Newsletter Archives

Letter of the Law: April 2011

IN THIS ISSUE:

FAMILY LAW: Employee Stock Ownership Plans

BUSINESS: Scams Continue to Target California Small Businesses

Kring & Chung Obtains Trial Victory

Employee Stock Ownership Plans

A common asset in a marital dissolution proceeding is the Employee Stock Ownership Plan ("ESOP"). An ESOP is a specialized employment benefit in which the corporate employer makes contributions of either cash or stock to a trust for its participant employees. The employees are then allocated a pre-determined amount by percentage in direct proportion to the employee participant's compensation.

The ESOP contributions are not taxable to the employee/participant until withdrawn from the ESOP by the employee.

There are two main types of pension plans available from corporate employment: 1) A Defined Benefit Plan ("DBP"), in which the employee is entitled to receive a specific sum upon retirement, either based upon a monthly sum or a percentage of salary; and 2) the Defined Contribution Plan ("DCP"), in which the employer makes recurring contributions and the employee's withdrawal entitlement is largely dependent upon performance of the DCP. DCPs almost always take the form of Profit Sharing Plans, 401(k) plans, Money Purchased Pension Plans, and ESOPs.

When a party to a marital dissolution proceeding is a participant to an ESOP, there is not only a potential community property interest in the ESOP. If the ESOP pays dividends directly to the participant/party, those dividends can also be income available for support.

In order to properly divide an ESOP or any other DCP or DBP in a divorce, the account should be valued by either an accountant or an actuarial skilled in valuation. A DCP is not valued the same as a DBP. If the parties want to award the ESOP or other such plan to the employee spouse in exchange for the non-employee spouse receiving other property (called an "in-kind" division), it must be borne in mind that the value on any given statement does not take into consideration the future tax consequences to the recipient, nor is an account's value guaranteed in the future. Thus, pre-tax assets should be valued against other pre-tax assets, and post-tax assets should be valued against other post-tax assets, or adjustments should be made to compensate for the future tax liability.

If the parties choose to divide the account, a qualified domestic relations order (QDRO - "qua-dro") will be needed. A QDRO is a legally binding order that sets forth the non-employee's interest in the account. The QDRO usually includes a survivorship provision to protect that non-employee's interest in the event of the death of the employee spouse, and binds the plan administrator to divide the account as stated in the QDRO. A QDRO should be prepared by an attorney that is experienced in the drafting of such orders. Most companies have "model QDRO's" available in the event of divorce. However, blindly following a model QDRO without the drafter knowing the significance of certain provisions can prove disastrous at a later time.

If you are considering a marital dissolution, or have additional questions about dividing ESOPs or other employee benefits in a divorce, you can reach our team by calling 949-345-1621 or by completing a short online contact form. Flexible appointments are available by request.

Scams Continue to Target California Small Businesses

By: Shane Singh

In late 2009, continuing a fight against "rip-off artists" operating in California, then Attorney General Edmund G. Brown, Jr. filed suit against eight individuals and six businesses that operated scams targeting small business owners. The lawsuits, filed in San Diego Superior Court, sought to recover more than $3 million. "These cases will send a powerful signal that small business owners must be on the alert," Brown said at the time. "These rip-off artists sent official-looking documents through the mail for the sole purpose of duping small business owners into paying them money - for no value in return."

Despite the notoriety these scams upon business owners have received, the perpetrators continue to try to work them on the public. Small businesses should be aware of these tactics. The San Diego cases were separate scams, but each follows a similar theme. The defendants mailed to small businesses solicitations that appear to be government documents, featuring an official-looking seal, an official-sounding name, citations to the Corporations Code and a "reply by" date. The forms claim that the business is in danger of losing its corporate or limited liability status if payment is not made within a short period of time.

Since 2004, the Attorney General's Office has received more than 5,000 complaints against a growing number of individuals who mail solicitations made to look like governmental forms to small businesses in California. Some of our clients report that they are continuing to be targeted by these scams. Any business owner receiving such a solicitation should be highly suspicious. Shane Singh at Kring & Chung's Sacramento office is experienced with these mailings, and is available to discuss with you any such solicitations that your business may receive.

