The Unromantic Side of Marriage

When we heard about Kobe and Vanessa finally splitting up, it was inevitable that we’d hear about how Kobe “foolishly” didn’t require a pre-nup. But how do you blame a 21 year old-straight-into-the-NBA-circus-out-of-high-school who is in love with a high school senior? You can’t. Call it naivete or immaturity. . .or even romance. Call it hard-headedness – a trait Kobe is known for. But it’s tough to call it “stupid.” It was the first year of his new contract where he jumped from $1.3M to $9M a season. Life was good. He was marrying his “college” sweetheart and the last thing he wanted to do was ruin the moment by saying, “honey, I love you, but I don’t see us lasting forever, so sign this.” What 18 year old high school doe-eyed relationship idealistic girl isn’t going to storm off or hold it against him for the rest of their relationship? And so, Vanessa gets half.

This is probably a common result with many who are afraid to broach the pre-nup subject. Obviously, life and wisdom teach us that such prudence may be necessary and it’s generally accepted when large sums of previously-acquired income and assets are involved.

But let’s talk about powers of attorney. These are prepared not at the beginning of a marriage, but typically after the first child is born and the first house is purchased. For those of you who aren’t sure what POAs are, there are essentially two types: medical and property. The first allows someone to make your health decisions when you are unable to do so due to physical, mental or emotional incapacity. (This is NOT the advanced directive which guides someone as to whether or not to terminate your life and what to do with your remains.) The second gives someone control over your property. This power is so great that clients are cautioned to be very careful who they pick as their attorney-in-fact for such necessary times because the designee can do anything with your property, depending on the extent to which the power is granted.

An interesting debate popped up between a colleague and me last week when we discussed the “triggering” event that gives someone power. See, POAs can either be effective immediately upon execution (aka “durable”) or upon incapacitation (aka “springing”).  In most situations, married couples are going to designate each other. Seems innocuous enough. And typically, people are cautioned to select their back-up agents with care. But let’s delve into the unromantic question of whether or not one should consider not blindly trusting his or her spouse.

When I prepare POAs for clients (they’re part of the trust preparation package), I always prepare them as springing. Why? Because I don’t trust anyone. Conversely, my colleague always prepares them as durable. Why? Because he has only done them for married couples and he believes in the sanctity and preciousness of marriage and all that is good and intended. He ignores the fact that many marriages don’t make it to the end and that you just really don’t know what’s going on behind closed doors. Now, I don’t mean to sound like I’m mocking marriage or my colleague because I believe there are plenty of marriages where trust is never in question. In fact, I have many friends with whom I know will be on the happy side of the 50%. That said, I’ve been around the block enough to know that both men and women cannot be trusted regardless of marriage and regardless of religion.

Exhibit A: I know several good “Christian” husbands who have a certain similar behavior that cost Tiger Woods at least one tooth and a 5-iron.

Exhibit B: I’ve heard plenty of stories of wives stepping out on their husbands and planning their moves with precision…biding their time.

The moral: People get in ruts. The original flame sometimes dies. Why risk it?

Okay, these two are probably going to go the distance.

Still, my colleague insisted that his couples would never use an active POA to do harm to the other. Bless his heart. The only problem is that by the time the ‘victim’ spouse learns of the abuse of power, it’s too late. Either the other spouse is gone or the funds are. And how many couples sit down and look at their accounts and investments together, and regularly? Sadly, most don’t. They set something up and let it sit forever assuming everything is just fine.

Well, I just dealt with a couple where Husband was stepping out on Wife. And their money (half of which is hers) has been disappearing over time. It was time to take steps to protect Wife. A quick look at the POAs they signed 20 years ago indicated that Husband could have done a lot of damage to Wife’s interest because the POA was valid immediately upon signing. I’m sure the attorney who prepared the trust and POAs had the same optimism and attitude as my colleague, but I shudder to think what kind of damage Husband could have done had he simply read the POA at any time. Based on the specific powers granted, he could have transferred the home into a new trust and then encumbered the home, fleeing with hundreds of thousands of dollars. He could have squandered her separate property which she inherited from her parents. And what if she owned 50% of his shares in a company? He could have fixed her real good. I could have been dealing with a very different problem. Luckily, the family caught him taking a smaller, but still large, sum of money from the wrong account to give to a woman with no shame (she’s half his age).

Now, how to turn this lemon into lemonade? Since Husband has been incapacitated for the past few weeks, we were able to exercise his POA and protect (move) all the remaining assets for his own good and for the good of Wife’s community property interest (not everything was placed into their trust so she couldn’t exercise her co-trustee powers over some things).

Corny, I know. But it's pretty much how it went down.

This is going to turn out okay and, admittedly, the threat is an anomalous one (and hopefully I didn’t just give a bunch of people ideas). Still, when it comes to the pursuit of the fairytale marriages, there’s nothing wrong with exercising a little prudence. The difference in exercising the springing power versus the durable one is negligible and it will save the world from a whole lot of evil-doing.

Happy Planning,

Bill

Why You and Your Attorney Need to Pay Attention to Your Termination Clauses

I just read about how the three-year old Women’s Professional Soccer league has decided to postpone its 2012 season because someone allegedly didn’t read the franchise agreement when they kicked out the owner of magicJack (not the Emilio Estevez movie similarly titled Freejack, but the long-distance phone price-saving device). It didn’t have to go this way. There was a protocol set in place for addressing disputes and, according to a Florida judge, the WPS didn’t follow it.

