California Business Litigation Blog

The website Yelp has been accused of trying to extort money from companies. The company is a customer review website and the class action lawsuit filed in court states that Yelp is extorting companies through high pressure sales tactics. The lawsuit, filed in Los Angeles federal court, alleges unfair business practices.

The lawsuit states that employees from Yelp contact the businesses that are listed on the website and request or demand that the company makes monthly payments to Yelp in order to have the negative reviews removed or modified. Yelp allows users to post favorable or negative customer reviews on the website about local businesses.

The law firms filing suit state that many of the businesses that have reviews from customers and are contacted by Yelp are small companies. The companies feel they have no choice to pay in order to protect further harm on their businesses.

However, the question that the lawsuit needs to answer is whether or not Yelp is offering to run a positive advertisement for the company above the negative reviews or if the company is offering to remove those reviews for a payment. If it is the second, this could be considered extortion since the payoffs to Yelp prevent the website from doing harm to the business.

The lawsuit is based on the California Unfair Competition Law, which dates to 1933 and is a broad law covering a large number of unfair business practices including any type of untrue or misleading advertising.

Cats and Dogs Animal Hospital is the plaintiff in the case. The veterinary hospital asked Yelp to remove false and defamatory review from the listings at the website. The website reviewed to remove the review, but the company’s sale representative called the veterinary hospital numerous times demanding that the hospital pay a hefty $300 payment in order to have the negative reviews hidden or removed from the website.

According to the lawsuit filed, a sales person contacted the hospital and stated that if a one year advertising subscription was purchased that the website would “Hide negative reviews on the Cats and Dogs Yelp.com listing page, or place them lower on the listing page.”

Further, it promised the animal hospital that if it purchased this type of subscription, no negative ads would appear in Google or other search engines. The hospital would also be able to choose a tagline and choose the order in which customer reviews appeared on Yelp.com.

Although the hospital is named the plaintiff in the case, the law firm handling the lawsuit has heard from numerous other small business owners who claim to have experienced the same type of extortion.

Vince Sollitto, vice president of Yelp states that the allegations are false and that many businesses advertise on Yelp when they have negative and positive reviews on the site.
Yelp is one of the largest customer review websites in the world. Each month more than 26 million people read and use the user generated content. The website contains more than eight million reviews.

On a related note, a recent article on TechCrunch.com states that Yelp owners walked away from a Google buyout offer worth over half a Billion dollars in December 2009.

Continue reading "Lawsuit Alleges Yelp Extorting Money from Business Owners" »

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Posted In: Business Litigation , Contract Litigation , False Advertising , Unfair Competition

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The New York State's highest court declined to hear the motion of television anchor Dan Rather, who has tried to unsuccessfully sue his former employer, CBS for $70 million. He alleges that the company was in breach of his contract and made accusations of fraud against the company. The state appellate court dismissed the case in September, but the Court of Appeals denied the motion without comment.

The ruling from the appellate court states that the pay or play clause in his contract allowed the network to take the actions they did. Further, the ruling stated that Rather failed to show support for his claims that CBS has hurt his future earning potential in the case.

Rather was with the company for 44 years. This motion was the final move the newsman could make in the case, which proved to be an expensive and ugly battle. Rather sued CBS first in 2007, when he stated that his treatment from the company in the aftermath of a controversial report issued about George W Bush's service in the Texas Air National Guard was released.

The lawsuit stems from a 60 Minutes II piece in which Rather reported that Bush received preferential treatment during his Vietnam era service in the National Guard. Rather states that there were documents obtained by CBS written by Bush's commanding officer at the time. However, the validity of the documents came under scrutiny and the network conceded that the documents could not be authenticated.

After he filed suit, some of his colleagues publically denounced him saying that he trying to deflect some of the blame for allowing the story, which had not been properly vetted, onto the news program. However, the lawsuit, claims Rather, is meant to take on political interests and business interests that he believes are affecting the news organizations.

Rather was quoted as saying the following in regards to the lawsuit and his claims, "I believed then and I believe now that its' important the public understand how much influence in collusion big government and big business can have in affecting how the news is handled." The remarks were made on Tuesday after his motion was declined.

CBS declined to comment on the ruling, stating that they will let Rather have the final word.
After the airing of the controversial piece, Rather says that he was pushed out of the anchor chair and then placed in the news division until he was prematurely released. He believes that the actions of the network damaged his reputation and made it difficult for the anchor to find work after that point.

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Posted In: Business Litigation , Contract Litigation , Employment Law

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In a ruling on Dec 29, former Deloitte partner, Thomas Flanagan, from Chicago, was found liable for violating the accounting firm's conflict of interest policies. These policies extend for stock and options trading of the firm's clients. Clients of the company include Motorola Corp, Allstate Corp and Walgreen Co. Flanagan who was a 30 year employee of the company, was also found to have concealed these trades from Deloitte.

A further hearing has been set to determine the extent of the penalty held against Flanagan, but reports indicate that the company is seeking monetary damages which may include Flanagan's retirement benefits. Flanagan has not made a statement regarding the case. He has said that some of his investments were allowed by the SEC, such as those in which he did not have specific interactions with client's or those clients that were not from the Chicago office where he was employed.

