Defining Conflicting Terms in a Contract

Conflicting terms in a contract exist when there are certain provisions that cannot each be complied with because performing one would violate another, or where the use and meaning of a particular term or terms varies throughout the contract. This situation can occur  when multiple parties are drafting and revising a contract without carefully reviewing the impact of each change on other portions of the contract, or when conflicting changes are made to a standard form contract that one or more parties are not entirely familiar with, and again, do not carefully review the impact of each change.  Conflicts can also occur when the terms used in the agreement are not defined and are unclear to people unfamiliar with the deal, industry, or product.

For example, sometimes other contracts or documents are alluded to in a contract but not actually defined in the agreement.  A contract could also rely heavily on terms that are defined by industry standards but which are foreign to people outside of the industry. All of these situations cold give rise to potentially conflicting terms, such as a reference to a term where the industry meaning and usage is in conflict with the meaning and use applied  in the contract.

A properly drafted contract will avoid conflicting terms and ambiguities, and, in anticipation of potential conflicts, include clauses which provide rules of interpretation. Contracts can also designate clauses in one portion of a contract to supersede conflicting provisions found in another part of the contract. Almost every contract will have a provision stating that if one provision is in conflict with another, the rest of the contract is still enforceable, and provide how the conflicting terms will be handled.

Also, a contract can very well provide a means for resolving conflicting terms and ambiguities, but still fail to resolve a conflict that arises under an unanticipated or obscure situation. In that situation, the contract parties can turn to California statutes and appellate court cases to find other rules of interpretation.

If you have any questions about conflicting terms in a contract, 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.

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 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.

Cancelling or Dissolving Your Business Entity

Parties often wait until a dispute arises to exercise or learn about their rights.  However, it is often more prudent to know and exercise rights before a dispute arises.  The main shareholder or partnership rights include limited “economic” rights, voting rights, inspection rights, the right to bring a derivative action, and, in certain circumstances, the right to start the dissolution process.

Business entities can dissolve or cancel their businesses at almost any time. In particular, California corporations  “dissolve,” while limited liability companies and partnerships “cancel.”  Dissolution or cancellation are options for businesses that wish to cease operations in California and need to terminate their legal existence in the state. In some instances of partner withdrawal from a partnership, cancellation or dissolution will be automatic.

The process for cancelling or dissolving a business entity will depend on the applicable state laws and the terms of the corporate or partnership agreement. For example, some partnership agreements may contain a provision stating that the death of a partner, or the withdrawal of a partner, will lead to automatic cancellation of the partnership.  This is merely a term that parties agree to at formation and not one that is required by the state.

More specifically, in a limited partnership, a general partner may withdraw at any time by giving written notice to the other partners. The general partner’s withdrawal from a limited partnership will terminate his or her or its status as a general partner, and the certificate of limited partnership (filed with the Secretary of State) must be amended. The same is true if a new general partner is admitted.

A limited partner, on the other hand, must give at least six months written notice to each general partner of his or her desire to withdraw. A partnership agreement can change this requirement, permitting for less or more notice.

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 commercial claims. Contact us at (310) 277-7747 to see how we can help you with your business  needs.

California Shareholder Rights

“Economic” Shareholder Rights

Shareholders invest in corporations primarily for economic gain or profit.  The two main ways shareholders can profit from a corporation are by receiving distributions of the company’s profits and by selling all or part of their interest in the corporation. These correspond with the two main “economic” shareholder rights: the right to receive dividends and the right to sell shares. Notably, shareholders only have the right to receive dividends as they are declared by the corporation’s board of directors, and directors are not obligated to declare dividends.  In addition, some investments and receipt of shares may come with limitations on transferability of the shares.

Shareholder Voting Rights

A company’s board of directors has the right to manage the company’s business. However, shareholders have the right to vote on important matters relating to the business, which gives them some control over the corporation as well. Most importantly, shareholders have the right to elect directors.

Shareholder Inspection Rights

Under California Corporations Code Section 1601, shareholders also have right to inspect the corporate documents, such as the incorporation record, accounting books, and meeting minutes.

Derivative Actions and Shareholder Rights

Derivative actions are brought by a shareholder on behalf of a corporation. Officers, directors, and majority shareholders owe a corporation a fiduciary duty. Someone who owes a fiduciary duty and who breaches that duty can be held liable to the corporation for damages.  Thus, in a derivative action a shareholder seeks judicial enforcement of, and redress for breach of, management’s fiduciary duties to the corporation and its shareholders by means of derivative litigation.

