Business Law Section E-News
Current News and Events from the State Bar of California Business Law Section.
Here is your August 2016 E-News from the Business Law Section
Ann Yvonne Walker is First Woman to Receive Lifetime Achievement Award at BLS Annual Breakfast Meeting
Ann Yvonne Walker is the first woman to receive the Business Law Section’s Lifetime Achievement Award. Join fellow BLS members as well as past and present leaders of the BLS and its 15 Standing Committees in honoring Ann’s distinguished achievements at the Annual BLS Breakfast at the State Bar of California’s 89th Annual Meeting in San Diego, California on Saturday, October 1, 2016 at 7:30 a.m. Ann has served as a leader of the business law community for the past 37 years nationally and in California. That leadership included chairing the Business Law Section. She has been a formidable advocate for the BLS. Ann began her career as a corporate securities lawyer at Wilson Sonsini Goodrich & Rosati in Palo Alto in 1979 following her graduation from law school here she continued until her retirement in 2014. Ann primarily represented high technology companies in Silicon Valley and specialized in corporate and securities law, including public offerings, mergers and acquisitions, corporate governance matters, and general corporate representation.
The keynote speaker for the Annual BLS Breakfast event is author and economist Alan Nevin, who will explore the unique economic and demographic attributes of the State of California and how they set us apart in our nation and the world as a whole. Mr. Nevin will focus on California’s resources, businesses and industries, and particularly its demographics, including our population’s aging patterns, ethnicity, and future employment and housing needs. These issues are all explored in depth in Mr. Nevins' latest book, The Great Divide, reporting how demography defines and determines the economic health of nations and states.
Seats are limited at this popular ticketed event (cost is $35 per person, breakfast included). Be sure to sign up for the BLS breakfast meeting when you REGISTER ONLINE for the State Bar Annual Meeting.
Don’t Miss the BLS Standing Committee Programs at the State Bar of California 89th Annual Meeting
The State Bar of California returns to San Diego for the 2016 Annual Meeting of the State Bar on September 29, 2016 – October 2, 2016. Mark your calendars and sign up now for this event, which blends business, education, entertainment and the opportunity to meet and engage with law professionals from throughout California. You can now REGISTER ONLINE for the State Bar of California’s 89th Annual Meeting.
The four-day meeting will showcase an education agenda consisting of MCLE seminars covering a variety of substantive topics, including legal technology, ethics, bankruptcy, business litigation, and other key areas of interest. Many of the BLS Standing Committees will be presenting programs at the Annual Meeting. A complete list of BLS presentations at the Annual Meeting is provided as follows.
The following BLS Committees will make presentations at the Annual Meeting as follows:
Insolvency Law Committee
Ninth Circuit Bankruptcy Year in Review
Friday, September 30 – 8:30 a.m. – 10 a.m.
10 Things Not To Do When Insolvent
Friday, September 30 – 1:30 p.m. – 3 p.m.
Managing Expectations: Understanding the Roles of the Main Actors in a Bankruptcy Case
Friday, September 30 – 3:30 p.m. – 5 p.m.
Business Litigation Committee
The Effective and Ethical Use of Expert Witnesses
Friday, September 30 – 1:30 p.m. – 3 p.m.
Health Law Committee
Medical and Health Care Privacy and Data Breach Compliance for Non-Health Care Clients and Their Attorneys
Saturday, October 1 – 10:30 a.m. – 12 noon
Internet Law Committee
Cyberspace Law 101: Representing Clients on the Internet
Saturday, October 1 – 1:30 p.m. – 3 p.m.
The Expectation of Privacy: The Roles and Responsibilities of Businesses
Sunday, October 2 – 8:30 a.m. – 10 a.m.
Attend the BLS Standing Committee Reception at the State Bar Annual Meeting
Are you curious about one or more of the BLS Standing Committees? Are you looking for an opportunity to cross network, collaborate and socialize with other fellow BLS members? All of the BLS Standing Committees will join to host a reception at the State Bar Annual Meeting on Friday, September 30, 2016, from 5 p.m. to 7 p.m. The reception will be in the Leucadia Room in the South Tower (near the Tequila Bar & Grille) at the San Diego Marriott Marquis & Marina and will feature a hosted beer and wine bar and light appetizers. All Standing Committee members, advisors and friends are invited to join and socialize with members of all BLS’s Standing Committees.
