Articles Posted in Business Litigation

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The question of whether or not a franchisor is a joint employer of the workers at a franchisee’s location was at the heart of a class action lawsuit in California. In the federal case, the judge ruled that a franchisor could be held accountable for the misdeeds of its franchisee.

Dollar and paragraph sign on a brass scale , 3d illustration

The complaint was filed in a federal court in San Francisco in 2014. Plaintiffs were a group of current and former employees at McDonald’s restaurants in the Bay Area. All of the restaurants were owned by a franchisee, which is known as The Edward J. Smith and Valerie S. Smith Family Limited Partnership. Workers leveled charges at the franchisee for violating California wage and hour laws. These allegations included consistent errors in payroll calculations, failure to pay overtime, not providing rest breaks and meal periods and neglecting to reimburse workers for the time they spent keeping their uniforms clean and ready to wear.

Along with the wage and hours issues, the lawsuit also questioned whether or not the McDonald’s corporation was a joint employer with the Smith partnership. The corporation ultimately agreed to a $3.75 million settlement, but maintains that it is not a joint employer with its franchisees. Instead, they agreed to the settlement in order to avoid the ongoing costs and disruptions of lengthy litigation.

Workers hail the settlement as a major victory that may allow other parent corporations to be held responsible for the actions of a franchisee. However, business owners take a grim view of the development. They are concerned that a trend toward holding parent corporations responsible for the actions or misdeeds of franchisees may be detrimental to entrepreneurism.

At this time, the National Labor Relations Board is making similar arguments that McDonald’s should be considered a joint employer in a worker retaliation case in New York. If this case receives similar treatment, then it may establish a precedent for holding parent corporations responsible as joint employers.

Whether you are a franchisor or a franchisee, it’s vital that you seek legal counsel so that you are aware of your rights and responsibilities as an employer.

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We at Sylvester Oppenheim & Linde would like to take a moment to wish our clients, family and friends (including our loyal blog readers), a very joyous and happy Thanksgiving.

thanksgivingWhether you are celebrating with a small gathering, or preparing for what is shaping up to be dinner for a small country, we wish you and yours all the very best.

It also seems appropriate to quote John F. Kennedy.

“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.”

 

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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.

If your lawsuit or legal problem involves business issues, you may find it helpful to visit our website.  Once there you will find the following information: “Eleven Questions to Ask BEFORE Hiring a Business Attorney”.  It has always been one of our most visited web pages.

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

DT%2019867194%20scale-001.jpgThe 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.
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A U.S. magistrate judge has made an important ruling that will allow plaintiff’s counsel to serve notice of a lawsuit on the defendant via Twitter. The ruling may help to set precedent in similar cases where a party in the U.S. wants to sue a foreign defendant.

Magnified illustration with the word Social Media on white background.

The case at hand was brought by St. Francis of Assisi. A non-profit that provides help to refugees, the organization wanted to sue the Kuwait Finance House, Kuveyt-Turk Participation Bank and an individual named Hajjaj al-Ajmi. Service on the first two defendants was relatively straightforward, but the plaintiff was having difficulty locating al-Ajmi.

St. Francis of Assisi was alleging that the three defendants had funded a Christian genocide in countries like Syria and Iraq. However, service of the complaint had to be completed before the case could proceed. Al-Ajmi had already been identified by the United Nations and the U.S. government as a financier of terror group ISIS. He is known to have organized numerous Twitter campaigns to raise funds for the organization under several different Twitter handles.

That’s why counsel for plaintiffs petitioned the judge for the opportunity to serve the complaint on al-Ajmi via Twitter. Traditional methods had already failed. Plus, because Kuwait is not a signor of the Hague Convention, it wasn’t possible for service to be completed through some sort of centralized or government authority.

Ultimately, U.S. Magistrate Judge Laurel Beeler granted the plaintiff’s request to serve notice via Twitter. Writing that Twitter was “reasonably calculated to give notice” and that the effort “is not prohibited by international agreement,” Beeler opened the door not only for St. Francis of Assisi, but also for other plaintiffs who want to serve a lawsuit on a foreign national that seems to be able to avoid service by regular means.

The ability to serve a lawsuit via Twitter doesn’t guarantee that al-Ajmi will respond or that he will ever pay any money that the court may decide is owed to the plaintiffs. Nonetheless, the fact that such unconventional service is being allowed may prove to be beneficial for other plaintiffs in similar situations.

 

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The Consumer Product Safety Act, or CPSA, and legislation like it, makes it a crime to sell products that are the subject of a safety recall. Nonetheless, that is precisely what the U.S. Consumer Product Safety Commission, or CPSC, says that retail giant Best Buy did between 2010 and 2015. The retailer recently agreed to pay a $3.8 million penalty to the CPSC for breaking the law.