Apparently Dan Borislow, magicJack owner, is a real jerk and a terrible owner. He allegedly treats his players horribly and doesn’t pay his franchise bills. Why he wants to continue to own the team makes no sense to me (I’d say the same thing about Donald Sterling, but the Clippers are finally for real). But, a contract is a contract. And somebody got bad advice or took good advice and swiftly ignored it.

This is why you have to really think about some of those terms you're signing

I imagine the conversation went something like this:

-WPS board: “Hey, lawyer, we hate this guy and want to get rid of him. Can we? Well, I know we can, but can we just, you know, fire him?”

-Lawyer: “I need to see the contract. Because even though you might think we lawyers are omniscient, I need to see if there are any well-placed commas or “ands” instead of “ors.”

-WPS board: “Here you go. It says something about us having to go through mediation or arbitration. Do we have to?”

-Lawyer: “Yes, I see it here. You’ve agreed to go to mediation first and he will have 30 days to agree or not. If not, you can then file immediately for arbitration. Or, if you have some claims that lie outside the contract, just file in court.”

-WPS board: “30 days?! We don’t want to have to wait. Can’t we just get rid of him now? Even if we go through some type of dispute resolution, we simply want him gone. What if we get rid of him and then dispute any money matters after the fact.”

-Lawyer [wanting to tell client what he thinks they want to hear]: “Well, you could do that. He probably won’t fight it. I mean, if he knows he’s not wanted, why would he want to stick around [ignoring any history about this guy’s behavior so far and apparently never dealing with a multi-millionaire before]?

-WPS Board: “Okay, so we don’t have to follow this contract we paid thousands of dollars to have drawn up and then fought over with other owners before finally signing?”

-Lawyer: “Well, I wouldn’t go that far, but it’s possible your strategy of not following this dispute resolution protocol will allow you to play the 2012 season and avoid dealing with this snake oil salesman.”

Without having access to much about the dispute, I can only guess that the reason for not following dispute protocol was a matter of getting the season underway without magicJack and that there wasn’t enough time to follow the contract. Oftentimes, this can work. But more often than not, in litigation, someone’s going to point out the protocol and insist on it. I think almost every time I attend court for a hearing, there’s always a status conference involving someone trying to enforce an arbitration clause. So that tells you something.

I’m reminded of a recent dispute with a construction client of mine. The owner stopped paying before the job’s completion and the client wanted to terminate. Without boring you, it’s pretty easy to walk off the job for non-payment, but there are protocols to follow if you want to avoid being bogged down by unnecessary defenses. As it turned out, the particular contract used included several particular notice and timing requirements where the owner had an opportunity to cure the defect or lack of payment. One included requesting assurance of the ability to pay in the future.

The problem? My client was dead set on terminating without giving the owner a chance to cure such that my client might be stuck finishing the job.

I wanted to be able to tell him, “just leave.” But that would have been irresponsible. I could have told him it was a strategy that might work and it would be the fastest way to end the relationship. However, it also would have been a trap-filled path to take. My prudence paid off. The owner has disputed some of the claims and asserted some claims of its own. But it can’t avoid its failure to provide the financial assurance. My client is free to terminate. I’ve also secured my client’s right to claim lost profits, which he wouldn’t have necessarily been able to do had he not followed the protocols for terminating.

Yes, there was a risk that the extra seven days might have resulted in a longer termination process. But in this case it worked out. Now, consider if we had cut some corners on this. When this case becomes a lawsuit, we wouldn’t have been able to rest on our compliance with the contract.

And look out for those mediation clauses. Sometimes, a party forfeits attorney’s fees they could have received had they followed the contract protocols and proceeded with mediation first.

Here's one way to teach Borislow a lesson

As for consequences, consider a 5-team women’s soccer league that has managed to survive for three years having to cancel a season and all of those players losing their salaries. Way to go magicJack.

~Bill

Did Online Texas Hold ‘Em Just Get a Favorable Flop?

Several years ago, I had a love-hate relationship with Internet poker. I loved the ease of playing in the comfort of my own home and the way that I was pretty good at winning early rounds in tournaments or other low-buy-in games.  That said, I hated that there were cheaters using bots or different wi-fi cards so that they could conspire against us honest players. I also hated that my money was held offshore and my own bank wouldn’t honor my meager payout check because it was from some bank in the Bahamas. But while I have my own trust issues with who’s on the other side, I like the idea that people can play online. The old school form of playing has been modernized by faster play and more aggressive strategies as evidenced by the great Doyle Brunson’s failure to keep up anymore (sorry, Doyle).

Then came the Department of Justice (“DOJ”) to shake down several poker websites earlier this year on April 15th on a day known as poker’s “Black Friday.” In addition to bank fraud and illegal gambling, the DOJ accused these sites of “money laundering,”  in order to skirt the laws against interstate and inter-continental gambling. These companies are currently being prosecuted and accounts were frozen.  The worst part? Companies like Full Tilt Poker held onto money, refusing to pay many of its customers. It got so bad that several pro players sponsored by Full Tilt actually refused to play in headline tournaments as a form of protest for this practice. Meanwhile, other pro players are right in the middle of it all where $300 Million has gone missing (paid out to the owners/investors) that belongs to customers like you and me. High Stakes Report has done a great job providing a historical timeline through September here.

