Assignment for Tuesday

We will discuss these seven cases in class on Tuesday.

Three Seventy Leasing Corp 31
Botticello 41
Humble Oil 66
Hoover 68
You have already done the questionnaires for these cases (or should have.  If you have not done them yet, turn them in now).
Partnership cases.
Martin v. Payton 137
Putnam 157
Page v. Page 166
Your case questionnaires for these three cases must be uploaded to dropbox by 6:30pm Tuesday.
Do the short essay as well.  We will begin the class by discussing the short essay.  The short essay question is in dropbox on D2L.

What is an employee under California law?

We are going to spend Tuesday discussing agency law.  The issue comes up in two contexts:  1.  Is a principal liable for the contract entered into by his (or its) agent?  Answer, yes if the agent had authority.  2.  Is a principal liable for the torts of his agents?  Answer, yes if the agent is an employee, maybe (although probably not) if the agent is an independent contractor.

So what is an employee?  That could easily be an entire semester.  The question necessarily includes what is an employer?

The California Supreme Court has recently given us 85 pages of explanation (and history of the issue) of how to figure out whether a person is an employee or independent contractor.

In Dynamex Operations West, Inc., v. Superior Court, 4 Cal.5th 903 (2018), the Supreme Court summarized it with a three part test:

1. Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?
2. Does the worker perform work that is outside the usual course of the hiring entity’s business?
3. Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?

It concluded that it is the employer’s burden to establish all three.  “The hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order.”

 

 

Is wife liable for hubby’s debts?

NO!  Students (and even most lawyers) are always surprised when I say that my wife is absolutely not liable for my debts – and certainly not because she is my wife.

Property that she and I own may be liable for my debts (i.e., is probably liable for my debts).

A few California Family Code sections:

910.

(a) *** the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.

(b) “During marriage” for purposes of this section does not include the period after the date of separation ***.

911.

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Apple stock to split

A student last week mentioned that he heard that Apple stock was going to “split.”  The LA Times confirmed that a day or two ago.  The split will be 4 to 1.  That means the board of directors has decided to “give” each shareholder three more shares for every share the shareholder already has.  So there is about 4 billion shares outstanding as of last Tuesday, there will suddenly be 16 billion.  Since the total value of the company does not go up, the cap value will still be $1.9 trillion.  The value of each share therefore should drop from $451 to $113.  Why would the company do that, the board of directors do that?  It brings smaller investors to the table.  Shares are generally sold on the NY Stock exchange in lots of 100.  There are more people who can afford $11,300 for 100 shares than $45,100.  What good does that do Apple?  Does it help them sell more iPhones?  No, but if Apple decides to sell new shares, there will be more interested buyers which will make the new shares easier to sell.  If Apple wants to raise $100 million, i.e., the board of directors decides to raise $100 million by selling new shares (885,000 new shares), they are easier to sell if there are more interested buyers.

Case to read for tomorrow

City of Chicago, Illinois v. Fulton,  926 F.3d 916  (7th Cir 2019)

Issue:   Does the City of Chicago violate the automatic stay when it continues to “hold” a debtor’s vehicle after the filing of a chapter 13 petition?

Holding:   Yes.

According to the 7th Circuit, “In this consolidated appeal of four Chapter 13 bankruptcies, we consider whether the City of Chicago may ignore the Bankruptcy Code’s automatic stay and continue to hold a debtor’s vehicle until the debtor pays her outstanding parking tickets.”  A previous 7th Circuit case called Thompson required turnover on these same basic facts and the 7th Circuit refused to overturn it.  The Thompson case ruled that holding onto an asset is exercising control which is an “act” which violates the stay.  It held that turnover is compulsory “under a plain reading of §§ 363(e) and 542(a) and the Supreme Court’s decision in Whiting Pools.”  363(e) requires the court to “prohibit or condition such use . . . [of property of the estate] as is necessary to provide adequate protection of such interest” (meaning turnover is required?).    542(a) says “a creditor in possession of property of the estate ‘shall deliver [it] to the trustee.'”

