerting them of a potential violation or infraction, but that letter cannot include a "demand for money." Attorneys sending those letters will be required to also send a copy of the letter to the California State Bar, who will examine the letter to make certain that it meets the requirements of the law.
  • Attorneys will also be required to send a copy of letters sent to businesses to the California Commission on Disabilities (CCDA.) CCDA will be required to compile a "Top 10" list of violations to be posted on its website by July 1, 2013, and also a list of those attorneys and law firms who are filing the bulk of the lawsuits.
  • SB 1186 provides an avenue for local cities and counties to expand the CASp program in their communities in order to help bring local businesses into ADA compliance, and to develop tools that will help educate the business community in expanding ADA access.

Land Use Laws Affecting California Wineries
By: Lance A. Adair

Are you contemplating the purchase of vineyard property or looking to establish a winery? It is essential to know the basics of California land use law before proceeding with your planned acquisition. What follows is a brief primer.

Nearly all cities and counties in California have adopted general plans and zoning ordinances. Any land use proposed by a property owner must be consistent with both. Zoning ordinances allow some uses "as of right"--meaning no special permit is required--while prohibiting others, and allowing still others only by application for a permit. Most zoning ordinances in California require a property owner seeking to establish an on-site winery to obtain a special or conditional use permit.

If a permit is required, be aware that the permitting process is a public one, generally requiring one or more noticed public hearings. This means that your neighbors, both friendly and hostile, are permitted to have their say in the permitting process. The permitting agency must, nonetheless, adhere to certain legal requirements in processing a permit application. A qualified land use attorney can assist with this process.

Discretionary permitting decisions undertaken by a California city or county must be analyzed for potential environmental impacts under the California Environmental Quality Act. As a general proposition, the local agency may not approve a winery project if it will cause "significant" adverse environmental impacts that have not been mitigated in the project's design. For the prospective winery owner and operator, this means that the potential environmental impacts of the project (such as increased traffic, water runoff and potential impacts on wildlife, among others) should be considered in determining its feasibility.

If the current zoning for your property does not allow your proposed use, that is not necessarily the end of the story. It is possible for property to be rezoned, although the process is not an easy one. Occasionally, it may be possible to obtain a zoning variance. A qualified land use attorney can provide advice and counseling on the feasibility of a proposed use under the applicable general plan and zoning ordinances, and can assist with the process of obtaining any necessary variances or amendments.

A proposed winery use also may be impacted by the California Land Conservation Act, commonly known as the "Williamson Act." The Williamson Act provides tax incentives to landowners who enter into renewable, ten-year contracts to maintain their land for agricultural and compatible uses. If a Williamson Act contract is in place, it will be necessary to determine whether your proposed winery use is allowable under the contract. Although restricted agricultural land can be removed from the Williamson Act, the process can be both expensive and difficult.

A separate set of issues is involved in determining the feasibility of a residential subdivision on vineyard property. Early consultation with legal counsel is advisable.

Given the rapid growth of the wine industry in recent years, the law is this area will no doubt continue to develop. Having knowledge of the most recent developments will be critical to the success of your grape-growing or wine-making venture.


Horizontal Stacking of Excess Coverage
By: J. Christopher Bennington

The California Supreme Court has issued an important decision concerning general liability insurance policies. In State of California v. Continental Insurance Company, 2012 DJDAR 11033 (August 9, 2012,) the court held that in the case of a progressive property damage loss, all excess carriers on the risk during the period of damage are responsible for the entire loss up to the limits of their respective policies. An insured covered for such a loss may stack the several policies together "horizontally," or over time.

The case involved the cost of environmental clean-up at the notorious Stringfellow Acid Pits waste site. The State designed and operated the site as an industrial waste disposal facility from 1956 until 1972, when it was discovered that toxins leaching from the site were contaminating groundwater in the area. The state sought coverage from its various carriers for the $700 million cost of the clean-up. After settling with a number of its carriers, the State sued a series of carriers providing it with excess coverage between 1964 and 1976.

The trial court held that with regard to the excess carriers, the State could only stack coverage "vertically," i.e. the State was limited to the various layers of coverage available during one policy period of its choosing, subject to an offset for the money already collected from its settlements with other carriers. Because of that offset (roughly $120 million,) the trial court found that the State was not entitled to any further coverage from its various excess carriers.

The Court of Appeal and then the Supreme Court reversed the trial court and held that all carriers with policies in effect during the period of damage were responsible for the loss, and that all of those policies could be aggregated or "stacked" horizontally. Instrumental to the Supreme Court's decision was the fact that the insuring clauses in all of the policies promised to indemnify the insured against "all sums" the insured was required to pay for a covered loss.

This decision can be important in a number of situations where there might be a progressive property loss or even a progressive personal injury over several years. Whether we are discussing a situation of environmental pollution, construction defect, or personal injury from contact with a tainted drug or product, carriers over several years might all have responsibility for the loss or injury. For that reason, it is essential that all insureds retain a comprehensive insurance history and all policy documents available to them. Your attorney needs to be in a position to make tenders to all carriers with a potential responsibility for a given loss.

It should be noted that the decision in State of California involved an older policy form no longer typically in use. But the holding should apply even to the newer standard forms that promise to "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." The only exception would be in cases where carriers have issued endorsements or policy forms which specifically exclude coverage for losses beginning prior to the date that a given policy went into effect.

In any event, the Supreme Court has once again underlined its position that in cases of continuing loss or damage, and absent specific exclusionary language concerning ongoing losses, all policies in effect during the course of the loss or damage are potentially a source of coverage for the insured.

Kring & Chung Newport Beach Triathlon
On October 21, 2012 the longest running triathlon in history will be returning for its 35th year. The .5 mile swim course will be in the Back Bay of Newport Beach, CA. The sprint distance race, which was established in 1978, has long been a favorite of both seasoned triathletes and beginners.

This year's Kring & Chung Newport Beach Triathlon will be adding a super sprint distance option. With the well-established sprint distance, a new super sprint distance, and a youth course option, there is something for all skill levels and ages.

Visit www.newportbeachtriathlon.com for more information and to register.

Shane Singh Nominated for Sacramento Business Journal's "40 Under 40" List
Shane Singh, a Partner with Kring & Chung's Sacramento, CA office, has been nominated for Sacramento Business Journal's "40 Under 40″ list. The "40 Under 40″ list honors individuals under the age of 40 who are excelling in their professional fields. The final list will be announced in December.

The Letter of the Law: September 2012

IN THIS ISSUE:

EMPLOYMENT: Can I Restrict My Employees from Working for My Competitor?

CONSTRUCTION: Alter Ego Liability in Construction

EMPLOYMENT: Independent Contractor or Employee?

Can I Restrict My Employees from Working for My Competitor?
By: Allyson Thompson

As an employment lawyer representing employers, this is one of the most frequently asked questions I get from my clients.

The short and safe answer is, "No." California has a strong public policy not to impede its residents' ability to work and make a living. California Business and Professions Code section 16600 provides that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

To that end, California courts consistently rule that covenants not to compete are unenforceable. A covenant not to compete can be worded a million different ways, but the intent of the clause is that if an employee leaves his employment, he or she cannot go work for an employer's competitor. Many times these clauses put mileage restrictions, such as the employee cannot work with a competitor within 100 miles of the business; or time restraints, such as two years. Regardless, just because you may think that the restrictions are not oppressive, a California court of law will most likely invalidate the provision.

With covenants not to compete being unenforceable in California, it goes without saying that employers may not force their employees to sign non-compete agreements. If employers make signing such an agreement a condition to continued employment, they face liability for wrongful termination and suits from subsequent employers for unfair competition.

