Posts in Court Practice
State or federal court?

Clients often ask whether it's better to file a lawsuit in state or federal court.

The answer is that, "It depends."

In plaintiff side employment cases, California law under the Fair Employment and Housing Act is more generous to plaintiffs with respect to certain types of damages claims than under Title VII, and sometimes it may be beneficial to file a claim in state court. 

State court judges are also considered to be more "plaintiff friendly" than federal judges, but I would hesitate to characterize state judges in such a broad manner.

In defense work, it is true that we try and look for ways to remove a case to federal court. 

Sometimes, the laws at issue require a specific venue. In copyright cases, for example, federal law requires that a federal court hear the claim. 

Federal court tends to be cheaper than state court, and because it is better funded, it is generally more organized. But judicial officers in both systems care more about the strength of the claim than anything else. And of course, whether they will be overturned on appeal.

Settling shareholder disputes through shares

We've seen an uptick in our practice of disputes between founders, or disputes between consultants and early stage Companies. Many of these disputes involve the number of shares that each party thinks is "fair" for service that has been provided.

In startups, cash tends to be more precious than equity, although later in a Company's lifetime the opposite becomes true. Still, with cash an almost sacred commodity, a Company can consider solving these disputes through issuance of equity. There's nothing wrong with settling a dispute and providing equity to people who may have claims against the Company.

In doing so, however, a Company should still make sure that it is complying with securities rules when it issues shares, particularly if it has not issued shares in the past to the other party, or is relying on a different exemption to do so. Companies are still required to comply with securities rules even if they are using shares to settle a case, instead of to raise finance.

Individuals who are receiving equity from a Company should do all necessary tax diligence to avoid phantom tax with respect to the value of the equity they are receiving. 

Of course, avoiding a dispute is best. Companies and individuals can do this by putting everything in writing and making sure that discussions about equity are crystal clear. This is easier said than done; but, assuming a professional resolution, a small amount of equity to restore harmony (and more importantly to obtain a release of claims and preserve intellectual property) isn't the end of the world.

Comar Law frees prisoner sentenced in 2004 to 54 years to life

Comar Law is pleased to announce that it has freed Raymond Lee Zimmerman, a Californian sentenced in 2004 to 54 years to life.

Originally sentenced under California’s draconian “Three Strikes Law,” Comar Law was court appointed to help secure Mr. Zimmerman’s release under Proposition 36, also known as the Three Strikes Reform Act, passed by the people of California in 2012.

The trial court conceded application of the Three Strikes Reform Act, but refused to provide full conduct credit to Mr. Zimmerman, reducing his term from 54 years to 18 years and 8 months.

In June of this year, the Court of Appeal agreed with Comar Law that Mr. Zimmerman was entitled to full credits for time already spent in prison. Mr. Zimmerman was ultimately released on October 30, 2014, decades before his initially scheduled release.

Californians have decided that certain non-violent offenders should not be subject to the Three Strikes Law and deserve a second chance. Comar Law is grateful to have played a role in securing the release of one such offender, particularly in time for the holidays

Tips to protect Company trade secrets

[The following is not legal advice and should not be relied on as such]

The heart and soul of many Companies are their trade secrets (think the Coca-Cola formula, a proprietary algorithm, or even customer lists and other sales/consumer data). Here are five things every Company should think about regarding trade secrets and trade secret protection:

(1) Trade secret law is governed at the state level. Most states have adopted some formulation of the “Uniform Trade Secrets Act,” which, in general terms,  requires that trade secrets be (1) kept secret and (2) provide economic value to the Company on account of the secrecy. However, some states have not adopted the Uniform Trade Secrets Act, including New York. Companies engaged in possible disclosure of trade secrets should check local law to make sure that the disclosure complies with trade secret law in that jurisdiction, so that trade secret protection is not lost.

(2) Assuming the Company is compliant with trade secret law, trade secret protection is generally indefinite. Thus, Companies should consider their intellectual property strategy with respect to their proprietary data and decide which of their confidential information may be appropriate for public disclosure in a patent application that may eventually expire after the term of the patent, and what is more appropriate for private, indefinite use.

(3) Companies that wish to disclose trade secrets (for example, to a potential investor or strategic partner), should always sign a tight non disclosure agreement to ensure that any trade secrets disclosed will be kept secret by the other party. Absent an NDA, such disclosure may result in the loss of trade secret status.

(4) Companies should ensure that their employees and independent contractors do not walk away with Company trade secrets when they leave, or inadvertently disclose the trade secrets upon departure. Best practice in this area includes doing an exit interview with departing employees to ensure they will comply with any confidentiality obligations, and to discuss what the Company considers proprietary and particularly sensitive.

(5) Companies that believe an employee may have walked away with trade secrets must take affirmative, immediate steps to contain the damage, or else they risk permanently losing trade secret protection over what was taken. Companies, for example, should seriously consider seeking a permanent injunction if they fear trade secrets have been taken or potentially disclosed, which is a court order prohibiting any further disclosure. In California, where non-competes are almost impossible to enforce and are generally void, employees can work for competitors immediately after departing a Company; in such situations, it is critical that Companies restrict access to shared proprietary data (such as data in DropBox or Box folders, email accounts, Google Drive accounts, etc.) immediately after an employee departs. Companies should be wary of, and police for, employees who begin to access such materials after departure.