Flanagan, a senior partner and Vice Chairman for the company embarrassed the company and left the company vulnerable to a variety of liability exposures from clients. In addition, the company is now shaken because of the additional regulatory scrutiny about the independence of the auditor. Within the accounting industry, there are strict rules about trading simply because employees have so much access to the private information of their clients that they could affect the pricing of the client's securities. Numerous times during the trial, Flanagan invoked his Fifth Amendment rights.

Many of the company's clients have had to do their own investigation to determine the involvement of Flanagan with their individual accounts. Walgreens, USG Corp and Allstate have conducted investigation that have found that Flanagan did not have involvement with their specific audits.

The company, Deloitte, says that Flanagan made investments into the company's audit clients and others more than 300 times between the period of 2001 to 2008. In some of those transactions, evidence showed that Deloitte was trading on non public information which is illegal. As of yet, the US Securities and Exchange Commission has not brought charges in the case.

Flanagan's involvement in such transactions was detailed numerous times in the case. One instance poses Flanagan attending a meeting of Allstate's audit committee in which a draft of the company's second quarter earnings statement was circulated. The company planned to announce significant increases in full year earnings at that time. This occurred on July 17, 2006. The following day, Flanagan purchased call options in Allstate stock. He later sold them on July 20th, the day after Allstate's earnings went public and the price of the stock purchased rose considerably. The stock saw an 85 percent gain in those days.

Flanagan is also charged with concealing his holdings from the company. The company requires individuals to report investments they or their immediate families own. In numerous instances, Flanagan would record unauthorized holdings into the company's computer tracking but would go back later the same day to correct such entries indicating that he had disposed of holdings when in fact he had not.

According to reports, Deloitte did not know of Flanagan’s wrongdoing until August of 2008. At that time, the SEC contacted Deloitte in regards to an audit for Walgreens in 2007. Flanagan purchased stock in Option Care Inc a week before Walgreens announced that it would buy the company in July of 2007. Flanagan did serve as an advisory partner on that audit. Flanagan resigned from his position with Deloitte as soon as the company contacted him regarding the SEC inquiry.

Continue reading "Deloitte Wins Lawsuit...Former Partner Loses" »

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Posted In: Business Litigation , Contract Litigation , Employment Law

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The California Science Center in Los Angeles canceled its screening of the documentary, "Darwin's Dilemma: The Mystery of the Cambrian Fossil Record." The documentary promotes the theory of intelligent design rather than the theory of evolution for the creation of human beings. The documentary specifically criticizes Charles Darwin's theory of evolution. Moreover, because of this cancelation, the museum is being sued.

The American Freedom Alliance says it has no position on intelligent design but does say that the filing of the lawsuit against the science center is necessary since the center is stifling debate on the topic by canceling it. The organization brought the lawsuit against the California Science Center in October, in Los Angeles Superior Court.

The science center was set to show the program in October of 2009. However, it pulls it after being pressured to do so by the Smithsonian and other scientific academies.

This is not the first time that this topic has come up in a court of law. In 2005, for example, the case of Kitzmiller vs. Dover Area School District resulted in a federal judge issuing a ruling that public school classes cannot present intelligent design as an argument for the creation of humans because it is a form of Creationism. It also occurred in 2005, when The Smithsonian approved auditorium space in its National Museum of Natural History to screen another intelligent design type of documentary. The scientific community opposed this, but The Smithsonian was unable to back out of the previously signed contract. It did refund the rental fee for the space and publically stated it was not endorsing the screening of the documentary.

The pretrial hearing in this case is scheduled for January 26th, 2010. The American Freedom Alliance claims that the cancelation of the screening was done under a false pretext and therefore that the science center committed contract fraud. It is seeking punitive damages.

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Posted In: Contract Litigation , Education , Education Law , Freedom of Speech

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A recent Associated Press article reveals that every lawsuit filed or threatened under a specific California law can trace back to two lawyers who worked together in the writing of that statute. The statute is in regards to electing more minorities to office. So far, there have been about $4.3 million in settlements made under this law.

Under this law, lawyers are able to sue and win judgments easier in cases from claims that minorities were shut out of local elections. In addition, the lawsuit shields attorneys from any type of liability if the claims are tossed out of court.

Seattle law professor Joaquin Avila drafted the law. Robert Rubin, a legal director for the Lawyers Committee for Civil Rights offered advice for the drafting. Both, along with other attorneys working alongside these two, have been able to bill local governments more than $4.3 million in three cases that have settled. There are two additional lawsuits pending. More so, dozens of additional cities and school boards received warning that they too could be sued under the California Voting Rights Act of 2002. Each of these cases has been initiated by Rubin's committee or by Avila.

Although it may seem unjust, there is nothing illegal occurring when an attorney profits from a law they helped to author and state lawmakers approved. What is unique in this situation is that after seven years, related legal efforts continue to be extremely narrow in focus. Avila testified in 2002 that he expected other attorneys would take on cases due to these favorable incentives placed into the law.

