California Business Lawyer Blog

The Racketeer Influenced and Corrupt Organizations Act (commonly referred to as RICO Act or RICO) is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. RICO was enacted by section 901(a) of the Organized Crime Control Act of 1970 (Pub.L. 91-452, 84 Stat. 922, enacted October 15, 1970). RICO is codified as Chapter 96 of Title 18 of the United States Code, 18 U.S.C. § 1961-1968. While its intended use was to prosecute the Mafia as well as others who were actively engaged in organized crime, its application has been more widespread.

It has been speculated that the name and acronym were selected in a sly reference to the movie Little Caesar, which featured a notorious gangster named Rico. The original drafter of the bill, G. Robert Blakey, refused to confirm or deny this. G. Robert Blakey remains the country's foremost expert[peacock term] on RICO; his former student Michael Goldsmith also gained a reputation as one of the nation's leading RICO experts.

Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes--27 federal crimes and 8 state crimes--within a 10-year period can be charged with racketeering. Those found guilty of racketeering can be fined up to $250,000 and/or sentenced to 20 years in prison per racketeering count. In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of "racketeering activity." RICO also permits a private individual harmed by the actions of such an enterprise to file a civil suit; if successful, the individual can collect treble damages.

When the U.S. Attorney decides to indict someone under RICO, he or she has the option of seeking a pre-trial restraining order or injunction to temporarily seize a defendant's assets and prevent the transfer of potentially forfeitable property, as well as require the defendant to put up a performance bond. This provision was placed in the law because the owners of Mafia-related shell corporations often absconded with the assets. An injunction and/or performance bond ensures that there is something to seize in the event of a guilty verdict.

In many cases, the threat of a RICO indictment can force defendants to plead guilty to lesser charges, in part because the seizure of assets would make it difficult to pay a defense attorney. Despite its harsh provisions, a RICO-related charge is considered easy to prove in court, as it focuses on patterns of behavior as opposed to criminal acts.

There is also a provision for private parties to sue. A "person damaged in his business or property" can sue one or more "racketeers." The plaintiff must prove the existence of a "criminal enterprise." The defendant(s) are not the enterprise; in other words, the defendant(s) and the enterprise are not one and the same. There must be one of four specified relationships between the defendant(s) and the enterprise. A civil RICO action, like many lawsuits based on federal law, can be filed in state or federal court.

Both the federal and civil components allow for the recovery of treble damages (damages in triple the amount of actual/compensatory damages).

Although its primary intent was to deal with organized crime, Blakey said that Congress never intended it to merely apply to the Mob. He once told Time, "We don't want one set of rules for people whose collars are blue or whose names end in vowels, and another set for those whose collars are white and have Ivy League diplomas."

The time before RICO was signed into law (October 15, 1970), was referred to as "The Golden Age" by those involved in organized crime. The term "The Golden Age" can be found on any of the multitude of "Mob Speak" glossaries on the internet.

Under the law, racketeering activity means:

Any violation of state statutes against gambling, murder, kidnapping, extortion, arson, robbery, bribery, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in the Controlled Substances Act);
Any act of bribery, counterfeiting, theft, embezzlement, fraud, dealing in obscene matter, obstruction of justice, slavery, racketeering, gambling, money laundering, commission of murder-for-hire, and several other offenses covered under the Federal criminal code (Title 18);
Embezzlement of union funds;
Bankruptcy fraud or securities fraud;
Drug trafficking; long-term and elaborate drug networks can also be prosecuted using the Continuing Criminal Enterprise Statute;
Money laundering and related offenses;
Bringing in, aiding or assisting aliens in illegally entering the country (if the action was for financial gain);
Acts of terrorism.
Pattern of racketeering activity requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity. The U.S. Supreme Court has instructed federal courts to follow the continuity-plus-relationship test in order to determine whether the facts of a specific case give rise to an established pattern. Predicate acts are related if they "have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." (H.J. Inc. v. Northwestern Bell Telephone Co.) Continuity is both a closed and open ended concept, referring to either a closed period of conduct, or to past conduct that by its nature projects into the future with a threat of repetition.

Continue reading "The Racketeer Influenced and Corrupt Organizations Act (RICO) May Be Used in Civil Business Law Actions" »

Consideration is the legal concept of value in connection with contracts. It is anything of value in the common sense, promised to another when making a contract. It can take the form of money, physical objects, services, promised actions,abstinence from a future action and much more. Under the notion of "pre-existing duties," if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense.

In common law it is a prerequisite that both parties offer some consideration before a contract can be thought of as binding.

However, even if a court decides there is no contract, there might be a possible recovery under Quantum meruit (sometimes referred to as a Quasi-contract) or promissory estoppel

Basic examples of consideration
If A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's consideration is the car.

Additionally, if A signs a contract with B such that A will paint B's house for $500, A's consideration is the service of painting B's house, and B's consideration is $500 paid to A.

Further, if A signs a contract with B such that A will not repaint his own house in any other color than white, and B will pay A $500 per year to keep this deal up, there is also consideration. Although A did not promise to affirmatively do anything, A did promise not to do something that he was allowed to do, and A therefore did pass consideration. A's consideration to B is the forbearance in painting his own house in a color other than white, and B's consideration to A is $500 per year.

This form of consideration is often seen in settlements. B committed a tort against A, causing $5,000 in compensatory damages and $3,000 in punitive damages. Since there is no guarantee that A would win against B if it went to court, A will agree to drop the case if B pays the $5,000 compensatory damages. This is sufficient consideration, since B's consideration is a guaranteed recovery, and A's consideration is that B only has to pay $5,000, instead of $8,000.

Conversely, if A signs a contract to buy a car from B for $0, B's consideration is still the car, but A is giving no consideration, and so there is no valid contract. However, if B still gives the title to the car to A, then B cannot take the car back, since, while it may not be a valid contract, it is a valid gift.

Continue reading "The Bargained for Value of Consideration Relating to Contracts" »

A fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

"A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence." says California Business Attorney Steven C. Peck.

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.

In English common law the fiduciary relation is arguably the most important concept within the portion of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became usable in common law courts.

When a fiduciary duty is imposed, equity requires a stricter standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty."

Continue reading "The Fiduciary Relationship of Confidence and Trust" »

Most commercial business law transactions are governed by a very detailed and well-established body of rules that have evolved over a very long period of time, it being the case that governing trade and commerce was a strong driving force in the creation of law and courts in Western civilization.

