Monthly Archives: September 2011

Prosecutors are using tough sentecing to exact plea bargains

A recent story in the NY Times describes how tough sentencing schemes have given prosecutors a large amount of leverage to exact plea deals from defendants.  Given the crazy sentencing schemes like California’s three strikes, discussed previously here, defendants are increasingly pleading guilty to crimes.  Although tough sentencing schemes may provide increased deterrence from crime, the leverage granted to prosecutors may be exacting guilty pleas from innocent defendants who are simply afraid of the worse-case scenario.

If you were innocent and looking at the chance of getting 25 to life or could sign a plea deal to one year in jail, what would you do?  How much faith do you have in our jury system?

Advertisements

Leave a comment

Filed under Criminal Law

How having sex with your (soon-to-be ex) spouse can cost you $25,000 (or more)

Let’s say that Mr. X and his spouse are splitting up and this is what transpires:
  1. Mrs. X sends her spouse packing, suitcase in hand out the door. 
  2. Mr. X receives a large annual bonus from his employer of $50,000. 
  3. A couple of months later Mr. and Mrs. X have drinks and decide to have sex. 
  4. Mr. X returns to being a total idiot shortly thereafter, reaffirming the fact that they need to get divorced.  Mrs. X calls him up and says he can expect divorce papers soon.
A client at a local firm recently found that such a one night stand cost him $25,000.  How could sleeping with your own wife cost you more than one of Eliot Spitzer’s call girls?  Community property can be a bitch (depending on what side you’re on). 
The Law
California, Louisiana, Arizona, Nevada, Texas, Washington, Idaho, and New Mexico are all community property states.  Anything either spouse earns during the marriage is presumed to be jointly owned (50/50).  In community property states, the “date of separation” is the date after which new income and property cease to be community property.  So, after the “date of separation,” what’s his is his and what’s hers is hers.   
Generally living apart from the other spouse establishes the “date of separation.”  California Family Code Section 771 provides: “The earnings and accumulations of a spouse, . . .while living separate and apart from the other spouse, are the separate property of the spouse.”  But what if you have sex with one another.   
Although “living separate and apart” from the other spouse is good guideline, the California courts have looked to two factors which are prerequisites to separation: (1) one spouse has the subjective intent to end the marriage; and (2) there is objective evidence of conduct furthering that intent. In re Marriage of Hardin (1995) 38 Cal.App.4th 448. 

Poor Mr. X
Going back to Mr. X and applying the above factors, having sex with his spouse clouded whether or not either spouse still had the subjective intent to end the marriage.  Their conduct also muddied the waters.  The court found that when they had sexual relations (Roman numeral III above), this “reset the clock” of their date of separation and they were not separated until Mrs. X reaffirmed her intent to end the marriage (Roman numeral IV above).  The court found that since the date of separation was after Mr. X’s receipt of a $50,000 bonus check (Roman numeral II above), this bonus check was community property and half of the money belonged to Mrs.  X.  Ouch.

How Not To Be Mr. X
Mr. X could have saved himself $25,000 and additional legal fees if he had simply made a clean break and not had sex with his soon-to-be ex-wife.  Recent movies like Friends With Benefits and No Strings Attached have given some people the idea that individuals can have a sex life separate from their emotional ties.  In addition, middle age couples struggling with separation may fear the dating scene, have sexual needs, and feel the need to fulfill those needs with their soon-to-be ex-spouse in spite of their reasons for separation.  As Mr. X can tell you, such a move can be quite expensive.  Even if you aren’t  thinking of “muddying the waters” with sex, during the recession many couples are living together in spite of their intent to split to save money.  If any of your actions are going to make your intent to divorce unclear get an attorney and file for legal separation to protect yourself.  If you file for legal separation, you don’t have to worry about the “date of separation”–the date you file for legal separation ends joint ownership of income and property acquired after that date.  Don’t worry, if you file for legal separation and later decide to stay married, you can vacate (reverse) it.  Just don’t be Mr. X.

Leave a comment

Filed under Family Law

A lawyer’s role (what it should be)

Lawyers far too often lose sight of what their practice is intended to be.  Justice Frankfurter once described what a lawyer’s role should be and what that requires. 

