Here is your February eNews from the Business Law Section (“BLS”):
What a difference a few months make. Since January 1, 2018, the Business Law
Section (BLS) and its 15 sister Sections have been operating as the
(CLA). Since the start of the year, BLS standing
committee members are once again free to communicate and otherwise meet with
each other with virtually no restrictions.
This has led to renewed enthusiasm among members of the BLS Executive
Committee and 15 standing committees.
What has this meant for the BLS?:
: On February 15, 2018,
California Assembly Member Brian Maienschein introduced AB 2557. Based on an ALP prepared by the
Nonprofit Organizations Committee
, the bill amends certain provisions of
the Corporations Code dealing with nonprofit corporations. To read AB 2557,
: BLS has been
sending members to law schools around the State to introduce law students to
the practice of business law. In the
past few months, BLS members have made presentations at USC and Hastings
Schools of Law, and plan to do so in the coming months at Pepperdine University
School of Law, among other law schools around the State.
3. Diversity: BLS is working with the California Minority Counsel Program (CMCP) to promote diversity in the legal profession and, specifically, at the
BLS. The two entities are planning a
joint mixer in San Francisco for April (date to be announced). We hope to see many of you at the mixer, or
at a future joint event.
: The CLA has
announced that this year’s Annual Meeting will be held in San Diego on
. Please note the dates
on your calendars. As in past years, the
BLS will hold a breakfast featuring a keynote speaker and presentation of the
Section’s Lifetime Achievement Award.
: On Friday, March 30, 2018,
in Century City, California, the BLS will hold a free MCLE program and
reception for young attorneys. The
program will start at 2:30 p.m. and will feature two one-hour panels.
1: will provide guidance on forming new
corporations, partnerships, LLCs and related issues, such as taxes and
• Panel 2: will provide guidance by members of various
Business Law Section members, such as business litigation, commercial
transactions, consumer financial services, financial institutions, franchise
law, health law, insolvency and internet & privacy.
For more information, click here. Please RSVP to Milan Smith
Institutions Committee (FIC)
March 13, 2018, the FIC will host its popular program at the Federal Reserve
Bank of San Francisco, entitled: “New
Winds in the Financial Services Industry: Legal, Regulatory and Technology
Developments and the Road Ahead.” For
7. eBulletins: BLS standing committees have been prodigious
in publishing eBulletins discussing new case law, administrative and
legislative developments, upcoming events, and other issues of interest to
business law practitioners. To receive
eBulletins from one or more of BLS’ 15 standing committees,
: The much anticipated Annual
(2017) issue of the BLN will be delivered to BLS members in the
coming weeks. This is one of the many
practice-enhancing benefits BLS members are entitled to receive. To join the BLS (dues: $95-per year) and
receive membership benefits,
Uzzi O. Raanan
Danning, Gill, Diamond & Kollitz, LLP (Los Angeles)
Chair, Business Law Section
The California Lawyers Association (CLA) has now officially launched, shifting oversight of the 16 Sections and the California Young Lawyers Association (CYLA) from the State Bar of California to a voluntary organization, as required by legislation passed in 2017. With nearly 100,000 members, the CLA is the nation’s second-largest professional association for attorneys, smaller only than the American Bar Association. Its first President Heather L. Rosing, first Vice-President Emilio Varanini, Board of Directors and officers began the work of the organization’s inaugural year this week.
For more information on the mission of the CLA or how to join, please visit www.calawyers.org
I'M ALREADY A SECTION MEMBER, SO HOW DO I BECOME A MEMBER OF THE CLA?
Your current membership will automatically transfer to the CLA until it expires at the end of the current bar year. Make sure to renew your membership in one or more Sections on the State Bar dues statement as usual, or log into My State Bar Profile. You should have received your annual dues statement from the State Bar on or after December 1, 2017.
HOW DO I JOIN A SECTION?
Simply log into your current My State Bar Profile and join a Section. You can also join a new Section (and renew current Section membership) when paying your annual State Bar dues. The State Bar began emailing out the annual dues statements on December 1, 2017.