As for other laws that regulate or impact businesses, in many countries it is all but impossible to chronicle them all in a single reference source. There are laws governing treatment of labor and generally relations with employees, safety and protection issues (Health and Safety), anti-discrimination laws (age, gender, disabilities, race, and in some jurisdictions, sexual orientation), minimum wage laws, union laws, workers compensation laws, and annual vacation or working hours time.

In some specialized businesses, there may also be licenses required, either due to special laws that govern entry into certain trades, occupations or professions, which may require special education, or by local governments. Professions that require special licenses range from law and medicine to flying airplanes to selling liquor to radio broadcasting to selling investment securities to selling used cars to roofing. Local jurisdictions may also require special licenses and taxes just to operate a business without regard to the type of business involved.

Some businesses are subject to ongoing special regulation. These industries include, for example, public utilities, investment securities, banking, insurance, broadcasting, aviation, and health care providers. Environmental regulations are also very complex and can impact many kinds of businesses in unexpected ways.

Continue reading "General Principles Attributable to Business Law Transactions" »

A negotiable instrument is a specialized type of "contract" for the payment of money that is unconditional and capable of transfer by negotiation. As payment of money is promised later, the instrument itself can be used by the holder in due course frequently as money. Common examples include cheques, banknotes (paper money), and commercial paper. In the United States, the Article 3 of the Uniform Commercial Code covers the use of negotiable instruments except banknotes (money)

Differences from a contract
A negotiable instrument is a contract, albeit not obvious in formation of the required offer, and consideration. Unlike ordinary contract documents, the right to the performance of a negotiable instrument is linked to the possession of the document itself (with certain exceptions such as loss or theft). The consideration for a negotiable instrument is the value given up to acquire it and the consequent loss of value in the prior holder. The instrument itself is understood as a right for payment and an obligation for payment evidenced by the instrument itself with possession the touchstone for the right of payment. The rights of a holder in due course of a negotiable instrument are better than those provided by ordinary contracts as follows:

The rights to payment are not subject to set-off, and do not rely on the validity of the underlying contract giving rise to the debt (for example if a cheque was drawn for payment for goods delivered but defective, the drawer is still liable on the cheque)
No notice needs to be given to any prior party liable on the instrument for transfer of the rights under the instrument by negotiation states Los Angeles Business Attorney Steven C. Peck.

Negotiation enables the transferee to become the party to the contract, and to enforce the contract in his own name. Negotiation can be effected by endorsement and delivery (order instruments), or by delivery alone (bearer instruments). In addition, it includes the rule of a derivative title which does not allow a property owner to transfer rights in a piece of property greater than his own.

Promissory notes and bills of exchange are two primary types of negotiable instruments.

Promissory note
A promissory note is a written promise by the maker to pay money to the payee. Bank note is frequently transferred as a promissory note, a promissory note made by a bank and payable to bearer on demand. A maker of a promissory note promises to unconditionally pay the payee (beneficiary) a specific amount on a specified date.

A promissory note is an unconditional promise to pay a specific amount to bearer or to the order of a named person, on demand or on a specified date indicates California Business Attorney Steven C. Peck.

A negotiable promissory note is unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at fixed or determinable future time, sum certain in money, to order or to bearer.

A promissory note, briefly stated, is a promise to pay a sum of money.

Original parties to a promissory note.

There are originally two parties in a promissory note. The one who makes the promise and signs the instrument is called the "maker" and the party to whom the promise is made or the instrument is payable is called the "payee"

Bill of exchange
A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today.

A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer business law Attorney Peck says.

It is essentially an order made by one person to another to pay money to a third person.

A bill of exchange requires in its inception three parties--the drawer, the drawee, and the payee.

The person who draws the bill is called the drawer. He gives the order to pay money to third party. The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. he becomes an acceptor when he indicates his willingness to pay the bill. The party in whose favor the bill is drawn or is payable is called the payee.

The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own order.

A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable.

In some cases a bill is marked "not negotiable". In that case it can still be transferred to a third party, but the third party can have no better right than the transferor.

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Continue reading "Negotiable Instruments Special Type of Contract to Pay Money" »

Many people in California do not realize that there are two Fair Debt Collection Practices Acts. First, there is the federal Fair Debt Collection Practices Act, which applies nationwide. Second, there is California's Rosenthal Fair Debt Collection Practices Act, which is California's version of the federal law.

There are key differences between the federal Act and the Rosenthal Act:

1. The federal Act generally does not apply to the original creditor (such as, your credit card company), but only to the company attempting to collect the debt on behalf of the original creditor. The Rosenthal Act, however, generally extends its protections to the original creditor. In addition, the Rosenthal Act makes nearly all violations of the federal Act a violation of the Rosenthal Act. That's great stuff for California consumers. And it makes sense: Why should the original creditor not be liable for who it hires? Of course, it should.

2. The federal Act applies to attorneys, while the Rosenthal Act does not. Hence, if you are going to sue an abusive collection attorney, it must be brought under the federal Act.

3. The federal Act applies to repossessors in only limited instances, while the Rosenthal Act extends all of its protections to repossessors. Again, this is a huge advantage for consumers in California.

The distinctions between the federal Act and the Rosenthal Act are critical in assessing any lawsuit involving debt collection harassment. Please feel free to contact my law firm with any questions.

Continue reading "Federal Debt Collection Practices Act and California Rosenthal Act Have Key Differences" »

One of the key legal features of corporations are their separate legal personality, also known as "personhood" or being "artificial persons".

However, separate legal personality does allow corporate groups a great deal of flexibility in relation to tax planning, and also enables multinational companies to manage the liability of their overseas operations. There are certain specific situations where courts are generally prepared to "pierce the corporate veil", to look directly at, and impose liability directly on the individuals behind the company. According to California Business Law Attorney Steven C. Peck the most commonly cited examples are:

Where the company is a mere façade;
Where the company is effectively just the agent of its members or controllers;
Where a representative of the company has taken some personal responsibility for a statement or action;
Where the company is engaged in fraud or other criminal wrongdoing;
Where the natural interpretation of a contract or statute is as a reference to the corporate group and not the individual company;
Where permitted by statute (for example, many jurisdictions provide for shareholder liability where a company breaches environmental protection laws) in many jurisdictions,
Where a company continues to trade despite inevitable bankruptcy, the directors can be forced to account for trading losses personally;

Continue reading "Coporations Have a Separate Legal Personality" »

Corporate law (also "company" or "corporations" law) is the law of the most dominant kind of business enterprise in the modern world. Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another under the internal rules of the firm. says California Business Lawyer Steven C. peck.