Chris "Jesus" Ferguson is one of the accused. Innocent pawn or diabolical schemer?

So what at first appeared to be the government’s attempts to shut down “illegal gambling” appears to be more geared at preventing money laundering, bank fraud and outright theft against consumers. And this has been supported by the DOJ’s Christmas present to the world of online poker….sort of.

In a letter two days before Christmas, the DOJ responded to inquiries by Illinois and New York to use the Internet for lottery ticket sales that are technically conducted across state lines. Since lotteries are huge revenue-gainers for states, the DOJ had an interest in supporting interstate Powerballs which provide payouts to people in any number of states (customers purchase in their own state, which apparently matters).

But for those of you non-lawyers and politicians, the DOJ also set a precedent that will help legalize online poker. The actual wording of the Wire Act prohibits “information assisting in the placing of bets or wagers on any sporting event or contest [referring mostly to horse racing and things like football].” Online poker involves betting in the game. Yes, that one preposition makes all the difference.

The other boring lawyer/legislator stuff is that our country has a system where states are permitted to pass their own laws on certain subjects where the federal government must acquiesce (you may be familiar with the perennial topic of abortion and whether or not it should be a states issue versus a federal one).  Anyway, both Nevada (of course) and Washington D.C. have legalized intra-state gaming where no federal law exists at this time to cause a conflict of laws.  So, in short, what’s good for the lotto is good for poker.

Consider that the Wire Act is really designed to prevent Bugsy and his gang of racketeers from engaging in illegal sports-booking and money laundering overseas. Trust me, Congress is moving toward legalizing online poker because there is so much money to be made and our states and fed need it. And, luckily, we even have a few leaders who actually care about the consumer and want better laws to protect them.  So, what the DOJ did was to draw a clear box around what is illegal so that states, businesses, and customers can act accordingly. Another great article for those of you who like how bills become laws is one by Professor I. Nelson –an internet law guru in our own backyard– found here. I’ll cut to the chase: it’s about whether or not the federal leadership can take credit for creating one-law-for-all or if it will be left to each state.

Sorry, Barney, but the states may take the wind out of your sails.

The good news is that internet gambling took a huge step in being legalized with laws designed to protect us from dishonest people using offshore accounts to steal from us. The bad news is that I still don’t trust that the system is cheater-proof sufficient that I’m willing to play with any real money.

Happy (Responsible) Gambling,

Bill

Best (Worst?) Lawsuits of 2011

I’ve never checked the stats, but I have to guess that a million lawsuits a year are filed in the U.S. Okay, I just checked and it’s something like 20 million. A lot of these are necessary for things like divorce cases, probate cases and things like that. Most, however, are more along the lines of “I’m mad at you for something and I’m going to sue you for it.”

Since I represent some of these people and businesses, I can tell you that many claims are legitimate. Someone did work and didn’t get paid, but then claim that the first guy’s work was somehow defective. Somebody lied about his intent for using undeveloped property and now they’re trying to take advantage. Some employee was fired in a discriminatory manner. Sometimes, it’s just part of the process of collecting against someone and those take up very little court time.

Well, thanks to the wonderful world of Twitter, somebody took the time to find the most ridiculous lawsuits of the year. In the good old days of law school, these kinds of claims set precedents to help forge our civil laws today. Now, the impact is less, but there’s still a chance some type of liability may be held against a company or person. This is why there’s so much legalese on everything. Yes, it annoys me, too.

So with credit to FacesOfLawsuitAbuse.Org, I give you some of the craziest lawsuits filed in 2011:

• -Young adults sue mother for sending cards without gifts and playing favorites (read story)
• -Man suing for age discrimination says judge in his case is too old (read story)
• -Obese man sues burger joint over tight squeeze in booths (read story)
• -Woman sues over movie trailer; says not enough driving in ‘Drive’ (read story)
• -Mom files suit against exclusive preschool over child’s college prospects (read story)
• -Man illegally brings gun into bar, gets injured in a fight, then sues bar for not searching him for a weapon (read story)
• -Passenger’s lawsuit says cruise ship went too fast and swayed from side to side (read story)
• -Woman disagrees with store over 80¢ refund, sues for $5m (read story)
• -Mother sues Chuck E. Cheese – says games encourage gambling in children (read story)
• -Convict sues couple he kidnapped for not helping him evade police (read story)

Trust me lady, your cruise could have ended up a lot worse.

You should recognize the Chuck E. Cheese case from one of my earlier blogs (no update, yet). But, look at some of these.  I’d have to say my favorite is either the woman suing for misleading movie advertising (someone has to start holding these producers accountable) or the guy who sues the bar for not protecting him from his own dangerous self. You laugh, but this is exactly why some of your kids no longer get to play dodge ball on the blacktop.

Seriously, this was my son's playground during lunch thanks to lawsuit fears. But they were allowed to play butt's up with a racquetball...

As for the criminal in Kansas who sued the couple for breaching their agreement to help him evade the police, I leave you with this lesson: Illegal contracts are unenforceable. So if you make an illegal bet on this weekend’s game and your buddy doesn’t pay up, don’t think you can win that case, even though you have a 1 in 3 chance of finding an attorney who would actually file the lawsuit for you.