Sneak Peek at the Next Business Law News Article from Issue 3
In July, the Consumer Financial Protection Bureau (“CFPB”) proposed a series of regulations intended to end “payday debt traps.” The proposals are subject to public comment and have generated substantial discussion.
The proposals address CFPB’s research into the payday loan industry. The CFPB found:
- Storefront payday lenders charged a median fee of $15 for every $100 borrowed, in many cases resulting in a two-week loan with an annual percentage rate of almost 400 percent.
- Within a month, almost 70 percent of payday loan borrowers take out a second payday loan. And, one in five new borrowers ends up taking out at least ten or more loans, one after the other. With each new loan, the consumer pays more fees and interest on the same debt.
- Consumers receiving public benefits are especially likely to fall into a long-term debt trap.
In the next issue of the Business Law News, Caren Enloe, a noted speaker on current topics and trends affecting the consumer financial services industry, will provide a primer on the new rules.
Of particular interest to practitioners, violations of the new rules may result in a finding by the CFPB that a lender is engaged in an abusive practice. While the rule does not create a private right of action, Ms. Enloe opines that litigants may use violations of the new rules as evidence that a lender is violating California’s unfair competition act.
Don’t miss out on this important topic, join the BLS today.
En Banc Review of Ozenne Case Relating to Appellate Jurisdiction; California Bankruptcy Forum Files Amicus Brief
The California Bankruptcy Forum (“CBF”), together with the Insolvency Law Committee of the BLS, is a leading state-wide organization of insolvency professionals. CBF, through its President Tom Phinney, filed its first ever amicus curiae brief in the case pending before the 9th Circuit In re Ozenne, Case No. 11-60039. Tom Phinney is also Vice-Chair of Legislation for the BLS Executive Committee.
The Ozenne decision, issued on March 25, 2016, held that the Bankruptcy Appellate Panel (“BAP”) did not have jurisdiction to consider a Petition for Writ of Mandamus, and also that the BAP is not a court established by Congress, but rather that the BAP is a panel created by the Judicial Council of the Ninth Circuit. CBF filed an amicus brief not to address the merits of the decision but to highlight its belief the decision merited en banc review and additional briefing. On July 13, 2016, the Ninth Circuit ordered that the case be re-heard en banc.
Join Agribusiness Law Committee For “A Day at the Races”
Interested in learning more about the Thoroughbred Racing industry in California? The Agribusiness Law Committee will be hosting “A Day at the Races” on October 21, 2016 at Golden Gate Fields in Berkeley. Join Agribusiness Law for an in-depth and behind the scenes looks at the Thoroughbred Racing industry in California.
Agribusiness Law Committee will also be holding its regular monthly conference call at Tuesday, September 13, 2016 at 11 a.m.
For further information about “A Day at the Races”, Agribusiness Law’s monthly meeting or for any additional questions, contact Steven J. Williamson at email@example.com.
Financial Institutions Committee Will Hold Two FREE MCLE Programs in September
The Financial Institutions Committee’s September meeting on September 13, 2016 from 9:30 a.m. to 11:30 a.m. will offer two free MCLE programs. The first program presented by Michael J. Steiner and Mary Kate Kamka of Severson Werson is entitled RESPA QWRS/Notices of Error and Related Litigation. The second program is entitled Current Overview of Employment Laws Affecting Financial Institutions, presented by Lisa Von Eschen of Lamb & Kawakami. The locations for the programs will be at the San Francisco and Santa Monica offices of Bryan Cave. All are welcome to attend.
For further information on programs or for any additional questions about the Financial Institutions Committee, contact Steven Bloom at firstname.lastname@example.org.