According to Avila and Rubin, their roles should not overshadow the importance of these cases, as they work to end injustice at the polls. The number of minority officeholders was on the rise prior to the law being in place, and these two claim the lawyers are using the statute to shake down local governments.

Under the law, state courts may create smaller election districts that favor minority candidates. This was necessary, they claim, because the more commonly used "at large" elections allowed candidates to run across the entire district. Avila says this method leads to discrimination since the majority group will win out.

According to several communities in California, there are no complaints about voter discrimination until these attorneys stepped forward. Critics say the law is flawed. They believe that even when there is no discrimination, cash strapped communities are nearly forced to settle the lawsuit.

Many believe that the law and the settlements do nothing to improve the discrimination. Avila, who charges $725 an hour for services, would not disclose his earnings from the lawsuit. Rubin earns $700 an hour. In some school districts, the cost of such settlements is resulting in the inability of schools to provide textbooks to students.

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Posted In: Business Litigation , Contract Litigation , Education , Education Law , School District Law

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Facebook, the social networking website has won an award of $711 million in damages. The damages awarded from Sanford Wallace who is a prolific spammer and social network scammer, reports state. The man was banned from accessing Facebook as well, as punishment for bombarding Facebook users with spam. The lawsuit, filed by Facebook in early 2009, names Wallace, Adam Arzoomanian and Scott Shaw, all accused of accessing accounts of users without permission to do so and sending spam emails and making posts to public message walls of users.

Facebook has a long list of victories over spammers, including one in 2008 for some $873 million against Adam Guerbuez and Atlantis Blue Capital. In this ruling, the three men violated the Computer Fraud and Abuse Act, the California Anti Phishing Act and the Controlling the Assault of Non Solicited Pornography and Marketing Act.

However, experts believe that Facebook will not see the judgement awarded. In fact, Wallace and his partner, Walter Rines, were fined some $230 million in May of 2008 in a case involving MySpace. In that case, the accused tricked users into providing login information through phishing scams. Then, as they accessed the accounts of users, they sent more than 730,000 messages with links to gambling, porn and ringtone websites. The two made more than half a million though their MySpace violations only.

It is unlikely that Facebook will receive much of the judgment, but that is not what Facebook is hoping for. They are using the case as a ploy to show other pro spammers what can happen to them for violating the rules. However, experts state that pro spammers already know what to expect and they do not see it as a deterrent. In fact, whenever these pros lose, they simply disappear for some time and emerge as a different entity somewhere else, rarely paying any of the fees they owe.

Ninety-Five percent of all email is spam, says Jamie De Guerre, who is chief technology officer at Cloudmark. De Guerre also stated that while the industry is doing well to fight spam, the spammers are doing well to find new ways to continue the process. The problem, and perhaps the solution, lies in the hands of consumers and legitimate organizations, who may wish to take more conservative communication efforts, such as avoiding any type of URLs in email communications. The problem is worldwide, and is even more common in other countries. In Russia, for example, even legitimate, respectable companies use spam.

Continue reading "Facebook Unlikely to Collect $711 Million Spam Award" »

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Posted In: Business Litigation , Contract Litigation , Intellectual Property , Internet

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Microsoft has returned virtually all Sidekick user data, including contact information and other personal data to users. Nevertheless, there are likely to be pending lawsuits filed against the company.

On Saturday, Microsoft informed users that it had lost all data and backup systems in a system wide crash. The company now says that it has restored that data, but it appeared to be weary of issuing such a message early on.

Microsoft vice president Roz Ho provided an open letter to customers of the Sidekick stating that only a small number of users are still without their personal data. However, such a warning may not be enough to keep customers. In recent conversations at T-Mobile's website, talk was about leaving the company. Users seemed to be interested in filing a class action lawsuit against Sidekick and owner Microsoft.

More so, there was evidence that some of the messages posted on the website from Sidekick users unhappy with the company were deleted or moved in some fashion after mention of the lawsuit.

The social media outlets are teaming with information. On Twitter, the micro blogging website, mention of Sidekick lawsuits was the talk of the day, including mention of several pending lawsuits in California and in Washington. One such case filed in California, was filed by a mother whose teen daughter lost photos and song lyrics in the loss of data.

Another lawsuit was filed in Atlanta, by a woman, Maureen Thompson, says that the companies she named (including T-Mobile, Microsoft and Danger the manufacturer of the device) were negligent and failed to meet advertised promises to customers. Attorney John Jablonski, speaking about the case, said that it was likely that such cases would lose merit, since the data was restored.

T-Mobile employees are not speaking of the case and claim they have no comment in regards to the online complaints from customers. The company does seem to have kept customers informed and on Monday, temporarily halted all sales of the Sidekick smartphones. In addition, the company offered affected customers one month free service from the company, plus a $100 T Mobile gift card.

It is not clear how many Sidekick users have filed or plan to file lawsuits against the company, nor how many people may still be affected by a loss of data. You may view the California lawsuit HERE, compliments of SeattlePI.com.

