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Posts Tagged ‘California’

Winemakers Decan’t Warn a Consumer About Every Risk

Posted on: May 16th, 2018

A Pour Result for Plaintiffs’ Attorneys in California, but a Grape Win for Vintners

By: Robyn Flegal

In May 2018, the California Court of Appeals refused to revive a class action lawsuit claiming wines made by fifteen winemakers should contain an arsenic warning. The lawsuit was originally filed in 2015, alleging that these wines exposed consumers to arsenic in violation of California law. The panel of the California Court of Appeals held that the alcoholic beverage warning on these wines sufficiently notified customers about the potential risks associated with consuming the wine, despite the lack of a specific arsenic warning.

California’s Proposition 65—the safe drinking water and toxic enforcement act of 1986—protects the state’s drinking water sources from being contaminated with chemicals known to cause cancer, birth defects, or other reproductive harms. Prop 65 requires businesses to disclose exposures to such chemicals to Californians.

The appeals court held that the Office of Environmental Health Hazard Assessment requires companies to disclose one chemical for each health risk. Thus, because the alcoholic beverage warning alerted customers that wine could result in cancer and reproductive harm, the additional arsenic warning was unnecessary. The failure to provide a separate arsenic warning was therefore not a violation of the regulations.

Companies doing business in California should be aware of Proposition 65 and the labeling and disclosure requirements thereunder. For more information, please contact Robyn Flegal at [email protected] or any of FMG’s Commercial Litigation Professionals.

In California Lawyer-Client Sex Will Soon Be A No-No

Posted on: May 14th, 2018

By: Greg Fayard

In California, lawyers can have consensual sex with their clients as long as it is not based on coercion or in exchange for legal services. That will change this Fall.  On May 10, 2018, the California Supreme Court approved comprehensive changes to the lawyer Rules of Professional Conduct—the first major change in 29 years.  Under the new rules, California lawyers cannot have consensual sex with their clients—except in one of two situations: 1) the client is the lawyer’s spouse or domestic partner; or 2) a sexual relationship existed prior to the lawyer-client relationship.  This means California lawyers can be disciplined by the State Bar for having consensual sex with clients.

The sex ban has been divisive even though at least 17 other states have adopted a similar ban. Supporters of the lawyer-client sex ban argue the relationship between a lawyer and client is inherently unequal, so any sexual relationship is potentially coercive. Others claim the blanket ban is an unjustified invasion of privacy.

The new Rule is 1.8.10 and goes into effect November 1, 2018.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

Philadelphia’s “Salary History Ban Law” Gets Banned!

Posted on: May 7th, 2018

By: Jen Ward and John McAvoy

More than a half-century after President JFK signed the Equal Pay Act, the gender pay gap is still with us. Women earn 79 cents for every dollar men earn, according to the Census Bureau.  What will it take to bridge that stubborn pay gap? Well, some believe we can and will reduce the impact of previous discrimination by not asking new hires for their salary history. Several cities and states agree with this approach and have passed legislation that prohibits employers from asking questions about an applicant’s salary history. In the cities and states where such laws have been passed, they are not without controversy.

Philadelphia passed a similar law last year. In response, Philadelphia’s Chamber of Commerce, backed by some of Philadelphia’s biggest employers, including Comcast and Children’s Hospital of Philadelphia (CHOP), filed suit against the City of Philadelphia challenging the constitutionality of the salary history ban law, arguing the portion of the law that prevents companies from inquiring about an applicant’s wage history violated an employer’s free speech rights.

On Monday, April 30, 2018, the Eastern District of Pennsylvania made two rulings with respect to Philadelphia’s salary history ban law in the matter of Chamber of Commerce for Greater Philadelphia v. City of Philadelphia, docket no. 2:17-cv-01548-MSG (E.D. Pa. Apr. 30, 2018) (Goldberg, J.).

First, the court found that the law as written violated the First Amendment free speech rights of Philadelphia employers. In sum, the court’s ruling is that employers can ask salary history questions.

Second, the court upheld the ‘reliance provision’ of the salary history ban law, which makes it illegal to rely upon that wage history to set the employee’s compensation.  This means that Philadelphia employers can ask salary history but cannot use it as a basis to set salary.  The purpose of this is to encourage employers to offer potential candidates what the job is worth rather than based on prior salary which could have been set based on discriminatory factors.

There is a prevailing trend nationwide for salary history ban laws. To date, California, Delaware, Massachusetts, Oregon, Puerto Rico, New York’s Albany County, New York City, and San Francisco have enacted salary history ban laws, and at least 14 other states are considering following suit.  Although we anticipate future and continued legal challenges, it seems likely that laws banning salary history inquiries will continue to gain ground, particularly in more progressive states or areas where the pay disparity directly impacts a large segment of eligible voters. As such, prudent employers should prepare themselves to address this new workforce right through smart planning and proper training of employees, including managers, supervisors and HR personnel responsible for ensuring a lawful hiring process.

Want to learn more about what Philadelphia’s salary history ban law means for your business? Let us help you by analyzing your hiring practices. Please call or email the employment experts Jen Ward (267.758.6012 [email protected]) and John McAvoy (215.789.4919 [email protected]). Our firm motto and goal is “Your Problem Solved!”

