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The Court Writes Another Boring Indemnity Opinion - Or So They Say

Before reading this post, read this warning first, directly from the Court:  "Indemnity is an inherently dull subject anyway, and reading even the most pellucid indemnity opinion generally takes much longer than reading an equivalent length opinion."  In its footnote at the end of this quote, the court continued,  "The comedy troupe Monty Python once made the subject of insurance -- insurance of all things -- the butt of a comedy skit.  But we doubt that even comedians of their caliber would try to make “indemnity” the topic of comedy.  It is a topic so deadly dull that it makes insurance look interesting.  That is not to say, however, that the topic is not of vital importance in many commercial contexts, particularly in California’s construction industry."

You can't say I didn't warn you. In fact, MIPTC has covered indemnity opinions before, and adds this important new one to its treasure trove, at the expense of boring you to death.  Indeed, the court "wades" through some twenty pages of its review of indemnity cases, and warns us again:  "There is also the problem that, generally speaking, indemnity cases are hard to read and easy to forget."  Here too, that is true.  While the opinion is exceptionally well-written, it's 82 pages long, including a 10-page dissent.  Nonetheless, it should be required reading for anyone dealing with this area of the law.

Forewarned is forearmed, so off we go.

Here's the root of the problem:  If a subcontractor is found innocent of contributing to construction defects where a developer was sued by upset homeowners, then is the sub excused from the indemnity provision requiring the the subcontractor to defend and indemnify the developer where the developer is sued by homeowners for defects not caused by the subcontractor?

Hold on to your seats here if you're a subcontractor:  the answer is yes, if the claim arises out of the subcontractor's work.  Yep, you didn't do anything wrong, but you still have to pay.  Before you get too riled up, check to see whether the indemnity provision in footnote 2 of this case is the same as yours.  Most likely, however, it is, since it's a fairly commonly used indemnity provision.

You might not be too surprised, though, if you had read this language in the "almost no fault" indemnity provision you signed:  you agreed to "...to insure [the developer's] interest from loss to the premises resulting from fire, earth settlement, earthquake, theft, embezzlement, riot or any other cause whatsoever..."  It's that last part that got you into trouble.  "any cause whatsoever" is very broad.

So broad, in fact, that the Court essentially interpreted it as a "almost no fault" clause, requiring you to defend the developer even if the developer got sued through no fault of yours, if and that's a big if, your developer was sued from something arising out of your work.  Here, the developer was sued for window leaks, and the window manufacturer refused to defend and indemnify the developer.  Even though the window manufacturer was ultimately found not liable for the window leaks - innocent/not guilty - the developer was found liable for other things.  The window framer, on the other hand, was found responsible - to the tune of some $700,000 in damages. 

Plus, the court found that there was no disparity between the developer and this particular sub (a manufacturer)  - both were of substantial size and equally capable of negotiating the contract between them.  That is not the case between small-time subs and big developers, and likely a similar indemnity provision in that single circumstance would turn out differently.  Even so, the trial court found that the sub had to pay the developer's attorneys fees and costs, but did not require the sub to indemnify the developer since the sub was found to have done nothing wrong.

What appeared at first to be a double whammy was in fact, a fair decision given the language of the agreement entered into between the parties.  The moral of the story?  Be careful what you sign, and have good insurance.

Posted by J. Craig Williams on Saturday, February 04, 2006 at 12:51. Comments Closed (0) |

If You Have To Walk A Mile For A Camel, Then Does Your Employer Have To Pay You?

If your employees have to park a long way from work and you offer voluntary transportation to and from the parking lot and your place of work, do you owe those employees wages for the time spent transporting them?

This question isn't one that many businesses have to answer, but as you can imagine, a big business or one with an place of work where there's a shortage of parking spaces will likely want to know the answer to this question.  Right off the bat, I can think that ski resorts, agricultural operations, amusement parks, entertainment facilities (think downtown sports arenas), companies with off-site operations and a host of other businesses may be affected by enterprising employees seeking a bit of extra compensation.

That's the situation that Disney faced from an employee at Disneyland who parked a mile away from work and rode a company shuttle to and from the parking lot to the park.  He wanted to get paid for that time.

The California Supreme Court for the most part already addressed this problem, and created a test:  are the employees subject to the company's control ("forced" to ride the bus)?  If so, then the employer must pay the employees for "hours worked."  The Court noted that federal wage and hour law is different than California's, so you will need to check federal and other state law if your business is not in California or you are subject to federal wage laws. 

