U.S. Supreme Court Will Hear Takings Clause Case from California

wine-countryIn January 2015, the United States Supreme Court agreed to hear a property case that originated in California dealing with whether the Fifth Amendment of the United States Constitution protects the seizure of personal property as well as real property.

The case, Horne v. U.S. Department of Agriculture, has already been before the United States Supreme Court before. In 2002 and 2003, the U.S. Department of Agriculture (the “USDA”) forced the Horne family to take almost half of its raisin crop off the market to help keep rising prices down. The Horne family sued, arguing that the USDA’s demand amounted to a taking of personal property for which the Horne family was entitled to compensation, just like a taking of real property would. When the case first came before the United States Supreme Court, the Court agreed to hear the case, but its decision did not address whether the government’s raisin marketing order constituted a “taking” of private property.  Instead the Court ruled on a procedural matter, holding that the San Francisco-based 9th U.S. Circuit Court of Appeals had jurisdiction to consider the takings claim, reversing the 9th Circuit’s finding that the claim had to be heard by the Court of Federal Claims.

The case went back to the 9th Circuit Court of Appeals, which ruled that there was no taking because the Takings Clause rule applies only to real property. The Horne family appealed, and the case will go before the United States Supreme Court once again. Horne v. U.S. Department of Agriculture, 750 F. 3d 1128 (2014).

The Takings Clause prohibits the Federal government from taking real property for public use without just compensation. The Supreme Court’s decision in this case can have major implications for business owners and farmers subject to government market orders.  However, the expansion of 5th Amendment protections to personal property could also set the stage for more federal lawsuits and claims that certain government regulations amount to takings of personal property.

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 real property claims. Contact us at (310) 277-7747 to see how we can help you.

Cardinal Change vs. Abandonment

Previously on the blog, we defined what constitutes a cardinal change in a construction contract. Importantly, California is one of the few states that differentiates between a cardinal change and the related legal theory of  “abandonment.”  It is important for property owners and contractors to understand the difference and the implications of both.

A cardinal change is a change that goes beyond the permitted changes detailed in the contract.  It is usually a request so far outside the scope of the original contract that it frustrates the very purpose of the contract (click here for examples from our previous blog).

“Abandonment” occurs when a property owner is said to have “abandoned” a project or property.  Abandonment can be shown where parties fail to follow change order procedures, when the final product differs substantially from the original contract, and even when there are impermissible cardinal changes.

The legal implications of cardinal changes and abandonment, and specifically the remedies and damages that are available to both, provide that a contractor may recover damages that are a result of excessive, owner-directed changes to a project, beyond what the parties could have reasonably anticipated at the time of contracting.

In fact, in most jurisdictions the two terms are sometimes used interchangeably.  However, according to the California Supreme Court, the two doctrines are “fundamentally different” and the scope of damages available also differ.  This nuanced issue in construction contract law may seem small, but it can have a significant affect on the amount of damages a contractor may recover.

In Amelco Electric v. City of Thousand Oaks, 15 Cal.Rptr.2d 900 (2002), the California Supreme Court held that under an abandonment claim, a contractor is entitled to recover the total cost (less payments received) for work both before and after the contract was abandoned. Under a cardinal change claim, however, the contractor is only entitled to breach of contract damages for the additional work constituting a cardinal change.

If you have any questions about construction contracts, 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.

Non-Disclosure Agreements: Issues and Variations

Non-disclosure agreements (NDA) can be either a stand-alone contract or a provision of a contract within a larger contractual agreement or transaction or a stand-alone contract that typically requires an individual or entity to (1) refrain from disclosing information, (2) protect the confidentiality of information received, and only (3)  limit the use information for a specified purpose. Businesses use NDAs as an asset protection tool. This is especially true for businesses working with technology and other intellectual property. Previously on the blog we discussed trade secrets, which are some type of information a business wants to keep confidential. One way to ensure the protection of a trade secret is by having parties with knowledge of the trade secret sign an NDA.

It is always best to have a NDA signed before confidential information is disclosed, rather than after. However, it is possible to draft non-disclosure agreements to protect information that was disclosed before the parties actually sign the agreement.

Non-disclosure agreements can be either mutually (reciprocal) or one-way (unilateral). A mutual or reciprocal NDA requires both parties, to keep certain information confidential usually an employer and employee, to keep certain information confidential. This type of NDA is used when both sides are revealing sensitive or proprietary information, such as a manufacturer revealing a new product design to a prototype design company who will use their proprietary methods to create a prototype.  A mutual NDA requires each party to protect the confidential information to the other party.

On the other hand, a one-way or unilateral (one-way) NDA only binds one party, usually such as an employee. This type of NDA is used when only one person party is disclosing sensitive information.

The length term of of non-disclosure agreements are typically specified in the agreement, and will depend on the type of information being protected. If the confidential information has a limited shelf life, it may be sufficient to limit the duration of the confidentiality obligation to a certain number of years or the duration of the parties’ association. If the confidential information may remain confidential indefinitely, then the agreement should also continue indefinitely, or at least as long as the confidential information remains confidential.

