2011 Brings Important Changes to California Mechanic’s Lien Law

With the coming of the new year, we believe that it would be a good idea to highlight a new law that effects many of our clients in the construction industry. This past year, the legislature passed legislation to change the procedure for a mechanics' lien.

Beginning on January 1, 2011, all new mechanic’s liens must include new and additional elements. Also, mechanic’s lien claimants must take new and additional steps to notify all interested parties of the mechanic’s lien on the property. In short, a mechanic’s lien claimant now must serve the owner of the property with the mechanic’s lien and a proof of service of the mechanic’s lien must be recorded with the mechanic’s lien in order for the mechanic’s lien to be considered enforceable. Also, there is new language entitled “Notice of Mechanic’s Lien” that must be included with all mechanic’s liens to be considered enforceable under California law. To see the exact language, which includes specific fonts and certain phrases that are required to be underlined and bolded, see California Civil Code Section 3084.

On top of the new requirements for an enforceable mechanic’s lien, it is now mandatory that a party who has filed a complaint to foreclose on a mechanic’s lien record a lis pendens (a.k.a. notice of pendency of action) with the county recorder for the county in which the action was filed, within 20 days of filing the complaint.

These new requirements significantly increase the burden on any party asserting a mechanic’s lien. For further clarification, feel free to give our office a call to discuss with an attorney the specifics of the changes being brought in with 2011.

Marijuana Growers as New Tenants for Industrial and Commercial Properties

After taking a quick break from the blog, we are back. Prior to the break, we ran ongoing posts about the extension of tax cuts. So, during the break, Congress passed and President Obama signed a new tax bill extending the Bush era tax cuts for all Americans. I am sure many people were relieved.

However, I do not want to spend too much time talking about taxes right now. Rather, I would like to take this opportunity to discuss industrial and commercial real estate. Due to the slow nature of leasing during this period in the economy, landlords are beginning to open up to the idea of leasing commercial and industrial properties to marijuana growers. Michael Shaw of the Sacramento County Business Journal wrote a very interesting article on this subject. I suggest that you check it out if you are interested.

You may be wondering, how can landlord’s rent space to a marijuana grower… isn’t marijuana illegal? Well, under Proposition 215, passed by the voters 1996, it is legal for patients with a valid doctor's recommendation to possess and cultivate marijuana for personal medical use. As such, if a grower has the proper authorization, it is legal for the grower to possess and cultivate marijuana under California law.

However, under federal law, the possession and cultivation of marijuana remains illegal. Thus, we have conflicting laws on this subject. Right now, the Obama administration is not pursuing persons who are using marijuana for medical purposes. As a result, many people are openly growing marijuana.

This is a potentially dangerous area for those involved in the business of marijuana, as the policy of the administration may change. Consequently, many marijuana dispensaries could be raided and potentially properties seized. What is more, much of the regulation of Proposition 215 is left to the counties and as a result, the regulations are wildly inconsistent between counties.

As such, if you want to enter into the marijuana business, you need to be very careful. Although this may sound self-serving, I suggest that you consult with a lawyer before entering into the business.

Happy Holiday Employment Issues

Our firm has considerable experience in employment law, from both an employer and an employee perspective. We have learned that an ounce of prevention is worth a pound of cure – that starting with solid business practices helps avoid problems later. We can help you from the outset with employment contracts, compliance with labor regulations, employee handbooks and much more.

We are particularly busy this time of year working with holiday-specific employment situations. Typical issues we focus on in December include:

• Elf employment and wage compliance
• Safe employment practices at polar workshops
• Worker compensation due to tinsel-lung
• Wrongful reindeer termination due to nasal deformity
• Disputes over dreidel winnings

Let us know if you have any questions regarding holiday employment issues, and have a Happy Holiday Season!

Tax Cuts: Are They Coming Or Not

Earlier this week we heard that President Obama negotiated a truce with Congressional Republicans by agreeing to extend the Bush era tax for another two years. However, Senate Democrats blocked a vote on the proposal. Meanwhile, Republicans refuse to approve any legislation unless the obtain tax cuts for everyone. Thus, leaving everyone at risk for higher taxes. Now, word out of Washington DC is that Democrats are planning to vote on a proposal nearly identical to the Obama/Republican agreement with a few changes. So, the question arises… will the tax cuts be extended for another two years or not.

As a side note, there is are a couple of interesting nuggets in the Obama/Republican agreement with respect to estate taxes, which will be coming back in 2011. First, the estate tax will be lowered to 45%. Second, there will be a personal exemption from the estate tax up to $5 million.

