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EMPLOYMENT LAW: When Is an Employee’s Resignation Not Really a “Resignation”

The California legislature and judiciary have rendered some rather absurd new regulations and laws impacting business owners over the course of the last 20 years. So much so, that business owners have come to expect pro-employee and anti-employer decisions on a regular basis. This pattern and practice also explains why businesses celebrate when common sense and rational thought factor into a court's decision in an employment law dispute. One such example of a logical and rational court decision was recently handed down by the Second Appellate District in a case that examined when an employee's resignation, really amounted to a resignation.

Ruth Featherstone had worked for a division of Kaiser Permanente (SCPMG) for four years before taking a leave of absence to have surgery on her sinuses. SCPMG granted Featherstone a leave of absence to have her surgery, recuperate and return to her regular duties. Fewer than three weeks following her return to work, Mrs. Featherstone resigned – not once, but twice. The first resignation took place during a telephone conversation when Featherstone told her supervisor that "God had told [her] to do something else" with her life, and that she was resigning her position at SCPMG, effective immediately. That afternoon, Featherstone posted to her Facebook account that she had resigned from her position to "do God's work." Three days later, Featherstone confirmed her decision to resign effective as of the date she tendered her verbal resignation. Five days after she submitted her second, written resignation, Featherstone contacted the human resources department for SCPMG asking to rescind her tendered resignation. By that point, the company had accepted her voluntary resignation, prepared and delivered her final paycheck and taken steps to replace her position in the office.

Featherstone told the HR representative that she had experienced a "relatively uncommon side effect of the medication" she had been taking following her sinus surgery. According to Featherstone, this alleged "adverse drug reaction" to cough syrup with codeine caused her to suffer from an "altered mental state." It was during this alleged "altered state" that she tendered both resignations. She further advised the HR representative, that her doctor discovered that she had "PCP and cocaine in her system that caused [her] to behave so wildly due to the Phenergan with codeine." She indicated it was for these reasons that she had been institutionalized for 72 hours in a mental health facility – which is where she had tendered her written confirmation of resignation.

SCPMG did not allow Featherstone to rescind her resignation, but was told that she would be eligible for re-hire if she sought another available position. Featherstone did not re-apply for any position at SCPMG. Rather, Featherstone sued for discrimination and wrongful termination in violation of public policy. The basis of her claim was that SCPMG knew that she suffered from a "temporary disability" following her surgery, which required accommodation – including an allowance for her to rescind her two resignation attempts.

After losing at the trial court level, Featherstone appealed her case to the Second Appellate District, which ultimately held: "Assuming, arguendo, that a temporary disability, such as the one Featherstone allegedly suffered from, qualifies as a disability under the FEHA [California Fair Employment and Housing Act], summary judgment in favor of SCPMG on Featherstone's disability claim was appropriate because refusing to allow a former employee to rescind a voluntary discharge – that is, a resignation free of employer coercion or misconduct – is not an adverse employment action." Featherstone v. Southern California Permanente Medical Group (April 19, 2017) __ Cal App. 4th ___, page 13.

In short, while each of these discrimination/retaliation/wrongful termination cases always turn on the facts of the case, employers can now rest easy knowing that refusing to allow an employee to rescind a voluntary resignation (presuming there is no untoward coercion forcing the resignation) is not an adverse employment action, which could lead to liability. Keeping in mind, though, that every termination in California carries some level of risk for the employer, consultation with a knowledgeable employment law attorney is essential to keep your business, in business, and away from the courtroom.

In case you are interested in a fun read, or an exercise in sound legal reasoning, the entire Featherstone opinion from the Court of Appeal can be found here.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Driverless Vehicle Regulations Cruise Forward

California has greenlit developers of driverless vehicles to test their vehicles on California roads without a backup driver at the helm, possible as early as November of this year. The tentative directive came from the Department of Motor Vehicles ("DMV"); which oversees regulation this highly-anticipated technology. Previously, developers of driverless cars were required to have a person stationed inside the vehicle, ready to take control if the need arose. The decision was announced after DMV representatives met with major developers at a public hearing held on Tuesday April 25, 2017, including familiar names such as General Motors, Uber, and Google.

The proposed regulations provide that the testing developer must notify and coordinate with the particular city in which the test is to be performed. Interestingly, the proposed regulation does not require the developer to seek approval from the city. Additionally, the developer must maintain a communication link between the vehicle and a remote operator, who is monitoring the vehicle while it is being controlled by the on-board computer. The developer must also provide law enforcement with the means of deactivating the car and communicating with the developer directly. Further, the driverless vehicle must also carry proof of insurance.

Intriguingly, the proposed regulations will also pave the way for developers to obtain permits to sell driverless vehicles within California. While industry leaders believe that the viability of a commercial market for driverless vehicles is still years away, these regulations, at least from a legal standpoint, would allow developers to seek permits as early as the end of this year.

Currently, approximately 30 companies are permitted to test driverless cars on California city streets and highways. These vehicles necessarily rely on computers, cameras, and light-based radar devices to judge distances between objects while in motion. Such electronic components have not always proven to be one-hundred percent reliable at all times. Accordingly, a backup driver was previously required to be stationed at the wheel, ready to take control should the electronic system malfunction.

Proponents of driverless cars are fueled by the concept that, once perfected, these vehicles will revolutionize the transportation industry and drastically reduce automobile collisions and collision-related injuries; which are largely attributable to human error.

However, skepticism remains as critics oppose this move as premature. They contend that the technology is not yet ready to deal with sudden changes in environmental conditions, such as rain, snow, or even fog. The responsiveness of these vehicles to make snap decisions is also largely unknown. Indeed, a driverless vehicle owned by Uber was involved in an automobile collision in Arizona at the end of March 2017, prompting Uber to temporarily suspend its program to conduct further investigation. One witness indicated that the self-driven Uber vehicle appeared to be trying to "beat the light" which had turned yellow just prior to the collision. For these reasons, some are concerned that California's proposed regulations may jeopardize public safety. Indeed, some California watchdog groups, such as the Consumers of Auto Reliability and Safety, are contemplating taking the DMV to court to block the adoption of the forthcoming regulations.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

LEGISLATIVE UPDATE: California Legislature Will Impact Your Business More Than The Washington Noise

All of the noise and chaos coming from Washington, D.C. and the Federal Government in the past 4 months, has made it very difficult for businesses to focus and know what steps to take to plan for their future. However, if you will take a breath and step back you will see that what is really happening is that Congress will continue to move slowly and that any major legislative changes will take significant time. In fact, if any significant measures are to pass I expect it will be the result of COMPROMISE, the word the partisans on both sides of the political spectrum hate. Yes, President Trump will continue to attempt to make significant changes through the issuance of Executive Orders. However, these are limited and some of them are already facing serious legal challenges.

Instead of focusing on the Washington D.C. circus, I would suggest that California businesses focus their time and effort on how California State Government will impact their business. I venture to guess it will be far more than Federal Government.

Since the 2017-2018 two year Legislative Session began in January, the California Legislature has the business community, and economic development, in its cross hairs. If you own a business, want to start a business, or want to develop housing and job centers, the Legislature is targeting you.

In spite of the fact that the Democrat Party regained 2/3 majorities (the Super Majority) in both the Assembly and State Senate in the November, 2016 election, the issues of economic growth and job creation should be bi-partisan issues. Unfortunately, they frequently are not.

Since this is the beginning of the 2 year Legislative session, new legislation is just beginning to work its way through the State Legislature. Any bill must pass its house of origin (either the Assembly or State Senate) then pass the other house before returning to its house of origin for agreement on any changes which had been made. This process will include at least 2, but frequently 4, policy committees in each house along with their respective Appropriations Committee. If a bill makes it through this gauntlet, then the Governor can sign, or veto, the bill and it will become law on January 1 of the next year.

Due to this process, there are many opportunities for you and your business to participate in advocating for or against a bill. Let me highlight just a few of the potential bills which are likely to have the most serious impact on your business and the economy.

­AB 199 (Chu D San Jose) would have imposed the requirement to pay prevailing wages on all development projects whether public or private. Prevailing Wage adds at least 30% to the cost of a project and is already applicable to most public works projects. AB 199 would have extended this requirement to private commercial and development projects. Fortunately, due to the mobilization of California businesses, AB 199 was amended on April 6 and no longer poses such a threat to business.

SB 224 (Jackson D Santa Barbara) would potentially require developers to not only mitigate the impacts of a proposed project, but also historical activities which the applicant has no legal liability or control over, by establishing new California Environmental Quality ACT (CEQA) guidelines regarding the baseline for CEQA analysis. This bill is strongly opposed by the Chamber of Commerce, Building Industry Association and the California Association of Realtors. It passed the Senate Environmental Quality Committee on April 19 with a vote of 5 to 2. It is currently on the Senate Appropriations Suspense File until the cost of the program and the source of the funding can be determined.

SB 562 (Lara D Bell Gardens) Creates a new single-payer government run, multibillion-dollar health care system. Currently the financing for this "revenue Plan" is unspecified and undeveloped. Many employers expect that the business community will be looked at to fund a great portion of this plan as it is developed. With the State already dealing with billions of dollars of long term debt, and the increasing cost of our Medicaid expansion, it is hard to understand how this proposal could be sustainable. The Non-Partisan Legislative Analysist's office has calculated that this would cost $250 billion per year and require significant tax increases on businesses and individuals. In spite of very strong opposition from business and health organizations, the bill passed the Senate Health Committee with a vote of 5 to 2; however, 2 Democrat Senators abstained. SB 562 is now in the Senator Appropriations Committee and due to its high cost will not move until specifics on the financing of this program are amended into the bill. Although California voters have twice voted against a similar plan during the last two decades, the uncertainty of the Affordable Care Act will continue to provide the impetus behind this proposal.

AB 1356 (Eggman D Stockton) Proposes increasing the personal income tax rate to 14.3 % on the highest individual earners, including sole proprietorships. Currently this group of taxpayers pay over 50% of the income tax received by the State's General Fund. If this measure passes, this group of taxpayers will find ways to decrease their burden, which could include leaving the State, resulting in the State losing long term revenue stability. While currently being held in the Assembly Higher Education Committee, this bill could be resurrected at any time.

SCA 6 (Wiener D San Francisco) Would allow local governments to enact special taxes, including parcel taxes, on commercial, residential and industrial property by decreasing the voter requirement from 66.67% to 55%. It passed the Senate Governance and Finance Committee on April 4 with a 5 to 2 vote, and the Senate Transportation and Housing Committee on May 9 by with a 8 to 3 vote, with 2 abstentions.

As indicated above, these bills are just a few of the bills that may have a significant impact on your business and/or the local economy. The California Chamber of Commerce has even gone so far as to label these bills "Jobs Killer Bills." For more information on these and other bills that may impact your business visit www.calchamber.com. The best way to make you voice heard is to get more involved with your local business organization, such as the Santa Clarita Valley Chamber, Valley Industrial Association or Valley Industrial and Commerce Association as these organizations work to help educate your legislators and fight these types of measures.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

CONSTRUCTION LAW: Public Contract Bidders Cannot Pursue Claims for Intentional Interference With Prospective Economic Advantage

Between 2009 and 2012, defendant outbid plaintiffs on 23 public works contracts to apply slurry seal coating on various roadways in Southern California counties. Plaintiffs jointly sued defendant in all of those counties for intentional interference with prospective economic advantage. In the action in Riverside County, plaintiffs alleged that defendant won six public contracts on which plaintiffs were the second lowest bidder. Plaintiffs allege that defendant submitted intentionally submitted deflated bids because it failed to pay prevailing wage and overtime compensation in connection with those contracts. Plaintiffs further alleged that they had relationships with the contracting entities and would have been the successful bidder but for defendant's conduct.