Here, however, Disney offered its employees innumerable options to get to work, some that included being dropped off in front of the park, carpools that had closer parking spots and others that did not require use of the bus.  For that matter, the employee could have walked or bicycled the mile between the parking lot and the park.

The Court held for Disney and against the employee, and the class of other employees he was trying to bring into the action, reasoning that since the employee had so many options, the employee wasn't forced to ride the bus as the only option between parking and work.

Posted by J. Craig Williams on Friday, February 03, 2006 at 11:55. Comments Closed (0) |

These Clothes Make Me Look Fat, So I Think I'll Sue The Designer

Regular readers will know that I'm being sarcastic with that headline, but the trouble with sarcasm is that it almost always has a grain of truth in it.  This sarcastic headline refers to this grain of truth about a man who's suing Apple over of his iPod, claiming that use of the device might cause hearing loss in people who use it.  He wants more warnings placed on the device. 

Let's see.  You stick small speakers so deep into your ears that no one else can see them, you turn up the volume so far that the only signal your brain sends to your eyes is that twenty-year old Maxell poster of the speaker facing the listener with his tie flying in the wind, the lampshade blowing and his martini spilling over, and you seriously think that you need to be warned your hearing might suffer?

Get real.  I wonder if this is the same guy who filed suit against McDonald's claiming that fries made him fat?

A couple of disclaimers here:  I don't own stock in Apple, I don't use a Mac (couldn't even turn one on if I tried), I don't own an iPod, but MIPTC's podcasts are listed on iTunes, presumably a subsidiary of Apple.  So in some distant, far-removed way, I suppose, Apple tangentially supports my podcasts.  Whew!  I feel better, don't you?

Anyway, I'm a child of the 70's, and although we probably didn't, we claim to have invented loud rock 'n' roll music, so I don't have a lot of sympathy for the if-I-turn-up-my-music-loud-I'll-go-deaf iPod guy. 

Now if he was listening to a Maxell cassette tape....

Posted by J. Craig Williams on Thursday, February 02, 2006 at 21:04. Comments Closed (0) |

Pirates, Finders-keepers And Sunken Treasure

As we grew up, each of us at some time uttered the words, "Finders-keepers" after the joyous glee of discovering some previously unknown treasure with a value we perceived would make us rich, and all the while safe in the knowledge that if we invoked that mysterious incantation, title to our discovery would pass to us with all the certainty of our ownership good against the entire world of others who might lay an unjustified claim to it.

The Fourth Circuit, on the other hand, now tells us that we were just "a step away" from being labeled a pirate.  Not the fanciful pirates we discovered at Disneyland, but the type of pirates the Court holds in disdain and who pillage and plunder the treasure of the high seas for their own profit.  Unless, that is, if you choose to believe the Fourth Circuit over the French government.

What am I talking about?  The R.M.S. Titanic, a British ship sailing under a British flag, owned by a British company, late of that British port, Southampton, that never made it to the United States, having struck an iceberg some 400 miles off Newfoundland, Canada, sinking to the ocean floor less than three hours after the collision.  Think about that for a moment:  English ship, sunk off Canada.  What are U.S. Courts and French Courts doing trying to exercise jurisdiction over the salvage efforts of the goods aboard the ship?  First and foremost, the salvagor, the RMS Titanic, Inc., submitted to the jurisdiction of the U.S. Court after obtaining title to some 1,800 artifacts in 1987 from a French Administrative Agency.   

Only a pirate would know why.  In fact, those were the words of the court in denying RMS Titanic, Inc. title to the items discovered at the bottom of the sea:  "A free finders-keepers policy is but a short step from active piracy and pillaging," Judge Niemeyer wrote.  The Court elected to respect the French ruling, but ultimately decided not to grant the salvage company full ownership rights to the sunken treasure. 

The Court was troubled most about the salvagor's attempt to get two bites at the apple:  finder's rights as a consequence of the artifacts in its possession and at the same time salvagor's rights over the articles at the bottom of the seabed that were not yet in its possession.  Salvage rights, in admiralty law, are designed "to give[ ] potential salvors incentives to render voluntary and effective aid to people and property in distress at sea."  As the Court properly noted, it's a little late for that incentive now, but instead noted that unless sunken treasure is ancient, and no one could possibly appear in court to lay claim to it, then the title to the goods lays with the original owner (now insurance companies), and the property is not deemed abandoned. 

Therefore, since it's not abandoned, you can't apply the law of "finds" (finders-keepers) to the undersea property.

It makes sense, but it's too bad.  I kind of liked being a pirate. 