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Posted In: Business Litigation , Contract Litigation , False Advertising , Internet

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The Kindle is an eBook reader heavily marketed by the company. While it is a new device and one that is selling well, the company promoting it, Amazon.com, has faced a lawsuit on behalf of the product already. The company has settled a lawsuit brought on by the deletion of two eBooks, George Orwell's Animal Farm and 1984.

The company deleted the material for the eBook reader's accounts, who had paid for them, and refunded the customer's cost. Amazon cited that there were problems regarding the copyright use of the material. In September, Amazon announced that it would replace the deleted eBooks for anyone who purchased them, and that they would offer $30 gift certificates for those who did not wish to receive the eBooks again. The Kindle also allows for users to place notations within the eBooks for their personal use. Amazon also stated these would be restored.

Just this month, Amazon also has announced that it will settle a lawsuit brought on by two Kindle users who saw deletions of these materials. The company is paying $150,000 to a Michigan high school student named Justin Gawronski and a man named Tony Bruguier. Their attorney has stated that the two will not see any of the funds, but will instead donate the money to charity.

The settlement was filed in the U.S. District Court in Seattle on September 25th. It was a closed settlement and no further details were made available. The attorney for Gawronski and Bruguier was quoted as saying that he believes Amazon has learned an important lesson from this lawsuit.

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Posted In: Business Litigation , Contract Litigation , False Advertising , Intellectual Property

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In Santa Monica, California, consumers have filed a complaint with the Los Angeles Superior Court requesting that the courts stop DIRECTV from pulling early cancellation penalty fees out of bank accounts or charging them to credit cards without the consumer's knowledge.

Fees up of to $480 are being withdrawn from customer accounts without their permission, the injunction claims. Consumer accounts have been overdrawn by the action, while others have experienced bounced checks and over the limit fees. As a result, credit reports may have been harmed. The injunction hopes to stop the withdrawal of funds from current and previous DIRECTV customers until a court can determine if the action is lawful.

The company charges an early cancellation penalty for customers who terminate their agreements before the term commitment period has been met. This period is typically 18 to 24 months. The charge applies to anyone who cancels service during this period of time, no matter what the cancellation reason is. Harvey Rosenfield who is the founder of nonprofit Consumer Watchdog and Litigation Director Pamela Pressley are heading the case on behalf of consumers. They claim that customers have no notice of the early cancellation penalty prior to their accounts being charged. Jennifer Steinberg, another attorney working the case calls the actions of the company "unauthorized seizure of people's money" and claims the company has refused to stop collecting fees like this.

Numerous people across the country have filed similar cases in regards to the cancellation charges applied to customer accounts without prior warning and without the ability to dispute the charge. In most cases, the customers did not know of the charge until the funds were already taken from their accounts.

DIRECTV has sought to block the state case, since another federal case is currently heard. Last July, Los Angeles Superior Court Judge Emilie H. Elias permitted the federal case to proceed. That case has been delayed at DIRECTV's behest.

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Two men accused of money laundering and stealing thousands of dollars from hurricane Katrina victims have turned themselves in to authorities. Steve Slepcevic and Matthew Todd, former business partners, are accused of stealing funds from these victims. A third man is likely to turn himself in.

The men are accused of stealing more than $320,000 from victims. Slepcevic is the founder of Paramount Disaster Recovery Inc. Although he eluded authorities for days, he turned himself in, in a 7Series BMW. Todd was arrested in California and is awaiting extradition to Louisiana. A third man, Michael Mekeel, has agreed to turn himself in.

The men are believed to have forged checks and steal insurance proceeds from the hurricane victims. Slepcevic is also being charged with four counts of money laundering. The men were arrested after a Times investigation showed numerous fraud complaints.

The third man, Mekeel, claims he worked as a subcontractor for Paramount and never received payment. He also claims he reported the company to the FBI and warned clients about the company.

In one claim against Slepcevic, an affidavit states that he stole insurance proceeds, threw a lavish party and then purchased a $1.6 million home in Redondo Beach, all within just six months of Hurricane Katrina. Two homeowners filed the case in Louisiana and two hotel owners who claim to have hired the Paramount Company after the hurricane. The company claimed to be a disaster recovery company that would work to negotiate settlements with the insurance companies on behalf of the claimants, for a 20 percent fee. The company employees are accused of taking the checks issued by insurance companies, forging client names and then depositing the funds in the company's accounts in California.

The California attorney general's office is also seeing $170,000 on top of all of the fraudulent charges for a 2007 settlement between the company and the California Department of Insurance. In that situation, Paramount, including Todd and Slepcevic represented themselves as public adjusters for the victims of the Angora fires in South Lake Tahoe. Five additional complaints are pending in that investigation.

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Posted In: Business Litigation , Contract Litigation , False Advertising

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The Ninth Circuit Court of Appeals rendered an opinion clarifying what a plaintiff must show to establish a whistleblower claim under the Sarbanes Oxley Act (SOX). In the opinion (HERE) by Judge Jay S. Bybee the Court found that plaintiffs did not have to "prove the existence of fraud before suggesting the need for an investigation." They only had to demonstrate they believed fraud had occurred to prompt the employer’s obligation to investigate.