The trial court sustained defendant's demurrer to the cause of action without leave to amend. However, a divided Court of Appeal panel found plaintiffs' allegations sufficient and reversed the trial court's ruling. Defendant then appealed the matter to the California Supreme Court.

In Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., California Supreme Court Case No. S225398 (February 16, 2017), the California Supreme Court held that an unsuccessful bidder on a public contract cannot meet the pleading and proof elements necessary to prevail on an intentional interference with prospective economic advantage claim. Specifically, the Court considered whether the unsuccessful bidder can meet the requirements of showing an existing relationship with the public agency that contains the probability of an economic benefit to the plaintiff. The Court noted that public contracts are a "unique species of commercial dealings" in which public agencies generally retain a broad discretion to reject all bids. Because the bids were sealed and there were no post-submission negotiations, the public agency could give no preference to any bidder based upon past dealings. The public agency was required to accept the lowest responsive and responsible bid, if any bid was accepted.

The Court further reasoned that plaintiffs could not show an existing economic relationship with the public agency because of the uncertainty as to who would be the lowest bidder and whether the agency would reject all of the bids. The Court further noted that the criteria for responsible and responsive bidders made it speculative for plaintiffs to allege that they would have been awarded the contract but for defendant's illegal conduct.

Accordingly, the Court held that plaintiffs' allegations were insufficient and the demurrer was properly sustained.

The Court's decision in Roy Allan eliminates an unsuccessful bidder's challenge to a public contract award based upon the filing of a tort claim for intentional interference with prospective economic advantage. Thus, contractors who are bidding on public contracts must now only focus upon challenges to the successful bidder's responsiveness and responsibility when protesting the award of a public contract. When making such challenges, the protesting bidder should pay close attention to the awarding entity's bid protest procedures.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: Silviana Dumitrescu

LITIGATION: Discovering Social Media

Individuals' willingness to share the details of their lives on social made has created a new source of evidence that has changed the way the legal community approaches discovery and the preservation and/or spoilage of evidence. People turn to their social media profiles to express themselves openly, candidly and often in a carefree way. There appears to be a pervasive belief that posts, opinions, and comments are "private" simply because the user selected an option from their social medial provider to make content viewable only to a select few. But privacy in a social media context is not the same as privacy in a court of law. Over the past few years, courts have provided litigators with broad latitude in discovery of social media data and some courts have issued sanctions for the destruction of relevant social media content.

Facebook, Twitter and Instagram, just to name a few, provide a pool of potential facts to challenge a party's claims or defenses. In transportation litigation, the communications and content created or shared by a plaintiff can be invaluable. Facebook, for example, can tell you where someone was, when, and what they were doing. Instagram, an image driven platform, can show you Plaintiff's physical condition at a given point in time. Snapchat can reveal unsuspecting video footage evidencing of a plaintiff's physical abilities. Given the value of this content to refute claims of injury or challenge a claimant's credibility, it is important to request social media records early in the litigation and further demand it be preserved.

Platforms that save records include Facebook, Twitter, and LinkedIn. Among the discoverable content is the identity of social media accounts, usernames, posts, shares, private messages and communications about issues relevant to the case. Because the content is accessible to plaintiffs through their own accounts, they must also produce all documents containing any content or communications relevant to the issues.

Importantly, relevant social media content from platforms over which the plaintiff has control can be obtained utilizing existing California discovery statutes. Similarly, current California law allows the right to demand that social media content be preserved pursuant to pending litigation. Protection of this often untapped source of evidence is paramount, and issuance of discovery demands and specific requests for preservation of all relevant electronically stored information ("ESI"), including social media content, is a vital part of preventing spoliation of evidence issues.

Not all social media platforms are created equal, and different approaches are necessary to secure potential evidence. Some platforms preserve all content, whereas others are designed to be only temporary custodians. It is not uncommon for user to delete relevant but unfavorable content despite pending litigation. Understanding the nature of the different social media platforms and how to use these tools is key to preserving and obtaining relevant social media content.

Social media data from temporary content platforms is also obtainable using the subpoena power. Data on temporary content platforms, such as Snapchat, Yik Yak, and Erodr, is designed to disappear after its created and viewed. While a plaintiff cannot access the data from his own account, the provider can recover the elusive content from its servers. However, because these platforms were specifically created to be temporary, anonymous, and unreachable, many will either refuse to produce records or keep content on their servers for only a short time. One way to potentially preserve this content is to act quickly in these situations and secure a court order before the content is lost.

Social media has forever changed the litigation landscape. Understanding what each platform has to offer and how its content can be used to uncover a plaintiff's communications, mental state, and physical condition is essential to litigating in the new millennium.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Driverless Vehicle Regulations Cruise Forward

California has greenlit developers of driverless vehicles to test their vehicles on California roads without a backup driver at the helm, possible as early as November of this year. The tentative directive came from the Department of Motor Vehicles ("DMV"); which oversees regulation this highly-anticipated technology. Previously, developers of driverless cars were required to have a person stationed inside the vehicle, ready to take control if the need arose. The decision was announced after DMV representatives met with major developers at a public hearing held on Tuesday April 25, 2017, including familiar names such as General Motors, Uber, and Google.

The proposed regulations provide that the testing developer must notify and coordinate with the particular city in which the test is to be performed. Interestingly, the proposed regulation does not require the developer to seek approval from the city. Additionally, the developer must maintain a communication link between the vehicle and a remote operator, who is monitoring the vehicle while it is being controlled by the on-board computer. The developer must also provide law enforcement with the means of deactivating the car and communicating with the developer directly. Further, the driverless vehicle must also carry proof of insurance.

Intriguingly, the proposed regulations will also pave the way for developers to obtain permits to sell driverless vehicles within California. While industry leaders believe that the viability of a commercial market for driverless vehicles is still years away, these regulations, at least from a legal standpoint, would allow developers to seek permits as early as the end of this year.

Currently, approximately 30 companies are permitted to test driverless cars on California city streets and highways. These vehicles necessarily rely on computers, cameras, and light-based radar devices to judge distances between objects while in motion. Such electronic components have not always proven to be one-hundred percent reliable at all times. Accordingly, a backup driver was previously required to be stationed at the wheel, ready to take control should the electronic system malfunction.

Proponents of driverless cars are fueled by the concept that, once perfected, these vehicles will revolutionize the transportation industry and drastically reduce automobile collisions and collision-related injuries; which are largely attributable to human error.

However, skepticism remains as critics oppose this move as premature. They contend that the technology is not yet ready to deal with sudden changes in environmental conditions, such as rain, snow, or even fog. The responsiveness of these vehicles to make snap decisions is also largely unknown. Indeed, a driverless vehicle owned by Uber was involved in an automobile collision in Arizona at the end of March 2017, prompting Uber to temporarily suspend its program to conduct further investigation. One witness indicated that the self-driven Uber vehicle appeared to be trying to "beat the light" which had turned yellow just prior to the collision. For these reasons, some are concerned that California's proposed regulations may jeopardize public safety. Indeed, some California watchdog groups, such as the Consumers of Auto Reliability and Safety, are contemplating taking the DMV to court to block the adoption of the forthcoming regulations.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: M. Lisa Odom

INTELLECTUAL PROPERTY: Trademarks Part III

By M. Lisa Odom and Andrew M. Sevanian

Now that you have a federally registered trademark, consider how you might police or enforce it against third parties in order to protect your trademark rights.

Editor's Note: this article is a follow-up to Andrew Sevanian's "Trademark Part II" article in which Mr. Sevanian addresses the important steps in applying for federal trademark registration and secure trademark rights.

In our trademark practice, we often face situations in which our clients must police (or enforce) their trademark rights against third parties who are using confusingly similar words, phrases and/or logos that violate our client's intellectual property rights. This often comes down to our client's ability to cite relevant trademark law, such as the federal Lanham Act (the "Trademark Act"), for actionable causes against these third parties.

The focus of this article is to address some (not all) of the key issues when considering how to police or enforce your trademark rights against third parties.

POLICING (OR ENFORCING) YOUR TRADEMARK RIGHTS

Trademark owners use several grounds to seek relief against third parties that violate the owner's trademark rights. Those grounds for trademark protection include, but are not limited to, (a) Trademark Infringement; (b) Trademark Dilution; and (c) Unfair Competition.

Infringement:

Perhaps the most commonly presented argument in any trademark dispute is that the other party is "infringing" on the trademark owner's rights. But what does "infringement" really mean in this context?

Trademark infringement turns on a subsequent mark (and/or the use thereof) that is "likely to cause confusion" as to the source of another, prior trademark. See 15 U.S.C. §§ 1114, 1125. Under the Trademark Act, the owner a valid, registered trademark can sue other parties who subsequently use an infringing mark. For infringement to occur, it typically must be shown that the infringing mark is confusingly similar to your trademark based on several different factors (i.e. the marks are confusingly similar in name, sound and/or commercial impression or connotation and/or sufficiently related in terms of the goods or services associated with the mark) to the point that the consumer may not be able to distinguish what or who the mark represents. See Polaroid Corp. v. Polarad Elect. Corp., 287 F.2d 492 (2d Cir.), cert. denied, 368 U.S. 820 (1961) (a landmark case that established the "Polaroid factors" for determining claims of trademark infringement).

By way of example, let's suppose the hypothetical scenario in which Mountain Dew, without any authorization from Nike, were to use the phrase "Just Dew It" on soda bottles and t-shirts. This could be confusingly similar to Nike's trademarked phrase "Just Do It" (featured on a variety of goods/services) and might thereby constitute trademark infringement.

Dilution:


An alternative cause of action is when the infringing mark (and/or use of that mark) is likely to impair the distinctiveness of your trademark by whittling away (or "diluting") its ability to serve as a source identifier of goods. See 15 U.S.C. § 1125(c). For dilution to apply, under federal law, your trademark must be "famous" (i.e. it must be "widely recognized by the general consuming public as a designation of goods and services of the mark's owner"). See 15 U.S.C. § 1125(c). Examples of famous marks include NIKE and TOYS "R" US.

Under the Trademark Act, there are two forms of Dilution:

  • Blurring occurs when an infringing mark "blurs" or weakens the power a mark by associating that mark with dissimilar goods/services. For example, the above hypothetical about "Just Dew It" vs. "Just Do It" could very well be considered a famous trademarked phrase ("Just Do It") being blurred by a confusingly similar mark in "Just Dew It." Another real world example can be found in the case where a company named NIKEPAL, which sold syringes through the website "nikepal.com," was found to dilute or "blur" the strength of the famous trademark NIKE (for apparel and footwear). Nike, Inc. v. Nikepal Int'l, 84 U.S.P.Q.2d 1820 (E.D. Cal. 2007).
  • Tarnishment occurs when an infringing mark loads a disreputable meaning on a trademark, and thereby harms the reputation of that trademark by casting it in an unflattering or unsavory light. For example, the adult-content website "ADULTSRUS.com" was found to dilute or "tarnish" the famous mark TOYS "R" US by casting it in an unflattering light. Toys "R" Us v. Akkaoui, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. Oct. 29, 1996).

