MAY IT PLEASE -- THE LAWYER

TSUNAMI DISASTER INFO FROM US GENERAL SERVICE ADMIN.

2005-01-01T15:55:00.000-08:00

TO THOSE WHO HAVE LOVED ONES AFFECTED BY THE TSUNAMI DISASTER, THE FOLLOWING INFO IS PROVIDED BY THE US GOVERNMENT, GENERAL SERVICES ADMINISTRATION.

I HOPE THAT THE INFORMATION IS HELPFUL.

TSUNAMI DISASTER INFORMATION FROM FirstGov.gov – THE UNITED STATES GENERAL SERVICES ADMINISTRATION IN PUEBLO, COLORADO

Americans concerned about the recent natural disaster in Southern Asia Now have a one-stop, online source of government information on the Disaster and on the relief efforts that are underway for those affected. FirstGov.gov, the official web portal of the U.S. government, is Constantly updating its special page covering the earthquake and tsunamis. To access it, go to www.FirstGov.gov. In the "In Focus" box on the right, click "Asia Tsunami Disaster." Or go to the page directly:http://www.firstgov.gov/Citizen/Topics/Asia_Tsunamis.shtml On this page, you'll find timely information you can trust from agencieslike the U.S. State Department, currently operating a hotline to help youfind out about the welfare and whereabouts of American citizens affected bythe disaster (1-888-407-4747 in the U.S. and Canada. Outside thosecountries, call 202-501-4444).

Learn how to access the International Red Cross' special FamilyLinkswebsite, helping concerned friends and family members affected by thetragedy connect with one another. Get news updates on the tragedy directly from the embassies of the affectedcountries and learn what the U.S. government and military are doing tohelp. Use the list of international relief organizations to find out what you,your family and your community can do to join in providing humanitarian assistance. Understand more about the power of earthquakes and tsunamis with information, maps and photographs from the National Oceanic and AtmosphericAdministration, the U.S. Geological Survey and the Federal EmergencyManagement Administration.

Be sure to check back frequently as FirstGov.gov continues to updateinformation on the disaster and the relief efforts.

CALIFORNIA'S NEW LAWS FOR 2005

2005-01-01T08:32:00.000-08:00

The following laws will take effect on Jan. 1, 2005, unless noted otherwise:
Motorized Scooters (AB 1878) — This law prohibits a person from operating a motorized scooter unless that person has a valid class C driver's license or an instruction permit. The bill also prohibits a person from altering or modifying the exhaust system to make it louder. This will be a violation of specified noise restrictions and muffler requirements.
License Fees (AB 2514) — This law increases from $25 to $30 the fee charged for annual renewal or retention of a personalized license plate. The fee to transfer a personalized license plate increases from $20 to $30.
Exceeding the Speed Limit (AB 2237) — Lead-footed drivers who are arrested a second and third time for speeding in excess of 100 mph will now pay $750 and $1,000 respectively.
Headlamps in the Rain (AB 1854) — This law requires that every motor vehicle other than motorcycles to be operated with headlamps whenever weather conditions prevent a driver from seeing clearly for more than 1000 feet or when driving in conditions that require windshield wipers to be in continuous use. This law takes effect July 1, 2005.
NOTE: Although approved this year, this law depends upon Congress first passing legislation to approve it.
High Occupancy Toll Lanes & Hybrid Vehicles (AB 2628) — This law allows specified hybrid vehicles to use the High Occupancy Vehicle (HOV) lanes without the required number of passengers. Qualifying vehicles must get an average fuel economy of 45 mpg. The DMV may issue no more than 75,000 special decals for this designation. Implementation of this law depends upon the federal government passing legislation permitting these vehicles in the HOV lanes without the required number of occupants.

##########################################

California's "Shine the Light" Law Goes into Effect Jan. 1, 2005
San Diego, CA -- In 2003, Senate Bill 27 introduced by California State Senator Liz Figueroa passed into law. The 'Shine the Light' law (CA Civil Code 1798.83) goes into effect for California residents on January 1, 2005.

When you’ve received junk mail, have you ever wondered which company provided your name and address to the marketer? Now you can find out. The “Shine the Light” law requires certain businesses to disclose their information-sharing practices with their customers. Upon request, companies must tell you with whom they have shared your personal information for marketing purposes within the last twelve months.

What businesses must comply with the law?
Businesses with 20 or more employees.
Businesses that have an established business relationship with a California resident. In other words, your request can be made to companies with which you have an account or from which you have purchased a product or service.
Businesses that have shared your information with third parties for marketing purposes within the last twelve months.

What businesses are exempt from the law?
Any business that offers its California customers the ability to say “no” to selling their personal information, either through an opt-in or opt-out.
Nonprofit organizations including charities and religious organizations asking for donations.
Politicians and other political groups that are fundraising.
Banks and financial institutions.
Any business that provides public real estate records information where information was not directly provided by a customer.
Credit reporting bureaus.

What does the law require businesses to do?
Businesses that are covered by the law must provide instructions about how to make your disclosure request. A company must offer you one of these three options:
It must tell you how to make your request when you ask one of its customer service representatives.
Or, it must make written information available to customers at all California business locations with regular customer contact.
Or, the company can post information on its web site. If a business chooses to provide instructions about how to make your disclosure request on its web site, look for terms like "Your Privacy Rights" or "Your California Privacy Rights."
For each of these methods, the company must provide a mailing address, email address, toll-free number or toll-free fax number for customers to make their disclosure request.

What must be included in the disclosure?
A business' response must disclose the categories of personal information disclosed to third parties. This includes information such as: name, address, email address, phone number, Social Security number, payment history, debit or credit card information, occupation, banking information, and profile information such as hobbies and interests, marital status, height, weight, religion, age, gender, and household income level. (See the text of Civil Code 1798.83 below for full details of categories).
They must provide the list of companies to which your personal information was disclosed for marketing purposes within the last calendar year.
However, companies that have a Privacy Policy or Privacy Notice that allows you to opt-in or opt-out of the sharing of your personal information, do not need to provide you with disclosure about the categories of personal information that were shared and with whom. Instead, the company must simply provide a copy of its opt-in or opt-out policy so you can minimize the sharing of your personal information.

What are my rights under the law?
A company must respond to your Information-Sharing Disclosure request within 30 days.
If you make your request in a manner not noted in the company's disclosure policy (to an email address, mailing address, toll-free number or fax number different from those designated for making a disclosure request), the company has 150 days to respond instead of 30 days.
A company does not need to respond to a second request within a one year time frame.
If the business fails to respond to a disclosure request, the customer may collect a civil penalty of up to $500. If a company willfully or intentionally does not comply with a disclosure request, the customer can recover a civil penalty of up to $3,000. Plaintiffs may also be entitled to attorneys fees.
What can I do once I receive disclosure information from the company?
Knowing which companies sell or share personal information with third parties helps you make better choices about the companies with which you decide to do business. If privacy is important to you, you can use your buying power to support companies that protect your personal information by not selling or sharing it with others.
You can also help us at the Privacy Rights Clearinghouse learn more about the information sharing practices of businesses. Here’s how:
We are compiling a list of companies' designated email addresses, mailing addresses, phone and fax numbers to which consumers can make their disclosure requests. Please notify us of companies’ contact information so we can post this information on our web site.
Because we are interested in better tracking the flow of personal information between companies, the PRC also would like to receive copies of companies’ disclosure statements. This will enable us to keep track of who is sharing personal information and with whom.
If you have made a disclosure request but have not received a response within 30 days, please let us know which company is not in compliance with the law. We will alert you to ways you can complain about the company, and we ourselves can notify authorities.
Feel free to contact us by mail, fax, email or phone. Our contact information is at the top of this page.
Where can I find more information?
California Office of Privacy ProtectionCalifornia Information-Sharing Disclosure and Privacy Policy Statementswww.privacyprotection.ca.gov/recommendations/infosharingdisclos.pdf
Text of CA Civil Code 1798.83www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1798.80-1798.84
Form Letter to Request Disclosure of Information Sharingwww.privacyrights.org/letters/jm3.htm

DETECTING ELDER ABUSE

2004-11-22T04:10:00.000-08:00

DETECTING ELDER ABUSE by California and Nevada Attorney Sharon Green

Some of the most common signs of physical abuse or neglect include: physical markings, bedsores, bruises, cuts, dehydration, fevers, vomiting, unexplained weight loss, withdrawal, depression, broken bones or injured muscles, infection, and soiled clothing or bed linens.

In 2001, each elder care facility in California had an average of 11 deficiencies, ranging from poor comprehensive care to lack of bed sore prevention. Such substandard care puts the safety and even the lives of our loved ones at risk-and it must not be tolerated.

Some indications of financial abuse include the transfer of property away from elders,"gifts" to others, and sudden trouble paying bills

Financial abuse of an Elder occurs when a person intends to defraud an Elder by taking or misappropriating the Elder’s property or money. Any transaction that wrongfully deprives an elder of his or her money or property may be financial abuse under the law. Financial abuse is very serious because elders frequently will not admit to family members that they are being “taken” by people they trust. In other cases, the Elder may not discover their losses until a crisis develops - so much money is lost that the Elder cannot afford to live on what is left. Such severe financial losses may cause the Elder to become very depressed and even lose his or her will to live. It is very important to get an evaluation as soon as possible to protect the elder’s rights against wrongdoers. For example, the statute of limitations for professional malpractice resulting in financial abuse may be as short as one year.

Who commits financial abuse of elders?

Any person who comes in contact, including telephone contact, with the Elder could potentially commit financial abuse. This includes doctors, nurses, clergy, care givers and family members. Family members commit more than half of all elder abuse violations.

What should we look for if we suspect financial abuse?

Some indications that financial abuse may be taking place are:

1. Unexplained disappearance or large withdrawals of funds from the Elder's banking or brokerage accounts, or unexpected problems paying bills
2. New "best friends" who "advise" or "help" the Elder but who are unfamiliar to the Elder's family
3. "Concerned" family members who previously had little contact with the Elder
4. Newly hired accountants or lawyers, replacing the Elder's long-term professional relationships for no valid reason, changing bank accounts
5. New wills or trusts that are not caused by changes in the Elder's family membership
6. Unexpected or large purchases of goods or services that are not needed by the Elder
7. Care givers who prevent or discourage communications between the Elder and family members, or one family member who keeps others away from the Elder
8. Any sudden or radical change in the Elder's lifestyle
9. Reports of "lost" or missing property; or communications with family members which arouse suspicion of possible financial abuse

How can we identify financial abuse?

Any act that wrongfully deprives the Elder of his or her money or property can be financial abuse.

Some of the common ways this can occur is:
1. Transfer of assets or property to care givers, "friends" or even family members
2. Power of Attorney given by the Elder to a third person who does not use it solely for the Elder's benefit
3. So-called "estate planning" set up by care givers or family members, which is not understood by the Elder, which does not benefit the Elder, but causes the Elder's assets to be transferred to others
4. Use of the Elder's ATM cards, checking accounts, savings accounts, certificates of deposit, or credit cards by others
5. Mortgages, deeds or loan documents signed by the Elder for reasons that do not benefit the elder
6. Any transaction the Elder is talked into doing, which is not fair and reasonable to the Elder
7. Missing personal property of the Elder such as jewelry, silverware, family heirlooms that the recipient claims was a gift
8. Loans or investments with care givers or family members that are not commercially reasonable
9. Commercial transactions with contractors, investment salespersons, lawyers, accountants, or others, in which misrepresentations have been made to the Elder

What is nursing home abuse?

Nursing home abuse includes any mistreatment of an elder, whether it is physical or verbal. Punches, kicks, insults, restraints, deprivation, over- or under-medication, lack of socialization activities, monetary theft—these are just a few examples of abuse.

What is nursing home neglect?

Nursing home negligence includes any incident in which an elder fails to receive proper medical attention, nutrition, socialization, hygienic care, or other mandatory care. Such neglect can cause serious harm, and in some cases, can spell death for the victim.

If you or a loved one has been the victim of nursing home neglect or abuse, contact lawyer Sharon Green. Licensed to practice in Nevada, she has helped residents of Los Angeles, San Diego, Las Vegas, San Francisco, and more.

What are some signs and symptoms of physical abuse or neglect?

Often, there are many indicators of abuse or neglect, including:
Bedsores and/or decubitus ulcers
Bruises
Cuts
Scrapes
Scratches
Dehydration
Fevers
Vomiting
Unexplained weight loss
Withdrawal
Depression
Broken bones
Injured muscles
Infection
Soiled clothing or bed linens
Evidence that restraints were used unnecessarily
Confusion/ Disorientation
Falls or falling out of bed
Force feeding

If you notice any of these signs of neglect, it is imperative that you contact nursing home abuse lawyer Sharon Green today. She has been helping residents of California, and Nevada for many years, handling cases in Los Angeles, San Francisco, and other cities.

What are some signs of financial abuse?

Often, there are many indicators of financial abuse, including:

Unexplained disappearance or large withdrawal of funds from the Elder's banking or brokerage accounts, or unexpected problems paying bills
New "best friends" who "advise" or "help" the Elder but who are unfamiliar to the Elder's family
"Concerned" family members who previously had little contact with the Elder
Newly hired accountants or lawyers, replacing the Elder's long-term professional relationships for no valid reason, changing bank accounts
New wills or trusts that are not caused by changes in the Elder's family membership
Unexpected or large purchases of goods or services that are not needed by the Elder
Care givers who prevent or discourage communications between the Elder and family members, or one family member who keeps others away from the Elder
Any sudden or radical changes in the Elder's lifestyle
Reports of "lost" or missing property; or communications with family members which arouse suspicion of possible financial abuse
Transfer of assets or property to care givers, "friends" or even family members
Power of Attorney given by the Elder to a third person who does not use it solely for the Elder's benefit
So-called "estate planning" set up by care givers or family members, which is not understood by the Elder, which does not benefit the Elder, but causes the Elder's assets to be transferred to others
Use of the Elder's ATM cards, checking accounts, savings accounts, certificates of deposit, or credit cards by others
Mortgages, deeds or loan documents signed by the Elder for reasons that do not benefit the elder
Any transaction the Elder is talked into doing, which is not fair and reasonable to the Elder
Missing personal property of the Elder such as jewelry, silverware, family heirlooms that the recipient claims was a gift
Loans or investments with care givers or family members that are not commercially reasonable
Commercial transactions with contractors, investment salespersons, lawyers, accountants, or others in which misrepresentations have been made to the Elder

How common is this type of abuse?