12/29/11 UPDATE: So apparently the winner by some reader vote somewhere was the criminal who sued his captors for not helping him evade police.  That’s probably what I would have voted for.

Looking forward to seeing what’s in store for the 2012 court dockets,

Bill

Beyond a Reasonable Doubt?

As the resident legal blogger, even though I’m not a criminal attorney, I feel compelled to comment on the jury’s verdict in the Casey Anthony case. While this happened in that other Orange County, the case has pretty much captivated a large portion of the population if FaceBook and Twitter are anything to go by. For those of you who live under a rock or simply don’t care about sensationalized court cases (especially after the OJ trial), today the jury acquitted Casey Anthony of the charges of killing her 2-year old daughter Cayley, either intentionally or negligently,  and also of any child abuse.

I don’t need to be the 100,000th person to write the prevailing opinion of the masses: “What a travesty our justice system is!” “That *&#$* got away with murder!” and so on…

Personally, I think she did it. I think her behavior (as submitted) and pathological lies are evidence enough, based on my experience with human behavior and, unfortunately, pathological liars. But I wasn’t on the jury. Twelve others were. And the thing I find most interesting is the jury vote: 12-0 as to each of the three major counts. 12-nothing?!

Now, when I looked at the jury pool yesterday, I saw a few biographies that made me assume Casey would have some support in the room. So, I knew Murder in the 1st was going to be tough to secure. But aggravated child abuse and aggravated manslaughter? I thought for sure she’d be found guilty on one of these counts. The mere fact that one of Cayley’s post-deceased hairs was found in Casey’s trunk, the tape on over the mouth, and the confirmation of the death smell by several witnesses, including her own father, suggested Casey did something wrong.  But, clearly there were gaps that needed to be filled.

I even heard myself utter “uh oh” during Prosecutor Jeff Ashton’s closing argument when he said, “somebody in that house killed Cayley.” Yep, someone most likely did because that’s usually how murder goes . . . it’s someone close. But, he left the door wide open to reasonable doubt, or rather, he didn’t, but the facts did. For the record, I thought Ashton did a great job pointing out that only one person had something to gain by Cayley’s death. So, if we assume somebody in the house killed Cayley –accidental or otherwise– it was likely Casey.

But, 12-0. That’s a pretty resounding vote. What that tells me is that the prosecution was simply unable to connect the minimal dots they had available with all of the circumstantial evidence. Now, I don’t think Jose Baez was anything special and found him bumbling a lot during examination and cross-examination, oftentimes threatening his own defense. But, as he stated on Sunday, he didn’t have to present any testimony in Casey’s defense. It was up to the prosecution to prove beyond a reasonable doubt that Casey was guilty of the crimes being charged. And, according to the unanimity of the jury, they did not. If you remove your prejudices and desires for justice, and simply look objectively at what was presented to the jury, there was enough for them to vote either way.

We know Cayley died. We know some bad things happened. But we also know that the Anthony house is a den of liars. And that gives me enough doubt to wonder what the heck actually happened?! I trust Cindy’s hysterical phone call that she didn’t know anything. I also trust that she lied when it was convenient to protect her daughter. And brother Lee probably was as clueless as he appeared to be. So that leaves George, Casey and any number of cohorts (consider who she partied with) who may have done something stupid. So was it intentional or accidental? There’s limited evidence.

Liar, liar...

I agree with the prosecution that there is absolutely no reason to put three pieces of duct tape over a child’s face, but does that get me to intentional suffocation? Personally, yes, but I don’t expect everyone to agree with me. And the chloroform that was detected? I heard all kinds of testimony. I don’t now who to believe. I know who I wanted to believe.

But the bottom line is that nobody in the jury felt convinced by any sequence of evidence. And that speaks volumes about the case. Basically, they said, “I’m not putting someone away for life based on at least ten assumptions.” I respect the jury for that and I respect the system. I considered that if Casey had a life insurance policy on Cayley, the jury might have been convinced to vote guilty since other juries seem to convict for murders without a body based on much less evidence while factoring in greed. The “money” in this case was Casey’s independence and the thing she was greedy for, but the jury didn’t see it the way I would. And that, in my opinion is too bad.

I do believe the system works, but I also believe it has inherent flaws. Here’s a case where someone managed to stall and spoil the evidence long enough to make the prosecution’s job of proving the case beyond a reasonable doubt very, very tough. And I hate to say it, but we live in a world now where almost anything can be thrown out there and will stick as “reasonable.” Consequently, it doesn’t take much for 12 people in a vacuum to decide that plausible = reasonable doubt.

If only this was a Law & Order episode. . .

Jack McCoy plays every card...

Then Jack McCoy would press charges against the parents and Casey would come running with a confession (before double jeopardy kicked in). But, who am I kidding? A sociopath wouldn’t come to the rescue of anyone.

But, I digress. I’d like to see someone write a book entitled, “12-0″ because that’s the one thing that keeps me level-headed about what was, yes, a travesty today.

Keep the Faith,

Bill

Mom v. Mouse

Here’s a fun one.

