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Business Law Section eNews

Current News and Events from the State Bar of California Business Law Section.

Here is your November eNews from the Business Law Section (“BLS”):

Message from Jim Hill, Chair of the Business Law Section

Jim HillThe Business Law Section (BLS) and its 15 Standing Committees are off and running, getting back to business as the 2016-2017 State Bar year gets underway.  The new leaders of the BLS Executive Committee and Standing Committees gathered on November 13-14 in San Diego, California, for two days of leadership educational programs.  They focused on the Standing Committees’ work in education, publications and legislative analysis and proposals, and shared best practices for communicating with BLS members and the general California business lawyer community. 

At the leadership education sessions, the Standing Committee leaders shared both accomplishments and challenges, and forecasts for the coming year, including:

  •  AgriBusiness Law -- repeating its well-attended tours of agribusinesses across the state, such as its water district tours, equine tours, and viticulture and oenology tours;

  • Business Law News -- emphasizing substantive law-themed issues like the Health Law and the Insolvency Law issues this past year, and the BLN Annual Review Issue, set to be published in early 2017;

  •  Business Litigation -- presenting educational seminars and programs (both live events and webinars), like its most recent presentation on the effective retention and use of expert witnesses;
     
  • Commercial Transactions (formerly known as the UCC Committee) -- updating and adding content to its widely popular Hidden Liens Report;

  •  Consumer Financial Services -- building membership through its regular Lunchtime Lecture Series and producing more in-person programs like its recent Bay Area event “Spotlight on FinTech” which featured leaders and in-house attorneys in financial tech businesses;

  • Corporations -- publishing its definitive and topical Securities Law Guide and restoring and maintaining relationships with regulatory agencies and legislators;

  • Financial Institutions -- continuing to partner with the San Francisco Bank Attorneys Association and the Financial Women of San Francisco  in hosting its leadership event at the Federal Reserve Bank of San Francisco;

  • Franchise Law -- reconnecting with key agencies affecting franchise law and providing a forum for lawyers for both franchisors and franchisees to address legislation and other legal developments affecting all Californians;

  • Health Law -- working toward establishing formal recognition of legal specialization in health law, and continuing affirmative outreach to law schools to introduce young lawyers to careers in health law;

  • Insolvency Law -- publishing high quality, timely eBulletins, scholarly articles and judicial profiles of interest to all California business lawyers and the judiciary, and presenting in-depth live and webinar educational programs;

  • Insurance Law -- expanding production of eBulletins, hosting insurance law symposiums, and collaborating with other standing committees on programs and publications to better inform business lawyers about insurance issues;

  • Internet and Privacy Law -- building on successful programs, like a recent UCLA Symposium, “Privacy in the Internet of Things/Current Issues in Data Breach”;

  • Nonprofit Organizations -- continuing to offer popular free MCLE to members and guests at regular NPO business meetings, planning new webinars to reach larger audiences, while increasing publications and outreach to lawmakers and governmental agencies;

  • Opinions -- serving as the repository and developer of legal opinions of interest to business lawyers, like last year’s sample UCC opinion, and the updated LLC and Partnerships Opinions Report, and this coming year’s updated report on exceptions and qualifications to the remedies opinion; and

  • Partnerships and LLCs -- finalizing the committee’s Guide to Organizing and Operating a Limited Liability Company in California.

 The work of the Standing Committees, and of the BLS as a whole, has been and is being accomplished despite the challenges imposed on the BLS and the other Sections of the State Bar because we are considered a part of a regulatory state agency.  The State Bar drew extended critical attention this last term from the California Assembly and Senate.  Well publicized criticism of the way the State Bar manages its discipline and regulatory functions remained unresolved this summer at the end of the Legislature’s regular term, leaving the State Bar and California lawyers without a dues authorization bill (required by our state Constitution).  The impasse with the Legislature in turn threatened to leave the State Bar without mandatory dues funding, and the Sections without their separate voluntary Section dues.  The funding crisis led the California Supreme Court to invite the State Bar to petition it to issue an emergency judicial branch authorization for the State Bar to issue fee bills to California’s approximately 250,000 lawyers, of which approximately 85,000 are Bar Section members, including more than 8,400 BLS members.

