How do we, the legal paraprofessionals, build a consistent, reliable bridge between the attorney and the clerk, while delivering our pleadings through the Court’s gatekeepers?

Whether we are Legal Secretaries, Paralegals or Legal Assistants, we need to ensure that our pleadings are successfully filed without being rejected by the clerk. When filing, we need to comply with both the California Rules of the Court (“CRC”) as well as the local rules of each court. Many of us did not go to law school, so how do we understand the legalese when reading these rules? Even attorneys with decades of legal practice experience may encounter obstacles when their best attempts at compliance with the California and local rules do not satisfy the clerk.

Here are three simple steps that can help overcome those obstacles:

1. Locate the applicable rules
2. Understand those rules
3. Clarify any remaining ambiguity with the clerk

1. Locating the Rules

Since the diminutive, spiral-bound desk books we once received annually have now become obsolete, the best modern day reference is to go straight to the source – the California Rules of Court website, where you can find the CRC’s. Each county’s local rules can be found at http://www.courts.ca.gov/find-my-court.htm, where you can find not only the links, locations, and contacts, but also the proper District for the Court of Appeal for each county.

2. Comprehending the Rules

Foundationally, we must understand the relationship between the Local Rules of the Court and the California Rules of the Court (hereinafter “CRC”). The California Rules of Court (“California Rules” or “CRC”) are rules that govern all the state Courts in California – that is, they apply statewide. They are administered, managed and updated by the Judicial Council of California (“The Judicial Council”), which is a body of highly qualified people employed by the State of California and under the leadership of the Chief Justice of the California Supreme Court, the highest court in our state judicial system. Local Rules cannot supersede the California Rules of the Court. CRC. 3.20.

However, at times, the California Rules often give the “green light” to the Local Rules, providing there is no conflict with higher authority. For example, to open a case, CRC Rule 2.220(a) requires, “The first paper filed in an action or proceeding must be accompanied by a case cover sheet” and that cover sheet “must be on a form prescribed by the Judicial Council and must be filed in addition to any cover sheet required by local court rule.” For example, the Los Angeles Superior Court includes within its Local Rules, LR 2.3(a)(1)(E), which instructs us that a Civil Case Cover Sheet Addendum is required for all new civil case filings in “addition to the Civil Case Cover Sheet required by the California Rules of the Court.” This Civil Case Cover Sheet Addendum is a locally approved form (LACIV109), which can be found on that court’s website. Therefore, to successfully file a first paper and open a new case in the Los Angeles Superior Court, this Civil Case Cover Sheet Addendum must also be filed in addition to documents required by the California Rules, the Complaint and Case Cover Sheet. If this local rule is not followed, your filing may be rejected or sent back asking for that form in order to open your case.

The second most basic rule is to learn to have patience in understanding the grueling legalese in so many of our rules. One way of breaking through the Court’s language as swiftly as possible is to take time in advance.

Here are two ways to get started. Let’s consider how the following two rules work: CRC Rule 1.5 and CRC Rule 1.6.

CRC Rule 1.5, “Construction of Rules and Standards” sets forth a series of requirements that require special attention. In this section, you should notice the mandatory words such as “must,” which are required, as compared to words such as “should,” which are simply strong suggestions. This will help you look out for and locate the words that flag a rule that unquestionably needs to be followed, versus words that may make your life easier if you follow them, but are not mandated.

Second, take a careful look at the definitions set forth in CRC Rule 1.6, “Definitions and Use of Terms.” The context of these rules is not the same in the everyday English we speak. For example, in Rule 1.6 (14), the word “Person” is not just a “natural person” but this word also includes a “corporation.” Who would have ever thought that a corporation would be considered a person when speaking everyday English? It is important to recognize when a term is specifically defined for the Court, and demands certain rules are followed, and when a term is free to be used on Friday night (such as ‘party’).

3. Contacting the Court Clerk

For many of us, the all-important interaction with the Clerk may be the most challenging task of all. As a general rule, it is always best to learn how the Clerk prefers to be contacted, by telephone or email, and then proceed from there. Some courts have designated phone hours. Other courts prefer contact by email. All of this vital information can usually be found on each individual court’s website.