It seems that Denise Keller, the mother of 3- and 5-year old kids decided she’d had it with cardboard-like pizza, a handful of broken games (guaranteed at the Costa Mesa location), and a 35¢ return on $10 worth of tokens.  But instead of boycotting Chuck E. Cheese’s, like most of us did, she sued them.

In a federal class action suit filed in the county just south of the OC, Keller and her lawyer, a 15-year law veteran, read California Penal Code § 330(a) and (b) and figured out that some of the games may just be considered gambling devices.  When a colleague posted the headline, I read responsive posts of “I hope that lawyer gets sanctioned for filing a frivolous lawsuit” and other statements about how unethical this suit is.

Now, I’m not going to go into what’s required in a class action this time around (but that post is coming).  But, I will say that it may be difficult to find the class of people who can prove they purchased tokens and then played those specific games listed in the complaint (Thunderation, Wheel of Fortune, Deal or No Deal, made the list).  I’m thinking the CSI crew may need to confirm finger prints.

All kidding aside, before passing judgment on my fellow shark, I decided to read the Penal Code section to see how he could possibly have thought this was a case that could pass muster.  I mean, Chuck E. Cheese’s has been around forever.  So have places like Dave & Buster’s.   Well, just to give you a feel for what we lawyers get paid the big bucks to draft, get a load of this:

(a) Every person, who has in his or her possession or under his or her control, either as owner, lessee, agent, employee, mortgagee, or otherwise, or who permits to be placed, maintained, or kept in any room, space, inclosure, or building owned, leased, or occupied by him or her, or under his or her management or control, any slot or card machine, contrivance, appliance or mechanical device, upon the result of action of which money or other valuable thing is staked or hazarded, and which is operated, or played, by placing or depositing therein any coins, checks, slugs, balls, or other articles or device, or in any other manner and by means whereof, or as a result of the operation of which any merchandise, money, representative or articles of value, checks, or tokens, redeemable in or exchangeable for money or any other thing of value, is won or lost, or taken from or obtained from the machine, when the result of action or operation of the machine, contrivance, appliance, or mechanical device is dependent upon hazard or chance, and every person, who has in his or her possession or under his or her control, either as owner, lessee, agent, employee, mortgagee, or otherwise, or who permits to be placed, maintained, or kept in any room, space, inclosure, or building owned, leased, or occupied by him or her, or under his or her management or control, any card dice, or any dice having more than six faces or bases each, upon the result of action of which any money or other valuable thing is staked or hazarded, or as a result of the operation of which any merchandise, money, representative or article of value, check or token, redeemable in or exchangeable for money or any other thing of value, is won or lost or taken, when the result of action or operation of the dice is dependent upon hazard or chance, is guilty of a misdemeanor.

Sadly, I followed along pretty well with this monstrous run-on sentence.

In layperson’s terms, you can’t have games that use tokens where you can win or lose things of value (or representative of value) where NO skill is involved (so pinball machines that offer free additional games and Skee Ball would not be considered “gambling devices”).

Smokin' Token?! This game just sounds like it's ready to steal your tokens...

At first I scoffed at the examples in the Complaint (I’ve hooked you now, so you can read the 7-page allegations here).  “There’s skill involved,” I said. In Wheel of Fortune, you have to time the coin drop which means you employ hand-eye coordination and the ability to time a moving object. But, then I considered one of my son’s favorite games, Deal or No Deal.  We play it at D&B’s. Pure luck.  The only question is will you win 2 tickets or 1,000?

I then considered that maybe the code section would be worded in such a way as to allow for the winning of even one ticket to consider a game to be outside the scope of Penal Code § 330.  In other words, if you played with the knowledge that you were guaranteed at least one ticket (versus zero), would this game of chance for one or more tickets be an exception? Nope. The statute isn’t worded that way.  Some will argue that the exchange of money into coins and the subsequent reward of tickets removes Chuck’s games outside the scope of this code.  But not so fast.  These tickets are redeemable for prizes, or “things of value.”  They are worthless anywhere else except at Chuck E.’s restaurant, thereby forcing you to redeem them for crappy toys.  Consequently, quarters become tokens which become tickets which become “things of value.”  I don’t recall if I’m supposed to apply modus tonens or modus tollens from my UCLA philosophy class, so I’ll just apply the law of congruency from high school Geometry and say that quarters = things of value.

"Win some crap!" ~Navin R. Johnson, The Jerk

I think this case might make it past the motion to dismiss, though I have my doubts about obtaining class certification.

Now, I’m not a fan of class actions and, as I stated in a previous post, I hate that the lawyers seem to benefit from their time put in while the consumer gets a coupon that requires additional patronage of the offending business.  However, I really do hate feeling ripped off at these gaming places where I give my kids $25 worth of D&B credits (and every game is 3.4 or 4.7 credits) all so they can win about $3.50 worth of candy and a rubber football.  I don’t really do it for the prizes, but the kids like to save their ticket credits for the big-ticket items, which I’m pretty sure equates to about $100 for a $10 stuffed Homer Simpson.

Oh, and in case you’ve been scratching your head this whole time wondering how a person can sue based on a criminal statute, the law provides for civil claims based on such violations.  The best example of this is a murder trial where the state sues the alleged, but that person can also be sued by the family for wrongful death.