There are several exceptions to the general rule against enforcement of covenants not to compete. California Business Code section 16601 permits a buyer of a business interest to enforce a covenant not to compete against the seller. Specifically, any person who sells the goodwill of a business or any owner selling or otherwise disposing of all of his ownership interest or operating assets in that business, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business in that area.

The second and third exceptions involve the dissolution of a partnership or limited liability corporation ("LLC.") Generally, a partner leaving the partnership, or a member of an LLC, can voluntarily agree not to compete with the existing partnership or LLC if the entity is going to continue to conduct business. The departing partner or member can agree to time and geographic constraints. This agreement has to be entered into voluntarily. (Bus. & Prof. Code sections 16602 and 16602.5)

For those employers that are panicking right now because you have an employment agreement or employee handbook that has a covenant not to compete provision in it, do not fret. Most courts will not invalidate the entire agreement if there is a non-competition clause. The best course of action is to remove the provision from any existing contracts or employee handbook. You can do this via an addendum or some other writing that makes it clear that the covenant not to compete is no longer a provision to the handbook or contract.

Does including a covenant not to compete in an employee handbook invalidate the entire handbook? No.

Alter Ego Liability in Construction
By: Lance A. Adair

Contractors routinely face a number of liability threats as a cost of doing business. One that is occasionally overlooked is the threat of "alter ego" liability. Are you the alter ego of your company? And what does that mean exactly? Under the law of most states, it means that you could be held personally liable for the debts or liabilities of your corporation or limited liability company if a plaintiff is able to satisfy certain legal requirements. Most likely, your intent in setting up a separate corporation or LLC was to avoid that kind of responsibility. It pays, therefore, to know a bit about the law of alter ego liability.

Under California law, alter ego liability will be imposed where two conditions are met: (1) there is such a unity of interest and ownership that the separateness of the individual (or another entity) and the business entity has ceased; and (2) recognizing the business entity as being separate from the individual (or other entity) would, under the particular circumstances, "sanction a fraud or promote injustice."

The meaning of the above standard is subject to considerable judicial interpretation and, as is often the case in litigation, the courts assess a variety of factors in deciding whether to impose liability on an alleged alter ego. The factors are numerous and the case law is not always consistent. Moreover, alter ego liability can be imposed where some of the factors, but not others, are present. Nonetheless, most alter ego cases have at their core an allegation that the defendant has failed to maintain proper separation between his or her personal affairs (or the affairs of another owned business entity) and those of the company being sued.

Here are a few simple guidelines for contractors and other business owners (including members of a California limited liability company) seeking to avoid the prospect of a personal judgment for the obligations of a corporation or LLC:

  1. Observe all corporate formalities. Devote the necessary time and attention to this task. It will be well worth it in the long run.
  2. Never commingle assets (or liabilities) . Maintain separate bank accounts and keep them separate. Always avoid commingling the funds of separate corporations or LLC's, and always keep personal and corporate funds separate from corporate funds. Never pay the debts of one using an account maintained by the other. (Contractors in California should also be aware of the potential civil and criminal penalties for diverting funds from one job to another-which is a topic for another update.)
  3. Never use corporate funds to purchase services or items for personal use . Pay yourself first, then use your own personal funds for your purchases.
  4. Never hold yourself out as being responsible for the debts or obligations of your company .
  5. Have adequate capitalization for your intended operations and purchase adequate insurance .

Following the basic guidelines above will not protect you from an alter ego judgment in all circumstances; every case is unique and calls for individualized legal advice and attention. If you have questions about avoiding alter ego liability, or if you are sued as an alleged alter ego, seek prompt legal advice.

Independent Contractor or Employee?
By: Nami E. Chun

Employers often misclassify employees as independent contractors so that they can avoid paying payroll taxes, minimum wage or overtime, and complying with other employment laws, such as providing meal and rest breaks and workers' compensation coverage. Misclassifying an employee as an independent contractor without a reasonable basis can lead to steep penalties and other significant legal consequences. Thus, it is critical that employers properly classify their workers.

What's the Difference?
The distinction between an independent contractor and an employee is not always clear. Numerous factors are considered in determining the status of a worker. Generally, if the employer has the right to control how the work will be done, and not just the result of the work, the worker is an employee. The following are some general guidelines.

An independent contractor typically:

  • is engaged in a distinct occupation or business
  • operates under a business name
  • is a specialist who works without supervision
  • has his or her own employees
  • provides his or her own tools and place of work
  • sets his or her own hours
  • advertises his or her business services
  • invoices for work done
  • has more than one client

Typical examples of independent contractors include lawyers, doctors, dentists, engineers, architects, accountants, chiropractors, contractors, and subcontractors.

An employee typically:

  • performs duties dictated or controlled by others
  • receives training for work to be done
  • uses company-provided equipment, tools, and materials
  • works hours or days dictated by a company
  • gets paid on an hourly, weekly, or monthly basis
  • works for only one employer

There is no set definition of an "independent contractor" for all purposes, and not one single factor is determinative. The determination must be made on a case by case basis. Additionally, depending on the state or federal agency involved, the factors that get considered vary.

The existence of a written agreement purporting to establish an independent contractor relationship is not determinative. Nor is the fact that a worker is issued a 1099 form rather than a W-2 form.

Why is it Important?
If you misclassify your workers as independent contractors, you could be liable for many years of back taxes and penalties for unpaid federal and state income taxes, Social Security and Medicare taxes, and workers' compensation and unemployment insurance premiums. You may also be liable to the worker for overtime pay, meal and rest period violations, reimbursement of business expenses, plus interest and penalties. The costs of misclassification can be extremely high and potentially devastating for some businesses, especially those highly reliant on independent contractors.

The U.S. Department of Labor as well as state task forces have been cracking down on businesses misclassifying their employees as independent contractors. The IRS has also been actively seeking what is estimated to be billions of dollars in lost tax revenues due to misclassification of independent contractors.

Under California labor law, there is a presumption that workers are employees, and the burden is on the employer to demonstrate that the workers are employees. Thus, employers should thoroughly research and analyze a working relationship before it is established. Employers should also diagnose whether current independent contractors are properly classified. If you are uncertain about whether a worker is an employee or an independent contractor, we advise that you contact an attorney or the appropriate government agency for guidance.

Kring & Chung Newport Beach Triathlon
Registration is now open for the Kring & Chung Newport Beach Triathlon, which is scheduled to take place on October 21, 2012 in Back Bay in Newport Beach, California. The course includes a 1/2 mile swim, 15 mile cycle, and a three mile run.

This year marks the 35th year of the event. Visit www.newportbeachtriathlon.com for more information and to register.

Shane Singh Nominated for Sacramento Business Journal's "40 Under 40" List
Shane Singh, a Partner with Kring & Chung's Sacramento, CA office, has been nominated for Sacramento Business Journal's "40 Under 40" list. The "40 Under 40" list honors individuals under the age of 40 who are excelling in their professional fields. The final list will be announced in December.

The Letter of the Law: August 2012

IN THIS ISSUE:

CONSTRUCTION: Service and Repair Agreements in California

INSURANCE: When Do You Settle a Policy Limits Case?

ESTATE PLANNING: When to Update Your Estate Plan

Service and Repair Agreements in California
By: Anna Greenstin Kudla

The California Contractors State License Board ("CSLB") requires contractors to include specific language in each Service and Repair Contract between a contractor and an owner or tenant for the performance of a home improvement. Both the contractor and the buyer need to be aware of the important rules regarding these agreements.