WILL MY SECTION DUES INCREASE DUE TO THE SEPARATION?
No. Section dues will remain the same through 2018. Log into My State Bar Profile to view your current Section dues and renew today!
WILL MY STATE BAR LICENSING FEE INCREASE DUE TO THE SEPARATION?
No. The State Bar’s licensing fee is set by the California Legislature and is expected to remain the same for 2018.
WILL CLA OFFER THE SAME EDUCATIONAL PUBLICATIONS, PROGRAMS, EVENTS AND CONFERENCES THAT ARE OFFERED BY THE SECTIONS NOW?
Yes, but as a voluntary bar association, the CLA will have more flexibility and fewer restrictions, enabling the Sections to expand, innovate and offer Section members new and innovative publications, programming and other events.
AFTER SEPARATION, WILL THE STATE BAR WEBSITE STILL REPORT THE STATUS OF MY SECTION MEMBERSHIP AS IT DOES NOW?
Yes. You may verify your Section(s) membership by logging into your profile via the new CLA website.
The Business Law Section of the CLA will present an event for young lawyers on Friday, March 30, 2018, in Century City. The event is free, will offer CLE and a reception following the presentation. The program starts at 2:30 p.m. and will feature two one-hour panels. Panel 1 provides guidance on forming new corporations, partnerships, LLCs and related issues, such as taxes and insurance.
Panel 2 provides guidance by other components of the Business Law Section, such as litigation, commercial transactions, consumer financial services, financial institutions, franchise law, health law, insolvency and internet & privacy.
Loeb & Loeb, LLP will host the event, located at 10100 Santa Monica Blvd., Los Angeles, CA 90067. firstname.lastname@example.org.
On January 26, 2018, the University of San Francisco Law School and Business Law Section’s Internet & Privacy Law Committee (IPLC) co-sponsored an all-day symposium on data insecurity. Over 150 people attended the event.
The symposium, “The Epidemic of Data Insecurity,” included panel discussions on data insecurity, preventative measures against attacks, legal recourse for breach victims, and the ethical issues related to retaining digital information. It was also co-sponsored by Hanson Bridgett.
There were five panels on topics of vital importance to California lawyers relating to information security and privacy, such as addressing health data ransomware threats, data breach response, best practices in information security, and ethical data practices, and litigation surrounding the Equifax data breach.
Noted panelists included M. K. Palmore, CISM, CISSP, Assistant Special Agent of the Federal Bureau of Investigation (FBI), Stacey Schesser, supervising deputy attorney general in the Consumer Law Section — Privacy Unit of the Office of the California Attorney General, and Kristine Poplawski, deputy city attorney in the San Francisco City Attorney’s Office. Joshua de Larios-Heiman, IPLC vice chair and managing director of Data Law, spoke on the importance of data privacy in start-up business plan development.
On February 2, 2018, Professor Eric Goldman of Santa Clara Law hosted a conference exploring how Internet companies operationalize the moderation and removal of third party/user-generated content (UGC). UGC services routinely say that moderating and removing content is hard and expensive. This conference explained the operational challenges and how companies are trying to solve them. The California Lawyers Association’s Business Law Section Internet and Privacy Law Committee (ILPC) was one of the co-sponsors of the event.
The Content Moderation & Removal at Scale conference, attended by the largest internet largest companies, is first of its kind. The impetus of the conference was to create an event where internet companies could discuss how to address such content moderation problems of hacking, trolling, fake news, and foreign clandestine intelligence services operations.
Many of Silicon Valley’s largest technology companies attended and participated in a candid discussion of their content moderation programs. Participating companies included Automattic, Dropbox, Facebook, Google, Medium, Microsoft, Pinterest, Reddit, Wikimedia, and Yelp. Academics from Stanford Law School’s Center for Internet and Society, UCLA Graduate School of Education & Information Studies, UC Berkeley School of Law also attended.
Panels included an overview of each company’s operations, the history and future of content moderation, employee/contractor hiring, training and mental well-being, AI efficacy in content moderation, in-sourcing to employees vs. outsourcing to the community or vendors, and transparency and appeals.