Corporate law is a part of a broader companies law (or law of business associations). Other types of business associations can include partnerships (like most law firms), or trusts (like a pension fund) or companies limited by guarantee (like some universities or charities). Corporate law is about big business, which has separate legal personality, with limited liability or unlimited liability for its members or shareholders, who buy and sell their stocks depending on the performance of the board of directors. It deals with the firms that are incorporated or registered under the corporate or company law of a sovereign state or their subnational states. According to the American Professors Hansmann (of Yale University) and Kraakman (of Harvard University), the five defining characteristics of the modern corporation are:

Separate Legal Personality of the corporation (the right to sue and be sued in its own name i.e. the law treats the company as a human being.
Limited Liability of the shareholders (so that when the company is insolvent, they only owe the money that they subscribed for in shares)
Transferable Shares (usually on a listed exchange, such as the London Stock Exchange, New York Stock Exchange or Euronext in Paris)
Delegated Management, in other words, control of the company placed in the hands of a board of directors
Investor Ownership, ownership by shareholders. The last of these defining features is contested. For a start, it is pointed out that shareholders do not own corporations, they own their shares. Ownership of a corporation is complicated by increasing social and economic interdependence, as different stakeholders compete to have a say in corporate affairs. In most developed countries excluding the English speaking world, company boards have representatives of both shareholders and employees to "codetermine" company strategy. Corporate law is often divided into corporate governance (which concerns the various power relations within a corporation) and corporate finance (which concerns the rules on how capital is used).

Continue reading "Corporate Law an Interaction Between The Officers, Directors, and Shareholders" »

Bailment describes a legal relationship in common law where physical possession of personal property (chattels) is transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently holds possession of the property says California Business Lawyer Steven C. Peck.

Bailment is distinguished from a contract of sale or a gift of property, as it only involves the transfer of possession and not its ownership. To create a bailment, the bailee must both intend to possess, and actually physically possess, the bailable chattel. Bailment is a typical common law concept and it is non-existent in civil law indicates Los Angeles Business Attorney Peck.

In addition, unlike a lease or rental, where ownership remains with the leasor but the lessee is allowed to use the property, the bailee is generally not entitled to the use of the property while it is in his possession. Moreover, unlike a security agreement or pawn at a pawnbroker, where the secured party is entitled to the possession and use of the property only on default of payment, a bailor can demand the return of the property at any reasonable time, without prior notice. A common example of bailment is leaving your car with a valet. Leaving your car in a parking garage is typically a license, as the car park's intent to possess your car cannot be shown. However, it arises in many other situations, including terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.

No matter how a bailment arises, the bailee will incur some liability in the taking of a bailment. Different jurisdictions maintain different standards of care.

Strict liability
The old common law held a bailee strictly liable for the bailment. The exception to this rule was the case of involuntary bailments (see below), when the bailee is only held to a standard of due care.

Tiered
In many Jurisdictions, including California, the system of strict liability has been replaced by a tiered system of liability that depends on the relationship of the bailee to the bailor. The bailee is generally expected to take reasonable precautions to safeguard the property, although this standard sometimes varies depending upon who benefits from the bailment.

If both bailor and bailee are found to benefit from the relationship, such as sending a package, then the bailee is held to a standard of ordinary, or reasonable, care.
If the bailment is to the primary benefit of the bailor, such as finding a lost wallet, the bailee must be found grossly negligent to be liable for damage done to the bailment.
If the bailee primarily benefits, such as if you borrow your neighbor's rake to clean your lawn, the bailee must exercise highest care, i.e. is liable for any damages arising from slight neligence.

Normal care
Some jurisdictions have held bailees to a standard of normal care regardless of who benefits in the bailor/bailee relationship.

Involuntary bailees
An exception to all the above is the case of an involuntary bailee, one who by not intentional acts is made a bailee. For example, if one is given a stock certificate but it turns out to be the wrong certificate (intended for someone else), he is an unintentional bailee, he has made not intentional act to become a bailee. He is therefore entitled to divest himself of the certificate regardless of a duty of care, so long as he does not malicious or intentional harm to another.

Damages
Plaintiffs will be able to sue for damages based on the duty of care. Often this will be normal tort damages. Plaintiff may elect also to sue for conversion, either in the replevin or trover, although these are generally considered older, common law damages.

Terms
Bailment can arise in a number of situations, and is often described by the type of relationship that gave rise to the bailment. Several common distinctions are:

Voluntary vs. Involuntary. In a voluntary bailment, the bailee agrees to accept responsibility for possession of the goods. In an involuntary bailment, the bailee has possession of the goods without intent to do so. A common situation that creates voluntary bailment is when a person leaves goods with someone for service (e.g., dry cleaning, pet grooming, car tune-up). The bailee must hold the goods safe for the bailor to reclaim within a reasonable time. An involuntary (or constructive) bailment occurs when a person comes into possession of property accidentally or mistakenly, as where a lost purse or car keys are found and need to be protected until properly redelivered - a bailment is implied by law.
For consideration vs. gratuitous. If a person agrees to accept a fee or other good consideration for holding possession of goods, they are generally held to a higher standard of care than a person who is doing so without being paid (or receives no benefit). Consider a paid coat-check counter versus a free coat-hook by the front door, and the respective obligations of the bailee. Some establishments even post signs to the effect that "no bailment" is created by leaving your personal possessions in their care, but local laws may prevent unfair enforcement of such terms (especially attended car parks).

Fixed term vs. indefinite term. A bailor who leaves property for a fixed term may be deemed to have abandoned the property if it is not removed at the end of the term, or it may convert to an involuntary bailment for a reasonable time (e.g., abandoned property in a bank safe, eventually escheats to the state, and the treasurer may hold it for some period, awaiting the owner). However, if there is no clear term of bailment agreed upon, the goods cannot be considered abandoned unless the bailee is given notice that the bailor wishes to give up possession of the goods. Frequently, in the case of storage of goods, the bailee also acquires a contractual or statutory right to dispose of the goods to satisfy overdue rent; a lawful conversion of bailed goods.

Continue reading "The Legal Principles Attributable to Bailments" »

A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt.It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets. Such rights vary according to the type of security interest, but in most cases, a holder of the security interest is entitled to seize, and usually sell, the property to discharge the debt that the security interest secures.

A secured creditor takes a security interest to enforce its rights against collateral in case the debtor defaults on the obligation. If the debtor goes bankrupt, a secured creditor takes precedence over unsecured creditor in the distribution.

