Twin Cities Business Litigation Blog : Minneapolis Business Litigation Lawyer & Attorney : Gavin P. Craig Law Firm : St. Paul, Twin Cities, Minnesota MN

First the scam. I just ran into this post from Reid My Blog about the false use of a lawyer's name and web site to defraud people. I think all lawyers need to be aware of the scams out there that could impact their clients. While I don't have any great ideas about how to answer this threat, other than communicate with existing clients, the threat seems real.

Most of us occasionally receive an email from someone claiming to be looking for a lawyers with our unspecified qualifications. The e-mail is always from a foreign country, although which one is hard to know. As lawyers we can laugh at the weak attempt to steal money from us or our clients. This new scam seems to rely upon the victim checking to see that the attorney is in good standing, and relying upon that information to fall for the scam, without the knowledge of the attorney.

As always, we need to be aware and watch for any unusual activity.

Predictions for 2009

Keeping with the theme of crime and fraud, I am predicting that 2009 will bring new revelations about additional criminal complaints for major fraud schemes. I can't feel comfortable believing the Madoff and Petter are the only major financial criminals. The era of deregulation has had a fairly long run, and when no-one is looking, there are always people ready to take advantage. I predict, without any actual knowledge of any investigation, that there will be several more arrests for major frauds. Hopefully I am wrong, and the worst is over.

I am interested in what others think.

Finally: Happy New Year to All!

Gavin Craig

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I always enjoy reviewing the California Attorney Fees Blog. California has some attorney fee shifting statutes, and they enforce contracts providing for attorney fees. Whether this has helped or hurt the trial court case load is always a subject for debate.

In a recent case, Cardet v. Burlison, Case No. B198625 (2d Dist., Div. 2 Dec. 17, 2008), the court looked at a law firm's retainer agreement for support to award fees. One of the questions before the court was whether the law firm's retainer agreement provided for the recovery of attorney fees against the law firm in the event there was a successful negligence (tort) claim against the firm. It is certainly common for retainer agreements to provide for the recovery of attorney fees expended in recovering past due fees. The provision in question read:

"If legal action is required to enforce this Agreement or to collect any fees or costs earned or advanced pursuant thereto, the prevailing party shall be entitled to recover any and all costs of such action, including, but not limited to, the expenses and court costs of the action [and] a reasonable attorneys fee."

The case goes all the way back to the January 17, 1994, Northridge earthquake in the Los Angeles Area. Cardet was a contractor and was not paid for certain improvements to property. The Plaintiff's attorneys did a very poor job prosecuting a mechanic's lien, including their failure to name the property owners of the improved or repaired property.

Cardet ultimately won a malpractice claim against the defendant law firm for a net amount of $500,577.30. In February 2007, Cardet filed a memorandum of costs, seeking, inter alia, $272,492.50 in attorney fees. The court ultimately granted $269,492.50 in attorney fees.

What is the basis for awarding attorney fees? The retainer agreement!

California Civil Code section 1717 provides, in relevant part:

(a) In any action on a contract, where the contract specifically provides that attorneys fees and costs, which are incurred to enforce that contract, shall be awarded . . . to the prevailing party, then the party who is determined to be the party prevailing on the contract . . . shall be entitled to reasonable attorneys fees in addition to other costs. . . (b)(1) . . . [T]he party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.

The court held the the retainer agreement contract language providing for attorney fees, "[i]f legal action is required to enforce this Agreement," was broad enough to cover both Tort and Contract claims.

I would guess that there are a lot of legal retainer agreements that have exactly the same language in them. A word to the wise: Check the language in your retainer agreements. Would the result have been the same if the agreement had specifically stated that the attorney fee provision only applied to fees incurred to collect legal fees?

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The California Supreme Court has greatly limited the use of the Good Samaritan Law immunity from liability when the Good Samaritan helps rescue an injured person - but does not render "medical" care.

The WSJ Law Blog, the California Supremes Blog, and the L. A. Times all report on the case.

"In a divided opinion, the court ruled that Lisa Torti — a young woman who in good faith pulled a co-worker from a crashed vehicle after a night of Halloween revelry in 2004 — isn’t immune from civil liability because the care she rendered wasn’t medical. Torti, according to the L. A. Times, allegedly worsened the injuries suffered by Alexandra Van Horn by yanking her “like a rag doll” from the wrecked car on Topanga Canyon Boulevard. Van Horn was rendered a paraplegic in the accident." WSJ Law Blog.

