Law Library Archives - Klinedinst PC

March 7, 2024

SAN DIEGO, CALIFORNIA – In what promises to be the first of several legal challenges, a U.S. District Court has determined that the new Corporate Transparency Act (CTA) is excessive in its scope and unconstitutional. However, the U.S. Treasury and its Financial Crimes Enforcement Network (FinCEN) were quick to issue guidance that the Court’s ruling applies only to the parties involved in the litigation, and businesses of all sizes are still bound by the CTA’s reporting requirements.

The Corporate Transparency Act was originally enacted on January 1, 2021 and went into effect as of January 1, 2024. The federal law requires most small- and medium-sized business entities to file a report with the Department of the Treasury, through its FinCEN unit, concerning the beneficial ownership of those business entities.

The National Small Business Association (NSBA), a non-profit organization with 65,000 members across the country, sued the Treasury Department and requested a permanent injunction against enforcement of the CTA. On March 1, 2024, Judge Liles C. Burke from the U.S. District Court, Northern District of Alabama, issued a ruling that agreed with the NSBA. In his opinion, Judge Burke wrote that, “[because the] CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals,” that the CTA is unconstitutional and that the NSBA was entitled to summary judgment.

The ruling surprised many in the business community. Many companies have already dedicated resources to compliance with the terms of CTA and its reporting requirements. However, many court watchers agreed that the grant of summary judgment to the NSBA and its request for a permanent injunction are likely limited only to the NSBA and its members for the time being. In fact, FinCEN released a statement that made clear that FinCEN’s interpretation is that the ruling only affects the plaintiffs in that case and does not prevent enforcement of the CTA otherwise.

What happens next is an open question. The Department of the Treasury may decide to appeal the decision to the Eleventh Circuit Court of Appeals. However, it is also likely that copycat lawsuits, similar to the one filed by the NSBA, will raise the same constitutionality issues in district courts across the country.

The CTA is a federal law which has several analogs at the state level. For instance, starting in December of 2024, businesses in New York will be required to comply with the LLC Transparency Act, which essentially requires those entities file similar beneficial owner reports to the State of New York. Regardless of the present disposition of the CTA, some entities may still have similar state law obligations to remain cognizant of.

While an expected appeal is pending and the future of CTA plays out in the courts, clients are encouraged to discuss their continued CTA compliance obligations with Klinedinst’s team of transactional and corporate attorneys. To learn more about the CTA, or to contact a member of the transaction team, please visit:

klinedinstlaw.com/practice/corporate-transparency-act

Please Note

This update on the CTA is provided as-is and does not constitute legal advice. The use of information from this article does not create any type of attorney-client relationship.

About Klinedinst

Klinedinst PC is the go-to firm for clients looking for litigation and trial experience, sophisticated transactional advice, and other solution-oriented legal counsel. Providing legal services across the West, our attorneys are dedicated to fostering trusted relationships with each and every client, to help them achieve their individual goals and objectives. Klinedinst lawyers strive to serve as true business partners, always at the ready to address the legal challenges that businesses are confronted with every day. Whether in court, at the board meeting, or otherwise, KPC is the trusted legal advisor to have by your side.

July 8, 2022

The following analysis is provided by Klinedinst Senior Counsel Phillip E. Stephan, Sasha J. Glenn, and Melissa Corona.

The adage that trial is theatre cannot be overused. While Depp v. Heard captivated several commentators, the outcome boiled down to how each side chose to present the people and evidence that would support their case.

Winning a libel case for a public figure is a difficult task, as the plaintiff (i.,e., the person suing) must not only prove untrue statements were published, but also that the person making the libelous statements had actual malice in doing so. Mr. Depp’s legal team presented several visual and auditory pieces of unique evidence, staged in a way to maximize the impact of Mr. Depp’s testimony and of the witnesses offered in support of his case.

Ms. Heard’s defense relied on her ability to convince the jury that she told the truth about Mr. Depp, although Mr. Depp needed to prove more than Ms. Heard simply not telling the truth. Credibility was the central challenge at stake. Therefore, each side had to make tactical decisions about how to prove credibility – would you choose to primarily argue on your tendency of truthfulness, or your opponent’s lack of credibility?

Strategic Deployment of Evidence

Mr. Depp’s presentation of evidence prominently featured visuals to engage the jury, including several that would be difficult to forget. Mr. Depp’s team slowly chipped away at Ms. Heard’s credibility as the case developed. Initial evidence concerned physical altercations between Ms. Heard and Mr. Depp, ranging from scratches to Mr. Depp‘s face to a mini-trial concerning Mr. Depp’s finger injury. The contentions regarding the finger injury even involved experts, which effectively turned the issue of Mr. Depp’s finger into a microcosm of credibility. Ms. Heard claimed Mr. Depp may have injured his finger by smashing a vintage wall phone to pieces. Her credibility on the incident was dismantled as she presented photos of the scene and none included any indication of the phone. Compounding against Ms. Heard’s credibility, Mr. Depp’s rebuttal witness who testified about visiting the scene on the day of the incident stated he saw no such phone or even remnants of it, driving another hole in Ms. Heard’s account of the incident. Mr. Depp presented testimony concerning Ms. Heard putting human fecal matter in his bed – this is unique evidence that is not likely to be found elsewhere, going directly to Ms. Heard’s credibility. Mr. Depp also used expert testimony to show that any visuals Ms. Heard would try to use were not worthy of trust and strategically deployed audio evidence to support his account of Ms. Heard’s true character.

