California Business Lawyer Blog

Estoppel in its broadest sense is a legal term referring to a series of legal and equitable doctrines that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied indicates California Business Law Attorney Steven C. Peck

This term appears to come from the French estoupail (or a variation), which meant "stopper plug", referring to placing a halt on the imbalance of the situation. The term is related to the verb "estop" which comes from the Old French term estopper, meaning "stop up, impede".

Where a court finds that a party has done something warranting a form of estoppel, that party is said to be "estopped" from making certain related arguments or claiming certain related rights. The defendant is said to be "estopped" from presenting the related defense, or the plaintiff is said to be "estopped" from making the related argument against the defendant.

Because estoppel is so factually dependant, it is perhaps best understood by considering specific examples.

Estoppel is closely related to the doctrines of waiver, variation, and election and is applied in many areas of law, including insurance, banking, employment, international trade, etc. In English law, the concept of legitimate expectation in the realm of administrative law and judicial review is estoppel's counterpart in public law, although subtle but important differences exist. The main species of estoppel shall be discussed in our next blog.

Continue reading "The Doctrine of Estoppel" »

The stock market gives many Americans a chance to have a small ownership share in publicly traded companies. Stock holders, as partial owners of the company, share in the company's profit and loss. However, they often have little, if any, say in the business decisions of the company and they have no control over the everyday operations of the company. Instead, it is the company's Board of Directors that is charged with the decision making responsibility and operational control says California Business Attorney Steven C. Peck.

Over the years, the courts have been in the often difficult position of having to decide if a company's Board of Directors acted appropriately in certain situations. The courts have been reluctant to second guess the business decisions of Boards of Directors, even if those decisions are disastrous. However, the courts have recognized that Boards of Directors have certain duties or responsibilities to company shareholders. Those duties are called the Board's fiduciary duties and include the duty of care and the duty of loyalty. indicates California Business lawyer Steven C. Peck.

The Duty of Care
Each publicly traded company's Board of Directors has a duty of care to its shareholders. That means that in making business decisions the Board must exercise reasonable care in the decisions that it makes for the company. Reasonable care has two elements. First, the Board must be acting in good faith for the benefit of the company. They must believe that the actions they are taking are in the company's best interest. Second, they must believe that the actions are in the best interest of the company based on a reasonable investigation of the options available. In other words, they must carefully consider the available options within the time and financial constraints presented before they make a decision or take a particular action on behalf of the company.

The Duty of Loyalty
In addition to the duty of care, the Board of Directors owes a duty of loyalty to company shareholders. That means that the Board of Directors must be loyal to the company and its shareholders and act in their best interest. The Board and its individual members may not act in their own best interest or engage in self-dealing while making decisions or taking actions on behalf of the company. The duty of loyalty is sometimes known as the business judgment rule because the Board is required to make its judgments in the best interest of the business.
Shareholders must remember, however, that even if the Board of Directors strictly adheres to both of its fiduciary duties of care and loyalty, business decisions may still be made that hurt that company. That is because many business decisions are inherently risky. The courts recognize this risk and do not engage in the business of second guessing business decisions that were carefully made in what was honestly believed to be the company's best interest. That said Boards of Directors are in unique positions of trust. They must, therefore, carefully exercise their duties of care and loyalty in their furtherance of their business goals. Then the shareholders, the Board members and the business will be protected.

Continue reading "The Duty of Care and the Duty of Loyalty: Basic Business Law Principles" »

The California State Bar said it has now shut down the loan modification businesses of two men for allegedly lying to consumers about being supervised by attorneys. The bar, which acted with the Orange County Superior Court in this case, has worked with other state and local officials to crack down on companies promising homeowner aid but not delivering it. says California Business Lawyer Steven C. Peck.

The bar alleges Curtis Melone of Huntington Beach and Christopher Fox of Redondo Beach promised to help homeowners facing foreclosure keep their properties but did nothing.

An attorney for the men was not immediately available for comment.