Avoiding mistakes with California's harassment laws

[The following is not legal advice and should not be relied on as such]

Companies in startup, expansion and consolidation phase need to comply with state and federal laws with respect to harassment and discrimination in the workplace. While state laws vary, California’s Fair Employment and Housing Act (“FEHA”) provides a robust set of protections for employees who work in California.

The FEHA prohibits discrimination and harassment on the basis of several protected classes, which includes race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age or sexual orientation. Cal. Gov. Code sections 12940(a), (j)(1). It also explicitly covers discrimination the basis of “military and veteran status,” “genetic information” and “gender expression”. Cal. Gov. Code section 12940(a).

In many respects, complying with harassment and discrimination laws is a matter of common sense, but as the old saw goes, sometimes common sense is not so common. Here are some practices companies can take to mitigate exposure to harassment and discrimination claims.

Put in place an official policy to prevent harassment and discrimination and distribute it to all staff. The policy can be part of the employee handbook, or it can be separately distributed. The policy should describe what an employee should do if they feel that there is harassment or discrimination in the work place, and how to report it.  Proof that an employee failed to take tangible steps to utilize a Company’s complaint procedure may limit a Company’s damages in any harassment claim. Faragher v. City of Boca Raton (1998) 524 U.S. 775, 807; Holly D. v. Calif. Inst. of Tech. (9th Cir. 2003) 339 F.3d 1158, 1177.

The absence of any such policy can work against a company as it may permit an employee to sue on the basis that the Company failed to take reasonable steps to protect him or her from the alleged harassment. Cal. Gov. Code section 12940(k).

Cultivate a mature work place where people feel respected. Work provides dignity and it should be a joy for employees to come to work, learn something new, and earn a living. Part of why harassment and discrimination claims become ugly is because people feel really hurt when the work place is uncomfortable or when they feel disrespected.

Make the workplace zero tolerance for harassment or discrimination. Having litigated both plaintiff and defense harassment cases, we’ve seen both extremes: plaintiffs with very weak cases who blow out of proportion their experiences, and on the other hand, defendant companies that are careless and irresponsible with respect to their legal duties. Companies should study federal and state obligations and ensure proper compliance just as they would with securities or other financial compliance. Under California law, supervisors can be held personally liable (in addition to the Company’s exposure) for failure to prevent harassment, and an employer will be strictly liable for any harassment done by a supervisor. Hope v. California Youth Authority (2005) 143 Cal. App. 4th 577, 588-589.

Do what you can to settle disputes early. Litigating harassment and discrimination cases takes a toll on both sides. They are oftentimes emotionally involved, and litigation can go on for at least one or two years. Plaintiffs and defendants are well advised to try and mediate cases out early. As part of their employment contracts, companies can also insert mediation and arbitration clauses requiring that such disputes be settled quickly and confidentially. Cal. Civ. Proc. Code section 1281.1, 1281; 9 U.S.C. section 3; AT&T Mobility LLC v. Concepcion (2011) 563 U.S.321

Five tips towards a successful mediation

Mediation is a conflict resolution technique whereby parties are joined by a neutral mediator who helps the parties work towards a negotiated settlement.

The mediator typically uses his or her expertise in the area of law, combined with the art of persuasion, to help the parties resolve their dispute. Unlike an arbitrator or judge, a mediator has no power to resolve the dispute him- or herself without the consent of the parties.

Many contracts insist on mandatory mediation prior to the filing of a lawsuit or notice of arbitration. This is because a mediation gives the parties some measure of control over the outcome of the dispute.

If the dispute is not too emotional or contentious, it may provide a measured way for the parties to resolve the dispute at minimal cost, and without needing to file a lawsuit.

Here are five tips to ensure a successful mediation:

1) Prepare a mediation brief that advocates your story. Mediation is meant to be conciliatory, but it is also an opportunity to tell the mediator your side of the story. Treat the mediation brief as an exercise in advocacy. There should be an objective recounting of the facts, followed by citations of law that support one’s position. A robust mediation brief will help the mediator understand where the parties agree and where they disagree.

2) Be prepared for different styles of mediation. Some mediators like the parties to be in the same room, while other mediators prefer “shuttle diplomacy” where they take offers back and forth. A mediator’s style is highly personal and is designed to put pressure on the parties to settle.

3) Remember that mediation is a process. People can and should use the mediation process as a way of telling their story to a neutral third party and receiving feedback about what happened. The process itself can be empowering, as it permits the parties to directly take control of the case and the outcome.

4) Be prepared for a long day. Sometimes it can take hours for a mediation to be successful. Progress can be slow, particularly if the parties are far apart at the beginning of the day. Key breakthroughs often happen at the end of the day when the parties are tired of the process but don’t want to lose the progress they’ve made. Fatigue can be a powerful ally in reaching a settlement.

5) Be prepared to hold your nose. The result of a successful mediation should be a settlement, and like all settlements, it may not be exactly what you want. Parties should be prepared to give and take with respect to their position. Figure out what your absolute “bottom line” is – which may be very different than your preferred or expected outcome.

Mediation is not magic. The parties have to want to settle, and they will have to be willing to be flexible regarding outcome. But if they can do these things, they may discover that mediation provides them with a good way to settle the case