DOJ Fails to Challenge 5th Circuit Ruling Striking Fiduciary Rule

Posted on: May 3rd, 2018

By: Theodore C. Peters

On March 15, 2018, the Fifth Circuit Court of Appeal stuck down the “fiduciary rule” proposed by the Department of Labor (DOL), which required brokers to act in the best interests of their clients in retirement accounts.  Subsequently, there was much speculation as to whether the Department of Justice (DOJ), acting on behalf of the DOL, would appeal that decision.  The April 30, 2018 deadline for the DOJ to appeal came and went, but …. nothing.  The Fifth Circuit’s ruling, therefore, is slotted to take effect on May 7, 2018.

In late April, AARP and several state attorneys general (including California, New York and Oregon) joined forces in seeking the court’s permission to intervene as defendants in the case, and also sought an en banc hearing before the entire 17-judge circuit. AARP contends that the court’s decision striking down the DOL rule puts Americans’ retirement security at substantial risk, resulting in an “issue of exceptional importance.”  The plaintiffs in the case, opponents of the DOL rule, formally opposed the motions to intervene on April 30.  Counsel for the plaintiffs charged that the “last-minute motions do not come close to justifying their unprecedented bid to intervene…”

On May 2, the Fifth Circuit denied the intervenors’ motions.  The court’s decision looks to be the final nail in the coffin holding the DOL’s fiduciary rule.  Despite this ruling, however, the DOL still has one more card it could play – it can file a petition by June 13 to have the Supreme Court hear the case. Even if the DOL stands quietly by and does nothing, the Supreme Court could conceivably take the case up on its own.

Ultimately, this legal brouhaha focuses attention on the SEC, which is currently taking public comment on newly proposed standards of conduct for brokers and advisors.

If you have questions or would like more information, please contact Ted Peters at [email protected].

Banks Attempt to Expand the Scope of Liability for Escrow Companies

Posted on: April 27th, 2018

By: Bryce M. Van De Moere

The collapse of the subprime mortgage market in 2008 created shock waves still felt today.  Over-extended lenders such as Washington Mutual and Countrywide failed; larger financial institutions absorbed their loans and were tasked with trying to administer, process and enforce hastily executed loans poorly documented.

As the surviving financial institutions complete clearing out the remaining bundled loans, a trend has emerged where large institutions attempt to shift responsibility for collection of outstanding loans to other professionals in the real estate sales market.  A target of big banks seeking to protect themselves from bad debt, uncollectible loans or defective security instruments has become the title insurers and the escrow holder.  Historically, escrow has held the position of the third party in a real estate sales transaction that holds money while ownership, money and title transfer. The escrow holder is the fiduciary to the buyer and seller, tasked with following the buyer and sellers’ instructions in the sale of real property that ordinarily includes extinguishing existing loans in favor of buyer’s new mortgage.  The title insurer protects the buyer and buyer’s lender to ensure the new mortgage is in priority to protect the lender’s security interest.

Where this issue has arisen is in the repayment of the mortgage after the sale of property, usually a home equity line of credit (HELOC) that was offered by the now-defunct lender.  Much of this commercial paper was acquired in pools as opposed to individual transactions with a matching promissory note and deed of trust.  New lenders change loan numbers from the old defunct lender’s account number to account numbers matching the system by the new owner of the paper.  Other instances, the loan is marked as a secured but the original deed of trust is missing or no assignment of the security interest is recorded.  A third situation occurs where there is an accounting issue when a seller claims to have made payments that are not credited on the account.  Finally, in the waning days of Countrywide and Washington Mutual, people refinanced their loans but the paid deed of trust was not re-conveyed and included in the pool of notes and trust deeds transferred.  Buyers and their lenders want free and clear title.  Escrow can only rely on what the principle tells them the loan number on any HELOC is or if the old loan number is printed on the deed of trust pulled from the assessor’s office.  If the loan number is the old number, a payoff demand may or may not pick up the correct loan account.  Big lenders use clearing houses to issue reconveyances that may or may not record within the statutory 75 days required under California Civil Code 2941.  A new buyer may receive a notice from its lender that has picked up an re-conveyed lien on the property that was to be free and clear.  A title insurer wants to protect its insured so it will issue a release to clear title.

All the while big bank is putting the pieces of the puzzle together on the old account and realizes they have been underpaid.  Civil Code 2943(d) offers a remedy, but it is often an empty remedy since the loan obligation is still enforceable, but only as an unsecured contract debt and their former borrower is long gone.  What to do?  Big Bank sues the escrow for preparing a faulty payoff statement and the title company for statutory violation of Civil Code 2941(b)(6), wrongful recording of the release.

Although existing case law holds the escrow holder’s duty is only to the depositors and not a third party outside of the escrow (Summit Financial v. Continental Lawyers Title, 27 Cal. 4th 705 (2007)); more and more trial courts are allowing bank’s claims against escrow companies to survive summary judgment forcing escrow companies to the exposure and risks of trial.  Second, on statutory violations against title insurers, banks are using the remedy of subsection (b)(6) as a statutory indemnity, threatening title insurers with exposure to the remaining balance plus all accrued interests, costs, penalties and attorney fees.

Big institutional lenders are well positioned to force changes, legislatively and judicially in what was once thought of as solid law limiting insurers and professional clients’ liability.  The next new horizon looks to be an assault on those limits of liability.

If you have any questions or would like more information, please contact Bryce Van De Moere at [email protected].