IPLC co-chairs Mark Aldrich and Ginny Sanderson, and vice chair Joshua de Larios-Heiman also attended on behalf of the committee.
A recent Health Law Committee E-Bulletin reports that, on December 28, 2017, the Centers for Medicare and Medicaid Services (CMS) issued Survey and Certification Memorandum Number 18-10-ALL to the State Survey Agencies to clarify its position regarding texting healthcare information by providers. CMS’s memo makes three main points: (1) Texting patient orders is absolutely prohibited; (2)Computerized Provider Order Entry (CPOE) remains the preferred method of order entry; and (3) the healthcare team may text patient information among itself if done through a secure platform.
Read the full analysis here.
Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications. This month’s feature is from the January 2018 update to Secured Transactions in California Commercial Law Practice. References are to the book’s section numbers. See CEB’s BLS Landing Page for special discounts for Business Law Section members. The most significant legal developments affecting secured transactions practice in California since the last update include developments in such important topic areas as commercial tort claims, debtors’ names on financing statements, terminating financing statements, information statements, distributions to junior creditors, damages for willful violations of the automatic stay, priority of claims in bankruptcy, the Equal Credit Opportunity Act, and more.
January 2018 Update
In Bayer CropScience, LLC v Stearns Bank Nat'l Ass'n (8th Cir 2016) 837 F3d 911, the Eighth Circuit agreed with the basic principles regarding commercial tort claims, but it also held that a settlement payment with respect to a commercial tort claim could be proceeds of other original collateral (equipment in this case) to the extent that there was damage to the original collateral. The issue was remanded to the district court to determine what part of the settlement would be allocated as proceeds of the original collateral. See §2.15.
Commercial Code §9503(a)(4), California's version of the Amendments to Uniform Commercial Code Article 9, National Conference of Commissioners on Uniform State Laws (2010), provides a safe harbor, with respect to individuals, that requires the financing statement to list the name on the driver's license or identification card issued by the Department of Motor Vehicles (DMV) to the individual debtor. Com C §9503(a)(4). If the individual debtor does not have a driver's license or identification card issued by the DMV, then the secured party needs to list the surname and the first personal name of the debtor. Com C §9503(a)(5). See §§3.88, 7.3.
The term "public organic record" is defined as the record initially filed to form the entity, and its most recent amendments. Com C §9102(a)(68). For a corporation, the public organic record is the articles of incorporation. It is important to review the articles of incorporation and any amendments to ensure that the financing statement lists the debtor's name correctly. A certificate of good standing, although a public document, does not meet the definition of a public organic record. See Official Comment 11 to UCC §9–102(a)(68). See §3.90.
Secured creditors must be cautious in terminating a financing statement. In Official Comm. of Unsecured Creditors of Motors Liquidation Co. v JP Morgan Chase Bank, N.A. (In re Motors Liquidation Co.) (2d Cir 2015) 777 F3d 100, the agent for the secured creditors was terminating many financing statements related to a credit agreement. In the process, the agent terminated in error a financing statement between the debtor and the agent that was related to a different transaction. The Second Circuit held that the secured party authorized the filing even though it later discovered that the filing was not one that it intended to make. See §3.110.
Both secured creditors and debtors may file information statements under Com C §9518. Commercial Code §9518(a)–(b) provides rules for a debtor and other parties who are not secured creditors to file an information statement. Similar rules are set forth in Com C §9518(c)–(d) for secured creditors. In general, a person may file an information statement with respect to a financing statement if the person believes that the record is inaccurate or was wrongfully filed. See Com C §9518(a) (for persons in general) and Com C §9518(c) (for secured creditors). The information statement must properly identify the filing by using the filing number and the date it was filed. The person must also indicate the reason why the financing statement was inaccurate and the method by which it should be corrected. Com C §9518(b) (for persons in general); Com C §9518(d) (for secured creditors). The effectiveness of the original financing statement is unaffected by an information statement. Com C §9518(e). See §3.115.