In learning from these cases, it is increasingly apparent that trademark owners (especially those with "famous" trademarks) must be vigilant in protecting their trademark. In doing nothing, the trademark owner runs the risk of his/her mark becoming diluted and weakened into a "generic" word or phrase that no longer operates as a distinctive trademark. If this were to happen, other parties might then be able to use your mark in a variety of ways because your mark would have become generic and essentially lost its strength as a trademark (i.e., a particular source identifier of goods/services). Examples of trademarks that have been notoriously diluted are "XEROX" and "KLEENEX." Unfortunately for XEROX and KLEENEX, people now associate the products (i.e. a copy of a document or a tissue, respectively) with the marks even if the copy is made by a Canon copier or the tissue is made by Puffs or another paper company.

Unfair competition and false designation of origin:

This occurs when the infringing trademark and/or use of that trademark constitutes a "false designation of origin" or is likely to cause confusion about the "origin, sponsorship, or approval" of goods, services or commercial activities. See 15 U.S.C. §1125. In other words, the infringing mark/use of the mark creates a false impression of sponsorship between you, the trademark owner, and the infringer.

The Nike vs. Mountain Dew hypothetical above is certainly an example of unfair competition based on some false designation of origin or a falsely implied sponsorship between the two parties due to the similarity in the phrases "Just Dew It" vs. "Just Do It."

Another example of unfair competition might include television show featuring a COCA COLA bottle in the background when the television show did not have the authorization to feature the COCA COLA name. This could create, among other things, a false impression of sponsorship or approval by Coca Cola unto the television show. Coca Cola would certainly want to take action to ensure that that their brand name and trademark are only used in a manner to which they consent.

The Big Picture:

When you find that another party might be infringing your trademark rights, or diluting the strength of your trademark, or perhaps even using your trademark in an unauthorized way that otherwise amounts of unfair competition, it is up to you to do something about it.

You and/or your representative might have to take necessary actions to protect your trademark rights, including:

  • Sending Cease and Desist (C&D) Letters to infringers of your mark. In such letters, the typical request is that the infringer stops committing such infringing use of your mark. C&D letters are usually the first step taken to stop infringers.
  • Filing legal claims. This is usually the subsequent step to sending C&D Letters. Legal claims can include injunctive relief (e.g. barring the infringer from further use of your mark/the infringing mark) and/or damages (e.g. monetary rewards, including lost profits caused by such infringing mark/use).

With these considerations in mind, you are equipped with some of the basics on how you might protect your trademark rights against third parties. When doing so, it is highly recommended that you hire an experienced trademark attorney to advise you with best practices in the various approaches to ensuring other parties cease any further violation of your trademark rights.

For more information about how to ensure that your trademark rights do not become abandoned, so that you can continue to protect your trademark, please stay tuned for our Trademarks Part IV article coming soon.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

EMPLOYMENT LITIGATION: Nine-Year Employment Lawsuit Against Motor Carrier Comes to an End

After nine years in the legal system, an exorbitant amount of legal fees, and hours upon hours of work, the matter of James Cole v. CRST Inc., et al. has finally come to an end, at least for the time being. On March 31, 2017, U.S. District Judge Virginia A. Phillips granted summary judgment to CRST, ending a lawsuit brought by James Cole on behalf of himself and 4,200 other truck drivers regarding CRST's labor practices.

On October 6, 2008, James Cole filed a putative class action lawsuit in California Superior Court for the County of San Bernardino against his employer, CRST Van Expedited, Inc., a motor carrier that transports freight to customers across the country, in California Superior Court for the County of San Bernardino. Cole alleged that he, along with 4,200 other truck drivers, were, among other claims, not provided rest and meal breaks, proper compensation for work performed, and not provided with itemized wage statements. Although class certification was initially granted in August 2010, Judge Phillips later reversed her original order and fully decertified the class in 2016 after finding that Cole could no longer satisfy the predominance requirement for class certification.

Despite losing on the issue of class certification, Cole continued to litigate his individual claims against CRST. However, after all the dust had settled over the years, the only real claims remaining were related to Cole's allegations that he was not provided with meal and rest breaks, as well as claims that he was not paid minimum wages for "nonproductive" work performed. On March 31, 2017, in what many would likely consider an anomaly, Judge Phillips adjudicated these remaining claims in favor of CRST and against Cole by granting CRST's motion for summary judgment, obliterating Cole's claims and ending the protracted litigation.

Under California Labor Code § 512, an employee is entitled to an uninterrupted/off-duty meal period of not less than thirty (30) minutes if he or she is working for more than five (5) hours per day, which may be waived by mutual consent of employer and employee only if the employee is working for no more than six hours. Additionally, a second uninterrupted meal period of thirty (30) minutes must be given if the employee works more than ten (10) hours per day. However, this second meal period may be waived, but only if a statutorily compliant first meal period was taken.

In the instance that a full uninterrupted/off-duty meal period is not taken or provided, the employee is entitled to a one hour premium wage rate for each missed meal period. Furthermore, pursuant to Brinker Restaurant Corporation, et al. v. Superior Court of San Diego County (2012) 53 Cal.4th 1004 ("Brinker"), if an employer's records fail to show that a meal period was given, there is a rebuttable presumption that the employee was not relieved of all duty and no meal period was provided.

Regarding rest periods, California Industrial Welfare Order 4-2001 requires that an employer authorizes and permits a ten (10) minute rest period for each four (4) hour work period, or major fraction thereof. These rest periods are counted as "time worked," and therefore, the employer is required to pay for such periods.

Here, CRST argued that it encouraged and trained its drivers to not drive more than five hours without taking a break and to take breaks if they ever felt fatigued. In contrast, Cole argued that CRST did not do enough to enforce their policy or police its employees to ensure that appropriate meal and rest breaks were being taken. The court, relying on the rationale of Brinker, tossed out Cole's claim as an employer is not obligated to police its employees to make certain that meal and rest periods are being taken. Indeed, the requirement in California is that an employer provide an opportunity for the mandated breaks and do nothing to discourage or prevent the employee from taking a meal or rest break.

In regards to Cole's claim that CRST had failed to pay him minimum wage for all work performed, Cole argued that the compensation structure of CRST, which utilized a piece-rate system, failed to account for "non-driving" tasks he performed while on duty. In essence, Cole argued that he was not paid for "nonproductive" time which is defined under Labor Code Section 226.2 as "time under the employer's control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis." In fact, this was the same claim made in the recent case of Ridgeway et al. v. Wal-Mart Stores Inc. et al. (Case No. 3:08-cv-05221) which resulted in a San Francisco jury awarding Wal-Mart drivers $54 million based on Wal-Mart's alleged failure to pay truckers for "nonproductive" work such as waiting to load/unload their cargo, washing and fueling the trucks, and filling out forms.

Despite the parallel nature of the claims, Cole's minimum wage cause of action was adjudicated in CRST's favor and never made it to a jury. In granting CRST's motion, the court found that Cole had failed to present any evidence of the specific hours in which he did not receive a minimum wage.

Although CRST and its attorneys may be breathing a sigh of relief, any celebration may be premature. Cole's attorneys have already indicated that they will appeal the case to the Ninth Circuit Court based on the belief that Judge Phillips erred in decertifying the class last year, which had detrimental ramifications for Cole and pervaded the court's summary judgment ruling in CRST's favor. It seems, that even after nine years of litigating this case, the final of chapter of James Cole v. CRST Inc., et al. has yet to be written.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TOXIC TORTS: One Step Forward, Two Steps Back for Monsanto and Glyphosate

Two days after the European Chemicals Agency (ECHA) announced that glyphosate does not cause cancer, over forty California residents sued its developer, Monsanto Co., and one of its distributors, Wilbur-Ellis Company, alleging that Monsanto's Roundup® products, which contains glyphosate, caused them or their decedents to develop non-Hodgkin's lymphoma and other hematopoietic cancers.

On March 15, 2017, the European Chemicals Agency (ECHA), an agency of the European Union (EU) that manages the technical, scientific and administrative aspects of the implementation of EU's chemicals legislation, stated that it would maintain its current "classification of glyphosate as a substance causing serious eye damage and being toxic to aquatic life with long-lasting effects." In reaching its decision, ECHA's Committee for Risk Assessment (RAC) concluded that the available scientific evidence did not meet the criteria to classify glyphosate as a carcinogen, as a mutagen, or as toxic for reproduction.

This finding was consistent with the European Food Safety Authority's conclusion expressed in November 2015, which directly contradicted the "probable" link between glyphosate and cancer that International Agency for Research on Cancer (IARC) warned about earlier that year.

Yet, on March 17, 2017, forty-one plaintiffs filed a complaint for personal injuries and wrongful death in Alameda County Superior Court. In Lorette I. Pennie, et al. v. Monsanto Company, et al. (Alameda County Sup. Ct., RG17853420), Plaintiffs alleged, among other things, that "Defendants knew or should have known that the Roundup® products were defective and were inherently dangerous and unsafe when used in the manner instructed and provided by Defendants." The allegations in the complaint relied heavily on the findings by IARC. Plaintiffs seek to recover under theories of strict liability, negligence, fraud, and breach of warranties, as well as punitive damages.

This lawsuit follows another setback for Monsanto Co. earlier this month when Fresno County Superior Court Judge, Hon. Kristi Culver Kapetan, ruled on March 10, 2017 that California's Office of Environmental Health Hazard Assessment (OEHHA) could move forward with its plan to include glyphosate on its Proposition 65 list. The list contains a wide range of naturally occurring and synthetic chemicals that are known to cause cancer or birth defects or other reproductive harm. If a product placed in the stream of commerce in California contains a chemical included in the Proposition 65 list, said product must include a specific warning unless the exposure is low enough to pose no significant risk of cancer, birth defects or reproductive harm.

Monsanto Co. sued to block OEHHA from including glyphosate in the Proposition 65 list, claiming that OEHHA acted unconstitutionally in listing it and was impinging on Monsanto's First Amended right to free speech by requiring Monsanto to include warning labels on products containing glyphosate. While the ECHA's finding may assist in combating lawsuits such as Pennie alleging a causal link between glyphosate and cancer, the inclusion of glyphosate on the Proposition 65 list, as well as IARC's "probable" link between glyphosate and cancer, will unfortunately allow such lawsuits to proceed past the pleading stages.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TOXIC TORTS: Tough on Talcum—Court sets Preferential Trial Date For Talcum Case

The judge overseeing California's coordinated docket for talcum powder cases has scheduled the first trial date, a significant event for companies and businesses that have talcum powder products. On January 30, 2017, at a hearing for Plaintiff Eva Echeverria's motion for trial preference, Judge Maren Nelson of the California Superior Court for Los Angeles County set trial in the case of Johnson & Johnson Talcum Powder Cases, JCCP No. 4872, for July 3, 2017.

This involves the claims of Plaintiff Eva Echeverria, who purportedly used Johnson & Johnson's talcum based baby powder and absorbent body powder for decades. She claims that her exposure to talcum powder was a substantial factor in causing her ovarian cancer, as well as causing her pain and suffering. Previously in the litigation, Echeverria moved for trial preference, claiming that she did not expect to live beyond the next six months due to her ovarian cancer.

Two of the defendants, Johnson & Johnson and Imerys Talc, opposed Echeverria's motion for preference, arguing that her motion would not only undermine the Court's coordination efforts, but also that there was insufficient time for discovery. Moreover, the defendants argued that Echeverria's motion failed to provide sufficient evidence in support of her motion, arguing that there is little scientific research regarding talcum powder's connection with cancer, especially ovarian cancer.

In reply, Plaintiff Echeverria provided three declarations from two oncologists, one of whom had been treating her since 2007, to support her argument for preferential trial dates due to her declining health. With supporting declarations of her doctors, Echeverria argued that her ovarian cancer was resistant to treatment, that she had been hospitalized in relation to her ovarian cancer, and that she had a grave prognosis. Echeverria also argued that the defendants failed to provide medical evidence to contradict the declarations made by her oncologists with regards to the seriousness of her ovarian cancer. Moreover, Echeverria argued that the early trial date would not interfere with the Court's efforts in coordinating the cases, arguing that her counsel could both prepare her own case for trial while furthering the coordinated case proceeding. Ultimately, Judge Nelson agreed with the plaintiff, and set a preference trial date for July 3, 2017.