Come Learn about the Corporations Committee at One of Its September Meetings
The Corporations Committee will be holding two meetings in September 2016. The first meeting will be held on September 9, 2016 from 9:30 a.m. to 11:30 a.m. The second meeting will be held on September 30, 2016 from 9:30 a.m. – 11:30 a.m. in the Pacific Ballroom of the San Diego Marriott Marquis & Marina in conjunction with the State Bar Annual Meeting. All are welcome to attend and learn about the advantages of being part of the Business Law Section and the work that the Corporations Committee and its members perform.
For further information on the meeting locations or for any additional questions, contact Deborah Gunny (email@example.com) or Cathy Gawne (firstname.lastname@example.org).
Franchise Law Committee August 2016 Case Report - Carl’s Jr. Case Reveals the Downside of Permissive Forum Selection Clauses
In Carl’s Jr. Restaurants LLC v. 6Points Food Services Ltd., et al., 2016 WL 3671116, the United States District Court for the Central District of California (Court), addressed the important issues raised by Defendant 6Points Food Services Ltd. (6Points) in its motion to dismiss Carl’s Jr. Restaurants, LLC (CJR) lawsuit against 6Points based on forum non conveniens.
Relevant Factual and Procedural Background
CJR is a fast service restaurant group that operates the Carl’s Jr. chain and also engages in franchising the Carl’s Jr. brand. CJR is a Delaware limited liability company with its principal offices in Carpinteria, California. 6Points is a CJR franchisee based in Ontario, Canada with its principal place of business in Saskatchewan, Canada. In early 2013, members of 6Points ownership group contacted a CJR vice-president in Vancouver, Canada to discuss CJR franchising opportunities that they saw advertised on the internet. Subsequently, the CJR vice-president put on a formal franchising presentation to the ownership group in Saskatchewan. Later, in August 2013, the 6Points team traveled to CJR headquarters in Carpinteria for a discovery day and continued negotiations with the CJR executives based in California. On November 13, 2013, CJR and 6Points entered into a “Development Agreement for Use in Canada” (Development Agreement) that laid out the development requirements for 6Points to open a certain amount of restaurants each year through 2020. The Development Agreement contains a choice-of-law provision that states that “any claim or controversy arising out of, or relating to, rights and obligations of the parties under this Agreement and any other claim or controversy between the parties shall be governed by and construed in accordance” with Ontario law. Furthermore, the forum selection clause states:
The Parties agree that, to the extent any disputes cannot be resolved directly between them, Developer [6Points] shall file any suit against CJR only in the federal or state court having jurisdiction where CJR’s principal offices are located at the time suit is filed. CJR may file suit in the federal or state court located in the jurisdiction where its principal offices are located at the time suit is filed or in the federal or provincial court located in the jurisdiction where Developer resides or does business or where the Development Territory or any Franchised Restaurant is or was located or where the claim arose. Developer consents to the personal jurisdiction of those courts over Developer and to venue in those courts. If the Development Territory is located in Alberta, Prince Edward Island, Ontario, New Brunswick or Manitoba, or if Developer is domiciled in Alberta, nothing in this Section shall prohibit Developer from filing suit in the applicable province.
At the time this lawsuit was filed, CJR’s principal offices were located in California. However, CJR plans to move its headquarters to Nashville, Tennessee when CJR’s lease expires in March 2017. The Development Agreement originally specified joint and several guarantees by 6Points members Michael Meekins and Michael Levine, but CJR agreed to a letter of credit instead of the personal guarantees. However, 6Points never obtained the promised letter of credit for CJR, but did execute four franchise agreements to open four CJR restaurants in Ontario. Moreover, CJR asserts that 6Points was properly disclosed to pursuant to Ontario’s franchise law. Nevertheless, on November 6, 2015, 6Points allegedly sent CJR a “Notice of Recession Letter” that claimed CJR’s disclosures were defective under Ontario’s franchise law. The letter stated that due to the defective disclosures, 6Points was rescinding all agreements with CJR, announced that it would cease operations of the Carl’s Jr. restaurants by January 10, 2016, and claimed to be owed $7,000,000 for refunds, compensation, and buy-backs. CJR contends that 6Points has mismanaged the restaurants, and the rescission is merely an attempt to renege on an agreement under which 6Points could not perform. Thereafter, CJR and 6Points attempted settlement negotiations. However, when those negotiations failed, CJR filed suit in the Court, and 6Points filed its own claims under the Ontario franchise law in the Ontario Superior Court of Justice. The Ontario claims are stayed pending the resolution of the current motions.