Approximately 1.6 million Americans live in nursing home or elder care facilities in the United States, and up to one-third of the facilities in which they reside have been cited for abuse or neglect. Despite laws that have been enacted to protect elders from such mistreatment, the number of violations is only expected to grow in the future.

What are some reasons for such abuse or neglect?

Most abuse results from poor training programs for employees, overworked employees, understaffed facilities, inefficient monitoring systems, and inadequate resources.

What should I do if I suspect abuse or neglect?

If you suspect abuse or neglect, it is crucial that you act quickly. Talk to your loved one about the suspected abuse/neglect, visit the facility frequently and at different times of the day, express your concern to doctors and administrators, contact the Department of Health, or file a complaint. And ultimately, contact the Law Offices of Sharon Green immediately. Nursing home abuse lawyer Sharon Green has been helping victims of elder abuse in California and Nevada for many years, handling cases in Los Angeles, San Francisco, Las Vegas, and other cities throughout both states.

How much can I expect to win?

It is impossible to predict how large a settlement will be or the amount a verdict will return-even comparing yours to a similar case is not accurate because each claim is so unique. However, Sharon Green is experienced in representing the victims of nursing home abuse, neglect, and other forms of elder abuse. She vows to diligently and loyally seek deserved compensation.

I want to pursue a case. What should I do?

During times that call for legal action, contact the Law Offices of Sharon Green. As a nursing home abuse lawyer licensed to practice in California and Nevada, she is uniquely qualified to handle cases in Los Angeles, Las Vegas, San Diego, San Francisco and many other cities in these two states. We can advise you on how to build the strongest case possible. We take the time and walk you through the legal process so that you can understand what we’re doing each step of the way.

POST OBESITY LITIGATION -- FOLLOWING PRE-TOBACCO LITIGATION !

2004-11-14T05:23:00.000-08:00

Obesity Litigation -- The Next "Tobacco"?

By Kenneth J. Parsigian and U. Gwyn Williams

As obesity rates in the United States continue to rise, self-styled consumer rights activists are turning their attention to the manufacturing and marketing practices of the food industry and considering whether litigation can be used to change those practices.

Spearheading this effort are two well-known anti-tobacco activists, Professor John Banzhaf of George Washington University's School of Law and Professor Richard Daynard of Northeastern University's School of Law. Both are champions of the use of litigation to effectuate social change. They have already begun to use their broad tobacco litigation experience in the fight against "Big Food" to bring about changes in the production, advertisement, and consumption of food in the United States. This course of action presents a litigation risk for many companies involved in the food industry.

Not surprisingly, the first litigation attacks against "Big Food" came in the form of personal injury lawsuits. For instance, in 2002, there was a well-publicized filing of a lawsuit against McDonald's, in which McDonald's was alleged to have caused the obesity and related health problems of two young customers. The court dismissed the complaint holding that the harm posed by the over-consumption of fast food is common knowledge and that plaintiffs freely chose to consume McDonald's fast food. Perlman v. McDonald's Corp., 237 F. Supp. 2d 512 (S.D.N.Y. 2003). But, the court noted that the complaint might have avoided dismissal had it alleged that the defendant manufactured food in such a way that the consumer could not have appreciated the harm posed by it. If certain undisclosed manufacturing processes or ingredients clouded the awareness of harm posed by certain food, plaintiffs may not be held to have "freely chosen" to eat it.

The court was particularly concerned with what it termed "McFrankenstein" creations - food that, through processing, had lost its presumed healthy character. The court commented that a question of fact could exist as to whether a reasonable consumer would know of such changes. It noted that if the plaintiffs were able to flesh out this argument in an amended complaint, they could establish that the dangers of McDonald's products were not commonly well known and McDonald's, therefore, had a duty to inform its customers. The plaintiffs in that case were unable to successfully meet this test, but the court's decision has provided a clear roadmap for future litigation in this general area.

Beyond providing this roadmap, though, the initial round of cases proved that personal injury lawsuits are not likely to succeed against the food industry. Professors Banzhaf and Daynard have themselves noted that this is the primary lesson learned from both tobacco litigation and the McDonald's case. Despite the existence of some science claiming that certain food processing techniques and ingredients increase the "addictiveness" of food, activists view the burden of proving that some particular action of defendants caused the plaintiff to overindulge as too great a hurdle to overcome.

The danger to the food industry now comes in another guise - one which is more likely to show some staying power, at least in the short run. Instead of continuing with personal injury suits, activists will likely look to state consumer protection statutes which empower consumers with the right to bring lawsuits based on unfair or deceptive commercial practices (similar to the lawsuits currently pending against tobacco companies charging that the word "Lights" was misleading). Under this rubric, lawsuits are likely to target supposedly deceptive advertisements emphasizing "low-fat," "high fiber" or "low sodium" foods without disclosing the actual high calorie or sugar counts of those foods.

Activists may also go after manufacturers' efforts to establish brand loyalty in children, with suits against supposedly unfair/deceptive advertisement or against "pouring rights" contracts that split school vending machine profits with school systems thus "unfairly" distributing "non-nutritious" products to a captive market.

Lawsuits brought under state consumer protection laws would present a number of significant advantages to the plaintiffs. First, those statutes allow plaintiffs to sue for purely economic injuries - such as refund of the purchase price - which is much easier to prove than establishing a causal connection to some personal injury. Those statutes also generally permit awards of multiple and/or statutory damages. Second, many of these statutes do not require that the consumers prove they "relied" on the statement to the detriment: it may be enough that the consumers were simply the recipient of a statement that was false or deceptive. Third, to the extent that individualized proof, like reliance on the statement, is not required by the relevant consumer protection statute, plaintiffs are more likely to succeed in having a class action certified than they would in a personal injury suit.

While some legal pundits discount the threat posed by obesity litigation against the food industry, lawsuits against the tobacco industry were also once considered outlandish. Recent surveys show that the same percentage of potential jurors side with plaintiffs against "Big Food" as those who side with plaintiffs against "Big Tobacco" - without having heard any evidence of malfeasance by the food industry. Additionally, there have already been four partially successful outcomes in 10 lawsuits brought against "Big Food:" McDonald's settled an ingredient mislabeling case for $12 million; the maker of a snack food settled a calorie mislabeling case for $4 million; Kraft voluntarily removed trans fat from its Oreo cookies; and the New York School system removed soda and snack machines from school property.

Congress is attempting to stem a possible tide of such lawsuits through the introduction of a bill banning personal injury obesity lawsuits against the food industry. The House of Representatives passed the bill in March, but the Senate will not likely pass it this year. Similar bills, "Baby McBills," have been introduced in over 20 state legislatures, and six have been enacted (Arizona, Idaho, Louisiana, South Dakota, Utah, and Washington). None of the bills, however, prohibit the pursuit of lawsuits based on deceptive advertising, nor does any such legislation seem likely.
As Professors Banzhaf and Daynard address plaintiffs lawyers at seminars on "Legal Approaches to the Obesity Epidemic" and claim that they are themselves preparing to file lawsuits this year, many companies are taking protective measures.

Full disclosure of nutritional and ingredient information is the most logical first step for a company concerned about its exposure to obesity litigation. Liability insurance and sound risk management planning is also a prudent consideration. A comprehensive evaluation of advertising campaigns would also be a sensible step. However, as experience with the tobacco litigation has shown, there is no foolproof immunization against a determined plaintiffs' bar, so litigation may be inevitable and the cost of "serving one billion."

law.com DictionaryTHE PARALEGAL GRIND WORKSHOPS

2004-11-01T02:14:00.000-08:00

Need to find the meaning of a legal term quickly? Simply click on "dictionary.law.com" above.

ABOUT THE PARALEGAL GRIND WORKSHOPS:

Barb Holmes Reynolds, is a 37 yrs Civil Litigation Paralegal who has specialized in teaching the merging of the substantive law to actual law office procedural practice, for the past 15 years. In so doing, she has "built a better mousetrap", by delivering "competent" paralegals with "real-world-paralegal-know-how" when they enter the law office door.

The Paralegal Grind Workshops were created to serve as advanced learning for the paralegal students, to ensure that their paralegal-know-how is on point with the expectations of practicing attorneys. The following , is the schedule for the remainder of the year. Please call and find out more about the Workshops and next year's schedule.

Remember -- lawyers will have the New Year budgets to hire after the first of the year !

The Paralegal Grind ©

Saturday's Menu

From October 30, 2004 through December 18, 2004

Call To Reserve Your Seat at (626) 575-4874 and find
out the nominal Cost of less than a dollar a day.
Seating Capacity is limited 10 to 15 Persons per Session -- "smaller is better", because the instruction is concentrated and makes one-on-one assistance possible.

Los Angeles Workshops Held At :
El Camino Property and Real Estate, Inc.
13366 Ramona Boulevard, Baldwin Park, CA
Call Now: (626) 575-4874 or (310) 592-2149

Saturday, Oct. 30, 2004, 11:00 am - 1:00 pm
A Cup of Starbucks Coffee and a Two (2)=hour Session of Forms
Preparation of a Complaint and an Answer to Complaint

Saturday, November 6, 2004, 11:00am - 1:00pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation of a Notice of Motion, Motion, Memorandum of
Points and Authorities and Supporting Declaration (Materials Included

Saturday, November 13, 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation of a Chapter 7 Bankruptcy (Materials Included)

Saturday, November 20, 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Three (3)-hour Session of Forms
Preparation in Chapter 13 Bankruptcy (including Mathematical
Calculation Of Chapter 13 Plan of Reorganization (Materials Included)

Saturday, November 27 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation in Wills, Conversion of Probate Assets to Non-Probate
Assets, And A Singles Living Trust (Materials included)

Saturday, December 4, 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation in A Couples Living Trust and Advanced Health Care
Directive (Materials Included)

Saturday, December 11, 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation in an Irrevocable Life Insurance Trust, A Totem Trust
And Interpreting the Trust (Materials Included)

Saturday, December 18, 2004, 11:00 am - 1:00 pm
A cup of Starbucks Coffee and a Two (2)-hour Session of Forms
Preparation in Funding the Trust and Change of Beneficiary Forms
To Transfer Individual Assets into the Name of the Trust (Materials Included)

……
……………………….

INTELLECTUAL PROPERTY -- MAINTAINING TRADE SECRETS

2004-10-21T21:14:00.000-07:00

How To Keep a Secret: Protecting Employers' Trade Secrets

By Jeffrey Morris

The economic turndown of the early 21st century, coupled with technological advances that have made it easier to download massive amounts of information in minutes, has resulted in increased litigation by employers against employees who steal their employers' trade secrets or confidential and proprietary information and seek to use this information for the benefit of their new employers or themselves. With the transitory workforce of today, when employees remain in one place for an average of between 3 and 4 years, it is even more important than ever for companies to identify and take steps to protect their trade secrets and other proprietary information from misappropriation and disclosure.

What type of information qualifies as a trade secret?

Whether or not your company's information qualifies as a trade secret is a fact-intensive inquiry. Many states, including Wisconsin, have developed laws or adopted the provisions of the Uniform Trade Secrets Act (UTSA), which defines the type of information that will be treated as a trade secret. For information to be deemed a "trade secret" within the meaning of the UTSA, the information must "derive independent economic value" and not be "generally known" or "readily ascertainable" by others who can benefit from this information. In addition, the UTSA requires that the company who is seeking to protect the information take efforts that are "reasonable under the circumstances to maintain its secrecy." Assuming the employer successfully establishes that its information qualifies as a trade secret, in litigation, defendant ex-employees often resort to attacking the steps that a company takes to protect its trade secrets as insufficient to show that the information is in fact, a secret.

What steps should employers take to protect trade secrets from disclosure?

Depending on the type and form of the information a company wants to protect, there are a variety of steps that can be taken to avoid disclosure by current and former employees.
Confidentiality Agreements. A carefully worded confidentiality and non-disclosure agreement between the employer and employee will go along way to show that your company takes its trade secret information seriously. Confidentiality agreements will also discourage disclosure by current and former employees.

Electronic Information.

If the information is only available in an electronic form, limit the number of individuals who have access to this data to those employees who have a legitimate, business reason to know the information. Require that each employee with access have separate passwords that are updated on a regular basis. Monitor the number of times employees log on for this information and scrutinize excessive or unusual frequency of access or any information that is downloaded or emailed.
Information in Hard Copy. Depending on the size of your business, information such as customer lists, account information, and prospects can be manually recorded. If this is the case, review where this information is contained in the office. This information should be kept in a location that is separate from common areas, such as reception desks or areas to which members of the general public have access. Again, this information should be available only to those who have a legitimate reason or business need to know the information. Designate a trusted individual as the "keeper" of the information and, at night, instruct the "keeper" to return the data to a locked office, file cabinet,or other secure location. In addition, limit the number of individuals who have keys, passcodes, or other means of access to this information.

What remedies are available if my company's tradesecrets are disclosed?