Compliance and Violation words on green road or street signs to illustrate the important choice between following or ignoring vital legal rules, guidelines, laws and regulations

The CPSC accused Best Buy of continuing to sell 16 products even after those items had been recalled. Ranging from cameras and laptops to dishwashers and electric ranges, each product posed a safety hazard. A recalled dehumidifier sparked a fire after being sold by a Best Buy store years after it should have been quarantined from sale. Given the more stringent clauses of the CPSA, which was amended in 2008, it was only a matter of time before the CPSC took notice.

Best Buy stated that they had a recall system in place during the 2010 to 2015 period. However, the CPSC found that Best Buy’s system for finding and getting rid of recalled products was ineffective. Among the findings, the CPSC says that the Best Buy system failed to permanently block product codes for recalled items. Additionally, some of those product codes were reactivated or the system functions that should have prevented a sale were overridden.

In addition to paying the $3.8 million penalty, Best Buy must also set up a much more robust system for identifying recalled products and preventing them from being sold. This system will include an internal component of controls and procedures as well as an element that requires reporting information to the CPSC.

Best Buy’s experience serves as a cautionary tale for all retailers. The CPSC is growing increasingly vigilant about enforcing the CPSA, and that means that more companies are going to see large penalties being levied against them. It is more important than ever for retailers to understand the CPSA and to stay informed regarding current government and manufacturer recalls. Working with an experienced business attorney is one of the best ways to ensure compliance.

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One of the questions I hear frequently is about whether we are accepting new clients.

While the short answer is “Yes”, here is some additional information which many people find interesting.

Great%20Fit%20Gears%2039896521-001.jpgOur law firm, Sylvester Oppenheim & Linde is committed to client service and quality legal representation for each and every client. That means that we only accept clients who we feel are a good match for our expertise, experience and areas of practice.

I learned a long time ago that we can’t be all things to all clients, but we can be all things to some clients: and those are the ones we welcome and serve in an exemplary manner.

The purpose of this blog is to provide helpful information to anyone who reads it. On our website, you will find another example of our “Be of Service” attitude by reading our Home Page Article “Eleven Questions to ask BEFORE Hiring a Business Attorney“. You will also find a list of our practice areas on that page.

Our clients tell us that they appreciate our honesty, accessibility and guidance. And we appreciate our clients.

Back to the question. The answer is: “Yes, we are always looking for one or two new good clients.” If you have a legal issue, I invite you to call and let’s find out whether we are a great fit for each other. I can be reached at 818-461-8500 or via the Contact form on this page.

Richard Oppenheim

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With approximately 60,000 employees participating in its 401(k) program, Morgan Stanley should be positioned to offer an outstanding retirement investment package. However, a group of employees is now seeking class action status as they sue the investment firm for mismanagement of the company’s 401(k) plan.

Balance in digital background / A concept of technology law or tIn the complaint, plaintiff Robert Patterson alleges that Morgan Stanley only made poorly performing investments available in its 401(k) program. The suit argues that instead of abiding by the Employee Retirement Income Security Act, which states that employers have a fiduciary responsibility to act in the best interests of plan members, Morgan Stanley routinely chose to include some of its least successful funds in the company 401(k).For instance, the available mid-cap fund was Morgan Stanley’s own Institutional Mid-Cap Growth Fund. Investment advisory firm Morningstar, Inc., gave this fund the worst rating for investors who held an interest in the fund over a period of several years. The small-cap fund that Morgan Stanley offered to its employees fared even worse. It underperformed 99 percent of all similar funds in 2014, and its performance didn’t improve much in the subsequent year.

Moreover, the lawsuit claims that Morgan Stanley was charging outrageous fees. Patterson and his co-plaintiffs allege that Morgan Stanley was charging their employees considerably more than outside clients were being charged. In some cases, employees were charged twice the going rate for outside clients.

In the complaint, lawyers for the plaintiffs argue that the company “selected their proprietary funds not based on their merits as investments, or because doing so was in the interest of plan participants, but because these products provided significant revenues and profits to Morgan Stanley.”

Other financial management firms like Edward Jones and Franklin Templeton have been hit with similar lawsuits in recent months. Several high-profile educational institutions like Yale University, the Massachusetts Institute of Technology and Johns Hopkins University have also been accused of similar mismanagement. With lawsuits like these on the rise, it is more important than ever before for employers to ensure that their 401(k) plans comply with ERISA and other applicable legislation.

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From outward appearances, the 56 campuses of the Marinello Schools of Beauty were profitable and successful. However, the Department of Education believed that school administrators had engaged in an ongoing and systematic program of misrepresentation that enabled the school to collect millions of dollars in federal financial aid. The schools have now been shuttered and a portion of the $11 million settlement is poised to be distributed among six whistleblowing employees while the remainder is being returned to the government.