On March 24, 2016, defendants Meekins and Levine filed a motion to dismiss based on personal jurisdiction, and 6Points filed a motion to dismiss based on forum non conveniens.
Forum Non Conveniens Standard of Review
A federal court has discretion to dismiss a case on the ground of forum non conveniens when an alternative forum has jurisdiction to hear the case, and trial in the chosen forum would establish oppressiveness and vexation to a defendant out of all proportion to plaintiff’s convenience, or the chosen forum is inappropriate because of considerations affecting the court’s own administrative and legal problems. To succeed on a motion to dismiss based on forum non conveniens, a defendant must demonstrate that an adequate alternative forum exists and that the balance of private and public interest factors favors dismissal.
The Forum-Selection Clause Analysis
As an initial matter, the Court reviewed CJR’s contention that the Court should apply the “modified” forum non conveniens framework because the Development Agreement contained a forum-selection clause. Typically, if the parties’ contract includes a valid forum-selection clause that requires litigation in a particular forum, courts conduct a modified forum non conveniens analysis. Under this modified approach, we determine only whether the forum non conveniens public interest factors advise against the clause’s enforcement. However, 6Points argued that the forum-selection clause here is permissive, and thus we should not apply the modified forum non conveniens framework. Permissive forum-selection clauses allow, but do not require, litigation in a designated forum, whereas mandatory forum-selection clauses require “exclusive jurisdiction.” Here, the Court held that on a plain language reading of the forum-selection clause, it was permissive and not mandatory. The Court interpreted the forum selection clause as permissive because the clause contained the word “may,” a permissive verb and not exclusive language such as “shall” or “must.”
Forum Non Conveniens Analysis
Next, the Court addressed whether an alternative forum is deemed adequate based on if (1) the defendant is amenable to process there; and (2) the other jurisdiction offers a satisfactory remedy. Neither party disputed that Ontario was an adequate alternative forum to hear this matter therefore this element was satisfied.
The Court then turned to the private interest factors: “(1) the residence of the parties and the witnesses; (2) the forum’s convenience to the litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the enforceability of the judgment; and (7) all other practical problems that make trial of a case easy, expeditious and inexpensive.”
Here, CJR is a California citizen, but it is undisputed that they plan on relocating their headquarters to Nashville, Tennessee in 2017, likely during this lawsuit, which is closer to Ontario than California. 6Points is a Canadian citizen with a principal place of business in Saskatchewan. Additionally, the likely witnesses in this matter from both 6Points and CJR will probably be located in Canada or Nashville, and not in California. Thus, the Court found this first factor weighed in favor of dismissal. For similar reasons, the Court held that the second factor, the forum’s convenience to the litigants, weighed in favor of dismissal. Next, the Court held the evidentiary consideration factor to be neutral because no witnesses have indicated they could not testify in either location, and most of the physical evidence is electronic. Further, for the same reasons stated above, the costs of bringing witnesses to trial would be greater in California than in Canada. The Court also determined that the enforcement of the judgment factor was neutral. Lastly, the Court felt that because there was pending litigation in Ontario, in addition to California, this suit could be duplicative, which also weighed in favor of dismissing the claim.
Having analyzed the private interest factors, the Court then turned to the public interest factors: (1) the local interest in the lawsuit, (2) the court’s familiarity with the governing law, (3) the burden on local courts and juries, (4) congestion in the court, and (5) the costs of resolving a dispute unrelated to a particular forum.
Here, the local interest factor has the “aim of determining if the forum in which the lawsuit was filed has its own identifiable interest in the litigation.” The Court held that even though CJR is currently a citizen of California, they will move to Nashville, likely before the end of this litigation; therefore, California will no longer have an interest in the outcome of this matter. Next, the governing law from the Development Agreement and franchise agreements states Ontario law will apply. Thus, the Court would face a substantial burden having to apply Ontario contract and franchise law that an Ontario court would more properly and easily apply. Therefore, this second factor also weighs in favor of dismissal. Moreover, applying the burden and congestion factors, the Court found that there was more burden on California to decide a case based on Canadian law and, soon to be, non-California litigants. Further, the Court noted it had a very congested docket and that this factor is at least neutral, not knowing the docket congestion in Ontario. Finally, due to the facts previously discussed, the Court felt trying the case in California would be more costly than in Ontario.