California's Health and Safety Code provides that “no person who in good faith, and not for compensation, renders emergency care at the scene of an emergency shall be liable for any civil damages resulting from any act or omission.” Please notice that the term "medical" is not in the statutory language.

Why is "medical" care suddenly a requirement for the Good Samaritan Law to shield the defendant? According to the L. A. Times there is no prior case law to support the requirement that the care provided be medical in nature (and how do you distinguish "medical" from "non-medical" in any case.)

I would hope that the court didn't decide the case the way they did because of the terrible injuries. The saying "bad facts make bad law" might be at work here. I can't think of very many court decisions where the court actually added words to a statute, and this is exactly what they seem to have done.

As a public policy issue it makes no sense to protect the good Samaritan for giving medical aid, but not for pulling a person from a burning car. I would hope that the California Legislature will fix this problem. At least three justices dissented from the majority opinion, so all is not lost.

Apparently in California the smart Good Samaritan will watch the victim burn up instead of attempting a rescue, and only apply first aid after the rescue has been accomplished, should here ever be one.
 

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One of the many things that the unwary businessperson can do on occasion is unintentionally create a franchise. The obvious reason is the failure to consult an attorney. Every state has its own franchise laws, and some are better than others depending upon whether you are representing the franchiser or the franchisee.

In general, a franchise is very easy to create, and thereby subject the creator to state franchise laws and regulations. The basic elements are:

1. A contract or agreement, either express or implied, whether oral or written, for a definite or indefinite period, between two or more persons:

a. by which a franchisee is granted the right to engage in the business of offering or distributing goods or services using the franchiser's trade name, trademark, service mark, logotype, advertising, or other commercial symbol or related characteristics (you use my name and send me a fee and we will both make money);

b. in which the franchiser and franchisee have a community of interest in the marketing of goods or services at wholesale, retail, by lease, agreement, or otherwise (We both make money and I will expand my business);

c. for which the franchisee pays, directly or indirectly, a franchise fee.

Pretty easy. The owner makes a verbal agreement to allow someone to use his trade name for a fee would pretty much satisfy the requirements. Much of the franchise litigation is over the issue of whether the payments amounted to a fee. If they didn't - there is no franchise. But then, the problem is that the unintended franchiser must litigate whether the business arrangement was a franchise or not. So the unintended franchiser agrees to allow someone to use its trade name to conduct business, all for a small fee per transaction. Franchises are securities, and as such they must be registered.

In my experience, many business owners wanting to expand their businesses come up with plans that look a lot like a franchise. They have no idea that the proposed business arrangement might created a franchise or a security. If there is a franchise, most states carefully regulate the franchise and require filings and approvals. Franchise law is a world unto its self. The failure to comply with the relevant states franchise laws create serious potential liability for the unintentional franchiser.

Another great thing about a franchise is that, in many states, the franchisee is entitled to costs and attorney fees if the franchiser is in violation of the franchise agreement and the franchisee incurred real damages. This is especially interesting when the alleged franchise agreement is verbal.

Franchise laws are intended to protect the public. The smart business owner will talk to his or her counsel BEFORE entering into any agreement that allows others to use their trade name(s) or trade mark(s).

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State and US District Courts use a legal analysis to determine whether the state or District Court has jurisdiction over a defendant located in another state. In a real stretch of logic, Delaware Court held that a law firm, by sending a document to CT Corporation (CSC in Delaware) in Delaware for filing with the Delaware Secretary of State for a Delaware Corporation conducted business in the state of Delaware. The court concluded that the courts in Delaware had jurisdiction over the law firm. Did the out of state law firm intend to conduct business in Delaware? No!

Would the result be the same if the law firm had served CT Corporation in Ohio, for delivery to CSC in Delaware? Would that action constitute transacting business in Delaware?

The law firm's client was already subject to jurisdiction in the courts in Delaware by virtue of their status as a Delaware Corporation. Thanks to Ward of Ward on Iowa Limited Liability Companies for the Reference.

Compare this result to the courts findings in the Pope and Bellisio cases discussed below on November 11th. Once again the courts find a single transaction sufficient to establish jurisdiction. One interesting question is whether the law firm, acting as agent for the Delaware principal, was really doing business in Delaware. The court decided, "yes."

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