There are other reasons that people sometimes take security over assets. In shareholders' agreements involving two parties (such as a joint venture), sometimes the shareholders will each charge their shares in favor of the other as security for the performance of their obligations under the agreement to prevent the other shareholder selling their shares to a third party. It is sometimes suggested that banks may take floating charges over companies by way of security - not so much for the security for payment of their own debts, but because this ensures that no other bank will, ordinarily, lend to the company, thereby almost granting a monopoly in favour of the bank holding the floating charge on lending to the company.

Some economists question the utility of security interests and secured lending generally. Proponents argue that secured interests lower the risk for the lender, and in turn allows the lender to charge lower interest, thereby lower the cost of capital for the borrower. Compare, for example, interest rates for a mortgage loan and for a credit card debt.

Detractors argue that creditors with security interests can destroy companies that are in financial difficulty, but which might still recover and be profitable. The secured lenders might get nervous and enforce the security early, repossessing key assets and forcing the company into bankruptcy. Further, the general principle of most insolvency regimes is that creditors should be treated equally (or pari passu), and allowing secured creditors a preference to certain assets upsets the conceptual basis of an insolvency.

More sophisticated criticisms of security point out that although unsecured creditors will receive less on insolvency, they should be able to compensate by charging a higher interest rate. However, since many unsecured creditors are unable to adjust their "interest rates" upwards (tort claimants, employees), the company benefits from a cheaper rate of credit, to the detriment of these non-adjusting creditors. There is thus a transfer of value from these parties to secured borrowers.
Most insolvency law allows mutual debts to be set-off, allowing certain creditors (those who also owe money to the insolvent debtor) a pre-preferential position. In some countries, "involuntary" creditors (such as tort victims) also have preferential status, and in others environmental claims have special preferred rights for cleanup costs.

The most frequently used criticism of secured lending is that, if secured creditors are allowed to seize and sell key assets, a liquidator or bankruptcy trustee loses the ability to sell off the business as a going concern, and may be forced to sell the business on a break-up basis. This may mean realising a much smaller return for the unsecured creditors, and will invariably mean that all the employees will be made redundant.

For this reason, many jurisdictions restrict the ability of secured creditors to enforce their rights in a bankruptcy. In the U.S., the Chapter 11 creditor protection, which completely prevents enforcement of security interests, aims at keeping enterprises running at the expense of creditors' rights, and is often heavily criticised for that reason. In the United Kingdom, an administration order has a similar effect, but are less expansive in scope and restriction in terms of creditors rights. European systems are often touted as being pro-creditor, but many European jurisdictions also impose restrictions upon time limits that must be observed before secured creditors can enforce their rights. The most draconian jurisdictions in favour of creditor's rights tend to be in offshore financial centres, who hope that, by having a legal system heavily biased towards secured creditors, they will encourage banks to lend at cheaper rates to offshore structures, and thus in turn encourage business to use them to obtain cheaper funds.

Continue reading "Security Interests have Preferential Rights in the Disposition of Secured Assets" »

Liens can be consensual or non-consensual (also termed voluntary or involuntary in different states). Consensual liens are imposed by a contract between the creditor and the debtor. Those liens include mortgages; car loans; security interests; chattel mortgages; property improvements(mechanic's lien).
Nonconsensual liens typically arise by statute or by the operation of the common law. Those laws give a creditor the right to impose a lien on an item of real property or a chattel by the existence of the relationship of creditor and debtor. Those liens include tax liens, imposed to secure payment of a tax; "weed liens" and "demolition liens", assessed by the government torectify a property from being a nuisance and public hazard; attorney's liens, against funds and documents to secure payment of fees; mechanic's liens, which secure payment for work done on property or land; judgment liens, imposed to secure payment of a judgment;
maritime liens, imposed on ships by admiralty law says California Business Lawyer Steven C. Peck.
Liens are also "perfected" or "unperfected" (see perfection). Perfected liens are those liens for which a creditor has established a priority right in the encumbered property with respect to third party creditors. Perfection is generally accomplished by taking steps required by law to give third party creditors notice of the lien. The fact that an item of property is in the hands of the creditor usually constitutes perfection. Where the property remains in the hands of the debtor, some further step must be taken, like recording a notice of the security interest with the appropriate office.

Perfecting a lien is an important part of the task of protecting the secured creditor's interest in the property. A perfected lien is valid against bona fide purchasers of property, and even against a trustee in bankruptcy; an unperfected lien may not be.

Continue reading "Liens: A General Overview" »

A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking says California Business Lawyer Steven C. Peck.

The LC can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or cancelled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment was insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

Continue reading "The Business Letter of Credit: General Overview" »

A business (also called a company, enterprise or firm) is a legally recognized organization designed to provide goods and/or services to consumers.[1] Businesses are predominant in capitalist economies, most being privately owned and formed to earn profit that will increase the wealth of its owners and grow the business itself. The owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses can also be formed not-for-profit or be state-owned.

The etymology of "business" relates to the state of being busy either as an individual or society as a whole, doing commercially viable and profitable work. The term "business" has at least three usages, depending on the scope -- the singular usage (above) to mean a particular company or corporation, the generalized usage to refer to a particular market sector, such as "the music business" and compound forms such as agribusiness, or the broadest meaning to include all activity by the community of suppliers of goods and services. However, the exact definition of business, like much else in the philosophy of business, is a matter of debate and complexity of meanings

Basic forms of ownership:
Although forms of business ownership vary by jurisdiction, there are several common forms:

Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may operate on his or her own or may employ others. The owner of the business has personal liability of the debts incurred by the business.
Partnership: A partnership is a form of business in which two or more people operate for the common goal which is often making profit. In most forms of partnerships, each partner has personal liability of the debts incurred by the business. There are three typical classifications of partnerships: general partnerships, limited partnerships, and limited liability partnerships.
Corporation: A corporation is either a limited or unlimited liability entity that has a separate legal personality from its members. A corporation can be organized for-profit or not-for-profit. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business's managerial staff. In addition to privately-owned corporate models, there are state-owned corporate models.
Cooperative: Often referred to as a "co-op", a cooperative is a limited liability entity that can organize for-profit or not-for-profit. A cooperative differs from a corporation in that it has members, as opposed to shareholders, who share decision-making authority. Cooperatives are typically classified as either consumer cooperatives or worker cooperatives. Cooperatives are fundamental to the ideology of economic democracy.

Continue reading "The Business Enterprise: A General Overview" »

Business journalism is the branch of journalism that tracks, records, analyzes and interprets the economic changes that take place in a society. It could include anything from personal finance, to business at the local market and shopping malls, to the performance of well-known and not-so-well-known companies.

