Attorneys’ Fees Awarded Based on Void Contract

Recently, in California-American Water Company v. Marina Coast Water District, a California court of appeal found prevailing parties could recover attorneys’ fees based on a void contract under Code of Civil Procedure section 1717 (“section 1717”). The non-prevailing party challenged the trial court’s award of attorneys’ fees, posing the question, “How can an attorney fees provision in a contract govern the parties’ fees obligations when the contract itself is deemed to have been void from its inception?”

In Santisas v. Goodin (1998) 17 Cal.4th 599, the California Supreme Court held that “when a party litigant prevails in an action on a contract by establishing that the contract is invalid, inapplicable, unenforceable, or nonexistent, section 1717 permits that party’s recovery of attorney fees whenever the opposing parties would have been entitled to attorney fees under the contract had they prevailed.” (Santisas, supra, 17 Cal.4th at p. 611.)

The appellant in California-American argued that the trial court’s attorney fees award contravened section 1717’s limitation that fees be awarded only in an “action on a contract.” In California-American, no contract-based claims were at issue. The only issue litigated was the effect of a board member’s conflict of interest on the validity of certain contracts. In other words, the action was one to declare certain contracts void. The losing party argued that such a claim is not an “action on a contract.” However, the appellate court in California-American found “a party’s entitlement to attorney fees under section 1717 turns on the fact that the litigation was about the existence and enforceability of the contract, not on the presence of particular contractual claims . . .” The court noted that a California appellate court had previously found a suit brought by litigants seeking to have a contract declared void is an “action on a contract” for the purposes of section 1717. (Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal.App.4th 418, 426.) Since an action to declare a contract void is an “action on a contract” for purposes of section 1717, attorneys’ fees can be awarded based on an attorney fees provision of a void contract.

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 Happens At the End of an LLC’s Term?

In its operating agreement, a Limited Liability Company, or LLC, may specify a termination date or other event that will result in the dissolution of the LLC. On the termination date or occurrence of another specified event, the LLC is “dissolved” (Corporations Code section 17707.01(e)), with only limited powers to “wind up” its affairs (Corporations Code section 17707.04).

Generally, after the dissolution has occurred, a certificate of dissolution must be filed with the California Secretary of State. Corporations Code section 17707.08(a). Upon the completion the winding up of the LLC’s affairs, a certificate of cancellation of the articles of organization must be filed with the California Secretary of State. Corporations Code section 17707.08(b). When the certificate of cancellation is filed, “a limited liability company shall be cancelled and its powers, rights and privileges shall cease.” Corporations Code section 17707.08(c).

Even after the filing of a certificate of cancellation, the LLC continues to exist for the purpose of prosecuting and defending actions by or against it in order to collect and discharge obligations, disposing of and conveying its property, and collecting and dividing its assets. Corporations Code section 17707.06(a). However, “A limited liability company shall not continue business except so far as necessary for its winding up.” Corporations Code section 17707.06(a).

Even after a certificate of dissolution has been filed, the LLC can be revived under limited circumstances enumerated in Corporations Code Section 17707.09, by the filing of a “certificate of continuation,” which has the effect of nullifying the certificate of dissolution.

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.

U.S. Supreme Court Declines To Rule On Large Fees For Homebuilders

Recently, the United States Supreme Court denied certiorari in 616 Croft Ave., LLC v. City of West Hollywood (2016) 3 Cal.App.5th 621, in which the issue for review was whether the City of West Hollywood’s in-lieu housing fee was an exaction. While the Supreme Court did not rule for or against the homebuilder claiming city fees were invalid, the decision not to hear the case affirms precedent. Just five months earlier, the Supreme Court issued a takings decision, authored by Justice Kennedy, in Murr v. Wisconsin (2017) 137 S. Ct. 1933. This most recent Supreme Court ruling is the latest in a line of cases that deprive property owners of power over their properties. The Court in Murr held the two parcels along the St. Croix River, combined under common ownership in 1995, were required to be evaluated as a single parcel in determining whether the regulations constituted a regulatory taking. Ultimately, the Court found the regulations, which did not allow petitioners to sell one parcel as part of an improvement plan for the lots, did not constitute a compensable regulatory taking.

Declining to hear a case like 616 Croft Ave., for now, continues the trend. The California Appellate Court in 616 Croft Ave. found a half a million dollar in-lieu fee imposed by the City of West Hollywood, to permit the homebuilder to build a condominium, was not an exaction or a taking. The Supreme Court declined to hear a similar case last year. For now, the Court is leaving open to interpretation the constitutionality of large fees upon homebuilders. With rumors of Justice Kennedy retiring soon and New Justices entering the Bench, perhaps a changed Supreme Court may tackle the constitutionality of fees upon homebuilders in coming years.