Mr. Depp prominently featured an audio clip, in which Ms. Heard stated: “Tell the world, Johnny. Tell them, ‘I Johnny Depp … am a victim of domestic violence,’ … and see how many people believe or side with you.” This evidence could have been used at any time – in the chronological quantum of when it was recorded, in cross-examination of Ms. Heard, or as the first piece of evidence during Mr. Depp’s testimony. Mr. Depp’s team chose to use this evidence as the ending to Mr. Depp’s story, which gave the evidence greater impact by showing the jury that Ms. Heard seems to imply that no one could ever believe Mr. Depp could be domestically abused. Before Ms. Heard had the chance to say one word, the jury was primed to believe that Ms. Heard had affirmatively stated that facts and evidence did not matter, since no one would ever believe Mr. Depp as a matter of principle.

A trial attorney will always tell you that successful trials must have hooks that will stay with the jury (anyone remember “If it doesn’t fit, you must acquit”?). Mr. Depp’s team’s use of the audio clip effectively had the same impact.

Rebuttal Witnesses

For every argument Ms. Heard offered, Mr. Depp offered a witness to directly and specifically rebut the testimony, utilizing several witnesses in smaller segments of testimony rather than one witness for a long period of time. Ms. Heard’s testimony told the story that she was an up and coming figure in Hollywood, and presented evidence attempting to bolster her profile and what her future would have held but for Mr. Depp’s conduct. After Ms. Heard’s testimony concluded, Mr. Depp presented several witnesses. Mr. Depp’s witnesses in rebuttal were structured to address the fundamental issues of who was more believable concerning domestic violence, while concisely countering contentions that Mr. Depp negatively affected Ms. Heard’s career and effectively drawing attention away from those arguments.

First, in response to Ms. Heard’s sister’s claim that, after Mr. Depp’s finger was severed, Mr. Depp punched Ms. Heard repeatedly, Mr. Depp called Dr. David Kulber, a treating physician that worked on Mr. Depp’s hand and placed a cast. “He could have hit someone, but then it probably would have injured [or] damaged the cast,” Kulber averred. When asked if he observed damages to the cast, he said, “I don’t recall. Nothing that comes to mind.” Dr. Kulber testified that Mr. Depp could not have formed a fist with the cast on. Several of Mr. Depp’s rebuttal witnesses presented testimony compounding against Ms. Heard’s credibility regarding domestic violence, stating they never saw any marks or bruises on Ms. Heard. These witness included a range of individuals from friends to law enforcement.

Mr. Depp also produced two witnesses to rebut Ms. Heard’s presentation of her stature in Hollywood. Ms. Heard claimed that Mr. Depp’s statements led to diminishment of her role in “Aquaman 2,” and even a potential recast where she would be removed from her role. However, the President of the studio responsible for “Aquaman 2” refuted that argument, noting that Ms. Heard was neither reduced nor recast, and any recasting consideration was because the studio felt Ms. Heard lacked chemistry with the main star of the film. Mr. Depp also attacked the projection of Ms. Heard’s career earnings by an entertainment consultant – instead of only attacking the numbers underlying the projection, Mr. Depp’s rebuttal witnesses focused on the actors Ms. Heard said constituted her peer group.

Mr. Depp also presented a forensic psychiatrist, who told the jury that Ms. Heard’s psychiatrist had violated ethical principles governing when psychiatric professionals may voice opinions, harping on the fact that Ms. Heard’s psychiatric witness did not personally examine Mr. Depp and had no authority to comment on Mr. Depp’s mental health.

Mr. Depp’s structuring of witnesses and evidence into small, concise segments kept the jury engaged and the issues clear. This allowed the jury to observe for themselves the compounding effect of the testimony presented against Ms. Heard’s credibility. Further, by avoiding longer segments of testimony, the jury had less time to evaluate a witness’s credibility and was more likely to take their testimony at face value.

It is no secret that legal proceedings can be tedious; the days are long and full of legalese. By breaking the trial into acts—much like a theatrical play— Mr. Depp’s team even kept the people at home engaged, helping Mr. Depp’s reputation along the way. The small segments and use of witnesses helped Mr. Depp’s team attack Ms. Heard’s claims and highlight Mr. Depp’s known qualities that made him rise to fame, all in one fell swoop.

The theatrical unfolding of this case underscores that knowledge of witnesses and your best evidence serves as the foundation of your trial, which you should be litigating towards from the beginning of your case. It is important to identify especially unique and or damaging evidence early, disclose it to opposing counsel to avoid any claims of undue prejudice or admissibility issues, and then consider when to deploy the evidence to maximize impact with the jury at time of trial. Disclosure of such evidence does not diminish the impact of your evidence, as the goal of discovery is to eliminate surprise at time of trial; in fact, your disclosure may help settle matters, should that be your goal.

About the Authors

Phillip E. Stephan is a member of Klinedinst’s Professional Liability, Employment, and Business and Commercial Litigation practice groups. Prior to joining Klinedinst, Mr. Stephan focused on professional liability, complex business litigation, class actions, antitrust, and unfair competition. Mr. Stephan has also represented startup and established companies, providing counsel regarding corporate governance, capital acquisition, contract drafting, strategic management, litigation, risk management, and intellectual property. Mr. Stephan can be reached at PStephan@KlinedinstLaw.com.