This form of journalism covers news and features articles about people, places and issues related to the field of [[business]. Most newspapers, magazines, radio, and television news shows carry a business segment. However, detailed and in depth business journalism can be found in publications, radio, and television channels dedicated specifically to business and financial journalism.

Business journalism began as early as the Middle Ages, to help well-known trading families communicate with each other [1]. In 1882 Charles Dow, Edward Jones and Charles Bergstresser begin a wire service that delivered news to investment houses along Wall Street. [2] And in 1889 the Wall Street Journal began publishing.[3] While the famous muckraking journalist Ida Tarbell didn't considered herself to be a business reporter, her reporting and writing about the Standard Oil Co. in 1902 provided the template for how thousands of business journalists have covered companies ever since.[4] Business coverage gained prominence in the 1990s, with wider investment in the stock market. The Wall Street Journal is one prominent example of business journalism, and is among the United States of America's top newspapers in terms of both circulation and respect for the journalists whose work appears there.

A journalist who works in this branch is considered a business journalist. Their main purpose is gathering information about current events in the economic life of the country. They may also cover processes, trends, consequences, and important people, in business and disseminate their work through all types of mass media.

Continue reading "Business Journalism: Tracking, Recording & Analyzing Economic Activity" »

Democratic Congressional leaders struck a tentative agreement on Thursday that breathes new life into President Obama's proposed overhaul of federal student loan programs.

The deal would bundle the bill into an expedited budget package along with the Democratic health care legislation, which would allow for both measures to be passed by the Senate on a simple majority vote. Without the deal, the student loan bill would have been unlikely to pass because it lacked the 60 votes needed to overcome a filibuster.

The bill would end government payments to private, commercial student lenders, leaving the government to lend directly to students. It would also redirect billions of dollars to expand the Pell grant program for low-income students, and to pay for other education initiatives.

The maximum Pell grant is set to rise to $5,550 for the 2010-11 school year and, under the deal struck Thursday, would increase automatically each year in line with inflation. As many as eight million of the nation's lowest-income students receive Pell grants to help pay for college each year. Under current law, Congress must determine any increases.

"Families and students who rely on federal student aid need to know that Congress sides with them and not with the big banks," Senator Tom Harkin, Democrat of Iowa and chairman of the Education Committee, said at a news conference on Thursday. "The federal government has been subsidizing these banks and wasting taxpayer money for far too long. It's time to end it."

Private banks had lobbied fiercely against the bill, which would cut off a longtime stream of revenue. Even on Thursday, lobbyists for the private lenders made a last-ditch effort to stop Democrats from adding it to the budget package.

House Democrats predicted that packaging the two proposals in an expedited budget reconciliation bill would help them secure the needed votes on health care because the financial aid bill is popular. In September, the House adopted that bill, the Student Aid and Fiscal Responsibility Act, by a vote of 253 to 171.

Senate Democrats said that they could lose some votes as a result of the packaging, but that they did not believe it would swing the outcome. Senate Democrats nominally control 59 votes, and need only 50 to approve the reconciliation measure, because Vice President Joseph R. Biden Jr. would break a tie.

Some Democrats in the Senate, where the private student loan industry has strong allies, had resisted tying the two bills together. But federal education officials warned on Thursday that if Congress failed to act, millions of students might see their Pell grants cut by 60 percent.

Democrats said that in a caucus meeting Thursday, Mr. Harkin made a compelling case for moving more quickly on the education measure and that other senators had voiced agreement, outweighing doubts raised in particular by Senator Kent Conrad of North Dakota, the chairman of the Budget Committee.

Aides to Mr. Conrad said he was open to packaging the two bills, provided that House Democrats agreed to meet budget reconciliation rules by adjusting the education measure to account for a revised cost analysis by the Congressional Budget Office.

The House-passed bill had anticipated savings of $87 billion by eliminating payments to private lenders, and would have redirected that money to Pell grants and other education programs.

But in recent months, more colleges have joined the government's direct lending program, in anticipation of the change, generating the savings up front and reducing the amount of revenue that would be available for new spending to about $67 billion.

"The Treasury is winning every day that somebody takes out a direct loan," said Representative George Miller, Democrat of California and chairman of the Education and Labor Committee. "The concept is already driving savings to the government."

At the same time, a rise in the number of people attending college and seeking aid in the weak economy has raised the projected cost of new Pell grants to $54 billion from $40 billion.

Officials said they could reduce the spending in the education bill by tying annual increases in Pell grants to the consumer price index, a measure of inflation, rather than to the consumer price index plus 1 percent, as set forth in the House bill.

Mr. Harkin and Mr. Miller said on Thursday that if the financial aid measure was not tied to health care, it might collapse.

Six Democrat senators had written a letter to the majority leader, Harry Reid of Nevada, expressing doubts about the education proposal. And given Republican opposition, the bill was unlikely to win the 60 votes needed to overcome a filibuster.

The decision by Democrats to package the two bills creates tough choices for some lawmakers. Senator Ben Nelson, Democrat of Nebraska, for instance, has reason to vote for the health care bill in part to undo a special provision that Senate leaders included giving Nebraska extra federal Medicaid money.

That provision, derided by Republicans as the "Cornhusker kickback," has become a political liability for Mr. Nelson. But Nebraska is also home to some major private student lenders, and he will be hard-pressed to vote in favor of a package that ends their lucrative business originating federal student loans.

Continue reading "Major OverHaul of Federal Student Loan Programs" »

According to reports issued this week, the domain name Sex.com will be put up for auction next week by its owners, with the bidding set to start at $1 million.

The domain, once considered one of the Internet's most valuable, is definitely one of its most storied. Acquired by Escom LLC in 2006, the domain is set to be auctioned off March 18 by New York law firm Windels Marx Lane & Mittendorf LLP, as part of a foreclosure by lender DOM Partners LLC, which backed the acquisition.

Escom, which, according to a Reuters report, published in the Globe and Mail, has been in default on its loan for more than a year. The article quotes a lawyer for DOM Partners, Scott Matthews, who says the company is foreclosing according to its rights outlined in the loan agreement.

The company acquired the domain in 2006 - for an amount believed to be in the range of $14 million - from then-owner Gary Kremen, who first registered the domain in 1994. Prior to its sale, Sex.com had been the subject of a long legal battle, one that continued until 2007.

In May of 2007, lawyers for Kremen announced that the Ninth Circuit Court of Appeals had issued an order dismissing the most recent appeal of a $65,000,000 judgment against Stephen Michael Cohen, effectively ending the case - at the time, it was considered a landmark decision in Internet law.

