Beware of Marriage of Davenport: Sanctions for “Aggressive” Lawyer in Divorce

  • December 2, 2014

Beware of Marriage of Davenport: Sanctions for “Aggressive” Lawyer in Divorce

I do not have enough fingers (and toes) to count the number of times a potential client has called this office looking for a family lawyer who is “mean”. The adjectives describing their dream lawyer can actually be quite humorous ranging from “blood thirsty shark” to “pit bull” and these types of clients will make it clear they want someone who has a “take no prisoners” attitude in litigation.  It always gives me pause that someone would look for these qualities when looking for the person they will have to work with during one of the most emotionally devastating times of their lives; when they have to simultaneously have to face the dismantling of their family, the restructuring of the lives of their children, the loss of their partner and the division of the assets they have worked so hard their entire lifetime to acquire.  I do try explain that the courts do not favor this type of approach and our system has developed such avenues as mediation and collaborative law in response to the laws of supply and demand which favor a less invasive and bitter process for resolving these sensitive issues. Nevertheless, there are still those who favor the scorched earth approach.  Often, those are clients I am not willing to work with. And to those I share this cautionary tale of Marriage of Davenport (2011) 194 Cal.App.4th 1507.

In this case, Justice Richman of the First Appellate District for Sonoma County, California made it clear that family law attorneys who embark on rampaging attacks against the opposing party and/or their attorneys risk meaningful and significant sanction awards. Clients who permit or encourage their attorneys to manage their cases in this style will find their purses and wallets opened very wide to the other side.

In Davenport, the court found that offending attorney had committed a variety of wrongs including (1) failing to meet and confer before filing a motion; (2) sending a series of  hostile and disrespectful letters; (3) referred with disdain to opposing counsel and his experts, (including referring to the IT experts in the case as “nerds”  that opposing counsel met in a karaoke bar); and (4) wasted the court’s time with a frivolous and expensive mini-trial in the midst of trial regarding the credentials of experts. For these offenses, the court found that the party who hired this lawyer would pay sanctions of $100,000 and attorney’s fees of $304,387 to her spouse. Nearly a half a million dollars just for choosing a lawyer who could not be civilized and play by the rules.  In its findings, the Court held that “Family law cases are not supposed to be conducted as adversarial proceedings. Quite the contrary, the goal is to reduce acrimony and adversarial approaches common to general civil litigation and instead to foster cooperation between the parties and their counsel with a view toward settlement short of full blown litigation.”

I try to remind clients of this. It is not always easy to consider being cordial to someone who is causing you pain. However, the long term benefits of conducting your divorce or separation proceeding in good faith and with grace and dignity cannot be overstated.  I like to suggest to my clients, especially those with very young children, how happy it might make their children in 25 years  to see them not only sitting nicely at the same table at their wedding, but perhaps even sharing a dance.

 Aggressive lawyers can cause sanctions in divorce.

Free Wine, Magazines, Television Services, and MORE!!!!

  • December 2, 2014

California has a relatively new law that could cost companies millions of dollars for non-compliance.  California Business and Professions Code §17600, et seq., also known as “The California Automatic Renewal Law,” is changing the way companies around the globe do business in California.  The law applies to services, with a few exceptions, that are subject to auto-renewal (think your wine club or the person that knocks on your door “selling” a free magazine subscription).

guaranteed-easy-free-trial

The law requires that any company doing business in the state of California, whether the company has a location in California or not, meet the disclosure requirements set forth in the statutes.  Many companies who do not follow California law closely may have overlooked this statute and are now exposed to serious monetary liability going forward.  The law also applies to companies who do business solely online, but sell to California customers.

The law attempts to get rid of deceptive fine print.  It requires, among other things, that companies who offer an automatic renewal service “offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity, or in the case of an offer conveyed by voice, in temporal proximity, to the request for consent to the offer.”  (§17602(a)(1)).  The law also adds requirements for cancellation of the service and “if the offer includes a free trial, the business shall also disclose in the acknowledgement how to cancel and allow the consumer to cancel before the consumer pays for the goods or services.” (§17602(a)(3)).

So what is at risk for all the companies currently renewing services without complying with this law?  The customer would get their money back and the company is deemed to have given an unconditional gift of whatever goods or services were automatically renewed.  It is easy to see why there is such large exposure.  For example, many satellite and cable companies are nationwide and do business in California.  They often offer free trials of certain programming.  However, when the trial ends, they begin charging the customer for the programming unless the customer calls and cancels.  These companies will have to be much more diligent in California in order to assure that the company is not in fact giving an unconditional gift to the consumer based on California Law.