WhistleblowerMarinello School of Beauty was founded in 1905. The school eventually boasted 39 locations in California with others found in Nevada, Utah, Connecticut and elsewhere. Programs offered included cosmetology, barbering and hair design. However, recent students knew that trouble was brewing. A Connecticut graduate received multiple notices from the school telling her that she owed several thousand dollars. She told the school that her tuition was supposed to be covered by federal aid, but to no avail. The school refused to release her transcripts so she cannot get a cosmetology license.

Her story is like many others, but it was a group of six former employees who brought the allegations of misdeeds to the federal government. They alleged that the schools did not provide adequate training. Moreover, they claimed that the school knowingly requested federal student aid for enrollees who did not have a diploma. Some of these students were maneuvered into a high school diploma completion program that was not accredited. Other students did not receive all of the federal funds that they were entitled to. Marinello was further accused of inflating its enrollment numbers, graduation rates and the earning potential of graduates.

The Department of Education withdrew federal financial support of the schools at the end of 2015, and the schools shuttered for good in February of the following year. The government will only be able to recoup a small portion of the many millions of dollars that had been distributed to the schools in the last year or two alone, but this case remains a cautionary tale for other institutions that receive aid from the federal government.

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Judge R. Gary Klausner has ruled that Led Zeppelin may not collect almost $800,000 in defense fees from the plaintiffs in a recent copyright lawsuit. Earlier, the copyright infringement case was settled in the band’s favor.

monumentThe lawsuit centered around the band’s most successful song, “Stairway to Heaven.” Songwriter and guitarist Randy Wolfe had long harbored suspicions that the better-known rockers had lifted the introduction of his 1968 instrumental composition “Taurus,” to be used in their hit. Wolfe passed away in 1997, but his trust filed the lawsuit in 2014. If the suit had been decided in the plaintiff’s favor, the trust might have received several million dollars. Estimates suggested that the song has generated more than $500 million thanks to its popularity.

The jury decided in Led Zeppelin’s favor. However, Jimmy Page and Robert Plant along with Warner/Chappell Music, the song’s publishing company, had expended considerable money in fighting the lawsuit. Once they prevailed, they decided that they were entitled to recoup those expenses from the unsuccessful plaintiff.

Ultimately, Judge Klausner found that the songwriters and publishing company were not entitled to legal fees and miscellaneous costs related to their defense because the initial lawsuit was not frivolous. The defendants contended that the lawsuit was merely an attempt to obtain easy money from famous musicians and that an award of legal fees to the defendants would discourage other potential plaintiffs from embarking on similar efforts.

The judge was not swayed by these arguments, stating that he had found sufficient validity in the lawsuit to allow it to go to trial. By definition, this meant that the suit could not be categorized as frivolous. Moreover, the judge asserted that there was no evidence suggesting that the Wolfe trustee had acted with “nefarious motives.”

The Led Zeppelin copyright infringement lawsuit contains many fascinating and instructive components. The most important of these may be how crucial it is to preserve and defend intellectual property rights. Whether you are an inventor or are being accused of profiting from someone’s else’s innovation, you need competent legal counsel to protect yourself.

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Most people think Snapchat is just a fun messaging app. They use it to send photos and videos that self-destruct seconds after being viewed. Snapchat also features an app that makes it possible to creatively alter photographs. Known as “Lenses,” this app is what makes it possible for the photo’s subject to sport floppy dog ears, hearts instead of eyes or a floral headband. Now, this capability is at the center of a potential class action lawsuit.

Magnified illustration with the word Social Media on white background.

Illinois residents Jose Martinez and Malcolm Neal filed a complaint in Los Angeles in May of 2016, arguing that Snapchat violated their state’s Biometric Information Privacy Act. The law is aimed at preventing biometric identifiers from falling into questionable hands and sprang from concerns about how the necessary technology used to collect biometric identifiers might be used without the user’s knowledge or permission.

The lawsuit contends that Snapchat is collecting and maintaining detailed biometric information on their customers. This is being done without the knowledge and consent of the users, which is contrary to Illinois’ law.

Snapchat categorically denies the allegations, arguing that their service is not capable of collecting complex biometric information that would allow them to identify the face of one user as opposed to another. Instead, they say that the technology involved is merely for object recognition, which makes it possible for the program to determine which objects in a photo are faces and where the eyes, nose and mouth are located. Moreover, Snapchat denies that they are in any way storing the data that is used in the Lenses app.

Snapchat is not the first social media platform to be sued over similar technology. Both Facebook and Google are facing legal battles relating to face-recognition software that automatically identifies particular people in photographs.

This lawsuit is only in its beginning stages. It was moved to the federal courts in July 2016, and Snapchat may be facing stiff fines if their software is determined to be guilty of violating Illinois’ law. This incident demonstrates the powerful need for businesses to understand the laws of states where they will be operating.