photo - OC home salesThe Orange County housing market continues to do well for sellers, buyers not so much. The Orange County Register reports that for the 22 business days ending February 9 the county’s median selling residential home price was $620,000, an increase of 8.8% compared to last year. There were 2,481 Orange County residential properties sold over the last year, an increase of 12.9% from the prior year ago.

To put this in perspective,

  • The nationwide average home value is $184,000 and through the end of January the median home price was $218,867, according to the real estate website Zillow. It states that the country’s home values have increased less than half the rate of Orange County’s increase, 4.2% over the past year.
  • Statewide 393,340 homes were sold in February 2016, up 6.4% from the same time last year, according to the California Association of Realtors (CAR). The state’s median home sales price in February was $446,460.

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2013_02_15__4814Normally a judge will not get involved in the sale of the business as long as there was no fraud and there was fair dealing with the purchase. In May the Delaware Court of Chancery did something out of the ordinary in a decision with potentially broad implications for the future of corporate takeovers, according to the New York Times. The judge decided that the board of directors of Dell Inc. under priced the company by $6 billion when the formerly public company was taken private by a buyout group led by company founder Michael Dell in 2013 for $24.4 billion.

Vice Chancellor J. Travis Laster stated in his decision there had been no higher offer and the board “and its advisors did many praiseworthy things.” However he ruled that shareholders had been short changed and Dell had to pay the plaintiff shareholders their portion of the difference. The decision got Wall Street’s attention because Laster essentially decided the free market didn’t set the right price.

Under the decision a board of directors doesn’t just have a fiduciary duty to find a buyer willing to pay the highest price, but it needs to operate knowing that a judge may finally decide later what that price should have been. Not surprisingly the decision was applauded by shareholder advocates and it may spark future lawsuits involving other companies.

There are dangers of conflicts of interest and self-dealing when management buyouts take a public company private but in this case the decision found no wrongdoing by Dell or its board. Laster decided that based on the “fair price” of the company, incorporated in Delaware, it was simply sold for too little. This case is part of a growing trend where investors buy a company’s stock after a takeover bid has been made public planning to sue the company claiming the price was too low (known as appraisal arbitrage).

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photo - 3 defendants EB5 fraudThree corporate defendants found themselves in a situation where no one wants to be: trying to convince a federal judge they shouldn’t be held in contempt. The August 30 hearing in the U.S. District Court for the Central District of California is the latest chapter in a case brought by the U.S. Securities and Exchange Commission (SEC) concerning an alleged $27 million fraud scheme.

The money allegedly came from at least fifty Chinese nationals seeking eligibility for permanent resident status through the EB-5 investor program. It allows foreigners investing anywhere from $500,000 to $1 million in a commercial U.S. enterprise, saving or creating at least ten jobs in the process, to have legal status in the country for two years with the potential for permanent legal status in the future.

The Beverly Proton Center, the Pacific Proton Therapy Regional Center, LLC, and the Pacific Proton EB 5 Fund, LLC, through their attorneys told the judge they lack access to the Continue reading

photo - fraud remediesAn ongoing fraud case involving an apparently fake plan to build cancer treatment center located in Montebello, funded by Chinese nationals seeking to take advantage of the EB-5 visa program, is an example of investment fraud. Normally fleeced investors lose money. These individuals also lost an opportunity to obtain at least temporary legal residency status in the country as well.

Investors who have been defrauded can take legal action against those who have stolen their money. How difficult this may be depends on the facts of the case and the applicable laws, which could be state and/or federal laws. Common hurdles in these cases beyond carrying the burden of proving fraud occurred is finding where the money went and then getting it back.

If the allegations against Charles Liu, Xin Wang and three corporate defendants are true, this would be a case of fraud by intentional misrepresentation. While investors were told their Continue reading

photo - Jones and Jackson lawsuitIt’s been nearly seven years since Michael Jackson’s death but that passed time hasn’t put an end to the lawsuits involving his music. The latest lawsuit in the news involves his former producer and the production and sales of Jackson’s music after his death.

Los Angeles Superior Court Judge Michal Stern ruled in February that a lawsuit over breach of contract claims filed by Jackson’s former producer Quincy Jones against MJJ Productions (controlled by Jackson’s estate) and record company, Sony Music Entertainment, involving royalties on some of the biggest hits Jones produced for Jackson can go to trial, reports the Orange County Register. He said it would be up to a jury to decide the numerous factual disputes about whether Jones is owed any money.

He sued MJJ Productions and Sony Music Entertainment in 2013 for at least $10 million. Jones claims the defendants edited songs for the “This Is It” film featuring footage of Jackson rehearsing for a concert tour, a pair of Cirque du Soleil shows featuring Jackson’s music and the 25th anniversary edition of Jackson’s album “Bad” to deprive him of royalties and production fees. He also seeks a credit on the film. Jackson’s estate and Sony Music have tried to have the case dismissed.

photo - texting a contractTexting has become a common form of communication. Smart phones are used less and less as phones and more and more as devices to text and email from. You may see texting as an informal, short hand way to communicate but a Massachusetts case shows you need to be careful with texting because the messages you send may be interpreted by a court as creating a binding contract.

The Massachusetts Land Court ruled in April that a series of text messages between two real estate brokers concerning the purchase and sale of a commercial building may be enough to constitute a “writing” meeting the requirements of the Massachusetts Statute of Frauds. In the St. John’s Holdings, LLC v. Two Electronics, LLC, case the court denied defendant’s motion to dismiss arguing the communications at issue were insufficient to be a contract for sale of real estate. The judge found the communications between the parties,

  • Identified the subject of the alleged agreement,
  • Showed they made a contract,
  • Stated the essential terms of the alleged contract with reasonable certainty,
  • Included a form of a signature, and
  • May be the legal equivalent of a written document signed by the parties.