Therefore, after balancing the private and public interest factors, the Court determined that all factors were either neutral or in favor of dismissal of the case in California. As a practical matter, the Court felt everyone would be burdened, at least at some point in the proceedings, with trying the case in California with no significant benefits. Thus, the Court decided to grant 6Point motion to dismiss based on forum non conveniens and denied the Defendant’s motion to dismiss based on personal jurisdiction because that claim was now moot.
Faults in the Forum-Selection Clause
This CJR case illustrates a perfect storm between a permissive forum selection clause that permitted litigation in any forum where CJR had its principal place of business and the known fact that CJR planned to move its headquarters from California to Tennessee. CJR’s use of the permissive forum selection clause was no doubt intended to provide them with flexibility in case of a move such as the one that will occur. However, when combined with an Ontario, Canada choice of law provision and Canadian Defendants, CJR could not overcome this motion to dismiss based on forum non conveniens. Even with an exclusive forum selection clause, it is unlikely that the Court would rule differently due to CJR’s move to Nashville and the Ontario choice of law provision. However, this case is worth noting for franchisor attorneys that have clients wanting flexibility in their development and franchise agreements in case of or due to the desire to move their headquarters out of state.
This case report was prepared by Taylor M. Vernon (email@example.com) of the Los Angeles, California office of the Dallas, Texas based law firm, The Vernon Law Group, PLLC (http://www.vernonlawgroup.com). The Vernon Law Group, PLLC is a boutique law firm that focuses on transactional legal matters and compliance issues, particularly in regard to domestic and international franchising and distribution and international trade compliance.
Early Bird Discount Available for BLS Members to the Los Angeles County Bar Association’s 49th Annual Securities Regulation Seminar
On Friday, October 21, 2016, the Los Angeles County Bar Association’s Business and Corporations Law Section and the Securities and Exchange Commission will present the 49th Annual Securities Regulation Seminar in downtown Los Angeles. This year, the Seminar will feature preeminent regulators and thought leaders in federal and California securities law, including SEC Director of Enforcement, Andrew Ceresney; Deputy Director of the SEC Division of Corporation Finance, Michele Anderson, Deputy Director, Legal, SEC Division of Corporation Finance, Leslie R. Caldwell; Acting Chief of the SEC Office of the Whistleblower, Jane Norberg; SEC Los Angeles Regional Director, Michele Wein Layne; SEC Deputy Solicitor, John Avery; and Chief of the Major Fraud Unit, U.S. Attorney’s Office, Central District of California, George Cardona.
The 49th Annual Securities Regulation Seminar, co-sponsored with the California Department of Business Oversight and FINRA, will present a comprehensive review of current events in the securities world, including a survey of the latest trends in public and private offerings and an overview of judicial, regulatory and enforcement developments. It will be held at the Millennium Biltmore Hotel, 506 South Grand Avenue in Los Angeles, from 8 am to 5 pm. Through Wednesday, October 5, 2016, BLS members can take advantage of the early bird registration fee of $360, which includes a continental breakfast, a luncheon program and up to 7.25 hours of CLE credit (including 1.0 hour ethics credit). After October 5th, BLS members will be entitled to the special LACBA member rate of $425.
For more information, CLICK HERE.
Weigh In On Proposed Changes to Ethics Rules
The California State Bar is currently seeking public comment on the proposed comprehensive amendments to the California Rules of Professional Conduct, which were last fully revised in 1987. Executive summaries of the proposed rules and redline versions may be found HERE. The California State Bar has authorized a 90-day public comment period on 68 proposed amended and new rules to the Rules of Professional Conduct.
Comments are due on September 27, 2016 and should be used using the public comment form.
