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“Drawing the Sting” and Using Direct Examination to Undermine Attacks on Your Client or Witness

It’s rare when a witness does not come with some baggage, whether it’s a criminal conviction, bias, inconsistent statement, or some other challenge that affects his or her credibility.

In this scenario, Counsel has a choice: bring the issue out first and before the other side has the opportunity or allow the opposing counsel to do so on crossexamination which would create a “sting.” This sting in definition is “to make something that is unpleasant a little less unpleasant.” In other words, it is a way to bring the “baggage” out first, which could promote maintaining the jury’s trust, as opposed to appearing as though you are attempting to hide information.

How and when should counsel attempt to take the sting out at trial? In most cases, the best time to do so would be neither at the beginning or the end of direct examination, but in somewhere in the middle. Counsel should aim to allow the client or witness to establish some rapport or trustworthiness with the jury and after doing so ask questions to enable the witness to acknowledge the flaw or issue and thereby mitigate its harm. By doing so, the jury will most likely appreciate the client or witness being candid and forthcoming.

On the other hand, glossing over the issue during direct examination will give opposing counsel the ability to bring it out first and attempt to manipulate the matter into something that is more than what is really is. That will leave the witness to defend themselves regarding matters that simply could have been brought out during direct examination and established as something in the past that has been handled, for example. At the end of the day, if there are negative matters that are likely to arise, then the foregoing preemptive “drawing the sting” approach would be more effective. If a client does not tell his or her attorney about an issue that could come up or if counsel is aware and does not address the matter head on, then a witness’ credibility will take a plunge and the viability of the case including damages will be certain to have an adverse impact on the case and possibly the determination of damages.

Please note there are limited circumstances when this approach may not apply. For example, where the impeachment or negative evidence is so weak or petty whereby bringing it up would create non-issues and waste the court’s time. If opposing counsel happens to bring it up, such petty evidence can be handled during re-direct examination (questions asked after cross examination) and mitigated at that time.

PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

WHAT IS INDEMNIFICATION IN CALIFORNIA?

There are two forms of indemnity: contractual and implied. The right to indemnity is predicated upon one’s breach of contract with the rationale being that a contract under which one undertook to do work or provide services necessarily implied an obligation to do the work in a proper manner and to discharge foreseeable damages that might result from incompetent performance.

In general, indemnity refers to “the obligation resting on one party to make good a loss or damage another party has incurred. Historically, the obligation of indemnity took three forms: (1) indemnity expressly provided for by contract (express indemnity); (2) indemnity implied from a contract not specifically mentioning indemnity (implied contractual indemnity); and (3) indemnity arising from the equities of particular circumstances (traditional equitable indemnity).”  Prince v. Pacific Gas & Electric Co. (2009) 45 Cal. 4th 1151, 1157.  Even though three forms of indemnity were once regarded as distinct, California courts have held that there are only two basic types of indemnity: express indemnity and equitable indemnity…”Id.

An action for contractual indemnity is based on a party’s breach of duty under a contract, express or implied. West v. Superior Court (1994) 27 Cal. App. 4th 1625, 1633.  An implied contractual indemnity claim, like a traditional equitable indemnity claim, is subject to the rule that a party’s liability for equitable indemnity is based on its pro rata share of responsibility for the damages to the injured party. Prince, supra, 45 Cal. 4th at p. 1165.

Indemnification agreements are appropriate when two people or entities are being sued, or should be sued, in a lawsuit action filed by an aggrieved Plaintiff. For example, if two companies are being sued by a Plaintiff, then there could be a viable claim for indemnification that would involve apportioning liability to each company based on the evidence, which is when this legal theory applies.

Please note there could be agreements drafted that one will only do business based if potential legal liability will be on one party over another, even though they both might be liable.

PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

What are Breach of Contract Damages in California?

I.     INTRODUCTION

Breach of Contract damages in California are primarily either General Damages or Special Damages.  General Damages are direct result of a breach of the contact since they arise directly and necessarily from the breach of contract. On the other hand, Special Damages are damages that are not directly and necessarily result from the breach. In this blog, we explore general principles of breach of contract damages in California in the context set forth above.

II.  CONTRACT LAW GENERALLY

Breach of Contract is generally governed by California Civil Code Sections 3300-3302 and 3353-3360.  There is also extensive case law elaborating upon these Sections and discussing the nuances of the governing law.