Every service contract to repair, remodel, alter, convert, modernize, or add to a residential property, signed by a homeowner or tenant, must include specific language outlining the consumer's rights. California Business and Professions Code § 7159.10 (e) (12)(A) states that every service contract must identify the buyer's right to cancel the work when 1) the buyer receives the contract signed and dated by the contractor and 2) at any time before the contractor starts the work.

However, even if the work has begun, the buyer may still cancel the contract within three business days of signing the contract for normal service and repairs, or within seven business days of signing a contract to repair or correct conditions resulting from any sudden or catastrophic event for which a state of emergency has been declared by a governmental entity. In such a situation, the buyer may still have a right to cancel if any of the following is true:

  1. The buyer may cancel the contract if the price, including all labor and materials, is more than $750;
  2. The buyer may cancel the contract if the buyer did not initiate the contact with the contractor to request the work;
  3. The buyer may cancel the contract if the contractor sold the buyer goods or services beyond those reasonably necessary to take care of the particular problem that caused buyer to contact the contractor; or
  4. The buyer may cancel the contract if the payment was due or the contractor accepted any money before the work was complete.

A contractor's failure to provide a home solicitation contract to a homeowner with a proper notice of cancellation is grounds for disciplinary action and fines by the Contractors' State License Board. Handyman Connection of Sacramento, Inc. v. Sands (2004) 123 Cal.App. 4th 867.

There are many more important rules governing the required content of Service and Repair Contracts, and each situation is unique. Many contractors have been surprised by consumers who intentionally sign agreements without the proper buyer's notices, and then refuse to pay for services performed. Kring & Chung has over 25 years of experience representing both contractors and homeowners. Should you need assistance in preparing enforceable home improvement agreements, if you have a question about an agreement you have been asked to sign, or if you simply want to review the contracts you currently present to consumers, please do not hesitate to contact us.

When Do You Settle a Policy Limits Case?
By: John Schroeder

The Federal Ninth Circuit Court of Appeal, applying California law, has held that an insurance company may breach its implied duty of good faith and fair dealing by failing "to effectuate settlement where liability is reasonably clear, even in the absence of a settlement demand." Du v. Allstate Insurance Company, et al. (2012) 681 F.3d 1118. The Court found this duty despite affirming the trial court's refusal to give a jury instruction requested by plaintiff's counsel to instruct the jury on the carrier's purported refusal to accept a reasonable settlement demand within policy limits.

In June 2005, appellant Yang Fang Du and three other occupants were injured when a car driven by Joon Hak Kim collided with their vehicle. Mr. Kim had a $100,000 per person, $300,000 per accident Deerbrook Insurance Company policy. Deerbrook, a subsidiary of Allstate Insurance Company, became aware in early 2006 that this was an adverse liability case with serious injuries. Almost one year after the accident, the attorney for all four injured plaintiffs sent Deerbrook a $300,000 policy limit demand to settle the four claims. His demand included $108,742.92 in medical bills for Ms. Du, and nearly $34,000 in medical bills for the other three passengers. Deerbrook rejected the $300,000 demand but offered $100,000 for Ms. Du's injuries.

This suit went to trial and the jury returned a verdict in favor of Ms. Du in the amount of $4,126,714.46. Mr. Kim thereafter assigned his bad faith rights to Ms. Du in exchange for a covenant not to execute. Ms. Du then filed her bad faith case against Deerbrook, alleging that they had violated their implied duty of good faith and fair dealing by not settling Ms. Du's claim within Mr. Kim's policy limits. Ms. Du requested a jury instruction that did NOT include language requiring plaintiff in the underlying action to make a demand before the Deerbrook had a duty to make an offer. The court refused to give the instruction and instead gave an instruction requiring a plaintiff's demand before the duty arose.

There exists an implied covenant of good faith and fair dealing in every liability insurance contract. Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654. This covenant includes the duty to accept a reasonable offer of settlement. PPG Indus., Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310. This implied covenant requires the insurance company to settle within policy limits when there is a substantial likelihood of recovery in excess of those limits. Kransco v. American Surplus Lines (2000) 23 Cal.4th 390. In Johansen v. California State Auto Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9, the California Supreme Court held that where it is likely that the judgment against the insured will exceed the policy limits, the covenant of good faith requires the carrier to settle the claim. In essence, public policy does not allow for an insurance carrier to gamble at trial with the policy holder's money.

The Du holding expands an insurance company's duty to offer to settle within the policy limits where liability has become reasonably clear. It will be interesting to see if there will be a reduction in policy limits demands in light of this court's finding that a plaintiff's demand is no longer required where liability is reasonably clear. For insurers and their clients, it becomes all the more important to reasonably identify cases of probable liability where policy limits might be exposed, and to perform diligent and early investigations.

When to Update Your Estate Plan
By: Christina L. Rogers

Most people invest a great deal of time and thought into putting together the proper estate plan to protect their families and their hard earned assets in the event of their death or incapacity. However, initially putting the estate plan together is just the first step in making sure that your estate planning goals continue to be met in the future. As we all know, one of the only constants in life is change, and your estate plan should be examined periodically to accommodate for it. A properly drafted estate plan should be reviewed every 3-5 years to accommodate for changes in your family, financial or personal circumstances.

Below are some common items that could prompt a change to your existing estate plan:

  • An individual that you have named as Trustee, Executor or as a beneficiary in your estate plan dies;
  • A birth or adoption of a child by you or a beneficiary;
  • Marriage or divorce of either you or a beneficiary;
  • Children or grandchildren reaching the age of 18;
  • A substantial increase or decrease in the value of your estate;
  • The acquisition or disposition of a significant asset;
  • A change in the personal relationship or circumstances with an individual named as Trustee, Executor or beneficiary;
  • Changes in relevant state or federal laws;
  • Disability or illness of you or an individual that you have named as a Trustee, Executor or as a beneficiary; and
  • Changes in debts or liabilities.

But are you putting the right people in charge of you and your estate if something should happen to you? Beyond changes in circumstances, there are other reasons to evaluate your estate plan to make sure that it is right for you. Given the uncertainty in the status of the estate tax laws, your living trust may need flexibility to accommodate for and protect your estate and family from future tax law changes coming at the end of 2012. Also, there are provisions you can add to your existing trust to protect your loved ones' inheritance from divorce claims of spouses, lawsuits, creditors and a potential second estate tax. You should also think about who has the right to amend your existing trust after you are gone, whether or not you are properly dealing with inheritances for step children and children, and whether you have chosen the appropriate person to manage your trust estate in the event that you are not able to do so. Fortunately, there are many quick ways to correctly address these and other common trust problems before they explode into a public and expensive dispute in probate court.

Registration Opens for Newport Beach Triathlon

Registration is now open for the Kring & Chung Newport Beach Triathlon, which is scheduled to take place on October 21, 2012 in Back Bay in Newport Beach, California. The course includes a 1/2 mile swim, 15 mile cycle, and a three mile run.

This year marks the 35th year of the event. Visit www.newportbeachtriathlon.com for more information and to register.

Kring & Chung Partners Named "Top Attorneys" in O.C.

Congratulations to Kring & Chung Managing Partner, Kenneth W. Chung and Partner, Laura C. Hess, on being named two of the top attorneys in Orange County for 2012 by AVVO.com. Churm Media and OC METRO Business Magazine have partnered with AVVO.com for three years to spotlight the leading attorneys in Orange County every August. The "Top Attorneys" list will be featured in OC METRO Magazine's August issue.

