New(er) Business Law Words and Phrases – Definitions of Critical Business Law/Finance Terms

Posted by Mack W. Borgen January 30th, 2023

Blog No 160

January 31, 2023
By Mack W. Borgen

Call Me Anytime

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or Corporate, Business or Real Property Law Matters

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New(er) Business Law Words and Phrases

 Introduction

Most of us have long ago given up trying to keep up with the alphabet soup names of our many federal and state agencies and other economic terms or references, but here is a quick list of some terms and phrases which should be noted. 

“Ban the Box” and “Fair Chance Acts:” State or local legislation which limits employers access to a job applicant’s criminal history pre-offer. 

Clawback Rules: SEC or other laws or regulations requiring corporations to recover incentive-based compensation wrongly received by a current or former executive officer during a defined prior period of time (usually the three (3) years prior to the triggering event or finding of liability). 

DEI:    Diversity, equity, and inclusion. Many major US companies are seeking to enhance their “DEI” through various methodologies and strategies relating to, for example, recruiting and through the use of ERGs.

ERGs: Employee resource groups. ERGs are networks of employees formed around common interests. It is argued by some that such ERGs have been effectively used by corporations to improve morale and performance of employees. 

ESG:   Environmental, Social, and Governance (e.g., corporation’s ESG criteria now sometimes required to be disclosed by investment companies and advisors). A short-phrased reference to this increasingly important set of criteria used by investors in their evaluation of the prospective investments in various corporations or industries.

Greenwashing: When an organization or corporation makes false, unsubstantiated, or misleading statements or claims about the ESG sustainability of a product or service (e.g. “sustainable” practices or low carbon emissions or “ethically sourced” products) or even about its business operations which such statements or claims may give rise to the initiation of false advertising or fraud actions by a class of consumers or, for example, environmental or some other ESG organization. 

PAGA: California’s “Private Attorneys General Act.” Enacted in 2004, PAGA authorizes aggrieved employees to file lawsuits against their employers to recover penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. The statute was originally seen as a way to “deputize” citizens to act as private attorneys general, and it arguably has been a useful tool especially for low wage workers to enforce their labor rights. In recent years, there has been a significant increase in the number of PAGA lawsuits – 6,502 PAGA notices in 2021 alone. However, this increase is largely the work of a select small group of law firms which specialize in PAGA lawsuits and which receive 33% of the workers’ total recovery. To date, small and mid-size businesses and hospitals have faced the brunt of these cases.

Pay Scale: The salary or hourly range that an employer reasonably expects to pay for an advertised employment position. This range would normally not include bonuses, tips, or other benefits. If the hourly or salary range is based upon a piece rate or commission, then the piece rate or commission range which the employer reasonably expects to pay must be included in the subject job posting.

Transparency Laws: Laws requiring a corporation (or other business entity) to disclose information either to its shareholders or other owners or, in certain cases, to the public. 

WARN Act: (Federal) Workers Adjustment and Retraining Notification Act. Enacted in 1988, the WARN Act protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of any plant closing or mass layoff. 

Zombie Foreclosure. A horrific situation whereby a bank initiates a normal foreclosure by the delivery of a notice of default to the homeowner, but then the bank knowingly and intentionally does not complete the foreclosure. As a result, the homeowner (sometimes unknowingly) remains the title owner and can be later pursued by cities and counties, homeowner associations, and even utilities for property taxes, property insurance, past due utility bills, and property maintenance obligations. This horrendous practice by banks became a major issue after the 2008 mortgage crisis in which it was estimated that more than 300,000 homes became, de facto, (a) abandoned via zombie foreclosures and, (b) the problems of local communities and the mortgagee-defaulting property owners. During the tricky housing market in which the U.S. is in, it is feared that banks will again sometimes use this practice to avoid the responsibility attendant to owning a piece of property via its own foreclosure.

Recommended Article of the Month: Wood, Robert W., “Tax Myths about IRS Statute of Limitations, Business Law News (December 2022), p. 34.

 Quick-Reference List

  • Business and Financial Accounting Terms and Phrases – 

Most business owners and their attorneys routinely use, review, or incorporate data from a businesses’ income statement and from other associated accounting statements. Set forth below is a quick-reference list of some of the primary financial accounting terms used in or in association with such financial statements and reports. 

COGS: Cost of Goods Sold (Direct costs that can be easily matched to revenue such as cost of raw materials and production costs). 

Earning Before Tax: Operating Income less interest expense.

EBIT: Earnings before Interest and Taxes (i.e., Operating Income).

EBITDA: Earnings before interest, taxes, depreciation, and amortization.

EPS: Earnings Per Share (i.e., Net Income divided by number of common shares).

Basic EPS: Denominator is the company’s total number of common shares outstanding.

Fully Diluted EPS: The denominator is both (a) the company’s total number of common shares outstanding plus (b) the additional shares that could be available from the conversion of stock options, warrants, and other convertible securities). 

Financial Statements: Basically, there are three (3) types: income statement, balance sheet, and statement of cash flow. 

Gross Profit: Revenue less COGS. 

Net Income: Operating Income less Net Interest and Income Tax Expense

Net Income Margin: A percentage (%) – Net Income/Revenue.

Net Interest Expense: Interest Expense less Interest Income.

Net Revenue: Gross revenue less adjustments such as sales discounts, returns, delayed payments, and expected uncollectible amounts. 

Operating Income: Gross Profit less SG&A (Measure of company’s profits from normal operations).

Operating Margin: A percentage (%) – Operating / Revenue. 

SG&A: Selling, General and Administrative Costs (Costs which cannot easily or directly matched to revenue and can include costs such as marketing and advertising, professional services, R&D, and office expenses). 

Tax Expense: Income taxes required to be paid to various tax authorities.

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Personal Note:

Some of us – I know — not you!!, are getting older.

I recently completed my own personal copy of The White Binder.

It helped to organize and present all information necessary for my heirs, relatives, and friends.

It took me three (3) days to complete.

It is entirely up to you, and I know that as the author of this book,

I am biased, but I recommend that you get your copy today.

It may be incredibly helpful to you and for your loved ones in organizing your life,

In compiling information and data about your assets and liabilities,

and in presenting your desires.

Get Your Personalized Copy Today

 The White Binder (2022)

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7 Major New Business / Real Estate Law Developments – The Year 2022 in Numbers

Posted by Mack W. Borgen January 16th, 2023

Blog No 159
January 17, 2023
By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards.