Depending on your jurisdiction, the remedies available to a company that is faced with actual or threatened disclosure of trade secrets generally include injunctive relief and monetary damages. If an employee leaves your company and takes your customer list or downloaded files with him, you can file a complaint in court and request an injunction, a court order, requiring the employee to return the misappropriated materials and to cease and desist from using them. Further, money damages representing your company's loss of business and the ex-employee's "unjust enrichment" as a result of his or her actions may also be available, but you must be prepared to prove damages, as it is a lawsuit and you, as the employer, will bear the burden of proof.

Finally, your company may be entitled to recover its attorney's fees and costs which it incurred as a result of bringing the lawsuit, under both the UTSA and Wisconsin contract law, assuming that you have a confidentiality or nondisclosure agreement in place that provides for the recovery of attorney's fees. Establishing appropriate protocol and policies for protection of your company's trade secrets will reduce the possibility of disclosure and provide your company with protection in the event of disclosure.

3 FEET AND 50 CENTS

2004-10-20T04:03:00.000-07:00

THINK & GROW RICH by Napoleon Hill

Three Feet & Fifty Cents

One of the most common causes of failure is the habit of quitting when one is overtaken by temporary defeat. Every person is guilty of this mistake at one time or another. An uncle of RU Darby was caught by the “gold fever” in the gold-rush days, and went west to dig and grow rich. He had never heard that more gold has been mined from the brains of people than has ever been taken from the earth. He staked a claim and went to work with pick and shovel. The going was hard, but his lust for gold was definite. After weeks of labor, he was rewarded by the discovery of the shining ore. He needed machinery to bring the ore to the surface. Quietly, he covered up the mine, retraced his footsteps to his home in Williamsburg, Maryland, and told his relatives and a few neighbors of the “strike.” They got together money for the needed machinery, had it shipped. The uncle and Darby went back to work the mine.

The first car of ore was mined, and shipped to a smelter. The returns proved they had one of the richest mines in Colorado! A few more cars of that ore would clear the debts. Then would come the big killing in profits. Down went the drills! Up went the hopes of Darby and Uncle! Then something happened. The vein of gold ore disappeared! They had come to the end of the rainbow, and the pot of gold was no longer there! They drilled on, desperately trying to pick up the vein again—all to no avail. Finally, they decided to QUIT. They sold the machinery to a junk man for a few hundred dollars, and took the train back home.

Some “junk” men are dumb, but not this one! He called in a mining engineer to look at the mine and do a little calculating. The engineer advised that the project had failed, because the owners were not familiar with “fault lines.” His calculations showed that the vein would be found JUST THREE FEET FROM WHERE THE DARBYS HAD STOPPED DRILLING! That is exactly where it was found! The “Junk” man took millions of dollars in ore from the mine, because he knew enough to seek expert counsel before giving up.

Most of the money which went into the machinery was procured through the efforts of R. U. Darby, who was then a very young man. The money came from his relatives and neighbors, because of their faith in him. He paid back every dollar of it, although he was years in doing so. Long afterward, Mr. Darby recouped his loss many times over, when he made the discovery that desire can be transmuted into gold. The discovery came after he went into the business of selling life insurance.

Remembering that he lost a huge fortune, because he STOPPED three feet from gold, Darby profited by the experience in his chosen work, by the simple method of saying to himself, “I stopped three feet from gold, but I will never stop because men say ‘no’ when I ask them to buy insurance.” Darby is one of a small group of fewer than fifty men who sell more than a million dollars in life insurance annually. [Editor’s note: Keep in mind that this passage was written in 1937]. He owes his “stickability” to the lesson he learned from his “quitability” in the gold mining business.

Before success comes in any person’s life, he is sure to meet with much temporary defeat, and, perhaps, some failure. When defeat overtakes a person, the easiest and most logical thing to do is to QUIT. That is exactly what the majority of people do. More than five hundred of the most successful men this country has ever known told the author their greatest success came just one step beyond the point at which defeat had overtaken them. Failure is a trickster with a keen sense of irony and cunning. It takes great delight in tripping one when success is almost within reach.

...Shortly after Mr. Darby received his degree from the “University of Hard Knocks” and had decided to profit by his experience in the gold mining business, he had the good fortune to be present on an occasion that proved to him that “No” does not necessarily mean no.

One afternoon he was helping his uncle grind wheat in an old fashioned mill. The uncle operated a large farm on which a number of colored sharecrop farmers lived. [Editor’s note: the word colored was an accepted term by both whites and African Americans when this was written]. Quietly, the door was opened, and a small colored child, the daughter of a tenant, walked in and took her place near the door. The uncle looked up, saw the child, and barked at her roughly, “What do you want?” Meekly, the child replied, “My mammy say send her fifty cents.” “I'll not do it,” the uncle retorted, “Now you run on home.”“Yas sah,” the child replied. But she did not move.

The uncle went ahead with his work, so busily engaged that he did not pay enough attention to the child to observe that she did not leave. When he looked up and saw her still standing there, he yelled at her, “I told you to go on home! Now go, or I'll take a switch to you.” The little girl said “yas sah,” but she did not budge an inch. The uncle dropped a sack of grain he was about to pour into the mill hopper, picked up a barrel stave, and started toward the child with an expression on his face that indicated trouble. Darby held his breath. He was certain he was about to witness a murder. He knew his uncle had a fierce temper. He knew that colored children were not supposed to defy white people in that part of the country. When the uncle reached the spot where the child was standing, she quickly stepped forward one step, looked up into his eyes, and screamed at the top of her shrill voice, “MY MAMMY’S GOTTA HAVE THAT FIFTY CENTS!”

The uncle stopped, looked at her for a minute, then slowly laid the barrel stave on the floor, put his hand in his pocket, took out half a dollar, and gave it to her. The child took the money and slowly backed toward the door, never taking her eyes off the man whom she had just conquered. After she had gone, the uncle sat down on a box and looked out the window into space for more than ten minutes. He was pondering, with awe, over the whipping he had just taken. Mr. Darby, too, was doing some thinking. That was the first time in all his experience that he had seen a colored child deliberately master an adult white person. How did she do it? What happened to his uncle that caused him to lose his fierceness and become as docile as a lamb? What strange power did this child use that made her master over ... [Mr. Darby’s uncle]?

...Strangely, the story of this unusual experience was told to the author in the old mill, on the very spot where the uncle took his whipping. Strangely, too, I had devoted nearly a quarter of a century to the study of the power which enabled an ignorant, illiterate colored child to conquer an intelligent man.As we stood there in that musty old mill, Mr. Darby repeated the story of the unusual conquest. ... [Moments later, he] retraced his thirty years of experience as a life insurance salesman, and frankly acknowledged that his success in that field was due, in no small degree, to the lesson he had learned from the child. Mr. Darby pointed out:“Every time a prospect tried to bow me out, without buying, I saw that child standing there in the old mill, her big eyes glaring in defiance, and I said to myself, ‘I’ve gotta make this sale.’ The better portion of all sales I have made, were made after people had said ‘NO’.”

He recalled, too, his mistake in having stopped only three feet from gold; “but,” he said, “that experience was a blessing in disguise. It taught me to keep on keeping on, no matter how hard the going may be, a lesson I needed to learn before I could succeed in anything.” This story of Mr. Darby and his uncle, the colored child and the gold mine, doubtless will be read by hundreds of people who make their living by selling life insurance, and to all of these, the author wishes to offer the suggestion that Darby owes to these two experiences his ability to sell more than a million dollars of life insurance every year.

Survivor

Several years ago, one of my business associates became ill. He became worse as time went on, and finally was taken to the hospital for an operation. Just before he was wheeled into the operating room, I took a look at him, and wondered how anyone as thin and emaciated as he, could possibly go through a major operation successfully. The doctor warned me that there was little if any chance of my ever seeing him alive again. But that was the DOCTOR’S OPINION. It was not the opinion of the patient.

Just before he was wheeled away, he whispered feebly, “Do not be disturbed, Chief, I will be out of here in a few days.” The attending nurse looked at me with pity. But the patient did come through safely. After it was all over, his physician said, “Nothing but his own desire to live saved him. He never would have pulled through if he had not refused to accept the possibility of death.”

Habit

…Both success and failure are largely the results of HABIT!Name Your Price[Editor’s Note: Fannie Hurst was a prominent novelist who lived from 1889-1968][Fannie Hurst] came to New York in 1915, to convert writing into riches. The conversion did not come quickly, BUT IT CAME. For four years Miss Hurst learned about “The Sidewalks of New York” from first hand experience.

She spent her days laboring, and her nights HOPING. When hope grew dim, she did not say, “Alright Broadway, you win!” She said, “Very well, Broadway, you may whip some, but not me. I’m going to force you to give up.” One publisher (The Saturday Evening Post) sent her thirty-six rejection slips, before she “broke the ice” and got a story across. The average writer, like the “average” in other walks of life, would have given up the job when the first rejection slip came. She pounded the pavements for four years to the tune of the publisher’s “NO,” because she was determined to win. Then came the “payoff.” The spell had been broken, the unseen Guide had tested Fannie Hurst, and she could take it. From that time on publishers made a beaten path to her door.

Money came so fast she hardly had time to count it. Then the moving picture [motion picture] men discovered her, and money came not in small change, but in floods. The moving picture rights to her latest novel, “Great Laughter,” brought $100,000.00, said to be the highest price ever paid for a story before publication. Her royalties from the sale of the book probably will run much more. Briefly, you have a description of what PERSISTENCE is capable of achieving. Fannie Hurst is no exception.

Wherever men and women accumulate great riches, you may be sure they first acquired PERSISTENCE. Broadway will give any beggar a cup of coffee and a sandwich, but it demands PERSISTENCE of those who go after the big stakes. Kate Smith will say “amen” when she reads this. [Editor’s Note: Kate Smith, who lived from 1909-1986, was a famous singer and media personality. He career catapulted even further after this passage was written].

For years she sang, without money, and without price, before any microphone she could reach. Broadway said to her, “Come and get it, if you can take it.” She did take it until one happy day Broadway got tired and said, “Aw, what’s the use? You don’t know when you’re whipped, so name your price, and go to work in earnest.” Miss Smith named her price! It was plenty. Away up in figures so high that one week’s salary is far more than most people make in a whole year. Verily it pays to be PERSISTENT!

Fear of Criticism

The majority of people permit relatives, friends, and the public at large to so influence them that they cannot live their own lives, because they fear criticism. Huge numbers of people make mistakes in marriage, stand by the bargain, and go through life miserable and unhappy because they fear criticism which may follow if they correct the mistake. (Anyone who has submitted to this form of fear knows the irreparable damage it does, by destroying ambition, self-reliance, and the desire to achieve).

Millions of people neglect to acquire belated educations, after having left school, because they fear criticism. Countless numbers of men and women, both young and old, permit relatives to wreck their lives in the name of DUTY, because they fear criticism. (Duty does not require any person to submit to the destruction of his personal ambitions and the right to live his own life in his own way).People refuse to take chances in business, because they fear the criticism which may follow if they fail. The fear of criticism, in such cases is stronger than the DESIRE for success.

Too many people refuse to set high goals for themselves, or even neglect selecting a career, because they fear the criticism of relatives and “friends” who may say “Don’t aim so high, people will think you are crazy.” ... The fear of criticism takes on many forms, the majority of which are petty and trivial.

Do What You Like

No person can succeed in a line of endeavor which he does not like. The most essential step in the marketing of personal services is that of selecting an occupation into which you can throw yourself wholeheartedly.

Dominating Thoughts

It is a well known fact that one comes, finally, to BELIEVE whatever one repeats to one’s self, whether the statement be true or false. If a person repeats a lie over and over, he will eventually accept the lie as truth. Moreover, he will BELIEVE it to be the truth. Every person is what he is, because of the DOMINATING THOUGHTS which he permits to occupy his mind.

Thoughts which a person deliberately places in his own mind, and encourages with sympathy, and with which he mixes any one or more of the emotions, constitute the motivating forces, which direct and control his every movement, act, and deed!

People Crave Commendation and Recognition

The leader who claims all the honor for the work of his followers, is sure to be met by resentment. The really great leader... is contented to see the honors, when there are any, go to his followers, because he knows that most men will work harder for commendation and recognition than they will for money alone.

Self-Mastery

Discipline comes through self-control. This means that one must control all negative qualities. Before you can control conditions, you must first control yourself. Self-mastery is the hardest job you will ever tackle. If you do not conquer self, you will be conquered by self. You may see at one and the same time both your best friend and your greatest enemy, by stepping in front of a mirror.

E-MAIL DISCOVERY -- ITS TIME HAS COME.

2004-10-13T05:15:00.000-07:00

The Proposed Federal E-Discovery Rules --
While Trying to Add Clarity, the Rules Still Leave Uncertainty

In recent lawsuits, the proverbial smoking gun may not be an interoffice memorandum found in a locked file cabinet. Instead, it may be an e-mail message stored and forgotten on someone's hard drive.

This reality has significantly altered discovery - the process by which parties to a litigation request documents from each other; produce documents to each other; and serve and answer each other's interrogatories and requests for admission.

Accordingly, on August 15, the federal judiciary disseminated a proposed set of rules to govern "e-discovery" - that is, the exchange of electronic information in litigation proceedings.

At present, at least four federal district courts have adopted local rules to address e-discovery. Two states have also court rules that specifically address e-discovery. The proposed federal amendments would be the first attempt to create a coherent set of rules for the entire federal judiciary.

The proposal, if adopted, would amend the Federal Rules of Civil Procedure (FRCP), which govern all federal civil litigation -- and would take effect by December 1, 2006. Currently, we are within the six-month period during which comments on the rules can be made to the Advisory Committee on Federal Rules.

In this column, I will comment on the strengths and weaknesses of the draft e-discovery rules. The new rules correctly advise discussion of e-discovery at parties' initial conference - and laudably would set rules for when privileged e-material is inadvertently disclosed.