Kring & Chung Welcomes New Family Law Associate

Kring & Chung is proud to announce the addition of Hoang-Anh Zapien to its Irvine, CA office. Ms. Zapien joins the firm with three years of experience successfully practicing family law and civil litigation in her own private practice. Ms. Zapien has assisted clients in all types of family law matters including, but not limited to, marital dissolutions, child support and visitation, spousal support and property division matters. She has a genuine passion for the field of family law. Ms. Zapien has proven to be an aggressive advocate for her clients in the courtroom and strives to be a strong source of guidance and support for her clients through their time of family crisis.

The Letter of the Law: July 2012

IN THIS ISSUE:

BUSINESS: Excess Disabled (ADA) Litigation

EMPLOYMENT: Wage & Hour Update: The Department of Labor is Cracking Down!

CONSTRUCTION: Mandatory Arbitration Agreements

Excess Disabled (ADA) Litigation
By: Shane Singh

California businesses have long struggled with "drive-by" Americans with Disabilities Act (ADA) lawsuits brought by "professional plaintiffs" represented by unscrupulous attorneys. Both the Federal and State Legislatures have struggled with finding a balance between providing access to the disabled, as well as protecting business from burdensome lawsuits.

In January 2009, ADA trial attorneys, business groups and advocates for the disabled came up with a compromise, creating the state's Certified Access Specialist (CASp) program. This created certain procedures for businesses to be deemed "compliant." Unfortunately, there are still ADA plaintiff attorneys that send out demand letters in efforts to obtain quick settlements with businesses based on the threat of protracted litigation. Some go so far as to make threats of $4,000 per violation claims, even before filing a lawsuit.

The goal of ADA litigation has to be to gain compliance rather than make "easy money" for certain professional plaintiffs and their attorneys. The State Legislature is now attempting to respond to complaints from businesses.

In a bipartisan effort, Democratic State Senate President Pro-Tem Darrell Steinberg of Sacramento and former State Senate Republican leader Bob Dutton of Rancho Cucamonga have authored Senate Bill (SB) 1186. This bill would ban demand for money letters and would require ADA plaintiff attorneys to give notice of any construction related access "barrier" at least thirty days before the filing of a lawsuit.

This "notice" would allow businesses a chance to fix the alleged barriers before a professional ADA plaintiff can increase his or her damages and attorney fees. Additionally, SB 1186 would protect "mom and pop" shops by requiring landlords to disclose in their leases whether their commercial property is certified in compliance with access regulations. Such small businesses would then know the status of compliance at the property before they enter into a lease agreement.

Lastly, the proposed legislation would resolve disparities between Federal and State access codes. These differences often lead to scenarios where a business complies with State regulations, only to be sued for non-compliance with Federal regulations. This provision will allow local building department officials to make certain that at least newly constructed buildings comply with current Federal regulations in addition to State requirements. Businesses will be able avoid future ADA lawsuits in this scenario.

California has to act now to protect its businesses from out of control ADA lawsuits. SB 1186 offers a reasonable approach to both protect disabled rights, as well as commerce.

Wage & Hour Update: The Department of Labor is Cracking Down!
By: Allyson K. Thompson

Employers, particularly restaurateurs in the Los Angeles area, need to be aware that the Department of Labor ("DOL") is increasing its surprise worksite visits and conducting immediate and unannounced wage and hour investigations. This news comes directly from Alfred Robinson, the acting Administrator of the DOL's Wage & Hour Division.

On April 18, 2012, the Wage & Hour Division issued a press release stating that it is "launching an enforcement and education initiative focused on the restaurant industry in the Los Angeles area to ensure compliance with the Fair Labor Standards Act's minimum wage, overtime, record-keeping and child labor provisions. Under this initiative, the division will be conducting unannounced investigations at restaurants in the San Fernando Valley, Hollywood, West Hollywood, West Los Angeles and other areas of Los Angeles County."

In the past six years, the Division's Los Angeles office found that "72% of all restaurants investigated in its jurisdiction were in violation of the FLSA. Those violations resulted in $2.2 million in minimum and overtime back wages owed to more than 1,400 workers."

Should your company be subjected to an impromptu investigation, be prepared to provide time cards for all of your employees going back a minimum of four years. They may also be requesting to inspect personnel records. The DOL is going to be looking for common violations including not paying for all hours worked, having employees perform work duties "off the clock," and incorrectly designating employees as exempt from overtime. Other violations include paying nonexempt employees a flat salary regardless of any overtime hours worked, as well as paying cash wages completely "off the books," which can lead not only to employees being cheated out of proper minimum wage and overtime compensation, but also to tax liabilities.

Best practices: The take away from this news is that all employers, regardless of whether they are in the restaurant business or not, must ensure that they are properly keeping track of employees' time, including requiring that employees clock out and then back in for their meal breaks. All too often we find that employers are not keeping a record of when employees are taking their lunches. Regardless of whether your company is subject to an investigation by the DOL, if an employee sues you for failure to provide meal and rest breaks, you will lose if you are unable to document that your employees did take a meal break. The obligation is on the employer to demonstrate that they are providing hourly employees with an opportunity to take a duty-free meal break for shifts longer than five hours.

Another best practice is to take a look at salaried employees and ensure that they are properly classified as an exempt employee, (meaning, not entitled to overtime). We caution that this is a fact-based inquiry that requires that you look at all of their job duties and the amount of time that they are performing those job duties. Just because you call someone a "manager" or "supervisor", or just because you pay them a "salary", does not alone mean that the employee is exempt. In the restaurant context, only a designated restaurant manager who manages at least 51% of the time would be considered exempt. Everyone else, from servers, bartenders, hostesses or cooks, regardless of whether you call them a manager or have them conduct training, will likely be considered a non-exempt employee. Non-exempt employees must fit into one of the major recognized exemptions including: administrative, professional, executive, computer professional, or an outside salesperson.

If you have any questions about whether an employee is properly classified, we advise that you seek qualified legal counsel. For more information about the classifications, click here.

Mandatory Arbitration Agreements

By: Brendan J. Coughlin

For anyone considering the purchase of a condominium in California, time can be tantalizing. The time between when a case is argued before the California Supreme Court and when a ruling is issued can also seem like forever for the litigants and other interested parties. And that is just where Pinnacle Museum Tower Association v. Pinnacle Market Development, S186149, hovers right now: waiting for a decision from the Court on whether developers can enforce mandatory arbitration agreements contained in covenants, conditions and restrictions ("CC&Rs") against condominium associations which bring lawsuits for construction defects.

Generally, when parties enter into a contract that includes an enforceable mandatory arbitration provision, they agree to waive their right to a jury trial. Any dispute between the parties will be resolved before an arbitrator.

Pinnacle v. Pinnacle was argued in San Francisco in late May this year, with Chief Justice Tani Gorre Cantil-Sakauye presiding. The case is the culmination of a number of conflicting holdings on the issues at play. Homeowners associations and consumer attorneys argue that at purchase, when buyers agree to CC&Rs, the HOA does not even exist, and therefore cannot be a party to any contract or binding arbitration agreement. Developers and building industry associations counter that our courts are already facing mandatory reductions due to shrinking budgets, making dispute resolution by arbitration a necessary and desired process.

Registration Opens for Newport Beach Triathlon

Registration is now open for the Kring & Chung Newport Beach Triathlon, which is scheduled to take place on October 21, 2012 in Back Bay in Newport Beach, California. The course includes a 1/2 mile swim, 15 mile cycle, and a three mile run.

This year marks the 35th year of the event. Visit www.newportbeachtriathlon.com for more information and to register.