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or Corporate, Business or Real Property Law Matters

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 Looking Back at the Year 2022

A Few of the Important, or at least Curious, Numbers

    2      Job Openings. Number of job openings per job seeker for the first time in two decades.

  8    Federal Student Loans. Number of times federal student loan payments has been extended.

  25      Gun Carry Rights. Number of U.S. states where it is now legal to carry a gun without a license. In 2010, there were only two such states – Vermont and Alaska. However, in the last three years, 11 more states have joined the list of states which no longer require a license, a permit, or even any gun safety knowledge or training.

  29th    US Life Expectancy. U.S. life expectancy ranking amongst all 44 OECD developed nations. The U.S. life expectancies are, respectively, 76.1 years for men (at birth) and 81.1 years for women (at birth). Compare the U.S. life expectancy with, for example, Monaco (89.4 years!), Japan (86.1 years), and Singapore (85.4 years).

129th   “Safest Nation” Ranking.  U.S.’ sadly low “safest nations” ranking. The U.S. ranks just below Azerbaijan and just above Brazil. Iceland, New Zealand, Ireland(!), Denmark, and Austria are the five safest nations in which to live.

11.9MM   Poverty Line. Estimated number of U.S. children living in households below the poverty line.

$       0 Change in Real Wages. Despite the highest pay raises for workers in seven (7) years, $0 is the average amount of inflation-adjusted dollars that workers received in 2022.

$3.5BB    Financial Institutions Reform. Aggregate amount consumers will start “saving” every year from their banks as the result of regulators pressuring or requiring financial institutions to curtail overdraft fees and certain other fees and charges. 

14 Months  Family “Excess Savings.” Average length of time that a family’s “excess savings” from the pandemic were likely to last before inflation and the cessation of pandemic-related payments forced people to dip into their cash reserves.

Overall, 2022 was another confusing year with the following:

Record High Corporate Profits

Unprecedented Levels of Corporate Concentration

Highest-Ever Levels of CEO Compensation

Steadily Increasing Levels of Wealth Disparity in the U.S.

Maybe even more long-term troublesome for our country and our children, since 2010 the median pay for U.S. teachers has decreasedDown 4.4% for high school teachers and down 8.4% for elementary and middle school teachers!

Recent Business, Contract,

and Real Estate Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office. 

  1. Contracts – More States Block Non-Compete Agreements. For many years, employers have used non-compete and non-solicitation agreements to stop former employees from competing with a company or from soliciting the company’s customers for a specific period of time after their departure from the company. Increasingly, state legislatures and court rulings have limited or wholly invalidated such agreements. Some states, like California, have entirely banned such agreements (with narrow exceptions). Nine (9) states prohibit such agreements unless the worker earns above a designated income level. Other states have restricted their enforceability if they do not, for example, have tightly defined geographical/territorial restrictions. Because of these growing restrictions and because companies have valid reasons for assuring that a former employee does not inappropriately compete with his former employee, it may be prudent to use other types of post-employment protection agreements by using, for example, carefully drafted trade secrets or confidentiality agreements. Note: According to a 2021 article in the Journal of Law and Economics, about 18% of American workers have noncompete agreements (as compared with an earlier study showing 38%).

             Update Alert: On January 5, 2023, the FTC announced a sweeping new proposed rule banning nearly all non-compete agreements between employers and workers in the U.S. The rule, if finally adopted, would supersede all state laws and prohibit the use of nearly all forms of non-compete agreements in the U.S. The proposed rule is based upon the FTC determination that such agreements inherently constitute an “unfair method of competition.” The rule would also prohibit such agreements with respect to both employees and all other associated workers of a corporation including, for example, even independent contractors. Lastly, the proposed rule (a) would apply to both new and existing employees and (b) would require corporations to provide notices of rescission with respect to all existing non-compete agreements. The only narrow exception relates to sale-of-business situations where the party is a “substantial owner” (i.e., holding at least 25% interest) of the business being sold.

  1. Employment Law – California’s New Transparency and Disclosure Requirements. Effective January 2023, all California employers with 15 or more employees* are now required to include a pay scale in every open job posting. The California Labor Commissioner has clarified that these requirements would also be applied to postings for remote workers if the position may “ever” be filled in California. Persons claiming violation of any such required pay transparency have one year to either file a complaint with the Labor Commissioner or initiate a civil action for retaliation. In addition, all employers must maintain (and keep for three years after such employees’ dismissal or retirement) records of job title and salary history for all employees, and all private employers with 100 or more employees must submit pay data reports to the CA Civil Rights Department.

* Caution: Even smaller companies are required to provide pay scale information upon the reasonable request from any job applicant. 

  1. Corporations – New California Warranty Law. Although seemingly a minor and “technical” change in California’s warranty law (effective July 1, 2023), the new warranty law should be noted by California corporations which sell products with written warranties. Normally, warranties measure their duration from the date of the sale of the product. However, due to recent changes in the Song-Beverly Warranty Act, warranties may now only commence upon the delivery date of the product. Almost more importantly – failure to make this warranty duration clear in the written warranty documents can give rise to penalties, damages, fees, and costs. 
  1. Corporations – SEC Adopts Final Clawback Rule. The SEC is now effectively requiring publicly-traded corporations (i) to adopt a written clawback policy and (b) to file such clawback policy as an exhibit to their annual report. Under the Clawback Rule, the policy must provide for recovery of incentive-based compensation erroneously received by current and former executive officers during the three (3) fiscal years preceding a required accounting restatement. Basically, the amount subject to such clawback is the excess of the compensation received over the amount which would have been received based upon the restated corporate income amounts. 
  1. Real Estate – Landlord-Tenant Law – Landlord Obligation to Conduct Specific Background Checks for Their Apartment Employees. Florida recently enacted legislation requiring landlords of “non-transient” apartments to conduct specific background checks for all employees hired to work in such apartment buildings. While the legislation obviously applies only to Florida properties, it serves as a good reminder for prudent California-based landlords to consider using articulated procedures and conducting document background checks for all employees of such properties. 
  1. Contracts – The Exercise of “Sole Discretion.” A recent Delaware Supreme Court decision held that even when a contractual provision vests in a person the absolute right to make a contractual determination, such person is still required to exercise such right “in good faith.” In this LLC case, the Court held that even though an Operating Agreement granted full designated rights to the “holders of the majority of the outstanding (LLC) units,” such majority must exercise those rights subject to an implied covenant of good faith and fair dealing.” 
  1. Commercial Leases – Renewal of Lease May Be Implied by Parties’ Conduct. If a lease contains renewal provisions, there is normally a required time for delivery of written notice by the tenant to the landlord of the tenant’s election to renew the lease. However, despite even express renewal requirements in the lease, the landlord may be later estopped from denying the renewal if, as occurred in several recent cases, (a) the tenant remains in possession and pays rent, and (b) the landlord continues to accept such rent. In these types of instances, the court may find that regardless of express renewal requirements set forth in the lease, the landlord may be estopped from terminating the lease due to the parties acting as if the renewal had occurred.

