House of Representatives Proposes Corporate Tax Breaks

In the U.S. Congress, members of both parties are working together to reduce the corporate tax rate and simultaneously limit business tax breaks. The plan to cut business tax rates is getting strong opposition from U.S. businesses.

Reducing corporate tax cuts and the corporate tax rate is a complicated issue because millions of U.S. businesses do not pay taxes through the corporate system. These businesses are often referred to as “pass-throughs” because the income they receive is not taxed at the corporate level but rather passes through to their owners’ tax returns.

According to the Tax Policy Center in Washington, approximately a third of all U.S. business activity is currently conducted through pass-throughs.  Pass-throughs account for almost 10% of adjusted gross income on individual tax returns.

A common misconception is that pass-throughs are mostly small businesses. In reality, some of the largest law and accounting firms, hedge funds, private-equity firms, and even some large manufacturers are pass-throughs. This means that tax breaks given to small businesses or pass-throughs amounts to a large amount of money, making it tougher to reduce the corporate tax rate.

The current approach to reducing tax rates and cuts focuses on the size of the business, potentially offering new tax breaks to only small businesses, and eliminating tax breaks for larger businesses in order to afford a lower corporate tax rate. While discussions regarding corporate tax cuts continue, lawmakers in both parties agree that they are too far apart on the issue of individual tax rates to reach any deal there. Therefore, individual taxes are likely to be left alone.

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 real estate, business, or contract law needs.

Misrepresentation in a Contract

If a party was dishonest about a material fact during the drafting process of a contract, the other party may be able to take the contract to court and argue that it should be rescinded, or cancelled, due to misrepresentation.  Moreover, if the honest party performed the contract because he, she, or it justifiably relied on the misrepresentation in a contract of material fact, he, she, or it may be able to collect damages if a court finds that the non-breaching party was damaged by the misrepresentation, or that the misrepresentation was intentional.

Misrepresentation in a contract circumstance occurs when a party to a contract makes a representation, using either words or conduct that communicates a false or misleading understanding, thereby inducing another party to sign a contract.  For example, if a seller of goods makes false statements or promises about the quality or nature of a product to get a consumer to agree to purchase it, that could constitute misrepresentation.

There are different types of misrepresentation in a contract, including fraudulent misrepresentation and negligent misrepresentation.

Fraudulent misrepresentation may be found where a knowingly false representation was made with the intent to deceive.  As mentioned earlier, if an individual justifiably relies on an intentionally made fraudulent misrepresentation and is harmed as a result of this reliance, they may recover damages to be compensated for their harm, which may include punitive damages.

Negligent misrepresentation occurs when a representation is made carelessly. Damages are generally available for negligent misrepresentation, however punitive damages will not be awarded in a negligent misrepresentation case.   Additionally, in the event that misrepresentation can be proven, rescission may be granted, which would release the parties from their contractual 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, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Examples of Unconscionable Contract Terms

A court may find that a contract, or some of its terms, should not be enforced if the contract as a whole or certain contract terms are unconscionable.  Regardless of whether you are drafting a contract or signing one, it is important to understand what types of contract terms may be found unconscionable. Below are a few examples and specific considerations.

Courts commonly describe unconscionable  contracts or contract terms as those that  “shock the conscience.” This means that it is so remarkably unfair that it would be wrong to uphold it.  Types of contracts or terms a court may invalidate for unconscionability will probably evidence severe unfairness, unequal bargaining power, and lack of notice.

California’s Consumer Legal Remedies Act explicitly prohibits “inserting an unconscionable provision in the contract.” Cal. Civ. Code § 1770(a)(19).  Likewise, California law also prohibits businesses from using certain early termination fees that are, in reality, unlawful penalties.

Certain contracts, by their very nature, are closely scrutinized for unconscionability.  For example, adhesion contracts, also referred to as standard form contracts, usually evidence mismatched drafting power, so a court will examine their terms more closely.  If it looks like the consumer was at a disadvantage when he or she signed, or if the consumer had zero negotiation power, a court may invalidate the contract or the particular unconscionable term. This scenario is often present in agreements associated with gym memberships, rental cars, cell phone services, cable/satellite TV services, and mortgages.