Under the "Rule of Explicitness," bankruptcy and other courts may not permit unsecured or undersecured senior creditors to recover postpetition interest or fees from distributions otherwise payable to the junior creditor unless those items are specifically included as senior debt in the subordination agreement. See Chemical Bank v First Trust of N.Y. (In re Southeast Banking Corp.) (11th Cir 1999) 179 F3d 1307; US Bank NA v TD Bank, NA (SD NY 2017) 569 BR 12. See §4.75B.
For a general discussion of adhesion contracts, see Tompkins v 23andMe, Inc. (9th Cir 2016) 840 F3d 1016. See §5.76.
In Sundquist v Bank of America (In re Sundquist) (Bankr ED Cal 2017) 566 BR 563, the creditor bank willfully violated the automatic stay by proceeding with a foreclosure sale, transferring title to the property that was subject to the foreclosure sale, and harassing the debtors, even though the creditor had knowledge of the bankruptcy filing. The court held that both actual damages, including for emotional distress, and punitive damages in the amount of $45 million were appropriate. See §6.10.
The United States Supreme Court has characterized the priority system set forth in the Bankruptcy Code as a "basic underpinning of business bankruptcy law" with the priorities of different types of claims in a Chapter 7 case being absolute and the priorities in a Chapter 11 case only being flexible if the requirements for cram-down in a plan of reorganization are met under 11 USC §1129(b). Czyzewski v Jevic Holding Corp. (2017) ___ US ___, 137 S Ct 973, 983. See §6.109 for a discussion of cram-down and the absolute priority rule in connection with a Chapter 11 plan of reorganization. In Czyzewski, the Court discussed priority in connection with a technique in bankruptcy called a "structured dismissal," which is a hybrid between the dismissal of a Chapter 11 case and the confirmation of a plan of reorganization. Generally, when a bankruptcy case is dismissed, unless the court orders otherwise, assets are revested in the debtor and the debtor is returned to the circumstances that were in place prepetition. See 11 USC §349(b). In structured dismissals, practitioners have tried to use §349(b) as a means to approve distributions to creditors while dismissing a Chapter 11 case rather than confirming a plan. In Czyzewski, the Supreme Court held that a bankruptcy court may not approve a structured dismissal that does not follow the ordinary bankruptcy priority rules without the consent of the affected creditors. See §6.97.
In Pacifica L 51 LLC v New Invs., Inc. (In re New Invs., Inc.) (9th Cir 2016) 840 F3d 1137, the Ninth Circuit held that in a plan of reorganization context, 11 USC §1123(d) is controlling. Section 1123(d) provides that if the plan of reorganization proposes to cure the default, the amount necessary to cure the default must be determined "in accordance with the underlying agreement and applicable nonbankruptcy law." 11 USC §1123(d). In deciding Pacifica, the Ninth Circuit held that a long-standing Ninth Circuit case, In re Entz-White Lumber & Supply, Inc. (9th Cir 1988) 850 F2d 1338, which provided that a cure of a default in accordance with a plan of reorganization would prohibit recovery of default interest, was no longer valid in light of §1123(d). See §6.101.
Further, the Ninth Circuit has held that 11 USC §510(b) applies even if the debtor is an individual. Liquidating Trust Comm. of the Del Biaggio Liquidating Trust v Freeman (In re Del Biaggio) (9th Cir 2016) 834 F3d 1003. Although the phrase "arising from the purchase or sale of a security" has been broadly interpreted, §510(b) does not encompass every transaction that involves stock. Khan v Barton (In re Khan) (9th Cir 2017) 846 F 3d 1058 (settlement in connection with debtor's conversion of stock years after purchase and sale of stock did not require subordination under §510(b)). See §6.103.