They can argue their case at a hearing scheduled at 1:30 p.m. on January 14, 2010, in Department 31 of the Orange County Superior Court. Their operations were halted on Dec. 21.

The duo operated under the names Guardian Credit Services, Green Credit Solutions, Green Credit Services, Erickson Law Group, Green Credit Law and PacWest Funding. A Web search indicates the companies were based primarily in Foothill Ranch and Irvine.

Here's more from the bar:

After working with the California Department of Justice, the California Department of Real Estate and the Orange County District Attorney's Office, State Bar investigators and prosecutors seized client files, terminated phone and computer services and posted notices to clients and the public about the shutdown. All officers, principals and employees of the businesses were ordered to cease and desist from holding themselves out as attorneys.
Since last March, the State Bar has aggressively sought to stop loan modification fraud by lawyers and to shut down the offices of people offering foreclosure services who represent themselves as lawyers. Thirteen attorneys have resigned in the wake of investigations by the State Bar Task Force on Loan Modification and six businesses have been closed. says California Business Lawyer Steven C. Peck.
Section 6126.3 of the Business and Professions Code gives authority to a superior court, on its own motion or upon application of the State Bar, to assume jurisdiction of the business of a person who is not a lawyer. Assumption of a law practice by a Superior Court is based upon the court finding that a person has engaged in the practice of law without being an active member of the State Bar or otherwise authorized to practice in California and that the interest of a client or interested person or entity will be prejudiced if the court does not assume jurisdiction.

Continue reading "California State Bar Closes Down Loan Modification Businesses" »

An Limited Liability Company ("LLC") is dissolved and its affairs are wound up on the happening of any of the following events: (1) at the time specified in the articles; (2) on the happening of events specified in the articles or a written operating agreement; (3) by a vote of at least a majority in interest of members or a greater percentage, if required by the articles or operating agreement; (4) without contrary provision in the articles or operating agreement, on the death, withdrawal, resignation, explusion, bankruptcy, or dissolution of a member, unless the LLC is continued by a vote of all remaining members within 90 days; or (5) on entry of a decree of judicial dissolution says California Business Law Attorney Steven C. Peck.

Continue reading "The Dissolution of a Limited Liability Company in California" »

Differences Between Corporations and LLC's
Due to the comparative complexity of starting and managing a corporation, businesses should carefully consider whether their needs will be better served by forming as an limited liability company (LLC), or even as a partnership or sole proprietorship.

The LLC does not require annual meetings, and is generally simpler to create, own and operate. An LLC may also have greater flexibility in allocating business profits between its members than does a corporation says california business lawyer Steven C. Peck. If a C Corporation has profits, it must pay corporate income taxes on those profits, whereas the profits of an LLC pass through to its members who individually report their share of the profits on their own tax returns. (Like LLC's, S Corporations also have pass-through profits.)

Corporations have advantages over LLC's in the respect that they are able to issue stock, and possibly stock options, to key employees and investors. There may also be tax advantages associated with having the corporation retain some of its own profits, even with the payment of corporate income taxes, over having all of the annual profits distributed to the owners and investors indicates california business attorney Steven C. Peck.
For people who wish to pass their businesses or investments to their children, there are advantages and disadvantages to using the corporation or an LLC for purposes of estate planning and wealth transfer. Those issues should be discussed with a qualified estate planning professional prior to choosing a business form for that purpose.

Continue reading "Differences Between Corporations and Limited Liability Companies" »

Relationships between manufacturers' representatives and suppliers are similar in many ways to a marriage. Before a contractual commitment, there is a courtship, a time during which both parties are able to examine their prospective partner during a variety of circumstances. If the attraction continues, both parties perform due diligence in order to ensure the absence of any nefarious dealings, both past and present. If a commitment is desired, both parties enter into a contractual relationship for the long-term. However, unlike a marriage, there is never a clause in a representative agreement that includes the words, "until death do us part." Representative relationships are expected to last only for a period during which both the rep and supplier reap benefit from the relationship. Once a partner can no longer foresee a benefit from the relationship, the partnership may be dissolved explains california business attorney Steven C. Peck.

