Does the alleged defective design of car's seat allow application of " consumer expectation" test, engineer strict-liability, and non-apportionment of general damages among designers?

seat-424212-m.jpgIn Romine v. Johnson Controls, Inc. (filed 3/17/14) B239761, the chain collision caused by a speeding vehicle crashing into a line of vehicles stopped at an intersection resulted in the striking of plaintiff's vehicle, rendering her a quadriplegic. The force of the collision caused plaintiff's seatback to collapse and her head violently struck the vehicles back seat. Parties sued by plaintiff included the manufacturer of the car seat and the engineering company which participated in the design of the Nissan Frontier vehicle's driver's seat. Other defendant-parties settled before trial. Plaintiff tried the case on the theory of strict product liability alone. The jury found these remaining defendants 20% responsible, with total verdict of $24.745 million; the trial court entered judgment against them in the sum of $4.607 million.

The information contained in this blog is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients, clients or otherwise, should act or refrain from acting on the basis of any content included in this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. The content of this blog contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this blog.

On appeal, the instant defendants contended (1) the trial court erred in permitting plaintiff to try the case under the consumer expectations design defect test;(2) the component parts doctrine precluded a strict liability finding; (3) the provider of engineering services could not be held strictly liable; (4) apportionment of fault should have been allowed among other manufacturers; and (5) the full billings of past medical care were erroneously admitted. The Court of Appeal, Second Appellate District, Division Five, while disagreeing with contentions (1), (2) and (5), reversed and remanded the matter for a partial retrial because the engineering company could not be strictly liable for its services, and the seat manufacturer was entitled to an apportionment of fault with the others within the stream of manufacture, as well with other defendants found by the jury to be a substantial cause of plaintiff's injuries.

First, the appellate court found the consumer expectation test was properly put before the jury. Defendant argued that the jury should have only been allowed to consider the risk/benefit test. Under the consumer expectation test, the objective condition of the product (the seat) is evaluated by the jury to see if its design meets a consumer's ordinary expectation of safety under the circumstances, regardless of the merits of the design. Such a test should not be used by a jury where the theory of defect seeks to examine "obscure components under complex circumstances." (McCabe v. American Honda Motor Co. (2002) 100 Cal.App.4th 1111, 1122.) The Court of Appeal found this not to be a matter of a component part at all, the seat itself being a product; furthermore this was not matter so complex as to render the jury incapable of assessing. Consumers have expectations about whether a vehicle's driver seat will collapse in a rear-end collision.

Next, the court ruled that because the engineering company did not "manufacture, sell, or otherwise place the car seat into commerce", it could not be held strictly liable. It could be liable for negligence, which was a cause of action in plaintiff's complaint; but plaintiff chose only to try the case on the strict liability theory.

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Does selling real estate broker incur disclosure liability to buyer who relied on reference to 24 year old earthquake-zone study's statement that property was "buildable"?

property-for-sale-1-1150485-m.jpgUnder the circumstances of Saffie v. Schmeling (filed 3/7/14) E055716, the answer is no. In 2006, seller's broker posted in the multiple listing service (MLS) the listing of a commercial parcel that stated the property was within an earthquake study zone, but a fault hazard zone investigation by a licensed geologist had determined the parcel buildable. With the help of his own broker, buyer negotiated an agreeable purchase contract. During escrow, seller's broker provided a copy of the 1982 Fault Hazard Investigation report, bearing the 1982 approval of Riverside County, wherein the property was located; he advised buyer's broker to "check out" the report. Neither buyer nor his broker read the report nor investigated the issue; buyer's broker led buyer to believe the property was "ready to build," and buyer so relied in completing the transaction. After closure of the deal, buyer learned that the state of the art concerning investigation of fault hazards had changed since the 1994 Northridge earthquake, and the County of Riverside no longer accepted investigation reports that predated that earthquake. Buyer's intended use of the property was rendered impractical by the costs it would now take to make the property buildable for his purposes.