 On November 17, 2016, Tani G. Cantil-Sakauye, Chief Justice of the Supreme Court of California, notified the State Bar that a special interim regulatory assessment has been approved, authorizing the State Bar to send California lawyers a dues bill that will cover the regulatory activities of the State Bar, including discipline-related functions, as well as funding for the California Young Lawyers Association and the Office of Communications, which the court viewed as benefiting the discipline system and aimed at improving attorney competence and ethical compliance.  See Justice Cantil-Sakauye’s letter to the Bar, and the Court’s Order.

Further good news for California lawyers, and particularly for the BLS and the other Sections of the State Bar, is that the bar dues bills set to go out in December from the State Bar will include, as in past years, the voluntary dues check off for California lawyers to continue their memberships in the Sections.  All Sections, including the BLS, are funded solely by your voluntary dues and other revenues we earn through programs and publications, like those I described above.  Not a penny of mandatory dues covers the expenses of the Sections.  Thus, we survive only through your support, which we urge you to continue without interruption as a member of the Business Law Section as we join with other Sections working toward an effective solution for reform and restructuring of the State Bar.  We will keep you informed as we clear these new challenges, ensuring that the BLS will survive long into the future as a force for leading California business lawyers. 

Corporations Committee Submits Comment Letter to the Securities and Exchange Commission

Earlier this year, Istvan Benko,  the Corporations Committee Co-Vice Chair of Judicial Developments, authored a comment letter that was submitted to the Securities and Exchange Commission (“SEC”) on behalf of the  Corporations Committee regarding the SEC’s proposal to eliminate the Rule 147 intrastate offering safe harbor under Section 3(a)(11) of the Securities Act of 1933 and to adopt a new intrastate exemption.  The comment letter recommended that the SEC leave existing Rule 147 in place.

On October 26, 2016, the SEC adopted a new Rule 147A and indicated that, consistent with commentators’ suggestions, including the Corporations Committee, it was retaining and modernizing Rule 147.  The Corporations Committee comment letter was cited in three other places in the SEC’s release.

Mr. Benko is a member of the corporate and securities department at TroyGould PC, where he provides counsel to companies in all stages of development, including their organization, financings and mergers and acquisitions.  For further information about the Comment Letter or the Corporations Committee, please contact Istvan Benko (ibenko@troygould.com) or the Corporations Committee Co-Chairs Doug Wade (doug@dmwadelaw.com) or William Ross (wross@hkemploymentlaw.com).  

Financial Institutions Committee Invites You to Its Annual Holiday Party

The Financial Institutions Committee will be holding its annual holiday party on Thursday, January 19, 2017, at 5:00 p.m., at the offices of Lamb & Kawakami LLP, 333 South Grand Avenue, Suite 4200, Los Angeles, California.  Come mingle with other professionals and learn more about the great work of the Financial Institutions Committee.  For more information about the Holiday Party or the Financial Institutions Committee, please contact Michael K. Slattery (mslattery@lkfirm.com) or Financial Institutions Committee Chair Daniel Wheeler (daniel.wheeler@bryancave.com). 

Consumer Financial Services Committee and Financial Institutions Committee to Host Joint Program on Data Privacy in Consumer Financial Services

The Consumer Financial Services Committee and Financial Institutions Committee will host a joint program on data privacy in consumer financial services on January 10, 2017, from 9:30 a.m. to 12:30 p.m., at the offices of Bryan Cave (Three Embarcadero Center, 7th Floor) in San Francisco.  The tentative program will feature a regulatory update and overview followed by workshops on preparing an effective data privacy policy and responding to a release or regulatory investigation.  For further details about the program or questions about the Consumer Financial Services Committee or Financial Institutions Committee, please contact Consumer Financial Services Committee Chair Andrew Noble (awn@severson.com) or Financial Institutions Committee Chair Daniel Wheeler (daniel.wheeler@bryancave.com).