The objective of the law of damages for breach of contract is to put the aggrieved party in the same position had the contract not been breached. The general measure of damages for breach of contract in California is set forth in Civil Code Section 3300: “For breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result from.”

In fact, the general principle governing measure of damages for a breach of contract was addressed by the California Supreme Court in Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal 4th 960.  The Court held “[d]amages awarded to an injured party for breach of contract “seek to approximate the agreed-upon performance.” The goal is to put the plaintiff “in as good a position as [s/he] would have occupied” had the defendant had not breached the contract. In other words, the plaintiff is entitled to damages that are equivalent to the benefit of the plaintiff’s contractual bargain. Id.

The injured party’s damages cannot, however, exceed what it would have received if the contract had been fully performed on both sides. Civil Code § 3358. This limitation of damages for breach of a contract “serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.” Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503.

Exemplary or punitive damages are not recoverable in a breach of contract action, even if the defendant’s act was malicious, willful or fraudulent, unless an independent tort (a wrongful act outside of the contract context) is involved.  Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal 4th 28.

III.      REASONABLENESS OF DAMAGES

Civil Code Section 3359 provides: “Damages must, in all cases, be reasonable, and where an obligation of any kind appears to create a right to unconscionable and grossly oppressive damages, contrary to substantial justice, no more than reasonable damages can be recovered.”

  1. Reasonable Certainty

Civil Code Section 3301 provides: “No damages could be recovered in a breach of contract which are not clearly ascertainable in both their nature and origin,” which would constitute speculative damages. Speculative damages are those that are highly improbable and based on conjecture.  Conversely, damages must be “clearly ascertainable” meaning there must be based on some reasonable basis and computation used in conjunction with the analysis.

IV.      GENERAL AND SPECIAL DAMAGES

  1. General Damages

General damages flow directly and necessarily from breach of contract. In other words,  general damages are deemed to have been contemplated by the parties at the time of entering into the contract since their occurrence is deemed predicable if contract is breached.

  1. Special Damages

Special damages, on the other hand, do not necessarily flow from breach of contract. Special damages arise from particular circumstances of the parties or of the particular contract. To recover special damages, the special circumstances must have been communicated to or known by the defendant, or the defendant should have become aware of such special circumstances when the contract was entered into.

The premise of defaulting party’s knowledge of any special circumstances for plaintiff to be able to recover special damages is predicated upon the principle that the defaulting party should be able to evaluate the risks inherent in entering into the contract, if it breaches the contract.

V.     LOST PROFITS RECOVERABLE IN BREACH OF CONTRACT

Lost profits of are recoverable, if and only if the extent of the lost profits and occurrence can  be proven. Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 CA4th 435.  To prove this, plaintiff must prove such profits are the direct and natural consequence of a specific breach of contract. Postal Instant Press, Inc. v. Sealy (1996) 43 CA4th 1704.

If the fact of damages is certain, then the trial court has discretion to determine the measure of damages. Greenwhich S.F. v. Wong (2010) 190 CA4th 739. Lost profits could be measured by “the past volume of business and other provable data relevant to the probable future sales.” Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 CA4th 847.

VI.     CONCLUSION

Breach of contract cases involve various nuances that must be explored by a legal professional to determine the extent of any breaches and extent of any damages.  Sometimes the breaching party may be entitled to offsets to the extent the opposing party did not perform as agreed.

Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

CALIFORNIA LEGAL MALPRACTICE BASICS

I. What is Legal Malpractice?

Legal malpractice is a type of civil law suit used to enforce the standards of professional conduct. When you initiate a lawsuit for California legal malpractice, you’re not only asking the court to compensate you for your damages; you’re also asking it to define and clarify the standard of care that applies to future lawyers. To better understand California legal malpractice lawsuits, it’s important to know the elements of the claim.

II. Elements of a Legal Malpractice Lawsuit in California

Legal malpractice claims are founded on the theory of negligence. For this reason, legal malpractice is also called professional negligence. To establish a cause of action for legal malpractice, you must prove the following elements: 1) that the attorney owed you a duty; 2) that the attorney breached that duty; and 3) that the attorney’s breach of duty resulted in actual damages.

The existence of a duty is a straightforward analysis, and it’s usually easy to prove. Thus, the heart of legal malpractice claims is whether your attorney breached their duty, i.e., your attorney failed to use an ordinary degree of care, skill, or knowledge expected from other attorneys under similar circumstances.