Kring & Chung Obtains Trial Victory

Kring & Chung attorneys Roland J. Amundsen and Matthew A. Reynolds recently represented a crane company in a jury trial relating to an accident in which a 108 foot long, pre-cast concrete I-girder weighing 73,000 pounds broke in mid-air at a job site, causing numerous injuries to the Plaintiff. Plaintiff claimed back, shoulder, head, and hand injuries, as well as loss of employment for over five years. Despite these injuries, and the fact that Kring & Chung's client was carrying the beam at the time of the accident, our client received a complete defense verdict with a finding of no liability. The jury awarded Plaintiff $1,600,000 as against the other defendants.

The case involved a number of highly technical issues that could easily have confused a jury. Lead trial counsel Roland J. Amundsen simplified the case for the jury. Another defendant's attorney commented that Amundsen's closing argument was the best made at trial.

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.

Letter of the Law: March 2011

IN THIS ISSUE:

EMPLOYMENT LAW: Important 2011 Updates

EMPLOYMENT LAW: Employer Liability for After Work Driving

Kring & Chung in the News

Important 2011 Updates

By: Allyson K. Thompson

At the start of every new year, it is important for all California employers, no matter their size, to familiarize themselves with some of the changes and new developments in state and federal laws which may affect the workplace. While this summary is not exhaustive of all of the potential labor and employment changes in the past year, it outlines some of the areas of the law that have changed, and provides helpful links to obtain more detailed information.

Employee Handbooks - The Federal Motor Carrier Safety Administration (FMCSA) enacted a new rule banning commercial motor vehicle (CMV) operators from text messaging while driving. Specifically, the rule prohibits texting by CMV drivers while operating interstate commerce and imposes sanctions, including civil penalties and disqualification from operating CMVs interstate commerce, for drivers who fail to comply with this rule. For more information, read the entire content of the rule.

If you are a company that employs CMV drivers, you should update your Employee Handbook or provide an Addendum to include this new rule.

Also, this past year Kring & Chung, LLP helped numerous employers formulate new company policies pertaining to the use and restrictions of social media websites, such as Facebook and MySpace, especially when they are used for marketing and advertising purposes.

I-9 Update - Last year, regulations implementing the electronic Form I-9 were approved by the U.S. Department of Homeland Security. The new regulations allow employers to complete, sign and store the Form I-9 electronically, although there is no requirement that employers must keep I-9 information electronically. Whether filled out manually or electronically, an employer representative must still physically examine the required identification and work eligibility documentation. For more information, go to the U.S. Citizenship and Immigration Services (USCIS) website.

Drug Testing in the Workplace - For employers in the transportation industry, the Department of Transportation (DOT) issued a regulation in 2010 requiring employers to use an updated DOT Alcohol Testing Form beginning January 1, 2011. This form must be used for DOT alcohol tests.

Tip Pooling - In August 2010, the California Supreme Court in Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, ruled on a case that restricted employees' ability to sue employers for tip pooling issues.

A dealer sued his employer for its policy of requiring dealers to set aside 15 to 20 percent of the tips received each shift, which were deposited into a "tip pool bank account" and later distributed to designated employees. The policy expressly prohibited managers and supervisors from participating in the pool. The plaintiffs brought a class action against a casino and its general manager, alleging that the casino's tip pooling policy violated the employees' protections under Labor Code § 351, prohibiting employers from taking, collecting or receiving employees' gratuities.

The California Supreme Court held that Labor Code § 351 does not provide a private cause of action to sue in court, reasoning that there were other remedies that may be appropriate, such as a private lawsuit for "conversion." To be clear, California law does not specifically prohibit involuntary tip pooling, so long as the employer and any supervisor are not sharing in the tips.

Unemployment Insurance - Effective January 1, 2011, employers must file returns with the EDD regarding an employee's wages, taxes withheld and other required information quarterly instead of annually. The form is called New Quarterly Contribution Return and Report of Wages (DE 9). This form replaces the Annual Reconciliation Statement (DE 7).

Pregnancy Disability Issues - The federal Patient Protection and Affordable Care Act of 2010 amended the Fair Labor Standards Act to provide reasonable break time for an employee to express breast milk while nursing for up to one year after a child's birth. This rule applies to all California employers with more than 50 employees. Under the federal law, employers with fewer than 50 employees are not subject to this requirement if it would impose an undue hardship. Note however that because federal law does not preempt state law, California employers of all sizes must comply with the state law requirements set forth below.