Laura C. Hess Selected for 2012 Rising Stars List

Congratulations to Kring & Chung Partner, Laura C. Hess, for being selected for the 2012 Southern California Rising Stars list. Super Lawyers launched Rising Stars in 1998 to recognize the top up-and-coming attorneys in the state - those who are 40 years old or younger, or who have been practicing for 10 years or less. Today, Rising Stars honors attorneys in California and thirty-five other states across the country.

There are three components to the Rising Stars selection process: the general survey, the research process and the final selection process. Lawyers are instructed to nominate fellow lawyers they have personally observed in action. The attorney-led research team then reviews the credentials of the potential candidates. The lawyers are ranked by point totals and those with the highest point totals are named to the Rising Stars list. No more than 2.5 percent of the lawyers in each state are named to the list.

Anna Greenstin Kudla Presents at NAHREP Seminar

This month, Kring & Chung presented Current Legal Topics to real estate agents and brokers who are members of the National Association of Hispanic Real Estate Professionals (NAHREP). This was a three day conference in Victorville, Rancho Cucamonga, and Palm Dessert.

The conferences were sponsored by Wells Fargo, Chase, and other local lenders. Anna Greenstin Kudla, real estate attorney at Kring & Chung, spoke on real estate disclosures, litigation pitfalls, foreclosures, short sales, and agent duties.

Kring & Chung looks forward to continuing its relationship with NAHREP, and hosting other speaking events. If your agency or association is interested in having an attorney present legal topics to your agents and members, please contact our offices.

John Schroeder Joins Kring & Chung's Irvine, CA Office

Kring & Chung is proud to announce the addition of John Schroeder to our Irvine, CA office. Mr. Schroeder has over thirty years of major trial experience with many trials lasting over twenty days. He is the former General Counsel to the Insurance Contractors of America and the immediate past President and Chairman of the Board of the CHP 11-99 Foundation. Mr. Schroeder has extensive experience in handling both public and private construction matters. He also has extensive experience inverse condemnation, landslide, Credit Union and financial institutions defense, personal injury and business litigation. Mr. Schroeder is currently on the Orange County Bar Association Fee Arbitration Panel and has served as a Superior Court Settlement Officer in both Orange and Los Angeles for many years.

Kring & Chung Welcomes Christina L. Rogers to its Irvine, CA Office

Christina L. Rogers has joined Kring & Chung's Irvine, CA office as an Associate attorney. Ms. Rogers practice will focus on Estate Planning and Business Transactions. As an experienced estate planner in multiple states, Ms. Rogers has assisted hundreds of families with the successful transition of wealth to the next generation. Ms. Rogers previously served clients in estate planning and business succession planning at both a large international law firm and a large national accounting firm. Her representative estate planning clients include retired individuals, small business owners, successful entrepreneurs, public figures and celebrities.

A ruling in this case is expected in August 2012. At this point, it is anyone's best educated guess on how the California Supreme Court will resolve the conflicting lower appellate court decisions regarding enforceability of arbitration clauses in construction defect actions brought by condominium homeowners associations. There may be a distinction made between original and subsequent purchasers. Or the Court may go further, expanding its decision to directly or indirectly affect the enforceability of other types of arbitration agreements. Does the Federal Arbitration Act control?

These are all considerations for the California Supreme Court in the next few weeks. If you are considering the purchase of a condominium in California, or need an informed update on the enforceability of arbitration clauses in business, employment and insurance contracts, the experienced attorneys at Kring & Chung are available to answer your questions.

The Letter of the Law: June 2012

IN THIS ISSUE:

EMPLOYMENT: Brinker Ruling: Coup for Employers

FAMILY LAW: Evidence in a Divorce and/or Custody Hearing

INSURANCE: Allowable Offsets in UIM/UM Claims

Brinker Ruling: Coup for Employers
By: Allyson K. Thompson

The California Supreme Court ruled today that employers are under no obligation to police that workers take their legally mandated lunch and rest breaks. This is a major victory for all California employers.

The ruling comes after employees argued that meal and rest break abuses are routine and widespread when companies are not required to issue direct orders to take breaks. Some of the major issues argued included: 1) does an employer need to regulate that employees are taking a 30-minute duty free meal period; and 2) the timing of when a meal break must be taken. Is early lunching, i.e., taking a lunch break at the very beginning of shift longer than five hours permissible?

The Supreme Court sided with employers when it ruled that requiring companies to specially schedule and order breaks is unmanageable and that those decisions should be left to the employees. Specifically, the court ruled that employers merely have an obligation to provide the opportunity to take a meal period to its employees. "The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.

The court went on to hold that employers "are not required to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Orders and Labor Code section 226.7. Next, the court addressed the timing of meal breaks. Their ruling upholds current California law, which states that absent a waiver, Labor Code section 512 requires a first meal period no later than the end of an employee's 5th hour of work, and a second meal period no later than the end of the employee's 10th hour of work. This means that an employer can provide a meal break at any point in scheduled shifts that exceed five hours.

The entire case can be accessed here. Please do not hesitate to contact us if you have any questions.

Evidence in a Divorce and/or Custody Hearing
By:

Many hearings in the family court involve supplying the court with evidence as to your claims. Only relevant and competent evidence can be received and considered by the court. Not every scrap of paper accumulated is going to be considered "relevant" to the court. And often, due to the time constraints of the court, it is especially necessary to select only the most relevant evidence for the court to consider.

Witnesses can be useful to tell the court facts they know, things they see, or things they hear one of the parties say. The more objective a witness appears, the better. A party to a dissolution proceeding will not need a witness for every fact or allegation. A party can testify or "tell their story" about most of the facts, but a witness that has observed violence or other bad behavior can be helpful to the court in verifying and validating what a party is alleging.

If a party to a dissolution proceeding wants a witness to testify at a hearing or the trial, they will need to prepare and file a witness list. This legal document tells the court and other party who the witness is, how they can be contacted, and generally what that witness can testify to.

There is other evidence beside witness testimony that may be helpful to a party's case. Very often, physical evidence is used. Common types of physical evidence used in a dissolution or custody case consists of photographs, videotapes, voice records, and such other things as torn clothing, broken property, and documents.

To properly get a photograph or videotape into evidence, a party or witness must testify that the photograph or videotape accurately represents what is being shown at the time taken, and that the photograph or videotape has not been altered.

Voice recordings are a bit more tricky. In California, you cannot record another person without their consent. However, if someone leaves a voicemail message, that person understands by the nature of leaving a voicemail message that they are being recorded. A party or person will want to testify as to the voice being heard, how they know that to be the voice of that person, and general foundational information as to how the voicemail recording came to take place.

It is wise to collect and preserve potential evidence as early as possible. These are just some examples of common types of evidence, but realistically, almost any object can be an item of evidence, depending upon what the item would prove.

Allowable Offsets in UM/UIM Claims
By: Merielle Enriquez

NRS §690B.020 requires with certain exceptions that automobile liability policies provide protection to insureds who are legally entitled to recover damages from uninsured drivers. When defending against UM/UIM (uninsured motorist/underinsured Motororist) claims, Nevada law allows for certain offsets, which may work to reduce the overall total exposure in UM/UIM claims for the insurer.

An Offset is Allowed for the Full Amount of the Underlying Insurance Policy, Even if the Policy Limits were not Paid.