But the rules' proposals as to when sanctions can be imposed for deletion of electronic information, and as to how hard companies must look for backup data and the idea, leave something to be desired. Both employ vague reasonableness standards that are open to interpretation.

E-Discovery: How the FRCP Currently Address It, and Why It's Different
Electronic data and records are certainly not new - nor is e-discovery. In 1970, the FRCP's definition of "documents" was amended to include "data compilations from which information can be obtained." And in 1993, a new Rule - Rule 26(a)(1)(B) - required that parties initial disclosures to each other encompass not only relevant documents and "tangible things," but also relevant "data compilations."

Still, the FRCP do not entirely account for the important differences between regular discovery, and discover of electronic data. For one thing, electronic data may be harder to review - requiring the examination of volumes of data and records contained on hard drives, servers, back-up tapes, and other data storage devices. In part, that's because it may be more voluminous: With electronic storage, we now have an exponentially greater amount of data that can be stored and hence retrieved.

For another thing, the lifespan of electronic data differs in important ways from that of paper data. On one hand, computer data can be destroyed or lost due to problems with hardware and software - or intentionally deleted. If there are no paper backups, the data may be lost forever. On the other hand, though, electronic data can have a longer lifespan, in a sense: Electronic documents often continue to exist (either as backups or originals) despite an author's intention to destroy them.
The content of e-documents also tends to differ: They can be more revealing than paper documents, in two ways.

First, they are often automatically saved and encoded with "metadata" - which states when they were created, modified, and accessed, and potentially, by whom they were accessed. Thus, those who create, access, or modify such a document may leave a more specific trail than they realize.

Second, because of their informality, e-documents such as e-mails may contain more off-the-cuff, candid remarks - the kind of remarks that, due to their candor, may be the "smoking gun."

Calling for Early Attention to Electronic Discovery Is a Good Idea

Under the proposed new rules, at their initial conference, parties would be required to discuss "any issues relating to disclosure or discovery of electronically stored information." The commentary notes that the parties should balance the need to preserve electronic information, against the parties' needs to continue the ordinary operations of computer systems.

The ABA's E-Discovery Task Force has suggested, in particular, what parties ought to discuss. The Task Force reminds lawyers to consider databases, networks, computer systems, servers, archives, backup or disaster recovery systems, laptops, personal digital assistants, mobile phones and pagers as possible e-discovery sources.

In addition, it notes that lawyers may want to discuss - among other things - the subject matter of the e-discovery, the time necessary to produce it, whether the data exists in a "searchable form," whether the data will be produced in electronic form or hard copy, relevant data retention policies and the allocation of costs.
Inadvertent Disclosure of E-Discovery: The New Rules' Sensible Procedure

Inadvertent disclosure has always been a problem in discovery: What if attorney-client privileged information or attorney work product, for instance, is inadvertently sent to the other side? A privileged memo from an attorney can easily be missed among a pile of other, non-privileged memos.

Electronic discovery may raise the risk of inadvertent disclosure - for the information stored can be voluminous, and hard to review. Accordingly, the proposed rules state that if a party notifies his opponent of inadvertent disclosure "within a reasonable time," the opponent must "promptly return, sequester, or destroy the specified information and any copies." (As it is, parties sometimes enter into agreements that allow for essentially the same procedure -- known as "quick peek" and "claw back" agreements.)

Beyond this, current rules would not change when e-discovery is at issue: Ethics rules would continue to require an attorney to stop reading if he realizes he is reading an inadvertently produced document. The producing party would still have to prepare a privilege log - matching document numbers with claimed privileges - so assertions of privilege could be challenged in court. Finally, issues of privilege waiver - that is, whether a party can no longer claim privilege on a given e-document due to its own conduct - would still be left to the court.

The Recurring Issue of E-Mail Deletion: The New Rules Are Right to Address It
The proposed new rules would also take on the recurring issue of e-mail deletion - and resulting sanctions. As recently as this year, several cases raising this issue have cropped up - as I discuss below. It is certainly time to confront the issue head on.

Currently, a number of questions remained unanswered by the FRCP, including these: For how long do companies have to retain electronic data? What duty do they have to retrieve and provide such data when they are sued? Do they have to keep backups forever?

To some extent, court discovery orders have filled the gap in the rules. And e-mail deletions that have violated those orders have led to sanctions. In July 2004, for instance, a federal district court in New York City ordered such sanctions against a company in an employment discrimination dispute, Zubulake v. USB Warburg.

Judge Shira Scheindlin's sanctions for employees' deletions of e-mails pertinent to discovery requests included the sanction of an "adverse inference." (That is, the judge allowed the judge to infer that the deleted emails would have been adverse to the company's position in the litigation.) The judge made clear that she thought the company ought to have warned employees not to delete relevant email from the start of the litigation - and when the email deletions were revealed, she ordered that the company immediately inform all employees not to delete anything further.

Only one day after the Zubulake decision was released, the U.S. District Court for the District of Columbia issued similar sanctions. U.S. District Judge Gladys Kessler noted that tobacco giant Philip Morris had failed to retain e-mail messages despite an October 1999 court order, and the company's own electronic discovery retention policy.
Worse, this failure was not the fault of new or low-level employees: To the contrary Judge Kessler found it "astounding that employees at the highest corporate level in Philip Morris, with significant responsibilities pertaining to issues in this lawsuit" were among those who failed to follow the order and the internal policy.

Judge Kessler ordered Philip Morris and its parent company to pay $2.75 million for e-discovery violations. In addition, she precluded several witnesses from testifying at trial.
The Controversial Safe Harbor the Rules Would Create for Routine Deletions

In light of cases like these, companies have complained that deletions, at times, may not be intentional - but rather, automatic. To respond to this complaint, the proposed new e-discovery rules would create a "safe harbor" for certain types of deletions, ensuring they could not be sanctioned. (This "safe harbor" would not apply, however, when a specific court order requiring preservation is in place.)

Two conditions would have to be satisfied for the safe harbor to apply. First, the electronic information must have been lost or destroyed as a result of the routine operation of the party's computer system--such as information lost when back-up tapes are recycled, or deleted information is automatically overwritten.

Second, the party must have taken reasonable steps to preserve the information after it knew the information to be relevant. (In addition, the report notes that in assessing the reasonableness of the steps taken by the party, the court should bear in mind what the party "knew or reasonably should have known when it took steps to preserve electronically sated information.")

Is the Safe Harbor's "Reasonableness" Standard the Correct One?
Is the safe harbor's "reasonableness" standard the correct one? Or should sanctions require intentional or willful conduct? The Committee is asking for feedback on this very issue.

In my view, the negligence standard is far preferable. If the level of culpability is raised to intentional or willful conduct, parties may be incentivized to have lax standards for preservation of electronic records. After all, the more quickly and completely automatic deletion works at a given company, the less the risk of intentional, willful deletion by a person would even be raised.

With the negligence standard, however, some vagueness does remain: What is "reasonable" when it comes to preserving electronic information?

One suggestion made to the committee, in particular, is a smart one: If a party took reasonable steps to notify the custodian of electronic information at the company of the need to preserve certain information, it should be deemed to have made out a prima facie - that is, an initial, though rebuttable - case that it fits within the safe harbor.

The Committee should also be open to a different approach: Setting a "safe harbor" here that stipulates for how many years - and with what kind of safeguards -- companies must preserve data in order to take advantage of the reasonableness standard. Clear limits and rules would be helpful here; reasonableness is not enough.

Without clearer rules, a "reasonableness" standard may end up punishing the innocent - companies whose good faith e-preservation methods weren't up-to-the-the-minute. It may also end up letting the guilty free - if companies' quick deletion systems are deemed acceptable (because common), even though they leave plaintiffs with scant discovery to review.

Must Hard-To-Access Data Be Produced? The Rules Ask For "Reasonableness"
A final major question addressed by the proposed rules is this one: How should the FRCP deal with discovery of e-data that is not readily accessible? For instance, must companies search "legacy data" that is currently unused and stored on an obsolete system, or inactive data stored for disaster recovery purposes?

Again, the rules take refuge in "reasonableness" - at the expense of clarity. Among the proposed amendments is one that would relieve a party from the obligation to retrieve and produce e-discovery that is "not reasonably accessible." The court could require disclosure of such information only for good cause and on specified terms and conditions.

A typical example of hard-to-get information would be information wiped from a computer hard drive on an employee's termination. The data can be recovered, but it takes time and money. Still, in an employment case that directly raises the reasons for the employee's being fired or quitting, the data may be central to the plaintiff's case.

Without more guidance - including concrete examples in the Commentary -- as to what "reasonably accessible" means, this rule should not be adopted. It threatens to give companies too much of an "easy out" - an excuse not to offer the plaintiff all relevant records.

In sum, the proposed new e-discovery rules show that we are still adjusting to the realities of such discovery. We should resist the urge to simply pass the ball to courts, with reasonableness standards that have little content until a judge applies them, and offer litigants more specifics as to what, practically speaking, they must, and must not, do.

PLEASE SHARE YOUR THOUGHTS WITH REYNOLDS, BY CONTACTING ME AT www.paralegalthirtysixyears@yahoo.com.

VERDICT OF DRUNK JUROR -- STILL A VALID VERDICT !!??

2004-10-11T05:00:00.000-07:00

Court: Verdict stands, even though juror was tanked on vodka
By Samantha Murphy, Court TV

NEW YORK (Court TV)— New Yorkers can not only booze up before serving jury duty, but can also snooze through trial proceedings, according to a ruling handed down by the state's Supreme Court.

After firefighter Samuel Brandon, 60, was found guilty in March of stealing 9/11 souvenirs from the World Trade Center site, he ran into one of the jurors outside the courthouse.

A visibly drunk John Anastas, 57, approached the defendant and offered to grab a beer with him, according to Brandon's lawyer, Ronald Kliegerman.

"We were out on the street and I could just smell the alcohol on him," Kliegerman said. "He was so inebriated."

When the defense team learned that Anastas had poured vodka and water from a Poland Spring bottle during jury deliberations, lawyers immediately filed an appeal on the grounds of juror misconduct.
The plastered panelist, however, actually had the law on his side.
New York Supreme Court Justice Ellen Coin refused too return the firefighter's conviction on Sept. 15, 2004, by ruling that Anastas's behavior was just shy of legal misconduct.

Drinking precedent
As outlandish as it sounds, Coin's decision was based on a rarely cited 1987 U.S. Supreme Court ruling. In that case, several jurors allegedly consumed alcohol during the trial's lunch breaks, used cocaine and marijuana, and even slept through hearings.

The defendants— a Floridian power plant procurement manager and an outside contractor who were convicted on charges of defraud conspiracy — filed a motion for a new trial after the defense attorney was informed that jurors were often incoherent during the trial.

Jurors testified that some of their fellow panelists were often "in a sort of giggly mood" due to intoxication, and others would sleep through the afternoon trial.

According to the U.S. Supreme Court's Federal Rules of Evidence, juror testimony cannot be used to impeach a verdict, except when certain outside influences are inflicted upon a jury. The court, however, does not recognize juror intoxication as severe enough "outside influence" or "juror misconduct" to sway a verdict.

"Drugs or alcohol voluntarily ingested by a juror— however severe their effect and improper their use — seem not more an outside influence than a virus, poorly prepared food, or lack of sleep, "the 11th circuit of the United States Court of Appeals ruled before the case was sent to the U.S. Supreme Court.

The 17-year-old ruling offers little legal recourse for firefighter Brandon and his defense team. "We are still very upset," Kliegerman said. "We were entitled to a jury of six people, but only five of them were awake and focused. I don't see how this is fair."

Though other jurors knew Anastas was intoxicated often during the trial, Kliegerman said they chose not to come forward with the information.
"It's a natural tendency for jury members to not want to get involved and become a witness for the next three years in a new case," he said.

All five jurors ultimately testified against Anastas, claiming he was "annoying" during the trial and extremely" unfocused."

Bombed jurors abroad
Though drunk jurors in the United States cannot void a verdict, other countries treat wasted panelists much differently.

During the 1998 trial of a accused rapist in Edinburgh, Scotland, juror James Smith, 51, celebrated his birthday in court with a similar vodka-in-a-water-bottle ploy. The jury may have found the defendant not guilty, but the judge found Smith not sober. The defendant walked free; the juror walked away with a fine of about$1,000.

Likewise, during the trial of an accused kidnapper in Plymouth Crown, England, the judge halted the trial when one juror stumbled back from lunch wasted. He dismissed the entire jury and sent the smashed panelist to jail for a night.

By contrast, the U.S law protects the verdict by not forcing jurors to regarding previous deliberations. This is relevant in all cases except with jury tampering.

"Sometimes you won't know right away if a juror is drunk or impaired," said Richard Willstatter, a defense lawyer in White Plains, N.Y., who has specialized in federal criminal cases for 15years. "In [Brandon's] case, it wasn't known until after the verdict was made. The next step would call for hearings to see whether the verdict was derived under 'outside influence.'" Although Anastas made a clean get away, the ruling has renewed the controversy surrounding drunk jurors and alerted lawyers on both sides of trials to closely watch the jury box.

"If something happens in a jury room and you see a juror drunk, you would want to boot his ass off the jury as fast as you can," Willstattersaid.

CAREFUL FILING A NOTICE OF LIS PENDENS--PLEADING TO NAME PROPERTY AND INVOLVE "TITLE".

2004-10-08T05:45:00.000-07:00

Gale v. Superior Court (Gale) (2004) , Cal.App.4th
[No. G033968. Fourth Dist., Div. Three. Oct. 6, 2004.]
LEE GALE, Petitioner, v. THE SUPERIOR COURT OF ORANGE COUNTY, Respondent; LAURA GALE, Real Party In Interest.

(Superior Court of Orange County, No. 02D002693, Thomas H. Schulte, Judge.)