California's coordinated docket for talcum powder cases, as well as the upcoming trial for the Johnson & Johnson Talcum Powder Cases in July 2017, should place companies and businesses on alert. As previously reported, in prior cases involving talcum powder, plaintiffs received large awards; including a $70 million verdict for a plaintiff suffering from ovarian cancer. Despite the dearth of research regarding the connection between talcum powder exposure and cancers such as ovarian cancer, California's court system has taken a serious interest in these talc cases, as demonstrated by the court's efforts to coordinate the cases. Companies with talcum products should be aware of the court's willingness to set a preference trial in talcum cases, despite few scientific studies linking talc to cancer and despite the Los Angeles County court's efforts to have a coordinated talcum powder docket.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

CONSTRUCTION LAW: CSLB Announces New Forms and Fees for Contractors

The California Contractors State License Board ("CSLB") has announced that it is issuing new, interactive forms to help simplify the application process to obtain a contractor license and to aid licensees who need to amend or update their licenses. CSLB considers the new forms a further step in the upgrade of CSLB's on-line services.

Applicants or licensees will now be able to use the "easy fill" option on the CSLB website. The new forms provide an alert if an error is made when entering information, such as when there are conflicts between information on the form or when necessary information is left blank. The new forms also provide reminders concerning additional forms which may need to be submitted. CSLB hopes that this new format will make completion of the forms faster and easier with less error.

While the forms can be completed on the CSLB website, the forms cannot be electronically submitted. Rather, the applicant or licensee must print out the form, sign it, and send it to the CSLB.

The new "easy fill" forms include the application for original contractor license, application for an additional license classification, application to replace the qualifying individual, certification of work experience, and application for home improvement salesperson registration.

The new forms also note the fee increases that take effect on July 1, 2017.

As of May 1, 2017, CSLB will only accept the forms with a revision date of October 2016 ("rev. 10/16" shown in the bottom left corner) or later, all of which are available on the CLSB website. Older forms sent to the CSLB after this date will be returned with any fees included with the form.

Accordingly, applicants for contractors licenses and current licensees who need to renew or amend their existing licenses need to pay careful attention that they are using the correct form and, after July 1, 2017, paying the correct fee to avoid having the form rejected and returned.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
Trademarks Part II21-Mar-2017
By: Andrew M. Sevanian

Trademarks Part II

Now that you have a trademark in mind, consider how you might protect it.

Editor's Note: this article is a follow-up to John Shaffery's February 21, 2017 article titled "Trademark Selection and Federal Registration" in which Mr. Shaffery addresses the important steps in choosing a trademark as well as the benefits of attaining federal trademark registration. With these important considerations in mind, trademark owners might want to then consider how they might secure, maintain and enforce their trademark rights:

Steps to Apply for Trademark Registration

When it comes to filing an application to register your trademark, individuals and entities with products and/or services in the United States will want to consider filing an application with the United States Patent and Trademark Office (the "USPTO").

Search to Make Sure Your Mark Appears Available

Before submitting an application to register your mark, you and/or your representative might want to consider conducting a trademark search. The purpose of a search is to create a reasonable level of confidence that the same or a similar trademark has not already been registered and/or is being used by another party.

You and/or your representative can log into the USPTO Trademark Electronic Search System (TESS) and search for similar marks to the mark you wish to register. You might also consider searching for similar marks on website search engines such as Google or Bing. More advanced search options may be available through law firms and other search agents.

It is highly recommended that you hire a professional representative, such as an attorney, to conduct your search as well as review your search results so as to advise you as to any apparent obstacles to the use and/or registration of your proposed trademark.

Filing Your Trademark Application – Consider Hiring an Attorney

It is again recommended that you hire an attorney or other representative experienced in trademark matters to assist you with your trademark filing, as roadblocks can occur along the way in the application process. A lawyer can file a trademark application on your behalf and act as your "Attorney of Record" as well as your "Correspondent" for all matters related to your trademark application. A primary benefit of hiring an attorney is that it allows you to delegate the responsibility of handling your application to an experienced professional while you are able to focus on what you do best- running your business!

Trademark applications can be filed on the USPTO trademarks database through the Trademark Electronic Application System (TEAS).

Principal Register vs. Supplemental Register

There are two types of federal trademark "Registers" to which you can apply for registration - (1) The Principal Register, which is exclusively for trademarks that are distinctly unique or that have acquired distinctiveness over time; and (2)The Supplemental Register; which is for non-distinctive marks that are capable of acquiring distinctiveness but have yet to acquire it.

The Principal Register carries all of the rights of federal trademark registration, including those mentioned in Mr. Shaffery's article. The Supplemental Register can be a good option if your mark would be incapable of principal registration but you still want to federally register it in some way. A Supplemental Registration does grant its owner certain rights of regular federal trademark registration (e.g., the right to use the registered ® symbol). However, Supplemental Registration does not grant all of the same rights of Principal Registration. For instance, a Supplemental Registration can never become "incontestable" (please see below for more details) and it cannot be converted into a Principal Registration; meaning you would need to submit a new application to file your trademark on the Principal Register so long as your mark has acquired distinctiveness.

Consider the Basis for Your Application - "Actual Use" or "Intent to Use"

When filing your application, you will need to consider if you are filing on an "Actual Use" or an "Intent to Use" Basis. In other words, are you already using the trademark (i.e., the goods/services associated with your mark are already being used, sold and/or transported across interstate commerce), or do you have a bona fide intent to use your trademark sometime in the reasonably foreseeable future? The basis of your filing carries different implications, including whether or not you have to submit "Specimens of Use" (i.e., evidence that you are actually using your mark in commerce) at the time of your initial filing.

Consider What Goods and/or Services You Want to be Associated with Your Trademark

When you file your trademark application, you will need to disclose the International Class or category of your goods/services as well as provide an accurate description of your goods/services.

In determining the appropriate class, you can consider consulting the Nice Classification which is broken up into 34 classes of "goods" and 11 classes of "services."

Once you have determined the appropriate class, you will then need to consider an accurate description of your goods/services. To this end, you might consider visiting the U.S. Acceptable Identification of Goods and Services Manual (ID Manual) for a list of acceptable descriptions. You have the option to use descriptions from this ID Manual. The benefit of selecting a description from this ID Manual is that it usually carries reduced filing fees in your application ($225 instead of $275+ for each class of goods/services that you apply for registration). On the other hand, you can choose to free-form write in your description during the application process, which will carry a higher filing fee.

Monitor Your Application for Important Updates

Once your trademark application is filed, keep track of your filing for important updates and notices from the USPTO. A Trademark Examining Attorney (TEA) at the USPTO will review your application and let you know if there are any objections (e.g., "Office Actions") to your mark becoming registered. It typically takes roughly three months before such a TEA review process occurs. If/when there are no more TEA objections, or all objections have been overcome, then the mark will proceed toward being "published" in the Trademark Gazette; which is available for review by third parties who have a limited window of opportunity (e.g., usually for 30 days unless extensions are granted) to oppose your mark becoming registered if such registration might otherwise violate the trademark rights of such third parties. If no oppositions arise, or any oppositions arise but are overcome, then your mark should proceed to registration.

IMPORTANT NOTE: you are responsible for responding to any and all communications from the USPTO in a timely fashion. If you fail to do so, you risk the termination of your application.

Maintaining Registration – "Use it or lose it?"

Assuming you have made it through the above steps and your mark has become registered, congratulations! However, that is not the end of your responsibilities as the trademark owner.

After registering your trademark, you will be required to submit various renewals at different stages in order to maintain your registration. The failure to submit such renewals on a timely basis could risk you losing your registration.

The first renewal is due between the 5th and 6th years after your registration date. At this time, you will be required to submit a "Declaration" that you are continuing to use your trademark or that you are excused from using the mark. You may also consider filing a "Declaration of Incontestability" (if applicable). A trademark that has been used in commerce for five (5) consecutive years following Principal Registration can qualify for "incontestable" status; which, among other things, carries with it conclusive evidence of the validity of the mark and the trademark owner's exclusive right to use the mark with the stated goods/services. There are certain limited exceptions to trademark incontestability set forth in §§15 and 33(b) of the Trademark Act, 15 U.S.C. §§1065 and 15 U.S.C. §§1115(b), such as if the registration was acquired via fraud or if the mark has later become abandoned based on non-use.

Subsequent renewals are due between the 9th and 10th year after your registration date, and then every 10 years thereafter. At these times, you will be required to file a Declaration of Continued Use or Excusable Non-Use as well as a Renewal of Registration.

Policing Your Trademark

Regardless of registration, you want to give careful consideration as to how you will protect your trademark.

Something very important to note about trademarks is that, as the owner the mark, you must self-police your rights against others. In other words, it is your responsibility to make sure that others do not infringe your trademark rights. Just because someone violates your trademark rights does not mean the authorities will seek them out and haul them off to trademark jail. Rather, you, the trademark owner, must do your own detective work in order to assess who is infringing your rights and then take action so as to prevent any further infringement and/or unauthorized use.

For more information about how to police your trademark (e.g., sending cease and desist letters and/or filing complaints based on the various theories of recovery based on the violation of trademark rights), please stay tuned for our Trademarks Part III article coming soon.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: Cecilie E. Read

One Hundred Hostile Hugs

In the recent 9th Circuit decision,Zetwick v. County of Yolo, the plaintiff, a county correctional officer alleged that her supervisor, the county sheriff, created a hostile work environment. Her primary complaint was that her supervisor hugged too much. Specifically, the plaintiff estimated that from 1999 to 2002, her supervisor hugged her approximately twenty five times; and from 2003 to 2011, he hugged her at least a hundred times. The plaintiff also indicated that she witnessed her supervisor hug other female employees, but never male employees.

The district court had decided as a matter of law that Plaintiff could not succeed on her hostile work environment claim under Title VII of the Civil Rights Act of 1964 ("Title VII"). Under Title VII, an employer is liable for conduct giving rise to a hostile environment where the employee proves: 1) she was subjected to verbal or physical conduct of a harassing nature; 2) that the conduct was unwelcome; and, 3) the conduct was sufficiently severe or pervasive to alter the condition of employment. However, the district court indicated that hugs and kisses were not "outside the realm of common workplace behavior" and the conduct was not sufficiently severe or pervasive as a matter of law to support a claim under Title VII.

The 9th circuit panel in Zetwick disagreed holding that "hugging can create a hostile and abusive workplace when it is unwelcome and pervasive."

The 9th circuit panel is not necessarily anti-hug, although during oral arguments all three judges expressed distaste for supervisors hugging their subordinates. Instead the holding indicates that a jury should decide whether the actions of the supervisor would "alter the conditions of employment."

Though the Zetwick Court was not specifically holding that hugging employees is prohibited, the case should give employers pause before they embrace their employees.

The evidence in Zetwick was that Sheriff was a prolific hugger. He not only hugged the plaintiff, but other female employees on a regular basis. The County alleged that the Sheriff also hugged male employees. Moreover, Plaintiff, herself, described the Sheriff's hugs "as the kind that one might give a relative or friend" (though it was argued that Plaintiff still felt uncomfortable with the hugging). Despite the seemingly good-natured intentions behind the Sheriff's squeezes, they were apparently unwelcome by the plaintiff.