In the case of Mann v. Farmers Insurance, 108 Nev. 648 (1992 (overruled on other grounds), the Court held that the UIM carrier was only obligated to pay UIM benefits for the damages that exceed the underinsured driver's liability limits. Therefore, even if a UM/UIM insured settled with the underinsured driver for less than the driver's liability limits, the insured's UIM coverage applies only to damages that surpass those liability limes. In other words, there is no UM/UIM coverage for the gap between the settlement amount and the adverse driver's liability policy limits.

To put this case law in perspective, in the Mann case, the UIM insured settled with the underinsured driver for $35,000.00 when the underinsured driver had policy limits $50,000.00. Since UIM coverage applies only to damages that surpass liability limits, the UIM insurer was allowed an offset of $15,000.00, the difference between the settlement amount and the underinsured driver's policy limits.

Offset Clauses are Allowed and Enforceable in UM/UIM Settlements for Medical Payments When the Contract Language is Clear and Understandable, and to the Extent that the Damages Do No Exceed the Coverage Limits.

In the case of Ellison v. California State Auto. Ass'n, 106 Nev. 601 (1990), the Nevada Supreme Court upheld the medical payments setoff provision in the auto insurance policy as enforceable. In Ellison, the insured driver, Karen Ellison, was injured in an accident with an uninsured motorist. Her auto insurance carrier paid medical expenses under the medical payments portion of her policy. Ellison's UM claim went to arbitration and the arbitrator awarded Ellison $7,000 for pain and suffering and $3,617.96 for medical expenses. Ellison's auto insurance carrier paid the pain and suffering award, but did not pay the medical expenses award, citing the medical payment setoff provision in the policy. The Court held that "because Ellison's medical expenses did not exceed the medical payment limits of the policy and there was full payment of such expenses, there can be no further recovery, especially in the face of the offset provision prohibiting duplicate payments." Id. at 604.

Offset Provisions are Enforceable Against Personal UM/UIM Coverage Where an Employer Provides the UM/UIM Coverage. However, No Offset is Allowed where the Insured Person Bought their Own Disability Insurance and Where the Contract Provisions Did Not Expressly Allow for this Offset

In the case of Phelps v. State Farm, 112 Nev. 675 (1996), Plaintiff Royal Phelps was injured while driving his employer's rented vehicle during the course and scope of his employment. The car that collided with Phelps was uninsured. Phelps made claims against his employer's UM/UIM insurance, worker's compensations, and against his own private disability coverage. Phelps recovered the policy limits of $100,000.00 from his employer's UM insurance, a total of $98,022.40 from worker's compensation ($16,542.40 for medical bills, $36,480.00 for past disability and $45,000.00 for future disability), and received $13,770.00 from his privately purchased disability insurance. The total amount received from these sources was $211,792.40.

Phelps alleged that the amount recovered from these three sources was insufficient to cover his total damages, and made a claim against his own UM/UIM insurance against State Farm. State Farm only paid Phelps the difference between his total damages and what he had received from other sources. Phelps alleges that State Farm was required to pay him for his total damages and was not permitted to offset what he received from other sources against his UM benefits. The Court ultimately held that the offsets for the employer's UM policy and worker's compensation were valid and that State Farm's Provisions regarding these offsets were valid. However, the Court held that the offset from the private disability insurance was improper because such an offset was not expressly permitted by Phelp's UM policy.

In UM/UIM actions, it is therefore important to fully analyze what offsets are allowed under the policy. Offset policy language that is clear and understandable will generally be enforced by the Court so as to prevent any potential double recovery. However, offset provisions that are ambiguous will be subject to further scrutiny and it will be up to the Court's discretion whether to allow the potential offset.

Kring & Chung Hosts "Suits for a Cause" Clothing Drive

Kring & Chung is participating in a law firm clothing drive called "Suits for a Cause" to benefit WHW (Women Helping Women/Men2Work), an Orange County non-profit organization that helps low-income women and men get jobs by providing them with resume assistance, job placement workshops, computer training, and a professional wardrobe. Visit the Women Helping Women/Men2Work website for more information.

Starting on Friday, June 1st and ending on Friday, June 29th, we will be collecting used men's and women's clothing, including professional/business attire, non-professional attire (all regular clothing), and accessories (shoes, purses, jewelry, ties, etc.) This year, WHW is especially looking for women's non-professional attire to sell in their resale boutique, Deja New, which supports many of their job assistance programs.

If you would like to make a donation, please contact Courtney Kring at (949) 261-7700 or ckring@kringandchung.com. We will have donation receipts available. Feel free to contact us for more information. Thank you for your support!

Partner Laura C. Hess Selected for OC METRO's "40 Under 40"

Congratulations to Partner Laura C. Hess who was named as one of OC Metro Magazine's "40 under 40" honorees.

The list consists of 40 Orange County entrepreneurs, leaders and opinion makers under the age of 40 who are making their mark. The list will appear in OC Metro Magazine's "40 Under 40" May 2012 issue.

Lance A. Adair Joins Kring & Chung's Irvine, CA Office

Kring & Chung is proud to announce the addition of Lance A. Adair to our Irvine, CA office. Mr. Adair is Of Counsel to the firm and handles all types of real estate, construction and land use disputes and litigation for clients ranging from individuals to Fortune 500 companies. He is experienced in handling all aspects of complex case management and litigation, including mediation, arbitration, trial and appeal. Mr. Adair is rated "AV-Preeminent" TM by Martindale-Hubbell, the highest rating awarded.

Registration Opens for Kring & Chung Newport Beach Triathlon

Registration is now open for the Kring & Chung Newport Beach Triathlon, which is scheduled to take place on October 21, 2012 in Back Bay in Newport Beach, California. The course includes a 1/2 mile swim, 15 mile cycle, and a three mile run.

This year marks the 35th year of the event. Visit www.newportbeachtriathlon.com for more information and to register.

The Letter of the Law: April 2012

IN THIS ISSUE:

EMPLOYMENT: Quick Summary of Meal and Rest Break Law

CIVIL LITIGATION: Summary Judgment: The Enemy of My Enemy

NEVADA LAW: The Effects of a DUI Conviction in Civil Liability Lawsuits

Quick Summary of Meal and Rest Break Law

By: Laura C. Hess

California's meal and rest break laws are complex. The following is a general overview of some of the most important concepts. Failure to provide employees with required meal and rest breaks can result in claims for unpaid wages, 30 day waiting time penalties, and subject an employer to exposure for attorney fees. This is one of the leading areas of employment class action litigation, where the liability exposure is multiplied by all affected employees for a period of up to four years. In sum, failure to comply with California's meal and rest break requirements could end up costing you a ton of money, so make sure you are complying.

  • Nonexempt employees must receive meal periods. The start and ending time of their meal periods must be recorded.
  • Employers must provide a meal period to nonexempt employees who work more than 5 hours in a workday. The meal period must start before the beginning of the 6th hour worked. So if your employee asks you if he can work through lunch so that he can leave early at the end of the 8 hour workday, the answer is no. Whether you choose to let the employee leave early is up to you, but the employee must take a lunch break at the required time. However, the meal period may be waived by mutual consent of the employer and employee if the employee's workday does not exceed 6 hours.
  • Employers must provide a second meal period to nonexempt employees who work more than 10 hours in a workday. The second meal period must start before the beginning of the 11th hour worked. The second meal period may be waived by mutual consent of the employer and employee if the employee does not work more than 12 hours in the workday and has not already waived the first meal period.
  • Meal periods may be unpaid, must last a minimum of 30 uninterrupted minutes, must be free of all duty, and the employee must be permitted to leave the workplace.
  • Employers must pay nonexempt employees an hour of pay at their regular rate for each workday that a meal period was not provided.
  • Rest periods must be authorized and permitted for every four hours worked "or major fraction thereof." The Division of Labor Standards Enforcement interprets the phrase "authorize and permit" as requiring employers to merely make rest periods available to employees. No rest period is required if the employee's workday is less than 3½ hours. Rest periods should, insofar as practicable, be in the middle of each work period. "Major fraction thereof" means more than 2 hours. For example, an employee who works an 8 hour workday must be authorized and permitted to take 2 paid rest periods, as close as practicable to the middle of each 4 hour segment of the workday.
  • Rest periods must be paid and uninterrupted for a full 10 minutes, must be free of all duty, but the employee may be required to remain at the worksite during rest periods. Rest periods may not be combined with another rest period, a meal period, or be taken at the start or end of the workday.
  • Employers are not required to document rest periods in their payroll records.
  • Employers must pay nonexempt employees an hour of pay at their regular rate for each workday that a rest period was not provided.