Once it can be shown that your attorney breached their duty of care owed to you, the next step is to show that the breach resulted in actual damages. Proving damages requires that you were injured by the outcome of the original case because of your lawyer’s omissions or misconduct. This is called the “case within the case” factor. Damages resulting from malpractice can be difficult to prove, and your original case must essentially be retried during your malpractice suit to determine whether the outcome would have been different.

Another important element of legal malpractice claims is the statute of limitations.

III. California Legal Malpractice Statute of Limitations

The statute of limitations is the time you have to file a claim for legal malpractice against your attorney. While the exact amount of time varies depending on the facts of your case, the general rule is that the you must bring an action against the attorney within one year after discovering (or after you should have reasonably discovered) that the wrongful act or omission has occurred, or four years from the date of the malpractice; whichever occurs first. The statute of limitations may be longer in certain circumstances, and it’s important to have a qualified legal malpractice lawyer review your case to determine whether you still have time to initiate a malpractice lawsuit against your attorney.

If you believe you’ve been injured by your lawyer’s professional negligence, we are here for you. We understand this can be a difficult time in your life and that you feel wronged. We will review the facts of your case, explain your rights, and advise you about how to proceed. Contact us today to discuss your case.

PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

WHEN DO LIES BECOME AN ACTIONABLE FRAUD CLAIM IN CALIFORNIA?

I. GENERALLY

The term “fraud” is thrown around a loosely these days. It is not uncommon for a business client to tell her attorney that she has been defrauded in a business deal because a vender lied, a partner stole from the business, or a supplier failed to deliver an order. While each of these scenarios may be fraudulent, more times than not, such actions or inactions do not quite rise to the level required under the law. It can be very difficult to prove all the elements of a fraud in court even where it even actually exists. More importantly, there is a general misunderstanding of what fraud is and how it’s applied under the law.

II. TYPES OF LEGAL FRAUD

There are four types of acts that can be considered fraud or deceit. They are commonly known as intentional misrepresentation, negligent misrepresentation, concealment, and false promise. Sometimes available is a fifth “catch-all” fraud category of “any other act fitted to deceive.”)

A. Intentional Misrepresentation

For an intentional misrepresentation to be considered fraudulent:

• The statement must be an intentionally or recklessly false statement of fact. It generally cannot be an opinion (though there are some exceptions);
• The perpetrator must have intended to defraud the victim. Intent is usually the most difficult element to prove;
• The victim must have reasonably relied on that false statement and altered a change his or her position. A victim can’t reasonably rely on the statement if she knew or should have known the statement was false; and
• The victim must be able to prove that it caused some type of measurable damage.

B. Negligent Misrepresentation

Negligent misrepresentation is essentially the same thing as intentional misrepresentation, except that the alleged perpetrator doesn’t have to know that the statement was false, but he or she must only lack a reasonable basis to believe it was true. This is generally easier to prove than intentional misrepresentation, but unlike intentional misrepresentation, the victim cannot collect punitive damages.

C. Concealment

Concealment is when someone who has a duty to disclose a material fact either does not disclose it or conceals it with the intent to defraud the victim. For concealment to be considered fraudulent, a victim must show the following:
• The perpetuator intentionally failed to disclose an important fact or disclosed some facts without full disclosure could be another important fact and thereby making the disclosure deceptive;
• The victim did not know of the concealed fact;
• The perpetrator intended to deceive the victim by concealing the fact;
• The victim reasonably relied on the concealed fact to change her position.
• The concealment caused some type of measurable damage.

D. False Promise

A false promise is a promise made without any intention of performing it. The elements of false promise are the following:

• The promise was important to the transaction;
• At the time of the promise, the promisor did not intend to perform it;
• The promisor intended the victim to rely on the promise;
• The victim reasonably relied on the promise;
• The promisor did not perform the promise;
• The victim was harmed as a result; and
• Reliance on the promise cause the victim’s harm.

E. Constructive Fraud

Aside from the types of actual fraud above which require an intent to defraud, with some exception, a court can also treat any misrepresentation as fraud if it gives someone an unfair advantage over someone else so long as there is some duty owed because of a legal relationship. The key to constructive fraud is that there must be some special relationship between the parties in the eyes of the law. For example, real estate brokers have a legal duty to disclose all known material facts to buyers. If the misrepresentation is made by someone who owes no duty to the other, then what might otherwise be constructive fraud becomes an innocent misrepresentation.