(Opinion by Sills, P. J., with Rylaarsdam, J., and Ikola, J., concurring.)

COUNSEL

Law Offices of David B. Dimitruk and David B. Dimitruk for Petitioner.

No appearance for Respondent.

Schumann, Rallo & Rosenberg, Thomas C. Rallo and John F. Cannon for Real Party In Interest. {Slip Opn. Page 2}

OPINION

SILLS, P. J.-

I. INTRODUCTION
In this writ proceeding we hold that a family law petition for dissolution of marriage which does not allege a community interest in specific real property does not state a "real property claim" so as to support the filing of a notice of lis pendens with regard to that property. The plain language of the governing statute, section 405.4 of the Code of Civil Procedure, requires a pleading which alleges a claim that affects title or possession to "specific real property." The common practice of family lawyers in this state of being deliberately cagey or noncommittal in the family law petition or response by not specifying items of community and separate property (e.g., "such assets as may be discovered at a later date" or "the full nature and extent of petitioner's community property is unknown at this time") does not comply with the statutory requirements allowing the filing of a notice of lis pendens, and consequently will not support such a filing.

II. BACKGROUND
Lee Gale (Husband) and Laura Gale (Wife) were married in 1994. Prior to the marriage, Husband was the trustee of a living trust that owned three expensive houses in Newport Beach, two of which were on Balboa Island. During the marriage, in 1995, the trust conveyed title to the three homes to Management VI Properties, LLC, which was formed to manage the properties. During the marriage Wife attended to many of the day-to-day details of that management, including making arrangements to keep the properties in repair and rented out. She also drew a salary from the company. Husband, however, had 99 percent of the voting rights in the firm.

Wife filed for dissolution in 2002 in a petition that did not mention anything at all about Management VI or the three properties it owned. Rather, the petition followed the common practice of not listing any specific assets as community or separate. Instead it only stated that there were such community assets "as may be {Slip Opn. Page 3} discovered at a later date; the right to amend being reserved." fn. 1 Management VI was not joined as a party to the proceedings.

In the Spring of 2004, Management VI was in the process of selling one of the Balboa Island properties. (According to the Husband, the purpose of the sale was to obtain the funds to fulfill an obligation -- apparently one he unilaterally undertook on the company's behalf -- to invest in a mobile home park, an investment on which he hoped to receive a higher return on capital.) Wife, herself a former real estate agent, thought the company was selling the property for too low a price, and should have held out for another $300,000. (She thought the value to be $1.4 million instead of the $1.1 million selling price.) So she filed a notice of lis pendens on the property.

The trial court judge denied Husband's subsequent motion to expunge, opining that he was not sure that maybe the automatic restraining orders issued at the outset of the case had not been violated by the mere attempt to sell. Husband then brought this writ petition to challenge the trial court's refusal to expunge the notice of lis pendens.

III. DISCUSSION

A. The Restraining Orders
Preliminarily, we must deal with the issue raised by the trial court's comments that the automatic restraining orders typically included in the summons in a divorce case might have been enough, by themselves, to prevent the sale of one of the Balboa houses. (See Fam. Code § 2040, subd. (a)(2).) We are forced into this detour because if the standard restraining orders do preclude the sale, then the case would not merit our discretionary writ review. Even a determination that Husband was entitled to have the notice of lis pendens expunged would not afford him effective relief. He (or more precisely, Management VI) still wouldn't be able to actually sell the property. {Slip Opn. Page 4}

Read literally, the restraining orders forbid a divorcing spouse from even buying groceries ("you and your spouse are restrained from . . . transferring . . . or in any way disposing of any property, real or personal . . . .") unless one reads further and realizes the blanket preclusion is qualified for disposals of property either in the "usual course of business or for the necessities of life." Besides being a matter of common sense, these qualifiers are mandated by a formidable body of constitutional law precluding the summary deprivation of property without due process, i.e., without notice and hearing. That law was forged in the context of overreaching creditor's remedies in which alleged debtors found themselves summarily deprived of the use of their property without deliberative court proceedings. (See Randone v. Appellate Department (1971) 5 Cal.3d 536 [prejudgment attachment procedure unconstitutional without notice and hearing]; Blair v. Pitchess (1971) 5 Cal.3d 258 [same for claim and delivery]; see also Sniadach v. Family Finance Corp. (1969) 395 U.S. 337 [summary attachments without notice and hearing unconstitutional].)

The record before us contains the (fairly hefty) formal operating agreement for Management VI. While the agreement is relatively brief on the "purpose" of the company (merely that the purpose is "the management of the Properties"), the agreement also gives the "Manager" of the company (i.e., Husband) "all necessary powers to carry out the purposes . . . of the Company, including, but not limited to, the right to enter into and carry out contracts of all kinds" and to "own, manage, sell, lease, mortgage, pledge or otherwise acquire or dispose of Company property." (Emphasis added.)

The record also includes Wife's declaration which only strengthens the conclusion that Management VI is a bona fide business entity. She recognizes she was paid a salary for her services in collecting the rent and managing the company bank account, and all but avers that the corporation was anything but an alter ego of the couple.

On such a record, then, we may confidently say that "usual course of business" language exempted from the automatic operation of the restraining orders the attempt to sell the Balboa house by the company. On the most elementary level, title to the Balboa property is held by a third party, and that third party was not joined to the {Slip Opn. Page 5} proceeding. While the trial court could issue restraining orders against Management VI without formal joinder (see Fam. Code, § 2045, subd. (a)), it would be a contravention of basic due process to hold Management VI itself accountable for restraining orders of which it never had notice.

On a more substantive level, even if we were, as an academic exercise, to disregard the separate identities of the company and Husband (and there is no basis to do that), the reallocation of assets to obtain a better return on capital is most assuredly in the "usual" course of business for a company whose business it is to hold and manage property.

Now, none of this is to say, of course, that Wife could not have sought a restraining order specifically targeted at the company's disposition of the Balboa property. But, to return to the basic theme of Randone, Blair and Sniadach, obtaining such order would have necessarily entailed the elementary due process of notice and a hearing, in which the merits of any application could be argued before the trial court. That scenario is quite different from the idea that mere automatic (no hearing) restraining orders issued against a divorcing spouse somehow can constrain a property management company merely because it is managed by that spouse. fn. 2

The lack of notice makes this case unlike one of the two major published family law decisions dealing with the usual-course-of-business language in restraining orders, Lee v. Superior Court (1976) 63 Cal.App.3d 705. There, the appellate court refused to disturb a trial court decision allowing the sale of a major community asset (an apartment house), but granted a writ vacating the decision to the extent that it allowed the proceeds to be used for an (apparently much needed) infusion of capital to pay the debts of a business of disputed character (a floor covering business). (See id. at pp. 708-710.) The appellate court reasoned that allowing the infusion "effectively settled" the {Slip Opn. Page 6} disposition of the proceeds because if the business were one spouse's separate property, the other spouse would have nothing "more than a bare right to demand an accounting and to obtain a surcharge against any existing asset." (Id. at pp. 710-711.)

While one might construct a superficial parallel between Lee and the present case if one were inclined to equate a debt-ridden and (probably separate property) business (Lee) with a brand new investment in a mobile home park (this case), the point is that the orders attacked in Lee were the product of a full-scale hearing, not automatic orders. And even then the appellate court was still willing to approve an order allowing a sale as long as there was some reasonable assurance that the proceeds would not be dissipated.

The other case is In re Marriage of Quay (1993) 18 Cal.App.4th 961. There, the court observed that a spouse who had control over about seven million dollars in community funds from the sale of stock did violate restraining orders which included a usual-course-of-business exemption when he lent about a fifth of the money to an "illiquid" start-up company based on his friendship with that company's owner. (See id. at p. 972.) But in Quay the managing spouse was not in the "business" of turning a profit with the community funds entrusted him; by profession he was a medical doctor who founded a drug company, and after the sale of the community's stock in that company he had been entrusted with the proceeds of the sale pending trial. Hence his job was not that of maximizing return on capital or being a full-time investor -- it was simply preserving the community property pending proper disposition by the court. The results might have been different if the spouse, instead of being a scientist whose drug company had recently been bought out, was a professional venture capitalist who made his or her living from investing.

B. The Lis Pendens
So the automatic restraining orders would not prevent Management VI from selling the property. What about the notice of lis pendens that Wife filed obviously hoping to accomplish the same thing? {Slip Opn. Page 7}

The potential for a notice of lis pendens to pour sand into the smooth gears of a real estate transaction has been well remarked in the cases. (E.g., Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 651 ["'the practical effect of a recorded lis pendens is to render a defendant's property unmarketable'"]; Malcolm v. Superior Court (1981) 29 Cal.3d 518, 523, fn. 2 ["As a practical matter, the filing of a lis pendens usually clouds the title to the property and prevents its transfer until the litigation is resolved or the lis pendens is expunged."]; BGJ Associates v. Superior Court (1999) 75 Cal.App.4th 952, 967 ["Once a lis pendens is filed, it clouds the title and effectively prevents the property's transfer until the litigation is resolved or the lis pendens is expunged."].)

The authorization to file a notice of lis pendens is found in section 405.20 of the Code of Civil Procedure. In pertinent part it provides: "A party to an action who asserts a real property claim may record a notice of pendency of action in which that real property claim is alleged." (Emphasis added.)

"Real property claim" is defined in another statute of the same code, section 405.4, to mean "the cause or causes of action in a pleading which would, if meritorious, affect (a) title to, or the right to possession of, specific real property or (b) the use of an easement identified in the pleading, other than an easement obtained pursuant to statute by any regulated public utility." (Emphasis added.)

As the emphasized words show, there is no entitlement to file a notice of lis pendens without a cause of action in a pleading that affects title to specific real property.

As our Supreme Court recently explained in Kirkeby, the question of whether pleadings state a real property claim is tested by a "'demurrer-like analysis'" that centers on the adequacy of the pleading. (Kirkeby, supra, 33 Cal.4th at p. 648.) It is strictly a binary process: If you properly plead a real property claim, you can file a notice of lis pendens; if you don't, you can't. (See ibid. ["Therefore, review of an expungement order under section 405.31 is limited to whether a real property claim has been properly {Slip Opn. Page 8} pled by the claimant."]; see also 5 Miller and Starr (5th ed. 2000) § 11:140, p. 361 ["the only issue is whether the pleadings state a real property claim"].) fn. 3

In the present case, no "real property claim" was pled by Wife in her petition. No specific property was mentioned, at all. Her claim that the holding company is at least part community is not even mentioned, fn. 4 much less is there any attempt to specifically identify the property which it might arguably hold on behalf of the community. Thus a third-party would already have to be familiar with the relevant marital property estate to even guess what real property might, or might not, be affected by the proceedings initiated by the petition.

The whole idea of a notice of lis pendens is to give constructive notice of the legal proceeding affecting title to a specific piece of property. (See Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2004) ¶ 3:313, p. 3-104.) In effect, a notice of lis pendens "'republishes'" the pleadings. (Id. at ¶ 3:314, p. 3-105.) Thus a potential buyer of the property should be able to go the courthouse and look up the documents (the pleadings) in the court proceeding which might affect title or possession of the real property he or she is thinking of buying or lending money on. There is no way a buyer could do that just by looking at the petition filed by Wife here. fn. 5

Put another way, because the purpose of a lis pendens is to notify "the world" as to a claim on specific real property, it is most assuredly not enough, as Wife {Slip Opn. Page 9} appeared to argue at oral argument, merely to give notice to one's adversary. Adversaries in all likelihood already know about any claims. It is third parties -- potential buyers or moneylenders -- who need to be able to ascertain from the pleadings the nature of any claim to specific real property.

At oral argument Wife's counsel also contended that the Judicial Council petition form does not provide for the listing of specific community real estate. Au contraire. While item 5 of the standard form is a declaration regarding community assets "as currently known," subitem c of that form allows a petitioner to check a box saying "All such assets and debts are listed" and provides enough space to list property by address, or type in "see attachment" if the litigant desires to list any such real property in more detail. (The language is exactly the same on the response form as well.) So the listing of specific real property is contemplated by the standard form. It will therefore clearly not suffice for purposes of the lis pendens statute to merely check item 5c of the petition form without specifying the property on which the claim is made. fn. 6

In this proceeding Wife lays heavy emphasis on the reservation of her right to amend her petition, but that bare option alone can hardly constitute a pleading within the contemplation of the statute. A petition might never be amended, and in any event there was nothing in it to comply with section 405.4 at the time of the expungement hearing now under our review in this proceeding. A court's review on a motion to expunge a notice of lis pendens is confined to whether a claim "as pled" is a real property claim. (See Kirkeby, supra, 33 Cal.4th at p. 650.) As King Lear might have said, if nothing is pled, nothing shall come of it. {Slip Opn. Page 10}

Wife also suggests (it isn't all that clear whether she is actually arguing the point) that her serving a preliminary declaration of disclosure which did list the three properties and Management VI as community assets supported the filing of the notice of lis pendens. To the degree that she makes the argument, the answer is no. At the top of the preliminary disclosure form it says "do not file with the court." (See Fam. Code, § 2104, subd. (b) ["The preliminary declaration of disclosure shall not be filed with the court, except on court order; however, the parties shall file proof of service of the preliminary declaration of disclosure with the court."].) The document will thus, in the normal course of things, not be a part of the public record that a potential buyer of real property could check. Moreover, as we just said, the theory of a notice of lis pendens is that it republishes the pleadings to give potential buyers notice. The exchange of a preliminary declaration of disclosure confined to two divorcing spouses hardly satisfies that need.