The story, in brief, is that Cohen used a fraudulent fax to convince the domain's then-registrar, Network Solutions, to transfer the domain to him. While Kremen sought to have the domain returned, Cohen operated a banner farm on the domain that reportedly generated between $50,000 and $500,000 per month, and continued to operate until 2000, when the courts ordered Network Solutions to return the domain to Kremen. Cohen left the country, and was arrested in Mexico in 2005.

Sex.com's story has been the subject of several books. But to date, the most interesting thing anyone has done with sex.com is steal it. The 2006 sale would seem to have been designed to tie the domain to a proper business venture, but - as observed in this week's TechCrunch report on the auction - as of earlier this week, the domain pointed to the PG landing page of a fairly ill-conceived sex-related "portal" site (as of Friday morning, the domain pointed to a parked page).

One of the most interesting subplots to the story is the fact that one of the Internet's most valuable properties has never really been properly developed. It's not clear who the suitors for the domain might be, but according to the announcement, they'll be required to bring a certified check for $1 million to the auction.

"I'm sure you've heard it before but the analogy I use is: it's like real estate," says Adam Eisner, director of domain services at wholesale registrar Tucows. "There are lousy properties, good properties, and great properties. As an address, sex.com is a great property. And in general, more people are starting to realize the value in the good and great names. It doesn't only apply to the great properties, though. Even smaller businesses are increasingly shelling out one to five thousand dollars to get domain names that are a perfect reflection of their business. Sure, they can have an okay name for a few bucks. Or they can spend a bit of their marketing budget to secure a good or great name."

Obviously there is still a great deal of inherent value in the domain sex.com - it's a single word, extremely topical and relevant, a powerful keyword related directly to a product people have proven very willing to pay for online. The question is whether that inherent value in the specific domain has diminished over time, though the changes in the nature of web navigation, the domain space itself and the user's relationship with the domain.

The question of the specific value of sex.com will be answered at next week's auction. The question of whether something compelling can be done with the property may take a little longer to answer.

While the auction is set to be an in-person affair at the law firm's New York offices, the Globe story quotes one of the partners as saying the firm was arranging for potential buyers to be able to bid online.

Continue reading "Domain Name Sex.Com to be Put up For Auction" »

The major factors affecting how a business is organized are usually:
The size and scope of the business, and its anticipated management and ownership. Generally a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as partnerships or (more commonly) corporations. In addition a business that wishes to raise money on a stock market or to be owned by a wide range of people will often be required to adopt a specific legal form to do so.
The sector and country. Private profit making businesses are different from government owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways.
Limited liability. Corporations, limited liability partnerships, and other specific types of business organizations protect their owners or shareholders from business failure by doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own are usually not so protected.
Tax advantages. Different structures are treated differently in tax law, and may have advantages for this reason.
Disclosure and compliance requirements. Different business structures may be required to make more or less information public (or reported to relevant authorities), and may be bound to comply with different rules and regulations.
Many businesses are operated through a separate entity such as a corporation or a partnership (either formed with or without limited liability). Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. The relationships and legal rights of shareholders, limited partners, or members are governed partly by the charter documents and partly by the law of the jurisdiction where the entity is organized. Generally speaking, shareholders in a corporation, limited partners in a limited partnership, and members in a limited liability company are shielded from personal liability for the debts and obligations of the entity, which is legally treated as a separate "person." This means that unless there is misconduct, the owner's own possessions are strongly protected in law, if the business does not succeed.

Where two or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership. The terms of a partnership are partly governed by a partnership agreement if one is created, and partly by the law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to create a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the law of the jurisdiction where the partnership is located.

A single person who owns and runs a business is commonly known as a sole proprietor, whether he or she owns it directly or through a formally organized entity.

A few relevant factors to consider in deciding how to operate a business include:

General partners in a partnership (other than a limited liability partnership), plus anyone who personally owns and operates a business without creating a separate legal entity, are personally liable for the debts and obligations of the business.
Generally, corporations are required to pay tax just like "real" people. In some tax systems, this can give rise to so-called double taxation, because first the corporation pays tax on the profit, and then when the corporation distributes its profits to its owners, individuals have to include dividends in their income when they complete their personal tax returns, at which point a second layer of income tax is imposed.
In most countries, there are laws which treat small corporations differently than large ones. They may be exempt from certain legal filing requirements or labor laws, have simplified procedures in specialized areas, and have simplified, advantageous, or slightly different tax treatment.
To "go public" (sometimes called IPO) -- which basically means to allow a part of the business to be owned by a wider range of investors or the public in general--you must organize a separate entity, which is usually required to comply with a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also public LLCs that sell units (sometimes also called shares), and other more exotic entities as well (for example, REITs in the USA, Unit Trusts in the UK). However, you cannot take a general partnership "public."

Continue reading "Major Factors Affecting How a Business is Organized" »

Are you having problems with your mortgage payments since you have been delayed on paying them? Or you might have doubts that you can have problems on settling your monthly dues in the coming days? Well, if you are currently on this state, then you are on the verge of welcoming foreclosure right in front of your door step. But there can be so many ways on how to prevent this from happening, and that is to opt for a short sale.

Now, what is this short sale all about? It is a given fact that foreclosure is the last thing that a struggling homeowner would want to happen to his property. When you have already been failing to settling your dues because of some unexpected happenings in your life, you can always open it to your lender and offer to do a short sale instead.

Short sale describes a property that is being sold at a price that is lower than the outstanding balance of the owner. This is like asking permission from the bank of the lender to dispose the property at a low value. The profit for this transaction will be used to settle the debt. Getting their approval to do a short sale transaction is just like giving you a reward that you exactly need as of the moment. Isn't it very fulfilling?

However, it is always not a happy ending for these poor homeowners since some lenders do not allow this arrangement. Alternatively, this option is not only good for those negligent borrowers. There are particular requisites before the lenders allow short sale to take place. There is a need for the borrowers to prove to the bank or lending company that they are indeed qualified for short sale. But take note, the process is definitely not as easy as you think.

Short sale does not only benefit the seller but the buyer and other parties involved. For most real estate investors, this is one of the most practical options for everybody.

For the two parties the seller and borrower, it can settle the remaining credit balance. And you can also stay away from getting a foreclosure. Hence, it can save you from staining your reputation because you are evicted from your house due to your own negligence.

Aside from that, lenders are also satisfied to receive the payment for the overdue balance instead of spending more for possible foreclosure procedure. This is a better option than selling the house through an auction. There is a tendency that the property will only sleep in the market for a long time.