Specifically, California law requires an employer to "reasonably accommodate" employees who wish to express milk at work. See Labor Code §§ 1030-1033. An employer can require that the nursing employee use the paid rest break time already being provided. If an employee needs more than the allotted 10 minutes, the time must be given. However, any time over 10 minutes may be unpaid. Lastly, the employer must provide a private place for a nursing employee to express milk, other than a toilet stall, that is shielded from view and free from intrusion.

Worker's Compensation: Construction - If you are a roofing contractor, a new law, AB 2305, extends the requirements that contractors with a C-39 roofing classification obtain and maintain worker's compensation insurance, even if they have no employees. This requirement was originally set to expire on January 1, 2011, however it has been extended to January 1, 2013.

Another important update affects licensed or unlicensed contractors who fail to procure worker's compensation coverage for employees. AB 1696 allows the registrar of contractors to issue a stop order, effective immediately, for failure of the contractor to procure worker's compensation insurance. Employees affected by the order must be paid by the contractor for lost time, up to ten days.

Should you have any questions about how some or all of these changes may affect your business, please do not hesitate to contact Allyson K. Thompson for more information.

Employer Liability for After Work Driving

By: Brendan J. Coughlin

The Fourth District Court of Appeal in California recently decided the matter of Lobo v. Tamco (2010) 182 Cal.App.4th 297. This case holds that a triable issue of material fact exists regarding whether an employer's infrequent reliance on an employee to drive his own car to meet with customers was an incidental benefit to the employer. The legal finding of such an incidental benefit may be sufficient to support a claim of vicarious liability against the employer for personal injuries caused while the employee was off the job, driving after work.

The troubling facts of the case are as follows. A San Bernardino County deputy sheriff was one of three motorcycle officers travelling together on Arrow Highway with their lights and sirens activated. Tamco is a manufacturer of steel bars used in construction. A metallurgist employed by Tamco was driving his own car, leaving work for the day. The employee did not see the officers as he exited Tamco's premises and entered the roadway. In the ensuing crash, Deputy Lobo suffered fatal injuries.

The officer's widow and daughters filed suit for his wrongful death. Tamco's attorneys argued in motions for summary adjudication that, under California's "coming and going" rule, the company had no liability for the accident. This rule provides that employers are generally exempt from liability for tortious acts committed by employees while on their way to and from work. Tamco argued that the metallurgist was off work, driving his own vehicle, and was not on company business at the time of the accident.

In this case, the Court found that because there was evidence that the employee sometimes used his own car for company business, it could not be decided as a matter of law that Tamco could never be vicariously liable for its employee's negligence. The Court stated, "If the employer requires or reasonably relies upon the employee to make his personal vehicle available to use for the employer's benefit and the employer derives a benefit from the availability of the vehicle, the fact that the employer only rarely makes use of the employee's personal vehicle should not, in and of itself, defeat the plaintiff's case."

This ruling expands the "required vehicle" exception to the "coming and going rule," and stretches the concept of an incidental benefit to the employer. In such circumstances, where summary adjudication is not possible, the employer may be forced to choose between settlement or trial of a sympathetic, potentially high exposure case. Lobo v. Tamco illustrates how the facts of a particular case can make new or expanded law. It should be noted that the California Supreme Court has denied review of this case, letting the Court of Appeal's decision stand.

The attorneys at Kring & Chung are knowledgeable in employment law, personal injury, and general civil litigation matters. We are available to discuss, draft and review with you your employee vehicle policies, as well as address all other important employment and liability issues.

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

Kring & Chung in the News

A lawsuit filed by Kring & Chung, LLP in February has received press coverage in Endurance Sports Business News, Avalon Bay News, Triathlon News, Runners Web, Triathlon Business, and Old Runner.

Since 1998, Pacific Sports, LLC has produced the award-winning Catalina Marathon which takes place every March on land managed by the Santa Catalina Island Conservancy. The land is open to the public for recreational use. No longer content to simply receive a permit fee and charitable donation from Pacific Sports, LLC for this race, the Conservancy has refused to grant Pacific Sports, LLC a permit to hold the Catalina Marathon in 2012, and instead recently announced that it has decided to produce this race itself.