By the same token, to the degree that Wife argues that the very existence of a preliminary declaration of disclosure mentioning real property obviates any need to actually list that real property in the petition or response, the answer is that she is confusing what the Family Code requires, at a minimum, to get a divorce case going -- in which case the usual noncommittal "not-ascertained-yet" boilerplate may do as far as the petition and response are concerned -- and what it takes to support a notice of lis pendens under the Code of Civil Procedure. The latter contemplates the use of pleadings to inform third parties of potential claims on real property; the former doesn't.

Final Judgment Doesn't Equal Loss of Court's Continuing Jurisdiction re Children

2004-10-03T17:54:00.002-07:00

In re Marriage of Kreiss (2004) , Cal.App.4th [No. B173810. Second Dist., Div. Eight. Sept. 29, 2004.]
In re Marriage of LISA and THOMAS KREISS.
THOMAS KREISS, Appellant, v. LISA KREISS, Respondent.
(Superior Court of Los Angeles County, No. BD365324, James D. Endman, Temporary Judge. fn. * )
(Opinion by Rubin, Acting P. J., with Boland, J., and Flier, J., concurring.)
COUNSEL
Trope and Trope, Thomas Paine Dunlap and Sorrell Trope for Appellant.
No appearance for Respondent. {Slip Opn. Page 2}
OPINION
RUBIN, Acting P. J.-
Thomas Kreiss appeals from the court's post-judgment order refusing to enforce a discovery stipulation. We reverse.

FACTS AND PROCEDURAL HISTORY

Thomas and Lisa Kreiss married in June 1998. They had one child, Cameron, born in June 1999. In September 2003, the trial court entered a judgment of dissolution, ending their marriage. The court awarded Thomas sole legal and physical custody of Cameron, and permitted Lisa monitored visitation several days a week. The custody order also permitted Lisa to take Cameron on two, one-week monitored vacations a year to visit her mother in Michigan.

In January 2004, Lisa wanted to take Cameron to visit her mother. Five months earlier in August 2003, Lisa had moved into a drug and alcohol rehabilitation facility and, even though she had planned to be there only 30 days, was still living there when she sought permission for the trip to Michigan. Because Thomas believed Lisa's mental health and ability to care for Cameron had deteriorated in the preceding months, he requested appointment of a professional monitor to accompany Lisa and Cameron on their vacation.

In support of the appointment, Thomas asked for discovery of Lisa's psychiatric records from UCLA Neuropsychiatric Hospital. He based his discovery request on a joint stipulation Lisa and he had signed during their divorce proceedings allowing mutual discovery of psychological evidence. Their stipulation, which the court entered as its own order, stated: "Both parties waive any privilege they may have or contend to have with respect to any mental health professionals or other therapists or medical providers with whom they have consulted or by whom they have been treated, from June of 1998 through the pendency of this action. This includes any professionals who have consulted with or treated either or both parties, together or separate, from June of 1998 through the pendency of this action . . . ." (Italics added.)
Citing the italicized language, Lisa refused to abide by the stipulation. She argued no action was pending because the final judgment of dissolution had ended the {Slip Opn. Page 3} proceedings between her and Thomas. The trial court sustained her position, finding the stipulation had expired upon entry of the judgment of dissolution. Thomas appeals from the court's order denying him discovery. fn. 1

DISCUSSION
Thomas contends In re Marriage of Armato (2001) 88 Cal.App.4th 1030 (Armato), governs this appeal. Armato involved modification of a child support order after entry of a judgment of dissolution. The validity of the modification turned on whether the matter remained "pending" after the trial court had entered a judgment of dissolution. The appellate court observed that "pendency" means different things in different circumstances; for child support, a case remained pending while the child was a dependent minor. (Id. at pp. 1043, 1045-1046.)

The trial court here knew of Armato, but concluded it applied only to child support orders. Thomas contends the trial court read Armato too narrowly in refusing to apply it to custody orders. We agree. Armato explained that a family law court retained jurisdiction, and thus a family law case remained pending, in order to let the court monitor the child's welfare. (Armato, supra, 88 Cal.App.4th at pp. 1045-1046.)

Armato's reasoning applies with equal, if not greater force, to custody orders: support orders involve money, but custody determines where, and with whom, the child lives. {Slip Opn. Page 4} Moreover, the authorities Armato relied upon drew very little, if any, distinction between support and custody. For example, Armato (id. at p. 1041) quoted Moore v. Superior Court (1928) 203 Cal. 238, 242-243, which stated, " '[T]he entry of a decree of divorce . . . , in so far as it relates to the custody, care, and maintenance of the minor children . . . is not a finality, but over whom, during their said minority as well as over their parents, the trial court retains a continuing jurisdiction which is as complete as that possessed by it prior to the entry of said final decree . . . ." (Italics omitted.)

And later in its opinion, the Armato court again quoted the California Supreme Court, stating " 'the judgment of divorce insofar as it relates to the custody and maintenance of minor children is not final. As to those matters the litigation must be regarded as still pending. . . ." (Armato, supra, at p. 1043, quoting Reynolds v. Reynolds (1943) 21 Cal.2d 580; italics omitted.)

We thus find Armato stands for the proposition that in child support and custody matters, the family court has continuing jurisdiction, and thus the matter remains pending, even after the court enters a judgment of dissolution.

DISPOSITION
The order refusing to enforce the discovery stipulation between Thomas and Lisa Kreiss is reversed. Appellant Thomas Kreiss to recover his costs on appeal.
Boland, J., and Flier, J., concurred.
FN *. Pursuant to Cal. Const., art. VI, § 21.
FN 1. After briefing ended, Lisa petitioned the trial court to modify its custody and visitation order. In support of her motion, Lisa filed the declaration of her treating psychiatrist. The declaration claims Lisa's improving mental state justifies letting her spend more time with Cameron under fewer restrictions. Thomas argues the declaration waives any claim by Lisa to continued confidentiality of her mental condition.

We grant Thomas's request that we take judicial notice of the declaration, and note in passing, without deciding, that Thomas's argument seems well taken. Be that as it may, we decide this appeal based on the argument raised in Thomas's brief.
Return to Top

The Anti-Phising Act of 2004--A Good Read.

2004-09-10T01:08:00.000-07:00

The Anti-Phishing Act of 2004: A Useful Tool Against Identity Theft
Phishing (pronounced "fishing") is a particularly pernicious type of Internet identity theft scam. So far, little has been done to stop it. But that will change if a promising new anti-phishing bill introduced by Senator Patrick Leahy.

In this column, I will explain the merits of Leahy's bill. I will also explain why legislation like this is still needed, even despite the fact that President Bush has just signed new federal identity theft legislation into law.

What Is "Phishing"? A Brief Primer
Here's how phishing works:
An Internet user receives an official-looking e-mail that purports to have been sent by a familiar business or organization - for example, an Internet service provider (ISP), bank, online payment service, or even a government agency. The user reads the message because it looks official.
The message says that the Internet user needs to "update" or "validate" his account information by clicking on a given link - or else some dire consequence, such as suspension of the user's account, may occur. The users clicks on the link.
The link takes the user to a copycat web site that looks very much like the site of the business or organization mentioned in the email. In fact, however, it is a phony site.

At the site, the user is asked to input personal and confidential information (credit card number, user name, password, and the like - for the supposed "update" or "validation" of his or her account information. But if the user does so, the user's information will actually be used for identity theft.

According to an industry consortium, the Anti-Phishing Working Group (APWG), the word "phishing" comes from an analogy: Internet fraudsters use email lures to "fish" for confidential passwords and financial data from a "sea" of Internet users.
Apparently, the term "phishing" was coined around 1996 by hackers who were stealing America On-Line Internet accounts by getting unsuspecting AOL users to divulge their passwords. The first Internet mention of phishing was reportedly on the alt.2600 hacker newsgroup in January 1996. However, the term may have been used even earlier in the printed edition of the hacker newsletter "2600".

APWG also notes "by 1996, hacked accounts were called "phish", and by 1997 phish were actually being traded between hackers as a form of currency. People would routinely trade 10 working AOL phish for a piece of hacking software that they needed."

Why the "ph"? Why not just call it "fishing" The answer is that hackers commonly replace the letter "f" with "ph" - for instance, the original form of hacking, done by phone, was known as "phreaking." Hackers used a special blue box that emitted tones to control the phone switches. Through phreaking, they could make long distance calls for free, or bill calls to someone else's phone number.

So Far, Phishing Has Grown, and Little Has Been Done to Stop It
Recently, phishing has been thriving. According to the APWG, there were 1,422 separate phishing scams in June. This was a 52 percent increase from May. (500 of these attacks targeted Citibank.) And according to Senator Leahy, during the last 12 months alone, the estimated losses have exceeded $2 billion, and the losses continue to mount.

Meanwhile, over the past few years, phishing attacks have not only grown in number, but also grown more sophisticated. Rather than stealing passwords to access the Internet for free, scam artists are now engaged in large scale identify theft. Early phishing attacks were by novices, but there is evidence now that some attacks are staged by organized criminal enterprises..

Phishing attacks now target users of online banking, payment services such as PayPal, and online e-commerce sites, such as eBay. Since August 2003, most major banks in the USA and the UK, for example, have been the targets of phishing attacks.

Educating Internet Users Is Not a Complete Solution to Phishing
Readers who are sophisticated about the Internet may assume that "phishing" may die of its own accord, as more and more Internet users get wise to the trick. And it's probably true that, as awareness of phishing grows among consumers, law enforcement and web hosting services, the incidence of phishing may shrink.

But getting rid of phishing through education alone may well be difficult to impossible. And new or technology-nave Internet users may always be easy pickings for phishers.
Even the savvy may sometimes be fooled. Phishers are getting better and better at mimicking genuine emails and websites. Where emails and websites were once suspicious-looking -- rife with misspellings or devoid of convincing corporate logos, and so on -- that is no longer always true. In fact, there is an Internet quiz designed to test a user's phishing IQ, which makes this point very well.
Indeed, sometimes there's no way - short of picking up the phone -- for users to verify whether a given e-mail came from their bank or not, beyond checking the return address (which can be forged). If a customer has no reason to think the e-mail is fraudulent in the first place, they aren't likely to spend the time tracking down someone at the bank or Internet retailer to check its authenticity. Many customers may not want to spend hours on hold or navigating a series of telephonic prompts when trying to get through to a specific company.
Even now, although phishing has existed since 1996, one in twenty Internet users may fall prey. According to a study by the APWG, by hijacking the trusted brands of well-known banks, online retailers, ISPs and credit card companies, phishers are able to convince up to 5% of recipients to respond to them.
With the cost of sending bulk email very low, that's a high return rate for the phishers. After all, one successful phishing expedition can mean they strike gold: Consumers suffer credit card fraud, identity theft, and financial loss.
Why Phishers Often Are Not Caught
Why aren't phishers caught and punished under existing fraud and theft laws? The answer is, in essence, that the fraud can be perpetrated very quickly, and afterward, the perpetrator can "vanish" into cyberspace.
The phony websites typically migrate from one server to another very rapidly -- in an effort to stay a step ahead of ISPs and law enforcement. For instance, in one scam documented by the APWG, the perpetrators operated a spoofed web page on seven different servers over a period of just 12 days. And the servers were all over the globe -- including four in Korea, two at American ISPs, and one in Uruguay.
The average phishing web site is online for only about 54 hours, according to June data from the APWG. (Some sites, however, have been able to remain online for more than two weeks before being shut down or abandoned.)
Existing Law Applies, But There Have Been Few Prosecutions
Existing federal laws do criminalize phishing - but mainly after the damage is done, when a consumer has already been defrauded as a result of the phishing. (Such laws include the laws against wire fraud, identity theft, credit card fraud, computer fraud, and a number of trade laws - and may even encompass the new federal CAN SPAM Act, which I wrote about for this site earlier.)
However, enforcement actions have been relatively few. In 2003, the Federal Trade Commission brought a civil enforcement action against a person who engaged in phishing - sending emails pretending to be from AOL that directed users to an "AOL" billing page." He used the information users entered to charge online purchases and open accounts with PayPal. Perhaps in part because of his age, the defendant in that case got off lightly. He was barred from sending spam in the future and was ordered to relinquish $3,500 of his "ill-gotten gains."
The agency charged the defendant's practices were deceptive and unfair, in violation of the FTC Act. In addition, the FTC alleged that the defendant's practices violated provisions of the Gramm-Leach-Bliley Act, which designed to protect the privacy of consumers' sensitive financial information.
More recently, the FTC and the DOJ took actions to shut down a phishing operation run by Zachary Keith Hill of Houston, Texas. The operation hijacked logos from AOL and PayPal in order to con hundreds of consumers into providing credit card and bank account numbers. DOJ obtained a criminal conviction, and Hill is awaiting sentencing.
In addition, President Bush recently signed legislation to increase penalties for identity theft-related crimes. The Identity Theft Penalty Enhancement Act, (ITPEA) establishes a new crime of "aggravated identity theft" This is defined as using a stolen identity to commit other crimes - and phishing would certainly qualify. Convictions for aggravated identity theft - including phishing -- would carry a mandatory two-year prison sentence.
With No Free Speech Question, There's No Need to Wait for Phishers to Strike
But ramping up enforcement, and increasing penalties, are not enough by themselves. The problem with the government's current approach goes deeper: It generally closing the barn door when the cows are already gone, waiting for a person to be victimized before bringing a prosecution or other enforcement action against the phisher.
So even if the savvy reader who opens a phishing email forwards it to the FTC or DOJ, enforcement won't happen until a later, nave reader opens the email and falls victim to the scam. Also, the savvy and nave reader alike may suffer a harm from phishing: a diminished trust in the Internet's system of addressing and linking. Senator Leahy has noted that trust in this system is crucial to the Internet fulfilling its potential as a medium for all manner of secure communications. Yet current law fails to protect against this harm.
Shouldn't the phisherman be punished before he lures his victim in, if possible? After all, the only purpose of his email is to commit fraud - there's no real free speech interest implicated here.