Join Agribusiness Committee’s Next Meeting to Learn More About Programs in 2017

Agribusiness Committee is currently working on six (6) tours for the 2017 calendar year, including water tour, berry tour, olive oil tour and viticulture and oenology tour.  Come join Agribusiness Committee’s next meeting via conference call on Tuesday, December 13, 2016, at 11:00 a.m., to hear more.  For more information about the December 13th meeting or to learn about the Agribusiness Committee, please contact Lauren Layne (LLayne@bakermanock.com). 

Preview of Financial Institutions Committee and Consumer Financial Services Committee’s Joint Article for the BLN’s Annual Review

Financial Institutions Committee and Consumer Financial Services Committee are working on an update on the California Finance Lenders Law (“CFLL”) for the BLN Annual Review.  The article will summarize CFLL, including its Pilot Program for Increased Access to Responsible Small Dollar Loans, describe recent legislation and regulatory actions that changes and interpreted CFFL and rules recently proposed by the Consumer Financial Protection Bureau which, if adopted, would affect loans covered by CFLL.  The Annual Review article will also describe AB 278 from the 2015-16 legislative session, which, though not enacted, would have made significant changes to CFFL.  For more information about CFLL, please contact Michael K. Slattery (mslattery@lkfirm.com).

Institute for Corporate Counsel to Hold Annual conference for In-House and Outside Counsel

Join Kevin Demoff, Thomas Donilon, Justice Leondra Kruger and many others at the 2016 Institute for Corporate Counsel on Wednesday, December 7, 2016.  The Institute will focus on new developments in law, business and politics that affect Los Angeles area lawyers and will held at the California Club in downtown Los Angeles (made available courtesy of Club member Michael C. Kelley).

Top notch speakers include:

  • Los Angeles Rams COO Kevin Demoff on the twists and turns in the path of the Rams’ return to Los Angeles.

  • Former National Security Advisor to President Obama Thomas Donilon on the risks facing U.S. businesses around the world.

  • California Supreme Court Justice Leondra Kruger on challenges facing the Supreme Court of our nation’s largest and most dynamic state.

  • The 44th Solicitor General of the United States Gregory Garre and the 46th Solicitor General of the United States Donald Verrilli on recent developments at the United States Supreme Court.

  • The General Counsels of CBRE Global Investors, Herbalife, Playboy Enterprises and the LA Clippers.

  • Plus many other top counsel, business and civic leaders.

Other can’t-miss sessions include an overview of the year of the angry voter and what comes next, alternatives to traditional bank lending, managing legal and communications strategy in a digital age, structuring joint ventures for success, dealing with the workplace of the 21st century, and managing enterprise-transformative opportunities and challenges.

Plus, five networking events allow you to meet, re-connect and learn from your peers.  MCLE and CPE credit are available. 

The Institute is organized by the USC Gould School of Law and the Corporate Law Departments Section of the Los Angeles County Bar Association. 

For more information about the Institute, or to register or sponsor, please visit the website at http://law.usc.edu/cle/icc/,  Call (213) 821-3580, or email cle@law.usc.edu with any questions.

Selected Developments in Business Law -- Drafting Business Contracts: Principles, Techniques & Forms

Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications.  This month’s feature is from the October 2016 update to Drafting Business Contracts: Principles, Techniques & Forms.  References are to the book’s section numbers.  See CEB’s BLS Landing Page for special discounts for Business Law Section members.  The most significant legal developments affecting contract drafting in California since the last update include developments in such important practice areas as arbitration clauses, spousal rights, third-party beneficiaries, contact dates, applicable statute of limitations, and more. 

When one spouse owned a partnership interest as separate property, a modification to the partnership agreement simply listing both spouses as owners of that interest did not serve to transmute the interest because it did not contain an express declaration that the characterization or ownership of the property was being changed. Marriage of Lafkas (2015) 237 CA4th 921. See §5.10.

A corporation violated the contractor's license law when it continued to act as the contracting party after its contractor's license expired, even though it claimed to have performed an undocumented "internal assignment" of the contract to a related corporation that was properly licensed. Judicial Council of Cal. v Jacobs Facilities, Inc. (2015) 239 CA4th 882. See §5.10.