Involuntary Dissolution of the Corporation

Under California law, one-half of the directors or one-third of company shareholders can sue for involuntary dissolution of a corporation. A corporate dissolution may consist of a court approved liquidation or sale of corporate assets. However, the involuntary dissolution of a corporation may be avoided if at least 50% of its shareholders elect to purchase, for cash, the shares owned by the shareholders initiating the dissolution proceeding.

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 needs, or visit our Shareholder Rights page for more information.

Ridesharing Hit with More Business Lawsuits

California prohibits unlawful, unfair, and fraudulent business practices, as well as unfair, deceptive, untrue or misleading advertising. Recently, the district attorney offices for Los Angeles and San Francisco claimed that Uber, one of the the most popular ridesharing companies, violated these California business laws in recently filed actions against the company.

Uber (recently valued at $41 Billion and has backers from Wall Street to Silicon Valley), is no stranger to lawsuits, which are coming from all over the world. In California, the district attorneys’ offices are alleging that Uber misleads consumers about the service’s safety and overcharges them with unnecessary tolls in violation of California consumer protection laws.

According to the lawsuit, Uber claims to be an industry-leader in conducting background checks, but fails to fingerprint its drivers. The district attorneys’ offices claim that without fingerprinting, the company’s criminal checks are “completely worthless.”

The San Francisco district attorneys’ offices also accuse Uber of fraud for charging certain tolls. Uber charges a $4 “airport fee toll,” which is automatically added to rides to and from San Francisco International Airport, even when drivers do not pay a toll themselves. Uber also automatically adds a $1 “safe rides fee” to every ride, claiming that this fee goes to funding the company’s background checks.

The district attorneys’ offices have asked the court for an injunction that will force Uber to stop these practices immediately. They also seek restitution and civil penalties for riders who suffered economic harm from the unnecessary fees.

California law allows a $2,500 penalty to be issued for each violation of the business code. The district attorneys’ offices claim that that are “tens of thousands of violations,” meaning that Uber may be facing a very expensive lawsuit.

Lyft, a competing ridesharing company, who recently raised $700 million, chose to settle a similar lawsuit, agreeing to stop picking up passengers at airports until it obtains the necessary permits and approvals. Lyft will also submit its application to a California testing agency to measure its accuracy in calculating fares.

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, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs

 

Understanding California’s Franchise Investment Law

If you are interested in buying or selling a franchise in California, it is important to be familiar with the applicable law before taking action.  California franchise law is largely governed by the state’s Franchise Investment Law, which was enacted in 1970.

One of the major requirements of California’s Franchise Investment Law is that franchisors must register with the California Department of Business Oversight before selling or offering for sale franchises in California. An “offer” or “offer to sell” includes every attempt to solicit an offer to buy or offer to sell a “franchise or interest in a franchise for value.”

The Franchise Investment Law also requires that franchisors provide franchisees with final franchise agreements as well as registration disclosure documents at least ten business days before the sale of a franchise. The purpose of these pre-sale disclosures is to provide, fully and truthfully, material information about the franchisor and its franchise offering to the prospective franchisee prior to the purchase.

Recently, the California Legislature attempted to amend the Franchise Investment Law.  Senate Bill 610 (SB 610), which was approved by the State Senate and Assembly, would have prevented a franchisor from severing licensing agreements with franchisees unless the franchisor could demonstrate that a “substantial and material breach … of a lawful requirement” of the agreement took place. In other words, it would have made it more difficult for franchisor companies to end licensing agreements with franchisees.  However, California’s Governor, Jerry Brown, vetoed the bill, stating that it would change the well-established “good cause” standard already in law to an untested benchmark of “substantial and material breach” that is not found in California or other states.

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 concerns.

Supreme Court Rules for Amazon in Employee Searches Case

It is common practice for retailers to search their employees before they leave work. In a recent United States Supreme Court opinion,  Integrity Staffing Solutions v. Busk, the Court ruled that workers do not have a federal right to be paid for the time spent in these post-shift employee searches. This decision will save businesses billions of dollars, including companies like Amazon, who is projected to save over $100 million.

In the opinion  the justices unanimously rejected former Amazon warehouse workers claims that Amazon and the company that staffs several Amazon facilities were not fairly compensated for their time during these employee searches, and that Amazon and the staffing company were therefore violating federal wage laws. Integrity Staffing Solutions v. Busk, 574 U. S. ____ (2014).