III. How to Deal with a Potential Fraud Claim

Being lied to or tricked can stir up feelings of anger and betrayal, not to mention the actual harm to you individually or your business. It is important to keep a clear head and focus on pursuing legal remedies that address the specific situation. The law disfavors contract fraud while at the same time provides significant remedies for victims under the appropriate circumstances.

Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

The Department of Labor’s Recent Joint Employer Interpretation Seeks to Hold More Employers, Whether Payroll Companies or Worksite Sites Controlled by Third Parties More Accountable

I. Overview

The U.S. Department of Labor (DOL) issued a new Administrator’s Interpretation (AI) that emphasizes the agency’s intent to apply joint employer status more broadly under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Even though the definition of joint employment under these acts has not changed, the DOL made it clear that it will examine dual employer relationships closely with what appears to be an intent to find joint employer status in more circumstances.
Of course, companies engaged as a “dual employer” generally seek to avoid joint employer status. Being a joint employer in the eyes of the DOL can result in liability for the acts of a client that has the primary responsibility to direct and control employees. This is not a favorable place to be. Temporary staffing agencies and PEOs do not have enough control over workers assigned to a client location to assume such liability. As a result, such companies have worked for years to maintain dual or co-employment relationships that do not constitute joint employment. It appears, however, that the DOL, through the AI, is trying to chip away at such relationships and include more dual employers within the definition of joint employer.

II. Dual Employers Are Subject to More Intense Scrutiny
All companies engaged in the business of providing employees to clients or co-employing workers are affected by this AI. As explained in more detail below, it is clear that the DOL intends to scrutinize all “dual employer” relationships more closely and focus on the degree of control over workers as a guide to determine whether a joint employer relationship exists.
The DOL identified the two most likely scenarios where joint employment typically exists.
1. One type of joint employment, referred to as vertical joint employment, is where there is an “intermediary employer”, such as a staffing agency, PEO, or other provider of workers to a client. Where such a relationship exists, the DOL will focus on the economic realities of the relationship to determine whether a worker is economically dependent on two or more employers, and if so, will be inclined to find joint employer status.
2. The second type of joint employment under scrutiny by the DOL is where the employee has two or more separate, but related employers, each benefitting from a person’s work during the same period of time. These scenarios are explained in more detail below.

III. Vertical Joint Employment

In a vertical employment relationship, it is common for the “intermediary employer” to be the W-2 employer that actually pays the wages and payroll taxes, but does not direct and control the day-to-day activities of the worker. The issue for the DOL as expressed in the AI is whether, based on the economic realities of the employment relationship shared by the intermediary and the client company, joint employment exists between the employee, the intermediary employer and the client at which the employee is assigned to work.

The economic realities test is not new to the FLSA or MSPA. What is new is that in reviewing a relationship for joint employer status, the DOL announced in the AI that it will abandon its prior practice to look only to its joint employer regulations, and focus exclusively on the economic realities factors in vertical employment scenarios. This is not necessarily bad news, but it is significant.

Under the economic realities test, the degree of control exerted by a person or entity over the workers is only one of the primary factors in a joint employer analysis, and is not definitive. Other economic reality factors the DOL will consider “in the mix” include:
• Does the other employer direct, control, or supervise (even indirectly) the work?
• Does the other employer have the power (even indirectly) to hire or fire the employee, change employment conditions, or determine the rate and method of pay?
• Is the relationship between the employee and the other employer permanent or long-standing?
• Is the employee’s work integral to the other employer’s business?
• Is the work performed on the other employer’s premises?
• Does the employer perform functions typically performed by employers, such as handling payroll, providing workers’ compensation insurance, tools, or equipment, or in agriculture, providing housing or transportation?
• Does the employee perform repetitive work or work requiring little skill?

The DOL also identified industries where it believes vertical joint employment relationships are common, and as a result, under increased scrutiny. These industries include “agriculture, construction, hotels, warehouse and logistics” as well as other industries that regularly use staffing agencies or subcontracting intermediaries.