Buyer sued seller, seller's broker and his own broker. At bench trial, the court found buyer's broker liable in the sum of $232,147 for breach of fiduciary duty and negligence. Seller and seller's broker were found not liable. Buyer appealed the finding of non-liability as to seller's broker. The Court of Appeal, Fourth Appellate District, Division Two, affirmed the judgment.

Without disputing the truthfulness of seller's statements, buyer contended the statements gave the false impression that the Fault Hazard Investigation report remained valid as a basis for developing the property in 2006. The appellate court began its analysis by commenting that, while a real estate broker owes his own client fiduciary duties, the only duties owed to third parties are statutory, specifically those found in Civil Code Section 1088. There, it is stated that one is responsible for the truth of all representations made in an MLS so far as one has knowledge or should have knowledge; a broker may be found negligent to anyone injured by the falseness or inaccuracy of such statements.

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May an adhesive, yet bilateral, employment arbitration clause that is not unduly harsh, oppressive or one-sided be found unconscionable and unenforceable?

In Sanchez v. CarMax Auto Superstores California, LLC (filed 2/6/14, publication ordered 3/4/14) B244772, plaintiff signed an arbitration agreement as a part of his employment application. He was hired as service manager and remained in that position until he was terminated about 4½ years later. In his lawsuit, plaintiff claimed the reason cited for his termination, unsatisfactory performance, was not the true reason; rather, he had been terminated because he raised safety issues about cars sold by CarMax. CarMax's motion to compel arbitration was denied by the trial court, which found the arbitration agreement to be unconscionable and thus unenforceable. CarMax appealed. The Court of Appeal, Second Appellate District, Division One, reversed, directing the matter to arbitration.

The appellate court, in its de novo review, did find the agreement evidenced some degree of procedural unconscionability due to its adhesive nature. However, continued the court, the arbitration agreement must also be substantively unconscionable to be unenforceable. That would require a contract term to be unduly harsh, oppressive, or one-sided. The trial court had found unenforceability here because it viewed the arbitration agreement as not sufficiently allowing discovery, as placing certain requirements on an employee that were not placed on employer, as not giving the arbitrator authority to require just cause for an employment termination, and as not allowing claims of multiple employee claimants to be adjudicated in a single arbitration. The appellate court disagreed on each of these points.

The arbitration agreement here limited each side to 20 interrogatories and 3 depositions; discovery could be expanded by the arbitrator if there is a showing of "substantial need" and additional discovery "is not unduly burdensome and will not unduly delay the conclusion of the arbitration." The trial court concluded the permitted amount of discovery is too low and the burden of showing a need for more discovery is so high as to thwart the ability to prove ones claims. The Court of Appeal disagreed because plaintiff here made no showing of any need for additional discovery. While a requesting party should not have to"demonstrate that a fair hearing would be impossible without additional discovery" (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 716), the standard here was merely a showing of substantial need.

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Where law exempts requirement, may owner who rents out a residence be liable for failure to install self-closing door latch of door leading to swimming pool where minor guest of tenant drowned?

Pool.jpgIn Johnson v. Prasad (filed 2/25/14) 2014 DJDAR 2325, homeowners (the Prasads) bought a home in 2000 which had a 14-year-old pool in the backyard. A six foot fence blocked access to the pool, except from the interior of the home via a kitchen sliding door. That door had a security gate, but lacked a self-closing mechanism. California law requires (since 1996) that new and remodeled pools either be fenced or otherwise have self-closing mechanism at entry points; existing pools are otherwise exempt. (Health & Safety Code section 115922.) In 2009, the residence was occupied by renters, who hosted a party at the home. Among their guests were four-year-old Allen, his father and grandmother. The group left the pool area to go into the house; grandmother left the security door open as others were still coming in. Grandmother lost track of Allen after he went into the house. Unfortunately, Allen went back outside into the pool area unnoticed, and drowned in the pool.

Allen's mother sued for Allen's wrongful death; the Prasads were named among other defendants. The Prasads' motion for summary judgment was granted by the trial court; that court found no triable issues of fact remained with respect to breach of any duty and causation. The Court of Appeal, Third Appellate District, reversed, finding as a matter of law that the homeowners owed a duty of care to protect the child from drowning in the home's pool, and that there were triable issues of fact as to whether the failure of the owners to install a self-closing mechanism was a substantial factor in casing the child's death.