Sasha J. Glenn and Melissa Corona also contributed to this article.

Please Note

This article does not intend to offer any comment on Ms. Heard or Mr. Depp personally, but only to discuss the tactics used during trial. This information does not constitute legal advice. The use of information from this article does not create any type of attorney-client relationship.

About Klinedinst

Klinedinst is the go-to firm for clients looking for litigation, trial experience, transactional representation, and legal counsel. The firm’s offices in Los Angeles, Sacramento, San Diego, Irvine, and Seattle service the entire West Coast. What sets Klinedinst apart is the relationship our attorneys foster with each and every client. Klinedinst lawyers are indispensable strategic partners to business leaders, helping to achieve business objectives and create proactive solutions to resolve the many legal challenges that businesses are confronted with every day. Whether vigorously advocating for business clients in court, or guiding business transactions and negotiations, Klinedinst is the trusted legal advisor to have by your side.

April 9, 2020

The following is an analysis of new emergency rules enacted by the California Judicial Council, courtesy of Ian Rambarran, Shareholder with Klinedinst PC. Rambarran currently serves as California MBA Legal Issues Committee Chair.

On April 6, 2020 the California Judicial Council enacted emergency rules amid the COVID-19 crisis. Among other things, the new rules apply to all unlawful detainer actions and judicial foreclosures. These rules remain in effect until 90 days after the Governor declares the COVID-19 state of emergency is lifted or the rules are repealed by the Judicial Council. A complete copy of the new emergency rules are available here:

Unlawful Detainer Evictions

The emergency rules now prevent the filing of new unlawful detainer actions, limit the ability to take a default, and postpone new and pending trial dates. Effective immediately:

Courts may not issue a summons on a complaint for any unlawful detainer action unless the court finds the action is necessary to protect public health and safety.

Courts may not enter default or a default judgment unless both 1) the action is necessary to protect the public health, and 2) the defendant has not appeared in the action within the time provided by law, including response deadline extensions issued within any applicable executive order.

Unlawful detainer trials pending as of April 6, 2020 must be continued a minimum of 60 days. All matters not set for trial may not be set for trial less than 60 days after a request for trial unless the court finds an earlier trial date is necessary to protect public health and safety.

Like Governor Newson’s Executive Orders and President Trump’s CARES Act, these rules aim to prevent the displacement of tenants and occupants during the state of emergency. However, this amendment is more expansive than Governor Newsom’s orders and President Trump’s CARES Act because it applies to all evictions – residential and commercial alike.

Judicial Foreclosures

The new rules also suspend all judicial foreclosures and prohibit courts from proceeding to judgment unless the court finds that the action is required to further public health and safety. Further, the rules toll the statutes of limitation for filing a judicial foreclosure action and extend the equitable rights of redemption.

Conclusion

In reality, the new rules fill in a gap on multiple levels. They now afford protection to residential and commercial tenants or occupants and protect commercial and residential borrowers too (although residential borrowers normally do not face judicial foreclosure). However, it is important to note that nothing contained in the new rules means that rent or monthly payments are forgiven. Those moneys are still owed; however, no one can attempt to recover possession until 90 days after Governor Newsom declares the state of emergency is lifted or until the Judicial Council repeals the rules.

About the Authors

Ian A. Rambarran works with the firm’s corporate clients, focusing primarily on business, financial services, employment, intellectual property, real estate, transportation, and construction issues. A graduate of the University of the Pacific, McGeorge School of Law, Mr. Rambarran currently serves as Chairman of the California MBA Legal Issues Committee. He frequently counsels and represents clients in business and commercial disputes, and represents lenders and financial institutions in disputes throughout California. Mr. Rambarran can be reached at irambarran@klinedinstlaw.com.

Please Note

This article is intended to be for informational purposes only. This information does not constitute legal advice. The law is constantly changing and the information may not be complete or correct depending on the date of the article and your particular legal problem. The use of information from this article does not create any type of attorney-client relationship.

About Klinedinst

April 7, 2020

The following is an analysis of the CARES Act, courtesy of Ian Rambarran, Shareholder with Klinedinst PC. Rambarran currently serves as California MBA Legal Issues Committee Chair.

President Trump signed into law the Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act a little over a week ago. Today, lenders and servicers are quickly instituting processes to assist borrowers and tenants with COVID-19 related relief. The CARES Act aims to streamline relief for all those affected by COVID-19, if the loans are federally backed. This means that the CARES Act applies to all FHA, HUD, VA, Department of Agriculture Loans, Fannie Mae and Freddie Mac loans.

A complete copy of the CARES Act can be found at: congress.gov/bill/116th-congress/house-bill/748/text#toc-H4D5728D599DE43C1B10376E596A41BCE.

Forbearance Relief

Unlike the typical loss mitigation scenario, the Act creates an automatic 180-day forbearance if:

A borrower is suffering financial hardship due directly or indirectly to COVID-19 and,
A borrower affirms he or she is experiencing the hardship during the COVID-19 emergency (National Emergency declared by the President).

The forbearance option applies without regard to prior delinquency and the forbearance period may be extended an additional 180 days. During the forbearance period, no fees, penalties, or interest beyond the amounts scheduled may be charged. Effectively, lenders and servicers should calculate them as if the borrower had made all of his or her payments on time and in full. Additionally, following a request for forbearance, a servicer may not initiate foreclosure or execute a foreclosure-related eviction for at least 60 days.