The moral of this case is that employers should tread carefully when there is touching in the workplace, particularly between supervisors and subordinates. A subordinate may feel they cannot reject the touching of a supervisor without repercussion to his or her job. A healthy handshake or fist bump may be a better practice when trying to be friendly at work. Employers should also provide harassment prevention training for supervisors to give guidance in navigating the gray areas of harassment.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TOXIC TORTS: DuPont’s Multi-Million Dollar Chemical Exposure Settlement

In February of 2017, DuPont reached terms on a $670.7 million settlement in resolution of 3,550 personal injury lawsuits by plaintiffs in Ohio and West Virginia. Chemours, a spin-off company of DuPont in 2015, is responsible to pay for half of the total settlement amount.

The large settlement is a culmination of over 3,550 pending personal injury lawsuits in Ohio and West Virginia. The plaintiffs, also residents of Ohio and West Virginia, alleged that they became sick from water that was contaminated by perfluorooctanoic acid (PFOA) or "C-8", which was released from a former DuPont plant in Parkersburg, West Virginia. This chemical is used to make items like Teflon non-stick pans, water repellent products such as water-proof jackets, and grease repellent products including microwavable popcorn bags. These chemical were used at the Parkersburg facility since the 1950s.

In 2001, the first lawsuits sprouted up against DuPont over purported issues due to exposure to C-8 from the local drinking water. In 2004, DuPont agreed to fund medical monitoring programs and install new water treatment systems for its plant in Parkersburg, WV. It empaneled a group of scientists to study the link between C-8 and relevant diseases. The panel concluded that there was a probable link between C-8 and the following illnesses: kidney and testicular cancer, ulcerative colitis, thyroid disease, pregnancy-induced hypertension and high cholesterol.

In 2005, the EPA levied a penalty against DuPont for purportedly hiding information regarding C-8 and its impact on the communities surrounding the plant. In 2006, DuPont, along with other companies such as 3M, decided to phase out the use of C-8 in the production of its products and eliminated the use of C-8 in their products.

Of the 3,550 PFOA injury cases, seven have gone to trial. Of those seven, three settled for an undisclosed amount, three resulted in jury awards for plaintiffs totaling approximately $20 million, and the most recent verdict, decided in January 2017, resulted in a verdict of $12.5 million. The pending class action settlement agreement for $670.7 million is currently waiting the approval by the plaintiffs of the remaining 3,550 injury cases.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Trumping Regulations, Vol. 2: ELD Mandate Likely Moving Forward

Last month we reported that the regulatory freeze imposed by the White House left an aura of uncertainty over the future of pending regulatory initiatives which were set to go into effect this year. In follow up, this month we report that the regulatory freeze will likely not affect the implementation of the Federal Motor Carrier Safety Administration's (FMCSA's) Electronic Logging Device Mandate ("ELD Mandate").

The ELD Mandate requires the mandatory use of electronic logging devices (ELDs) by drivers currently required to prepare hours-of-service (HOS) records of duty status. These devices are aimed at allowing drivers to keep accurate track of their hours of service. The ELD Mandate is set to take effect on December 18, 2017, following a two-year compliance window allotted to allow the transportation industry to sufficiently equip their vehicles with ELDs.

It is estimated that this regulation will save truckers more than $1 billion in annual costs, attributable to the elimination of paperwork and logbooks. It will also allow law enforcement personnel to review a driver's records more efficiently.

The regulation is not without controversy; however, because it may push out smaller operators who may struggle to incur the additional costs of equipping their vehicles with ELDs. The costs of this hardware is estimated at approximately $1,500.00 per truck; a cost that can add up depending on the number of trucks in operation. Although the costs may not appear to be exuberant, this regulation is yet another in a slew of tougher regulations from the FMCSA enacted in the previous 18 months; including regulations determining the number of allowable hours, lengths of shift and time between shifts that commercial drivers must observe.

The White House's freeze on regulatory implementation may temporarily ease some of these concerns; and it would not be unreasonable to assume that some of these regulations will be rolled-back under a conservative administration. However, the ELD Mandate is likely here to stay. This is largely due to the fact that the ELD Mandate was stipulated in law by Congress and executed by FMCSA. Further, it technically already became law in December 2015, and is merely set to take effect this year. Whereas, the White House's current freeze prevents "new" regulation from being enacted.

Barring an act of Congress, expect the ELD Mandate to take full effect on December 18, 2017.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

CONSTRUCTION LAW: Fourth Appellate District Strictly Construes Time Limits of the Right to Repair Act

Builders, when confronted with insufficient notices of claim under the California Right to Repair Act (S.B. 800 or Civil Code Section 895, et seq.), have been faced with a dilemma of either respond to the notice and start the timing considerations of the Act or ignore the notice and challenge its specificity should the homeowner file a lawsuit based upon the claims raised in the notice. The Fourth Appellate District has now held that the Builder "who unilaterally concludes the level of specificity in a notice is insufficient, and therefore concludes it need not respond within the 14-day period prescribed by statute, acts at its peril later, if it wishes to employ an inspection and settlement process otherwise mandated by the statute."

In Blanchette v. Superior Court, California Court of Appeal, Fourth Appellate District, Case No. D070545 (February 10, 2017), petitioner was a homeowner who had served a notice of claim under Civil Code Section 910 for claims concerning his home and the other 27 homes constructed by builder in the subject development. Petitioner's notice asserted a variety of construction defects by directly borrowing language from certain performance standards set forth in Civil Code Section 896.

The builder received the notice but believed the notice did not provide the detail required by Civil Code Section 910(a). Section 910(a) requires that the notice "describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation." Accordingly, the builder responded to the homeowner's notice 21 days after the homeowner's service of the notice. Section 913 requires that the builder respond to a notice within 14 days of service.

The homeowner responded to the builder's response, noting that it was untimely. Thereafter, the homeowner filed a class action lawsuit on behalf of himself and the 27 other homeowners identified in his notice.

The builder filed a motion to stay the litigation, under Civil Code Section 930(b), based upon the homeowner's failure to comply with the requirements of Section 910(a) concerning the lack of specificity regarding the claims identified in the notice. The trial court agreed with the builder's contentions and granted the motion, staying the litigation. The homeowner challenged the trial court's ruling on a petition for writ of mandate.

The Fourth Appellate District agreed with the builder's position that the homeowner's notice did not comply with Section 910. It noted that the notice was insufficient on its face because it merely repeats the language of Section 896, failing to provide the detail required by Section 910(a). However, relying upon the decision in Darling v. Superior Court (2012) 211 Cal. App. 4th 1266, the court found that there is an express difference between the sufficiency of a homeowner's notice and the strict response time limits of the Act. The court noted that Section 930(a) clearly provides that the time periods of the Act are to be strictly construed unless extended by mutual agreement of the parties. The court found that Section 913 clearly provides that a builder must respond to a notice of claim within 14 days of service. The court further noted that Section 915 is equally explicit as to the consequences of a late or no response from a builder; i.e., "the homeowner is released from the requirements of this chapter and may proceed with the filing of an action." The court held that "if a builder believes that the notice is not sufficient to determine the nature and location of the claimed violation, the builder may, within that 14-day period, bring the lack of specificity to the claimant's attention. However, the requirement for specificity is not a ground upon which the developer may choose to ignore the notice of a defect and the 14-day period within which it must respond."

Accordingly, the Fourth Appellate District issued a writ, directing the trial court to enter a new order denying the builder's motion to stay.

After the ruling in Blanchette, builders must be certain to serve a timely response to any Section 910 notice of claim within the 14-day response window prescribed by Section 913. Failure to do so leaves the builder open to the prosecution of a lawsuit without first having investigated and provided an opportunity to repair the claimed defect(s) pursuant to the terms of the Act. A builder who wishes to challenge the sufficiency of the notice can do so either with the service of the Section 913 response or prior to the response in a separate communication with the claimant or claimant's counsel.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

An Insurer’s Broad Duty to Defend Remains Unchanged for 2017

It is widely known amongst insurance professionals that California applies one of the broadest standards in the country when examining an insurer's duty to defend its insureds. In my practice, I frequently remind my carrier clients that California law obligates the insurer to bear a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy. If there are any conceivable facts in a demand or lawsuit that could give rise to coverage, a defense is owed, even if the insurer has doubts whether these facts could be proved or established. For 2017, the high bar governing an insurer's duty to defend seems to have reached its peak.

In a recent decision, Tidwell Enterprises, Inc. v. Financial Pacific Insurance Company (2016) 6 Cal.App.5th 100, the California Court of Appeal held that a liability insurer had a duty to defend a chimney contractor in a fire loss claim tendered over a year after the applicable policy period in a general liability policy ended. How is this possible you ask? The Tidwell Court held that due to the contractor's fabrication and installation of a custom chimney termination top that limited airflow and caused the fireplace to run too hot when in use, the chimney and structure could have sustained continuous and progressive damage that occurred during Financial Pacific's policy period and prior to the final fire that ultimately burned down the house.

Financial Pacific issued general liability policies to fireplace contractor Tidwell Enterprises between March 2003 and March 2010. Under the terms set forth in the standard CGL forms in these policies, Financial Pacific agreed to pay sums that Tidwell became "legally obligated to pay as damages because of. . .'property damage' caused by an 'occurrence' if the 'property damage' occurred during the policy period." The policies defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

In 2006 or 2007, Tidwell worked on the construction of a new home by installing the fireplace. Pursuant to this work, Tidwell was contracted to fabricate and install a custom "termination top" for the fireplace designed by the project architect. On November 11, 2011 (some 20 months after the end of the last policy period for Tidwell's general liability coverage with Financial Pacific), the house was damaged by fire. State Farm, the homeowner's carrier, covered the fire and issued a letter to Tidwell advising that the fire may have been caused by the manufacture, design or installation of the "fireplace, chimney chase, residence structure or involved component parts." Tidwell tendered State Farm's letter to claims professionals at Financial Pacific who, in turn, were provided with a fire investigation report by State Farm's forensic expert during their investigation of the fire loss. State Farm's expert concluded that the fire was caused by the installation of an "unlisted shroud located at the top of the chimney chase." In essence, the shroud prevented the fireplace from drafting properly, which "resulted in the overheating of the fireplace and heat transfer to the surrounding wood framing members." Ultimately, State Farm asserted that this "overheating of the fireplace resulted in the ignition of the surrounding framing members at the sides, top and bottom of the fireplace."

State Farm sued Tidwell for negligence to recover, in subrogation, amounts it paid to the homeowner for the fire loss. State Farm asserted that Tidwell negligently installed the fireplace systems in the subject home and that Tidwell's negligence was the proximate cause of the fire. Tidwell tendered the suit to Financial Pacific wherein Financial Pacific declined coverage on the grounds that no potential for coverage existed with respect to the State Farm suit. Financial Pacific concluded that "the property damage occurred on November 11, 2011 the date of the fire at issue, long after Financial Pacific's policies had expired" and that "for coverage to exist, the property damage must take place during the policy period." Tidwell contested the denial of coverage asserting that "[t]he construction of the fireplace and the continuous burning of fires therein created the potential for continuous and repeated exposure to the same general harmful conditions" and that there could have been occurrences of property damage long before the fire finally manifested itself.

Ultimately, Tidwell initiated a bad faith/declaratory relief action against Financial Pacific seeking a declaration that Tidwell owed a duty to defend due to a continuing occurrences of property damage allegedly caused by Tidwell during the operative policy period more than a year before the final fire. The trial court granted summary judgment in favor of Financial Pacific noting that the final fire occurred after the expiration of the applicable policies and that Tidwell could not "assert alternative causes State Farm 'should have' alleged in order to create coverage issues."