In its opinion, the appellate court analyzes policy considerations involved in determining duty and causation in the context of the above-cited Swimming Pool Safety Act. More specifically, it examined the burden and consequence of imposing a duty of care here. The trial court had found that the Prasads were not negligent per se with respect to failing to install a self-closing mechanism as they were exempt from that requirement. But the Court of Appeal sees the statute as having a broader applicability: that the Act reflects a policy of this state to impose some responsibility on certain homeowners to prevent swimming pool drownings; the extent and burden on even exempt homeowners is slight, in the court's view, when compared with the benefit to the community in saving lives.

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May server of alcohol at a fee-generating event be liable for the vehicular tort committed by an obviously intoxicated paying minor?

Social hosts furnishing alcohol generally enjoy immunity from liability as not being the proximate cause for injuries caused by an intoxicated guest. (Civil Code section 1714 (b).) However, this immunity is not available for a server falling within Business and Professions Code section 25601.2, which provides that a person not required to have a liquor license may be held liable if a sale of alcohol to an obviously intoxicated minor occurs.

The critical question for the California Supreme Court in Ennabe v. Manosa (filed 2/24/14) S189577 was whether the circumstances there constituted a sale within the meaning of section 25601.2. Manosa hosted a party at her parent's vacant rental residence, paying for a disc jockey to play music, and providing $60 worth of alcoholic beverages, as well as cups and cranberry juice. Two of Manosa's friends paid for a portion of the initial purchase of alcohol. A number of guests were invited to the party free of charge. She asked a friend to act as a "bouncer" at the side gate entry to the party, instructing him to charge uninvited guests $3 to $5. Thomas Garcia was among those who paid an entrance fee. Once $50 to $60 had been collected, those funds were use to purchase additional alcohol. Garcia, a minor, as were most of the people at the party, had 4 shots of whiskey before arriving at the party and continued to consume the provided alcohol once there. Ennabe, a late-arriving invited guest, escorted the unruly Garcia to Garcia's car. The intoxicated Garcia ran over Ennabe, killing him.

In the wrongful death action brought by Ennabe's heirs, Manosa was granted summary judgment in the trial court on the defense of civil immunity; the Court of Appeal affirmed. The Supreme Court reversed based on the liability provision of section 25601.2.

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May employee sue for whistleblower retaliation under the federal False Claims Act in state court, and have that right decided in a petition for extraordinary relief?

February 17, 2014

file000127834430.jpgIn Driscoll v. Superior Court (filed 1/30/14) 2014 DJDAR 11270, the Court of Appeal, Fifth Appellate District, answered yes on both counts, issuing a writ of mandate instructing the state trial court to overrule the demurrer it had previously sustained without leave to amend.

Driscoll had been employed as a medical doctor with real party Spencer's medical group. Spencer initiated the state action by suing Driscoll, alleging various causes of actions including breach of contract, disparagement, fraud and defamation. Driscoll proceeded to file a federal court action alleging retaliation under the FCA; he additionally cross-complained in the state action claiming whistleblower retaliation under the federal FCA and wrongful termination. The gist of his claims was that Spencer refused to pay him for excess hours worked and he was terminated in retaliation for requesting such pay and for complaining about Spencer's billing practices which he believed were fraudulent concerning Medicare and Medi-Cal patients.

In the state court action, Spencer demurred to the federal FCA causes of action alleging the trial court lacked subject matter jurisdiction. The trial court agreed, finding that the federal FCA statute's reference to the filing of such action in an "appropriate [federal] district court" implies that the state courts would not have concurrent jurisdiction. Driscoll then petitioned the state appellate court for a writ of mandate to reinstate the federal FCA causes of action.

Because Driscoll still had other causes of action he could pursue in his state action cross-complaint and still had to defend against Spencer's complaint, Driscoll did not have an order from which he could appeal; his resort for relief here thus was for extraordinary writ relief, which is a method of review dependent on the appellate court's exercise of discretion. Here, the court exercised that discretion because: (1) it appeared the trial court deprived Driscoll of the opportunity to plead his cause of action and immediate review may prevent a needless trial and reversal (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894); and (2) the demurrer raised an important question of subject matter jurisdiction (San Diego Gas & Electric v. Superior Court (1996) 13 Cal.3d4th 893, 913).