The CARES Act states the only documentation required from the borrower is an attestation that their financial hardship is caused by COVID-19. It is not yet clear how attenuated the hardship may be to COVID-19, but the COVID-19 pandemic will affect all aspects of commerce because close to 90% of the country has been ordered to shelter in place. Nearly any hardship could therefore be connected to COVID-19 based on circuitous logic.

Forbearance For Multifamily Properties

The CARES Act also applies to covered Multifamily Properties. A multifamily borrower (borrower of a property of five or more dwellings) experiencing financial hardship either directly or indirectly because of COVID-19 may request forbearance either orally or by written request. For this type of investment-based property, a servicer must document the hardship, provide forbearance for up to 30 days, and extend the forbearance for up to two additional 30 day periods, so long as a borrower makes the request at least 15 days prior to the end of a provided forbearance period.

The CARES Act also expects the benefits afforded to multifamily property owners be passed down to the tenants. For example, a borrower/landlord cannot evict a tenant nor can the borrower/landlord charge late fees or penalties against the tenant during the forbearance period. Indeed, the borrower cannot serve notices to vacate until after the expiration of the forbearance period and must provide at least 30 days to vacate.

Eviction Moratorium

The CARES Act implements a 120 days moratorium on all covered properties. This means that the borrower may not: initiate an action (file a complaint) to recover the property based on nonpayment of rent or charge a tenant penalty for nonpayment of rent. Furthermore, a tenant must also receive at least 30 days’ notice to vacate and the notice may not be served until after the expiration of the 120-day period. Following a foreclosure, the property owner steps into the shoes of the prior borrower/lessor. Therefore, this enactment will limit the ability of lenders to proceed with actions such as unlawful detainers.

Foreclosure Moratorium

Finally, the CARES Act makes clears that a servicer “may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.” The only exception to the foregoing is the property is vacant or abandoned.

Conclusion

The servicing landscape is quickly changing in light of the COVID-19 pandemic. The CARES Act provides extensive new protections for borrowers and occupants of covered properties. In order to ensure compliance with the CARES Act, lenders and servicers should exercise an abundance of caution before moving to foreclosure or eviction. In fact, it would be prudent to communicate with the borrowers to ensure retention options are offered (not just received). Similar efforts should be provided to tenants as well. By following a cautious approach, the lending and servicing industry will be ahead of any new regulatory concerns and support the policy goals of the CARES Act, which amongst other things, stabilizes the economy and secure public health.

About the Authors

Please Note

About Klinedinst

March 31, 2020

The following analysis is provided by Klinedinst Shareholder Ian Rambarran, Chairman of the California MBA Legal Issues Committee.

The financial services industry is part of the critical infrastructure of California and of the country. Governor Newsom articulated the importance of the financial services industry in the guidance he provided on March 20, 2020, which came shortly after the shelter-in-place order became effective.

On March 28, the Department of Homeland Security’s Cybersecurity and Infrastructure Agency (CISA) released additional guidance on the potential impact the financial services industry could have.

CISA’s guidance also designates the industry as part of the country’s critical infrastructure and contains more specifics than Governor Newsom’s order. CISA’s guidance contemplates work performed by the servicing industry as it recognizes workers may be needed for both “consumer and commercial lending” and for supporting “financial operations and staffing call centers.” Those parts of the operations are becoming increasingly important as borrowers begin to experience the economic realities of COVID-19 related restrictions and when they need guidance. These effects will be imminently seen, especially as unemployment claims rise at astronomical rates.

The servicing industry in particular is being called on to voluntarily support the financial systems in a way not seen since the 2008 financial crisis. Regulators are anticipating hardships related to imminent defaults caused by drop of income due to COVID-19. For example, the Department of Business and Oversight (“DBO”) reported that the State of California has reached agreements with national banks, credit unions and loan servicers to considering borrowers for loss mitigation options. The DBO states that numerous participating lenders and servicers have agreed to:

90-day grace period for all mortgage payments
Relief from fees and charges for 90 days
No new foreclosures for 60 days
No credit score changes for accessing relief

While almost all lenders and servicers have clear systems in place that stem from compliance with legislation like the Homeowner Bill of Rights and regulations prescribed by the Consumer Financial Protection Bureau, it is of critical importance that those systems are re-tooled to fit within this unprecedented pandemic.

As previously recommended, lenders and servicers should stay ahead of this crisis by starting COVID-19 specific loss mitigation plans and informing borrowers about options for relief. A protocol for handling these issues will be important as new requests for relief flood in and as regulators further engage the lending and servicing industry to pivot.

Please Note

About the Author

About Klinedinst

March 29, 2020

The following analysis is provided by Klinedinst Shareholder Ian Rambarran, Chairman of the California MBA Legal Issues Committee.

California lawmakers grappling with the effects of COVID-19 are issuing guidance and changing the rules on a frequent, sometimes daily, basis. Requirements on the residential unlawful detainer front have changed again.

On March 27, 2020, Governor Newsom refined, and to a certain extent superseded, his March 16th order affecting residential evictions in California. In Executive Order N-30-27, Governor Newsom harmonized the patchwork of responses from various counties after his prior order suggested restrictions on residential evictions spurred by problems related to COVID-19.