During the early years of a representative relationship, little fears on both sides can become irritants that grow, fester, and hold back both parties from achieving greater success. What can be done to reduce the impact of otherwise minor fears? Both parties can build into the representative agreement protection that shields them from some of their greatest fears. Manufacturers' representatives often fear unjust termination by a supplier for whom they work diligently for several months or years with relatively little compensation. Suppliers often fear inability to terminate a rep whose performance has deteriorated. Both fears are real and can be addressed in the representative agreement in an equitable manner says california business lawyer Steven C. Peck.

If mutual success of the rep and the supplier is to be achieved, little fears on both sides must be dealt with in a manner that prohibits those fears from undermining performance. This paper addresses steps that can be taken to reduce fear on the part of both the manufacturers' representative and the supplier. By building protection into the representative agreement, two objectives can be accomplished: First, some natural fears can be either reduced or eliminated. By reducing the impact of some fears, performance of both the rep and the supplier can be enhanced. Second, when the time comes to dissolve the representative relationship, the same protections that were used to enhance performance can be used to unwind the relationship with less acrimony and legal action says Los Angles business attorney Steven C. Peck.

Well Written Agreements Reduce Fear
Suppliers have a natural fear of manufacturers' representatives. Simultaneously, manufacturers' representatives have a natural fear of suppliers. Any solution to this problem cannot be developed unless these natural fears are recognized. A solution, therefore, must identify some of the most obvious fears and work to minimize the impact of their realization. A manufacturers' representative might have a legitimate fear of being terminated if a small supplier becomes very successful and becomes acquired by a larger supplier. In most cases, the rep or the direct sales force of the surviving, (acquiring) supplier becomes the sales force of record and the rep of the smaller, (acquired) supplier is terminated. Termination is the result irrespective of performance.

Any manufacturer, large or small, may fear that the selected representative will not perform to expectations. If the gap between expectations and actual performance is too great, the manufacturer may need to change representation, but may feel trapped in a representative agreement that it feels cannot be changed easily or quickly. Well crafted representative agreements can relieve some of the fears of both reps and suppliers. We'll explore clauses that can be inserted to help protect both manufacturers' representatives and suppliers.

Protection for Manufacturers' Representatives
One common fear among manufacturers' representatives is that termination may come after months or years of hard work, but before significant commissions are generated. This a justifiable concern particularly where the supplier is relatively new and has no established customers. A rep must labor long and hard in order to create the first customers, designs and purchase orders. The world provides many examples whereby a small supplier signs up many reps that are required to provide several months of missionary work with customers before sales are realized. If the supplier provides a great product offering and executes well, its booming sales soon make it an attractive target of acquisition by a larger, more established competitor. During an acquisition, the sales organizations of the acquiring and acquired companies must be consolidated. Most often, the direct sales team or rep from the acquiring company survives, while the rep from the acquired supplier is terminated. Recognizing that history favors the reps of established suppliers, many reps are loath to adding start-up suppliers to their line card.

One solution that protects the manufacturers' representative for a small start-up supplier is the insertion of a clause that provides commissions beyond termination in the event of a change of ownership of the supplier. The rep may be offered six-to-twelve months of commissions after the effective date of termination if termination is the result of a change of ownership in the start-up supplier.

The mechanism calling for extended commissions is sometimes called a "double trigger." The term, "double trigger" is used in this case because two events must occur before the extra commissions are warranted: a) change of ownership, and b) termination of the representative agreement. If an acquisition occurs, but the rep is retained, there are no extended commissions. Similarly, if the rep is terminated, but there is no change of ownership, there are no extended commissions. When, however, termination occurs within weeks of a change of ownership, two conditions will have been "triggered" and the rep becomes entitled to extended commissions.

Inclusion of the "double trigger" clause removes the fear that reps might have when partnering with start-up suppliers. The expense of extended commissions become real to the start-up supplier only if it becomes very successful and simultaneously becomes acquired. The extended commissions can be easily justified and in addition, can be spread forward in time.