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Where a sanction award is statutorily appealable, may the merits of a medical damages discovery dispute resulting in that sanction be reviewed at the same time?

February 14, 2014

file0001257337525.jpgIn Dodd v. Cruz (filed 2/5/2014) B247493, Dodd sued Cruz for injuries sustained in a vehicle accident, including medical surgical expenses he incurred with Coast Surgery Center as a result of the accident. Coast sold to Medical Finance LLC (MedFi) its medical lien for services provided to Dodd. (MedFi's president is Dodd's attorney, Waks.) Cruz sought discovery of documents relating to the lien transaction via subpoena; MedFi succeeded in a motion to quash the subpoena (joined by Dodd), including the trial court's award of $5,600 in sanctions. Cruz appealed the sanction order (sanctions in excess of $5,000 being immediately appealable under Code of Civil Procedure section 904.1, subd. (a)(12).). The Court of Appeal, Second Appellate District, Division Three, reversed the granting of the motion and awarding of sanctions.

The documents sought by Cruz were a contract between Med-FI and Coast that predated Dodd's surgery, a redacted assignment of the claim dated the day of the surgery, and "MedFi's Open Lien Detail;" these documents included evidence of the amount paid for its lien. MedFi objected on grounds of confidentiality, proprietary rights, and relevance. In its motion to quash the subpoena of the documents, MedFi claimed it would incur attorney fees of $5,600 in prosecuting it motion. The trial court granted the motion on grounds of relevancy and awarded the requested sanctions.

Respondents to the appeal first contend the trial court order to quash was not reviewable on a statutory appeal of the sanctions order. The appellate court disagreed, finding that a discovery ruling is reviewable if it "necessarily affects" an appealable order (section 906); here the underlying discovery ruling was "inextricably intertwined" with the monetary sanctions order.

Next, the Court Appeal discussed respondents' contention that the subpoena was not directed at obtaining any documents relevant to this personal injury litigation. It was undisputed that the amount of economic damages, if any, that Dodd may recover for his medical treatment by Coast was one of the subject matters of the lawsuit. The court thus reviewed the measure of damages for past medical expenses: the lesser of the reasonable value of the medical services and the actual amount paid to discharge that obligation. (Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 555.) The court found that the subpoena was reasonably calculated to lead to discovery of admissible evidence of reasonable value of the services. Coast's belief of reasonable value, allowing for the risk and expense of collection, could be explained from the amount it received for conveying the lien to Medfi. As a part of this inquiry, what a medical provider is willing to accept in relinquishing its claim may be an adjustment downward from the face amount of its gross billing.

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Does employer owe preconception duty-of-care to child of employee for harmful work environment, and is "duty" necessary to prove strict liability?

office-supplies-2-892172-m.jpgIn El sheref v. Applied Materials, Inc. (filed 1/27/14) H038333, the father of the plaintiff minor worked as an engineer at defendant's semiconductor manufacturing facility. Father's duties included working with tools containing mercury and ethylene glycol and being exposed to ionizing radiation. Defendant provided information, training, and medical advice to employees to assess and reduce potential workplace hazards. At one point, father was examined by a physician to authorize his wearing of a respirator at work; that examination included a questionnaire that posed, among its inquiries, some questions about his reproductive history. At another point, a report was completed by employer concerning whether a subject tool leaked mercury. No mercury was detected, according to the report, but the report went on to direct measures for limiting employees' skin from mercury exposure. Minor's mother conceived and gave birth to him during father's employment.

Minor was born with birth defects, alleged in his lawsuit to have resulted from father's exposure to reproductively toxic chemicals. The lawsuit further alleged that defendant knew or should have known of this danger, and failed to adequately protect its employees; that serious injury was a probable result to employee's future children. The causes of action asserted were negligence, strict liability/ultrahazardous activity, willful misconduct, misrepresentation and strict products liability. In the trial court, defendant moved for summary adjudication arguing that no legal duty was owed to minor for preconception injuries; only medical professionals and manufacturers related to conception/pregnancy owe such a duty of care. The trial court agreed. Through his guardians, minor appealed.