Third party beneficiaries may have greater rights than the formal parties to the contract. For example, the Ninth Circuit held that a third party beneficiary is not barred from suing a promisor for breach of contract even when the promisee is a suspended corporation lacking the capacity to sue. Bozzio v EMI Group Ltd. (9th Cir 2016) 811 F3d 1144. See §5.13.

An arbitration clause in an employment agreement may be enforced by the employer's successor by merger, even though the successor was not a signatory to the agreement. Jenks v DLA Piper Rudnick Gray Cary US LLP (2015) 243 CA4th 1. See §5.13.

In DJB Holding Corp. v Commissioner (9th Cir 2015) 803 F3d 1014, the Ninth Circuit concluded that the parties to a joint venture agreement had not created a valid partnership for tax purposes, frustrating their stated intent, when they failed to follow key provisions of the agreement (including those relating to the allocation of profits) or to otherwise act as partners. See §5.21.

The date a contract is entered into can affect the contract's enforceability. In Vanacore & Assocs., Inc. v Rosenfeld (2016) 246 CA4th 438, the court held that an agreement to recover unclaimed property was illegal and unenforceable because it was entered into during a window of time precluded by the California Unclaimed Property Law. See §6.2.

In Gilkyson v Disney Enters., Inc. (2016) 244 CA4th 1336, claims by heirs of a songwriter for breach of a contractual obligation to pay royalties were not barred by the applicable statute of limitations based on the application of the continuous accrual doctrine, under which each breach of a recurring obligation is independently actionable with its own time limit for recovery. See §6.43.

The term of a royalty agreement may need to be limited because a patent holder cannot continue to receive royalties for sales made after the patent expires. Kimble v Marvel Entertainment, LLC (2015) 576 US ___, 135 S Ct 2401. See §6.43.

In Epic Med. Mgmt., LLC v Paquette (2015) 244 CA4th 504, a contract provided that a doctor would pay variable fees for nonmedical management services. In practice, the management company charged, and the doctor paid, fees based on formulas different from those specified in the contract. Even though the contract provided that all modifications must be in writing, the court affirmed that the parties could modify the fees by conduct. See §8.6.

The Partnerships and Limited Liability Companies Committee and the Opinions Committee of the Business Law Section have completed an exposure draft of their joint report, Third-Party Closing Opinions: Limited Liability Companies and Partnerships (Mar. 29, 2016), which updates the 1998 and 2000 reports on partnership and LLC opinions by the Partnerships and Limited Liability Companies Committee. See §12.2.

In Amis v Greenberg Traurig LLP (2015) 235 CA4th 331, mediation confidentiality rules precluded a client's legal malpractice claim because evidence of counsel's damaging acts or omissions during mediation was inadmissible. See §16.16.

In drafting arbitration clauses, counsel should consider whether the FAA or the CAA should control the proceedings and should take care to refer to specific sections of the applicable law to properly reflect the parties' intent. A broad choice-of-law clause specifying that California law applies to the contract will incorporate the CAA. See Cronus Invs., Inc. v Concierge Servs. (2005) 35 C4th 376, 387. However, if one party is not governed by the FAA, the agreement will not be governed by the FAA even if the agreement states that it is. Garrido v Air Liquide Indus. U.S. LP (2015) 241 CA4th 833 (truck driver who transported employer's products across state lines was exempt from FAA as transportation worker engaged in interstate commerce). See §16.21.

When one party could no longer pay the arbitrator's fee and the arbitrator terminated the process without an award or judgment, the court held that arbitration had been "had" per agreement and lifted the litigation stay. Tillman v Tillman (9th Cir, June 15, 2016, No. 13-56624) 2016 US App Lexis 10818. See §16.23.

The court held in Khalatian v Prime Time Shuttle, Inc. (2015) 237 CA4th 651, 656, that Lab C §229, which allows causes of action for wage claims under Lab C §§200244 to be brought in court despite an agreement to arbitrate, is preempted by the FAA. See §16.24.