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Starting the Year Off Easy – The 50 Best Song Titles of All Times

Posted by Mack W. Borgen January 2nd, 2023

Blog No 158

January 3, 2023

By Mack W. Borgen

Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (3 Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013).

As advertised in The New York Review of Books. Recipient of Eight National Book Awards

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Next Week: Major Real Estate, Business Law Developments

BUT FOR NOW –

Let’s Start the Year Out with a Little Light Fun

 The 50 Best Song Titles of All Time 

(Country Western Division)

Number of Best Song Titles of All Time – By Decade

Decade            Number of Best Song Titles

1950s                                        3

1960s                                        4

1970s                                       17

1980s                                        7

1990s                                       12

2000s                                        6

2010s                                         1

Barbara Mandrell     I Was Country When Country Wasn’t Cool (1981)

Billy Boil                      I Still Miss You, Baby, But My Aim’s Getting Better (2008)

Billy Rae Cyrus         I’m So Miserable Without You, It’s Like Having You Here (1992)

                                       I Want My Mullet Back (2006)

 B.J.Thomas             Heh, Won’t You Play Another Somebody Done Somebody Wrong Song (1975)

 Brooks and Dunn      Boot Scootin’ Boogie (1992)

 Chuck Mead            She Got the Ring and I Got the Finger (2009)

 Crystal Gayle          Don’t It Make My Brown Eyes Blue (1977)

 Dan Hicks                How Can I Miss You If You Don’t Go Away (1969)

 Earl Thomas Conley             Holding Her and Loving You (1983)

 Eddie Rabbit           Every Which Way But Loose (1978)

Garth Brooks           Ain’t Going Down (‘Til the Sun Comes Up) (1993)

Gary Stewart            She’s Actin’ Single (I’m Drinkin’ Double) (1975)

George Jones           I Always Get Lucky with You (1983)

George Strait           You Look So Good in Love (1983)

Gretchen Wilson     One Bud Wiser (2005)

Hank Williams Jr.  All My Rowdy Friends (Have Settled Down) (1981)

Hank Williams       Long Gone Lonesome Blues (1950)

Joe Stampley          I’ll Marry You Tomorrow, But Let’s Honeymoon Tonight (1978)

John Denver           Thank God I’m a Country Boy (1975)

John Michael Montgomery              I Love the Way You Love Me (1993)

Johnny Cash             Sunday Mornin’ Comin’ Down (1972) and Ray Stevens (1969) (With Kris Kristofferson)

Johnny Paycheck    Take This Job and Shove It (1977)

Johnny Russell      Rednecks, White Socks and Blue Ribbon Beer (1973)

Kathy Mattea          Eighteen Wheels and a Dozen Roses (1988)

Kenny Chesney      You Had Me from Hello (1999) (Based on Tom Cruise’s famous script line in the 1996 movie Jerry McGuire)

Kitty Wells               It Wasn’t God Who Made Honky Tonk Angels (1952)

Lefty Frizzel            If You’ve Got the Money, I’ve Got the Time (1950)

Loretta Lynn           Don’t Come Home a Drinkin’ (With Lovin’ on Your Mind) (1966)

Mark Chestnutt     It Sure Is Monday (1993)

Molly Ivans             Her Teeth Were Stained, But Her Heart Was Pure (1987)

New Riders of the Purple Sage        She’s Lookin’ Better after Every Beer (1976)

Oak Ridge Boys     Y’All Come Back Saloon (1977)

Phil Vassar             Six-Pack Summer (2001)

Roger Miller          You Can’t Roller Skate in a Buffalo Herd (1965)

Ronnie Milsap      Daydreams about Night Things (1975)

Rusty Ford             If the Phone Don’t Ring, You’ll Know It’s Me (2012)

Sara Evans             Three Chords and the Truth (1997)

Steve Wariner      Holes in the Floor of Heaven (1998)

The Kendalls        Heaven’s Just a Sin Away (1977)

Tim McGraw        Refried Dreams (1994)

Toby Keith            A Little Less Talk and a Lot More Action (1993)

                                  How Do You Like Me Now? (1999)

Tom T. Hall          (Old Dogs, Children and) Watermelon Wine (1972)

Trick Pony            Pour Me (2000)

Vince Gill              One More Last Chance (1993)

Waylen Jennings       Are You Sure Hank Done It This Way? (1975)

Wayne Carter      My Wife Ran Off with My Best Friend, and I Sure Do Miss Him (1996)

Wayne Stewart    I Keep Forgettin’ I Forgot about You (1967)

Willie Nelson       Mama, Don’t Let Your Babies Grow Up to Be Cowboys (With Waylon Jennings) (1975)

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Trickle Down Economics and Trickle Up Inflation – 7 Major Business and Real Estate Law Developments

Posted by Mack W. Borgen December 5th, 2022

Blog No 157
December 6, 2022
By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards
See my legal articles and other blogs at  https://www.mackwborgen.com/  . Then, just click the “Blogs” tab.

Call Me Anytime

General Business Planning

or Corporate, Business or Real Property Law Matters

805-450-2602

Trickledown Economics and Trickle-Up Inflation

Trickledown

 Trickledow

 Trickledo

  Trickled

   Trickle

    Trickl

    Trick

   (!) 

Many Americans believe that the accelerating extent of our country’s wealth disparity must be addressed. Partly, this is because in the past 40 years, an estimated $50 Trillion Dollars has shifted from the “Bottom 90%” of the population to the top 1% wealthiest Americans. It would seem that trickle-down economics, the self-serving fad of the early 1980s and Friedman’s University of Chicago School of Economics, has steadily generated a trickle-up source of profits – for many American corporation and for an ever-smaller percentage of Americans. 

Trickle-Up Inflation 

Inflation, just like wealth disparity, has hurt most Americans. It has increased our cost of living and simultaneously diminished the buying power of our wages and salaries.

Evidence of such inflation is everywhere, but it is most vividly and visually presented to us each day as we drive by the post price signs at gas stations. With that in mind, we should look with disdain upon the less-advertised reality that oil companies (under the clever cover of inflation) have dramatically increased their prices and have booked massive profits.