The Court of Appeal, Sixth Appellate District, concluded defendant employer did not owe a preconception duty to minor; however, because minor's strict products liability claim did not require the proof of duty, the court reversed the judgment with directions to the trial court to reinstate that cause of action.

A cause of action for a preconception tort was recognized by the California Supreme Court in Turpin v. Sortini (1982) 31 Cal.3d 220; the court narrowly limited such liability to negligent medical treatment of a mother during pregnancy or before conception. Liability was sought to be extended to a motorist who caused an accident that injured a mother years before she gave birth to a child born with a health defect in Hegyes v. Unjian Enterprises, Inc. (1991) 234 Cal.App.3d 1103. The Hegyes court found no liability could arise because defendant's conduct was not inextricably related to an inevitable future pregnancy, and there was neither a special relationship nor foreseeable injury.

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Is employee's verdict finding employer retaliated in violation of public policy in terminating him reversible and subject to retrial based on jury's instruction that retaliation was "a motivating reason" rather than "a substantial motivating reason?"

hammer-to-fall-673264-m.jpgIn Mendoza v. Western Medical Center Santa Ana (filed 1/14/14) G047394, plaintiff served as a staff nurse at defendants' hospital for more than 20 years. At times, he was supervised by fellow employee Del Erdmann, a per diem house supervisor since April 2010. Both men are gay. Mendoza complained to defendant's human resource department that Erdmann had harassed him with inappropriate comments, physical contact, and lewd displays starting in August 2010. Mendoza denied he had consented to this activity, Erdmann claimed he had. Defendants investigated and determined that both should be terminated; with respect to Mendoza, defendant cited him for "unprofessional conduct" in that he was complicit with Erdmann in engaging in inappropriate sexual behavior while on duty.

Plaintiff prevailed at trial on his claim of retaliation in violation of public policy; he was awarded $238,328. The trial court had instructed the jury with the 2012 version of CACI No. 2430 that the plaintiff must prove that his report of sexual harassment was "a motivation reason," for plaintiff's termination. Defendants had objected to this instruction. As the California Supreme Court later determined in Harris v. City of Santa Monica Target="_blank" (2013) 56 Cal.4th 203, the correct instruction is that plaintiff needed to prove that such was "a substantial motivating reason." Defendants appealed claiming the instruction constituted prejudicial error, and that because no substantial evidence supported the verdict, they were entitled to a defense verdict as a matter of law. The Court of Appeal, Fourth Appellate District, Division Three, reversed for prejudicial error, but denied the request for a defense judgment, remanding for retrial.

The appellate court focused on the causation requirement as the crux of the case. That concept gets a bit slippery here. Plaintiff claimed his report of sexual harassment caused defendants to fire him. Defendants cited their belief that he had willingly participated in sexual misconduct on the job as their motivation reason for termination. What gets tricky is that even under defendants'stated motivation, Mendoza's report did cause the firing in the indirect sense that he alerted them to what they ultimately determined was misconduct on plaintiff's part.

So defendants not only claimed that Harris disapproved of the instruction given by the trial court, but also that the instruction given, and its corresponding special verdict form, may have made the verdict inevitable because it allowed the jury to infer retaliatory intent based on a causal finding that Mendoza's report of sexual harassment even though their concern was misconduct revealed to them by this triggering report. They suggest that a more appropriate instruction would be plaintiff must prove that defendant acted based on the prohibited motivating reason and not the permitted motivating reason.

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Can allegation of employer's failure to reimburse for extensive vehicle use support constructive discharge or emotional distress claims?

In Vasquez v. Franklin Management Real Estate Fund, Inc. (pub. ordered 12/31/13) B245735, the Court of Appeal, Second Appellate District, Division Four, answered "yes" to the constructive discharge claim, and "no" to the emotional distress claim.

