Examples of California Unfair Competition Lawsuits

Previously on the blog, we discussed what constitutes unfair competition in California. In this article, we will share a few examples of recent unfair competition lawsuits involving California businesses.

As a refresher, California Business and Professions Code Section 17200 prohibits “unfair competition,” which includes any unlawful, unfair or fraudulent business act or practice. It also includes any unfair, deceptive, untrue or misleading advertising, as well as any other act prohibited by the Business and Professions Code. A  violation under this code section is often one of the many allegations making up a lawsuit accusing a business of some sort of fraud or deceptive practice prohibited by a different state rule or statute leading to wide variation in unfair competition lawsuits in California.

Recent unfair competition lawsuits include:

  • The district attorney offices for the counties of Los Angeles and San Francisco claimed that Uber violated California’s unfair competition laws by misguiding and overcharging consumers;
  • The district attorney offices for the counties of Yolo, Sacramento, and San Joaquin  filed an unfair competition lawsuit against chocolate Easter bunny candy-maker R.M. Palmer Co., alleging that the false-bottomed boxes used to sell the product “Too Tall Bunny” amount to deceptive packaging; and
  • In a case that could impact millions of Americans, two private individuals have brought an unfair competition lawsuits against Apple, alleging that the company falsely advertised the storage capacity available in its iPhones, iPads and iPods, because the large data footprint of the iOS 8 operating software eats into the advertised capacity of Apple’s mobile devices, making a fraction of the advertised capacity of the devices available to users.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

Selling Partnership Shares

Selling partnership shares often involves various considerations.  In most partnerships, partners can choose to sell their share of the partnership to the partnership or a new potential partner as part of the resolution of a partnership dispute or simply because the individual or entity no longer desires to be part of the partnership.

Selling partnership shares will be governed by a partnership agreement, or if there is no partnership agreement, state law will govern sale of a partnership share. It is especially important to check the provisions of a partnership agreement before selling a partnership share, as there might be restrictions on share sales.  For example, a “right of first offer” provision may subject the selling partner to financial penalties or a lawsuit if there is no initial offer to existing partners before offering to sell to outsiders. Also, a partnership agreement might have certain notice requirements that a partner must follow when considering selling his, her or its share.

It is also important to consider what will and will not change as a result of the  sale of a partnership interest.  For example, according to California Corporations Code Section 16201, “partnership is an entity distinct from its partners.” Therefore, if a partner sells their share, that change alone will not dissolve a partnership or create a new one. The original partnership entity will continue to exist despite such changes.  Similarly, section 16502 of California’s Corporation Code provides that a partner’s only transferable interest is “the partner’s share of the profits and losses of the partnership and the partner’s right to receive distributions.” This means that when a partner is selling partnership shares, they are really only transferring their financial interest in the partnership. All other interests are separate, and must be dealt with separately.

If the partner had a managing role in the partnership, the new partners should update the partnership agreement to make sure the new ownership and responsibilities are memorialized in writing.

If you have any questions about selling partnership shares, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

What is a Cardinal Change in a Construction Contract?

Changes to a construction contract are  a part of doing business in most cases. Therefore, parties to a construction contract almost always have the right to make change orders. However, there are often limitations to the changes that can be requested and made. Parties to a construction contract should be familiar with what a permitted change is, and what an impermissible “cardinal change” is.

Construction contracts should contain what is often called a “contract changes” provision where the parties outline the types of permitted contract changes. These changes are usually limited by the general scope of work provided for in the construction contract.

A cardinal change, on the other hand, is a change that falls outside of the permitted changes detailed in the contract.  It is a deviation so far outside the scope of work that it frustrates the very purpose of the contract and invalidates the terms of the original contract. If a property owner makes a cardinal change order, a contractor could have a basis for damages in a construction contract.

For example, imagine a construction contract in which an owner enters into an agreement with a contractor for the construction of a pool.  The original plans for  call for a snow cone stand next to the pool. If the owner requests that the pool be removed from the contract, this would violate the purpose of the original contract. This cardinal change order would frustrate the purpose of the contract so much that it could invalidate the contract.

On the other hand, if the owner requests that the construction of the pool continues, only without the snow cone stand, the original purpose in constructing a pool would not be violated, and that would be a permissible change. Here, if the contractor refuses to continue work because he is upset the snow cone stand is being taken out of the plans, the contractor could be held liable for breach of contract.  Whether or not the snow cone stand change order would constitute a cardinal change would depend on the unique circumstances surrounding the agreement between the parties.

If you have questions about construction contract claims, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.

 

What Constitutes Doing Business in California?

Even if your business is not based in California, you may be held to certain California filing obligations and tax liabilities if your business meets the legal definition of “doing business” in California.

There are two definitions for doing business in California. One is from the Franchise Tax Board, and determines whether an individual or business will have tax liabilities in California. The other is established by the California Corporations Code, and it determines what corporate filing obligations an out-of-state business will have with the California Secretary of State.

Doing Business in California According to the Franchise Tax Board

According to the Franchise Tax Board, doing business in California consists of “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” An out-of-state entity is treated as “doing business” in California if:

  • The entity is commercially domiciled in California (meaning the entity is controlled in California, like a headquarters);
  • Sales in California exceed the lesser of $500,000 or 25% of the entity’s total sales;
  • The entity has real or tangible property in California exceeding the lesser of $50,000 or 25% of the entity’s total real and tangible property; or
  • The amount paid in California by the entity for compensation exceeds the lesser of $50,000 or 25% of the total compensation paid.

If none of those situations apply, an entity organized in a jurisdiction outside of California could still be considered to be doing business in California if it is a member or general partner of an entity that does business in California, or if any of the entity’s members, managers, or other agents conduct business in California on behalf of the entity.

