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Entries in court decisions (10)

Wednesday
Jun062012

Municipal Bankruptcies - When Local Governments Go Belly-Up

 

Los Angeles Litigation AttorneyEnvironmental Law & Civil Litigation AttorneyJune 6, 2012
by Stephen T. Holzer

Los Angeles Environmental Attorney

When an individual opts to declare bankruptcy, he or she generally qualifies for either Chapter 7 Bankruptcy, in which the individual's property is sold to pay some, or all of the debts; or Chapter 13 Bankruptcy, in which options for payment of these debts are offered over a fixed period of time.

Creditors may be notified and may contest the process, as they want to recover as much of the loan and interest as possible.

It's much more complex for local governments under Chapter 9 of the Bankruptcy Code because:

  1. Municipal debts are usually much larger.
  2. Local government employees don't want to have their contracts abolished or reduced. They stand to lose their benefits, pensions and other compensation when a municipality files bankruptcy.
  3. Bonds and other means of financing municipal projects completely complicate the process.

State Assemblyman Bob Wieckowsky attempted to alleviate some of the confusion for municipalities, their employees and their creditors by introducing a bill that became law this year. In a compromise between the unions and the governments, AB 506 requires cities, towns, counties and villages to engage in mediation with creditors in an attempt to stave off bankruptcy proceedings.

Though only enacted several months ago, the Assemblyman wants to amend the law to broaden the powers of the mediators.

The new bill, AB 1692, will subject local governments to an evaluation, or force them to declare a state of fiscal emergency before they can declare bankruptcy. Several state organizations such as the California Professional Firefighters, the California Labor Federation and the California Nurses Association back this new bill.

Many local government officials oppose AB 1692 though, citing as a reason that the process gives the mediators too much power and allows more time for financial resources to be drained.

The new bill limits a neutral evaluation to 60 days following the appointment of the evaluator, unless participating interests elect to extend the process by another 90 days (or longer if the parties agree).


Insolvent Cities – A Look at Stockton, Mammoth Lakes and Vallejo


The gold rush city of Stockton currently stands to be the most populous in America to declare bankruptcy. The municipality projects a deficit of $20-38 million over the next fiscal year, due partly to overgenerous pension packages for city employees, an over-aggressive development plan, and the nosedive of the real estate market in the current recession.

The parties involved in the bankruptcy proceedings just recently voted to extend the mediation period another 30 days, giving offices until June 27th to come to an agreement with creditors.

Mammoth Lakes has a different reason for facing Chapter 9 bankruptcy proceedings: A legal judgment of $43 million stemming from a lawsuit first brought six years ago against the town by a developer. The plaintiff refuses to participate in the mediation process.

Before the Stockton financial crisis, and even before ABs 1692 and 506, Vallejo was one of the first and largest cities to go bankrupt.

Vallejo did so in the spring of 2008, and the move gave the city protection from creditors, as well as time to renegotiate employee contracts and find new sources of revenue, according to an article in the San Francisco Chronicle. Last November, the city came out of bankruptcy status, released from the stigma by a federal judge.

The Vallejo's City Manager says bankruptcy should be a last resort option. Whether or not ABs 506 and 1692 provide other means of deliverance, only time will tell.

Stephen T. Holzer is a business litigation attorney and Chair of our Environmental  Law Practice Group. Contact him via e-mail: sholzer@lewitthackman.com.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
May242012

Medical Marijuana Use Not Protected by ADA, 9th Circuit

Lawyer for EmployerWage and Hour Defense

by Nicole Kamm

818.907.3235

 

In 2008, the California Supreme Court held in Ross v. Ragingwire that an employer may lawfully terminate an employee (or refuse to hire an applicant) who tests positive for marijuana, even if the marijuana use is for lawful medical purposes under California law.  Recently, the Ninth Circuit (the federal court with jurisdiction over California) held the Americans with Disabilities Act (“ADA”) similarly does not protect medical marijuana use.

The plaintiffs in the case entitled James v. City of Costa Mesa, were severely disabled California residents, who claimed conventional medicine and treatments failed to alleviate the pain caused by their impairments, but medical marijuana helped. 

Medical marijuana, as we know, is permissible under California law.  The plaintiffs obtained their medical marijuana through collectives located in Lake Forest and Costa Mesa, California. 

Concerned about the possible shut down of the collectives pursuant to various local ordinances excluding medical marijuana dispensaries, the plaintiffs brought suit in federal district court, alleging the cities’ actions violated Title II of the ADA.