The Court of Appeal overturned the trial court and began its opinion by reiterating the longstanding rule in California regarding an insurer's duty to defend: "An insurer. . .bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy." Seeking to apply this rule as broadly as possible, the Court of Appeal added "[f]acts known to the insurer and extrinsic to the third party complaint can generate a duty to defend, even though the face of the complaint does not reflect a potential for liability under the policy. . .[t]his is so because current pleading rules liberally allow amendment; the third party plaintiff cannot be the arbiter of coverage."

The Tidwell Court also applied what it considered a straightforward application of the applicable policy provisions to conclude that Financial Pacific "would be liable under the policies for any sums Tidwell became legally obligated to pay as damages because of physical injury to tangible property that: (1) occurred during a policy period; and (2) was caused by continuous or repeated exposure to substantially the same general harmful conditions."

Based on the allegations in State Farm's complaint against Tidwell and the facts known to Financial Pacific (including the findings of State Farm's forensic expert), the Court of Appeal concluded that a possibility for coverage existed (and thus a duty to defend) because there was reason to believe Tidwell might have negligently installed a custom top on the chimney that restricted the flow of air in the chimney, which in turn, might have resulted in excessive heat in the chimney every time a fire was burned in the fireplace from the time the house was built, which in turn might have altered the chemical composition of the wood framing at the chimney chase, thereby reducing the temperature at which it would ignite, until eventually, on November 11, 2011, the wood framing did ignite resulting in the fire loss.

Importantly, the Tidwell Court stressed that a court need not find and Tidwell need not prove that the above convoluted series of facts actually happened. Rather, to establish an insurer's duty to defend, Tidwell need only show that under the allegations in the State Farm complaint and the facts known to Financial Pacific, the above facts might have happened.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: John H. Shaffery

Trademark Selection and Federal Registration

A trademark is a word, symbol, logo, or phrase that a company or individual has adopted to identify their goods or services to the purchasing public. A trademark serves as a source identifier for the purchasing public. For example, you know that when you go in to a shoe store and see a shoe with the Nike Swoosh symbol on it that the shoe is manufactured by the Nike shoe company and therefore carries with it certain standards of quality. Nike has worked very hard and spent millions of dollars ($100 Million on the endorsement of Tiger Woods alone over the last 7 years) to create the connection in the minds of consumers that the Swoosh symbol means the product comes from Nike.

Now a business owner does not have to be as big and well known as Nike to have trademarks or to be concerned about their trademark protection. Quite the opposite, I would argue that small and medium sized businesses should be even more worried about their trademarks because, unlike Nike, a typical small or medium sized business cannot afford to make a mistake like spending years of effort and tens of thousands of dollars building a company brand only to be forced to abandon the brand because an unknown competitor has a prior use of a similar mark.

To avoid this unfortunate result, business owners need to be thoughtful and deliberate in the selection, use, and protection of their trademarks.

Selection of Trademarks

Thoughtful analysis of potential trademarks is an important step that is often overlooked by business owners when selecting a new trademark for a new product or service. Trademarks come in a variety of strengths which depends on the level of distinctiveness. The distinctiveness of trademarks is measured along a spectrum, of increasing distinctiveness: (1) Generic, (2) Merely Descriptive, (3) Suggestive, (4) Arbitrary, and (5) Fanciful.

Generic marks are marks that are generally accepted word for the item described. For example, water, coffee, computer, and automobile are all generic words for what they describe. Generic words are not protectable under trademark law because allowing exclusive use of generic words would confer an unfair advantage on the first companies to arrive in an industry. Just imagine if Company A got received rights to exclusive use of the word “water” for selling bottled water. Obviously, this would be unfair to Company B who also sells bottled water.

On the other side of the spectrum are fanciful marks, which are marks that are invented words which have no meaning outside of the mark. Some of the most famous trademarks in the world are fanciful, for example, Google, Starbucks, and Clorox. These words did not exist and had no meaning before these companies choose them as their trademarks. Because they are not generally used in normal English language fanciful marks become easily recognizable and become strong easily protectable trademarks.

A category that will often cause problems for trademark applicants is the merely descriptive marks. Descriptive marks are on the weak side spectrum and, unlike generic marks, can obtain federal registration but only under certain circumstances. A mark is considered merely descriptive if it describes an ingredient, quality, characteristic, function, feature, purpose, or use of the specified goods or services. Examples of merely descriptive marks include, SMARTTOWER merely descriptive of highly automated cooling towers (In re Tower Tech, Inc., 64 USPQ2d 1314, 1317-18 (TTAB 2002)), E FASHION merely descriptive of electronic retailing services (In re Styleclick.com Inc., 57 USPQ2d 1445 (TTAB 2000)), and REDUCER is generic for flow meters for measuring flow through pipes (In re Rosemount Inc.,86 USPQ2d 1436 (TTAB 2008)).

Business owners love choosing descriptive marks because descriptive marks immediately convey to a potential customer what the product or service does. While this may be true, descriptive marks are not as strong as other types of trademarks and they come with the strong risk that the United States Patent and Trademark Office (USPTO) will refuse the registration. This refusal can sometimes be overcome by a showing of “secondary meaning” which is showing that the general public has learned to associate a mark with a certain source (i.e. showing the connection that Nike has created). This requires some effort and success is not assured, so descriptive trademarks should be avoided in favor or fanciful or arbitrary trademarks.

Once a business owner has selected a strong trademark it is highly advisable to seek federal registration of that trademark. There is no requirement to obtain registration but there are many benefits.

Benefits of Federal Trademark Registration

National Protection

When a business owner uses their trademark in commerce the owner accrues exclusive rights to use the trademark in the areas of actual operations. However, without federal registration, a competitor is free to use as similar mark in an area of the state where the business owner has not yet begun operations. If instead the business owner obtains Federal registration of the trademark with the USPTO, upon registration, the business owner immediately obtains trademark rights nationwide regardless of where the trademark owner’s actual operations are.

Use of ® symbol

Once a business owner has registered trademark with the USPTO the business owner is free to use the ® next to the trademark. This is valuable for a couple of reasons first, it puts customers and competitors on notice that the business owner is claiming exclusive rights in the trademark, second, it makes the trademark and business owner’s brand look more professional.

Increases the value of your business

A trademark registration is an asset of the business just like a piece of equipment. Trademarks can appreciate in value as the business grows. A trademark registration can also be sold as part of the business assets which potentially makes the business more valuable to potential purchasers.

Advantages in Litigation

Federal registration also gives a trademark owner an advantage in potential infringement lawsuits. Federal registration allows trademark owners to file lawsuits in Federal court without concern about satisfying other jurisdictional requirements. Furthermore, Federal registrants get to take advantage of several statutory presumptions 1) that the trademark is valid, 2) that the registrant is the owner of the trademark, and 3) that the registrant has the exclusive right to use the registered trademark. These presumptions are valuable in proving infringement by a competitor.

With all of the valuable benefits Federal trademark registration provides there is no reason not to seek Federal trademark registration. With a little bit of thoughtful planning every business owner can protect their company brand and build valuable trademark assets.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

CONSTRUCTION LAW: Elliot Homes Decision Casts Further Doubt on the Viability of the Liberty Mutual Decision

We previously discussed how the Fourth Appellate District's decision in LibertyMutual Insurance Company v. Brookfield Crystal Cove (2013) 219 Cal.App.4th 1194 held that the California Right to Repair Act (S.B. 800 – Civil Code Section 895 et seq.) was not an exclusive remedy for residential construction defect cases where tort liability arising from actual damage was found. After the Second Appellate District followed the Liberty Mutual decision in Burch v. Superior Court (2014) 223 Cal.App. 4th 1411, it appeared settled that homeowners would be able to pursue both statutory and common law tort claims and could escape the notice requirements, statutes of limitations, and damage limitations imposed by the Right to Repair Act by solely pursuing common law tort claims. However, in McMillin Albany v. Superior Court (2015) 239 Cal.App.4th 1132, review granted November 24, 2015, S229762, the Fifth Appellate District rejected the Liberty Mutual holding, finding that the Liberty Mutual court had failed to fully analyze the language in Civil Code Sections 896, 897, and 943. Consequently, the court held that the Legislature did intend that all claims arising out of residential construction, involving new residences sold on or after January 1, 2003, be subject to the standards and requirements of the Act.

The Third Appellate District has now issued a decision in line with the McMillin decision, holding that a homeowner must comply with the Act's notice provisions even in actions in which the plaintiff has not alleged a violation of the Act's performance standards. In Elliott Homes, Inc. v. Superior Court (December 2, 2016) California Court of Appeal, Third Appellate District, Case No. C078122, plaintiffs filed suit against the developer of their homes for alleged deficiencies in their construction. Plaintiffs' complaint, however, did not include any allegations concerning a violation of The Right to Repair Act, but, rather, only alleged common law tort actions. The developer sought to stay Plaintiffs' complaint until Plaintiffs complied with the Act's pre-litigation procedures. Plaintiffs opposed the motion on the grounds that their complaint did not include a cause of action under the Act and, therefore, compliance with those procedures was not required. Relying on the Liberty Mutual decision, the trial court agreed.

When considering the developer's writ petition, the Third Appellate District rejected the trial court's reliance on Liberty Mutual, holding that the Act and its pre-litigation procedures applies to any suit to recover damages for construction defects in residential construction falling within the purview of the Act. The court based its holding upon the language and intent of the Act, concluding that a homeowner must comply with the notice provisions in the Act. Absent such compliance, the court found that a developer could stay a lawsuit, even one which did not allege any violation of the Act. While the issue of whether compliance with the pre-litigation procedures was the only issue before it, the court in dicta indicated clearly its position that the Liberty Mutual court reached the wrong decision on the issue of whether the Act provided the sole remedy for construction defect claims for residential construction involving new residences sold on or after January 1, 2003.

The decision in Elliott Homes provides further hope that the California Supreme Court will overturn the decisions in Liberty Mutual and Burch when ruling upon the appeal in McMillin. In the interim, the Third Appellate District's decision to certify the Elliott Homes decision for publication gives the construction industry a decision to which to cite when countering homeowners who bring actions relying upon the decisions in Liberty Mutual and Burch.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Filter Fires: ACB’s Renewed Efforts to Protect the Safety of Drivers

The Alliance for California Business ("ACB") received a renewed attempt at attacking regulations propagated by the California Air Resources Board ("CARB") which pose a safety hazard to the California Trucking community. Specifically ACB initiated litigation aimed at the requirement that all trucks and buses manufactured prior to 2007 be retrofitted with special filters which have been linked to engine fires. The outcome of this litigation will hopefully shed light on the hazards of this regulation and the development of better, more effective regulations that protect the safety of drivers.

For almost three years the ACB, a non-profit boasting more than 400 members with the goal of protecting and promoting business in California, has condemned both the attorney general and the CARB for failing to investigate the truck fires which it attributes to Diesel Particular Filters ("DPF"). After having a prior lawsuit dismissed in July, the ACB initiated a new lawsuit (Alliance for California Business v. California State Transportation Agency, 80002491 [Sac. Super Ct., filed Nov. 22, 2016]) based on newly discovered information that was not available when the previous action was filed.

This controversy began in 2008 when CARB established the 'California Statewide Truck and Bus Rule,' which requires large diesel trucks and buses manufactured prior to 2007 to be retrofitted, repowered or replaced in order to reduce particulate matter emissions.