Executive Order N-30-27 focuses on two parts of the eviction process – the filing of the lawsuit and the actual eviction by the Sheriff.

First, the Order extends the timeline for a tenant to respond to an eviction complaint from five days to 60 days, if the reason for the eviction is nonpayment because of issues related to COVID-19 and the tenant satisfies all of the following:

a. Prior to the date of the Order, the tenant paid rent to the landlord pursuant to an agreement;

b. Before the time rent is due, or no more than seven days after the due date, the tenant notifies the landlord that there will be a delay in payment or nonpayment due to reasons related to COVID-19. For example, COVID-19 reasons for default may stem from:

sickness of the tenant or care of a household or family member with confirmed COVID-19;
layoffs, employment hour reductions, the state of emergency or related government response to COVID-19;
childcare issues because of school closures related to COVID-19.

c. The tenant verifiably documents the hardship by providing termination notices, payroll checks, pay stubs, bank statements, medical bills, and the like. The tenant can wait to provide this documentation to the landlord, but the tenant should do so no later than the time of payment of the back-due rent.

Second, the Order restricts the enforcement of a Writ of Possession while the Order is in effect and the tenant has satisfied the aforementioned requirements. Put another way, the Sheriff will not make arrangements to perform a lockout.

Tenants do not get a free ride, however. The Order makes it expressly clear that the tenant will be required to make back rent payments and that the Order does not apply if the tenant can make rental payments. Further, the Order will only remain in effect until May 31, 2020.

It is important to note that Executive Order N-30-27 does not affect commercial evictions. However, there may be restrictions on the commercial eviction front by way of local government action or some order in the future. For example, the Sacramento City Council passed temporary protections on March 25, 2020 to prevent commercial tenants from being evicted if the hardship stemmed from lack of patrons due to the state’s shelter-in-place order. To the extent there are problems in the commercial eviction space, a proactive dialogue between the landlord and commercial tenant is critical for business planning and operations, so it should be done without delay.

Please Note

About the Author

About Klinedinst

March 20, 2020

The following analysis is provided by Klinedinst Shareholder Ian Rambarran, Chairman of the California MBA Legal Issues Committee, originally published in the CMBA’s Member Alert on March 17, 2020.

On March 16, 2020, Governor Newsom issued Executive Order N-28-20 limiting evictions and foreclosures in California. View the full Executive Order.

Executive Order N-28-20 seeks to reduce potential public health issues related to foreclosures and evictions by keeping people in their homes and to provide hardship relief to people economically disenfranchised by COVID-19. Though the Order is not entirely precise, there are a few keys points to take away.

1. The Order authorizes local counties and cities to consider actions to halt evictions and foreclosures, if the reason for the default arises from COVID-19 related income issues.

COVID-19 related income issues are those caused by the reduction in compensable hours, layoffs, business income and consumer demand, as well as a lack of available income due to substantial medical expenses. The Order expressly recognizes that these income issues may have been caused by government imposed restrictions.

2. The Order requests that financial institutions halt judicial foreclosures and evictions, if the reason for the default arises from COVID-19 related income issues.

Though the effect of COVID-19 restrictions will begin to permeate the market for many borrowers and tenants in the next couple of weeks because of employer payroll cycles, it would be best practice to reach out to borrowers who default to stay ahead of any concerns. Even basic notices on websites, billing statements, and newsflashes informing borrowers what programs are available would help alleviate some concerns.

3. The Order asks the Department of Business and Oversight to work with financial institutions to consider alternatives to foreclosures.

At this time, it would be prudent to fine tune loss mitigation action plans to address borrower and DBO concerns before they reach out to you. For example, imminent default or financial hardship should be strongly considered, forbearance plans with extended payment times or modifications with recapitalized missed payments would be worth considering.

The above directives/suggestions are effective until May 31, 2020; however, it would certainly be prudent to halt all foreclosure and eviction activities for the same time so that the effect of COVID-19 is understood nationally and locally. Indeed, many counties have already instituted moratoriums and President Trump issued similar measures for HUD-based programs.

Maintaining that course of action would support the public policy behind Executive Order N-28-20 and help to ensure public health and safety will be strengthened by keeping people in their homes. Finally, postponing foreclosure and evictions will be likely viewed as a positive industry contribution to California and its economy.

Please Note

About Klinedinst

March 19, 2020

By: Tara R. Burd

It is easy to avoid planning when illness and tragedy are on someone else’s doorstep. Today’s COVID-19 pandemic is a reminder that every person is vulnerable to disease, instability, and loss. Its worldwide reach has created circumstances that most people never before considered, but which have always been possibilities. It is an opportunity to break from routine and to consider how to best protect your family and future if you become unavailable for any reason.

As we navigate the many impacts of the COVID-19 pandemic we are curating and delivering a multitude of updates on the legal obligations, risks, and potential solutions to arising challenges. Estate planning remains one of those critically important matters, too often set on the back burner. We are here to offer guidance and planning solutions to help you to make sure that your family and affairs are taken care of the way you want.

Self-Care for You and Your Estate During COVID-19

Self-care means taking action today to improve your health or circumstances tomorrow. Self-care is not limited to your physical well-being and should include ensuring that your financial, social, and emotional needs are met when the unexpected strikes.