Summary Judgment: The Enemy of My Enemy

By: Brendan J. Coughlin

First year law students generally spend a year suffering through Civil Procedure class. This article will not be that time consuming. By now readers of this newsletter likely have a workable understanding of the civil litigation process. A lawsuit is filed, the parties conduct discovery, and as the case moves toward trial, negotiations occur. Frequently, parties file motions for summary adjudication, seeking to dismiss the case, clarify legal issues, or gain a strategic advantage. New law is sometimes made during the summary adjudication process as higher courts review the decisions of lower courts.

When a plaintiff is injured or damaged and sues two separate defendants, the defendants have a common interest in reducing the value of plaintiff's claims. However, the defendants also have different interests in that each wants as much of the fault as possible to fall on the other. When it comes to summary adjudication motions, defendants can have very divergent interests.

California Code of Civil Procedure section 437c(l) provides that if one defendant is dismissed from a case via summary adjudication on the basis that the defendant was without fault, no other defendant during trial, over plaintiff's objection, may attempt to attribute fault to or comment on the absence or involvement of the defendant who was granted the motion. This can be very important in a case for personal injury, wrongful death, or property damage, where plaintiff alleges large economic damages. Economic damages are damages such as medical charges, lost earnings, property damage, loss of use of property, loss of employment, and loss of business or employment opportunities, where a bill or charge arguably exists to quantify the value of the damage. Under California law, a defendant may be 100% liable for plaintiff's economic damages, even if only 1% responsible for the damaging incident.

An example of joint and several liability has two hunters firing shotguns into the woods, injuring their guide. In the days before forensic crime scene investigation, the hunters jointly shared liability because it could not be determined whose pellet injured the guide. In modern times, a roofer and sheet metal contractor may be joint and severally liable for property damage caused by roof leaks if both of their acts jointly caused the damage.

Therefore, co-defendants must seriously consider filing their own opposition to a fellow defendant's motion for summary adjudication. It may be a mistake to count on plaintiff's ability to defeat such a motion, especially when significant exposure for plaintiff's damages is at stake for the remaining defendant. The attorneys at Kring & Chung are experienced litigators who can answer your questions about your case and litigation strategy. Please feel free to contact us.

The Effects of a DUI Conviction in Civil Liability Lawsuits

By: Robert L. Thompson

In Nevada it is unlawful to drive under the influence of alcohol with a blood/alcohol level above .08. Nevada Revised Statutes ("NRS") §484. However, Nevada's penalties are lighter than most states in terms of fines, jail sentences, and the length of time that a person's license can be suspended. Additionally, Nevada's DUI statute is more generous regarding differentiation between misdemeanor DUI and felony DUI. A driver will be guilty of a misdemeanor DUI for first and second offenses within seven years. Even if substantial property damage is involved during the first or second offense, it could result in a more severe sentence in the form of additional jail time or heavier fines, but it will not enhance the conviction to felony DUI. For a person to be convicted of a felony DUI in Nevada, they must either have three convictions within seven years, or have caused substantial bodily harm. Substantial bodily harm includes death or severe physical impairment of another human being. In a civil action involving a DUI that caused injuries to the plaintiff, whether the defendant was convicted of felony or misdemeanor DUI has very different consequences regarding the determination of liability.

These distinctions come into play during civil litigation due to NRS §41.133, which states that if a person is convicted of a crime causing injury to the victim, the judgment of conviction is conclusive evidence of all facts necessary to impose civil liability for injury. This is otherwise known as Nevada's Victim's Rights statute. On its face, this would lead one to conclude that if a defendant is arrested at the scene of an accident for a DUI, liability will automatically be established in a later civil lawsuit. However, a distinction is made in applying the statute to felony DUI versus misdemeanor DUI. In Langdon v. Matamoros, 121 Nev. 142, 145 (Nev. 2005), the Nevada Supreme Court ruled that NRS §41.133 does not apply to misdemeanors involving traffic accidents. In Cromer v. Wilson, 225 P.3d 788, 790 (Nev. 2010), the Court held that NRS §41.133 applies to a felony DUI. This distinction is important because in a civil case arising from an accident where a defendant is convicted of a misdemeanor DUI, plaintiff's counsel cannot use NRS §41.133 to win a Motion for Summary Judgment on liability.

A misdemeanor DUI is by no means an easy fact for the defense to deal with in a civil litigation lawsuit. Although NRS §41.133 cannot be used to establish civil liability as a matter of law, that does not preclude opposing counsel from commenting on it at trial to prove his or her case to a jury. The defense should make all appropriate arguments in pre-trial motions in limine regarding the conviction's potential for prejudice to the defendant. However, since plaintiff must prove negligence to the jury directly rather than have it established as a matter of law by a judge, the door opens for the defense to raise a comparative negligence affirmative defense trial. It is important to approach discovery with this in mind. While this approach will not necessarily get a defense verdict, if the jury finds that a plaintiff is even partially negligent, the defense will be entitled to an offset during post-trial motions. Such arguments should be utilized by the defense team during mediation in order to lower opposing counsel's expectations for overall recovery, and to help achieve the best settlement possible for the client.

SCORE Seminars

Congratulations to Kring & Chung attorneys Matthew A. Reynolds and Allyson K. Thompson for their informative and entertaining seminars for SCORE in March.

SCORE is a non-profit association helping local businesses grow and prosper. The seminars dealt with Legal Issues for Start Up Businesses, and Avoiding Employment Related Litigation.

Kring & Chung attorneys are scheduled to present again on exciting topics in the coming months, including April 10th on Employment and Social Media, at National University's Costa Mesa Campus. For more details and to register for our upcoming seminar on April 10th, click here.

In the Community

On March 3, 2012, Kring & Chung attorneys Kyle D. Kring and Allyson K. Thompson shared their perspectives and experience with students from the 9th Circuit of the American Bar Association Law Student Division's Spring Meeting. The meeting was held at Whittier Law School in Costa Mesa.

The program focused on getting ahead in the current economy. Students were able to have casual conversations with the attorneys over lunch. Kring offered a hiring attorney's perspective on resumes and interviews and provided tips to impress the hiring partner. Thompson shared with the students her own insights on thriving in the local legal community.

Also at the meeting, Michelle Philo, a paralegal with Kring & Chung and SBA President at Whittier Law School, was awarded the ABA Law Student Division's Silver Key Award. The Silver Key Award is the highest circuit level award and is presented in recognition of an individual's support of the Law Student Division.

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.