Defendant employed plaintiff as a maintenance technician at $10 per hour for a 40-hour week. Plaintiff's duties included driving his own vehicle to a hardware store and performing other errands in obtaining items needed in maintaining defendant's apartments. Plaintiff alleged in his lawsuit against defendant that he could not afford these vehicle costs which were incurred based on a minimum of 30 miles of travel per day; his requests for reimbursement were denied. He claimed he had no choice but to resign after his repeated requests were denied after 15 months on the job. His suit alleged violation of Labor Code section 2802 and that the denial of reimbursement effectively left him with less than minimum wage during his tenure. His claims included constructive discharge in violation of public policy, and intentional infliction of emotional distress.

Defendant demurrer to the first amended complaint was sustained without leave to amend. The trial court found that the failure to pay $15 per day for mileage expenses was "not conduct that was so intolerable or aggravated that a reasonable person in the employee's position would have felt no choice but to resign." Plaintiff appealed.

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Review granted of opinion on sleep-time compensation for round-the-clock security guards.

December 18, 2013

The blog dated July 12, 2013, discussed the Second District opinion of Mendiola v. CPS Security Solutions (2013) 217 Cal.App. 4th 851. As I stated then, the Court of Appeal decision appeared to be a split decision that (1) permitted employers so situated to deduct eight hours from an employee's pay for sleep time when the employee guard was on duty for 24 hours, yet (2) found that on-call time that did not fall within a truly uninterrupted sleep time feel within "hours worked" requiring compensation. The critical question was whether the employee was under the control of the employer and not free to pursue personal matters.

On October 16, 2013, the California Supreme Court granted review of that opinion. Other than the fact that the Court of Appeal opinion is no longer citable, what conclusions, if any, should one draw from this grant? In the first place, it is always dangerous to assume that when the Supreme Court grants review that it will reverse the appellate court. Often times, the state high court will determine that it is time that it speak to a particular issue, and that pronouncement might well be totally in lock-step with the lower court opinion. Trying to read the "tea leaves" in this instance is even more difficult because there may be portions of the opinion the court will agree with, and other portions that it takes issue with.

So how should similarly-situated parties conduct their business in the meantime (which can be a long time)? It would seem that parties need to expressly provide in employment contracts the circumstances under which compensation will be paid including precise statements of employee freedom during those times the employee will not be paid. But even then, an employer runs the risk that the Supreme Court may rule that contractual exclusions from "hours worked" violate public policy. So there really is no safe haven and we will await the Supreme Court's ruling for a clearer definition. Whether a "brighter line" will be drawn remains to be seen.

The information contained in this blog is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients, clients or otherwise, should act or refrain from acting on the basis of any content included in this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. The content of this blog contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this blog.

IC-DISCS AND THE TAX SAVINGS FOR U.S. EXPORTERS

December 16, 2013

The implementation of IC-DISCs saves growers, food manufacturers, and other exporters of U.S. goods and services millions of dollars in federal income tax each year. By way of example, a California exporter with $1,000,000 in taxable income from qualified export sales, could save more than $95,000 each year in federal income tax. What follows is a brief discussion of IC-DISCs and the tax benefits they present.

Due to the significant federal income tax savings potential, we have advised many clients in evaluating and implementing IC-DISCs. In light of the prominence of California's agriculture and food exports, not surprisingly, many of our clients to implement IC-DISCs have been growers and food manufacturers.

How Do IC-DISCs Work and What Are the Tax Savings?

Most commonly, the IC-DISC is treated as the U.S. exporter's broker for export sales. As such, the exporter pays the IC-DISC a commission, which the exporter may deduct as a business expense so long as certain rules are followed. Among those rules is the requirement that the commission be determined using one of three statutorily authorized methods. Of these methods, often the most tax-favorable and practical method is the one which requires commissions to be set at 50% of the taxable income derived from export sales (plus 10% of marketing expenses attributable to those sales).