Doing Business in California According to the California Corporations Code

Under the California Corporations Code, “doing business” is referred to as “transact[ing] intrastate business,” which is defined as “entering into repeated and successive transactions of its business in [California], other than interstate or foreign commerce.” An entity might need to register with the California Secretary of State if it meets this definition. However, the application and meaning of this definition differs from entity to entity. Because of this varied application, it is best to consult with an experienced business attorney to determine your precise tax liabilities  and filing obligations.

Ezer Williamson Law provides a  wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Defining Changed Conditions in a Contract

It is prudent for parties to a contract to include a clause that addresses “changed conditions.” A provision in a contract discussing changed conditions should broadly identify  altered circumstances from the time the contract was signed and how these new circumstances will be addressed.

A changed conditions clause is frequently found in construction contracts. This is because construction projects rely on so many variables, including weather, labor, and materials, that can be subject to unpredictable changes. Sometimes certain conditions of a construction site may go undetected prior to construction, which will necessitate new plans, supplies, or timelines. Sometimes a contractor will run into unanticipated snags after construction commences, such as the discovery of hazardous materials in the soil. These changes can impact the cost and scheduled completion of a project, which is otherwise outlined in the construction contract. It is therefore important to have a provision that dictates how costs and schedules will be moved when changed conditions arise.

Generally, a changed condition clause in a construction contract will detail a contractor’s liability in bearing any additional cost that stem from unforeseen changes in the condition of the construction site. The provision will usually also outline the process to be followed when changed conditions are noticed, including scheduling consults with an engineer and whether contract changes will have to be made.

One of the most important terms in a changed conditions clause is the requirement and meaning of “notice.”  A changed conditions clause may give a fixed amount of time, such as fourteen days, in which the contractor is given a window to notify the owner of a changed condition.  If an owner is not notified within that contractual window, the contractor may be stuck with extra costs associated with the changed condition, and perhaps even penalties if the project will not be completed on time as a result.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

What is a Flow-Down Clause in a Contract?

A flow-down clause (also referred to as a pass-through or conduit clause) is usually found in a construction contract and provides that subcontractors will be bound to the general contractor in the same fashion as the general contractor is bound under its contract with the property owner.

Flow-down provisions are important to protect parties to a construction contract by spelling out that a subcontractor’s obligations to the general contractor are identical to the ones a contractor has to the property owner. The specific obligations that “flow-down” generally involve the scope of work to be performed, and often also the timelines in which the work will be completed.

Flow-down clauses may also include terms about dispute resolution and payment. For example, a flow-down payment clause may state that a subcontractor will be paid by the general contractor when the general contractor is paid by the owner. Likewise, if an owner has agreed to resolve disputes with the general contractor through arbitration, a subcontractor may be required to resolve disputes through arbitration as well.

It is in an owner’s interest to have a subcontractor bound by the same obligations and requirements as the general contractor.  Subcontractors, on the other hand, commonly dispute or try to limit the scope of responsibility attributed to them through a flow-down clause, particularly when the subcontractor has limited involvement in a project. It is therefore especially important for contractors and subcontractors to look for a flow-down clause, and understand the full scope of the agreement they are signing. If a flow-down clause is particularly broad and a subcontractor cannot determine which contractual obligations will actually flow down, the clause may be found unenforceable.

If you have any questions about contract terms, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

Dissolving a Joint Venture

There are many reasons why parties may end up dissolving a joint venture. Their efforts may have been unsuccessful, their project may me complete, there could be clashing management styles, or there could simply be a need for a new characterization of the businesses.

If the parties to the joint venture have a written agreement governing the relationship, that agreement will likely contain the provisions that will determine the process for dissolution. In the absence of an agreement, California law will dictate how the relationship will be terminated.

If the joint venture was characterized as a limited liability company or corporation, the parties will need to follow the formal procedures to dissolve and cancel the existence of the applicable entity. In the absence of this separate legal entity characterization, the parties to the joint venture will need to proceed as if they were dissolving a general partnership. One of the most important steps will be to notify third parties, as well as relevant licensing and taxing authorities. If third parties such as vendors are not notified of the dissolution, the parties to the joint venture could be responsible for any debts that are accrued by the third party under the principles of agency.

Upon dissolving a joint venture, the parties will split the assets and debts in accordance to their agreement. In the absence of an agreement, the parties will get back what assets they contributed.  If, however, the parties do not retake possession of certain assets, such assets should be sold.

If you have questions about dissolving a joint venture, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

Tips for Creating a Successful Joint Venture

Previously on our blog, we discussed what a joint venture actually is and how to create one. Now we will share a few tips for making a joint venture relationship more successful.

  1. Have a Written Agreement

By its very nature, a joint venture is a commitment by two or more different individuals or entities to work together on one single goal.  Much like any relationship, this set up leaves a joint venture vulnerable to management and financial problems.  Having a written agreement that anticipates potential disputes and controls how they will be handled is critical, and it is always best for parties to a joint venture to agree and sign a written agreement at the outset of the joint venture. This agreement should especially cover matters of asset control, asset valuation methods, how disputes will be handled, and how the winding-up process will work.

  1. Protect the Joint Venture from Liability

Unless a joint venture is otherwise characterized as a separate legal entity, its members are vulnerable to personal liability. Members should therefore consider forming a corporation or limited liability company or corporation to protect themselves from potential liability. Additionally, if the venture is unsuccessful, the parties will not be personally liable for the resulting debts, as long as the entity was properly funded and properly formed.

  1. Financial Planning

If the parties to a joint venture do not have a solid financial plan, they can find their financial resources evaporating too quickly. Prudent joint venturers will anticipate the need for additional capital and determine acceptable sources of funding in the initial joint venture agreement.

If you have any questions about creating a joint venture, consult an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.