The Letter of the Law: March 2012

IN THIS ISSUE:

CONSTRUCTION: New 2012 Prevailing Wage Requirements for Contractors

FAMILY: Saving Money in a Divorce

EMPLOYMENT: $15 Million Judgment Against U.S. Bank Reversed in Wage and Hour Class Action

New 2012 Prevailing Wage Requirements for Contractors

By: Kyle D. Kring

Contractors working on public works construction projects in California will find that they are subject to new regulations of the Division of Labor Standards Enforcement's (DSLE) Compliance Monitoring Unit (CMU). The CMU is a new component within the Department of Industrial Relations, DSLE created to monitor and enforce prevailing wage requirements on public works projects which receive state bond funding, and on other projects that are legally required to use CMU. The CMU began operations on January 1, 2012, following the recent adoption of AB 438 and approval of revisions to the program regulations. One of the new key requirements of CMU is that you now must electronically file your certified payroll reports (rather than submit a paper form) using a third party electronic certified payroll service - My LCM. My LCM is designed to flag violations and enable Prime Contractors and Awarding Bodies to verify, accept or reject certified.

The service must be used by all awarding bodies and contractors for projects subject to CMU monitoring and enforcement for contracts awarded on or after January 1, 2012. A link is established for electronic certified payroll at https://app.mylcm.com. The site includes step-by-step instructions on how to assign contractors, manage employee profiles and submit certified payroll reports.

Awarding bodies will be required to register projects into My LCM and make sure that all contractors are registered on its projects. Prime Contractors will also be responsible for all sub-contractors working on the public works project and will have the responsibility to ensure that they and their subcontractors are registered and trained as required to utilize the electronic payroll service.

The CMU will not only monitor specific public works projects to ensure compliance and enforcement of prevailing wage requirements, the CMU will also, (1) conduct random onsite inspections, (2) visually monitor construction activities, (3) conduct contractor and worker interviews, and (4) verify CLSB licensing and Workers Compensation insurance, among other things.

As part of your preparation for the new prevailing wage requirements, if you are a prime contractor it is always important to ensure that your Subcontract Agreement properly complies with Labor Code § 1775 in order to escape possible liability for violations of the prevailing wage statutes by your subcontractors.

Saving Money in a Divorce

By:

With divorces costing anywhere from $3,000 to $100,000 or more, most couples would be interested in finding ways to assist their attorney in saving money. When Kring & Chung is alerted by a client that cost-saving measures should be taken where possible, we make a concerted effort to educate and utilize our client as part of our available resources during the dissolution process.

There are many ways to save on costs during a divorce. To be frank, if a client is only willing to put in a half-hearted effort, then it may be better to let the attorney's office handle the issue completely.

A client can perform photocopying functions and possibly save some time and costs on photocopying charges. A client can sometimes act as a messenger or take documents to court for filing. However, a client cannot act as a process server, because the laws of California require that process not be served by a party to the action.

In divorce, the parties can work together to figure out how to equitably or equally divide their personal property. Generally speaking, personal property will be the contents of their home. It can be as simple as rolling the dice. Whomever rolls the higher number chooses the first item. The next person chooses an item of similar value or emotional desirability, and so forth. Another method is to sit down together and assign values to items of property. As long as the parties feel that they are both receiving a similar dollar value of personal property, and as long as the parties are reasonably content with the division, this is sufficient. Keep in mind that in general, property a person brings into the marriage is already their separate property, and is not divided in a divorce. Property that a third person gives to a party during marriage is usually separate property, and property a party purchases using separate property is usually their separate property. If valuable collectibles, art, antiques, and jewelry are involved, then appraisers may be necessary in order to determine a fair market value. It rarely makes sense to pay an attorney their hourly rate just to argue over pots, pans and other replaceables. Personal property is normally valued at current fair market (re-sale) value. We have heard judges refer to this as "garage sale value."

California is a community property state. This means that assets and debts are divided equally in a divorce. That is true regardless of any fault attributed, or the reasons for the divorce. Bearing that in mind during a divorce should enable the parties to accept the fact that they will be dividing these assets and debts regardless of who actually bought them or worked for them. Then, by committing to being reasonable and reasonably emotion-free, the parties can view their divorce in a business-like manner, rather than as a tool for exacting revenge or extracting emotional payment.

Another suggestion is to be organized in the presentation of documents to your attorney. If you tab documents and divide them into stacks of similar items, you are saving your attorney the time of having to do so. By keeping notes, inventories, copies of support payments, and such before, during and after divorce, you will save yourself the time of having to later recreate those items. You will also save yourself in attorney fees because the necessary information will be easily obtained when needed.

At Kring & Chung, LLP, we are pleased to offer a free initial consultation of your family law matter of up to 30 minutes. We encourage you to take advantage of this opportunity to find out how the laws of California may affect your family law issue. With family law attorneys in Irvine, Rancho Santa Margarita, Ontario, Chino, Sacramento and Las Vegas, we can consult with you in person or by phone - whichever is most convenient for you.

$15 Million Judgment Against U.S. Bank Reversed in Wage and Hour Class Action

By: Nami E. Chun

On February 6, 2012, the California Court of Appeal, First Appellate District decertified a wage and hour class action lawsuit filed by business banking officers and overturned a $15 million judgment against U.S. Bank. This was in the recent case of Duran v. U.S. Bank National Association, 2012 WL 366590 (Cal.App 1 Dist.).

The plaintiffs first filed their case in 2001, alleging that they were misclassified as "exempt" employees and denied compensation for overtime hours. U.S. Bank claimed that the business banking officers fit the exemption for "outside salespersons," because they spent more than half their working time away from the office selling financial services.

During trial, the trial court used a random sample of 21 class members to testify as representatives for a class consisting of 260 members, in the interest of expediency. The trial court refused to allow the bank to introduce evidence challenging the claims of the other 239 class members. The evidence the bank sought to introduce, if deemed persuasive, would have established that at least one-third of the class was properly classified as exempt.

The Court of Appeal held that the trial court's strategy of relying solely on the evidence derived from a 20-person sample to determine class-wide liability violated principles of due process, and deprived U.S. bank's constitutional right to a fair trial. While innovation and pragmatic procedural devices are encouraged to simplify and manage class actions, the rights of parties may not be sacrificed for the sake of expedience.

This case supports the premise that due process principles require individualized inquiries where the applicability of an exemption turns on the specific circumstances of each employee. The attorneys at Kring & Chung are available to answer any inquiries you may have relating to this new case, as well as discuss with you any wage and hour issues.

Nami E. Chun Joins Kring & Chung's Irvine Office

Nami E. Chun joins Kring & Chung as an associate in Irvine. Ms. Chun graduated cum laude from the University of California, Los Angeles in 2005 with a Bachelor of Science in Biochemistry. She then received her Juris Doctor, cum laude, from the University of California, Hastings College of the Law in 2009.

After being admitted to the State Bar of California in December 2009, Chun joined Clayson, Mann, Yaeger & Hansen, where she practiced general civil litigation, with an emphasis on employment and business litigation. Her employment practice involved work for both employees and employers, including wrongful termination, discrimination, retaliation, and harassment claims.

Chun will be focusing her practice on employment and business litigation.

Chun is an active member of the Orange County Korean American Bar Association and is currently serving on its Board of Directors. In her spare time, Chun enjoys hiking, cycling, cooking, and traveling.

Attorney Spotlight

Sacramento Partner, Shane Singh, representing Dollar Tree Stores, Inc., recently prevailed on a motion for summary judgment related to a disability access (ADA) lawsuit at a location in Citrus Heights, California. The Federal Court found that plaintiff's allegations with regard to physical "barriers" were either moot or not applicable to the plaintiff, based on his disability. The court went on to grant judgment in favor of Dollar Tree against the plaintiff.

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.

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