It is a fair characterization of the lawyer’s responsibility in our society that he stands ‘as a shield,’ to quote Devlin, J., in defense of right and to ward off wrong. From a profession charged with such responsibilities there must be exacted those qualities of truth-speaking, of a high sense of honor, of granite discretion, of the strictest observance of fiduciary responsibility, that have, throughout the centuries, been compendiously described as ‘moral character.’

Schware v. Board of Bar Exam. of State of N.M. (1957) 353 U.S. 232, 247 (Concurrence)

Leave a comment

Filed under Quotes

California non-compete and non-solicit agreements: when they matter and when they don’t

You’re a consultant and you sign a non-compete agreement or non-solicit with a company that demands you sign it.  Do they matter?  Do you need to keep track of who you can solicit and who you can’t?  The long answer is:  it depends. 
The short answer is that if you are an employee or contractor (not a partner or owner) and the employer is headquartered in California, then such agreements are unenforceable.
Most non-compete and non-solicit agreements in California are illegal, as against public policy, due to California Business & Professions Code § 16600:
Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.
Three situations where such agreements are valid and enforceable:
  1. Business Ownership exception: sales of stock, mergers, LLC membership
  2. Partnerships
  3. Federal Court Boogaloo
Business Ownership Exception
Some of what the California legislature took away from businesses in CA Bus. & Prof. Code § 16600, they gave back in § 16601, 16602, and 16602.5.  Most non-compete and non-solicit agreements coupled with the sale of stock are considered enforceable under § 16601.  Let’s say you are a CEO of a corporation and you own 3% of the company in stock.  As a part of a corporate merger, you sell your stock and sign a non-compete agreement.  The non-compete agreement is valid and enforceable.
The Business Ownership exception also applies to members of an LLC under § 16602.5.  If a member of an LLC signs a non-compete or non-solicit agreement, it is enforceable.
Business owners, I know what you are thinking.  Can’t you just have every employee sign a non-compete agreement, have them buy a small amount of stock, and force the stock’s sale upon leaving the company?  The buy/sell provision will be valid, but you can’t use such measures to circumvent § 16600.  A company tried this technique and lost in Bosley Medical Group v. Abramson (1984) 161 Cal.App.3d 284, where the Bosley court state that a “substantial” sale of all shares must take place, so that it can be said that goodwill of the company is being transferred.  So how much stock must an employee for it to be valid?  No one knows.  However, employers can’t have employees buy a small amount of stock just to validate their non-compete agreements.
Partnerships
A partnership is “two or more persons associated together in a business for profit.”  Also note, no partnership agreement is required in order to be a partner.  So be warned, you may be a partner and not know it.  If you are a partner, non-compete and non-solicit agreements are valid under § 16602.  They are subject to a “rule of reason,” meaning they must be geographically and temporally reasonable.  Generally something like a few years and radius of 40-60 miles are considered reasonable.  Such agreements have been upheld in the context of accountants (Swenson v. File (1970) 3 Cal.3d 389), attorneys (Howard v. Babcock (1993) 6 Cal.4th 409), and physicians (South Bay Radiology Medical Associates v. W.M. Asher, M.D., Inc. (1990) 220 Cal.App.3d 1073, Farthing v. San Mateo Clinic (1956) 143 Cal.App.2d 385).  Consultants beware!   If you sign any consulting agreement make sure that it makes very clear that you are not working “in association,” are not partners, and are not embarking on a joint venture.  Also, contractual denials of partnership formation will be of no avail if all of your conduct indicates otherwise.  Make sure you are consulting and not becoming a partner, or else a non-compete agreement might become valid.
Federal Court Boogaloo
When an employer wants to sue a former employee for violating a non-compete agreement, the employer may try and “remove” the action to Federal Court.  The employer may be able to do so if certain jurisdictional requirements are met, but generally will be able to do so if $75,000+ is at stake and the employer and employee are residents of different states.  (Courts apply many tests when determining where corporations “reside,” but generally look to the corporate headquarters and where they do most of their business.)  The 9th Circuit (Federal Court) is supposed to respect California law and follow § 16600, but guess what, they don’t like it.  In IBM v. Bajorek (9th Cir. 1998) 191 F.3d 1033, the 9th Circuit upheld a non-compete agreement in spite of § 16600.
Edwards and Employer Demands