Other contract terms that could indicate unfair one-sidedness include:

  • Damage limitations against the seller;
  • Limitations on a consumer’s right to seek court relief against the seller;
  • Imposition of punitive penalties or fees on the consumer; and
  • Open-ended provisions that give the seller unilateral discretion to set or change price or other terms.

Keep in mind that a court will not free a party from its contractual obligations just because he or she did not read or understand a contract. As a general rule, the parties are bound to the agreements they make, even if the bargain made is to the detriment of one of the parties.

If you are questioning the fairness of a contract term, an experienced attorney will be able to help you determine whether it is unconscionable. 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 business or contract law needs.

What Constitutes a Trade Secret?

Unlike patents and trademarks, trade secrets are protected without any procedural formalities associated with the benefits of registration with a government agency. The benefit to this is that a trade secret can be protected for an unlimited period of time and requires no public disclosure. The downside is that defining and protecting a trade secret can be trickier.

There are different definitions of what constitutes a “trade secret.” California law has adopted the Uniform Trade Secrets Act definition, qualifying a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that meets two qualifications. The first qualification is that the information must derive “independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.”  The second qualification is that the trade secret owner must take reasonable steps to maintain the secrecy of the information.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, an international agreement administered by the World Trade Organization, similarly defines a trade secret.  According to the TRIPS Agreement, trade secret information cannot be generally known among, or readily accessible to, circles that normally deal with the kind of information in question.  It must also have commercial value because it is a secret, and it must have been subject to reasonable steps by the rightful holder of the information to keep it secret.

Thus, if a company deals with third parties who are privy to a company’s trade secret, it is important to always have them sign confidentiality agreements to make sure they understand that the information is a secret.  Taking those steps not only gives the company a cause of action for breach, but also evidences reasonable steps to maintain the secrecy of the trade secret.  Information that constitutes a trade secret can include processes that make production more efficient, a formula (like the Coca-Cola soft drink formula), customer lists, and proprietary business plans.

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 needs.

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

 

Intellectual Property Basics for Businesses

Intellectual Property Basics

It is important to protect the intellectual property and proprietary aspects of any businesses’ goods and/or services.  There are a variety of different ways to go about protecting your intellectual property, and it is important to determine what method will accomplish your goals effectively. It is therefore important to develop an understanding of the different intellectual property protection options. Depending on your company’s needs, you may want to consider either a patent, trademark, trade secret, or copyrights.

What is a Patent?

patent is a property right. Upon successful application, a patent is granted by the federal government to an inventor. The purpose is “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States.” This protection is given to an inventor for a limited time in exchange for the public disclosure of the invention when the patent is granted.

What is a Trademark?

A patent is very different from a trademark.  A trademark is a word, phrase, symbol, or design (or a combination of these), that identifies and distinguishes the source of one’s goods from others.  A “service mark” is like a trademark, but it identifies and distinguishes the source of a service instead of goods.  Like a patent, a trademark is also granted by the government and entitles the holder of the mark to protect their marks from other competitors.

What is a Trade Secret?

When determining whether a patent is feasible for you, you should also take timing into consideration. For example, if your idea is for something that would be part of fast-moving industries, a patent might not be viable. Technology often moves faster than the patent application process, so it might be better to keep your idea a trade secret, i.e., information that companies keep secret to give them an advantage over their competitors.  Protecting trade secrets often involves contractual protections and state unfair competition laws, among others.

What is a Copyright?

A copyright is a form of protection offered to authors of “original works of authorship,” such as music, books, and plays. Copyrights are available for published and unpublished works and are given copyright protection after the copyright is registered through the Federal Government.

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 business law needs.

 

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.

What is a Clawback Suit?