Our communication with the Court will likely be much smoother if we have all the information available: case number, type of hearing, date and question. Just remember to keep your eye on the ball, and that ball is getting the document successfully filed without any delay. Don’t be intimidated by the comportment of the Clerk; these folks are constantly dealing with the public, and often are happy to help a legal professional. Think of yourself and the Clerk working together for a successful filing and representation of your client and strive to do your job in a kind and professional manner. As your career develops, a friendly Clerk who recalls your professionalism and good cheer will almost certainly prove to be one of your most trusted professional contacts.

So, to wrap this up, remember three simple steps: first, locate the applicable rules; second, understand those rules, and third, clarify any remaining ambiguity with the clerk. You got this!

Francie Skaggs is a legal assistant at Coblentz Patch Duffy & Bass LLP. She is the Educational Chair for the San Francisco Legal Professionals Association.

Internal Revenue Code (IRC) Section 1031 allows nonrecognition of gain or loss where property held for investment or for productive use in a trade or business is exchanged for like-kind property held for the same purpose. An issue arising under Section 1031 involves multiple owners of a real estate business entity holding one or more investment properties, where some owners want to maintain their investment while others want to cash out their investment. One common technique when the owners want to go their separate ways with investments is for the entity to redeem the interest of the member in exchange for an undivided interest in the property (a so-called “drop-and-swap”). Thereafter, the entity and the former owner join in the sale of the property to a buyer. Following the sale, the former owner can direct its share of the sale proceeds to a qualified intermediary to be reinvested in like-kind property without recognizing gain.

While California law conforms to Section 1031, the California Franchise Tax Board (FTB) has historically taken a much more restrictive approach than the IRS. Particularly in the area of drop-and-swaps, the FTB has disqualified attempted 1031 exchanges by asserting the step transaction doctrine and examining a series of integrated transactions as a whole. But in 2015, the California State Board of Equalization (BOE) departed from the FTB’s narrow interpretation of the rules, unanimously overruling the FTB’s disallowance of like-kind exchange treatment under Section 1031. The BOE does not often issue formal guidance that may be cited as precedent. However, the 2015 decision—In re Rago Development Corp., 2015-DBR-001— was issued as a formal opinion. The decision involved a “swap-and-drop,” which is an exchange followed by a capital contribution of the replacement property to an entity in return for an ownership interest in the entity. In that opinion, the BOE rejected the FTB’s assertion that the step transaction doctrine should treat it as though the taxpayer had exchanged real property interests for interests in an LLC.

More recently, in August 2018, the new California Office of Tax Appeals (OTA) (which replaced the BOE as an administrative board) issued an opinion rejecting the FTB’s disqualification of Section 1031 like-kind treatment based on the step transaction doctrine. In Appeal of Mitchell, the taxpayer held an interest in a general partnership owning a single property as its sole asset. The majority of the other partners sought to cash out their interest, but the taxpayer wanted to maintain her investment in real estate through a 1031 exchange. A sale of the property was arranged and the partnership redeemed the taxpayer’s partnership interest for a TIC interest in the property. Thereafter, through a qualified intermediary, the taxpayer’s proceeds from the sale were reinvested in qualified property outside of California.

The FTB issued a Notice of Proposed Assessment to the taxpayer in Mitchell, asserting that the transaction did not qualify as a 1031 exchange and that she must recognize gain from the sale of the property. Asserting the step transaction doctrine, the FTB argued that the taxpayer failed to meet the “exchange” requirement of Section 1031 because the partnership, rather than the taxpayer, made the sale of the property and the taxpayer was only a conduit for the sale.. On this point, the FTB stressed the fact that the partnership, and not the taxpayer, negotiated the sale of the property with the buyer. Additionally, the FTB asserted that the taxpayer did not satisfy the holding requirement for a Section 1031 property because she only held her TIC interest in the property for two days—the days between the redemption of her partnership interest and the sale of her TIC interest in the property to the buyer. The OTA disagreed.