While Nevada has a law that covers Deceptive Trade Practices, it does not specifically preclude automatic renewal in most situations.

 

Hyatt v. California Franchise Tax Board

  • December 2, 2014

In 1998 former California resident Gilbert Hyatt won a big trial against the tax collection arm of California, the Franchise Tax Board (FTB). After a four month long jury trial, Hyatt was awarded over $138 million in tort damages, $250 million in punitive damages and $2.5 million in costs.

Hyatt’s suit was prompted by an FTB audit of his 1991 tax return. Hyatt claimed he moved to Nevada in 1991. In 1993, the FTB started an audit and investigation because it doubted that Hyatt had actually moved in 1991. After years of investigating, the FTB determined that Hyatt had not moved to Nevada in 1991 entitling California to tax much more of Hyatt’s patent license income. After penalties and interest were assessed, the FTB claimed Hyatt owed many millions of dollars. Because the FTB challenged Hyatt’s “move” in 1991, it also challenged his “move” in an audit of his 1992 tax return resulting in many more millions of dollars found to be due to California.

The FTB appealed the jury trial findings in favor of Hyatt. On appeal the Nevada Supreme Court denied Hyatt damages for negligence by the FTB, but upheld damage awards for intentional tort. FTB’s fraud liability was upheld, for $1.8 million, as were damages for intentional infliction of emotional distress (IIED) with no limit or cap. But a new trial was warranted because of errors in the trial court and the $82 million dollar award was vacated. On retrial there is no cap to FTB’s liability and so a retrial may produce more or less damages for FTB’s bad conduct. The punitive damage award for $250 million was vacated and the Court granted California and its FTB immunity from all punitive damages on comity grounds: Nevada would also have granted immunity had Nevada been the bad actor. The trial court award of $52 million for breach of privacy was also vacated. The Court found that because Hyatt’s private information (SSN, home address and other personal identifiers) had previously been published by Hyatt and others, there was no expectation of privacy, hence no privacy damages for FTB’s sharing of that information. But, FTB’s sharing of that information was a foundational element in the award of fraud damages and IIED damages. The attorney’s fees and cost award of $2.5 million – which took a separate court proceeding and 15 months to resolve – was also vacated for recalculation once the retrial was done.

Although we root for the lowly taxpayer in his fight against the mighty tax collection arm of California, we are sure no one would want to be in Hyatt’s shoes because of the anguish and costs he was and is enduring. Even if he is ultimately successful he will have invested decades of his life and unknown amounts of money in his efforts to be vindicated for the harm inflicted upon him.

 

California_Franchise_Tax_Board

End of Year Business (and Personal) Planning

  • December 2, 2014

Whether you are thinking about end of year organization or New Year’s business resolutions, here are a few thoughts for readying your business for the new year ahead:

NewYearAhead300

  • Tax Planning: Many businesses operate on a calendar year tax basis.  That means this is the time to call your CPA and discuss any over or under payments, year-end purchases and retirement account contributions.
  • Charitable Giving: Business or personal, charitable giving is not only a tax deductible event but it is also good for your heart.  There are many local non-profits that could especially use your help this time of year.
  • Trademark Renewals: Trademark registrations do have an expiration date.  Do you know when yours is due?  Do you have it calendared?  You should.
  • Business Registrations: All entities, whether a corporation, LLC or other have annual or bi-annual renewal filing requirements.  Similarly, state and local business licenses may be need to be renewed.  Business registration renewals of all types should be calendared.  If Incline Law Group, LLP serves as your registered agent, we will track your annual business registration and state business license renewal for you.
  • Leases: Commercial leases often run for longer periods of time and new leases or renewals can often take some time to complete. If your lease is expiring in 2016, now is the time to start planning for that.
  • Employment Policies: Does your company have a social media policy? When is the last time you updated your employee handbook?  January 1 is a great time to put new policies in place.  You do want to be sure that your employment practices and policies are compliant with state and federal employment law.  Please be sure to consult with your attorney before putting new employment policies in place.
  • Website Policies: “Terms of Use” and “Privacy Policies” can become outdated, quickly. It is a good idea to review your website policies on an annual basis.  You might also take a look at whether your website technologies are optimized for mobile phones and tablets.  It is the wave of the future, or so the kids say.
  • Insurance: Under the Affordable Care Act (“Obamacare”), there is an open enrollment period which runs November 15 through February 15.  Your employee health insurance plan is now likely to have a year-end renewal date regardless of when you used to renew.  Now is the time to check that out.