Estate planning is not just about naming your heirs. It also includes identifying the people in your life that you trust the most to care for your loves ones, your own health, and your financial stability when you’re sick, injured, or quarantined.

Here are ways that setting up an estate plan with a Klinedinst attorney can help you to be prepared.

Guardianship Designation for Your Children

It is important to carefully consider who you trust to take quick and immediate care of your children in the event of an emergency. The emergency guardian should be someone who has a flexible schedule and can be relied upon to remain proximately located to your child’s school or daycare. The emergency guardian is the childcare first responder who can rush to the home or school when there’s a fire, a lockdown, or another threatening event.

This person is often different than the person you trust to raise your children if you are no longer able to. A long term guardian may not live nearby, but they have the financial and emotional stability to bring your child or children into their own family and raise them with the same care and values you would have provided.

Power of Attorney to Pay Bills or Handle Business

Durable powers of attorney are incredibly flexible documents that can impart authority to another person or agent. The level of authority can be as broad or as narrowly-defined as you wish, and is designed to designate your “backup” should you become incapacitated. If you are quarantined or hospitalized and require someone trustworthy enough to access your bank accounts, write checks on your behalf, or handle pending business, a power of attorney can be used to grant another person the authority to act on your behalf. That power can be revoked at any time, and only has an effect during your lifetime.

Self-Care Planning Through Advanced Health Care Directives

An advanced health care directive is an opportunity for you to tell your doctors, nurses, and loved ones what is most important to you about your physical, mental and emotional health. If you value maximizing the time you have here on Earth, you can indicate your preference to receive any and all life-saving measures. If you prefer quality of life and minimizing pain, there is a wide spectrum of options that can be completely customized to your individual preferences.

One of the scariest aspects of not being well is not being able to express to the people around you what you need. With advanced care planning, we put an emphasis on identifying the people and circumstances that best contribute to your mental and emotional health. For some individuals, this means ample human interaction and engaging in high-stimuli activities. It might mean listening to classical music, and the attendance of a priest, rabbi, or another religious leader. For others, it means withholding food even when they cannot feed themselves. By setting forth in writing the people and circumstances that bring you the greatest peace and joy, you can help to ensure you’re cared for in the manner you wish, at all stages of life.

Wills and Trusts Ease the Burden of Your Loss

By preparing a will and a trust, you can alleviate the weight of the burden that death often leaves behind. Unfortunately, for older Americans, there are many traps that cause heartache and homelessness for the ones that live the longest. Elderly lovers and companions often remain unmarried, but share a home and other assets. If the person on title dies first, the surviving partner often has no right to continue to live in the home and can be evicted by the heirs. This can easily be avoided by planning for your companion to receive the right to occupy your family home for the remainder of their life, while your children retain the right to inherit it eventually.

For those who have a loved one who is currently receiving needs-based benefits, special needs trusts can sometimes be established for purposes of receiving your assets without jeopardizing their receipt of benefits.

And, for parents who own a home in California, a trust can help to provide for your children for many years after you’re gone. This is especially helpful when distributing assets to a minor, as a trust can be structured to make distributions over time. The planning you do now can help put your child through college, vocational training, or other predetermined goals.

The COVID-19 pandemic is a perfect opportunity to enact some self-care for both you and your estate. Take action today so that you have the peace of mind to know that you will be cared for in the manner of your choice when you are injured, unavailable or infirm and that your loved ones will be safe and cared for when you’re gone.

Start Today with Remote Estate Planning

Klinedinst is proud to offer a 5-step remote estate planning solution:

Contact us by phone or email to let us know you’re interested. One of our attorneys will connect with you to make sure that our office is the best fit for your legal needs.
For no commitment or charge, we will provide you with our estate planning intake packet, so that you can tell us about the important people in your life and the assets that need protecting. This gives us a starting point so that we are better prepared to ask you the tough questions during the interview process.
When you’re ready to retain us, send us your packet and tender payment through our secure online portal.
Once we receive your packet and payment, we will schedule a consultation with one of our estate planning attorneys by call or video chat – your choice.
We do the rest! After our planning consultation, we will prepare your estate plan and follow up with you by email or phone if we have any further questions. When your estate plan is complete, we will contact you to discuss the best means of delivering and executing your plan.

About the Author

Tara R. Burd is an experienced probate and trust litigator, with specific emphasis on trust administration, probate avoidance, and probate litigation. Much of her career has been focused on helping clients navigate their way through breach of contracts, business disputes, partition actions, employment, and personal injury lawsuits. Ms. Burd has represented companies, partnerships, and sole practitioners in a variety of matters, and can be reached directly at tburd@klinedinstlaw.com.

About Klinedinst

August 11, 2017

By: Douglas W. Lytle

On August 9, 2017, in Jones v. Royal Admin. Servs., No. 15-17328, 2017 U.S. App. LEXIS 14671, at *3 (9th Cir. August 9, 2017), the Ninth Circuit published an opinion analyzing the ten factors used to determine when a company may be liable for the actions of others acting as its agents.