At first glance, extended commissions from a double trigger clause result to the benefit of the manufacturers' representative only. Upon deeper reflection, the start-up supplier benefits also. Without a double trigger clause, large and established rep organizations avoid start-up companies because of the risk that they represent. Without the clause, a start-up supplier might be forced to select a rep from among a group of smaller and less established rep organizations. Inclusion of a double trigger allows start-up suppliers to add powerful manufacturers' representatives to its sales team. Such an addition increases the suppliers' chances for success.

Continue reading "Contractual Relationships Between Manufacturer Representatives and Suppliers" »

Whether or not to utilize a tax professional such as a Tax attorney is an important decision. Here are some things to consider:

1. Huge agencies. The tax agencies are massive organizations with many highly trained professionals on their side. Despite any hype to the contrary, they are there to collect taxes--not to provide independent counsel to taxpayers.

2. Tax return filings. Taxpayers are required to prepare and file their own tax returns. Even if the taxpayer is well educated and informed, the tax codes are vast and complex. Even tax attorneys struggle to keep up. Thus trying to prepare your own return is not a good idea unless it is very simple such as a wage earner with no special income or deductions. Even then it would be wise to utilize tax software.

3. Tax avoidance. Taxpayers have a legal right to arrange their affairs in such a manner to minimize tax liabilities. This is called tax planning or tax avoidance and is highly advisable for taxpayers that are self employed, have a high net worth or otherwise complex tax situations. There are many legal ways to reduce taxes such as charitable donations, tuition fees, savings plans, estate planning, asset depreciation and so on.

4. Tax evasion. Taxpayers are required by law to file tax returns, not cheat on the accounting and pay taxes due. Failure to do this could result in criminal proceedings for tax evasion. It would be very wise to engage an experienced tax attorney if the IRS is contemplating this route. Dealing with the CID (criminal investigation division) is no small matter.

5. Overdue taxes. The IRS (for federal taxes) and the Franchise Tax Board (for California taxes) are basically collection agencies. Once a tax return is filed with tax due, the tax agency collection procedures kick in to full gear. In a very short time, they will take very aggressive action to collect any taxes due including tax liens, bank account liens, asset seizure and wage garnishment. There are a number of remedies such as negotiating installment agreements and offer in compromise.

Taxpayers looking to solve tax problems would be wise to engage an experienced tax attorney. Steven Peck's Premier Legal has a tax attorney on staff servicing clients in the San Fernando Valley and all of Southern California. Premier Legal has the proven knowledge and skill to effectively represent taxpayers when dealing with the IRS or the Califoria State Franchise Tax Board. Please contact us toll free at 1.866.999.9085 for a complimentary initial consultation

The existence and the amount of the partnership liabilities are factors in setting the purchase price of the partner's interest. Deciding how to treat unknown liaibilities e.g.an asserted tort or breach of warranty claim, that cannot specificallly be taken into account in the valuation can be problematic. This problem is compounded by the fact that the decision on whether to indemnify against unknown liabilities must be made whrn the buy-sell agreement is drafted, perhaps years before any sale or liquidation of partnership interest occurs.

Assumption of the unknown liabilities by the remaining partners may result in windfall to the withdrawing partner. However the partnership also may benefit from future windfall profits, such as the award of large contract shortly after withdrawal when work on the contract had been in process before the partner's withdrawal or an unexpected increase in the value of fixed assets.

Continue reading "The Existence and Amount of Partnership Liabilities: California Business Law" »

Fannie Mae said Monday it may have to ask the government for more financial assistance because the company cannot sell $5.2 billion in tax credits.
The Treasury Department last week blocked the mortgage giant from selling about $2.6 billion in low-income housing tax credits to investors that included Goldman Sachs Group. Because the investors could use the credits to reduce their own tax bills, Treasury said the sale would result in a loss of tax revenue greater than the savings to the government.