IV. Horizontal Joint Employment

According to the DOL, the so-called horizontal joint employment relationship exists where multiple employers who are sufficiently associated with each other both benefit from the individual’s work, such as where two separate restaurants have the same ownership and jointly schedule an employee to work at both establishments. The factors to consider when analyzing this type of joint employment include:

• Who owns or operates the possible joint employers?
• Do they have any agreements between the employers?
• Do the two employers share control over operations?
• Do the employers share or have overlapping officers, directors, executives, or managers?
• Does one employer supervise the work of the other?
• Do the employers share supervisory authority over the employee?
• Are their operations co-mingled?
• Do they share clients or customers?

The DOL emphasized that it is not necessary for all, or even most, of these factors to exist in order to find joint employment status between two or more related employers.

V. NLRB Focus On Joint Employers

The National Labor Relations Board (NLRB) has also been expanding its use of joint employment status to hold companies liable for violations of the National Labor Relations Act. Although the DOL stated in a recently issued Questions and Answers document that its joint employment analysis is different than that used by the NLRB, reports suggest that the office of the Solicitor of Labor reached out to the NLRB’s General Counsel on the issue of joint employment in advance of issuing the new Administrator’s Interpretation. It is clear that both agencies are focused on a broad application of the joint employer doctrine.

a) What Does This Mean for Employers?

If joint employment is found, both entities may be held responsible for compliance with all applicable laws, including wage and hour and other employment protection laws. This includes making sure non-exempt employees are paid minimum wage for all hours worked and overtime pay for hours worked over 40 in a workweek. For employers covered by MSPA, both employers are liable for ensuring necessary disclosures of the terms and conditions of employment, and payment of wages are made, as well as maintaining required written payroll records. A joint employer could also find itself named as a co-defendant in a tort liability suit brought against the “primary actor” employer.

VI. Conclusion

Joint employment also applies for determining eligibility and coverage under the Family and Medical Leave Act (FMLA). This is critical as smaller employers with less than 50 employees may think they are free of any FMLA obligations, only to find that they meet the coverage threshold if they are deemed to be a joint employer with another entity, such as a staffing agency that provides them with additional workers. Similarly, joint employer status could affect compliance under the Affordable Care Act.

In light of this new guidance and the emphasis by the federal government on broad application of joint employment, staffing agencies, PEOs, and their clients should examine their relationships, including but not limited to, the degree of control, supervision, termination rights, setting of pay rates, and provision of tools, training, and policies exerted by the client company. The higher the degree of control and reservation of rights over the workers, the higher the chance that a joint employment relationship will be found. This also means that clients may ask staffing agencies to provide additional information about their compliance with applicable laws so as to gauge their level of risk. In fact, compliant staffing companies that are violation-free may see that as a marketing point in the future.

In the end, if employers comply with applicable laws, joint employment need not come into play. It is only when compliance takes a back seat and government investigators arrive at the door, that companies need to worry about whether they are a joint employer. Otherwise the issues will be dealt with in civil court.

Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

Higher Accountability for Federal labor violations by Employers

The Department of Labor’s Recent Joint Employer Interpretation Seeks to Hold More Employers, Whether Payroll Companies or Worksite Sites Controlled by Third Parties More Accountable

I. Overview

The U.S. Department of Labor (DOL) issued a new Administrator’s Interpretation (AI) that emphasizes the agency’s intent to apply joint employer status more broadly under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Even though the definition of joint employment under these acts has not changed, the DOL made it clear that it will examine dual employer relationships closely with what appears to be an intent to find joint employer status in more circumstances.
Of course, companies engaged as a “dual employer” generally seek to avoid joint employer status. Being a joint employer in the eyes of the DOL can result in liability for the acts of a client that has the primary responsibility to direct and control employees. This is not a favorable place to be. Temporary staffing agencies and PEOs do not have enough control over workers assigned to a client location to assume such liability. As a result, such companies have worked for years to maintain dual or co-employment relationships that do not constitute joint employment. It appears, however, that the DOL, through the AI, is trying to chip away at such relationships and include more dual employers within the definition of joint employer.