This case could set a precedent that determines the future rights to and ownership of existing sporting events being held around the country. We believe this is the first such case within the endurance sports industry in which the permit holder has denied the permit in order to take over the event itself.

Laura C. Hess, the attorney with Kring & Chung, LLP that is representing Pacific Sports LLC, was quoted as saying, "Event producers of all kinds should be paying close attention to this case. The issue is broader than just what happens to your asset when the city won't give you a permit. The issue is whether someone can try to stand in your shoes and capitalize off of your success by putting on an event so much like yours that people are confused as to which event is which."

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.

Letter of the Law: February 2011

IN THIS ISSUE

EMPLOYMENT LAW: Sexual Harassment Training Required in 2011

FAMILY LAW: Overview on Evaluating a Small Business in Divorce

CONSTRUCTION LAW: Changes to Mechanic's Lien Forms and Procedures Effective January 1, 2011

Sexual Harassment Training Required in 2011

By: Kyle D. Kring

Employers should be aware that 2011 is a training year for supervisors and managers. California Government Code § 12950.1 requires that employers with 50 or more employees provide sexual harassment prevention training at least every two years. In 2011, most employers with California offices will have to provide sexual harassment training to their supervisory employees. In addition, new supervisors and managers must receive the training within six months of assuming supervisory duties, even if it is not a training year.

The law allows employers to avoid individually tracking their employees' re-training dates if the employer designates a "training year." Using this method, an employer must train all of its supervisors regardless of when those employees were last trained. Given the significant burden of tracking the two-year period for each employee individually, the training year is most typically used by employers.

The state regulations implementing the sexual harassment prevention training law define "having 50 or more employees" as employing or engaging 50 or more employees or contractors for each working day in any 20 consecutive weeks in the current or preceding calendar year. The 50 employee or more threshold includes full-time, part-time, temporary workers and contractors, and even those that reside or work outside of California.

Kring and Chung, LLP has been providing cost-effective interactive Sexual Harassment Supervisor and Staff Training throughout California since this new law was enacted. Training can be conducted on site at your offices. Please call Kyle Kring or Allyson Thompson should you have any questions, or to schedule your training.

Kyle D. Kring is a Managing Partner with Kring & Chung, LLP. He can be contacted at (949) 261-7700 or kkring@kringandchung.com.

Overview on Evaluating a Small Business in Divorce

A small business interest is a typical asset to be dealt with in a dissolution (divorce) proceeding, particularly in medium-to high-income-bracket divorces.

In almost every field of law, a person will encounter the "general law" on an issue or subject, which is typically what a lay-person will learn via ordinary channels (initial consultation, television, neighbors, etc.). But each "general law" will typically have "exceptions" and those exceptions (I call them red flags) are what lawyers are trained to look for and deal with as effectively as possible. That is where a lawyer's education, skills and experience will set him or her apart and justify the hourly rate that lawyers charge.

Generally speaking, a business interest that is owned by one spouse before marriage is that spouse's separate property. The exception to this general rule would be if the operating spouse's efforts, skills or talent expended during marriage caused the value of that business to increase. If that was the case, then the community (aka "the marriage") could acquire an interest in the business. Even though the business itself would most likely be assigned to the operating spouse, there might need to be a financial pay-out to the non-operating spouse for their share of the community interest. This is called an apportionment. Now, of course, an exception to this exception is if a prenuptial agreement or other contract exists that governs the issue. It is moderately difficult for an operating spouse to enter into an agreement with their business partners that seeks to limit a spouse's interest in case of divorce, absent a prenuptial agreement, marital agreement or other transmutation agreement, because of issues with spousal consent and the fiduciary duties that each spouse owes to the other.

There are three main approaches for determining the value of a business: 1) an income-based approach; 2) a market-based approach; and 3) an asset-based approach.

Speaking in the most general terms, the income-based approach seeks to determine the value of a business by assessing the present value of its expected future earnings. The market-based approach is what it sounds like - a business value is determined by comparing it to other similar businesses. (Think of "comps" in real estate). This is a typical approach when dealing with a closely held corporation. The last approach being discussed is the asset-based approach wherein the assets of a business are given a fair market value which is then off-set by liabilities.