Demand After Employment
Let’s say your employer comes to you and demands you sign a non-compete or non-solicit agreement or they are going to fire you.  You refuse and they fire you.  There may be a valid cause of action for wrongful termination.  In Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937, the court found that an employer cannot lawfully make the signing of an employment agreement, which contains an unenforceable covenant not to compete, a condition of continued employment.
Employment Contingent Upon Agreement
If an employer demands you sign a non-compete or non-solicit agreement in order to get a job, each individual will need to analyze the prospective benefit of employment against the detriment from signing such an agreement (taking its enforceability into account).  However, there is not yet a case on point whether Edwards applies to prospective employment.  An employee would not yet have an action for wrongful termination.  An employer would probably not be intentionally interfering with prospective economic advantage, because usually in such instances a third party is involved.  It is questionable whether or not such an employee would have any claim.  As a result, prospective employees will need to analyze the risk/benefit and enforceability of such agreements before they decide whether to sign them.

Leave a comment

Filed under Business Law

Don’t get charged in federal court—federal sentencing mini-trial madness

The hallmarks of the American judicial system: the jury, innocent until proven guilty, and evidence proving guilt beyond a reasonable doubt may not have a full place in the Federal court system.  You receive these protections at your initial trial, but then at the sentencing hearing—they go away.  At sentencing, a judge must use the Federal sentencing guidelines, which contain various enhancements.  If you have prior convictions, used a weapon in the commission of the crime, etc. then your sentence is enhanced.  An example of the federal sentencing guideline is here.  
So, you go to trial, and let’s say they prove you committed fraud and you are looking at a statutory minimum of 2 years.  The judge during the sentencing hearing examines the evidence and determines if one of the enhancing factors applies.  However, the existence of the factor does not have to be proven at trial, examined by a jury or proven beyond a reasonable doubt.  If the sentencing enhancement is not extreme—a preponderance of the evidence is the right standard.  If the enhancement is a substantial increase, the judge must find clear and convincing evidence (a lower standard than reasonable doubt).
How does this play out?  In a case written by the 9th Circuit Court of Appeals this Friday, David Kent Fitch was a shady guy doing shady things.  The US Attorney’s office threw everything at him.  Ultimately he was convicted by a jury of bank fraud and money laundering.  It turns out that right before the bank fraud took place, Fitch’s wife disappeared.   The body was never found and there was no proof that he killed her.  He was never charged with her murder.  
At sentencing, the judge enhanced Fitch’s prison term from two years to 20.  He found by clear and convincing evidence that Fitch murdered his wife in the first degree.  The judge cited that he failed to report her disappearance, he told conflicting stories about her whereabouts, he tried to sell her car, he got married when she was still missing (and without getting divorced), he had her checkbook and credit cards, and he used her credit cards after she disappeared.  
The 9th Circuit said that’s all okay.  I think the dissent got it right.  There is no proof that it was first degree murder.  Maybe there is enough for voluntary manslaughter, but not first degree murder.  This is what the dissent had to say, We simply do not know any of the circumstances of Bozi’s disappearance. We know that she has disappeared and that Fitch immediately exploited her disappearance for his own benefit. While Fitch may indeed have been played a causative,or a concealing, role in Bozi’s disappearance, the record contains no evidence that sheds light on the manner of his involvement or the degree of his involvement.”
The moral of the story is don’t commit Federal crimes, because due to crazy sentencing procedures you have diminished due process rights compared to those available in state court.