In a nine-month period in 2021, four of the largest oil companies (Exxon, Chevron, Shell, and BP) recorded $174 Billion in profits with record distributions to shareholders and, in the case of a few companies, record share buybacks. We can have our “drill-baby-drill” fights next weekend, but for now we should be concerned about corporations using the cover of inflation to artificially increase their product prices. 

Recent Business, Contract, and Real Estate

Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office. 
  1. Employment Law – California Privacy Rights Act (CPRA) – More Changes Effective January 2023 – Important Pending Legislation. Very summarily, the CPRA grants California consumers heightened rights and control over their personal information. This legislation is in addition to the previously-enacted California Consumer Privacy Act, and it provides rights to both individuals and employees in California. For example, the new rights of California employees include (a) their right to notice regarding the types of personal information their employer collects, sells, or discloses, and (b) the right of employees to correct or rectify the personal information. Because of the substantial changes in many aspects of California employment law, it is recommended that certain employers (especially those with over 15- and 50- employees) have their employment file and information practices checked by a qualified California employment law counsel at least once every two to three years. Such an internal audit, even if it is “capped” at six- to -ten hours, could save employers burdensome and costly noncompliance penalties and audits. 
  1. Corporations – New Indemnifications for Corporate Officers. Delaware has made it permissible for corporate organizational documents to be even more favorable to corporate officers. Pursuant to a new provision of the Delaware General Corporation Law, corporations are now authorized to include a provision in their certificate of incorporation limiting the liability of corporate officers for monetary damages. Previously, this type of provision under Delaware law was only available to corporate directors. Under the new law, corporate officer liability cannot be fully eliminated (e.g., liability for the dangerously vague standards such as for breaches of duty of loyalty or acts not in good faith), but corporations can eliminate certain types of monetary liability such as for an officer’s “breach of a duty of care.”
  1. Real Estate PACE Loans. The word “PACE” stands for “property assessed clean energy,” and PACE financing is a fast-growing source of potential capital to developers and property owners throughout the US. PACE loans may be available to both commercial and residential property owners, and oftentimes such loans can provide low-rate, long-term financing to address the upfront costs of certain types of “environmentally-friendly” improvements. Examples of typical projects which may qualify for PACE financing include (i) energy-efficient heating, (ii) ventilation and air-conditioning upgrades, (iii) lighting, insulation, windows, and solar heating systems. 
  1. The Advisable Use of Board-Certified Counsels in Certain Circumstances. Certain areas of the law are becoming more and more detailed and require more and more specialized, focused expertise. In retaining or recommending counsel, it is sometimes advisable to focus upon counsels with certain certifications. The theory is that such board-certification provides a degree of assurance of the lawyer’s expertise. Some believe that there may be too many certifications programs which, in turn, both dilutes the usefulness of the certifications and confuses the client. For example, board certification is now offered by eight national private organizations with eighteen programs accredited by the American Bar Association. This is in addition to the many robust state programs such as those of California and Texas. Nevertheless, when trying to identify a highly qualified attorney within a reasonably narrow area of the law, such certification can be useful because to obtain such certification the attorneys may need to have as much as five years’ experience and must pass a rigorous examination in the subject specialty area. 
  1. Contracts – The Use of Contractual Risk Transfers. Especially in the context of commercial property development, the parties (owner, general contractor, etc.) face numerous risks resulting from accidents, injuries, negligence, bad weather, or even some acts of God. The careful use of contractual risk provisions can materially protect your client and the project. Such al risk transfers are achieved through the use of contractual obligations which expressly pass on the defined potential risk(s) to another party. Examples of such risk transfer provisions include indemnification agreements or provisions, waivers of subrogation, the affirmative obligation of third-parties (such as general contractors) (i) to obtain additional insured endorsements so that the owners are contractually indemnified by the general contractor and (ii) to identify such party as an “additional insured” under the contractor’s insurance policy. 
  1. Direct IRS Audits of Multi-Member Partnerships. Under the landmark changes in 2018, the IRS can directly audit – and now is auditing – certain large partnerships and many multi-member LLCs. This can now be done rather than  separately auditing the partners or members. After such audits, the IRS can assess tax, interest, and penalties directly against such entities. There is a provision whereby not-so-large partnerships can exercise their right to opt-out of the comprehensive audit regime (the “CPAR”). As a part of any partnership or LLC formation or possibly thereafter on an annual basis, it should be determined by the entity’s tax counsel or advisor whether it is feasible and advisable for the new entity to opt-out of the CPAR. 
  1. Buy-Sell Agreements. Far too often the governance documents of corporations, partnerships, or LLCs, do not incorporate critical buy-sell provisions. This can be a serious and consequential oversight. Buy-sell provisions provide the mechanism whereby a person (or entity in certain circumstances) can exit in the instance, as the case may be, of an individual’s retirement, death, disability divorce, or employment termination. More specifically, majority owners do not want to be stuck with a minority partner who is not making meaningful contributions to the company or, worse still, is interfering with the successful operation of the business. Conversely, well-drafted buy-sell provisions allow minority owners to have an opportunity to monetize their minority interests. Without such redemption or exit provision, a minority investor may be stuck for years holding an illiquid, unmarketable interest in a company or business. Also of note is that the ideal time for negotiating these buy-sell arrangements is at the time of the entity’s formation. This timing is usually preferable because it, in a way, almost assures a certain balance amongst the parties because they do not know at that time to whom the provisions may eventually apply – themselves as withdrawing sellers or themselves as purchasing buyers.

 

Order by December 20, 2022

My Most Recent Publication

The White Binder (2022)

For Your Detailed Personal Asset and Liability Management,

Estate Organization, and (Detailed) Disposition Planning 

–Order Today–

Just email me at mwborgen@live.com (Mailing Address and Number of Copies)

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All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, without the prior written permission of the author.

The Real Players in Our Nation Are … – Recent Business, Contract, and Real Property Law Developments

Posted by Mack W. Borgen October 24th, 2022

Blog No 156

October 24, 2022
By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards
See my legal articles and other blogs at  https://www.mackwborgen.com/  . Then, just click the “Blogs” tab.

Call Me Anytime – General Business Planning

or Corporate, Business or Real Property Law Matters

805-450-2602

The Real Players in Our Nation

The Need for More Corporate Economic Transparency in America

– Nobody Needs a Rant Right Now – This Is JUST an Idea –

Given accurate information, most Americans can assess and evaluate the import of such information. O.k., not all Americans, but “most.” However, getting that information remains an unnecessary challenge.