II. Dual Employers Are Subject to More Intense Scrutiny
All companies engaged in the business of providing employees to clients or co-employing workers are affected by this AI. As explained in more detail below, it is clear that the DOL intends to scrutinize all “dual employer” relationships more closely and focus on the degree of control over workers as a guide to determine whether a joint employer relationship exists.
The DOL identified the two most likely scenarios where joint employment typically exists.
1. One type of joint employment, referred to as vertical joint employment, is where there is an “intermediary employer”, such as a staffing agency, PEO, or other provider of workers to a client. Where such a relationship exists, the DOL will focus on the economic realities of the relationship to determine whether a worker is economically dependent on two or more employers, and if so, will be inclined to find joint employer status.
2. The second type of joint employment under scrutiny by the DOL is where the employee has two or more separate, but related employers, each benefitting from a person’s work during the same period of time. These scenarios are explained in more detail below.

III. Vertical Joint Employment

In a vertical employment relationship, it is common for the “intermediary employer” to be the W-2 employer that actually pays the wages and payroll taxes, but does not direct and control the day-to-day activities of the worker. The issue for the DOL as expressed in the AI is whether, based on the economic realities of the employment relationship shared by the intermediary and the client company, joint employment exists between the employee, the intermediary employer and the client at which the employee is assigned to work.

The economic realities test is not new to the FLSA or MSPA. What is new is that in reviewing a relationship for joint employer status, the DOL announced in the AI that it will abandon its prior practice to look only to its joint employer regulations, and focus exclusively on the economic realities factors in vertical employment scenarios. This is not necessarily bad news, but it is significant.

Under the economic realities test, the degree of control exerted by a person or entity over the workers is only one of the primary factors in a joint employer analysis, and is not definitive. Other economic reality factors the DOL will consider “in the mix” include:
• Does the other employer direct, control, or supervise (even indirectly) the work?
• Does the other employer have the power (even indirectly) to hire or fire the employee, change employment conditions, or determine the rate and method of pay?
• Is the relationship between the employee and the other employer permanent or long-standing?
• Is the employee’s work integral to the other employer’s business?
• Is the work performed on the other employer’s premises?
• Does the employer perform functions typically performed by employers, such as handling payroll, providing workers’ compensation insurance, tools, or equipment, or in agriculture, providing housing or transportation?
• Does the employee perform repetitive work or work requiring little skill?

The DOL also identified industries where it believes vertical joint employment relationships are common, and as a result, under increased scrutiny. These industries include “agriculture, construction, hotels, warehouse and logistics” as well as other industries that regularly use staffing agencies or subcontracting intermediaries.

IV. Horizontal Joint Employment

According to the DOL, the so-called horizontal joint employment relationship exists where multiple employers who are sufficiently associated with each other both benefit from the individual’s work, such as where two separate restaurants have the same ownership and jointly schedule an employee to work at both establishments. The factors to consider when analyzing this type of joint employment include:

• Who owns or operates the possible joint employers?
• Do they have any agreements between the employers?
• Do the two employers share control over operations?
• Do the employers share or have overlapping officers, directors, executives, or managers?
• Does one employer supervise the work of the other?
• Do the employers share supervisory authority over the employee?
• Are their operations co-mingled?
• Do they share clients or customers?

The DOL emphasized that it is not necessary for all, or even most, of these factors to exist in order to find joint employment status between two or more related employers.

V. NLRB Focus On Joint Employers

The National Labor Relations Board (NLRB) has also been expanding its use of joint employment status to hold companies liable for violations of the National Labor Relations Act. Although the DOL stated in a recently issued Questions and Answers document that its joint employment analysis is different than that used by the NLRB, reports suggest that the office of the Solicitor of Labor reached out to the NLRB’s General Counsel on the issue of joint employment in advance of issuing the new Administrator’s Interpretation. It is clear that both agencies are focused on a broad application of the joint employer doctrine.

a) What Does This Mean for Employers?

If joint employment is found, both entities may be held responsible for compliance with all applicable laws, including wage and hour and other employment protection laws. This includes making sure non-exempt employees are paid minimum wage for all hours worked and overtime pay for hours worked over 40 in a workweek. For employers covered by MSPA, both employers are liable for ensuring necessary disclosures of the terms and conditions of employment, and payment of wages are made, as well as maintaining required written payroll records. A joint employer could also find itself named as a co-defendant in a tort liability suit brought against the “primary actor” employer.

VI. Conclusion

Joint employment also applies for determining eligibility and coverage under the Family and Medical Leave Act (FMLA). This is critical as smaller employers with less than 50 employees may think they are free of any FMLA obligations, only to find that they meet the coverage threshold if they are deemed to be a joint employer with another entity, such as a staffing agency that provides them with additional workers. Similarly, joint employer status could affect compliance under the Affordable Care Act.