Plaintiffs had registered their mobile phone numbers on the Do-Not-Call list, but nevertheless received automated telemarketing calls in violation of the Telephone Consumer Protection Act (TCPA). Plaintiffs claimed the telemarketers were agents of Royal, and sought to hold Royal vicariously liable for the calls. Royal claimed the telemarketers were independent contractors employed by All American Auto Protection, Inc. (AAAP).[1]

If the AAAP telemarketers were agents of Royal rather than independent contractors, Royal could be vicariously liable. Whether the telemarketers were Royal’s agents or independent contractors required consideration of ten factors set forth in the Restatement (Second) Of Agency § 220(2) (1958):

(1) the control exerted by the employer,
(2) whether the one employed is engaged in a distinct occupation,
(3) whether the work is normally done under the supervision of an employer,
(4) the skill required,
(5) whether the employer supplies tools and instrumentalities [and the place of work],
(6) the length of time employed,
(7) whether payment is by time or by the job,
(8) whether the work is in the regular business of the employer,
(9) the subjective intent of the parties, and
(10) whether the employer is or is not in business.

See Schmidt v. Burlington N. & Santa Fe Ry. Co., 605 F.3d 686, 690 and fn. 3 (9th Cir. 2010).

Factual Background for Evaluating the Factors

Royal sells vehicle service contracts (VSCs), or extended warranties, through auto dealers and about twenty different marketing vendors. AAAP is one marketing vendor that sells VSCs through telemarketing. When AAAP telemarketers make a call, they first “sell the concept of . . . a vehicle service contract” to the consumer.
The telemarketer then picks a particular service plan from one of many companies (e.g., Royal) to sell to the consumer, based on the make, model, and mileage of the consumer’s car, and the price and benefits in which the consumer expressed interest.

Royal had a marketing agreement with AAAP, which required AAAP to comply with authorized sales and marketing methodologies. Expressly excluded from these methodologies, however, were acts or inaction violating federal or state laws, including “robo-calling.”

Clayton Churchill handled Royal’s account with AAAP. He trained AAAP employees at AAAP’s call center, and provided information about Royal’s VSCs, claim structure, coverage, pricing, and customer service. Royal’s president visited the call center with Churchill about a dozen times. During those visits, officials for AAAP provided assurances that the telemarketers were dialing customers one at a time and were complying with the national do-not-call registry.

Vicarious Liability Under the Law of Agency and Independent Contractors

For purposes of its motion for summary judgment, Royal did not challenge whether AAAP’s telemarketers violated the TCPA. Rather, Royal focused specifically on whether it could be held vicariously liable for AAAP’s calls. Under the TCPA, a defendant may be held vicariously liable for violations if the plaintiff proves an agency relationship between the defendant (Royal) and the caller (AAAP).
Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.

For such an agency relationship to exist, the agent must have authority to act on behalf of the principal and the principal must have a right to control the actions of the agent.

One theory of agency, actual authority, arises from a principal’s assent for the agent to take action on behalf of the principal. An agent acts with actual authority if the agent reasonably believes, at the time the agent is taking action, that the principal wants the agent to take action that has legal consequences to the principal. [Note: The district court analyzed whether Royal could be vicariously liable under three different agency theories: actual authority, apparent authority, and ratification. Plaintiffs’ appeal, however, only pursued an actual authority theory.]

Not all relationships in which one person provides services to another satisfy the definition of agency. An individual acting as an “independent contractor,” rather than an agent, does not have the traditional agency relationship with the principal necessary for vicarious liability. And generally, a principal is not vicariously liable for the actions of an independent contractor, because the principal does not have sufficient control over an independent contractor. The extent of control exercised by the principal is the essential ingredient.

Analysis of the Agent v. Independent Contractor Factors

The Ninth Circuit applied the factors as follows:

(1) Control Exerted By the [Alleged] Employer/Agent
Royal exercised some amount of control over AAAP:

(a) AAAP was required to keep records of its interactions with consumers who purchased Royal VSCs, give Royal weekly reports on VSC sales, and provide notice of requests to cancel Royal VSCs.
(b) AAAP was also required to implement security measures to protect consumer information, collect payments on behalf of Royal, and obtain Royal’s approval before using sales literature to assist in the sale of Royal VSCs.
(c) AAAP was only permitted to use the “scripts and materials” Royal approved and had to comply with the “guidelines and procedures” Royal provided when selling Royal products.
(d) These guidelines and procedures generally required AAAP to “operate in accordance with laws and regulations” and refrain from making “false and misleading” representations.
(e) Royal suspended its relationship with AAAP on one occasion after it suspected AAAP telemarketers were violating Royal’s standards and procedures.

However, Royal had only limited control of AAAP’s telemarketers:

(a) Royal did not have the right to control the hours the telemarketers worked nor did it set quotas for the number of calls or sales the telemarketers had to make.
(b) Significantly, Royal did not have any control of a telemarketer’s call until the telemarketer decided to pitch a Royal VSC to the consumer. When an AAAP telemarketer reached a consumer, they first had to sell the consumer on the idea of a VSC. Royal did not have control over this sales pitch. Only after the consumer was sold on the idea of a VSC, would an AAAP telemarketer pitch a specific VSC. (Only if the specific VSC was a Royal VSC would Royal control the “scripts and materials” the telemarketer was permitted to use in the sale.)
(c) AAAP sold VSCs for multiple companies (all of whom, presumably, had their own standards and procedures AAAP telemarketers were required to comply with).

In this case, an AAAP telemarketer pitched a VSC to a plaintiff during only one call. And during that call, the telemarketer attempted to sell a “Diamond New Car” protection plan—a plan not sold by Royal through AAAP.

Thus, there was no evidence that AAAP telemarketers ever tried to sell Royal VSCs to the plaintiffs.