Certainly, there is plenty of garbage floating about the media — and especially the social media. And yes, America and some of our leaders have far too readily embraced a pathetic tolerance for “alternative facts,” “untruths,” and “misinformation.” Admittedly, reporting mistakes occur, bias is oftentimes a component of our news, and any data is vulnerable to varying analyses and interpretations. However, even in our not-so-simple world, facts can still be facts. And data can still be meaningful.

Since we are now immersed in the season of election tension, possibly it would be useful – even encouraging – to remember a couple simple observations about our democracy. As brilliant as our Constitution is; as hard as our government may work; and no matter how many elections are held …

Democracy, at its core, is based merely upon the belief that 51% of the people are right 51% of the time.

and

As “clumsy” as our democracy is — it is certainly better than any other alternative yet conceived or designed. 

These are pretty low D-/51% standards, but they are still true. They are still important and sustaining for our democracy. Most of all, they suggest a need for tolerance and humility which is admittedly hard to find in our temporary know-it-all, blustery, conquer-style society.

But one manner by which America might start tempering its anger and regaining its self-confidence would be for there to simply be more transparency about our nation’s major corporations — because these corporations are important, because these corporations are some of the real players in our country. And mere data transparency would be useful on many levels. As we have all said to ourselves, “just give me the facts, and I’ll take it from there.”

Every month our government reports reams of data – from our nation’s inflation rate to the unemployment rate, from wage patterns to labor participation rates, and on and on. Such data is widely reported in the news. But similar or even remotely parallel data about our nation’s largest corporations is not readily available. Why?

The Data IS There! 

A great deal of core economic data is calculated each month by such corporations – especially public corporations. But such data is rarely disclosed to the public or is deeply and intentionally buried in annual reports and filings. Would it not be useful for us, both as Americans and consumers, to have ready access to some of the basic, already-calculated monthly corporate data? Would not Americans have a better understanding of our own economy and some of its corporate participants if data was available — data about changes in corporate profits and profit margins, worker wages and employee turnover rates, the marginal federal corporate tax rates actually paid, gross receipts, and maybe even the amounts these corporations pay to lobbyists, political parties, and PACs?

This is particularly important because these corporations are some of the real players in our country. Their behavior and their successes and failures affect all aspects of our economy from the changes on the stock market to the health and welfare of workers, from the growth or diminishment of wealth disparity to the prospects for the future. Surprisingly, there are less than 7,500 public corporations in America, but they employ more than one-third of all non-farm workers in this country. It is not here suggested that their power be limited – merely that we Americans have a right and need to know – on a regular reporting basis – some basic facts about these massive public corporations.

Consider this in the context of our current inflation economy. Americans need to know the extent to which price increases are “real” — or are they merely a smokescreen and opportunistic pretext for increasing corporate prices and profits. For example, it is both relevant and unnerving, at least to this writer, that the corporate profits of the top six oil companies soared last year. Why is not such information routinely demanded and widely reported? The fact that our nation’s economy is at least 50% more concentrated now than it was just 15 years ago in 2005 (think Albertsons and Kroger), should be a matter of grave concern to all Americans.

Hell, We Know What Kim Kardashian Had for Dinner Last Night!

Think of it this way: We read reviews of every AirBnB we stay at. We track local restaurants and contractors on Yelp. We have access to every piece of minutiae data about the professional athletes in our country. We rate and compare the academics and even the food and dorms at our colleges. Hell, we know what Kim Kardashian had for dinner last night. Is it not time we have ready access to comparative information about America’s largest corporations – the truly Big and Real Players in our nation’s economy, health, and well-being?

More information would allow us to know – rather than speculate — about what is occurring. And, yes, as our thoughts about our economy influence our decisions about our political system. This is just another reason America needs enhanced reporting and more corporate transparency.

As always, this is offered just an idea. Now back to work.

 Recent Business, Contract, and Real Estate Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office. 

  1. Employment Law – Important Pending Legislation. At the end of California’s recent legislative session, several particularly important employment laws were passed (pending action by Governor Newsom). Expanding legislation adopted two years ago which required employers with more than 100 employees, to report specific pay data annually, this legislation would (a) add civil penalties for failing to report such data and (b) require such data to be provided to job applicants. Another adopted bill would allow employees to leave work or refuse to show up it they feel “unsafe,” and it would prohibit employers from taking adverse action against such employees. The bill adopts a “reasonable belief” standard but specific does not include health pandemic within the definition of “emergency condition.” Lastly, legislation was adopted to assure employees the right to five (5) days “bereavement leave” upon the death of a family member and to take family leave for a “designated person” (defined to include a family member or one whose relationship with the employee is the “equivalent of a family relationship.” For the appropriate benefit of the employer, the employer may limit an employee to one designated person leave per 12-month period. 
  1. Corporate Formations – Continued Selection of Delaware as the State of Incorporation. Approximately 68% of Fortune 500 companies are now incorporated in Delaware. This state-selection preference reflects a number of different factors: low franchise taxes, ease of filing, user-friendly online services, well-developed body of corporate law, judicial expertise in corporate law, and business-friendly laws. An example of Delaware’s corporate/management bias is the state’s recent (and rather absurd) statutory enactment whereby both corporate officers and directors are exempt from monetary damages arising even from breaches of fiduciary obligations. This was briefly discussed un my previous Blog No. 155, October 2, 2022. Even with these real or theoretical Delaware incorporation advantages, for small or moderate-sized corporations and especially for such non-public corporations, California, the local jurisdiction, is normally preferable (and more convenient). Note: Some persons still follow the tired, but rarely useful, practice of incorporating in Nevada – but this rarely creates any material advantages to the corporation. 
  1. Real Property Law – Ground Leases – The Too Often Forgotten Use of Ground Leases. Reading the real estate market is nearly impossible. However, one thing is almost certain – the long-term increase in real estate value and the immediate utility of ground lease rents. In the buy/sell world of real estate, the use of ground leases is too often forgotten. A well-drafted ground lease, which is both a conveyance and a contractual agreement between the ground lessor and the ground lessee, can have extraordinary advantages to both parties. While there are many considerations to be considered (e.g., term, rental amount and periodic increases, subject provisions, financeability of improvements, use, and subordination, non-disturbance, and attornment provisions), ground leases should be seriously considered by any party contemplating selling their property – and especially if it is currently unimproved.
  1. Landlord-Tenant – Prohibition of “Self-Help Evictions” – Clarification of Distinctions between “At fault” Evictions and “No-Fault” Evictions. New California AG directives prohibit landlords from conducting unlawful lock outs and other “self-help evictions) (changing locks without court order, shutting off water or electricity). Furthermore, new California legislation generally prohibits a landlord from evicting most tenants without “just cause” except in the context of “no-fault” evictions such as then the owners wish to move into the property, remodeling that requires local permitting and which would take more than thirty (30) days, or, obviously, the intent to demolish toe unit. 
  1. Employment Law – Minimization of “Quiet Quitting” – Steps for Employers to Take. With the growing use and abuse of quiet quitting whereby the employee refuses or delays in doing anything outside the boundaries of one’s job description and to avoid burdensome litigation, corporate employers should take certain steps to minimize the adverse impact of such quiet quitting. The three most commonly-identified steps are (a) to be precise (and arguably expansive) in defining one’s job description, (b) to conduct regular and routine performance reviews, and (c) to prepare and circulate detailed employee handbooks so as to define and articulate the employer’s expectation with respect to the employee’s work. 
  1. Accurate Consumer Credit Reporting – Importance of Providing Accurate Information to Consumer Reporting Agencies. The recent case involving Hyundai (in which it was fined $19.2MM) underscores the importance of providing accurate information to consumer reporting agencies, Hyundai’s penalty imposed by the Bureau of Consumer Financial Protection was due to Hyundai failing to promptly update consumer information, failing to provide the date of first delinquency information, and failing to have reasonable identity theft and related blocking procedures. If such reporting is a component of one’s business, accurate reporting is critical and sometimes it is advantageous to have such reporting administered by retained third-parties with focused expertise. 
  1. Trade Secrets and Noncompete Agreements. Once again, another state (this time Colorado) has narrowed the enforceability of trade secrets, nondisclosure, and non-solicitation agreements. These types of agreements can be critical for the protection of one’s business – especially as they relate to true corporate trade secrets and contain non-(employee-)raiding and customer non-solicitation provisions), they must be evermore carefully drafted in light of more and more jurisdictions, in effect, placing the burden of enforceability upon the corporation rather than the (former) employee. Too often such agreements are executed, placed in an employee file, and forgotten about. It is the recommendation of this author that they be routinely (e.g., once every 2-3 years) be reviewed and if necessary, amended and re-executed.