In light of this new guidance and the emphasis by the federal government on broad application of joint employment, staffing agencies, PEOs, and their clients should examine their relationships, including but not limited to, the degree of control, supervision, termination rights, setting of pay rates, and provision of tools, training, and policies exerted by the client company. The higher the degree of control and reservation of rights over the workers, the higher the chance that a joint employment relationship will be found. This also means that clients may ask staffing agencies to provide additional information about their compliance with applicable laws so as to gauge their level of risk. In fact, compliant staffing companies that are violation-free may see that as a marketing point in the future.

In the end, if employers comply with applicable laws, joint employment need not come into play. It is only when compliance takes a back seat and government investigators arrive at the door, that companies need to worry about whether they are a joint employer. Otherwise the issues will be dealt with in civil court.

Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

Attorney’s Fees as Damages In California: When Are They Recoverable?

I. GENERALLY

California follows the “American Rule,” which provides each party involved in litigation is responsible for paying his or her own attorney’s fees and costs unless provided otherwise by statute or contract. However, a party can circumvent this rule through the “tort of another” doctrine. This doctrine applies if the party is required to file or defend a suit because of a third party’s tort, which typically occurs in professional malpractice suits. A tort is a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.

II. THIRD PARTY LIABILITY

Specifically, when a plaintiff must bring an action against a third party as “the natural and probable consequence” of the defendant’s negligence, the plaintiff is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred. (Prentice v. North Am. Title Guaranty Corp., Alameda Division (1963) 59 Cal.2d 618, 620.) Unless the parties have stipulated otherwise, a claim for attorney’s fees and costs under the “tort of another” doctrine cannot be asserted by a post-trial motion or memorandum of costs, but must be pleaded and proved to the trier of fact. (Gorman v Tassajara Dev. Corp. (2009) 178 Cal.App.4th 44, 79.)

The “tort of another” doctrine, rather than being an exception to the rule that parties must bear their own attorneys’ fees, is an application of the usual measure of tort damages. The exception is predicated on damages wrongfully caused by the defendant’s improper actions. The theory of recovery is the attorney’s fees are recoverable as damages resulting from a tort in the same way medical fees would be part of the damages in a personal injury action. (Sooy v. Peter (1990) 220 Cal.App.3d 1305, 1310.) “Nearly all cases which have applied the “tort of another” doctrine involve a clear violation of a traditional tort duty between the tortfeasor who is required to pay the attorney’s fees and the person seeking compensation for those fees.” Id.

III. THERE MUST BE MERITORIOUS CLAIMS AND THUS DAMAGES TO MOVE FOR AND OBTAIN ATTORNEY’S FEES AND COSTS

The court’s holding in Mega RV Corporation v. HWH Corporation (2014) 225 Cal.App.4th 1318 is a reminder that the existence of an underlying tort by a defendant is a basic requirement for applying the tort of another. In this case, plaintiffs sued Mega RV (the retailer of an allegedly defective motor home), Country Coach (the manufacturer of the motor home) and Bank of America (who financed the transaction) for defective hydraulic systems in the motor home. Mega RV filed a cross-complaint for partial indemnification against HWH Corporation (“HWH”), the entity who manufactured components for the motor home. The trial court concluded HWH was not required to indemnify Mega RV and awarded $166,000 to HWH in attorneys’ fees based on the tort of another. HWH had argued it was entitled to these fees because Mega RV was negligent in servicing plaintiffs’ motor home.

However, the appellate court held the tort of another did not apply and struck the award of damages. The court found the defendants had not committed a tort against plaintiffs, and the plaintiffs had not sued for negligence or any other tort. (Id. at 1338.) The court also rejected HWH’s contention that Mega RV negligently serviced plaintiffs’ motor home. (Id. at 1338-1339.) The court reasoned:

“The connection between HWH’s harm and Mega RV’s servicing of the motor home is extremely attenuated. There is no moral blame attached to Mega RV’s servicing repair failures, even assuming failures occurred; there was certainly no evidence of reckless or purposeful behavior, or of anything other than economic damages suffered by anyone involved in this case…” (Id. at 1342.)