If you have questions about non-disclosure agreements, 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, contract, and real property claims. Contact us at (310) 277-7747 to see how we can help you.

California Prosecutors Win Unfair Competition Suit Against Candymaker

Previously on our blog, we explained the nature of unfair competition lawsuits, and also gave examples of recent cases involving unfair competition claims. One of the cases we mentioned has reached a resolution, and the final judgment shows how steep unfair competition penalties can be.

District attorneys in Yolo, Sacramento and San Joaquin counties successfully sued Pennsylvania-based R.M. Palmer Co., the candy company behind “Too Tall Bunny,” a chocolate bunny marketed as “too tall” for the box it is in. The company began marketing the chocolate bunny, whose ears appear to poke out of the top of the box, about three years ago. According to the prosecutors, the product’s packaging is “untrue and misleading,” because the bunny not really “too tall” for the box. The candy bunny sits on a cardboard platform that raises its stature, and makes its size deceptive.

The candy maker and prosecutors reached a deal, but to make sure it was enforced the district attorneys filed a lawsuit in Yolo County Superior Court. The deal was attached to the lawsuit which was confirmed by the Yolo County Superior Court.  A judge issued a final judgment the same day the suit was filed, agreeing that the packaging was misleading and in violation of laws prohibiting unfair competition and false advertising.

In Pursuant to the agreement, R.M. Palmer agreed to cease discontinue marketing the product. The company and will pay a civil penalty of $2,500 for each act of false or misleading advertising. It will also reimburse the county prosecutors for their costs associated with trying the case.  The total amount that R.M. Palmer will pay under the A total court judgment of ($46,919) will be paid over two years.

Unfair competition actions usually begin with consumer complaints, which are pursued to protect consumers from false and misleading marketing schemes. They are also pursued to make sure there is a level playing field for all businesses. The fines associated with a violation will depend on the seriousness of the misconduct, the number of violations, and the length and willfulness of the misconduct. The idea behind issuing penalties is that they will remove the financial incentive for deceptive business practices and deter businesses from violating unfair competition and false advertising laws.

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.

Liability in an ADA Compliant Commercial Lease

The Americans with Disabilities Act (ADA) requires anyone who owns, leases, or operates a place of public accommodation to make sure that the place or premises complies with ADA guidelines. This means that when drafting an ADA compliant commercial lease, a property owner must address how the parties to the agreement will comply with the ADA, and who will absorb the cost of a potential ADA lawsuit.

Title III of the ADA requires “barrier removal” for existing structures and prevents modifications or new construction that can impede access by the disabled persons. Barrier removal imposes a range of compliance obligations that may include installing ramps, creating designated and accessible disabled  parking spaces for the disabled, widening doors, installing special door hardware, and removing certain types of carpeting.

Determining and memorializing which parties are responsible for meeting ADA requirements is important. At least one individual will have the burden of paying the costs associated with ADA compliance. Generally, the landlord will be responsible for meeting any compliance requirements that deal with the structure of the building, while . A tenant will usually be responsible for issues that are solely within the tenant’’s control. To avoid any confusion about who has what responsibilities, there should be a provision clear language in the commercial lease spelling out the landlord’s and tenant’s respective responsibilities.

NoteablyNotably, both a landlord and tenant can be held liable to a third party plaintiff for violations of the ADA. In Botosan v. Paul McNally Realty, 216 F. 3d 827 (2000), a court held that despite the tenant’s contractual responsibility to ensure ADA compliance, either a landlord or tenant can be liable to a third party.

At the very least, a commercial lease should include language representations and warranties stating whether the property complies with the ADA, provisions setting forth who will be responsible for any required retrofitting, how future liability will be allocated, and how the potential cost of compliance costs will be allocated.

If you have any questions about ADA compliant commercial lease terms, 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, commercial and real property claims. 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.

Contract Law: Defining Conflicting Terms- Part 2

Previously on the blog, we discussed ambiguous and conflicting terms in contracts. Most contracts include clauses which provide interpretation rules for ambiguous and conflicting terms. In the absence of such a clause (or if the provisions of the clause do not resolve the conflict), certain California statutes, and case law interpreting and applying those rules, will provide the method of determining  which, if any, ambiguous or conflicting terms can be enforced.

Generally speaking, an ambiguous term can reasonably be read in more than one way.  Likewise, a conflicting term exists where compliance with one or more contractual provisions would violate another contractual provision.

The California Legislature codified contract interpretation rules in the California Civil Code to cover a variety of circumstances that can arise with ambiguous or conflicting terms. A summary of a few of the most common principles  follows below.