I’ll keep you posted on how this whole madness works out.  And if I were Dave & Buster, I’d start looking out for the process server.

Happy Gaming,

Bill

(a) Every person, who has in his or her possession or under
his or her control, either as owner, lessee, agent, employee,
mortgagee, or otherwise, or who permits to be placed, maintained, or
kept in any room, space, inclosure, or building owned, leased, or
occupied by him or her, or under his or her management or control,
any slot or card machine, contrivance, appliance or mechanical
device, upon the result of action of which money or other valuable
thing is staked or hazarded, and which is operated, or played, by
placing or depositing therein any coins, checks, slugs, balls, or
other articles or device, or in any other manner and by means
whereof, or as a result of the operation of which any merchandise,
money, representative or articles of value, checks, or tokens,
redeemable in or exchangeable for money or any other thing of value,
is won or lost, or taken from or obtained from the machine, when the
result of action or operation of the machine, contrivance, appliance,
or mechanical device is dependent upon hazard or chance, and every
person, who has in his or her possession or under his or her control,
either as owner, lessee, agent, employee, mortgagee, or otherwise,
or who permits to be placed, maintained, or kept in any room, space,
inclosure, or building owned, leased, or occupied by him or her, or
under his or her management or control, any card dice, or any dice
having more than six faces or bases each, upon the result of action
of which any money or other valuable thing is staked or hazarded, or
as a result of the operation of which any merchandise, money,
representative or article of value, check or token, redeemable in or
exchangeable for money or any other thing of value, is won or lost or
taken, when the result of action or operation of the dice is
dependent upon hazard or chance, is guilty of a misdemeanor.

No Cooling Off Period for Settlement Agreements

Just over a week ago, a federal appeals court told the Winklevoss twins to lie in the money-stuffed bed they made.  For those of you who have forgotten, the Winklevoss twins are the two spoiled Harvard rowers who claimed Mark Zuckerberg –of FaceBook fame– stole their social networking site idea.  The 2010 movie The Social Network portrayed this dispute and let us see Justin Timberlake sans Peyton Manning in something that lasted longer than 15 seconds.

Anyway, back in 2004, the twins sued Zuckerberg because he allegedly agreed to help them with their project and then designed and launched his own.  As is common with lawsuits, the parties agreed to mediate.  As is less common with lawsuits, the parties actually settled.  The twins agreed to give their company rights to ConnectU (their “FaceBook”) in exchange for $20 million and approximately a million FaceBook shares for a total value of approximately $65 million.

At some point, the twins decided that the settlement wasn’t good enough for them and accused Zuckerberg of misrepresenting the share values and that they are actually entitled to 4 million shares.

The problem?  Settlement agreements –which typically contain full releases of all claims– are not easy to undo…especially when the complaining party is sophisticated and has a team of lawyers at the time of settlement.  The U.S. 9th Circuit of appeals held that sentiment.  The first stop was the federal district court which ruled in 2008 that the settlement agreement holds up.

Obviously not what Team W was hoping to hear, they appealed the lower court ruling.  The appellate judges felt the appeal was a joke and made sure the duo knew it in their April 11, 2011 decision.

Chief Judge Alex Kozinksi authored the opinion which stated, “[t]he Winklevosses…engaged in discovery, which gave them access to a good deal of information about their opponents.  They brought half-a-dozen lawyers to the mediation.  Howard Winklevoss [the twins father,  former accounting professor at Wharton School of Business, and valuation expert] also participated.”  The ruling further stated, “[a] party seeking to rescind a settlement agreement under these circumstances faces a steep uphill battle.”

In other words, they needed to show that Zuckerberg committed clear fraud.

“With the help of a team of lawyers and a financial advisory, they made a deal that appears quite favorable in light of recent market activity.”  It wasn’t lost on Kozinksi that the share values have continued to grow astronomically since the settlement.

“At some point, litigation must come to an end.  That point has now been reached.”

Personally, I haven’t been involved in too many appeals.  But, I don’t believe I’ve ever seen an opinion so directly suggest to a party, in writing, to stop the insanity and waste.   The court included commentary that the twins were simply bested in the marketplace and sunk the final dagger by reminding them that they released all of their claims when they signed the agreement.  In California, settlement and release agreements almost always include a “Civil Code section 1542 waiver.”  Civil Code 1542 provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

But, when this is waived by the parties, any attempt to cry, “hey wait! I didn’t know x, y and z when I signed!” goes out the door.  Only in instances of clear concealment or misrepresentation would a party hope to undo what has been done.  Since they had access to all of FaceBook’s financials, and experts to review them, any fraud argument would likely fail.

"Thanks, Dad!" "I hope there aren't any sharks around." "Uh, Cameron, those are our lawyers."

In other words, the Winklevoss Twins’ boat was sunk.

This is an important lesson that should not be lost on any business, whether the claim is over $5,000 or $50 million.

As for the W Twins’ 2008 6th Place finish at the Beijing Olympics, no word yet on if they plan to appeal those results…

Bill

Journey against Gouging Process Fees Starts at Step 1

Like everyone else, I love the convenience that online shopping, ticket-ordering, and race registering provide me.  But, like everyone else, I abhor the feeling that I’m getting gouged.  Every. Single. Time.  “Process fees” and “delivery charges” are like phone cases and chargers that cell phone companies change and inflate with each new model because that money is all gravy ($20 for a $.13 piece of plastic molding?! .14 if you add the cool skin design) (I also hear that phone chargers are going universal by 2012 thanks to the feds).