Fannie Mae requested $15 billion in financial aid last week after reporting a $19.8 billion quarterly loss, bringing the taxpayers' bill for the mortgage company's rescue to $60 billion.

Fannie said in a regulatory filing that it was evaluating whether it would have to take a charge in the current quarter to reflect the value of the now-worthless tax credits. If so, Fannie Mae's net worth would be reduced by that amount, and it would need more money to shore up its balance sheet.

The Washington-based company and its sibling Freddie Mac were seized by federal regulators 14 months ago. Fannie and Freddie play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. Together, Fannie and Freddie own or guarantee.

Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced business attorney and please visit us on-line at www.premierlegal.org,

Even though the economy is still suffering and many small businesses won't be hiring for some time, some companies are thinking about taking on more workers. The question for many is, what kind?

Some business owners will hire full-time or part-time employees, while others will consider going the independent contractor route. Temps are another option.

Each kind of worker has its pros and cons. With an employee who's on the payroll, for example, an owner is responsible for salary, employment taxes and insurance that is required by law, such as workers compensation. At the same time, that employee may have more of a commitment to the company than other types of workers.

Here are the kinds of workers an employer should consider:

EMPLOYEES

An owner has the greatest responsibility for employees who are given staff positions. There are many federal and state labor laws to be aware of, and expenses like employment taxes -- Social Security and Medicare -- and workers compensation insurance to be paid. If the employee is laid off, the company ends up paying for some of the unemployment benefits.

But for many companies, hiring employees is the best way to build for the long term.

The temporary employee, meanwhile, is going to be clocking out at 5, and an independent contractor may be juggling jobs for other companies.

Anyone who has hired employees knows it can be an iffy proposition. When someone doesn't work out, there are issues about how to handle the dismissal, and the search for a successor can take time.

But with the right employee, a company has a chance to grow.

"The person is more readily integrated into the culture of the organization, which can have a hard-to-measure but real impact on the productivity of that person and those around him or her," said Jay Keegan, CEO of Adams Keegan, a Memphis, Tenn.-based human resources management firm.

INDEPENDENT CONTRACTORS

Many small business owners use independent contractors because they can be engaged for a specific project, which means different people for different jobs. And because these workers are self-employed, there's no need to pay the taxes and insurance that go along with a full-time hire. They also don't provide benefits to independent contractors.

Some small businesses ask employees they had to lay off to work as independent contractors. That can be a huge plus, since the worker is already familiar with the company, what it does and what its culture is like.

One of the downsides of an independent contractor is that a business could be competing with others for the worker's time and attention. On the other hand, if they like the work and the pay, they're likely to keep working with you.

There's also a tax caveat to be considered. Because companies don't need to pay employment taxes when they use independent contractors, the IRS is on the lookout for abuses in which a worker is called an independent contractor, but is being treated like an employee.

The key distinction between the two types of workers is control. If an owner has the right to control aspects of the job like the place of work and the hours put in, and if there is too much supervision of the worker, the IRS is likely to consider this an employer-employee relationship.

The IRS has information about the differences between employees and independent contractors on its Web site at www.irs.gov/businesses/small/.

TEMPORARY WORKERS

First, it's important to distinguish between someone you hire temporarily, and a worker who comes from a temporary staffing agency. Someone you hire for a limited time is still an employee under the law, and so you'll have to pay for taxes and insurance. Someone from a temp agency technically is working for the agency and so you don't need to pay that money.

Many companies turn to temp agencies so they can try out a worker before committing to a permanent hire. The worker also gets to give the boss a tryout.

And if the employee doesn't work out, the company doesn't have to deal with severance issues like unemployment insurance.

The minuses with temporary workers include the fact that they may not have the kind of commitment to the job as someone who knows the job is theirs. And co-workers may not work as well with someone who's here now but likely to be gone soon.

Temps can also be expensive, since you're paying fees to the agency. And if you decide to take the worker on full-time, you could be paying a fee in the thousands of dollars.