While the exporter receives a deduction for the commissions paid, the IC-DISC pays no federal income tax on the commissions received. In fact, putting aside certain exceptions, commissions (or other income) of the IC-DISC are not taxed until distributed to the IC-DISC shareholders. Further, such distributions are treated as qualified dividends currently taxed at a maximum federal rate of 20%.1


1 A more comprehensive discussion of the taxation of IC-DISCs and their shareholders would include the rules relating to the "interest-charge" imposed on IC-DISC shareholders with respect to undistributed IC-DISC income, and deemed distributions which arise in the event an IC-DISC has taxable income attributable to exports in excess of
$10,000,000. While these, and other issues not discussed here should be thoroughly considered with tax counsel, since the interest-charge, which is based on one-year Treasury bill rate, remains low, and the fact most IC-DISCs do not generate taxable income in excess of $10,000,000, these issues are not addressed in detail here.

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Under what circumstances may an injured professional athlete employed by team in different state receive California workers' compensation benefits?

December 13, 2013

Recently, public attention has been drawn to out-of-state professional athletes, who have performed at times in California, seeking the benefits of workers' compensation under California law. Several of these cases have now emerged from the appellate courts. One such case is that of Federal Insurance Company v. WCAB and Johnson (filed 12/3/13) B249201. There, the Court of Appeal, Second Appellate District, Division Five, ruled the state did not have a sufficient interest in the matter to apply its workers' compensation law and retain jurisdiction over the matter.

Adrienne Johnson journeyed to several Women's National Basketball Association teams from 1997 through 2005: teams in the states of Ohio, Florida, Connecticut and Washington. She lived in those states during those times except she resided in New Jersey while playing for the Connecticut Sun franchise. She injured her right knee and Achilles tendon in 1999 while playing for the Orlando Miracle, had surgery in 2000 in Florida, and missed the entire 2001 season. She reinjured her knee in 2003. Through her Ohio-based agent, she signed a 2-year contract in 2003 with Connecticut, and played in 34 games that year. For the next two years she practiced with teams but played in no games. During 2003, she played her only game in California. Later that same year, she received a $30,000 settlement for a workers' compensation claim filed in Connecticut concerning her right knee.

After leaving professional basketball and while working and residing in the state of Kentucky in 2010, Johnson complained of various discomforts in her knee, hip and shoulder. She filed for Workers' Comp benefits against the Sun team in California. She was supported by an agreed medical examiner's opinion that her injuries were chronic, that she suffered from irritable bowel syndrome related to her orthopedic problems, and these injuries at least in part stemmed from her professional basketball playing days with the Sun. The California Workers' Compensation Judge awarded disability indemnity; this ruling was partially rescinded by the WCAB which returned the award to the WCJ for apportionment. Employer Sun and its insurer, Federal Insurance Company petitioned and received a writ of review from the Court of Appeal, contending the California WCAB had no jurisdiction. The Court of Appeal agreed.

The appellate court saw the dispositive issues as whether one or more state compensation laws apply and whether this case is one where California may provide a forum for the claim. The court saw the WCJ's statement that"[p]laying in even one professional basketball game in California is sufficient to establish jurisdiction" as mischaracterizing the controversy. This is more a matter of subject matter jurisdiction than it is one of personal jurisdiction. And a big part of determining whether California law governs is a question of due process. If an employer or insurer is to be subject to this state's workers' comp law, due process requires that the state have sufficient contact with the matter. The U.S. Supreme Court cases of Bradford Electric Light Co. v. Clapper (1932) 286 U.S. 145, and Alaska Packers Assn. v. Industrial Acc. Comm. (1935) 294 U.S. 532 have long supported the principle that the place of the injury as a single factor is insufficient to permit coverage by a state when the employee's presence in the state is temporary.

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Is there a triable issue of fact concerning company lawyer as a cause of termination of employee when company lawyer co-represents employer and employee?