This complicated story involves married intellectual property attorneys Shawn and Lena Van Asdale working for International Game Technology (IGT) as associate general counsel. One or both of them discovered documents which lead them to believe that an investigation into a patent held by Anchor Gaming should be started. Anchor was a former competitor of IGT before the 2 companies merged.

The slot machine patent in question was a major asset of Anchor and if not valid, could have fraudulently overvalued Anchor before the merger.

Shawn expressed concern to his bosses that an older Bally machine may have a valid patent which had not been disclosed before the merger. His belief was that IGT had been intentionally misled about Anchor's value. The Van Asdales both raised the issue again with IGT's general counsel (Anchor's former top lawyer), stating they believed the nondisclosure of the Bally machine was suspicious and there was a potential of fraud.

The Van Asdales were terminated within a short time following those meetings.

The couple sued, asserting a whistleblower claim under the SOX, contending they were terminated for reporting potential shareholder fraud in connection with the IGT / Anchor merger. The Nevada-based federal trial court sided with the employer and granted its summary judgment motion, finding the Van Asdales had not shown they had discussed the suspected fraud specifically enough with IGT before they were terminated.

The Ninth Circuit Court of Appeals disagreed and reversed, vacated and remanded the trial court’s decision. While this decision may clarify what a plaintiff must do to establish a whistleblower claim, it may expand the use of privileged information by in house counsel, which was previously constrained under “attorney/client privilege”.

Continue reading "New Standard for Whistleblower Claims Determined by Ninth Circuit Court of Appeals" »

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California attorney Patricia Meyer has filed a lawsuit on behalf of a former Chadbourne & Parke client alleging overcharging of fees related to legal research. The complaint alleges unfair business practices, unjust enrichment, fraud and deceit.

Former client J. Virgil Waggoner retained the Chadbourne law firm in 2002. His bill totaled $108,000.00, of which $20,000 was for legal research related to his matter. Ms. Meyer claims the research should have been only about $5000. The lawsuit alleges that Chadbourne billed Waggoner for research on an hourly basis, while paying the research on a flat fee basis.

Ms Meyer states that the practice of profiting from costs, without disclosing the practice in the client retainer agreement violates rules of professional conduct set forth by the California and American bar associations. There was no such disclosure made to Mr. Waggoner.

In a statement, Chadbourne partner Thomas Hall paints a different picture: "We adamantly deny this claim of Mr. Waggoner, with whom we ended our relationship over four years ago. It is telling that Mr. Waggoner -- a Texan who had retained our New York, not California, office -- filed suit in California only after his New York malpractice lawsuit against Chadbourne was dismissed and only after we sued him in New York for unpaid fees."

Ms. Meyer said the reason the lawsuit was filed on March 2, but not served on Chadbourne & Parke until May 1 is because she did not want to compromise other investigations alleging similar claims. She went on to say that similar lawsuits are in the pipeline, and she has evidence that shows at least a dozen other law firms are overcharging clients for legal research.

Continue reading "Lawsuit Filed Against New York Law Firm Chadbourne & Parke Over Legal Research Fees" »

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Redbox Automated Retail, LLC (Redbox) has built a growing business renting DVDs for only $1 per day from their bright red kiosks. In the lawsuit filed in Federal Court on October 10, Redbox claims that Universal Studios Home Entertainment (USHE) and 3 subsidiaries are trying to force changes that will constrain Redbox and its business model.

In a meeting on August 26, USHE gave Redbox until close of business on August 27, 2008 to agree to the following:

Redbox is immediatedly prohibited from renting any DVDs for 45 days after the public release date

Redbox is prohibited from selling any USHE DVDs and must destroy all previously rented copies

Under the currently successful Redbox business model, Redbox stocks new release DVDs in kiosks on the date of public release, in large quantities and sells previously viewed DVDs for $7 as early as 12 days after release.

This model is in large part responsible for the growth of Redbox from 125 kiosks in 2004 to over 6500 at the end of 2007. The projections for 2008 call for 12,000 kiosks.

Putting teeth in their “my way or the hi-way” proposal, USHE stated it will terminate relationship with both Redbox DVD distributors; VPD and Ingram.

Instead of agreeing to the new terms, Redbox filed suit in Federal Court. In the suit, Redbox is claiming that UHSE and subsidiaries have violated the Sherman Antitrust Act and are misusing copyright laws.

Redbox is asking for the court to award the following relief:

a. A declaration that Defendants' conduct constitutes copyright misuse, and
thereby renders copyrights for Universal DVDs - however marketed, sold
or distributed - unenforceable during the period of misconduct;
b. Injunctive relief prohibiting USHE from engaging in any efforts to limit
the supply of Universal DVDs to Redbox;
c. A declaration that the Revenue Sharing Agreement and USHE's
threatened action against VPD and Ingram violate the Sherman Antitrust
Act;
d. Damages to the full extent permitted by law;
e. Attorneys' fees and costs; and
f. Such further relief as this Court deems just and appropriate.

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On August 7, 2008, the California Supreme Court unanimously ruled in Edwards v. Arthur Andersen that the state legislature effectively restricted the ability of employers to prevent employees from working for competitors.