Continue reading "What Kind of Worker to Hire : Employee, Independent Contractor or Temporary Worker" »

Have you received a "personal and confidential" notice in the mail from the "debt resolution department" at a California law firm offering to help you restructure a debt. Does the letter urge you to call a toll-free number as soon as possible if you wanted to take advantage of the offer?

Such advertisements for debt resolution services are common these days, and government officials and consumer groups have increasingly raised questions about many of them.

In recent years, as consumers have gotten themselves into more debt, for-profit debt settlement, management and negotiation services have popped up to help those in debt lower their payments, interest rates or fees; extend the terms of their loan with new payment plans; or pay off the debt with a lump payment.

But often, according to the Consumer Federation of America, the firms ask for upfront fees without delivering their promised results or don't disclose what effect the services may have on credit scores or debt collector calls, misleading consumers and leaving them worse off.

"People are given false hope," says Steven Peck, a California business attorney located in Van Nuys, California. "The Federal Trade Commission is holding hearing related to the misleading of consumers concerning this issues" Peck says.

The proposed rules currently include bans on both taking fees in advance of successful results and misrepresentations about how the service works and what consumers can expect. The proposals would also require disclosure about service costs and time necessary to achieve results. In addition, the rules say the firms must tell consumers that they may still be contacted by debt collectors. The rules would apply to both sales calls from debt relief services as well as calls consumers make to such services in response to advertisements.

If you're in debt, instead of making such calls initially, it is recommended that you first contact your creditor to see if you can work something out yourself (ask customer service to be connected with someone who can help you renegotiate). "You may be able to resolve the problem yourself," Peck says.

If that doesn't work, check the National Foundation for Credit Counseling's Web site to find nonprofit members in your area who may able to help you determine if you qualify for a debt management plan that could help rework payments for a nominal fee. Such nonprofits are governed by federal legislation.

Finally, if a debt resolution service is your only option, Steven Peck suggests looking for firms that "charge based on success" or just charge a small fee. Also, check with a state or local consumer protection agencies to make sure that the service's advertisements meet any state regulations that may exist. To see if there are complaints about the firm, check with the local Better Business Bureau and sites like Ripoff Report.

Readers, how have you found ways to renegotiate or lower your debt?

As for notices received by clients' unsolicited in the mail, our offices called the firm to find out where the information about my debt came from. An operator and a debt manager I spoke with said it came from public records that might have inaccurate information and that we could just "shred" the notice if we didn't have the debt.

Be very careful of those "upfront retainers". Should you have any questions about debt renegotiation or other business law matters please contact Steven Peck's Premier Legal toll free at 1.866.999.9085 or contact us on-line at www.premierlegal.org.

Many many small business owners have not been able to get a small-business loans, and have walked the treacherous lines of relying on using credit cards and 401(k)'s to fund their businesses.

Business has gone well, sales are up, but they have been able to receive or acquire an expansion loan.

Complete frustration has set in, nobody is considering small business owners seeking loans so that they may expand their business.

The initiatives announced last week by President Obama, and a separate proposal this month by Sen. Mark Warner, D-Va., aim to fix such quandaries.

Warner wants to create a $50 billion loan fund for small businesses by taking $40 billion of the remaining Troubled Asset Relief Program money and adding $10 billion that would be raised from banks of all sizes. The president's plan would increase the top limits on Small Business Administration loans and provide lower-cost capital to community banks, credit unions and community development financial institutions. He's asked the Treasury Department and SBA to confer with Congress members, lenders and small-business leaders to determine additional steps to help businesses.

Many small-business owners and industry experts praise the proposals but say they are a little late in coming.

Until the latest proposals, the government has given TARP funds to major banks so they could be strengthened and help stimulate the economy.

But that just resulted in banks hoarding cash and providing an insufficient number of loans to small businesses, says Terry Brandt, executive director of Albina Opportunities Corp., a non-profit organization that provides entrepreneurs access to capital. Community-based lenders have been shortchanged in the process, he says, even though they are the primary source of most small-business loans.