Ponzi schemes endanger investors and securities professionals, but these victims are not without recourse. Investors who fell victim to such schemes may pursue compensation from the brokers and other entities that perpetrated the fraud. They may also bring a clawback suit.  A Clawback suit allows them to seek compensation from the early investors who either knowingly or unknowingly benefited from their early involvement.

A common type of clawback suit is brought through federal equity receivers or bankruptcy trustees. These cases are based on several sections of the United Stated Bankruptcy Code, allowing investors to recover false profits that were paid to investors in order to redistribute these funds to investors that lost the principal on their investment.  They are not unique to just Ponzi scheme cases, but rather, can be used in instances where large partnerships dissolve and leave large outstanding debts.

An example of a clawback suit is the recent case against former law firm partners at Dewey & LeBoeuf LLP. Last month, a bankruptcy judge did not dismiss lawsuits against former partners of the firm. The defunct firm’s creditors are seeking nearly $16 million, hoping to obtain, or “clawback,” any money the partners were paid while the firm was insolvent

The judge hearing the arguments found that the partners cannot argue that the value of the work they did offsets the money they were paid, a defense that is sometimes successful in such clawback suits. For example, if a partner who brought in $2 million in fees and received $1 million in payment during the same period could argue that he or she would not owe the bankrupt firm anything.

Following the court’s decision that creditors can clawback funds, the next decision will consider when the firm became unable to pay its debts as they came due.

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.

What is Respondeat Superior?

Under the doctrine of respondeat superior a principle (employer) is liable for the torts of its agents (employees).  A principle-agent relationship exists where the employee has agreed to work on behalf of the employer and to be subject to the employer’s control or right to control the physical conduct of the employee.

Respondeat superior is Latin for “let the master answer.”  In the employment context, it might be read more accurately as meaning that “the employer must respond and take responsibility.”

The legal doctrine of respondeat superior makes an employer responsible for the actions of an employee, except where the employee’s actions occur outside the course and scope of employment. This makes it important to understand what it means to be “within the course and scope of employment.”

Whether an action is within the course and scope of employment largely depends on the specific facts and circumstances surrounding the action.  For example, if an employee is running an errand for the company in his or her own personal vehicle, and is responsible for an accident, his or her employer is generally liable. At least one point of settled law is that, generally, if the employee is just commuting to or from work, and the same type of accident occurs, the employer is probably not responsible.

As a business owner, it would be in your best interest to make sure your insurance covers such situations. If a situation arises where someone is trying to hold your business liable because of the actions of an employee, 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 and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

The Difference Between a Merger and an Acquisition

What is the difference between a merger and an acquisition?  The terms “merger” and “acquisition” are common business terms, but they are often inappropriately used interchangeably, when in fact the two transactions are rather different. If you are planning to combine or purchase assets from another company it is imperative that  you understand the benefits and drawbacks of each.

Merger

In a merger, usually two or more businesses wind down as separate entities, and then a new entity is formed – that is, two entities merge into one new entity. The assets and liabilities of both the original businesses are often carried over to the new company.

Recently, mergers have been especially prevalent in the healthcare and airline industries. For example, one of the biggest mergers has been American Airlines and U.S. Airways. Final steps of the 2010 merger, such as a single reservation system and consolidating frequent flyer programs, are still not complete because of the size of this operation.

Acquisition

In an acquisition, usually one business purchases all or part of another business. As in a merger, most acquisitions involve lengthy negotiations, due diligence, and portfolio transfers. In addition, sellers are generally required to provide information about its’ or their finances, personnel, business opportunities, marketing practices, insurance, and legal status.

Acquisitions are unique and fact-specific.  For example, a seller may finance part of the sale in one transaction, or complete an acquisition using a transfer of stock or cash or both.

Examples of major acquisitions just this year include AT&T’s $69.8 billion purchase of DirectTV and Comcast’s $45 billion acquisition of Time Warner Cable.

If you are considering an acquisition or merger it is always best to consult with an attorney who can help find the most advantageous transaction in light of all the factors and issues in your particular case.

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.