This  year I’ve intentionally boycotted a few foot races and triathlons simply because I believe Active.com is guilty of this practice, yet I’m forced to use them if I want to pay money to put myself through hours of agony along with 2,000 other people.  But, let me get this straight.  If my race costs $60, I have to pay a service fee of $4, or something.  But if that race costs $130 thanks to the “Rock N’ Roll” branding, I have to pay $10 for the same exact programming that categorizes me into my Age Group by age, gender, anticipated time, previous race history, favorite iTunes song, and shoe brand?!  No.  I also don’t appreciate people charging me different “postage fees” or “UPS” fees when they’re obviously inflating the charge.  It’s not quite as offensive as the $40 restocking fee, but that’s the problem.  It’s almost too small to complain about, until you do the math.  I’m sure I spent over $150 in 2010 simply to let companies register me for races using a computer program written years ago that requires a few column heading changes!

Well, as I begin my campaign to tell Active.com to “keep it honest,” my cause has been supported by someone who was fed up with Ticketmaster’s fees. [And I'd like to put a plug in here for Really Big Free Marathon who has managed to get enough sponsorship to host a free marathon, which is how it should be].

Back in 2003, a class action suit was filed in California to challenge Ticketmaster’s “Order Processing Fee” as well as the alleged “substantial mark-up” of UPS delivery costs which sometimes reached $20…yes, for something that would actually cost about $5.

This past January –eight years later (yeah, I know, that’s a long time)– Ticketmaster.com’s parent, Live Nation, finally settled with the class for $22.3 million to cover the settlement costs.  This actually seems low to me, but I’ll take it to some extent because it’s still money out for them.  Keep in mind, this was a settlement, not a judgment, so we’re required to draw our own conclusions as to whether this was guilt or a business decision to stop the bleeding of $4 million in legal fees.

Class members who meet certain conditions –likely  identifiable by their credit cards and who had to have made Ticketmaster purchases between October 1999 and May 2010– will either receive a cash payment or discounts of one or more future ticket purchases.  Ticketmaster will also make certain changes to disclosures on its website.

This amounts to more than a slap on the wrist, though less than a public Singapore caning.  The $22.3 million clearly isn’t the value of the gouging that occurred over the 11-year span of selling tickets.  And how many actual cash payments are we likely to see?  Then there’s my favorite…discount for future purchases!  So, I have to contribute to their future gross profits if I want to realize a discount?  No, thanks.  I can’t wait for the class action attorneys (the real winners) to stop agreeing to discounts that require future use of the service.  What if I don’t ever want to buy from them again?  What if I no longer want to use AT&T’s dropped-call cell service?  What if I’ve hung up my running shoes?  Am I made whole?

"I will be good*" *I will be more creative in ripping consumers off.

I also love the certain changes to their disclosure. “We will be gouging you with different wording now and telling you it’s for something else.”  We’ve seen the cell phone companies and banks do this for decades now and continue to get away with unnecessary fees.  The FTC continues to help us fight this battle, but as we all know, it takes an Act of Congress to get anything done around here…(double entendre intended).

Neither Live Nation nor Ticketmaster admitted to doing anything wrong.  However, they were in the hot seat last February 2010 when the FTC charged them with a bait-and-switch tactic that caused customers to pay up to four times the face value of Springsteen tickets (some of you might say that’s their own fault for wanting to see him, but I have to tell you, he puts on a great show…at least he did back in 1985).

Perhaps someday, Live Nation/Ticketmaster will endear itself to many of its long-gone customers by reducing these fees and announcing it…followed by all the other companies.  And perhaps, I should wait for Hell to freeze over.  I do believe however in taking pro-active steps beyond what the FTC is doing –especially if we can’t get a Federal budget in the next few days– and I do believe something can be done about this problem.  I just hope it doesn’t take 8-year long class actions every time.

I’d actually love to hear others’ pet peeves and who their first target would be.

Happy Consuming,

Bill

The Two-Year Window of Estate Tax Limbo

At the end of last year, the country’s estate and gift tax law, enacted back in 2001, was all set to sunset on January 1, 2011. This means that the steadily increasing estate plan exclusion would drop from $3.5 Million (with a 35% tax rate above that amount) per individual back down to the 2001 amount of $1 Million (with a 55% tax rate!).  Generation Skipping Transfer and Gift Tax exemptions and tax rates were also set to drastically change.