Leave a comment

Filed under Criminal Law

Super lawyer fails epically

So, you’re a member of a very large law firm in New York.  You humbly note on your firm profile that you have been named “one of the ‘500 Leading Litigators in America,’ one of the ‘500 Leading Plaintiffs’ Lawyers,’ and one of the ‘100 Lawyers You Need to Know in Securities Litigation,’ and … repeatedly named a Super Lawyer by Super Lawyers magazine, in 2007, 2008 and 2009.”  Very humble.  You launch a multi-million dollar securities lawsuit against Smith Barney.  You work on the case for six years.
Now lets say you’re a partner at a law firm made up of over a 1000 attorneys with locations in 12 cities.  You are defending Smith Barney (now Citibank since they bought up Smith Barney).  You defend your client for six years.
No one figures out that the plaintiff never bought securities from the defendant for six years.
The judge said, “In retrospect, it was something so obvious that every lawyer in the case should have recognized the problem and reacted immediately. But no one did.”  You can read more about it here.
So, if you are ever suing anyone or representing someone…make sure they actually bought the thing you’re suing about.  Never mind the fact you signed a declaration that they bought it. 

Leave a comment

Filed under Civil Litigation

Divorce-proof your business


So you have a business with your spouse and business is going well, but marital bliss is fleeting.  Have you thought about the fact that post-dissolution; your business may have to be sold to raise cash?  Anything you can do to divorce-proof your business?  Here are some thoughts:

  1. Keep good records
Be sure to maintain records and keep business and personal assets separate.  
  1. Pay yourself a salary (maybe)
A salary can be a double-edged sword.  Pay yourself a lower salary than your spouse and his attorney may argue he is entitled to a larger share of the business post-marriage.  Pay yourself a higher salary, and you may provide great evidence for his lawyer to come after you for spousal support.  The best bet is to have the same salary level as your spouse.
  1. Regularly value your business (conservatively)
The value of someone’s business changes drastically depending on whom is asking.  Applying for an SBA loan?  Then you’ll claim you have great cash flow and low current ratio.  During divorce proceedings, the respondent will always claim that the business is hemorrhaging cash and has a negative net worth.  Annually valuating your business in a conservative manner may help provide a fairer divorce settlement.  If you receive very aggressive valuations from a generous analyst and your spouse sues you for divorce the next day, you may be kicking yourself all the way to the courthouse.  If you have your business valuated, make sure it is conservative and accurate.
  1. Realize that your business is probably a partnership
Unless you have another business association (LLC, Corporation, etc.) your business with your spouse is probably a partnership.  Even if you never signed a partnership agreement, you have a partnership.  If you never signed an agreement, surprise! The state of California has written a partnership agreement for you.  It’s something very much like the Uniform Partnership Act.  Under the UPA, any partner can force dissolution of the partnership.  So, if you have a partnership and you haven’t agreed to other terms, your spouse can force the destruction and sale of assets of the business.  If you sign a buy/sell agreement, you can agree in advance to buy the other spouse’s share for a set (or floating) amount and prevent the destruction of your business.
  1. Buy/Sell agreement
Any buy/sell agreement should take fiduciary duties (discussed below) into account, but a buy/sell agreement can be a useful planning tool.  Who gets to keep operating the business after dissolution?  Is one party ousted?  Does the type of business require that one spouse stay in the business to ensure its viability?  Is the ousted party the one who files for dissolution?  Is it the one who commits adultery?  Is the departing spouse paid in installments?  Will the dissolution force the sale of the business?  What about goodwill? 
One popular buy/sell provision requires that one partner divide the assets of the partnership.  The other partner is assigned the task of dividing up the debts.  The partner who divided the assets gets to choose one of the piles of debt.  The partner who divided the debts gets to choose one of the piles of assets.  This gives a strong incentive for each to divide the piles equally.
  1. Be ready to buy him out
So you want to keep the business, but where are you going to come up with the funds to buy out your ex-spouse?  Talk to your friends about investing in the business in order to shore up the funds.  Talk to a business consultant about leveraging business loans to shore up the cash.
  1. Don’t let it burn to the ground
You may want to burn the marriage and sift through the ashes, but don’t let the split do the same to the business.  If money is starting to disappear, someone has acquired a substance abuse problem, or one spouse is grossly mismanaging the business, be prepared to dissolve the business as soon as possible before they squander anything its worth.  Even if that means dissolving the business, that may be better than losing everything.
  1. Special options with abuse, harassment, or violence
If your spouse has been abusive, you may be able to get a domestic violence protective order that also restrains him from the home or your business.  In the alternative you may pursue a civil harassment order or a workplace violence order.  Note: the standard for a civil harassment order is much lower.  In addition, you don’t need to be married to seek protection under the Domestic Violence Protection Act (commencing at Family Code § 6200).
Also, under Family Code § 6324, as a part of a domestic violence protective order, a court can order the “temporary use, possession, and control of real or personal property of the parties and the payment of any liens or encumbrances coming due during the period the order is in effect.”  Not only might you be able to keep him away from the business, the judge may order he pay the mortgage and rent in the meantime.
  1. Act in good faith
Marriage creates a fiduciary relationship just like a business partnership.  California Family Code § 721 states, “This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.”  Firing your spouse, concealing assets, and signing really one-sided contracts are probably going to back-fire in the long run.
  1. Talk to an attorney
You want your husband out of the business, but how do you avoid liability for his future actions?  What type of buyout provision works best for you and won’t be thrown out of court?  If I pay myself a salary, will that protect me or reduce my prospective spousal support award?  Running a business and ending a marriage is stressful enough, get some accurate answers to your concerns in advance to make sure you are setting yourself up for a smooth transition.