The federal Equal Credit Opportunity Act (ECOA) (15 USC §§1691–1691f) and its Regulation B (12 CFR pt 202) prohibit discrimination, with respect to any aspect of a credit transaction, by creditors against any applicant on the basis of (1) race, color, religion, national origin, sex, marital status, or age; (2) the applicant's receipt of income from a public assistance program; or (3) the applicant's good-faith exercise of rights under the Consumer Credit Protection Act (15 USC §§1601–1667f). 15 USC §1691. This statute has been held to apply to consumer leases. Brothers v First Leasing (9th Cir 1984) 724 F2d 789 (automobile lease). Brothers has been criticized by other courts for its interpretation of the ECOA. See Dorton v KMart Corp. (ED Mich 2017) 229 F Supp 3d 612 for a discussion of the ECOA and Brothers. See §7.70.
The U.S. Supreme Court has held that the filing of a proof of claim that covers an obviously time-barred debt in a Chapter 13 case does not violate the Fair Debt Collection Practices Act. Midland Funding, LLC v Johnson (2017) ___ US ___, 137 S Ct 1407. See §7.72.
The State Bar of California has published a new opinion report: State Bar of California, Business Law Section, Third-Party Closing Opinions: Limited Liability Companies and Partnerships (Dec. 2016). See §9.1A. Copies of this report may be purchased here.
Legal Support Needed for
Survivors of the California Fires
Legal services organizations have been flooded with requests for
help following the fires in California. The State Bar of California has a
number of resources to help attorneys willing to help with the recovery.
Attorneys can sign up online with the State Bar to be notified
about pro bono opportunities related to the fires. Contact Sharon Ngim at
Elizabeth Hom at
the State Bar of California Office of Legal Services for questions.
To sign up to become a
Online training and technical assistance are available. Once attorneys have been trained in providing
legal help after a disaster, they can volunteer to provide pro bono legal
services with a disaster response team.
If you know of other opportunities for pro bono help from BLS
members, please contact Dennis Wickham,
The 15 BLS Standing Committees publish eBulletins announcing developments in their area of law and upcoming events open to BLS members. Click here to sign up to receive these eBulletins from any BLS Standing Committee completely free of charge.
Did you know that the BLS maintains a presence on LinkedIn, Twitter, and Facebook where it posts regular updates about new cases, new regulations, key legislative developments, and news and events from the BLS’s Standing Committees? What you may not know is that you can not only send items to the BLS to post or tweet, but also suggest items from your own social media pages for the BLS to re-post, re-tweet, or like. Doing so expands the reach of what you have to say to everyone who likes or follows the BLS on its various social media platforms, and may result in the BLS following you! Please submit your suggested items for consideration or direct any questions to BLS Social Media Coordinator, Reno Fernandez (reno@MacFern.com) and join the ever-expanding discussion!
Standing Committees continue to accept applications to fill vacant seats. Practitioners and other legal professionals who are members of the BLS and who have at least five years of experience are eligible to apply. Membership on a committee affords unique opportunities to participate in the creation of law in your practice area, to get to know and be known by other practitioners, to work with the recognized leaders in your field, and to stay on the cutting edge of developments and practice techniques. Membership is a rewarding experience that keeps one ahead of, and in touch with, business law developments. Most committees meet once a month, often by phone. A description of the required commitment and application process, along with a link to the application, can be found here.
The BLS achieves its goals through the work of its 15 Standing Committees. You are invited to attend the regular monthly meeting of any BLS Standing Committees (see below for meeting dates). These monthly meetings provide attendees an excellent opportunity to chat with committee members and other lawyers with a similar expertise. Some committees even offer free MCLE credit! Please see the contact person listed below to RSVP or request more information. Follow us on Twitter @calbarbuslaw. Use a Standing Committee’s hashtag to search for tweets by that committee in its designated field and to re-tweet.
For a list of upcoming meeting dates and contact persons, click HERE.
Dennis Wickham, Editor-in-ChiefKristina Del Vecchio, Contributing Editor
Cathryn S. Gawne, Contributing Editor
Kenneth Minesinger, Contributing Editor
Corey R. Weber, Contributing Editor
Monique D. Jewett-Brewster, BLS Vice Chair of Publications
Uzzi O. Raanan, BLS Chair
For contact information, see the Executive Committee Roster HERE.
To join the BLS and receive membership benefits