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 property law concerns.

California Court Eases Employee’s Burden in Proving Employer’s Wage Statement Violations

In 2004, the State legislature enacted the Labor Code Private Attorneys General Act of 2004 (“PAGA”), which authorizes California employees to sue their employers for Labor Code violations and collect civil penalties that would otherwise be collectible only by California’s Labor and Workforce Development Agency. PAGA suits are known as “representative actions,” in which an employee sues “on behalf of himself or herself and other current or former employees.” Civil penalties recovered in a PAGA action are distributed 75% to the State of California and 25% to the employees.

Recently, a California appellate court, in Eduardo Lopez v. Friant & Associates, LLC, held that an employee can sue his or her employer under PAGA for failure to provide accurate wage statements without showing that the employer’s conduct was “knowing and intentional.” The ruling is significant because employees can also sue their employer for wage statement violations without using the PAGA statute. But when they do, they must show that the employer’s violation was “knowing and intentional” in order to win their case. Thus, the Lopez decision is likely to significantly impact how suits for wage claim violations will be filed in the future. After Lopez, it is unclear why employees would bring lawsuits for “knowing and intentional” wage statement violations when they can bring PAGA claims without proving the wage statement violations were knowing and intentional.

In the Lopez case, the plaintiff, Mr. Lopez, filed an action seeking recovery of civil penalties under PAGA for his employer’s failure to include the last four digits of its employees’ social security numbers or employee identification numbers on their itemized wage statements. The trial court found that the employer had been unaware that this required information was missing and therefore ruled in favor of the employer. The trial court reasoned that Lopez could not prevail because the employer’s omission was not “knowing or intentional” within the meaning of Labor Code section 226, which specifies what information must be included in employee wage statements.

The appellate court reversed the judgment. The Lopez court reasoned a PAGA claim is not subject to Section 226’s “knowing and intentional” requirement, and that the “knowing and intentional” requirement applies only to non-PAGA lawsuits.

Ezer Williamson Law provides a wide range of employment services to employers and employees. Contact us at (310) 277-7747 to see how we can help you with your employment law concerns.

Tenant Security Deposits and “Deduct-and-Return” Under Civil Code Section 1950.5

Subject to certain limitations, a landlord may withhold tenant security deposits in order to clean, repair, and make ready a rental unit for new tenants.  In fact, California Civil Code Section 1950.5 provides that the landlord may use summary “deduct-and-return” procedures (that is, procedures that do not require formal legal process) as long as certain rules are followed.

“Deduct-and-Return” Under Civil Code Section 1950.5

Under California law, after a tenant has vacated the premises a landlord has 21 days or less to notify the tenant either (1) that the landlord will provide a full refund of the security deposit, or (2) mail or personally deliver to the tenant an itemized statement listing the amounts of any deductions from the security deposit and the reasons for the deductions, together with a refund of any amounts not deducted. Civil Code Section 1950.5(g)(1).  The landlord must include copies of receipts for the charges that were incurred to repair or clean the rental unit with the itemized statement, or, if the landlord or their employees performed the work or repairs, then the itemized statement must describe the work performed, including the time spent, the hourly rate charged, and the hourly rate must be reasonable. Civil Code Section 1950.5(g)(2).

Failing to Follow the Section 1950.5 Procedure and Potential Penalties

When a landlord fails to follow the timeline and steps identified in Section 1950.5 in good faith, the landlord loses the ability to use the summary procedure.  Put differently, the landlord cannot simply “deduct-and-return” the tenant’s security deposit, but, instead, must return the security deposit in full and bring an action for damages to recover amounts owed to clean and/or repair the rental units.

If the landlord withholds the tenant’s security deposit in bad faith then the tenant may bring an action against the landlord and the landlord may be forced to pay “statutory damages of up to twice the amount of the security, in addition to actual damages.” Civil Code Section 1950.5(l).

Enforcing Restrictive Land Covenants

Land Covenant AttorneysRestrictive covenants are contract clauses that  limit a contracting party’s future conduct. A restrictive land covenant prevents certain use of the land. In this article, we will discuss restrictive land covenants, and how to enforce them in California.

In general, restrictive land covenants serve the purpose of enforcing neighborhood presentation standards. These are your restrictive easements, Covenants, Conditions, and Restrictions (“CC&Rs”), and other Home Owner’s Association rules. They can range from mandating where a home owner puts his trash cans to the permissible colors of a home’s façade. Such covenants are typically written into a deed, or at least referenced in the deed and recorded. Nahrstedt v. Lakeside Village, 8 Cal.4th 361 (1994). Restrictive land covenants are usually created by developers of a planned community, and enforced by community representatives or land owners.