Home buyers also love to invest on short sale properties since they come out cheaper than a regular house. They can have a chance to check out the place thoroughly before they finally decide to buy it.

Of course, you can not deny that opting for short sale will give you negative impact especially in your credit rating. This is just like a foreclosure but not that worst. But do not feel too bad since there are some considerations. If the seller decided to do a short sale but did not fail in his payments, you can have a stable credit standing.

However, if it is made due to several failed payments, this will surely leave a terrible effect to your credit record. Even if you have settled you debt, it can still show a negative impression to your reputation as a borrower. So always be responsible in your finances to prevent getting into trouble such as this.

Continue reading "Short Sales: What Are They All About???" »

Every business should protect proprietary information when dealing with independent contractors, vendors and other businesses. The best way to do this is to use a non-disclosure agreement, often referred to as an "NDA."

What is an NDA?

An NDA is an agreement between two parties to protect confidential information disclosed in a business transaction. The proprietary information can include business methods, finances, client lists, and anything that isn't already readily available in the public arena. If a party subsequently breaches the NDA, the injured party can sue for damages, an injunction against further disclosure and attorney's fees.

Directional NDA

In many situations, only one party requires the protection provided by an NDA. If you invent a new product, you are going to need an NDA from manufacturers, distributors, etc., before you discuss the product with them. While this may seem like common sense, most businesses fail to carry the thought through to their daily activities.

Practically every business hires independent contractors, but they rarely obtain NDAs prior to disclosing information to the contractors. For example, do you use third parties to create or maintain your websites? Did you obtain NDAs from any of them? If not, what's to keep that party from using your business methods on other sites? A directional NDA can keep this from occurring.

Mutual NDA

As the name suggest, a mutual NDA allows two parties to protect confidential information. The mutual NDA is typically used when two businesses are negotiating a joint venture. Each party must disclose enough information to make the negotiations viable, but neither wants that information made public if the negotiations fail. If negotiations go well, additional non-disclosure information will be incorporated into the joint venture agreement to protect additional information revealed during the joint venture.

Refusing to Sign an NDA

Alarms and warning lights should go off if a party refuses to sign your NDA. Unless they can provide a very compelling reason for the refusal, you should walk away from the business relationship.

When an NDA isn't really an NDA

Just because a document is titled, "Non-Disclosure Agreement", does not mean it provides you with protection. You should ALWAYS read the language of an NDA because the document may establish that you are WAIVING all confidentiality rights. The waiver might be very direct and read something like, "The disclosure of information pursuant to this Agreement shall not be considered confidential." Alternatively, the language may be more indirect and read, "The parties acknowledge and agree that all information exchanged pursuant to this agreement has previously been established in public forums." Regardless, the "reverse NDAs" strip you of protection and should not be signed.

Continue reading "Non-Disclosure Agreements Useful In Protecting Confidential Business Information" »

The Commercial Collection Agency Association (CCAA) reported that its members received a record volume of business-to-business accounts for collection in 2009.

Emil Hartleb, Executive Director of CCAA reported that in 2009 CCAA members received $17, 762,139,514 in accounts placed for collection.

This represents an increase of 33.4 percent over 2008. Account placement in 2008 held the previous record, $13,311,932,553.

Hartleb pointed out that the gain in placement for the Fourth Quarter of 2009 compared to the same quarter in 2008 was particularly strong registering a gain of over 48 percent.

He indicated that the problems in the economy's business sector are not behind us yet, particularly for small and medium sized businesses.

In addition to reporting their account placement statistics, members are surveyed quarterly on their outlook for account placement and the collectability of that placement. Hartleb stated that in the survey conducted for the Fourth Quarter of 2009, 70 percent of CCAA's membership believed that a lackluster economy, marked by high levels of account placement and declining collectability, will continue for at least the next six months. This is an increase of approximately 27 percent from the Third Quarter Survey where 55 percent of the CCAA membership believed that account placement would continue to rise and collectability decline.

Continue reading "ACCOUNTS PLACED WITH COLLECTION AGENCIES SET A NEW RECORD" »

The Ninth Circuit affirmed the district court's ruling in Office Depot v.
Zuccarini agreeing that a creditor may levy against a domain name in the jurisdiction
where the domain name registry is located. The decision is significant for two
reasons. First, it affirms (or reaffirms) that domain names are property
subject to the claims of creditors. Second, it allows creditors to proceed
against domain names where the registry is located, thus allowing creditors to
proceed against domain names in one proceeding and more importantly levy
against domain names located abroad (where the registry is located in the
United States). Overall, this makes getting at a domain name much easier for
creditors says California Collection Attorney Steven C. Peck.

Background: Office Depot originally obtained a judgment against frequent cybersquatting defendant John Zuccarini. Office Depot then assigned the judgment to DS Holdings. Office Depot obtained the judgment in 2000 and it's surprising that 10 years later the judgment is finally being enforced against something. Although Zuccarini is proceeding pro se, it seems
like he was or became well versed in putting up roadblocks and delaying resolution of the litigation.

DS went after 190 .com domain names that were registered in Zuccarini's
name. DS originally tried unsuccessfully to have the domain names transferred
directly to it. (This was the technique successfully used by the plaintiff in Bosh
v. Zavala.) Later, DS sought to have a receiver appointed over the domain
names. The district court granted DS's request to have the receiver appointed,
and Zuccarini appealed. Zuccarini's appeal focused on whether it was proper to
appoint the receiver in the Northern District of California, since the domain
names were not necessarily "located" there.
The court's ruling: The court runs through basic principles
of in rem jurisdiction and what rules apply. The court then looks to federal
rules to determine where the receiver should be appointed in this case. Finding
no applicable federal rule, the court looks to California law. California law
provides that a writ of execution may be issued "in the county where the
levy is to be made." With this in the background, the two questions
presented by the court are: (1) "are domain names property that is subject
to execution?" and (2) "if so, where are the domain names located for
purposes of execution?"

With respect to the first question, the court cites to Kremen v. Cohen, and
easily concludes that (under California law) "domain names are intangible
property subject to a writ of execution." Kremen undermined Network
Solutions, Inc. v. Umbro Int'l, Inc., 259 Va. 759, 770 (Va. 2000), a Virginia
case widely cited for the proposition that creditors cannot get at domain names
because domain names are contract rights rather then property. To the extent
Kremen did not refute Umbro, this decision definitely provides the necessary
ammunition to creditors. (Again, collection is state-specific, and apart from
the analysis of the nature of domain names, the outcome in these cases turns on
the statute in question, which vary from state to state. That said, I think
given the robust marketplace in domain names, Umbro's conception of the domain
name as a personal services agreement seems outdated, and most courts will
easily recognize this.)