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photo - vizioThe $2 billion sale of Vizio to Leshi Internet Information & Technology Corporation (known as LeEco) is expected to result in the Chinese firm’s much broader reach into the American market. LeEco sells a variety products and the company tries to marry content (some of it of its own making) with the sale of its electronics, according to the Los Angeles Times.

  • LeEco’s Le 2 pro handset sells for $166 in China but for another $15 you get a one-year subscription to the company’s entertainment offerings (Disney’s “Zootopia,” DreamWorks Animation’s “Kung Fu Panda 3,” and live sports broadcasts including Major League Baseball, NBA games and European soccer matches).
  • If you own a LeEco Internet enabled television any shows you stream or bookmark on your phone will be queued up automatically on your TV (and vice versa). The phone is also a remote control for the television set.

That kind of “synergy” may be coming to future Vizio (or LeEco) smartphones sold in the U.S. where, until now, the company is practically unknown. In China and India LeEco has sold millions of phones and televisions. By buying Vizio LeEco enters the U.S. market without having to build its own brand from scratch.

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photo - business divorceIf it’s more than you running the business chances are pretty good the relationship between you and other owners will hit a rocky patch at some point, maybe even become adversarial. Breaking up that business relationship can be seen as a divorce. With some thought, planning and proper execution the split need not necessarily a traumatic break up.

A business divorce is a court-ordered dissolution of a business entity that the parties are involved in. They normally involve corporations, limited liability companies or limited partnerships, though they can also involve general partnerships. Depending on the circumstances this type of dissolution may be not possible or is just not the best option for you. There are other methods that can create leverage for you resulting in a better outcome.

How things can or should end depend on a number of things, including the form of the entity and any agreements between the parties. You would also need to consider state statutes, bylaws and any agreements.

If a partner is not controlling the company or part of management, he or she has a right to inspect the books and records of the company as long as there is a proper purpose for seeking these documents.

  • In a business divorce you might say you’re “investigating possible mismanagement” or “valuing my interest in the company.”
  • Company documents could be the basis for a lawsuit against the managers or directors.
  • Your request to look at books and records may spark a discussion between you and management about how your concerns could be resolved.

The stockholder, member or partner can sue the persons or entities controlling the company for damages due to breach of fiduciary duty or the relevant agreements. If successful, on paper this type of action will not break up the relationship, but as a practical matter that may be the best way to settle the case. Continue reading

photo - pick the right boardIf you’ve chosen a corporation as the structure for your business you need to have a board of directors. If chosen well these people can be a huge asset to your company and help your business become more successful. Choosing the wrong people can be a big setback, sucking time, energy and resources away from managing a business and towards a malfunctioning board.

A board of directors is elected by stockholders and it oversees the corporation’s management. Daily functioning of the business should be left to executive officers recruited and retained by the board. Major decisions affecting a business should be decided at the board level.

If you have a new business you need to find directors. If you have an existing company after a board member leaves you may need to find a replacement. In either case, here are some things to think about.

  • Find someone you trust. A board member will be privy to the company’s innermost secrets. A board member who uses his or her position for personal gain, perhaps by starting a competing company or working for one, would be a huge problem. Though this could be grounds for legal action against this individual, the threat of a lawsuit might not necessarily prevent the person from trying to cash in on his or her access to the company.
  • Those to avoid: VentureBeat lists The Do-Nothing, The White Flag (avoids confrontation), The Cabalist (his or her personal agenda is foremost), The Meddler (focuses too much on details) and The Pontificator (just wants to hear himself talk).
  • Are there too many board members? Do meetings get bogged down because too many people are involved? Is it difficult to reach a decision because of so many opinions? A larger board will also probably be less engaged with the business.
  • What skillsets you should be looking for in board members depends on the maturity of the business. Individuals whose skills are especially helpful for a startup may not be so helpful with a mature, established business. Board members should also have a mix of skills that complement each other and members of management.
  • A board member should be a good fit with the culture of the business. Is the culture dominated by those with strong opinions or run by consensus?
  • How much compensation should a board member receive? If you want skilled, experienced people their time is very valuable. It will take a commitment by a board member to become engaged, do the homework necessary to make informed decisions and attend and participate in board meetings.

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If your company has employees driving either company owned or employee owned vehicles in the course of their duties depending on the circumstances your firm may be held liable for their negligence. Given the potential damages of a catastrophic accident it’s important that your company has sufficient insurance to cover this situation. Without proper insurance your company could be responsible for paying for your legal defense, settlement amount or damages awarded at a trial.

If you have employees driving their own vehicles for company purposes you need to review your coverage. If such a company related errand or delivery is done in a vehicle not owned by your company and an accident occurs your insurance may not cover it. Most business owners have a general liability policy. It’s a common myth this policy will cover anything and everything that could result from business related negligence but most of these policies do not cover car accidents.

There are several potential causes of action that could be filed against you.

  • The legal doctrine of ‘respondeat superior’ means that an employer can be held responsible for the negligent acts of an employee if he or she is acting within the scope of his or her employment. The reasoning is the employer is exercising some control over the employee while the employee is doing his or her job. This can include actions taken by an employee driving his or her own vehicle or one owned by the company.
  • Another legal doctrine impacting such a situation is that an employer has an obligation to defend legal claims against an employee who is acting within the scope of his or her job. If the employer fails to do so the employer can be sued by the employee to get a court order mandating the defense or to pay the employee’s legal bills.

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