That's where Senator Leahy's Anti-Phishing Act of 2004, introduced last week, comes in. It targets the entire scam, all the way from sending the e-mail to creating fraudulent sites. And it averts free speech issues by exempting parodies and political speech (via email or on websites) from its reach - and by stipulating that the perpetrator must have the specific criminal purpose of committing a crime of fraud or identity theft.
The Act is smart because it criminalizes the bait - not just successful phishing. It makes it illegal to knowingly send out spoofed email that links to sham websites, with the intention of committing a crime. And it criminalizes the operation of the sham websites that are the locus of the wrongdoing.
If the bill were to become law, then each and every element of the scam would become a felony subject to five years in prison and/or a fine up to $250,000.
Will the Proposed Anti-Phishing Act, If Enacted, Really Work?
The Anti-Phishing Act should be enacted into law. But even if it is, it won't clear the Internet "sea" of all phishermen. So while it's valuable, it won't be the last word on this issue.

Many phishers appear to send their emails from overseas, and it may be difficult to prosecute persons who reside offshore [because of other children and . And finding quickly-vanishing websites and phishers - who may take advantage of Internet anonymity - may be time-consuming, costly, and in some cases futile.

What other anti-phishing measures might be invented. The computer industry is hard at work on new technological solutions to the problem According to one approach, anti-virus and anti-spam companies are trying to add additional filters to their programs to target these e-mails - but the challenge is to filter out only the fakes, not legitimate communications consumers have signed up to receive.
Meanwhile, security experts predict that we may be months--or years--away from implementing more extensive e-mail authentication measures. So for now, the Internet's waters still aren't entirely safe to swim in.

Please send all comments to practice@findlaw.com or give us your opinion at the Modern Practice discussion board.

IT'S FINALLY BEEN SETTLED.AND AFFIRMS EXISTING CA LAW

2004-09-09T04:57:00.000-07:00

Court rules child welfare trumps all custody issues APRIL 30, 2004
By David Kravets, Associated Press

SAN FRANCISCO - The California Supreme Court clarified yesterday the rules for when a separated parent can move out of state with his or her children.

The justices emphasized that judges are to consider the "best interests of the children" - not the parents - if there is a dispute about an out-of-state move in which one parent wants to take the children.

Until yesterday's decision 6-1, a parent with custody of the children generally could move to another state over the objections of the other parent.

Such moves were usually allowed, under a standard the court announced in 1996, because of "the paramount need for continuity and stability in custody arrangements."

But the court, while affirming that credo, said its primary concern was for the courts to fashion "a custody order that serves the best interests of the children," Justice Carlos Moreno wrote.

The case decided yesterday involves a custody dispute between Gary LaMusga and Susan Navarro, a Bay Area couple who divorced in 1995.
The couple's two sons, then 2 and 4, remained with their mother and the father had visitation rights.

Navarro, who later remarried, asked the court to alter the children's visitation schedule with their father so she could move to Ohio, where her new husband had a job offer.
A judge turned down the request, saying it would be detrimental to the children because of their emerging relationship with the father. If Navarro moved to Ohio, the judge said, her ex-husband would get custody of the boys.

LaMusga's attorney said the court's decision affirmed existing California law, which was being misapplied by the courts.
"The perceived standard that the custodial parent had an absolute right to move is not the correct standard," attorney Garrett Daily said.
"What the court is saying is that the best interest of the child is paramount."
Navarro's attorney, Tony Tanke, did not return calls seeking comment.
But during oral arguments three months ago, Tanke said the judge who blocked the move should have considered whether granting the father custody if the mother moved would be a greater harm to the children.
Justice Joyce L. Kennard, in a dissent, agreed with Tanke.
That judge, Kennard wrote, did not "give any weight to the presumption favoring continuation of the existing custodial arrangement so that the stability and continuity of the child's environment is not disrupted."
Woman's groups urged the court to allow the woman to move with the children as well.

"It is unrealistic, if not dangerous, to require custodial families to remain in the same location throughout a child's minority, especially if such confinement is at the significant cost to the custodial family's ability to start a new and potentially improved life," the California Women's Law Center wrote the justices.
Navarro has since moved to Arizona, taking her sons with her under a court agreement pending the outcome of the case.
Copyright and permissions

Article Compliments of Family Law Specialist Aaron Dishon, (949) 231-1305, www.cadivorce.com

2004-09-08T10:51:00.000-07:00

ACTIVITIES FOR HELPING CHILDREN DEAL WITH DIVORCE

University of Missouri-ColumbiaSharon Leigh, Extension AssociateJanet A. Clark, Associate State SpecialistHuman Development and Family Studies Extension

Going through the process of divorce is a challenging life transition for both parents and children.

During their parents' divorce, children often feel a wide variety of conflicting emotions. It is very important for parents to provide their children with understanding and support.
This guide provides ideas for many activities parents can do to support their children and help them work through their feelings, concerns and frustrations regarding the divorce.

DRAWING PICTURESAnger, sadness, worry, relief, confusion, guilt, embarrassment, loneliness, nervousness — these are all common emotions that children experience when their parents divorce.
Many children have difficulty expressing these emotions in words. Drawing pictures of feelings can be an easier way for children to express how they truly feel inside. This process helps children express themselves in a positive manner and aids parents in knowing what their children are thinking and feeling concerning the divorce.
After your child has drawn a picture, ask specific questions about the drawing. Encourage him or her to explain what he or she has drawn and why. Be positive and supportive.

Things to draw pictures of:

What does divorce look like?
How does divorce make you feel?
Draw pictures of various feelings, such as anger, sadness or loneliness.
Draw a picture of your family, including anyone you feel is part of your family. Write each person's name by his or her picture.
Draw a picture of the homes you live in.
If a genie could grant you one wish related to your family, what would you wish for? Draw a picture of your wish.

CONVERSATION STARTERS

Following divorce, it is important for parents and children to keep the lines of communication open. Often, children have many fears, worries and questions about the divorce.
If they feel comfortable talking with their parents about these issues, they will likely have an easier adjustment to the changes divorce brings. However, children may not always know how to express their feelings or put their questions into words.

Discuss the following questions with your children to help them talk through their feelings about the divorce. Good conversations can occur in a wide variety of settings: during dinner, in the car, at bedtime or on walks.

Possible Questions:

How has your life changed since the divorce?
Why do you think people get married?
Why do you think people get divorced?
What is a happy family like?
Who do you talk with about the divorce?
What good has come from the divorce?
What do you worry about?
What do you think your life will be like in five years?
What good qualities does your dad have? Your mom?
If you could change anything about your life, what would you make different?

COMMUNICATING FROM A DISTANCE

When one parent moves a considerable distance away, coping with the divorce often becomes more difficult for children because, in addition to the effects of the divorce, they must also adjust to not seeing that parent very often.
The following tips can help parents and children maintain strong relationships from long distances.

E-mail each other. E-mail is a fast, convenient way to keep in touch.
Start a postcard club. Everyone likes to receive mail! It only takes a few minutes to fill out a postcard. Give some stamped cards to your child, and take turns sending a card each week.
Have weekly or monthly phone dates. Set a specific time when you will talk on the phone (e.g. Wednesday evenings at 7 p.m. or the first Sunday of each month at noon). This will give both of you something to look forward to!

Create a shared journal. Buy an inexpensive notebook and write your thoughts and feelings in it. Exchange the notebook when you see each other.

Create a family Web site. This is a great way to post information and pictures to each other.
Make audio or video tape recordings. Hearing or seeing each other, whether for special occasions or just during daily activities, will keep the bond between you strong!

LETTER WRITING

Writing letters is a constructive way to deal with confusing feelings and to blow off steam.
Encourage your child to write a letter to one or both parents, expressing her feelings about the divorce. Tell her she can write whatever she feels like. Assure her that she does not have to send the letters if she does not want to.
The act of putting feelings and ideas in writing often helps to put the situation in perspective.

PARENT INFORMATION CARDS

Make information cards for you, your child and the other parent. Write information about yourself on one side of a large index card, and put information about your child's other parent on the other side.
With this card, you, your child and your child's other parent will always know how to contact each other.

Items to include:
Name
Addresses (home and work)
Phone numbers (home and work)
Days I live with this parent
Things we like to do together

THE POWER OF STORIES

READING CHILDREN'S BOOKS

Many children's books address the topic of divorce. Reading such books with your child can be a valuable way to help him work through the feelings and concerns he is facing regarding the divorce in his own life.
Children often identify with characters in books. Discussing how characters work through their challenges can give your child insight into his own situation.

WRITING STORIES

Many children write and illustrate stories. If your child enjoys this kind of activity, suggest that he write a story about divorce.
Encourage your child to be as creative as possible and to draw pictures that help illustrate the story. If your child is willing, have him share his story with you. Be sure to be positive and supportive of his work.

PERSONAL HISTORY TIME LINE

One common feeling children experience after the divorce is worry about the future. They may be concerned about what is going to happen to them and if their lives will ever be normal again.
Creating a time line can help children put the current events of their lives in perspective. It can help them see that they have experienced many good things in the past, and that they have many years ahead of them to have fun and happy times with their families.
Younger children will need help with this activity but will enjoy thinking of events for their parent to put on their time line.

Discuss your child's time line with him when he is finished. Point out that he has experienced many different events throughout life, some good and some bad. Help him to understand that he can get through the difficult time of divorce and that there are happiness and good times ahead.
Directions for a personal history time line
Draw a long horizontal line on a sheet of paper.
Label your birth at one end with a star.
Label the present time somewhere in the middle.
Mark significant events that have occurred in your life between the "birth" star and the "present" mark. Possible ideas include births of siblings, getting pets, starting school, moving, learning to read, learning to ride a bike, divorce, remarriage, joining a team or club, death of relatives and special holidays and vacations.
Mark events that you hope will happen in the future.

PLAY TOGETHER

As with drawing pictures, play is often a good way to help children express their feelings when it is difficult to talk about them. The following are some ideas of effective play activities:
Make puppets.Create finger puppets or puppets out of brown paper sacks. Have the puppets talk about their feelings.
Play games.Sometimes when people are occupied in another activity, it is easier to talk about feelings than if they just sit down to have a talk. There are even some games on the market that specifically address divorce.
Role play.Practice dealing with difficult situations that come about during divorce by acting out scenarios and discussing ways these situations can be handled positively.

LET'S EXERCISE

Engaging in physical activities together helps parents and children spend time with one another and reap the health benefits of exercise!
Exercising is a good way to get rid of tension or angry feelings in a positive way.

Good activities for parents and children to enjoy together:
swimming
biking
hiking
walking
camping
flying kites
roller blading

CREATING TWO COMFORTABLE HOMES

Your child should feel comfortable both in your home and in the home of your former spouse. Making sure that each home contains familiar items will help your child feel secure and at home in both places.
If possible, work with your child's other parent and include the following items in both households:
Favorite toys and games
Basic school supplies (paper, pencils, scissors, etc.)
Clothing (underwear, socks, pajamas, jeans, etc.)
Toiletries (toothbrush, hair brush, deodorant, etc.)
Favorite foods
Photos of all family members

TIME CAPSULE

Making a time capsule is another way of helping children recognize that the troublesome feelings surrounding the divorce won't last forever and that there are many things to look forward to in the future.

Have your child put things in the capsule that represent his life: stories, drawings, photographs, and other special treasures and reminders. Encourage your child to answer the following questions and include them in the time capsule:

Time capsule questions
Who are your friends?
Who is part of your family now?
Who will be part of your family in the future?
Where will you be living in one year? Five years?
What kinds of things do you like to do?
What would you like to learn how to do in the future?
What do you want to be when you grow up? There are many different kinds of containers that make good time capsules — large glass jars with tight lids, large manila envelopes, shoe boxes, or drawstring bags.
After your child has finished making the time capsule, help her seal it. Let her decide when she will open it. For example, it might be opened in one year, on a certain birthday, or five years from the divorce.
When the time comes to open the capsule, your child will undoubtedly have fun looking at the things she put in it, noticing how her handwriting has changed, and reading the things she wrote.

CONCLUSION

Divorce is a difficult adjustment for children and parents. All family members must deal with a wide variety of emotions and make changes in the way they live. However, despite their own struggles in the divorce process, parents still have an obligation to provide their children with love, nurturing and a sense of stability. Relationship-building activities, such as those discussed in this guide, can help parents connect with their children and better understand their children's feelings and concerns. With time, patience and creativity, children and parents can successfully work through the effects of divorce together.

ReferencesBonkowski, S. (1987). Kids are nondivorceable: A workbook for divorced parents and their children. Chicago: ACTA Publications.
Brett, D. (1988). Annie stories: A special kind of storytelling. New York: Workman Publishing Company.
Davenport, M. A., Gordy, P. L., & Miranda, N. A. (1993). Children of divorce. Milwaukee, WI: Families International, Inc.
Garigan, E., & Urbanski, M. (1991). Living with divorce: Activities to help children cope with difficult situations. Carthage, IL: Good Apple.
Hickey, E., & Dalton, E. (1994). Healing hearts: Helping children and adults recover from divorce. Carson City, NV: Gold Leaf Press.
Margolin, S. (1996). Complete group counseling program for children of divorce. West Nyack, NY: The Center for Applied Research in Education.
Copyright 2002 University of Missouri. Published by University Extension, University of Missouri-Columbia.

You may also Contact Us directlyTelephone: 949-231-1305 Email: lawyer@cadivorce.com
Consultation limited to Southern California residents or those with cases pending in Southern California. If you are out of the local calling area, we will set up an appointment time for you to call.

BUSINESS VALUATION IN DIVORCE CASES

2004-09-07T05:06:00.000-07:00

"To achieve you need thought. . .You have to know what you are doing and that's real power. -- Ayn Rand, "Meditations for Women Who Do Too Much"

The instant article is from the library of Attorney Aaron Dishon, Family Law Specialist, Orange County, and is intended for educational purposes. For his services, contact 949-231-1305.