Leave a comment

Filed under Business Law, Family Law

Mass incarceration, inevitable bias, and supreme court staying executions, oh my!

In 1970, 200,000 people were incarcerated in the United States.  That represented .09% of the US population.

In 2011, 2,300,000 people are incarcerated in the US.  That represents .73% of the US population.

Since 1970, the incarcerated population has grown 11.5 times (1150%) and the per capita incarceration rate has grown 818%.

The burden is borne mostly on black males.  One in three men age 18-30 in the South are either on probation, parole or in prison.  Over 34% of black men in Alabama have lost their right to vote due to felony convictions.  In McKlesky v. Kemp, the Supreme Court found that in Georgia, defendants charged with killing white victims were 4.3 times as likely to receive a death sentence as defendants charged with killing blacks.  Although in McKlesky the court found that “a certain amount of bias is inevitable,”  the court this week stayed two different executions one of which was for Duane Buck.  During the sentencing phase of Buck’s trial, a psychologist was allowed to testify that black men have a higher recidivism rate than white men.  Buck received the death penalty.  Ironically, it was the defense counsel who called the psychologist as a witness.  You can read about Buck’s stay here.

Bryan Stevenson is an attorney for the Equal Justice Initiative and details the severity and scope of the problem in a presentation given to Washington University School of Law here.  You may want to skip the first 20 minutes or so of introductions.

Leave a comment

Filed under Criminal Law

Three strikes: when $20 will get you 25 to life

In the early 1990’s a wave of crime swept over California and provided the impetus for increased criminalization, harsher sentencing, and the wholesale rejection of rehabilitation as a penological goal.  In the same year (1994) that Bill Clinton signed an assault weapons ban, Californians passed the Three Strikes Law by initiative.  The same year, Colorado, Connecticut, Indiana, Kansas, Nevada, and North Dakota passed their own “three strikes” initiatives.  The father of the late Polly Klass encouraged passage of the bill.  
Californians don’t understand how the sentencing scheme works.  Few people do.  The first two “strikes” in the scheme need to be serious or violent felonies.  California statute distills what crimes are serious and what crimes are violent.  Not all serious crimes are that serious.  In most states, shoplifting is a lesser crime than burglary.  In California, shoplifting is second degree burglary.  The first and second felonies result in sentencing according to the normal sentencing laid out in the California Penal Code.  
The third strike does not have to be serious or violent.  The third strike simply needs to be a felony.  In addition, the third strike can be a wobbler.  See my previous post on wobblers in California here.   The sentence for the third strike is “25 years to life in prison.”  Again, few Californians understand what that means.  The sentence “25 years to life in prison” means that the prisoner will serve a minimum of 25 years in prison.  After 25 years, they will eligible for a parole board hearing during which the parole board will use their discretion and decide whether or not to release the individual on parole.  It is within the discretion of the parole board to keep the individual in prison for life.  That is what “25 years to life in prison” means.
Let’s look at a recent example of how the three strikes law can work in real life.  Scott Andrew Hove was a welder by trade.  In 1991 Hove broke into rooms and the offices of a hotel he was staying at.  He pleaded guilty to three counts of second degree burglary (a serious crime).  The first two strikes can be committed at the same time on the same day, as long as they are separate counts.  Hove recently walked out of a Home Depot with a pair of gloves and some welding wire worth $20.94.  This was a wobbler that could be charged as a felony.  The Riverside District Attorneys Office decided to prosecute Hove under the three strikes law.  He is now serving 29 years to life in prison for stealing $20.94 from Home Depot.  Admittedly, Hove isn’t the most egregious case which implemented the Three Strikes Law, as he did commit some other unlawful acts in the interim, but the application of the law in this case seems totally egregious and out of proportion with the crime committed.  You can read about Hove here
As egregious as the Three Strikes Law is, it appears to be here to stay.  The Supreme Court in both Ewing v. California, 538 U.S. 11 and Lockyer v. Andrade, 538 U.S. 63 held that similar three strikes sentences were not violations of the 8th Amendment guarantee against cruel and unusual punishment.