And while much of the attention has been on SBA loans, which are primarily for business expansion, most small-business owners need a short-term line of credit to pay for contracts and workers, says Todd McCracken, president of the National Small Business Association.

"That is where the biggest crunch seems to be right now," he says. And those revolving lines of credit traditionally come from a local bank. Warner says that his plan could be used for short-term bank financing that can fill the gap until the market recovers.

James Daigle, a small-business owner of Sports Systems Services in Fort Lee, N.J., says that he has been laughed off when he has asked banks for a line of credit. But he needs working capital for day-to-day operations and to hire five more people. He says he needs it right now.

Warner says he understands such urgency. "We've got to move quickly," Warner says. "This is something that is a real time problem for small businesses across America."

Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced small busines lawyer and visit us on-line at www.premierlegal.org.

President Obama said that he will shift spending of the government's multibillion-dollar financial bailout away from large financial institutions and toward smaller banks in an effort to bolster small business, which he says forms "the backbone of the American economy."

Speaking at a family-owned storage business in suburban Washington, Obama said smaller financial institutions are in greater need of capital to grow and expand -- and that the country's large banks have moved past their need for what's left of the $700-billion Troubled Asset Relief Program.

"The major banks that were in critical condition a year ago need no new assistance from the government," Obama said, "and so we are winding down that portion of the TARP program."

In order to spur lending to small businesses, he said, it is "essential that we make more credit available to the smaller banks and community financial institutions that these businesses depend on. These are the community banks who know their borrowers, who gave them their first loan, who have watched them grow from down the street, not from Wall Street."

The shift comes just more than a year after Congress approved the bailout; the fund has about $138 billion left to dole out. The U.S. Treasury will decide how much of that should go to smaller financial institutions by the end of the year after talking it over with community bankers around the country.

The amount of money still on hand is enough to significantly boost lending to small business, a senior administration official said today.

In addition to the shift in bailout spending, Obama is asking Congress to increase the maximum size of Small Business Administration loans, including those designed to encourage them to invest in machinery, equipment, land and buildings and to expand their payrolls.

Increasing the maximum loan size of so-called micro-loans to $50,000 from $35,000 will help start-up companies in particular, administration officials predict.

"America's 29 million small businesses have been hard hit in this recession," Small Business Administration chief Karen Mills said. "Increasing maximum loan sizes will allow the SBA to ensure that more small-business owners and entrepreneurs can get access to the credit they need to expand their operations and create jobs."

Continue reading "Smaller Banks to Receive Troubled Asset Relief" »

An attorney who is asked to represent more than one party to a buy-sell agreement must address certain fundamental conflict issues that arise in all joint representations. these issues concern the idenity of the conflict, its suitability for waiver, and the procedures for establishing a valid waiver.

A critical initial step in representing any client is to consider whether a conflict of interest exists. In most buy-sell situations, it is unlikely that there will be a complete absence of conflict.

For example, a disparity in the ages of the partners or shareholders or in their individual net worth could significantly influence the structure of the buy-sell agreement. Simiarly, disparate funding obligations of buy-sell terms for the shareholders may lead to a conflict.

If a conflict does exist, the attorney must determine whether the conflict can be resolved by obtaining the written consent of one or more of the parties. Under the proper circumstances, having a single attorney represent multiple parties may result in a simpler transaction, reduced legal fees, and certainly a more harmonious relationship than if each party is in fact represented by separate counsel.

Continue reading "Joint Representation: Buy-Sell Agreement Waivers by a California Business Lawyer" »

New data suggest that foreclosures are rising in more expensive housing markets.

About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.

The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.

The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.

Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties. Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% last year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year.

The prime category includes so-called exotic mortgages that were increasingly used to buy more expensive homes, including interest-only mortgages that allowed borrowers to defer principal payments during an initial period. Borrowers often aren't able to refinance out of these products because the drop in home values has left them with little equity in their homes.

Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments.

Continue reading "Foreclosures are Rising in the More Affluent Housing Markets" »