Restrictive covenants “run with the land.” This means that they are tied to the property (land), and not to a  specific owner(s). In other words, the limitations of a restrictive land covenant are legally binding for anybody who subsequently buys the property.

A restrictive land covenant is enforceable as long it was recorded, it is being enforced in a fair and non-discriminatory manner, and there is still an individual or group benefiting from it. It can be enforced by any individual land owner who benefits from the restriction, or the collective homeowner’s association if there is one.  (Cal. Civ. Code §5975).

For the most part, homeowner’s associations are the principal enforcers of restrictive land covenants. California’s Civil Code authorizes these types of associations to initiate legal action, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings on behalf of the association membership (Cal. Civ. Code §5980). An association can take action to enforce CC&Rs, resolve issues concerning damage to common areas, and similar land-use matters.

Steps for enforcing a restrictive land covenant will vary based on the planned community. For example, one particular homeowner’s association may have outlined provisions for commencement of an enforcement action. In the absence of a homeowner’s association, the land owner seeking to enforce a restrictive land covenant can sue. A plaintiff in an action seeking to enforce CC&Rs can petition the court for an injunction against the defendant, which would require the defendant to stop non-compliance and seek money damages.

If you have any questions about restrictive covenants, 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.

What is a Partition Action?

As a business law firm, we often deal with partnership disputes.  We have shared information on our blog on how to protect against partnership disputes, as well as tips for solving them such disputes.  Unfortunately, not all disputes can be prevented or solved.  In these circumstances, partnerships often dissolve. When that is the case, , and a partition action may be necessary to distribute partnership assets.

In a partition action, known as a partition of partnership property, a court is asked to divide partnership property equally between amongst interested parties. The guidelines for distributing assets in a partition action are set out in California Code of Civil Procedure section 872.010, et seq.  Although most partition actions involve real estate, but the laws of partition actions can be applied to distributing any type of partnership property, such as manufacturing equipment. Specifically, this type of action would be referred to as an action for partition of partnership property.

If a partner wants to file for a partition action, he or she will have to file a complaint with the court seeking a partition action is initiated like any other legal dispute, meaning that the partner would file a complaint in the appropriate court alleging a cause of action for partition of partnership property.  When the action involves real property, the plaintiff will shall also have to record a notice of pendency of the action, called a ““lis pendens,” in the office of with the county recorder of each county in which any real property described in the complaint is located.  Once recorded, the party should file a Notice of Lis Pendens with the court. This will prevent the other partner from selling or taking loans out on the property by putting buyers and lenders on notice of the pending action.

In general, a court will allow a partition unless it is against the interest of the parties. To determine whether the partition is in the best interest of the parties, the court will consider the character of the property and expenses associated with the partition.

If a court finds that a partition is in the best interest of the parties, it will usually order that the business or property be sold and the proceeds be divided amongst the partners. However, sometimes the parties are able to come to a partition settlement agreement, and the court will merely issue a judgment so that the agreement will be enforced.

If you have questions about partition actions or partnership disputes, 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, commercial and real property claims. Contact us at (310) 277-7747 to see how we can help you.

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.

Obtaining a Variance to a Zoning Restriction

In order to build a development, home, or addition that does not comply with local zoning ordinances or restrictions, a property owner or developer must obtain a variance. The exact process of obtaining a variance will vary based on applicable city or county laws, and can vary depending on the scope of the project and the type of variance sought.

For example, there could be different processes or requirements for “residential use” variances versus “residential area” variances.  Generally speaking, there are two types of variances: an “area variance” and a “use variance.” An area variance can be requested by a property owner or developer who is seeking an exception to a regulation dealing with land configuration or physical structure improvements.  A use variance, on the other hand, seeks an exception to the type of use of land permitted by a zoning ordinance or restriction.

Similarly, the process or requirements for residential variances differ as compared to variances for agricultural, industrial, recreational, or commercial property.  Once you have determined the type of variance you will need, the next step will be to contact the local city or county government office that handles development in the area where the property is located.  The local government office will usually have an application that must be completed, and typically require copies of relevant site plans, floor plans, and elevation drawings, as well as the payment of any fees associated with application submission.  Once complete, a city board will review your application and may require public hearings on the application.  If the variance request is denied, there is generally an appeals process.

If you have questions about obtaining a variance, 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.

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