The district court sympathized with the plaintiffs, but denied their application for a preliminary injunction on the grounds that the ADA does not protect against discrimination on the basis of marijuana use - even medical marijuana use prescribed by a doctor in accordance with state law - because such use violates federal law.

The Ninth Circuit affirmed the lower court’s decision, holding the ADA does not protect individuals who claim discrimination because of medical marijuana use.  The court reasoned the ADA excludes from coverage disabilities based on illegal drug use, and “illegality” is tied to federal, not state, law.  Because marijuana is still illegal under federal law, medical marijuana use is not covered under the ADA, even if states such as California have legalized the medical use of the drug.

Disability Claims Defense LawyerAgain sympathizing with the plaintiffs’ position, the Court held:

We recognize that the plaintiffs are gravely ill, and that their request for ADA relief implicates not only their right to live comfortably, but also their basic human dignity.  We also acknowledge that California has embraced marijuana as an effective treatment for individuals like the plaintiffs…Congress has made clear, however, that the ADA defines ‘illegal drug use’ by reference to federal, rather than state, law, and federal law does not authorize the plaintiff’s medical marijuana use.

While the James v. City of Costa Mesa decision did not arise in the employment context, the court’s holding is still relevant for employers.  Employers should note that while it is not unlawful to discriminate against an applicant or employee on the basis of their marijuana use (even if for medical reasons), it is still unlawful to discriminate based on an underlying disability, including those for which the individual may be using the medical marijuana. 

Accordingly, employers should use caution in handling these situations to minimize risk and ensure they can demonstrate that any adverse employment action was based solely on knowledge of illegal marijuana use and not on any underlying disability.

Nicole Kamm is an Employment Defense Lawyer who provides counsel and training for employers to avoid discrimination, harassment and other worker claims. Contact her via e-mail: NKamm@lewitthackman.com

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Tuesday
May012012

Another Blow for Property Owners Challenging Foreclosure

Business LitigationSan Fernando Valley Business Litigation Lawyer

Nicholas Kanter
818.907.3289

When challenging a foreclosure sale, property owners look to defects or irregularities in the foreclosure process, which is strictly regulated by California’s Civil Code, to have the sale enjoined or rescinded.  Recently, one section of the Civil Code has received a lot of attention.

Civil Code Section 2932.5 requires the assignee of a mortgage to record the assignment prior to exercising a power to sell real property.  Parties have relied on this section to challenge foreclosure sales where a deed of trust is assigned, but not recorded, until after the sale. 

California case law, dating back to 1908, established that the predecessor statute to section 2932.5 (section 858) applies only to mortgages, not deeds of trust (Stockwell v. Barnum). 

However, federal and state courts have recently disagreed over the application of Section 2932.5 to deeds of trust.  On the federal side, e.g., Tamburri v. Suntrust Mortgage, Inc., (2011), and In re Cruz (2011), courts have applied Section 2932.5 to deeds of trust.  On the state side, the court in Calvo v. HSBC Bank USA, N.A. (2011), followed the Stockwell decision.

In support of Stockwell and Calvo, the Court of Appeal in Haynes v. EMC Mortgage Corp., (filed April 9, 2012, publication ordered April 24, 2012) found that Section 2932.5 does not apply to deeds of trust.  The Haynes court rejected Haynes’ reliance on the federal decisions finding:

We of course, are not bound by federal decisions on matters of state law…While our Supreme Court has noted in passing on issues other than the interpretation of section 2932.5, that “a deed of trust is tantamount to a mortgage with a power of sale” [citation], the court has not addressed section 2932.5 and the statute, by its plain terms, does not apply to deeds of trust.  

The court also explained why section 2932.5 applies to mortgages but not deeds of trust:

Section 2932.5 requires the recorded assignment of a mortgage so that prospective purchaser knows that the mortgagee has the authority to exercise the power of sale.  This is not necessary when a deed of trust is involved, as the trustee conducts the sale and transfers title. 

The Haynes decision, along with the holding in Calvo, reinforces long-standing California case law that Civil Code Section 2932.5 does not apply to deeds of trust, thus all but taking away a party’s ability to challenge a non-judicial foreclosure sale based on an unrecorded assignment.  

Nicholas Kanter is a Business Litigation Attorney in our Real Estate Practice Group. Contact him via e-mail: nkanter@lewitthackman.com.




 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
Apr122012

Landmark Decision: CA Supreme Court Decides Employers Are Not Meal Police

Lawyer for EmployersEmployment Defense Attorney Los Angeles

 

by Sue M. Bendavid
818.907.3220

Employer Lawyer Los Angeles Google+

 

Employees of Brinker Restaurant Corporation (the parent company of Chili’s, Maggiano's, and Macaroni Grill, among others) brought a class action against Brinker alleging years of meal and rest period violations.