The opinion of the Court centered on what constitutes a “principal activity.” Under the 1938 Fair Labor Standards Act, workers must be compensated for their principal activities, which the Supreme Court previously described as activities that are “integral and indispensable” to the job itself.  The Court found that the security screenings at issue did not constitute principal activities, as they were not integral and indispensable parts of the job. Therefore, there is no need for companies to compensate their employees for the time they spend waiting to be searched and the time of the employee search.

Amazon’s position was that employee searches help protect against theft, and is necessary but not part of the employees’ jobs. This ruling may shield several other companies who use employee searches from facing similar claims, including Apple, Ross Stores Inc., CVS Health Corp., and J.C. Penney Co.  If the Supreme Court had decided for the workers, Amazon and the various staffing agencies it uses could have been liable for the back wages of as many as 400,000 workers, amounting to $100 million or more.

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 concerns.

California Coastal Access and Property Law

A common issue that arises in California property law surrounds public coastal access. In September 2014, a California Superior Court judge ruled in favor of coastal access advocates by holding that a property cannot block the only public access route to Martins Beach (located less than an hour outside of San Francisco, California), without permission from the Coastal Commission, and demanding the property owner to open the gate blocking access to the beach.

The case, Surfrider Foundation v. Martins Beach 1, LLC, et al., was a bitter dispute over private property rights and public access to California’s coast filed in the San Mateo County Superior Court, Case No. CIV520336, before Judge Barbara Mallach.  The court held that blocking access to the road constituted “development” under the California Coastal Act, and the owner, venture capitalist Vinod Khosla, must apply for a permit if he wants to block the public from accessing the road.

Khosla was sued by the nonprofit Surfrider Foundation after his property manager blocked off Martins Beach Road, the only access to Martins Beach.  His property manager previously allowed the public to occasionally visit a stretch of sand off the property where locals went surfing and smelt-fishing for decades, but Khosla had the gate permanently closed after his property manager received a letter from the county in 2010 demanding that the gate stay open every day.

The issue is complicated because, under the public trust doctrine, beaches are widely considered public property and access to them is protected. However, there is no legal requirement that private property owners allow the public to cross their land to get to the beach.

The court sided with the Surfrider Foundation’s position that under the 1976 Coastal Act, which gave a statewide Coastal Commission jurisdiction over beachfront land and coastal access. Khosla needed to apply for a development permit in order to close the gate. The commission usually only grants development permits, typically to build a home or another structure, if the public gets an established right of way in return. However, the Commission cannot ask a property owner to dedicate an easement for public access.

The Judge’s ruling and recent injunctive relief order require public access to be restored to Martins beach. Khosla’s lawyers are considering appealing the verdict and pushing the issue of private property rights. Even if he does, a bill has been proposed that would require the State Lands Commission to consider purchasing the road if negotiations with Khosla for public access fail.

This case is important because the final determination will set a property law precedent that will impact all 840 miles of California’s coastline.

If you have any questions about easements or real estate transactions, contact 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 and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law or real estate concerns.

Keeping Up Yearly Corporate Filings

California law requires corporations, limited liability companies and common interest development associations to update the records of the California Secretary of State on an annual or biennial basis by filing a statement of information.  Keeping up with these yearly corporate filings is necessary in order to maintain good corporate standing and avoid penalties and fees.

If you do not file an annual statement of information and pay the accompanying nominal fee, the Secretary of State can fine your corporation $250. If you continue to not file the statement, your corporation can be suspended.

If your corporation is suspended, it will lose the protections and benefits of a properly maintained corporation, including the right and ability to:

  • exercise its power, privileges and rights;
  • bring a lawsuit;
  • defend itself against a lawsuit;
  • file a notice of appeal; and
  • engage in any type of real estate transaction.

If your corporation is suspended it could also lose its corporate name, which would allow another properly formed and maintained California corporation to take the name.

To avoid suspension, corporations are advised to do everything possible to maintain the responsibilities associated with a corporation. This includes paying corporate taxes every year, filing a tax return, submitting an annual statement of information, and holding annual shareholder meetings.

However, even if your corporation has been suspended, it can be reinstated. This process may be costly, particularly if there are many delinquent fines and reinstatement fees. Also, if your corporate name was taken by someone else during suspension you will not be able to get it back. Upon applying for reinstatement and meeting all corporate requirements, most corporate powers will be restored.

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 concerns.