In Brinkley v Monterey Fin. Servs., Inc. (2015) 242 CA4th 314, incorporation of the AAA rules in an arbitration clause demonstrated the parties intended for the arbitrator to decide if class arbitration was permitted. However, in Meadows v Dickey's Barbecue Restaurants, Inc. (ND Cal, Nov. 12, 2015, No. 15-cv-02139-JST) 2015 US Dist Lexis 153385, *17, the court held that before determining whether parties clearly and unmistakably delegated arbitrability by incorporating AAA rules in an arbitration clause, the court must "first consider the position of those parties." See §16.25.

In May 2016, the Consumer Financial Protection Bureau proposed rules that would prohibit mandatory arbitration clauses that prevent class actions. In contracts subject to the proposed rule, the arbitration clauses would be required to explicitly state that they cannot be used to stop consumers from being part of a class action in court. See §16.25.

The California Supreme Court held that the trial court erred by deciding the issue of whether or not an employment contract arbitration provision allowed for class arbitration. Sandquist v Lebo Auto., Inc. (July 28, 2016, S220812) 2016 Cal Lexis 6246. See §16.25.

The Seventh Circuit is the first circuit to follow the National Labor Relations Board's D.R. Horton I rule (see D.R. Horton, Inc. (2012) 357 NLRB 2277). Lewis v Epic Sys. Corp. (7th Cir, May 26, 2016, No. 15-2997) 2016 US App Lexis 9638 (bar on collective action violates §§7 and 8 of NLRA); Totten v Kellogg Brown & Root, LLC (CD Cal, Jan. 22, 2016, No. ED CV 14-1766 DMG (DTBx)) 2016 US Dist Lexis 10424 (following D.R. Horton I). The NLRB has cited the Seventh Circuit decision in recent filings with the Fifth, Ninth, and D.C. circuits. See §16.26.

In Savetsky v Pre-Paid Legal Servs., Inc. (ND Cal, Feb. 12, 2015, No. 14-03514 SC) 2015 US Dist Lexis 17591, the court denied a motion to compel arbitration because the arbitration clause was buried on the defendant's website and did not require assent by the consumer. Consumers could order a legal services plan simply by clicking a "Buy Now" button, without ever being aware that a membership contract with an arbitration clause existed. See §18A.5.

In Long v Provide Commerce, Inc. (2016) 245 CA4th 855, the court found that there was no mutual assent to an arbitration provision in the seller's terms of use. The buyer was unaware of the provision's existence and therefore not bound by it. The website's checkout process did not prominently indicate that placing an order was an express acceptance of the seller's terms, and an inconspicuous link to the seller's terms in an order confirmation e-mail was insufficient to put a reasonably prudent Internet consumer on notice to investigate whether disputes related to the order would be subject to binding arbitration. See §18A.5.

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 business law 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.  The next BLN issue is the Annual Review of Recent Developments of Interest to California Business Lawyers.  This issue provides a useful tool to check on current developments in practice areas of interest to you.  The submission deadline for the Annual Review is January 15, 2017.  Please submit your articles to the new editor-in-chief, Kenneth Minesinger (minesinger@gmail.com).  

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 respective areas of law and upcoming events open to BLS members. Click HERE to sign up to receive 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 Coordinator, Dennis J. Wickham (wickham@scmv.com); BLS Vice-Chair of Member Services, Uzzi O. Raanan (uraanan@dgdk.com); or BLS Chair, James P. Hill (hill@sullivanhill.com), and join the ever expanding discussion!

Amplify Your Professional Reputation by Joining a Standing Committee

The 15 Standing Committees of the BLS 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 December 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 Committee (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 December

For a list of upcoming meeting dates and contact persons, see Standing Committee Meetings HERE. 

Editors

Jennifer Duncan, Editor-in-Chief
Kristina Del Vecchio, Contributing Editor
Corey R. Weber, Contributing Editor
Dennis J. Wickham, Contributing Editor
Uzzi O. Raanan, BLS Vice Chair, Member Services
James P. Hill, BLS Chair

For contact information, see the Executive Committee Roster HERE

To join the BLS and receive membership benefits
click HERE