Accordingly, Royal never specifically controlled any part of any of the calls to the plaintiffs.

(2) Whether the One Employed Is Engaged in a Distinct Occupation

AAAP was an independent business, separate and apart from Royal.
Royal was engaged in the “distinct occupation” of selling VSCs through telemarketing, and had many different clients and offered the same services to companies other than Royal.

Thus, this factor suggested that AAAP’s telemarketers were independent contractors rather than agents of Royal.

(3) Whether the Work Is Normally Done Under Supervision of an Employer

The AAAP telemarketer calls were not normally done under the supervision of Royal.

Churchill provided some training and oversight at AAAP’s call center, and Royal’s president visited the call center about a dozen times over the course of three years. But no Royal employee directly supervised AAAP’s calls.

Thus, this factor favored finding that AAAP’s telemarketers were independent contractors.

(4) Skill Required

No evidence was presented regarding the skill required to place the calls or sell a VSC.

Thus, the court did not consider this factor.

(5) Whether the Employer Supplies Tools and Instrumentalities (Including Place of Work]

Royal provided AAAP with some things necessary to complete the sales. In particular, Royal:

(a) provided the contracts that were to be sold and gave AAAP access to their “on-line Contract quote manager”; and
(b) trained AAAP telemarketers in how to sell Royal contracts.

AAAP, on the other hand, provided its own phones, computers, furniture, and office space. And if AAAP wanted any “brochures [or] other sales literature,” it had to develop and manufacture them itself.

Thus, AAAP’s supply of most of the “tools and instrumentalities” supported a finding of independent contractor status.

(6) Length of Time Employed

The original contract was in effect for only one year, with each party retaining the ability to cancel the contract at any time on 30 days’ notice. AAAP sold VSCs for Royal for three years. While not a short period of time, the limited nature of the original contract showed there was a “contemplated end to the . . . relationship.”

The court said that such “designated impermanency” of the relationship supported a finding of independent contractor status.

(7) Whether Payment Is By-Time or By-The-Job

AAAP was paid a commission for each sale, and was not paid for the time the telemarketers worked.

The court said this was a strong indicator that the telemarketers were independent contractors.

(8) Whether the Work Is in the Regular Business of the Employer

Royal contracted out its direct sales to many different vendors and car dealerships, and did not hire its own employees to sell its VSCs.

Since Royal is in the business of selling VSCs, and AAAP’s sales are a regular part of Royal’s business, however, this factor favored finding an agency relationship.

(9) The Subjective Intent of the Parties

There was no clear evidence regarding subjective intent of the parties.

That AAAP sold VSCs for multiple companies, however, indicated AAAP’s intent to have its telemarketers operate as independent contractors for many different companies.

(10) Whether the Employer Is or Is Not in Business

Royal is a business, which favors finding an agency relationship.

Conclusion that AAAP Telemarketers Were Independent Contractors, Not Agents

Based on its analysis of the factors, the Ninth Circuit concluded that AAAP’s telemarketers clearly were independent contractors rather than agents, which it summarized as follows:

AAAP was its own independent business that sold VSCs for multiple companies without the direct supervision of a Royal employee.

AAAP provided its own equipment, set its own hours, and only received payment if one of its telemarketers actually made a sale.

Finally, although Royal had some control over AAAP’s telemarketers, it did not specifically control the calls at issue in this case, because the telemarketers never attempted to sell a Royal VSC during those calls.

Since AAAP’s telemarketers were independent contractors, and not Royal’s agents, Royal was not vicariously liable for telemarketer calls that violated the TCPA. Thus, the district court was correct in granting summary judgment to Royal.

Bonus for making it to the end: see the oral argument before the Ninth Circuit here.

[1] Royal was added as a defendant when it appeared AAAP would declare bankruptcy.

February 25, 2016

In the February, 2016 issue of Mortgage Compliance Magazine, Ian Rambarran discusses the growing importance of establishing a Single Point of Contact with borrowers in the loan servicing industry. California has already codified SPOC guidelines for loan servicers, and begun to pave the way for the industry nationwide.

SACRAMENTO – The February, 2016 edition of Mortgage Compliance Magazine features an article written by Klinedinst shareholder Ian A. Rambarran.

In his article, “Managing Single Points of Contact Claims,” Mr. Rambarran discusses the recent trend of case law tipping in borrowers’ favor and how the provisions of Single Point of Contact guidelines can help loan servicers mitigate default risk. Mr. Rambarran outlines the SPOC rules established by the Civil Code, and how compliance can be a strong first step in avoiding potentially costly litigation.

Mr. Rambarran helps lenders navigate when and how to use a SPOC, and he argues that establishing a SPOC with borrowers is a mutually beneficial practice that will soon become the standard operating procedure for the industry nationwide.

Klinedinst congratulates Mr. Rambarran on the publication of this comprehensive article. To read the full article, please click here.

About Klinedinst

Klinedinst has become the go-to firm for clients across California, across the West, and across the globe. Our litigators, trial attorneys, and transactional lawyers guide clients through every problem, finding solutions at every turn. The firm serves clients from offices in Los Angeles, Sacramento, San Diego, Santa Ana, and Seattle. Whether representing businesses in court, helping negotiate transactions, or handling matters in state, federal, or appellate courts, Klinedinst attorneys help get the job done.