The City argued that it needed to retain possession “to prevent the loss or destruction of the vehicles” but it apparently offered no evidence that giving the vehicle back would result in loss or destruction.  Further it could and should “seek protection on an expedited basis” under 363(e).  The City argued that it had a lien perfected by possession and that § 362(b)(3) excepted it from compliance, i.e., the stay does not apply to acts “to continue the perfection of” its lien.  The court responded that there are other ways to perfect liens and in any event, “the City’s possessory lien is not destroyed by its involuntary loss of possession due to forced compliance with the Bankruptcy Code’s automatic stay.”  The City also argued that this is an act to enforce its “police or regulatory power.”  The court chided the City saying this is “an exercise of “revenue collection” rather than police power.

The court concluded, “the City needs to satisfy the debts owed to it through the bankruptcy process, as do all other creditors.”

Note:  The court says that this ruling is in line with the 9th Circuit in California Employment Development Department v. Taxel 98 F.3d 1147 (9th Cir. 1996).

The City argued to the Supreme Court that this ruling ignores its ruling in Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995)(bank may put a “temporary” administrative freeze on the debtor’s bank account upon learning of the bankruptcy filing without violating the automatic stay under Section 362(a)).  But this case is not discussed anywhere in the 7th Circuit opinion.

Need a volunteer to defend a bankruptcy debtor in a non-dischargeability action

I have agreed to represent a debtor – pro bono – who has been sued to have the debt declared non-dischargeable.  The guy was in an altercation and was arrested.  The “victim’s” finger was broken.  My guy has his side of the story.  The “victim” has demanded $5 million.

Anyway I took the case as part of the UWLA Bankruptcy Litigation Clinic.  This is a great case for a student or new atty to get involved in.  You will work side by side with me.  You will be “second chair” at trial.  The legal issues are not complex but it will likely go to trial downtown – several months from now.  In the meantime there will be discovery, depositions etc.  If you have taken a bankruptcy course, but are not yet an attorney, you can be certified by the bankruptcy court and actually argue some portion of the case.

If you are interested send me an email at jhayes@rhmfirm.com.

You must be prepared to spend a few hours a week on the case for the next several months.  There will likely be weeks of no work.  This will go to trial.    Let me know.

Summary of the Duties of the Board of Directors

This is such a great summary of the duties of the board of directors from three attorneys at Sidley Austin LLP – Claire H. HollandHolly J.Gregory and Rebecca Grapsas:

Responsibilities of the board (supervisory)

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The primary legal responsibility of the board is to direct the business and affairs of the corporation (see DGCL, section 141). While the functions of a board are not specified by statute, it is generally understood, as noted in the ALI’s Principles of Corporate Governance and other codes of best practice, that board functions typically include:

  • selecting, evaluating, fixing the compensation of and, where appropriate, replacing the CEO and other members of senior management;
  • developing, approving and implementing succession plans for the CEO and senior executives;
  • overseeing management to ensure that the corporation’s business is being run properly;
  • reviewing and, where appropriate, approving the corporation’s financial objectives and major corporate plans, strategies and actions;
  • understanding the corporation’s risk profile and reviewing and overseeing the corporation’s management of risks;
  • reviewing and approving major changes in the auditing and accounting principles and practices to be used in preparing the corporation’s financial statements;
  • establishing and monitoring effective systems for receiving and reporting information about the corporation’s compliance with its legal and ethical obligations, and articulating expectations and standards related to corporate culture and the ‘tone at the top’;
  • understanding the corporation’s financial statements and monitoring the adequacy of its financial and other internal controls, as well as its disclosure controls and procedures;
  • evaluating and approving major transactions such as mergers, acquisitions, significant expenditures and the disposition of major assets;
  • providing advice and counsel to senior management;
  • reviewing the process for providing adequate and timely financial and operational information to management, directors and shareholders;
  • establishing the composition of the board and its committees, board succession planning and determining governance practices;
  • retaining independent advisers to assist the board and committees;
  • assessing the effectiveness of the board, its committees or individual directors; and
  • performing such other functions as are necessary.

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