With respect to the second question, the court acknowledges that
"attaching a situs to intangible property is ... a legal fiction,"
and the determination must be made in a "context-specific" manner.
Fairness was relevant to the court's determination of the appropriate situs,
and the court was understandably not receptive to Zuccarini's policy arguments
that allowing a court to issue an order directed to the registry would mean
that every .com and .net domain name could be levied through courts in the
Northern District of California. The court also looked to the ACPA, which
provides for in rem jurisdiction over certain cases where the "registrar,
registry, or other domain name authority" is located. Although this was
not an ACPA case, the court found the structure set up by the statute
persuasive and that the writ was appropriately issued from Northern District of
California since VeriSign (the registry for .com domains) is located there.
The decision clears up two things: Although
post Kremen v. Cohen there shouldn't have been much dispute that domain names
are property which are subject to the claims of creditors, the case clears up
any lingering doubt that may have existed. (Kremen and this case applied
California law, but the result shouldn't vary much across other states.)
Second, the decision makes clear that a court which has jurisdiction over the
registry can issue an order allowing the creditor to get at the domain names.
The case also implicitly affirms that getting a receiver appointed to sell the
domain names is the appropriate route for the creditor. Getting the name
transferred to the creditor is not a remedy allowed under California law
(Palacio Del Mar Homeowners Ass'n, Inc. v. McMahon). Additionally, a transfer
of domain names from a cybersquatter to a judgment creditor raises some issues
around potential infringement of third party rights through sales or other
exploitation of the domain names. (See this
post on Bosh v. Zavala for some discussion of those issues.) The method
ultimately used by DS in this case (a receiver) avoids all of these issues, or
at least shifts them over to the receiver rather than the creditor.

As mentioned above, this ruling makes clear that regardless of
whether a domain name is registered through a foreign registrar, a court having
jurisdiction over the registry can issue an order directing transfer of the
domain names to a receiver. With respect to .com and .net domain names, this
means that creditors can try to get at these domain names through proceeding in
the Northern District of California (as the court notes, VeriSign is the
registry for .com and .net domain names and is headquartered in Mountain View).
While the ACPA allows plaintiffs to file in rem suits where the registry is
located, it's nice (for creditors) to have a similar ruling in the
post-judgment context, and one from the Ninth Circuit as well.

Will this cause a rush of similar claims to be filed in the Northern
District of California? It's tough to say, but even post Kremen, it does not
seem like there's been a ton of post-judgment collections activity with respect
to domain names. From a practitioner's standpoint, it's certainly nice to have
this rule on the books.

Continue reading "Creditor May Levy Against a Domain Name in the Jurisdiction Where the Domain Registry is Located" »

Whether you're starting a business from home or opening a large-scale operation, you'll need to decide on the best legal structure for your new company. Don't underestimate the importance of your choice, as the legal entity you choose will affect how much personal liability you face, how much you pay in taxes and how in- depth your new company's record keeping will need to be. Your business structure can take one of five basic forms: the sole proprietorship, the partnership, the regular or C corporation, the S corporation, and the increasingly popular limited liability company or LLC.

The best entity for you will depend on the type of business you'll run, your potential exposure to lawsuits, the number of owners and whether you want the ability to raise capital or transfer shares. It's smart, and in many cases necessary, to consult a lawyer or accountant when making your choice.

Sole Proprietorships
The vast majority of small businesses start off as sole proprietorships, which are the simplest and least expensive vehicles to create and operate, according to the SBA. With a sole proprietorship, the owner and the business are essentially one and the same, meaning you have complete control, you can make decisions as you see fit and the profits from the business flow through to your personal tax return as Schedule C income. (If you don't have profits, you may be entitled to a business loss that can help offset other income.) To launch a sole proprietorship, you don't need to file legal forms or paperwork, such as articles of incorporation, but you might have to obtain a business license, or file a fictitious name document, depending on your state law. A sole proprietorship can only be used by an individual who owns the company, unless it's a husband- and- wife team, in which case it can be shared.

The main drawback of setting up a sole proprietorship is that you have unlimited personal responsibility for all debts or judgments related to the business. That liability, in turn, may make it difficult to attract investors or raise funds for your business.

As a sole proprietor, you'll also be responsible for paying the full burden of Social Security and Medicare taxes-- a cost normally split between employer and employee. For 2010, the first $106,800 of self- employment income is taxed at 12.4 percent for Social Security and 2.9 percent for Medicare. Any amount over $106,800 continues to be taxed at 2.9 percent for Medicare only

Continue reading "The Sole Proprietorship Business Entity" »

Bailment is the delivery of property from one person (bailor) to another person (bailee) who holds the property for a specific period of time under an express or implied-in-fact contract. To be distinguished from a contract of sale or a gift of property, bailment only involves the transfer of possession and not of ownership. An example of a bailment is taking your car to a parking garage and leaving the car and the keys in the possession of the parking garage attendant states California Business Attorney Steven C. Peck.

Bailments may be of several types: a bailment may be gratuitous when the bailee receives no compensation (as when you borrow your friend's notebook computer to work on an open source online encyclopedia project because he believes in the open source movement and wants to help you out), or a bailment for hire for which the bailee is compensated as in the parking garage example above, another common example is the coatcheck person.

A constructive bailment is a legal obligation that is imposed upon someone who has possession of property to return that property to the rightful owner as when the bailment is involuntary (done without intent or by accident but without negligence). An involuntary bailee may be liable in conversion if they do not return the property on the request of the bailor.

Continue reading "Bailments" »

Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, allows the other, the agent, to represent her or his legal interests and to perform legal acts that bind the principal. Agency can be created in a variety of ways, such as through the grant of a power of attorney also known as a mandate in civil law jurisdictions, it can also be implied from the conduct of the parties. says California Business Attorney Steven C. Peck.
The law of agency is used in many professional areas, from contract negotiation (business management), employment procurement (i.e. modelling agencies), by financial advisors, in the buying and selling of real estate, the negotiation of entertainment and sports deals and in many day to day transactions where one person (the "agent") is allowed to stand in for another individual to fulfill their wishes. Agents can represent the interests of one party, or they may represent the interests of several, conflicting or potentially conflicting parties. In the case of such dual agency the agent must either disclose information received by one party to the other or act in a limited agency capacity to prevent a situation where the agent's loyalty to the multiple principals is compromised.

Continue reading "Agency: Allowing an Individual to Perform Legal Acts That Bind the Principal" »