Instead, thanks to a bill signed into law at the 11th hour, a two-year “limbo” window was created to allow for continued generous exemptions and tax rates (in comparison to 2001).  However, as can be expected with tax laws, this window comes with all kinds of twists and turns…or is that streaks and fingerprints?  Here are some highlights:

• -  The exemption amount is now $5 Million per person with a tax rate of 35% for amounts above that.  While this seems great, you will have to have your estate plan reviewed again as 2013 approaches to see if you need to make any strategic changes prior to January 1, 2013 when the exemption reverts back to $1 Million and the tax rate increases back to 50%…for now;
• -  If someone passed away in 2010, then you have options with how to handle their estate tax…either apply the above tax exemption or apply zero estate tax and carryover the basis of all property and investments (a form 8939 must be filed by your accountant or attorney by September 19, 2011, or later if the death occurred after December 17, 2010);
• -  Interestingly, a spouse may take advantage of his/her decedent spouse’s $5M exemption at a later time, provided they filed the proper 706 form.  Since there are advantages to maintaining a Bypass Trust instead, it may be smarter to not exercise this option for control and protection purposes;
• -  The same 2011-2012 rates apply to gift taxes and generation skipping transfer taxes, with the same reversion;
• -  The annual maximum gift exclusion per person is $13K (which means $26K per couple to each individual donee), but this may revert back to $10K

Since we don’t know what Congress is going to do come 2013, it’s possible you may proceed with planning and gifting that suddenly doesn’t jive with the new laws (e.g., reversion to 2002 numbers). How will the IRS rule?  Since we all know the answer to that is “arbitrarily,” there are many considerations to be made over the next two years.

If you feel like this, you're not alone. Just know that it all clear up in the next two years...unless it doesn't.

Typically, you want to consult your estate planning attorney every couple of years to make sure your estate plan addresses any growth or losses to your estate and to make sure your plans are still your plans.  If you haven’t done so recently, this is the year to schedule an appointment, especially if you have a large estate and/or business interests. It probably makes sense to do just after tax season ends and before summer laziness sets in.  It will then be necessary to schedule another appointment toward the last quarter of 2012 to make sure you give your estate planner enough time to amend your trust and advise you in a consistent manner with Congress’ intentions.  Bear in mind that Congress didn’t act until December 10, 2010, leaving very little time to make adjustments had they allowed the last Act to revert by way of the “sunset provision.”

In view of the above (and it is much more complicated than my simplified description), most estate planning attorneys agree that there is absolutely no certainty and no predictability as to how this two-year limbo window will play out.  Since this doesn’t provide much in the way of comfort, better to stay informed and make adjustments than to “stand pat” and hope everything will be okay.  And if you think this doesn’t apply to you because you only have a small or mid-sized estate, think again.  You need to mark the fall of 2012 on your calendar to consult your estate planner regarding what direction Congress appears to be heading.

Happy Planning,

Bill

The Employee Retaliation Umbrella Just Got a Little Bigger

Employers now have a new question to ask before firing someone: “Has a person close to this employee recently filed an EEOC claim against us?”  The answer and the employer’s basis for firing this employee, plus HR documentation may determine whether or not the company will have a second EEOC complaint.

In a recent U.S. Supreme Court decision, an employee who was fired after his fiance filed a complaint against the employer was deemed to have “standing” (may bring a viable claim) to sue the employer.  Title VII of the Civil Rights Act protects employees from retaliation or other discrimination because that employee opposes an unlawful practice or otherwise reports or assists in an investigation of such practice. However, that protection did not extend to third parties, such as one related to the “whistle-blowing” employee, until now.

In Thompson v. North American Stainless, LP (No. 09-291, 1/24/11), Eric Thompson was engaged to Miriam Regalado.  Both worked for North American Stainless (“NAS”) and it was well known throughout the company that the two were engaged to be married.  Regalado filed a claim with the Equal Employment Opportunity Commission (“EEOC”) alleging gender discrimination.  Three weeks later, Thompson -not Regalado- was fired.  So, Thompson filed his own claim with the EEOC claiming retaliation based on Regalado’s claim.  The EEOC agreed with Thompson and ruled in his favor.  Naturally, NAS appealed. At trial, NAS argued that, since Thompson did not have his own discrimination claim, he did not fall under the umbrella of the Title VII.  The trial court agreed, stating that Thompson did not fall under the protected class of citizens Congress intended to protect under Section 704(a) of Title VII.  When Thompson appealed that ruling, the appellate court affirmed the trial court stating that Thompson did not engage in any protected activity upon which he could base his retaliation claim (i.e., Regalado’s gender discrimination claim was not his).

But the Supreme Court stepped in and stated that Thompson, as Regalado’s fiance, fell within Regalado’s “protected zone of interests” sought to be protected by the law at issue (Title VII).  In other words, he had “standing” to sue NAS.  The Court reasoned that  Thompson was not “collateral damage,” but rather, that firing Thompson “was a means of harming Regalado. Hurting him was the unlawful act by which the employer punished her… He is a person aggrieved with standing to sue.”

"I promise to love, honor, and cherish you...oh and to put you in my zone of protected interests."

Accordingly, the Supreme Court has now broadened the definition of potential claimants in a retaliation claim to include a close friend, family member, or fiance — those who might be dissuaded by the employer from initiating or supporting a discrimination charge.

What to do?

As an employer, you should already have a handbook that includes protocols for documenting employee performance or conduct problems so that you have a paper trail justifying termination, even in an at-will state like California.  NAS may have been correct to terminate Thompson and they, in fact, alleged his performance was the basis for such firing.  However, the evidence apparently was lacking to support this claim and, by all appearances, the firing was a retaliation against Regalado, a federal no-no. NAS learned the hard way that retaliation is never the way to go.

Remember, even if you believe you have every good reason to terminate an employee, it’s probably a good idea to consult your employee handbook and your attorney…and maybe the employee’s Facebook list of friends and fiances…

Bill