CEB Offers Discounts to BLS Members
CEB is currently offering discounts to BLS Members, including 10% off the price of a wide selection of CEB print and OnLAW publications as well as savings on section dues. For more information on these and other CEB discounts, click HERE.
Reach a State-Wide Audience by Publishing in the Business Law News
The Business Law News (BLN) is seeking articles of general interest to practitioners for its next publication. With approximately 8,200 members, the BLS has a wide-ranging audience. The BLN is not only circulated to BLS members in print every quarter, it is also available to BLS members on the internet at www.calbar.ca.gov. Please submit your articles to Everett L. Green, Everett.L.Green@usdoj.gov.
A subscription to the BLN is one of the most significant membership benefits of the BLS. Publishing in the BLN is a terrific opportunity both to influence the discourse in the areas in which you practice and to market yourself and your skill set. Now is your chance to participate!
You can find the BLN’s submission guidelines HERE. Finally, have you been interested in getting involved in the BLS but don’t know where to start? BLN is now seeking enthusiastic section members to join its Editorial Board. You can find more information about the BLN Editorial Board HERE and the application to join BLN HERE.
Keep Up With Current Legal Developments by Receiving eBulletins Specifically Tailored for Your Field
The 15 BLS Standing Committees publish eBulletins announcing developments in their area of law and upcoming events open to BLS members. Click HERE to sign up to receive these eBulletins from any BLS Standing Committee completely free of charge.
Showcase Your Knowledge: Follow the BLS on Social Media and Contribute to Discussions
We all know that social media can help drive new business. Did you know that the BLS maintains a presence on LinkedIn, Twitter and Facebook where it posts regular updates about new cases, new regulations, key legislative developments, and news and events from the BLS’s Standing Committees? What you may not know is that you can not only send items to the BLS to post or tweet, but also suggest items from your own social media pages for the BLS to re-post, re-tweet, or like. Doing so expands the reach of what you have to say to everyone who likes or follows the BLS on its various social media platforms, and may result in the BLS following you! Please submit your suggested items for consideration or direct any questions to BLS Social Media Subcommittee Chair, Sarah DeDiego (firstname.lastname@example.org); BLS Vice-Chair of Member Services, James P. Hill (email@example.com); or BLS Chair, Rob Harris (firstname.lastname@example.org), and join the ever expanding discussion!
Amplify Your Professional Reputation by Joining a Standing Committee
Standing Committees continue to accept applications to fill vacant seats. Practitioners and other legal professionals who are members of the BLS and who have at least five years of experience are eligible to apply. Membership on a committee affords unique opportunities to participate in the creation of law in your practice area, to get to know and be known by other practitioners, to work with the recognized leaders in your field, and to stay on the cutting edge of developments and practice techniques. Membership is a rewarding experience that keeps one ahead of, and in touch with, business law developments. Most committees meet once a month, often by phone. A full list of the Standing Committee meeting dates for September are listed below. A description of the required commitment and application process, along with a link to the application, can be found HERE.
Attend a Standing Committee Meeting and Participate in Your BLS
The BLS achieves its goals through the work of its 15 Standing Committees. You are invited to attend the regular monthly meeting of any BLS Standing Committees (see below for meeting dates). These monthly meetings provide attendees an excellent opportunity to chat with committee members and other lawyers with a similar expertise. Some committees even offer free MCLE credit! Please see the contact person listed below to RSVP or request more information. Follow us on Twitter @calbarbuslaw. Use a Standing Committee’s hashtag to search for tweets by that committee in its designated field and to re-tweet.
Standing Committee Meeting Dates for September
Most of the BLS Standing Committees as well as the BLS Executive Committee will be holding business meetings and other events at the State Bar Annual Meeting. For a list of upcoming meeting dates and contact persons, see Standing Committee Meetings HERE.
Diana D. Herman, Editor-in-Chief
Monique Jewett-Brewster, Contributing Editor
Peter M. Menard, Contributing Editor
Kristina Del Vecchio, Contributing Editor
Jim Hill, BLS Vice Chair, Member Services
Rob Harris, BLS Chair
For contact information, see the Executive Committee Roster HERE.