As to FTB’s argument that the step transaction doctrine applied, the OTA referred to the Tax Court and Ninth Circuit decisions in Magneson v. Commissioner, 753 F.2d 1490 (9th Cir. 1985) and Bolker v. Commissioner, 760 F.2d 1039 (9th Cir. 1985) to ignore the series of integrated transactions accomplishing the exchange. In Magneson, the court acknowledged that combining the steps of a transaction may not be appropriate if the transaction could not have been achieved directly. In Mitchell, the fact that some of the partners sought to cash out their investment while others sought to continue their investment presented such a situation. The OTA also rejected the FTB’s support for the argument that the transaction failed because the taxpayer did not negotiate directly for the sale, since the taxpayer worked directly with the managing partner and the partnership’s attorney in structuring the multiple steps leading up to the sale. Further, in response to the FTB’s argument that the taxpayer did not “hold” the property for investment, the OTA explained that Section 1031 does not require ownership of the relinquished property for any period of time. Moreover, citing Bolker, the OTA noted that courts have allowed simultaneous or immediate transfers of replacement property following an exchange.

A potential distinction between the facts of Mitchell and Magneson is the nature of the interests held by the taxpayers. While both cases involved general partnership interests, Magneson involved a limited partnership and Mitchell involved a general partnership. While the court in Magneson did focus a significant portion of its opinion on the nature of a general partnership interest, it did not make any distinction based on which type of partnership the general partner held its interest in. Rather, the opinion explained the similarities between holding property via a general partnership interest and through a TIC interest. This portion of the decision, however, was mostly aimed at distinguishing partnership interests from corporate shares. Ultimately, the court in Magneson focused much more on the underlying property, providing that the “critical basis for [the] decision is that the partnership, in this case, had as its underlying assets property of like kind to the Magnesons’ original property, and its purpose was to hold that property for investment.”

In both Magneson and Bolker, the court reasoned that the individual transactions in either series would not have triggered a tax, and therefore the combination of transactions should not have triggered a tax. Following this reasoning, the OTA found that the transaction involved “the use of a series of reasonable, necessary, and integrated transactions to delay, not avoid, the recognition of gain, which section 1031 allows.” These decisions by the BOE and the OTA are an indication that California may be finally aligning itself with the federal standards for qualifying 1031 exchanges (although the FTB has not yet decided whether it will request a rehearing).

For more information, contact Tax Partner Jeffry Bernstein at jbernstein@coblentzlaw.com. Research analysis provided by Jessica N. Wilson.

The California Supreme Court recently issued its long-awaited opinion in Dynamex Operations West v. Superior Court, clarifying the standard for determining whether workers in California should be classified as employees or independent contractors. To ensure conformity with the Court’s ruling we recommend a review of your independent contractor relationships. Given the potentially very high costs of misclassification – multiple violations of California and Federal wage and hour laws with attendant back pay, overtime, penalties, interest and attorney fees – it is prudent to confirm that your agreements are fully compliant.

The Dynamex Court held that individuals are employees unless the entity classifying the individuals can shoulder the burden of establishing that they should, in fact, be independent contractors under the ABC test. To meet the ABC test, each of the following three factors must be established:

A. That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

B. That the worker performs work that is outside the usual course of the hiring entity’s business; and

C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Factor A which requires that the worker must be free of the control of the hiring entity in the performance of the work can be based on a myriad of related factors evidencing control of the employer over the worker’s performance of work, including whether the worker supplies his own tools or controls the specific details of his work, without interference by the hiring entity.

Factor B mandates that to be considered an independent contractor, a worker must perform work that is outside the usual course of the hiring entity’s business. To illustrate the meaning of the “usual course of business,” the Supreme Court gave the example that “when a retail store hires an outside plumber to repair a leak in a bathroom on its premises or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store’s usual course of business and the store would not reasonably be seen as having “suffered or permitted” the plumber or electrician to be working as its employee. On the other hand, “when a clothing manufacturing company hires work-at-home seamstresses to make dresses form cloth and patterns supplied by the company that will thereafter be sold by the company,” or “when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes,” the works are part of the hiring entity’s usual business operation and the hiring business can reasonably be viewed as having suffered or permitted the workers to provide services as employees” and not as independent contractors.

Factor C which requires that workers must be customarily engaged in an independently established trade, occupation or business of the same nature as the work performed, requires a showing that the worker has “independently made the decision to go into business for himself or herself.” Such workers would be expected to have taken “the usual steps to establish and promote his or her independent business,” for example through “incorporation, licensure, advertisements, routine offerings to provide the services of the independent business to the public or to a number of potential customers, and the like.”