The Opinion States: “We conclude that Andersen’s noncompetition agreement was invalid. As the Court of Appeal observed, “The first challenged clause prohibited Edwards, for an 18-month period, from performing professional services of the type he had provided while at Andersen, for any client on whose account he had worked during 18 months prior to his termination. The second challenged clause prohibited Edwards, for a year after termination, from ‘soliciting,’ defined by the agreement as providing professional services to any client of Andersen’s Los Angeles office.” The agreement restricted Edwards from performing work for Andersen’s Los Angeles clients and therefore restricted his ability to practice his accounting profession.”

With a few exemptions primarily related to the sale of a business, the court essentially voided all California non-competition agreements.

California Business and Professions Code Section 16600 states:

Except as provided in this chapter, every contract by which
anyone is restrained from engaging in a lawful profession, trade, or
business of any kind is to that extent void.

Still in effect are the protections for the employer in the Uniform Trade Secrets Act which prevent employees from “stealing” the employer’s client list.

This case also takes on issues related to “employee release” agreements often signed upon termination of employment.

The Supreme Court held that employee release agreements in which the employee releases the employer from “any and all” claims do not waive statutory protections provided to the employee in Labor Code Section 2802.

Continue reading "California Supreme Court Rejects Validity of Most Non-Competition Agreements" »

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For over 45 years the Magic Castle has been the clubhouse of the Academy of Magical Arts (AMA). On February 21, 2008 the AMA flied a lawsuit against Magic Food & Beverage Inc., a company with an affiliation to Magic Castle Park LLC, the owner of the property, which has been for sale since last year. Although not a subsidiary of Magic Castle Park LLC, Magic Food and Beverage Inc. is affiliated through corporate officers and/or executives common to both entities. This information is based solely on the complaint filed, Case No: BC 385828, in Los Angeles Superior Court.

The lawsuit includes 4 “Causes of Action” as follows:

• Trespass

• Trespass to personal property

• Assault

• Injunctive relief

The following sentence is heresay: AMA members have been told that the AMA wants to stay in the building known as the “Magic Castle”. NOTE: If the AMA governing board would like to make a formal statement to the contrary, I will post a retraction here.

Here is the question. If you were a tenant (AMA) in a 100 year old building (known as the Magic Castle) which was a small part of a parcel of land (10 plus acres) currently for sale and positioned for total redevelopment, would it be smart to sue those affiliated with your landlord if you wanted to stay?

This lawsuit appears to indicate the contrary. Personally, it would be unlikely that I would sue anyone affiliated with my landlord if I wanted to stay.

Following the filing of this lawsuit, the plaintiff (AMA) filed an ExParte application for temporary restraining order and an order to show cause RE: preliminary Injunction.

From the Court Document: “The Court has read and considered the above stated Ex Parte Application.

After argument of Counsel, the Application is denied.”

Continue reading "How Will Magic Castle/AMA Lawsuit Affect Its Future? " »

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Allianz Life Insurance Co. is reportedly the largest seller of annuities in California. According to the Department of Insurance, Allianz allegedly used deceptive sales tactics to mislead thousands of elderly people into purchasing unstable and/or unsuitable annuities. Many of those mislead were over 80 years old!

An annuity is a contract between a person and a financial institution (insurer) in which the person makes at least one payment and in turn receives "tax-deferred growth of earnings" back from the insurer.

California Department of Insurance officials conducted an examination into Alliance which revealed that in 2004/2005 Allianz replaced 126 existing annuities with financially unsuitable annuities for elderly clients.

In addition to the $10 Million penalty, Allianz agreed to implement a “suitability review” for customers over 65 to insure they are “fully aware of the products they are purchasing."

California Insurance Commissioner Steve Poizner stated “This landmark settlement ends years of aggressive and misleading marketing schemes targeted to our most elderly and vulnerable. The fact that Allianz used deceptive practices and high-pressure sales tactics to lure and cajole seniors into buying unsuitable policies is appalling. However, today's settlement represents a real change for the industry and is a tremendous victory for all California seniors."

Anyone with questions regarding insurance matters can contact the California Department of Insurance consumer hot line at (800) 927-HELP or visit http://www.insurance.ca.gov.

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The California Supreme Court took steps to clarify the process of suing a governmental entity that Courts of Appeal have disagreed on for years. The Supreme Court has clarified the requirement of the “Tort Claims Act,” requiring the filing of a demand prior to the institution of tort and contract litigation against a governmental entity.

Prior to this ruling, Courts of Appeal in California presented contradictory rulings on the issue. Some ruled that the “Tort Claims Act” excluded contract disputes and others ruled that it included contract disputes with governmental entities.

To further clarify, the Supreme Court went as far as changing the name of the act. The new name is the “Government Claims Act”.

In a unanimous opinion, Justice Carol Corrigan wrote “Government Code section 905 requires that ‘all claims for money or damages against local public entities’ be presented to the responsible public entity before a lawsuit is filed. Failure to present a timely claim bars suit against the entity. (§ 945.4.) Here we hold that these requirements apply to breach of contract claims.”