My Most Recent Publication

The White Binder (2022)

For Your Detailed Personal Asset and Liability Management,

Estate Organization, and (Detailed) Disposition Planning 

–Order Today–

Just email me at mwborgen@live.com (Mailing Address and Number of Copies)

(Binder Format, $49.95 plus $6.95 Shipping, Pay After Delivery)

All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical without the prior written permission of the author.

 

 

Quick Facts – Some Humble Thoughts for America and 8 Major Business/Real Estate Law Cases and Developments

Posted by Mack W. Borgen October 4th, 2022

Blog No 155
October 4, 2022
By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards
See my legal articles and other blogs at  https://www.mackwborgen.com/  . Then, just click the “Blogs” tab. 

Three Thoughts for America

 The beautiful thing about learning

Is that nobody can take it away from you.

B.B. King

– 

In the end, it matters less that you can fight.

What you fight for is the real test.

John McCain

 –

And on a lighter note,

When you come to a fork in the road,

Take it.

Yogi Berra

Quick Facts

Important Tax Terms 

“Contemporaneous Records.” To substantiate deductions, the IRS requires that one keep “contemporaneous records.” This key term means that deductions cannot just be estimated and reported at the end of one’s year. Instead, substantiating records must be kept “contemporaneously,” via, for example, by keeping receipts or by keeping a log of all deductible costs and expenses. 

Marginal Tax Rate. The tax rate which would be applied to the next dollar one earns. Since our income tax rates are progressive, the next dollar one earns could be taxed for as little as zero or as high as 37%. 

Effective Tax Rate: The tax rate an individual or corporation actually pays. It is the total income taxes paid divided by a taxpayer’s total taxable income. This phrase (far more than one’s marginal tax rate) is a far more valid basis of comparison in evaluating the reasonableness of tax burden complaints by individuals, corporations, and for that matter, politicians.

 Definitions provided by the excellent Newsletter of Bryars, Tolleson Whitton LLP.

 Recent Business, Contract, and Real Estate

Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office. 

  1. Corporations – Corporate Officers Further Exculpated from Personal Liability Under New Delaware Law. Corporate Directors have considerable immunity from personal liability under existing Delaware laws. Now, by new Delaware legislation, both Directors and certain corporate officers have expanded protections for personal monetary damages even some of those resulting from a breach of fiduciary duty. While this author has serious reservations about cutting off meaningful (i.e., costly) recourse against corporate officers in such circumstances, the Delaware legislature suggested that such expanding immunity was necessary due to changes in the availability of liability insurance for such corporate officers. This is, or soon will be, another reason many businesses incorporate in Delaware regardless of their principal place of business.   
  1. Contracts – Letters of Intent – Exclusivity Provisions. Early in many business transactions, parties will prepare and sign letters of intent (”LOIs”). While such LOIs nearly always state that the terms and provisions of the LOI are not binding until final transactional documentation has been prepared, agreed upon, and signed, such LOIs sometimes include an exclusivity provision. Such provisions normally provide that for a designated period of time (e.g., 2-3-4 months) or until the parties mutually agree, the other party will not negotiate with any third-parties. In a recent New York case (but which may have parallel implications in many other jurisdictions including California), the court imposed significant liability upon one of the parties who breached the exclusivity provision – even though the underlying transaction never closed. While damages can be difficult to calculate, if an LOI contains an exclusivity provision it is highly advisable that they be honored and complied with. 
  1. Structural Integrity Reserve Study for Condominiums. Under a new Florida law, condominiums which are higher than two stories must conduct “structural integrity” and “deferred maintenance” inspections. Certainly, this legislation is in partial response to the horrific June 2021 collapse of the Surfside, Florida condominium in which 98 people were killed. While this legislation only applies to Florida condominiums, it would be prudent for all condominiums and cooperatives (and the HOAs in charge thereof), including those in California and especially high-rise condominiums, — as a matter of due care — to periodically have such structure integrity and deferred maintenance inspections.
  1. Caution Regarding Pricing Gouging under California Law. Regrettably, more and more frequently there have been state or local declarations of emergency due largely this year to fires. During such periods of emergency, local businesses must be cautious about any changes in product pricing. Basically, California law prohibits charging more than 10% higher than the price immediately before any such declaration of emergency. With respect to the sale of new products during emergency periods, prices cannot exceed 50% of the seller’s cost. This anti-price gouging law applies to a wide range of products and services – from food, emergency supplies, building materials and gasoline to repair or reconstruction services and even hotel accommodations and rental housing. As a practical matter, such enforcement is, at best, haphazard, but pricing gouging can lead to both criminal (up to 1-year imprisonment) and civil remedies ($2,500 per violation etc.). 
  1. California Establishment of Unelected Council to Set Minimum Wage/Working Conditions for 500,000 Fast Food Workers. As a result of new September 2022 legislation, the state will now appoint a 10-member Council composed of employees, employers, and “union activists” in order to set minimum wages and working conditions of fast-food workers in California. The legislation applies only to “non-unionized workplaces” and “fast food chains” are defined as those with 100 or more restaurants nationwide. 
  1. SEC Continues More Aggressive Enforcement. After its much-publicized intention to do so, the Securities and Exchange Commission (the “SEC”) over the last several months has continued more aggressive enforcement actions. Examples include its seeming willingness to exercise claw-back compensation from corporate offices, its increasing insistence upon admission of wrongdoing (as opposed to the previously standards “no admission of guilt” settlements), and its stepped enforcement against corporations which fail to present ESG (Environmental, Social and Governance) criteria and information to prospective investors. ESG is basically a set of criteria which comprise a set of standards for socially responsible investors to use in order to evaluate a corporation’s activities or proposals.
  1. The Cessation of the Libor Rate – “The World’s Most Important Number.” Although not commonly known outside the real estate and lending industries, the London Interbank Offered Rate (“Libor Rate”) has been used for decades to establish the interest rates payable in the context of many transactions. Effective as of June 2023, the Libor rate will be discontinued. New loans without fixed interest rates are now being negotiated without Libor terms, and existing Libor agreements (without provisions for replacement interest rate basis) either need to re-negotiated or will be subject to the replacement interest rate provisions as enacted now by many states and Congress.
  1. Residential Development of Commercially-Zoned Land. In order to increase the construction of multi-family, residential housing on commercially zoned land, two recent pieces have been enacted to streamline the approval process for such land use. Such legislation, unless vetoed by Governor Newsom, will take effect as of July 1, 2023. Such legislation obviously was enacted in order to accelerate the construction of residential housing, but it will also encourage owners of commercial land to more closely evaluate the possibly enhanced value and even use of their commercially-zoned properties. It is the observation of this author that the impact of this legislation (in a manner similar to the enhanced authorization for ADUs in California) has not begun to be reflected in the marketplace – or begun to be appreciated, if that is the right word, by landowners, real estate developers, and brokers.