The purpose of DPF is to trap particulate matter from large diesel engines before they are expelled in the exhaust of a truck or other large diesel vehicle. As a result of what the ACB contends was a flawed study, CARB instituted environmental regulations requiring large diesel vehicles to utilize DPFs. Although DPFs are standard equipment on newer engines, they must now be installed into the engines of older vehicles.

The prior case by ACB challenged CARB's regulation requiring the installation of DPF on large tracks, arguing that the CARB withheld data about the safety of using the DPF. However, the previous case was dismissed this past summer based on the Court's finding that CARB's safety regulations were adequate.

Nevertheless, as part of the prior case, ACB was able to obtained thousands of documents from CARB which it is now using as the basis for a new lawsuit challenging CARBS' DPF requirement. According to the documents obtained by ACB, CARB's own studies and investigations show that the DPF are riddled with serious issues. Notably, these devises experience problems with high temperatures and clogging, even when they are used properly, which leads to fires that sensors cannot identify in time. Indeed, according to ACB's complaint, of the 15 buss fires and 50 truck fires that occurred between 2014 and 2016, the vast majority were caused by DPF devices.

Although, CARB denies the allegations (asserting instead that these fires are caused by poor maintenance) ACB's cause has been revived in its effort protect the interest of the California trucking industry. Perhaps most importantly, the investigation and subsequent results of the pending litigation will undoubtedly shed light on the adequacy of DFT regulations and may lead to better and more limited regulations that protect the safety of the trucking community.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

EMPLOYMENT LAW: Court’s “Swift” Action Threatens Greater Employment Litigation

The largest interstate truckload carrier in the U.S., Swift Transportation Co., was dealt a major blow in early January 2017, when an Arizona federal district court bypassed the trucking giant's arbitration agreements with five of its drivers, ruling that the drivers were in fact employees, rather than independent contractors. In concluding that the plaintiffs are exempt from arbitration under section 1 of the Federal Arbitration Act ("FAA"), the Arizona District Court effectively vitiated Swift's independent contractor and arbitration agreements with its drivers. Section 1 of the FAA specifically excludes the arbitration of "contracts of employment" of transportation workers.

The ruling came after years of litigation and follows two companion decisions from 2016 wherein a Ninth Circuit Court of Appeals Panel declined to issue a writ of mandamus ordering the district court to compel arbitration and found that that it lacked jurisdiction to review the district court's interlocutory order compelling discovery and trial on the issue of whether the drivers were properly classified as independent contractors. The district court had previously held that the district court, rather than an arbitrator, must decide whether the dispute was exempt from arbitration under Section 1 of the FAA.

The FAA is an act of Congress that applies in both state and federal courts and provides for judicial facilitation and resolution of private disputes through arbitration. Arbitration is a preferred method of dispute resolution in many industries because of knowledgeable arbitrators, the speedy and cost-effective process, the flexibility of confidentiality, and the benefit of a global decision across several jurisdictions. Arbitration is also an effective means of controlling the risks and costs of litigation. This is particularly true in large industries, such as trucking. For example, without the benefit of enforceable class-action waivers in arbitration agreements, companies like Swift could face the threat of a class-action prompted by a single disgruntled driver. Moreover, the costs and exposure associated with class actions can lead companies like Swift to settle otherwise defensible claims, rather than place their companies at risk.

For Swift, the threat of more law suits premised on driver classification following the district court's ruling is a real concern. According to a filing with the Securities and Exchange Commission, in the quarter ending in September 2016, Swift averaged 17,480 active drivers, of which 4,391 were classified by Swift as independent contractors. Following the district court's decision, the latter potentially have suits against the company on the same issue.

In California alone, truck drivers have filed 799 wage claims on the grounds of employee misclassification since 2011 and more than $35 million has been awarded to drivers in 302 cases, according to the California Labor Commissioner's Office. In December 2016, one Southern California port trucking firm was ordered to pay 38 drivers nearly $7 million in back pay after the state Labor Commissioner's Office ruled they were improperly treated as independent contractors instead of employees.

The key difference between Federal law and California law on this issue is that California Labor Code Section 229 allows for the pursuit of a claim for unpaid wages despite the existence of an arbitration agreement. Federal law does not have such a provision. In fact, the FAA expresses a clear federal policy in favor of arbitration and any doubts concerning the scope of arbitration issues are most often resolved in favor of arbitration.

However, the FAA only mandates arbitration in contracts that contain arbitration provisions involving interstate commerce (as opposed to exclusively intrastate commerce), and Section 1 of the FAA exempts from coverage contracts of employment involving transportation workers, such as truck drivers. In general, the Section 1 exemption is narrowly construed and the party opposing arbitration bears the burden of proving that it applies.

The Arizona district court apparently found that the drivers for Swift overcame their burden and reclassified five independent contractors as employees, thereby eliminating the mandatory arbitration provision in their contracts. Swift has appealed the decision with the Ninth Circuit, but the final outcome is uncertain.

Given the high stakes involved in the potential re-classification of drivers, transportation companies and other businesses operating in the field of intermodal transportation and logistics in California need a trusted partner in navigating the changing landscape. Poole & Shaffery, LLP has garnered a reputation throughout California for providing professional, effective legal representation in litigation, business counseling, transactional services, arbitration and mediation, and a range of other legal services. The firm has a strong track record for providing exceptional representation in both transportation and employment law by combining the personal, hands-on attention and focus of a smaller firm with the extensive professional resources that are customarily found in a much larger firm.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Trumping Regulations

A new administration naturally brings with it a flurry of regulatory course changes, and regulations of the Federal Motor Carrier Safety Administration (FMCSA) are no exception as seen with the FMCSA's recent postponement of the implementation of its Entry-Level Driver Training rule (ELDT).

On January 20, 2017, the White House issued a directive to all the federal agencies ordering them to "temporarily postpone" the effective date of rules that had already been published in the Federal Register for 60-days. Accordingly, the FMCSA announced through the Federal Register (82 FR 8903) that the effective date of the ELDT is continued from February 6, 2017 to March 21, 2017. However, the FMCSA cautioned that the effective date could be delayed beyond March 21, 2017, depending on any whether any further directives are issued by the White House.

The ELDT, as published on December 8, 2016 (81 FR 88732), establishes new minimum training standards for certain first time commercial drivers including those applying for a Class A or Class B commercial driver's license (CDL), seeking to upgrade their CDL, or seeking a hazardous materials, passenger, or school bus endorsement. The training will include a prescribed program of theory (knowledge) and behind-the-wheel (range and public road) instruction provided by an FMCSA approved entity.

Although the initial draft of the ELDT required 30 hours of behind the wheel training, the current ELDT lacks such minimum training time. Instead, the current ELDT simply requires trainers to train new drivers to allow them to demonstrate proficiency "to the satisfaction of the trainer."

On December 21, 2016, four groups petitioned the FMCSA to halt the implementation of the ELDT until the 30 hours of behind the wheel training was restored. The groups included the Owner-Operator Independent Drivers Association, The Advocates for Highway and Auto Safety, the Truck Safety Coalition and Citizens for Reliable and Safe Highways. Notably, other recently published rules have not been affected, including mandating electronic logging devices and establishing a CDL Drug and Alcohol Clearinghouse.

Notwithstanding, this reexamination will likely not be the last regulation to be thrown into the realm of uncertainty while a new administration seeks to secure its footing.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: Brian E. Koegle

New Laws for a New Year – 2017 Edition

It seems that the resounding sentiment at the end of last year was that 2016 was a pretty crummy year. An inordinate number of celebrity deaths, horrific acts of terrorism worldwide, and a contentious presidential election cycle left many with a bad taste in their collective mouths. However, as we look forward, with a "fresh start" and a new year ahead, California businesses are left to wonder if 2017 will be as difficult as 2016. Among the 898 bills Governor Brown signed into law in 2016, there were very few significant regulations which would affect California employers. However, where the state legislature left off, municipal government entities, administrative agencies and the courts have picked up the slack, which means that small businesses will continue to feel the pain into 2017 and beyond! The following is a brief summary of the new laws, regulations and court opinions that will change the landscape for California employers in 2017:

Minimum wage laws

While a Texas judge stopped the nationwide increase in the minimum salary for exempt employees (original article found here), California was not granted a reprieve for the increase in the statewide minimum wage which became effective on January 1, 2017. For all businesses with 26 or more employees, the statewide minimum wage increased to $10.50/hour, while smaller companies (≤25) will remain at $10.00/hour until January 2018. Complicating matters, though, are the state's largest cities/counties which are also scheduled to increase minimum wages during the 2017 calendar year, on their way to a $15.00/hour minimum wage by 2020. On July 1, 2017, San Francisco will see its minimum wage increase to $14.00/hour while the City of Los Angeles and unincorporated business sectors of Los Angeles County are set to increase minimum wage for employers with 25 or more workers to $12.00/hour. A table explaining the different minimum wage rates throughout L.A. County can be found here. San Diego sits at $11.50/hour, and – not to be outdone by its Bay Area neighbors – Oakland has set a peculiar minimum at $12.55/hour. Depending on where the worker is performing his duties (for a period as short as two hours in any given workweek), the rate of pay may fluctuate.

While the lowest wage earners will certainly be affected by these minimum wage increases, it is also important to note that these increases have a "trickle up" effect, influencing the minimum salary of even salaried, exempt employees. Most of the statewide "white collar" exemptions set forth in the California Industrial Wage Commission Wage Orders, require an employee to earn no less than double the state minimum wage in order to qualify as exempt (e.g. no obligation for an employer to pay overtime). This would equate to a pay raise of more than $2,000.00 per year in order for exempt employees to maintain their status.

Mandatory Sick Leave

Another convoluted state vs. city vs. county variance in the law is in the relatively new sick leave requirements. The cities of Los Angeles and San Diego require accrual of forty-eight (48) hours of paid sick leave annually, compared to the 24-hour cap permitted by state law. Unincorporated areas of Los Angeles County will have a similar plan in early 2017. San Francisco, Oakland, Santa Monica and Long Beach each have their own unique rules on this issue as well. Again, the location of where the worker performs services dictates which regulation will apply for the calculation of sick pay.

Sexual Harassment Policies

The Fair Employment and Housing Commission (FEHC) issued new regulations, effective April 1, 2016, which require certain information to be included in every employer's harassment prevention and reporting policies. In addition to distributing the DFEH brochure on harassment prevention to employees (Form DFEH 185), employers must now also: (1) communicate their specific policies in writing; (2) list the categories of individuals protected by the Fair Employment and Housing Act (FEHA), (3) provide a specified complaint procedure to ensure that complaints are kept confidential (to the extent possible), responded to in a timely manner, investigated by "qualified personnel" in a timely and impartial manner, documented and tracked; (4) advise and instruct supervisors on reporting procedure for any complaints of misconduct; (5) provide that allegations of misconduct will be addressed in a fair, timely, and thorough investigation; (6) instruct employees that if misconduct is found during the investigation, appropriate remedial measures will be taken; and, (7) ensure that there will be no retaliation against employees for lodging a complaint or participating in an investigation. If your policy does not address all of these issues clearly, this would be a great time to review and revise your handbook.

New Form I-9 for Employee Eligibility Verification

Effective November 2016, and mandatory as of January 22, 2017, a new Form I-9 (Employment Eligibility Verification form) was issued by the U.S. Customs and Immigration Service (USCIS). The form is designed to streamline the verification process, in order to avoid "technical errors" in form completion, which (theoretically) will reduce the number of fines issued to employers for non-compliance. The new "smart" form (online application only) allows for fillable drop-down menus in several key areas where errors occur. A paper copy of the form is still available, but it does not provide any of the new "smart" features. The USCIS also updated the instruction on correct completion of the Form I-9, as part of the new form, which can be found here.