November 13, 2013

lawyers-140579-m.jpgIn Yanez v. Plummer (filed & published 11/5/13) C070726, Plaintiff Yanez sued his former employer, Union Pacific, for wrongful discharge and its in-house counsel, Plummer for legal malpractice, breach of fiduciary duty and fraud. Yanez had witnessed the injury of a co-worker who filed a personal injury lawsuit under the Federal Employers Liability Act (FELA) against Union Pacific. Yanez was twice asked to give the employer written statements about the accident, to which he complied (the employer request the second statement because the first statement "lacked details.") In the second statement, Yanez wrote that he saw the employee slip and fall on the greasy floor where they were working; the first statement merely observed the greasy condition of the floor and that the co-worker had slipped and fell on that floor. Plummer represented both Union Pacific and Yanez at Yanez's deposition, at which Yanez admitted he did not actually see the co-worker slip--that the second statement was a miswording on his part. Based on these circumstances, Union Pacific fired Yanez for dishonesty.

Plummer's motion for summary judgment in Yanez's lawsuit was granted by the trial court. Plummer convinced the court that Yanez could not prove that any conduct on Plummer's part could have caused the termination. The Court of Appeal, Third Appellate District, disagreed, finding that Yanez had raised a triable issue of material fact that but for Plummer's conduct, Union Pacific would not have fired Yanez. The judgment was reversed, and Yanez's claims against Plummer were reinstated.

The appellate court found particular significance in facts set forth by Yanez concerning the pre-deposition meeting he had with Plummer. Plummer instructed Yanez to meet with him shortly before Yanez's deposition. Plummer confirmed with Yanez that he had not actually seen the co-worker fall down and asked about the work-site conditions at the time of the accident. There was no discussion about the two written statement. When Yanez expressed concern as to who would protect him during the deposition, and that he felt his job might be in jeopardy because his testimony would likely be unfavorable to Union Pacific, Plummer responded that Plummer was his attorney for the deposition and so long as he told the truth his job would not be affected. Plummer never advised Yanez about counsel's conflict of interest.

At the deposition, the attorney for the injured co-worker elicited testimony from Yanez that he did not witness the accident, but he did observe the unsafe, slippery conditions at the accident site. Plummer's questioning of Yanez essentially aimed at highlighting Union Pacific's safety culture and discrediting Yanez; Yanez offered that the second written statement was "worded wrong." Attending the deposition was a supervisor of Yanez, Magures, who obtained a transcript of the deposition. On the basis of the deposition testimony, Magures brought disciplinary charges against Yanez, leading to his termination.

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May trial court order temporary removal of attorney's website postings which could prejudice jurors?

Easy access to social media and the Internet provide great learning and informational tools. But with these benefits have come abuses and challenges for many of society's institutions, educational and judicial to name two. For educators, the challenge involves patrolling some students' trying to cheat their way through their education. For judges, it is a matter of guaranteeing a fair trial where jurors are to decide cases based only on evidence presented in the court proceedings, and not from outside sources.

In Steiner v. Superior Court (filed and published 10/30/13) No. B235347, after jurors were impaneled, defendants Volkswagen and Ford moved the trial court to order that plaintiffs' counsel remove from her website, until the conclusion of trial, two entries touting recent successes against Ford and others in similar asbestos cases. The first article discussed a $1.6 million award, boasting the jury there overcame "defendants' court confusion" to finding them at fault. A second article listed a similar $4.3 million award. Defendants here claimed that the curious human nature of jurors might cause them to Google the attorney and become prejudiced by this provocative information. Plaintiffs and their counsel opposed the motion as infringing upon counsel's right to free speech; that the more appropriate remedy would be to admonish the jurors to not search the Internet.

The trial court granted the motion and additionally admonished the jurors not to Google the attorneys, nor to use the Internet in any way. Plaintiffs petitioned the Court of Appeal, Second Appellate District, Division Six, for a writ of mandate, which was initially summarily denied. Petitioners petitioned for review in the California Supreme Court. The petition misstated that the trial court had ordered plaintiffs' counsel to "take down her firm's entire website," but went on to say that even if the order was more limited, it would be unreasonable. The Supreme Court granted review and transferred the case back to the appellate court to issue an order to show cause. The appellate court did so, and concluded the order was an unlawful prior restraint on the attorney's free speech rights under the First Amendment. Even though the order was limited (and not as plaintiff's counsel had represented to the Supreme Court), and even under the lesser standard for commercial speech, the public interest in assuring a fair trial is adequately met by juror admonitions and instructions.

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