BUSINESS VALUATION

Business valuations are prepared by a variety of professionals, including business appraisers, business brokers, financial analysts, certified public accountants and economists.
On occasion, the background of the evaluator preparing the valuation may predispose that individual to serious errors in the valuation of the business. This article will explore some of the most common errors made in business valuations in dissolution proceedings.

I: USE OF A VALUATION METHOD NOT ACCEPTED BY THE COURTS

A. Market Value Method

A common error in the valuation of businesses - particularly with appraisers who are unfamiliar with the practice of family law - is the application of the market value method to privately-held companies. Using the market value method, the appraiser simply applies to the business being valued the price-earnings ratio of a comparable public company.
For example, if the business being valued is a cosmetic company, and publicly-held cosmetic companies are selling for twenty times earnings, then the subject cosmetic business would be valued by multiplying by twenty its annual earnings. If the current market price of a publicly-held cosmetic company were $50 per share, and there were ten million shares of stock outstanding, then the market value of the company would be $500 million. If the marketplace currently expects that the company will have annual earnings of $100 million dollars, then the price-earnings ratio would be 500 to 100, or 5 to 1. Using this approach, the privately-held cosmetics company with $2 million in earnings would be valued at $10 million, by using the price-earnings ratio of 5 to 1, or five times annual earnings.

Two cases, In Re Marriage of Lotz (1981) 120 Cal.App.3d 379, 174 Cal. Rptr. 618, and In Re Marriage of Hewitson (1983) 142 CaI.App.3d 874, 191 CaI.Rptr. 392, have held that relying solely on the price-earnings ratio of publicly-traded corporations to value closely-held corporations is error. These cases have reasoned that one cannot compare the stock of a business owned by a single shareholder, responsible to no one, that cannot be easily sold, to a company that is publicly-held and easily sold. Furthermore, an owner of a private company may eliminate most of the corporate profits by paying himself a large salary; a public company will not arbitrarily eliminate profits by paying out large salaries.

B. Discounted Future Earnings Method

Another valuation method that is occasionally used is the "discounted future earnings method." This method equates the value of a company to the present discounted value of the company's expected future earnings. The evaluator, for example, may determine that the company will earn $2 million in the two years following valuation, $2.5 million in the next two years, and $3 million for each year thereafter. The present discounted value of those millions, after adding in the residual value of the business at the end of the cash flow stream, constitutes the business' value. This approach, while acceptable as a valuation method for certain businesses, should not be used in valuing a professional practice. As the court in Marriage of Fortier (1973) 34 CaI.App.3d 384, 109 CaI.Rptr. 915, held: "Since the philosophy of the community property system is that a community interest can be acquired only during the time of the marriage, it would then be inconsistent with that philosophy to assign to any community interest the value of post-marital efforts of either spouse." In Re Marriage of King (1983) 150 Cal.App.3d 304, 197 Cal. Rptr. 716, similarly rejected a valuation where the appraisal was "replete with references to post-separation efforts of husband."

II. USE OF VALUATION METHODS THAT DO NOT INCLUDE ALL OF THE

ASSETS OF THE BUSINESS

There are certain accepted formulas and rules of thumb often used in valuing a small business. An appraiser relying on a particular formula or rule of thumb should keep in mind that many formulas addressing the valuation of small businesses do not necessarily consider all of the assets of the business. For example, one formula used to value a retail auto parts business produces an indicated value for the fixed assets, the lease and the "intangibles" of the business, but it omits from the valuation the company's cash in hand, accounts receivable, prepaid expenses and all of its liabilities. Another method produces an indicated value for the company's lease and intangibles, but omits from the valuation the fixed and current assets of the company and the business' liabilities.
Similarly, the calculation of goodwill may be so complicated that it becomes the exclusive focus of attention. In one recent trial court case, an appraiser ended up using goodwill alone as the value of the business, inadvertently omitting consideration of all other assets and liabilities.

III. APPLICATION OF VALUE MULTIPLES TO THE WRONG INCOME STREAM

Certain valuation methods use income multiples to determine goodwill. In one industry, for example, goodwill may be a multiple of the company's earnings. To properly figure goodwill, however, an appraiser will need to determine whether goodwill in that industry is based on after-tax or pre-tax earnings. The difference may be significant. Imagine, for example, that a company's pre-tax earnings are $100,000 and the after-tax eamings are $70,000. The difference in the goodwill value, at five times earnings, will be $150,000 - the difference between $500,000 and $350,000 - a thirty percent error.
Similarly, in applying valuation methods that use a multiple of gross revenue, one should guard against the inadvertent use of a multiple of net income, or the use of income where cash flow instead is required.

IV. OMISSION OF MINORITY DISCOUNTS

Imagine two identical businesses, with the same sales and profits, except that Company A is owned by a single stockholder, whereas Company B is owned equally by five shareholders. A valuation of both businesses concludes that each company is worth $25 million. The stock of Company A's sole stockholder is accordingly worth $25 million. Presumably, the stock of Company B's five equal shareholders is also each worth $5 million.

The valuation assigned to Company B's shareholders' stock is wrong. The value of each of Company B's shareholders' stock must be discounted because each stockholder has only a minority interest in the company. The Company B shareholder cannot dictate company policy (unlike the sole stockholder of Company A) and he cannot control profits (as can Company A's stockholder). To illustrate this, assume that the sole stockholder of Company A sold his shares to a new owner on the express condition that the new owner could not change sales policies, production methods, personnel or purchasing practices. The new buyer would technically own Company A, but he would have no real control over it. Presumably, he would pay much less for the stock than if he were able to run the company however he chose. The new owner is simply a passive investor; if he had true control over the company, he would be an active owner. A passive investor will pay less because he has no control over his investment.

V. FAILURE TO CONSIDER UNIQUE EVENTS

In calculating goodwill, a common practice is to average the more recent years' income and expenses to arrive at an average net income, which then forms the basis for a goodwill calculation. In calculating goodwill, it is usually appropriate to eliminate all atypical income and expense for the company, because the purpose of the valuation is to determine the value of the business without the effect of unusual events which might cause temporary fluctuations in the market for the goods or services.

A prospective buyer, for example, would probably ignore unusual occurrences such as earthquakes, floods and fire in determining business value. The buyer will want to know the value of the business under normal circumstances. The appraiser must therefore eliminate the effects of unusual, non-recurring income or losses from the company's financial statements. For example, the costs of nonrecurring litigation should be "normalized" by the appraiser, as should the financial effects of an earthquake. The appraiser should determine if anything unusual has happened during the years being considered, and the necessary adjustments should be made.

VI. FAILURE TO ADJUST GOODWILL TO RISK FACTORS

Goodwill is usually found where a business both generates and appears likely to continue generating income which exceeds the norm for that type of business. One commonly-used goodwill calculation incorporates at least two steps - a determination of the business' excess income and an assessment of whether the excess income is likely to continue. An appraiser may be valuing an accounting or legal practice using methods that are perfectly appropriate to the valuation of those practices, but the result will be flawed if those practices are unusual in nature.

For example, a law practice may be highly specialized with a unique referral source. A law firm focused primarily on asbestos litigation, for example, which was at one time a lucrative area of practice, typifies the problem. The likelihood of continued future earning at previous levels in such a firm would be much different from the earnings of a law firm with a wide area of practice which is not dependent on a single or atypical referral source. A manufacturer may be very successful, and his product may be similar to others in the industry, but the success may be dependent on a patent that is about to expire. A retail store may be very successful, but the neighborhood may be full of people who work at the nearby General Motors plant, which has just announced it is about to close. A local hardware store may be thriving, but a hardware chain may be building a massive store nearby.

Furthermore, using the prior example, it is not even necessary that the General Motors plant announce a closing to affect the valuation of the retail store. Even if no such announcement were made, one must at least consider that the success of the retail business may depend on the General Motor plant's continued operation. The risk factor for the retail business must consider the risk factor of that General Motors plant.

VII. OMISSION OF CERTAIN ASSETS OR LIABILITIES

Certain assets and liabilities are easily overlooked because of their nature. One such asset is "work in progress." Work in progress is a form of accounts receivable for services rendered, for which no invoices have yet been issued. For certain businesses, work in progress can form a substantial portion of the accounts receivable. For example, a construction company typically bills only when a significant part of the job is completed. The value of those unbilled services needs to be reflected as an asset of the business.
Another asset to be considered is the value of a lease. A below-market lease may be a considerable asset and should likewise be reflected in assessing the business' value.

VIII. OVERLY THEORETICAL ANALYSES

Some business appraisals are prepared by experts who are theoretically inclined. Their appraisals may be based upon complex theoretical assumptions and analyses. When the same business is valued by a business broker, however, the broker may give a much different value. The business broker operates in the real world, and he knows how that business will be sold on the market. Complex theoretical analysis is rarely the basis for determining real world value. An appraisal based on theoretical analysis is often out of touch with reality.

IX. BUY-SELL AGREEMENTS

A buy-sell agreement may form part of a firm's partnership agreement, governing the terms of a partner's buy-out if the partner leaves or dies or a new partner wants in. A buy-sell agreement may also be used to determine the value for the transfer of shares in a stockholders agreement. In family law valuations, depending on the circumstances, it is sometimes appropriate to use buy-sell agreements. In the valuation of professional practices, for example, the courts have held that a buy-sell agreement may be considered, but will not be determinative. Marriage of Slater (1979) 100 CaI.App.3d 241, 160 CaI.Rptr. 686. A recent case, Marriage of Nichols (1994) 27 CaI.App.4th 661,33 CaI.Rptr.2d 13, concluded that it was not an abuse of discretion for the trial court to value the husband's shareholder interest in his law firm based on the formula set forth in his firm's stock purchase agreement.

The Nichols stock purchase agreement excluded the value of accounts receivable and work in progress although in Marriage of Lopez (1974) 38 Cal.App.3d 93, 113 Cal. Rptr. 237, the court held that these should be included in valuing a law practice interest. The court in Nichols, supra, found that the stock purchase agreement, which the firm had consistently adhered to with every shareholder who had retired or left, was an appropriate valuation method in this particular case. The Nichols court recognized that the law firm at issue was a large firm where the shareholder did not share in the firm's earnings, but was compensated as an employee based upon his own productivity and length of service to the firm. In assessing whether a buy-sell agreement should be determinative, the Nichols Court set forth the following criteria:

The proximity of the date of the buy-sell agreement to the date of separation to ensure that the agreement was not entered into in contemplation of marital dissolution;
The existence of an independent motive for entering into the buy-sell agreement, such as the firm's desire to protect all partners from the possible effects of a partnership dissolution; and the similarity of the value resulting from the agreement's purchase price formula to the value produced by other approaches.

Mrs. Nichols was, however, awarded an interest in her husband's professional goodwill. The court reasoned that the stock purchase agreement did not determine the lawyer's goodwill, and that Mr. Nichols had personal goodwill whether he remained with the firm or not. In effect, the court said, goodwill cannot be eliminated merely by a recital in a buy-sell agreement. "It is a community asset because husband's experience, reputation and skill, which enabled him to command this high income, were developed while he was married to wife. It directly creates excess income for husband whether he stays with his firm or strikes out on his own" Marriage of Fenton (1982) 134 CaI.App.3d 451,463, 184 CaI.Rptr. 597. Because Nichols upheld a buy-sell agreement as to accounts receivable and work in progress, but not as to goodwill, it appears that trial courts will have to examine carefully, on a case-by-case basis, the facts behind individual buy-sell agreements. X.

CONCLUSION

Business appraisals require close attention both to theoretical and practical considerations. Attorneys and clients typically want a speedy, Iow-cost appraisal, but that approach invites errors such as the ones described above. In appraising businesses in family law actions, the appraiser should keep in mind these possible errors and avoid such pitfalls. By Mark Kohn, CPA, CVA

You may also Contact Us directlyTelephone: 949-231-1305 Email: lawyer@cadivorce.com
Consultation limited to Southern California residents or those with cases pending in Southern California. If you are out of the local calling area, we will set up an appointment time for you to call.

UNUSUAL PROPERTY IN COMMUNITY PROPERTY RIGHTS

2004-08-31T05:53:00.000-07:00

LET ME NOTICE TODAY how many times -- I use work -- as an excuse for my inhuman behavior." -- May Sarton, "Meditations For Women Who Do Too Much"

WRITTEN BY MORENO VALLEY FAMILY LAW ATTORNEY DAVID BLAISDELL

The following unusual property are Intellectual Property Rights that may possess a Community Property Interest when assessing Community Property Interests in a dissolution of marriage action:

Awards and judgments, blueprints, brand names, broadcast license, buy-sell agreements, chemical formulations, computer software, computerized databases, cooperative agreements, customer lists, development rights, distribution rights, drilling right, easements, employment contracts, FCC rights, film libraries, food flavorings and recipes, franchise agreements, historical documents, joint ventures, laboratory notebooks, landing rights, leasehold interests, manuscripts, marketing and promotional materials, mineral rights, non-competition agreements, open orders, permits, prizes and awards, product designs, proprietary products and processes, regulatory approvals, retail shelf space, royalty agreements, shareholder agreements, trade secrets, use rights, airline frequent flyer miles, club memberships (initial fees and right to continue as member), fishing permits, liquor or wine, model trains, prepaid taxes, season tickets to sporting events or other entertainment, severance pay or golden parachutes, sick leave, Social Security replacement plans, phone number, vacation or annual leave, web domain names, work in progress and others.

These forms of unsual property that may represent a Community Property Interest, warrant a review of Intellectual Property relating to Copyrights, Patents, Trademarks, Trade Secrets and Infringement issues.