The employees claimed Brinker required them to take early lunches and then work an additional five to nine hours without a second meal break – and that this requirement violated wage and hour laws.

The plaintiffs also alleged employees were required to work off the clock during meal periods; that managers altered employee time cards; and that Brinker had an obligation to ensure employees take their meal periods.

The trial court ruled mostly for the employees, but Brinker appealed, and the Appellate Court ruled in favor of the employer and determined the claim could not proceed as a class action. The California Supreme Court granted review to resolve the questions regarding the nature of meal and rest breaks, how they should be provided, as well as whether or not the claims presented should be treated in a class action setting. The Court heard arguments in November, and delivered its decision today.

According to the decision written by Associate Justice Kathryn M. Werdegar, the most contentious issue proved to be whether employers must police meal periods to ensure employees take those breaks without doing any work in a 30 minute time frame.

 

The Supreme Court's Decision – Providing vs. Policing

 

The Supreme Court concluded an employer's obligation ends with providing the meal period. Once a meal break begins, an employee is "at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done."

The Court also decided that though first meal break must be provided no later than five hours into a shift, the employer need not schedule another meal break within five hours after the first meal period ended. Rather, employers must only provide a second meal break after 10 hours of work.

 

Employee Break Times Put to Rest Too

 

The Supreme Court cited Industrial Welfare Commission wage order rules, deciding that employees are entitled to a 10 minute break in the middle of each four hour work period (or “major fraction thereof”), meaning for many employees a rest break should be permitted between 3.5 and 6.0 hours of work into a shift. However, rest breaks are not necessarily required for a specific time before or after the meal period.

 

The Takeaway

 

All in all, the decision today is good news for employers, as it limits the scope of responsibility regarding meal periods:

“We conclude that under Wage Order No. 5 and Labor Code section 512, subdivision (a), an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work.”

 

Sue M. Bendavid is the Chair of our Employment Practice Group. Employers with questions regarding today's landmark decision can reach her at 818.990.2120.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

Tuesday
Oct042011

Software Licenses (and Appleā€™s Dominance) Are Reinforced by Ninth Circuit

Business LitigationIP Business Litigation Lawyer

Nicholas Kanter
818.907.3289

 

The Ninth Circuit recently reaffirmed a company’s ability to use a license agreement to significantly restrict customers’ use of its software. 

In Apple, Inc. v. Pystar Corporation (filed September 28, 2011), Apple sued Pystar Corp., a small computer company selling its own brand of “Open Computers” running Apple’s proprietary operating system. 

Apple claimed Pystar would purchase Apple’s software, copy it onto its Open Computer, and sell the computer to purchasers who wanted to run Apple’s software, but not pay Apple computer prices. Pystar would also include an unopened copy of Apple’s software with the computer to show that it purchased the software that was copied onto its computers. 

Apple claimed Pystar infringed its copyright by copying Apple’s software onto unauthorized, non-Apple, computers in violation of the Apple license agreement, which provided: 

“The License allows you to install, use and run one (1) copy of the Apple Software on a single-Apple-labeled computer at a time. You agree not to install, use or run the Apple Software on any non-Apple labeled computer, or to enable others to do so.” 

Pystar argued Apple was misusing its copyright by requiring purchasers to run Apple’s software only on Apple-brand computers. 

The Ninth Circuit rejected Pystar’s copyright misuse argument finding a restrictive software license “represents a legitimate exercise of a copyright holder’s right to conditionally transfer works of authorship, and does not constitute copyright misuse.”  In doing so, the court affirmed the grant of summary judgment in Apple’s favor, as well as the permanent injunction that prohibited Pystar from selling Open Computers running Apple’s software. 

This ruling is significant in that it reinforces a copyright owner’s right to significantly limit a customer’s use of its software licenses. However, to show that the customer is a software licensee rather than an owner, the copyright owner should be able to demonstrate that its purported license: 

1. Specifies that the user is granted a license;

2. Significantly restricts the user’s ability to transfer the 
software; and

3. Imposes notable use restrictions. 

If the copyright owner is not able to satisfy this 3-part test, it may be determined that the user of the software owns the software, and therefore has the right to sell and resell the software without restriction. 

Therefore, copyright owners should not only consider licensing, rather than selling, their software, but also make sure that software licenses meet the above three-part test to avoid relinquishing the ability to control the use of its software. 

Nicholas Kanter is a Business Litigation Lawyer. His practice focuses on business, intellectual property and real estate matters. You can reach him by calling 818.990.2120.

 

 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

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