Contract Interpretation in General

  • A contract must be interpreted to give effect to the mutual intention of the parties as they existed at the time of contracting, so far as such intentions are both ascertainable and lawful. Civil Code § 1636
  • The whole of a contract should be taken together, so as to give effect to every part, if reasonably practicable, with each clause helping to interpret the other. Civil Code § 1641
  • Several contracts relating to the same matters, between the same parties, and made as part or parts of substantially one transaction, are to be taken together. Civil Code § 1642
  • A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates. Civil Code § 1647
  • No matter how broad a contract is, it extends only to those things the parties intended to contract. Civil Code § 1648
  • Inconsistencies in a contract must be reconciled, if possible, by an interpretation that will give some effect to the inconsistent clauses, subordinate to the general intent and purpose of the whole contract. Civil Code § 1652

Interpreting Specific Contract Language

  • Contract language should be understood in an ordinary and popular sense, not in its strict legal meaning. The exception to this is when parties use words meant to be taken in a technical sense. For example, construction contracts often use language that references published trade standards, which can be used to interpret the contract. Civil Code § 1644
  • Technical words should be interpreted as usually understood by individuals in the profession or business to which they relate, unless clearly used in a different sense. Civil Code § 1645
  • Contract words that are wholly inconsistent with a contract’s nature, or with the main intention of the parties, are to be rejected. Civil Code § 1653

If you have any questions about ambiguous or 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.

Using Power of Attorney in a Real Estate Transaction

A power of attorney is a legal document that grants a person the legal authority to sign documents and enter into transactions on someone else’s behalf.  If you give a trusted professional, friend, or family member power of attorney, their signature on your behalf is legally effective to the same extent as if you had signed.

There are several reasons why you may give someone power of attorney, such as anticipation of your own incapacity or extended travel. In the actual power of attorney document, you can limit the extent of an individual’s powers to sign agreements on your behalf. For example, you may give someone power to only handle medical or only financial matters.

Similarly, some power of attorneys are granted specifically for real estate transactions only.  In fact there are often practical considerations that weigh in favor of considering a power of attorney in a real estate transaction. If you are in the middle of a real estate purchase or sale, it can be hard to predict a close of escrow date, or difficult to coordinate a close date with work or leisure travel schedules.  By granting your attorney or other trusted professional power of attorney in a real estate transaction, he or she can sign all the closing documents while you maintain your travel plans.

Another reason to consider a power of attorney for real estate transactions is to protect your interests in the event of your incapacity. Planning for incapacity by creating a power of attorney can make sure your real estate is taken care of as you intend by allowing someone else to step in and take care of your property for you.

Always remember that when an individual uses their power or attorney to sign on your behalf, they are binding you to all agreements just as if you had signed them yourself. A power of attorney does not absolve you of any future responsibilities or obligations associated with a real estate transaction.

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 Change Order in a Construction Contract?

“No prudent individual would make a contract for the construction of a building of any magnitude without incorporating a provision somewhere making specific and definite arrangements concerning extra work.” City Street Improvement Company v. Kroh, 158 Cal. 308, 321 (1910).

Previously on our blog, we discussed how changes to construction contracts are often unavoidable, but that there are limitations to how much a construction contract can change. In this article, we will discuss the proper tool for acceptable change requests: the “change order.”

A change order is essentially an amendment to a construction contract. It represents the mutual consensus between the parties on a change to the schedule, price, work, or other contract term.  Like any other contract amendment, a change order has to meet the requirements of valid contract formation (offer, acceptance, reasonable identification of changed terms, exchange of consideration, and be signed by both parties).

A change order should always be accompanied by documentation, such as original contract documents, emails discussing the change, revised plans and specifications, meeting minutes, and any other reports that might be related to the change order.  Change orders and associated documents should be kept on file with all other project records.  Moreover, since the statute of limitations for most construction claims is ten years, every contract, change order, and supporting document for a change order should be kept at least that long. Finally, it is especially important to determine and document the cost of a change order.

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 is Incorporation by Reference in a Contract?

Previously on our blog, we discussed how more complex contracts allude to other existing contracts and documents. Incorporation by reference is the method of making these alluded-to documents part of a contract, and is often used to save space when parties want to include or reference another legal document or contract into a new contract. To properly incorporate another document by reference, it has to be adequately described in a new contract, and it is good practice also to attach a copy of the referenced document to the new contract to which it is being incorporated.

The concept of incorporation by reference is similar to that of flow-down contract clauses in construction contracts.  For example, a flow-down clause is used to bind subcontractors to the general contractor in the same fashion as the general contractor is bound under its contract with the property owner. In the same vein, subcontracts usually incorporate general contracts by reference.

When drafting an incorporation by reference clause, parties have the option to incorporate certain provisions of an existing legal document, or the entire document. If the parties make it clear that only certain provisions are to be incorporated, the incorporation by reference clause should be explicitly clear in its limited scope and purpose. However, if the incorporation clause is very general, this could lead to potential disputes about which provisions to a contract were incorporated. To avoid any confusion, parties should specify exactly which terms are being incorporated.

Any time existing legal documents are incorporated by reference, there is a potential for conflicting terms. It is therefore important that all provisions are reviewed for conflicts, and a contract provision dictating how conflicting terms will be resolved should also be included.

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.