Leave a comment

Filed under Criminal Law

Your children are going to testify at your divorce (maybe)

Elkins
The Elkins Implementation Task Force is currently attempting to overhaul California’s family law court system to increase fairness and efficiency.  The Elkins Task Force was created after the decision in Elkins v. Superior Court (2007) 41 Cal.4th 1337 found that current family law procedures were inadequate.  The court stated, “family law litigants should not be subjected to second-class status or deprived of access to justice.”  Id. at 1368.  The main objection of Jeffrey Elkins was that a local rule of the court reduced testimony almost entirely to written declarations.  Parties in family law court were outraged when they discovered they would not be allowed to testify in their own divorce proceedings.  AB 1050 was an assembly bill that sought to increase the participation of children in divorce proceedings.  Some proponents said it would better aid the court in following children’s wishes.  Others fear (rightly so) that children may be increasingly manipulated during divorce as a result.  In addition, children’s testimony may increase the trauma of the divorce process.  Although the statutory change in the family code does little, the change to the family court rules exacerbates the manipulation issue by making attorneys recommendation for testimony discretionary instead of mandated.  This will ensure that lawyers will only have children testify if they are certain in will benefit their client, instead of looking for the input of children whenever a child wishes to give it.
California AB 1050
One result of the Elkins Implementation Task Force was state Assembly Bill 1050.  AB 1050 did two things:
1) It changed California Family Code § 3042 (children’s testimony) and
2) It will change the rules of the court regarding § 3042.
California Family Code § 3042
So how did § 3042 get changed?  Here is part of the statute before and after AB 1050:
Before:
If a child is of sufficient age and capacity to reason so as to form an intelligent preference as to custody, the court shall consider and give due weight to the wishes of the child in making an order granting or modifying custody.
After:
If a child is of sufficient age and capacity to reason so as to form an intelligent preference as to custody or visitation, the court shall consider, and give due weight to, the wishes of the child in making an order granting or modifying custody or visitation.
So, besides adding a few unnecessary commas , the new statute requires that the family court hear children’s testimony regarding visitation and not just custody.  Big deal.  
Family Rule 5.250
AB 1050 also required that the judicial council adopt a new rule to implement the changes made in § 3042.  In essence, this rule is where all the action is.  The newly proposed rule is Rule 5.250: Children’s participation and testimony in family court proceedings.  You can read the new rule on page 69 of the proposed rules (Here).  
A family law attorney may but is not required to inform the court that a child wishes to address the court.  Minor’s counsel (in dependency court) must inform the court that a child wishes to address the court.  So, even though a judge will only allow such testimony if it is in the best interests of the child, an attorney will only inform the court that the child wishes to testify if it is in the best interest of their client.  
The End Result
It was expected that Elkins would transform family law in California.  Lawyers anticipated AB 1050 to cause a great increase in the amount of child testimony in family law cases.  The end product changes very little, for better or worse.

Leave a comment

Filed under Family Law