The decision is available for review here on the California Supreme Court website.

To sum up, if you have a dispute with any public entity within the State of California, you are required to file a claim with that entity before filing a lawsuit. With this decision in place, failure to file a claim will provide the public entity the legal clout to have your lawsuit dismissed.

Continue reading "California Supreme Court: “You Must File a Claim Before Suing the Government!”" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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Pamela Hope Cincotta and Joyce Kraus are plaintiffs in a class action lawsuit alleging price gouging at 2 different hospital emergency rooms. The class action lawsuit was filed December 3rd by attorney Ron Bochner against the California Emergency Physicians Medical Group (known today as CEP America).

From the lawsuit “…CEP provides emergency room professional services for many hospitals in California. It separately bills patients for such services. Plaintiffs are informed and believe and theron allege that in so billing patients, CEP has engaged, and continues to engage, in a pattern and practice of charging unfair, unreasonable and inflated prices for medical care to its uninsured patients who are generally the least able to pay these inflated and unreasonable charges. CEP also pursues aggressive collection techniques in charging these unfair, unreasonable, irregular and inflated prices. In doing so, they have attempted to collect, by various means, the unfair, unreasonable and inflated prices for medical care to CEP’s uninsured patients as debts in California.”

CEP provides ER services to approximately 55 hospitals in California. The results of this lawsuit would likely affect prices and billing practices at all of those hospitals.

Dr. Wes Curry, president of CEP America, said "We're confident that our billing practices are proper."

Technically the lawsuit is a class action complaint for violation of California Unfair Business Practices Act; Consumers Legal Remedies Act; Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing; Unjust Enrichment.

California has approximately 7 million uninsured residents.

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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What does the writers strike, the success or failure of the movie “State of Play” and contract law all have in common? They will all factor in to Universal’s decision about suing Brad Pitt in the future.

Pitt pulled out of the movie last month. It is believed that Pitt was unhappy with script rewrites and due to the writers strike and shooting schedule, further changes could not be made.

Universal issued this statement: "Brad Pitt has left the Universal Pictures production of State of Play. We remain committed to this project and to the filmmakers, cast members, crew and others who are also involved in making the movie. We reserve all rights in this matter."

There are an almost infinite number of factors involved in assessing any breach of contract lawsuit.

A few of the common ones in business contracts include: Which party drafted the contract? Are the terms clear and concise or subject to interpretation? Was there a “meeting of the minds”? Was there an exchange of value? Was there full disclosure or possible fraud?

Not being a mind reader (and not having seen the contract), I won’t try to predict whether Universal will file suit. But the last sentence in their statement “We reserve all rights in this matter." literally shouts that they are giving it serious consideration.

And the latest news? Russell Crowe has stepped in to take the lead in “State of Play”.

Continue reading "Will Brad Pitt be Sued by Universal?" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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We regularly receive requests to explain the process of litigation, which we always communicate (using dialog NOT monologue) to prospective clients during our initial consultation. We hope you will find our lawsuit synopsis helpful. Feel free to forward it to others and remember to contact us with any questions about any business or employment lawsuit.

The litigation process generally involves four (4) phases. The length of each phase varies with the legal and factual complexities of each case.

The initial phase takes place before anything is filed in court. The attorney meets with the client to determine the facts of the claim being advanced by the client or the client's defense to a claim brought by another. In either case, it is essential that the client meet with the attorney at the earliest opportunity as valuable rights may be lost by delay. Once the attorney meets with the client, the attorney will review any documents relevant to the matter, research the applicable law and possibly speak to witnesses in order to chart a course which is in the best interest of the client.

The next phase involves the filing of an initial pleading in court. Typically, this is the filing of a Complaint or an Answer to a Complaint. The discovery process begins, which may include serving the other side with written questions, called Interrogatories, obtaining evidence which may be in the possession of the adversary or some other party and taking depositions, the oral questioning of parties and witnesses.

Once this phase has been completed, the case is ready to be tried. A trial may be in front of a Jury or a Judge and can vary in length depending upon the number of witnesses and quantity of exhibits offered. Under our system of jurisprudence, the plaintiff has the burden of proof. The plaintiff's case goes first. The defendant then has an opportunity to respond to the plaintiff's case with witnesses and evidence to support the defense. If the defendant has brought a Cross-Complaint, it is tried in the same manner. Otherwise, the plaintiff has an opportunity to put on a rebuttal case to counter the evidence offered by the defendant and, on occasion, a defendant may offer a sur-rebuttal to reply to the evidence offered by plaintiff in the rebuttal case.

The final phase of litigation involves the post-trial matters including motions to vacate or correct the judgment, appeals and efforts to collect on the judgment.

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation , Employment Law , False Advertising , Internet , Real Estate

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The case of City of Santa Monica v. Baron & Budd, B187425, simply stated, is a case about legal fees and retainer agreements. The City of Santa Monica hired attorneys, discharged attorneys and hired more attorneys. The retainer agreement in dispute included contingent fee provisions. It also had a clause stating that the attorneys were entitled to a reasonable fee if the contingent fee provisions could not be enforced. Further it stated that the amount of the fee was subject to arbitration before JAMS (Judicial Arbitration and Mediation Services).

