The Letter of the Law: March 2015

On Behalf of | Mar 1, 2015 | Newsletter

Real Estate Law: How to Clear Title to Real Property – The Basics

Construction Law: Reforms to Construction Defect Litigation Signed Into Law in Nevada

Employment Law: A Parent Corporation May Be Liable for the Nonpayment of Wages By its Subsidiary

How to Clear Title to Real Property – The Basics

By: Lance Adair

California law provides a statutory method of resolving conflicting interests in real property, known as an action to “quiet title.” A quiet title action may be brought to establish-or to clear title against-any kind of claimed title or interest in real property. The action is available to anyone who holds an interest or a claimed interest in the property.

Quiet title actions are typically brought to establish or defeat easement claims or to resolve competing claims of legal or equitable ownership. But the remedy is not limited to these more or less straightforward situations. The author of this newsletter recently handled a quiet title case involving disputed rights and obligations arising from the foreclosure of a developer’s ownership interest, water rights and development rights in approximately 1,100 acres of land covered by a complex, multi-party development agreement.

There is no specific statute of limitations for an action to quiet title; the applicable limitation period generally is based on the underlying legal theory of relief. However, an action to quiet title against a known adverse claim must be brought within five years of the first assertion of the adverse claim. Any question regarding a possible statute of limitations issue should be brought to the attention of an attorney at the earliest possible time.

A quiet title judgment generally will be binding as against all persons, known or unknown, provided that the procedural requirements of the quiet title statute have been met. If the action is handled properly, the quiet title judgment should result in a clear and marketable title that can be insured by any title insurance company.

A quiet title action must be distinguished from an action to remove a “cloud” on title created by the existence and/or recordation of a particular legal instrument. The proper form of action in that type of case typically will be an action for cancellation or “reformation” of the instrument.

Reforms to Construction Defect Litigation Signed Into Law in Nevada

By: Robert L. Thompson

On February 25, 2015, Governor Sandoval signed into law Assembly Bill 125 which significantly reforms Nevada’s construction defect law statute, also known as “Chapter 40.” The reforms to the statute have been an ongoing issue in previous legislative sessions over the past 10 years and will have a significant effect on subsequent construction defect litigation in Nevada.

Originally, the purpose of Chapter 40 was to prevent large scale construction defect litigation and frivolous lawsuits during the construction boom in Southern Nevada during the late 1990’s and early 2000’s. The law placed a requirement that before a homeowner could pursue litigation against a general contractor or subcontractor, they had to serve the contractor with a notice of alleged defects and allow the general contractor up to 90 days to come out and inspect and repair the defect. The original intent was obvious in that it gave the contractor a chance to fix the alleged defect rather than face a lawsuit and allow a quick remedy for the homeowner.

The problem with the statute became clear early on. First, just because a contractor agreed to repair alleged defects, did not mean the homeowner had to agree to accept the repair. In fact, the homeowner could declare that the repair was incomplete and then pursue litigation against the contractor for the original defect allegation and the defective repair. As such, attorneys for general contractors and subcontractors would often have to caution their clients on performing such repairs as to risk additional exposure in future litigation.

The second problem with Chapter 40 was its provision awarding homeowner attorney fees and expert costs. While this seemed like a generous provision at first, it quickly became abused by homeowner attorneys. Even if a contractor came out and performed repairs, they were still given a bill for the homeowner’s attorney fees and any costs associated with hiring an expert to identify potential defects. Additionally, this practice was also abused frequently by attorneys who would sign on clients under the impression that they would pursue action for the original defect they complained about only to find out that the experts hired by the attorneys would make numerous (and often unsupported) allegations of defects on the property. For instance, a homeowner who complained about a roof leak and hired an attorney would learn that the attorney hired an architect, a civil engineer, and electrical contractor, and a geological engineer who would come up with over fifty new defect allegations that the homeowner never complained about in the past. These experts were often the same ones retained by the handful of law firms that based their business practice off of these lawsuits. The expert reports were generally the same for each house with the exception of changing the name and address on the report. This resulted is the homeowner being dragged into lengthy litigation which could take up to five years to resolve over issues they had not intended to pursue in the lawsuit.

Assembly Bill 125 provided major reforms to these practices. First, it revised the statute to require homeowners to first resolve any potential remedies with the contractors through any warranty provisions that were provided. In the past, homeowner attorneys would bypass this measure and just serve a Chapter 40 notice and then proceed to litigation (often within 2 years of the home being built). This will be beneficial to the homeowner because contractors generally have an entire department in their company to handle warranty claims and they can be resolved quickly. Second, the bill abolished the attorney fees and costs provision. Now, the homeowner will have to hire their own attorneys and experts, which will reduce the numerous amount of frivolous allegations that were often added to the original homeowner complaint. Finally, the statute reduced the time to bring a construction defect lawsuit from ten years to six years which is much more in line with Nevada’s statute of limitations for other tort and contract actions.