Call Me Anytime

General Business Planning

or Corporate, Business or Real Property Law Matters

805-450-2602

 

My Most Recent Publications

The Writings of a Lifetime (2021)

A Semi-Autobiographical Writing

(Hardback: $19.95 / Paperback: Just $12.95)

The Writings of a Lifetime

and

The White Binder (2022)

For Your Detailed Personal Asset and Liability Management,

Estate Organization, and (Detailed) Disposition Planning

 –Order Today–

Just email me at mwborgen@live.com (Mailing Address and Number of Copies)

(Binder Format, $49.95 plus $6.95 Shipping, Pay After Delivery)

All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical without the prior written permission of the author.

 

A Different Kind of Article – Sometimes We Have to Laugh – The World’s Funniest Word

Posted by Mack W. Borgen September 26th, 2022

Blog No 154

September 27, 2022

By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards
See my legal articles and other blogs at  https://www.mackwborgen.com/  . Then, just click the “Blogs” tab.

NORMALLY, my articles present major legal developments or commentary about the social and economic issues facing our country.

 But sometimes, We just need a break.

 We just need to laugh.

Thus, today:

 “The world funniest word”

Compliments of Shawna S. Borgen Who First Showed Me the Word.

So, what is the word?

Technically, it is an under-used adjective meaning “extremely tasty, delicious, or very attractive”

 But also — It is a type of flower — a peony.

It is routinely sold at nurseries. 

 It is a pretty flower — actually, an o.k. flower.

But its glory is in its name:

               The Scrumdiddlyumptious Peony                   

 If you can repeat this word

– “scrumdiddlyumptious” –

Three times without smiling, Then, give me a call.

Both your next therapy session and dinner are on me 

 —

Some Fine Honorable Mentions

Lickety-split (ASAP)

Ramshackle (Something that is about to fall apart)

Pusillanimous (Showing lack of courage)

Doohickey (Small object or gadget for which one has forgotten its name)

Gobbledygook (Meaningless talk or language)

Skedaddle (To run away)

Scalawag (A rascal)

Hullabaloo (Talking about a commotion)

Whippersnapper (Young, overly-confident person)

Lollygag (When a person is messing around)

Cattywampus (Catty-corner from something)

And, of course, the perennial

Fuddy-duddy (Super, old-fashioned person)

 But Pound-for-Pound, Letter-for-Letter, and Syllable-for-Syllable,

 I respectfully suggest,

Scrum-did-dly-ump-tious wins.

 For now, my friends

Enjoy the rest of September,

Next newsletter is back to business

 Call Me Anytime

General Business Planning

or Corporate, Business or Real Property Law Matters

805-450-2602

 My Most Recent Books and Publication

The Writings of a Lifetime (2021)

(A Semi-Autobiographical Work)

The Writings of a Lifetime

and

The White Binder (2022)

For Your Personalized and Detailed Asset and Liability Management,

Estate Organization, and (Detailed) Disposition Planning 

–Order Today–

Just email me at mwborgen@live.com (Mailing Address and Number of Copies)

(Binder Format, $49.95 plus $6.95 Shipping, Pay After Delivery)
 All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical without the prior written permission of the author.

 

Quick Facts (Who Gets Audited) – 8 Major CA Business and Real Estate Law Developments

Posted by Mack W. Borgen September 12th, 2022

Blog No 153

September 13, 2022

By Mack W. Borgen
Author (7 Books): The White Binder – Your Personal Data and Information Book (2022); The Writings of a Lifetime (2021); Dead Serious and Lighthearted – The Memorable Words of Modern America (Three Volumes) (2018-2019); and The Relevance of Reason – The Hard Facts and Real Data about the State of Current America (2 Volumes) (2013). As advertised in The New York Review of Books. Recipient of Eight National Book Awards
See my legal articles and other blogs at  https://www.mackwborgen.com/  . Then, just click the “Blogs” tab.

Quick Facts

80% Drop in IRS Audits – So Who Does Get Audited?                                     