The next 5 to 10 paragraphs could be spent describing the legal wrangling of a city government and 3 law firms. Instead I will just give the highlights.

Around the time the City of Santa Monica was resolving/settling the legal matter which caused it to hire outside counsel, the attorneys and the city realized there were disagreements about calculations and fees to be paid to outside counsel.

With no resolution at hand the city sued for declaratory relief in May 2004. It later amended the complaint to allege breach of fiduciary duties. Coming as no surprise, the lawyers cross-complained for their fees.

In May 2005, Los Angeles Superior Court Judge David Minning denied the city’s motion for summary adjudication. Five months later, the city moved to compel arbitration. Judge Minning denied the motion.

Court of Appeal Justice Robert Mallano said the trial judge was correct.

He cited the 17-month delay between the filing of the suit and the demand for arbitration, that the parties had extensively litigated the issues that would be the subject of the arbitration, and the prejudice the law firms would have suffered as a result of having to provide the city with more discovery than would have been required had the case been assigned to arbitration at the outset.

Los Angeles Superior Court Judge Frank Jackson, sitting on assignment, concurred in the opinion, while Justice Frances Rothschild concurred separately.

Continue reading "Court of Appeal to Santa Monica: Your Litigation Waived Your Right to Arbitration in Lawsuit" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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In a recent court of appeal decision (Kim v. Euro Motors, et al.), the Court held that notwithstanding the fact that a defendant settled prior to trial, it could be liable for attorney’s fees. Kim brought an action against a car dealer pursuant to the Consumer Legal Remedies Act (CLRA, Civil Code § 1750, et seq.) in connection with a Porsche Turbo that he leased from a dealer. During the first year of the lease, the vehicle was out of service for over 78 days, due to various problems. When the dealer was unable to fix the car to Kim’s satisfaction, he demanded that the dealer take the car back and refund to him all monies that he had spent. When his demand was refused, he brought an action against the dealer for damages and for recission of the lease. Kim ultimately settled with the dealer, short of trial and entered into a mutual general release and settlement agreement wherein, among other things, the dealer agreed to take back the vehicle, terminate the lease and pay a$10,000 lump sum settlement to Kim. Kim acknowledged that the payment was in full and final settlement of all claims with the exception of attorney’s fees and costs. The agreement contained the usual language that neither party admitted liability or that the other was the prevailing party.

Kim filed an application for attorney’s fees, which was opposed by the dealer on the grounds that Kim was not the prevailing party. The trial court denied the application finding in light of the settlement, there was no prevailing party. Kim appealed.

Continue reading "Porsche Lessee Settles Lawsuit Against Auto Dealer... California Court of Appeals Remands Case Back to Trial Court RE: Attorney’s Fees " »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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It’s an old Hollywood tale: Someone makes a film. Someone else finances and produces it and even before the editing is finished the question of who controls the film rights becomes a legal battle. The twist is that the filmmaker is only eleven (yes 11) years old! With 23 movie credits (see New Yorker Article), Kay had always planned to direct. In his directorial debut “Saving Angelo” creative differences arose between Kay and Malibu neighbor/producer Conroy Kanter, who contributed $11,000 to the making of the film.

In last month’s settlement, Kay got full ownership and creative control of the 15 minute film and Kanter got a producer’s credit. By the way, Kevin Bacon plays a fireman in “Saving Angelo”.

Now that the legal issues have been settled, Kay can return to more important things like finishing the editing in preparation for the film’s submission to festivals.

Returning to the law, this case like so many, illustrates the importance of having a contract that spells out each parties rights and responsibilities. Sadly, huge numbers of contracts are not written well enough to avoid litigation, and that my friends is one of the reasons our courts are clogged and more states are creating Business Courts (see March 10, 2007 post " Business Lawsuits Heard in Their Own Court...Will California be next?”)

The remaining question is: Will Dominic Scott Kay become the next Ron Howard?

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Contract Litigation , Intellectual Property

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A California Superior Court judge ruled March 29th that a startup's media server does not violate the security technology used to protect DVD disks because the standard licensing contract and specifications for the technology are so poorly worded.

Rather than spend a lot of time analyzing the specifics of this case between Kaleidescape and the DVD Copy Control Association (DVD CCA), let’s just look at this from a contract law/litigation perspective.

Judge Leslie C. Nichols stated that the DVD CCA provided a license for its Content Scramble System (CSS) to Kaleidescape without including tech specs in the license agreement. Judge Nichols also stated "This [CSS spec] is a product of a committee of lawyers."

What can we learn from this? Sadly, this is very basic contract law.

Importantly, a contract is whatever the court says it is. Further, any ambiguities in a contract are held against the writer/creator/author of the contract.

Using the above case as an example, the judge held the DVD CCA responsible for its poorly worded licensing agreement (contract) and ruled in favor of Kaleidescape.

Lastly, contract lawyers usually fall into two categories.

Continue reading "California Judge Rules in Favor of Kaleidescape and Consumers" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation , Contract Litigation

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