With the elimination of the attorney fees and costs provision, the attorneys for the homeowners will be more inclined to only pursue litigation in clear cut cases where there are actual defect allegations. This is also in line with several other tort statutes in the country which require each side to bear their own attorney fees and costs. Furthermore, with the risk of litigation being reduced, attorneys for the contractors will be more inclined to advise them to go forward with making the repairs to any alleged defects. This end result will be the homeowner having the original defect repaired and the contractor avoiding years of large scale litigation. Essentially, Chapter 40 will be more in line with its original intent which was to ensure a quick and effective remedy for homeowners who have defect claims and reduce the amount of frivolous litigation.

A Parent Corporation May Be Liable for the Nonpayment of Wages By its Subsidiary

By: Alis Moon

In Castaneda v. Ensign Group, Inc., (2014) 229 Cal.App.4th 1015, plaintiff, a former employee of Cabrillo Rehabilitation and Care Center (“Cabrillo”), filed a class action against Cabrillo’s parent company, The Ensign Group, Inc. (“Ensign”) for nonpayment of minimum wages and overtime wages.

The employee alleged that the parent corporation was his employer because: (1) it owned and controlled Cabrillo; and (2) it controlled the training, supervision, work requirements, work condition and employee benefits for the employees who worked at Cabrillo.

In deciding whether Ensign could be liable as a joint employer, the Court of Appeal pointed out that an entity that controls a business enterprise may be an “employer” even if it did not “directly hire, fire or supervise” the employees. Multiple entities may be considered employers where they “control different aspects of the employment relation.” For example, when an entity such as a temporary employment agency hire and pays an employee, while an entirely different entity supervises the employee’s work, both entities can be considered that employee’s “employer.”

Ensign argued that it was not plaintiff’s employer as it is purely a holding company that has no employees and is not engaged in the direction, management or control of Cabrillo or its employees. Ensign even introduced a written agreement entered into with Cabrillo, stating that Cabrillo’s employees were its “own” employees.

Plaintiff, on the other hand, argued that Ensign did in fact exercise control over Cabrillo’s operations and employees. It was undisputed that Ensign owned all of Cabrillo’s stock. Plaintiff introduced evidence showing that Ensign exercised control over Cabrillo’s workplace policies, and provided equipment and computer systems, including employee timekeeping systems for Cabrillo. All of Cabrillo’s new hires were shown Ensign “policy and training videos,” Ensign had the ability to discipline Cabrillo’s employees, and Ensign handled the traditional employee benefits including medical, dental, vision, and 401(k) savings plans for all of Cabrillo’s employees.

After weighing the evidence, the Court of Appeal concluded that a trier of fact could reasonably infer that Ensign was plaintiff’s employer. Thus, even though Ensign was merely a corporate parent with no employees, it could nevertheless be liable for its subsidiary’s failure to pay overtime and minimum wages under the joint employer theory.

This case emphasizes the need for companies to be cautious in maintaining separate, distinct and independent corporate structures in order to avoid joint employer liability.


Jon J. Carlston Joins the Las Vegas, Nevada Office

Kring & Chung would like to welcome Jon Carlston to the Las Vegas, Nevada office. His litigation-based practice focuses in the areas of commercial, property, landlord/tenant, personal injury, and family law disputes. Mr. Carlston began his law career as a judicial law clerk for a number of Clark County, Nevada, judges before moving on to private practice. Mr. Carlston handles all facets of case management and litigation, including mediation, arbitration, trial, and appeal. He is accomplished at litigating a wide variety of cases for both businesses and individuals.

2015 Global Awards Recipient

Corporate LiveWire has selected Kring & Chung, LLP as a 2015 Global Awards recipient in the area of Labor and Employment. The Global Award recognizes businesses that display excellent standards and incredible performance across the globe. Corporate LiveWire’s team of journalists work to provide business professionals and individuals in the corporate and business community with information on the latest news and developments around the world.

SCORE Workshop – Avoiding Employment Related Litigation

Partner, of our Irvine, CA office will be presenting a workshop on how to avoid employment related litigation from 5:00 p.m. to 8:00 p.m. on March 24, 2015 at Lake Forest City Hall located at 25550 Commercentre Drive, Lake Forest, CA 92630. This workshop covers the potential pitfalls of employment issues and how these mistakes can lead to costly litigation. Topics include the hiring process and avoiding discrimination; employee handbooks; wage and hour issues; overtime and meal/rest breaks; handling internal complaints; discipline and performance reviews; independent contractor vs. employee; and wrongful termination. A question-and-answer session will follow her presentation. There is no cost to attend the workshop.

Score Seminar – Common Legal Questions for Start-up Businesses

Matthew A. Reynolds of our Irvine, CA office will be conducting a workshop on April 16, 2015 from 6:00 PM to 9:00 PM regarding common legal questions for start-up businesses. New business owners often have questions regarding the formalities required to get their business off the ground. This seminar assists the small business owner in determining the best legal structure for their business. In addition, the seminar addresses the common types of contracts small business owners encounter and provides attendees with tips for entering contracts. Finally, the seminar will also touch on protecting the intellectual property of a small business. The workshop will take place at Fullerton Public Library, 353 W. Commonwealth Ave., Fullerton, 92832. There is no cost to attend the workshop.


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