One final note, the Dynamex ruling only applies to wage orders, which set rules on minimum pay and basic working conditions such as meal and rest breaks. While the decision does not directly apply to other employment claims, such as workers’ compensation claims or tax claims, it seems probable that trial courts and courts, in general, will apply the Dynamex case to other California labor code claims that protect workers’ rights. Indeed, the case will likely trigger more litigation over each of the three factors and what they really mean, as applied to various types of workplaces.

For further information on determining whether workers in California should be classified as employees or independent contractors, or assistance in reviewing your employee agreements for compliance, contact Coblentz Employment lawyers Fred Alvarez or Hannah Jones.

Authored by Lindsay Gehman; Originally published in The Daily Journal, May 24, 2018.

Advertisers continue to utilize influencer marketing as an effective means of connecting with their target consumers and achieving a high ROI.  As such, it is imperative that advertisers and influencers enter into written agreements at the outset in order to ensure an effective campaign and a mutually beneficial relationship between the parties. Written influencer agreements allow the advertiser and influencer to get on the same page about expectations and risk allocation in order to help prevent future disputes.

Here are five essential provisions of every influencer agreement, which are drafted from the perspective of the advertiser/agency. Another key consideration when drafting influencer agreements from the agency’s perspective is to ensure that the influencer agreement (just like any other vendor agreement) ladders up to the agreement between the agency and its client, the advertiser, as tightly as possible.

Content Ownership and Rights

It is imperative to specify who owns the content created by the influencer. If the influencer retains ownership and the advertiser only receives a license to use such content, the scope of such license should be drafted as broadly as possible, both in terms of what the advertiser may do with the content (i.e., repost, create derivative works, etc.) and the type of media it covers (i.e., the advertiser’s website and social channels, broadcasts, publications, etc.). In connection with these rights, the influencer should also provide a license to use his or her name, blog name or social media handle, likeness, voice, image and testimonials to the advertiser in connection with the use of the content.

Exclusivity

In some cases, advertisers expect that they will be the only brand featured in the content they are asking the influencer to create. Accordingly, the influencer agreement should include a clause that prohibits the influencer from monetizing the content in any way without the advertiser’s consent. In addition, advertisers oftentimes expect that the influencer will not work with a competitor of the advertiser during the campaign and sometimes for some period thereafter. In such cases, the influencer agreement should include an exclusivity provision that lists the competitors that are off limits as well as the term of the restriction.

Termination

Because digital campaigns are fluid and can change on a dime, advertisers typically require broad termination rights that allow them to terminate the influencer agreement without cause on little to no advance notice. On the flip side, since influencers are typically selected for their unique expertise or influence (and are therefore difficult to replace), advertisers seek to limit the influencer’s ability to terminate without cause. In terms of what the influencer must be paid in the event of early termination, advertisers typically push for paying only for deliverables that have been accepted prior to the termination date.

Regardless of where the termination notice period nets out, advertisers should include a morals clause that allows them to terminate the influencer agreement immediately in the event the influencer violates any law or if the influencer’s conduct violates generally acceptable standards of behavior such that the advertiser’s association with the influencer could damage the advertiser’s reputation. Related to this, a clause that requires the influencer to take down any content featuring the advertiser from the influencer’s website or social channels upon the advertiser’s request should be included.

Representations, Warranties, Covenantsand Indemnification

In addition to standard representations, warranties and covenants like authority and no conflict, advertisers will also want influencers to represent, warrant and covenant that the influencer has obtained all rights and licenses necessary for the advertiser to use the content, that the content will not infringe or violate any intellectual property rights and that the content will comply with all applicable laws, rules and regulations, including the Federal Trade Commission’s then current Guides Concerning the Use of Endorsements and Testimonials in Advertising and the applicable social media platform’s terms of service.

Advertisers will also expect the influencer to indemnify the advertiser in certain instances, including if the influencer breaches the agreement or if the influencer acts in a negligent or willful fashion.

Social Media Policy

To the extent the advertiser has its own Social Media Policy – which every advertiser should – that Social Media Policy should be attached to the influencer agreement as an exhibit, and the influencer should be required to comply with the policy. Social media policies typically include practical guidance around disclosures, the editorial process and other “best practices” that the influencer should follow.

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