Business appraisals must be conducted by a professional, usually a CPA or forensic accountant. For cost saving measures, the parties can select a joint appraiser, but usually each party will have their own appraiser, or the court will appoint a "court's expert." Business appraisals can be quite costly, typically running between $5,000-$20,000 or more, so the utilization of a joint expert or a court's expert can be financially prudent.

The expert will inspect financial documents, visit the business, and speak with key personnel. It is an intrusive, but necessary task, in order to determine the value that the community has in a business interest.

If you a have a business interest and are contemplating divorce, conducting preliminary "divorce planning" is a prudent and worthwhile investment. Divorce planning can allow you to make wise changes before divorce litigation is filed, or at the very least, enable you to be prepared mentally and financially for the anticipated process. Do not hesitate to contact Kring & Chung, LLP to set up a consultation to address your divorce plan.

Changes to Mechanic's Lien Forms and Procedures Effective January 1, 2011

By: Kyle D. Kring

To address concerns by owners regarding lack of notice of Mechanic's Liens, particularly in residential construction, California legislators enacted new forms and procedures which are now required beginning January 1, 2011. All contractors should be aware of the new forms and procedures. Assembly Bill 457 amends California Civil Code §§ 3084 and 3146 to reflect the new changes.

Prior to this legislation, there was no requirement that a contractor inform the property owner that it had recorded a Mechanic's Lien on the owner's property. Under the new law, a Mechanic's Lien and Notice of Mechanic's Lien must be served on the owner of the property, or on the construction lender or the original contractor if those parties cannot be served, at the time the lien is recorded. If they are not properly served, as provided by the amended statute, the lien is unenforceable as a matter of law.

Further, the new law also requires a "Proof of Service Affidavit" to be completed and signed by the person serving the Notice of Mechanic's Lien.

Lastly, after filing an action to foreclose on the Mechanic's Lien, a Notice of Pending Action (or "lis pendens") must be recorded no later than 20 days after the filing of the Complaint Foreclosing on the Mechanic's Lien. Recording of a Notice of Pending Action when the claimant files a complaint to foreclose on the Mechanic's Lien is now mandatory.

If you have any questions concerning the new Mechanic's Lien forms or procedures, please contact Kyle D. Kring or Timothy J. Broussard at Kring & Chung, LLP.

Kyle D. Kring is a Managing Partner with Kring & Chung, LLP. He can be contacted at (949) 261-7700 or kkring@kringandchung.com.

Attorneys in the Community

Kenneth W. Chung will be presenting a seminar to more than 50 real estate agents at Team Spirit Realty on legal issues arising out of the purchase and sale of business opportunities. Anna Greenstin also recently presented a seminar to Team Spirit Realty on short sales and foreclosure issues.

Kring & Chung Attorneys Named in Super Lawyers

Congratulations to Kyle D. Kring and Kenneth W. Chung for their selection and designation in 2011 Southern California Super Lawyers. The Super Lawyers selection process includes peer nominations, a blue ribbon panel review and independent research of candidates. The list of Super Lawyers is published by Southern California Super Lawyers magazine. The final published list represents no more than five percent of the lawyers in California.

Attorney Spotlight

Congratulations to Shane Singh of our Sacramento office for prevailing on a Federal Motion for Summary Judgment on behalf of Starbucks Coffee Company. Singh is a Partner in our Sacramento office and he specializes in defending business and landowners from disability access (ADA) claims. In this matter, Singh argued that the plaintiff did not encounter any illegal "barriers" to his access by matter of law. The court agreed and granted judgment in favor of Starbucks.

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.

Letter of the Law: January 2011

IN THIS ISSUE:

Delayed Discovery Rules

3 Easy Steps to Manage the Risk of Products Liability

Top 10 Reasons to Settle

Delayed Discovery Rules

By: Brendan J. Coughlin

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

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

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

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

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

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

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

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

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

3 Easy Steps to Manage the Risk of Products Liability

By: Laura C. Hess

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

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

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

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

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

Step 2: Send a consistent and accurate message.

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

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

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

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

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

Top 10 Reasons to Settle

By: Judge Thomas Thrasher (Ret.)

1. Prevent adverse publicity

2. Clients avoid emotional trauma

3. Uncertainty of jury verdict

4. Cannot depend on witness availability or testimony

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

6. Substantial cost involved

7. Settlement is final, no appeal

8. Avoid risk of adverse judgment

9. Money is paid now

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

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

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

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

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