"Associational" Disability Discrimination

In a very peculiar case, a California court of appeal significantly expanded the duty for employers to provide reasonable accommodations to its employees, adding protections for those who are associated with a disabled person. Castro-Ramirez v. Dependable Highway Express Inc. (2016) 2 Cal.App.5th 1028. In that case, Mr. Castro-Ramirez was the caretaker for his ill son, who required nightly dialysis. For years the employer accommodated his request for a modified work schedule to accommodate his son's needs, but a new supervisor, who was initially unaware of the son's condition, changed that accommodation. After Mr. Castro-Ramirez was terminated for refusing to return to the original work schedule, he brought a claim stating that his association with his son (a disabled individual under both the ADA and FEHA definitions) was the reason behind the decision to terminate. The appeals court agreed. In December, the California Supreme Court denied the opportunity to review this decision, effectively making the appellate court decision the "law of the land." As such, employers should make sure that they are engaging in the mandatory "interactive process" when an employee requests a reasonable accommodation arising out of an "associated party's" disability, and should be cognizant of these issues when making critical employment decisions (e.g. promotion or termination of employment), as the newly created protected class is also a basis for an employment retaliation claim.

These are only some of the highlights from the 2016 year that was. For more information on these, and other new topics in the law, please be sure to join the Poole & Shaffery team during the annual Employment Law Update presentation on Tuesday February 21, 2017 at noon at the Hyatt Regency Valencia. Please visit www.EmploymentLawRSVP.com for further details, or to purchase tickets. As always, this information is intended to flag issues in the law for California employers. It does not replace or substitute comprehensive legal advice which can be provided by competent legal counsel with experience in the employment law arena. We encourage you to contact counsel for a more detailed analysis. Happy New Year!


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
By: Chris S. Jacobsen

Minutes From Your Company's January Annual Meeting

The annual meeting of the Board of Principals of Your Company, a California business entity, was duly held at the principal executive office of Your Company on January 18, 2017 at 9:00 a.m. Your Company recognizes the importance of conducting yearly reviews of its business, financial and legal affairs. Accordingly, Your Company called this annual meeting to address financial and tax matters of the prior year, the sufficiency of its insurance, changes in employment and related laws, Your Company's intellectual property, Your Company's ownership succession planning, and other important matters to be considered as Your Company prepares to conduct business in the new year.

The following Principals were present at the meeting:

Your President

Your Treasurer

Your Secretary

No Principals were absent.

Your President presided as Chairman of the meeting and Your Secretary acted as secretary of the meeting. The Chairman called the meeting to order and announced that, since all Principals of Your Company were present at the meeting and none object to the lack of or inadequacy of notice, notice of the holding of the meeting was deemed waived. The Chairman noted that in excess of a majority of the Principals of Your Company were present and the meeting therefore had a quorum as required by the Bylaws of Your Company.

Financial Statements & Taxes

The Chairman then announced that the first order of business was Your Company's financial statements and taxes. After discussion, on motion duly made, seconded and unanimously carried, the following resolutions were adopted:

RESOLVED, that Your Company shall promptly deliver annual reports, financial statements and tax preparation information to the owners of Your Company;

RESOLVED FURTHER, that Your Company pursue its tax return preparation (before the eve of the filing deadline) and consider the adequacy of its current accounting methods, policies and systems; and

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with Your CPA, Your Company's accountant, to carry out the foregoing resolutions.

Insurance Matters

The Chairman then turned to the next order of business, Your Company's insurance. After discussion, on motion duly made, seconded and unanimously carried, the following resolution was adopted:

RESOLVED, that the officers of Your Company are authorized and directed to consult with Your Agent, Your Company's insurance agent, to discuss the adequacy of Company's insurance coverages and, in particular: key person life insurance to fund potential buy-outs of owners, and employment practices liability insurance.

Employment Matters

The discussions of the Principals then turned to Your Company's employees. After discussion, on motion duly made, seconded and unanimously carried, the following resolutions were adopted:

RESOLVED, that Your Company shall update its employee handbook to reflect current employee policies and benefits and to address the latest changes in labor and employment law requirements;

RESOLVED FURTHER, that Your Company post updated posters and notices to employees as required by state and federal law;

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with Brian E.Koegle, Your Company's employment attorney, to carry out the foregoing resolution.

RESOLVED FURTHER, that, as an additional incentive to employees, Your Company shall develop plans for the implementation of an employee stock option and purchase plan;

RESOLVED FURTHER, that, in connection with such plan, Your Company shall prepare and file with the California Department of Business Oversight appropriate notices for such issuances of securities to employees, and shall make any similar filings that may be required with the Securities and Exchange Commission; and

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with Claudia J. McDowell, Your Company's securities attorney, to carry out the foregoing resolution.

Intellectual Property

The Chairman then led the Principals in a discussion of Your Company's intellectual property. After discussion, on motion duly made, seconded and unanimously carried, the following resolutions were adopted:

RESOLVED, that Your Company take immediate steps to protect the intellectual property of the business by implementing a system to protect trade secrets, by requiring employee confidential information and invention agreements, and by registering Your Company's trademarks;

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with Jason R. Beaman, Your Company's intellectual property attorney, to carry out the foregoing resolution.

Company Owners

The Chairman then noted that the owners of Your Company did not have buy-sell arrangements in place nor had they discussed business succession plans. After discussion, on motion duly made, seconded and unanimously carried, the following resolutions were adopted:

RESOLVED, that Your Company shall coordinate a meeting of its owners to discuss and agree upon (1) buy-sell arrangements so that efficient transfers of ownership may take place when an owner withdraws, dies or otherwise desires to sell his or her stake in Your Company and (2) a business succession plan so that Your Company will be prepared for changes in management personnel without disruption of its day to day business operations; and

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with M. Lisa Odom, Your Company's corporate attorney, to carry out the foregoing resolution.

Standard Contracts

The meeting then turned to a discussion of Your Company's standard contracts and their continuing adequacy to meet the needs of Your Company. After discussion, on motion duly made, seconded and unanimously carried, the following resolution was adopted:

RESOLVED, that Your Company review and (if necessary) revise its standard forms of contracts, invoices, terms and conditions, and other documents to assure that they are adequate to accomplish the matters for which they are used and to protect Your Company;

RESOLVED FURTHER, that the officers of Your Company are authorized and directed to consult with Chris S. Jacobsen, Your Company's business attorney, to carry out the foregoing resolution.

There being no further business to come before the meeting, upon motion duly made, seconded and unanimously carried, the meeting was adjourned.

Your Secretary,

Secretary



Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such

TRUCKING & TRANSPORTATION: Transporting in California – An Employment Overview: Part 2

In our previous article, we discussed California's overtime compensation and meal and rest period obligations in relation to truck drivers engaging in interstate and intrastate commerce. In this article, we discuss independent contractors and the risks associated with misclassification of employees in California.

Transportation companies frequently utilize independent contractors or owner/operators to provide hauling and services on its behalf. However, with ever-increasing regulations and legislations relating to classification of employees, California has made it more and more difficult to truly classify someone as an independent contractor. In fact, the California Labor Code starts with the presumption that an individual is an employee and places the burden on the "employer" to show proper classification as an independent contractor. Fortunately, the California courts provided some direction as to what factors would be looked at in determining the proper classification of a trucker driver in Ruiz v. Affinity Logistics Corp. (2014) 754 F.3d 1093.

In the Ruiz case, the plaintiff alleged that he, as well as other similarly situated truck drivers, was misclassified as an independent contractor while providing furniture delivery services in California for Sears. Previously, the plaintiff had provided the same delivery services for Penske Logistics as an employee, but was reclassified as an independent contractor when Affinity Logistics took over the contract with Sears. Ruiz argued that as a result of the misclassification, the drivers were deprived of various benefits afforded to employees including sick leave, vacation, holiday, and severance wages, in addition to improperly being charged workers' compensation fees.

In order to analyze whether or not the truck drivers were properly classified as independent contractors, the court looked to a 1989 California Supreme Court case called S.G. Borello & Sons, Inc. v. Dep't of Industrial Relations (1989) 48 Cal.3d 341 (Borello). The court in Ruiz noted that Borello emphasized that the most important or most significant consideration in determining proper classification was based on who has the right to control the work details. (Ruiz, 754 F.3d at 1101.) In addition to the "right of control" factor, Borello had also set forth additional "secondary" factors including (a) whether the one performing services is engage in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is part of the regular business of the principal; (h) whether or not the parties believe they are creating the relationship of employer-employee. (Ibid.)

In Ruiz, the court found that it was undisputed that Affinity had the right to control the details of the drivers' work in light of the fact that Affinity controlled the drivers' rates, schedules, and routes. Specifically, Affinity set the drivers' flat "per stop" rate and the drivers, unlike true independent contractors, could not negotiate for higher rates. Furthermore, Affinity decided what days drivers worked and could deny drivers' requests for days off. Additionally, Affinity determined what routes the drivers would take and drivers were instructed not to deviate from the order of deliveries listed on the manifest route Affinity had prepared. Moreover, Affinity controlled the trucks, tools, and equipment used by the drivers and even regulated the appearance of the drivers by implementing a dress code and prohibiting earrings, tattoos, and certain facial hair. Accordingly, under the "most significant factor" of Borello, the Ruiz court found that drivers for Affinity were, in fact, employees and not independent contractors.

Although it is easy to look at the facts in Ruiz and understand that the court found misclassification based on the degree of control by the employer, other regulatory agencies are free to determine classification of employees or independent contractor based on different considerations. For example, the Internal Revenue Service uses a 20-point test to determine if a worker is an Aindependent contractor." As such, when determining a worker's classification, business owners will be asked the following questions to determine whether the worker(s) in question are employees or independent contractors:

  • Whether the employer can fire the worker Aat will@;
  • Whether the worker is engaged in a distinct occupation or business;
  • Whether the work is usually done under the direction of the employer or by the worker without supervision;
  • Whether the worker requires any training, including attending meetings and working closely with experienced employees;
  • The level of skill required in a particular occupation;
  • Whether the worker can set his/her own hours of work;
  • Whether the level of effort requires a full-time devotion;
  • Whether the work requires a specific sequence of activities;
  • Whether the worker supplies his own instrumentalities, tools or work space;
  • The length of time for which the services are to be performed;
  • The method of payment, either by the time or a flat-rate paid per job;
  • Whether the work is integrated as a part of the Aregular business@ conducted by the employer;
  • Whether the parties believe they were creating an employer-employee relationship;
  • Whether the worker received reimbursements for business or travel-related expenses;
  • Whether the classification as an independent contractor is bona fide, and not a Asubterfuge@ to allow the employer to avoid designating the worker as an employee;
  • Whether the worker holds himself out as having his own business and/or business license;
  • Whether the worker is required to render services personally;
  • Whether the worker has employees of his/her own;
  • The worker=s opportunity for profit or loss depending on his/her managerial skills; and,
  • Whether the services provided is Aan integral part of the employer=s business.@

Even though there are a series of objective factors and measurements to be applied, many times the decision on classification becomes quite subjective depending on who is evaluating the factors. As such, while an employer may believe they are on the right side of the balancing test, ultimately it is an auditor or a jury who will determine whether the scales tip in favor or against the business. Unfortunately, this lack of certainty for employers of truck drivers in California means that there is always a looming risk of misclassifying a driver as an independent contractor. However, with the assistance of competent counsel, such risks can be reduced, or altogether eliminated.


Disclaimer: This article is intended for general information purposes only. Nothing contained in this document is legal advice, nor should it be relied upon as such
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