                                                                                               2019                            2010              

All individual tax returns                                            0.2%                           1.0% 

Reporting:

No Income                                                                               1.1%                            20.6%

Under $50,000                                                                       0.6%                              1,6%

$50,000 – $100,000                                                              0.4%                              1.4%

$100,000-$500,000                                                             0.4%                              3.1%

$500,000 – $1,000,000                                                       0.6%                              3.6%

$1,000,000 – $10,000,000                                                 3.3%                            21.7%

Over $10,000,000                                                                8.7%                            21.5%

Source: Newsletter of Bryars Tolleson Spires and Whitman LLP – One of Southern California’s excellent accounting firms.

Conclusion: Our federal tax system depends, largely, upon voluntary reporting and compliance. However, some level of compliance is assured only by the potentiality of being audited. If under-reporting is found, then there is also a risk of monetary penalties and even criminal tax evasion prosecution. Now, for many reasons including the under-staffing of the IRS itself, the percentage of tax returns which in the U.S. are audited has dramatically shrunk in recent years – and especially since 2016.

Overall, there used to be about a one-in-a-hundred chance of being audited. Now, that is one-in- 500! The most dramatic audit diminishment has been among the tax returns of the ultra-wealthy. The percentage of those tax returns audited has dropped by about 75%!

The Proverbial Bottom Line. No one, absolutely no one, wants to be audited. But without at least a risk of audit, a “voluntary compliance system” eventually becomes a “pay-if-you-wish” system – and I guess the rest of us will cover the shortfall. 

Eight Major Business, Contract, and Real Estate

Cases and Developments

General Sources: Daily or Periodic Judicial and Legislative Reports from various sources including the California Lawyers Association Daily Reports, the CLA’s Monthly Business Law News, and Announcements and Press Releases from the (California) State Attorney General’s Office.

1 . Contracts. Another court has held that an email confirmation from a partner CAN be deemed a “written instrument” for purposes of amending a partnership agreement. It is preferable to expressly authorize the use and acceptance of email confirmations in the notice and amendments sections of documents, but here, another US District Court joined the growing consensus that email confirmations will normally suffice.

2 . Employment Law. In California, the right of an employer to mandate that its employees agree to arbitrate their employment-related disputes is still in flux. Without going into detail, this issue (Chamber of Commerce of the U.S.A. v. Bonta) has been flipped, appealed, and reversed between the District Court and the Ninth Circuit. The status in California of such mandated-arbitration provisions remains, regrettably, in a state of confusion.

3 . Contracts – Clarity in Definition of Terms or Standards. The selection of terms and phrasing can lead to very different standards. Litigation is almost always the most challenging (and costly) means of dispute resolution, and contract clarity and comprehensiveness are oftentimes the best way to avoid the necessity of such litigation. I will use just one example. There is a ridiculous amount of litigation about one parties’ obligation to another party based upon the use the phrase “best efforts,” “reasonable efforts, and even “commercially reasonably best efforts.” The courts have rather consistently held “best efforts” to require a party to a high standard of effort than “reasonable efforts,” but the key is contract drafting and clarity.

4 . Real Estate. Short-Term Governmental Rental Regulation (or Even Prohibition) Not Deemed a “Taking” Under the 5th Amendment – California Coastal Act Exception. While this author is troubled by this series of cases, more and more courts are concluding that a governmental body MAY effectively prohibit the use of one’s property for short-term rentals. The courts’ strained logic is that the property still has other beneficial uses, and thus the property has not lost all of its value and usefulness to the impacted homeowners. In California, however, there is an exception. In California, it has recently been held that the California Coastal Act overrides local cities’ plans to implement short-term rental bans (Keen v. City of Manhattan Beach). Basically, coastal California cities are faced with a choice – give up on short-term rental bans or seek the approval of the Coastal Commission.

5 . Misuse of Consumer Data. There are more and more instances of corporations misusing (or misappropriating and selling) consumer information. Last month, U.S. Bank had the dubious distinction of joining Wells Fargo as another bank which “pressured and incentivized” its employees to use consumers credit reports and personal information to open other accounts, credit cards and credit lines without the consumers knowledge or consent. A paltry $37.5MM fined was imposed upon U.S. Bank. However, this case underscores the necessity of taking due diligence steps to assure that customer information data is secure. To that end, in certain cases and to minimize any third-party claims, I have recommended that in some cases — and especially when a substantial volume of customer data is assembled by a client corporation, it is advisable to schedule regular, third-party reviews with respect to all client and corporate data. 

6 . Non-Compete and Non-Disclosure Agreements. Such agreements have become more and more common. However, over the last couple of years more states have banned or severely restricted their use. For example, in the first six months of this year alone, four more states (Hawaii, Maine, Oregon, and Washington) have enacted or amended state laws voiding, prohibiting, or restricting employer/employee nondisclosure agreements. Parallel trends have occurred with respect to non-compete agreements. Very, very summarily, some form of such agreements (including anti-raiding provisions), albeit carefully tailored, are still recommended by this author to protect, for example, an employer’s trade secrets and customer lists. They can still be enforceable and can have an appropriate chilling effect with respect to areas of potential disagreement or confusion.   

7 . Condominium Deconversions. Some developers are creatively turning to condominium “deconversions” as a means of taking advantage of the strong multifamily rental demand. Such deconversions are enabled and regulated by state statutes and local ordinances. Oftentimes these statutes and ordinances permit such deconversions upon the approval of a super majority (e.g., 75% or more) of the condominium ownership. There are limited remedies for condo owners opposing the bulk sale so long as they timely (e.g., within 20 days) object to the proposed deconversion sale.

8 . Protecting Your Personal Assets – Assurance of Entity Capitalization and Steady Maintenance of Entity Documentation and Records. In another NY case, the court rejected a third-parties attempt to “pierce the corporate veil” of a corporation and impose direct personal liability upon, in this case, the corporate defendant’s sole principal. The claimant argued that the “corporation” was inadequately capitalized and routinely did not follow corporate procedures and documentation. In this case the court held that the claimant did not meet the “heavy burden” of so piercing the corporate veil. Salesmark Ventures, LLC v. Jay Singh, JJHM Trading Corp. The protection of one’s personal assets from corporate/business-based claims is critical and should not be ignored. There are many factors which a court will consider such as the following quick list: (1) whether the entity was undercapitalized, (2) whether the entity failed to maintain adequate corporate records, (3) whether the owners used the entity to promote fraud, or illegal activities, (4) whether the owners used the entity to pay for individual, non-corporate-related obligations, (5) whether the owners commingled personal and business assets, and (6) whether the owners and board failed to observe required “corporate formalities. It is certainly easy to forget, but sometimes it is advisable to conduct a formal, but “internal,” audits of one’s own corporation or other business entity to assure the protective shield of the corporation or LLC.

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