IV. THE DUTIES OF ENTITIES CAN BE COMPLEX AND REQUIRE CAREFUL ANALYSIS

In sum, there was no tort because Mega RV had no duty to HWH with regard to the servicing of plaintiffs’ motor home. If there is no tort, the tort of another doctrine cannot apply. (Id.) The court in Mega RV Corp. clarified that attorney’s fees cannot be awarded against one of several joint tortfeasor defendants on the theory one induced the other co-defendants to participate in the injury-producing event. Joint tortfeasors are treated as a single unit (i.e. one party), and the third party tort doctrine does not apply. (Id. at 1340.) The court noted the tort of another doctrine is not particularly relevant in cases involving physical injury or property damage.

V. CONCLUSION

Due to the American Rule, attorneys and clients often do not consider their opponents’ attorneys’ fees in evaluating cases. Given the “tort of another” doctrine, counsel and their clients should consider their opponents’ attorneys’ fees in applicable situations when evaluating their clients’ potential exposure. Furthermore, parties who plan to sue for attorneys’ fees, pursuant to the tort of another, must be careful to identify an existing tort committed by a defendant or face losing this claim.

Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.

WHEN DOES THE STATUTE OF LIMITATIONS BEGIN TO ACCRUE, OR “RUN,” IN PROFESSIONAL MALPRACTICE CASES?

I. OVERVIEW

In summary, this blog addresses when “actual injury” occurs to satisfy the damages element of professional negligence lawsuits against attorneys, brokers, accountants, and other professionals and analyze the divergent views as to when the statute of limitations (known as the time-barred defense) begins to “run” or whether it could be deemed extended or “tolled” until damages are sustained.

For context, let us begin by identifying what is required in terms of alleging and proving the elements of a legal malpractice case against a negligent attorney. First, a duty of care must be established. Second, there must be a breach of a duty by the attorney. Third, causation must be established which requires showing a nexus between the act or omission and the resulting damages. Finally, damages of some appreciable amount must arise due to the attorney’s negligent act or omission. These four elements are generally required to establish a professional negligence claim but are not intended to be exhaustive since the nuances vary for each profession.

II. WHEN DOES THE STATUTE OF LIMITATIONS (“SOL”) COMMENCE?

Whether the negligence was committed by an attorney, broker, accountant, or other professional, the issue of when the SOL may time bar a claim commonly arises when, for example, a former client might not become aware of the negligent act until long after termination of the engagement or not until damages are sustained which may not be apparent until many years down the road. That is when the former client could argue the limitations period should be tolled as a result of not experiencing “actual injury.”

There are various SOL deadlines depending upon the professional that is being sued. For example, claims against a negligent attorney must generally be filed within 1-year whereas for claims against a negligent broker must be brought within 2-years. In 1998, the California Supreme Court addressed the actual injury analysis in the legal malpractice context which has since then been applied to determine the accrual or tolling of damages of various professional malpractice cases.

In 1998, the California Supreme Court in a case entitled Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal. 4th 739, 958 addressed the issue of when all of the elements were met to commence the running of the limitations period and in doing so developed the “actual injury” analysis to determine the time period wherein a claim is tolled and thereby when the damages element is met.

III. WHAT DETERMINES WHEN ACTUAL INJURY HAS BEEN SUSTAINED?

According to Jordache, the Court held determining whether actual injury has occurred is primarily a factual inquiry since actual injury may occur without a judgment or settlement, nominal damages, or a mere threat of harm. The Court further provided there is no “bright line rule” meaning the specific facts and circumstances of each case should be considered based on the evidence presented.

Evaluating whether actual injury has been sustained is an emerging and evolving issue within California’s court system. For example, Jordache notes that while some courts have ruled that once a client expends attorney’s fees to remedy the negligent attorney’s wrong that could begin the accrual of the limitations period. Conversely, there are other instances where actual injury did not arise merely due to expending attorney’s fees but was tolled until another court ruled upon the evidence or making upon a final determination regarding the matter. (Jordache citing Shifren v. Spiro (2012) 206 Cal. App. 4th 481).

IV. CONCLUSION

Professional negligence claims are complex and require a competent attorney to thoroughly evaluate your potential matter and to determine whether a viable claim might exist and the deadline it should be filed by. We implore you to seek the advice of legal counsel immediately to avoid the waiver of any rights or remedies.

PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship. Please note this blog is not intended to address the unique issues pertaining to medical malpractice and for any such potential matter you must immediately seek the advice of appropriate counsel.