American Chopper – The Lawsuit

I am sure many people have seen the show American Chopper on the Discovery Channel. I am ashamed to admit that I am hooked on the show this year as it pits Paul Tuetul Sr. versus Paul Tuetul Jr. What drew me in this year was the legal battle between Sr. and Jr. as it is a classic dispute between partners.

Previously on the show, Sr. and Jr. worked together and were co-owners of a custom motorcycle company known as Orange County Choppers. A major theme of the show were the fights between Sr. and Jr. Frankly, I thought it was partially an act to draw in more viewers. However, given the lawsuit it appears that there were more to the fights than I truly believed.

From what I can gather from watching the show, the roots of the dispute between Sr. and Jr. are common in many partnership disputes where a partner was brought in at a later time. On one side you have the partner who “built the business the hard way.” On the other side, you have the other partner who came in later and “added value” to help the business grow. In my opinion (based only on watching the show), both Sr. and Jr. overvalue their contributions when in fact it was the team effort between the two to grow Orange County Choppers.

Another theme that is common in a partnership dispute occurs when you have a “money partner” and a “sweat equity partner”. Generally, in this situation, the “money partner” puts in the money to begin the business and handles the business operations. The “sweat equity partner” on the hand, does the work. Many times, these two partners can never see eye to eye, because again, both overvalue their contribution and undervalue the contribution of the other.

In my experience, the catalyst for the dispute between partners is money… or rather the lack thereof. Everything runs fine when everyone is getting paid. However, the differences between the partners come out when the money dries up. I cannot say that Orange County Choppers or that the Tuetuls are out of money. However, I find it reasonable to believe that money was a catalyst in the dispute between Sr. and Jr., although they would never say it. I base this on my experience and the fact that the show disclosed that a valuation was done for Orange County Choppers indicating that the business had a value of $0. If the business has a value of $0… there has to be a money problem somewhere, whether that money problem is receivables, payables or leveraging the assets.

Difficulties Obtaining Commercial Loans

Many of our clients are reporting they are experiencing difficulties obtaining commercial loans from banks. Moreover, it is a problem that is being reported by many local area publications, including the Sacramento Business Journal. It appears that banks, although flush with cash, are hesitant to loan money to perspective borrowers. In many cases banks are requiring potential borrowers to over-collateralize loans before they will issue a loan. Which, makes many people ask, if I can over-collateralize the loan, why do I need the loan in the first place.

At some point banks are going to need to realize that in order to get the economy moving again, they will need to start lending money once again. Otherwise, the economy will remain stagnant. However, when banks start lending money again, I would suggest that they strike a balance between the current lending practices and the excessive lending practices of the early-mid 2000’s.

Ask us if you have any business legal questions.

ABOTA – Masters in Trial

On December 3, 2010, I attended the ABOTA Masters in Trial Seminar. The purpose of this seminar was to provide attorneys with different strategies for opening and closing statements at trial. However, I think that non-lawyers might find this interesting as well. It is a window into the thoughts of a trial attorney.

Ten different practitioners, who are considered the best in the business, gave an opening or closing statement that they gave at a previous trial. In one instance, one practitioner gave an opening statement that he plans to use at an upcoming trial. I thought that took some guts… to give an opening statement in front of a room of your peers for a matter that is not decided. Every other attorney gave a statement from a case where they knew the result, in most cases it was their signature victory.

I must admit that each of the practitioners were very good and it gave me some new ideas as to style and approaching a jury. However, each of the practitioners confirmed three key beliefs that I have when prosecuting or defending a case:

1. Be prepared. Get your facts and law together prior to trial. Do not approach a jury based on sympathy. The jury as a whole will be insulted. Approach the jury with facts and law.

2. Be credible. Be prepared to conceded bad facts/circumstances to a jury. Do not allow the jury to hear the bad facts/circumstances from your opponent. If you deliver the bad news to the jury, the jury will find you more credible than your opponent.

3. Look at the matter through the eyes of your client. If you do not put yourself in the shoes of your client, the jury will never be able to connect with your client. Ultimately, the jury has to understand your client’s point of view.

As good as I thought these attorneys were in delivering their respective opening and closing statement, I couldn’t help but think, that I would love the opportunity to oppose any one of the attorneys. Either as a plaintiff or a defendant. The MC referred to these attorneys as the New York Yankees of attorneys. What better way to prove my abilities as an attorney than to defeat one of them in trial. This may sound arrogant, but you need a little swagger to be a trial attorney.