Posted by J. Craig Williams on Wednesday, February 01, 2006 at 23:48. Comments Closed (0) |

Incentivizing Trust Babies To Work For Their Inheritance

If you're paying your taxes and not otherwise using unscrupulous tax shelters, then you might want to consider how what you've earned gets passed on to your children, grandchildren and heirs.  There a number of alternatives out there, including generation-skipping trusts such as dynasty trusts, as well as other planning mechanisms to consider.  But the New York Times points out a "new" (it's been around for about fifteen years) twist to estate planning called the incentive trust.

The idea behind the "incentive" helps parents or grandparents avoid creating trust babies who inherit money, but lose their elders' drive that led to the fortune in the first place.  Some incentive trusts dole out "dollar for dollar" - your heirs will receive a dollar for each dollar they earn.  There are other provisions that allow for partial, lump-sum payments upon achieving certain life milestones, such as graduations, religious events, marriages, births and the like.  Still others are tied to performance of some type such as obtaining a job, a promotion, even positive performance reviews. 

There are no standard set of guidelines, and to be sure it's important to consider flexibility in the terms of the trust to allow for differences in your heirs' earning capacities, interests and unfortunate events like an injury or disability that may prevent achieving the measurements detailed above.  Many trusts allow for a safety net as a catch-all for heirs that may fall outside strict achievement guidelines, but nonetheless within the category of a deserving heir.

Critics, on the other hand, complain that incentive trust end up exerting too much control over the lives of the heirs.

In some ways, these trusts are a variant of an ethical will, and constitute an effort by the parents and grandparents to pass along their values to their children and grandchildren.  Since very few incentive trusts have been challenged in court, there's little guidance for lawyers out there trying to put these wishes into words.  Contrary to most legal documents, however, flexibility may be a crucial key to the success of the trust and help avoid litigation.  Perhaps most important, choosing a strong, but flexible trustee who understands the family dynamic will allow heirs to receive the family fortune, and at the same time ensure that the heirs earn their way instead of inheriting it.

In other words, if you had to choose a second father, mother or guardian for your heirs, who would you pick to manage your money and transfer it to your heirs according to your wishes?

Posted by J. Craig Williams on Monday, January 30, 2006 at 22:59. Comments Closed (0) |

Off-duty, Non-required Physical Activity Not Covered By Work Comp

If your employer requires you to stay in shape in order to do your job (such as a fitness trainer, a dancer or performer, certainly as here the police and fire departments), and you elect to play in a pickup basketball game "in order to maintain cardiovascular fitness," are you entitled to worker's compensation benefits if you're injured in that game?

Probably not, and in this case, definitely no.

How about a league sponsored by your employer?  Does that make it a closer call?  What if your boss plays on the team and encourages you to play?  What about a company picnic?  Most of the cases cited in this opinion rule against providing such benefits.

The court said that it turns on the statute added back in 1978, California Labor Code section 3600.  The Court said the injury is covered when "the employee is performing service growing out of and incidental to his or her employment and is acting within the course of his or her employment" and "the injury is proximately caused by the employment, either with or without negligence."

That pretty much leaves out most off-work, non-required voluntary physical activity.

Posted by J. Craig Williams on Sunday, January 29, 2006 at 11:48. Comments Closed (0) |

Coast to Coast Looks At The Role Of DNA Evidence In Criminal Convictions

Our internet radio program, Coast to Coast, on the Legal Talk Network and co-hosted my fellow Law.com blogger, Robert Ambrogi, looks at how DNA is being used in many cases to prove previously convicted people innocent of crimes for which many have served decades in jail.  You'll hear about the Innocence Project, a non-profit legal clinic founded by Barry Scheck, of O.J. Simpson trial fame and his partner, Peter Neufeld, which has freed 172 wrongly convicted men and women.  We have two guests on this week's show.

Joining us is Attorney Robert N. Feldman, partner at the Boston firm, Birnbaum & Godkin, LLP, and one of the founders of the New England Innocence Project.  He is a lawyer with the firm Birnbaum & Godkin, LLP and also one of the founders of the New England Innocence Project.  Rob represents wrongly convicted individuals who are seeking compensation for false conviction and imprisonment.  His practice also focuses on civil business litigation … with clients ranging from large public companies to new businesses and individuals.

Also joining us is Attorney Josh Marquis, has been District Attorney of Clatsop County (Astoria) Oregon, since 1994.  He is currently Vice President of the National District Attorneys Association and a member of that group's governing Executive Committee.  Attorney Marquis is a former president of the Oregon District Attorney's Association and has served on the Board of Directors of the since 1997.  He is also a frequent guest on national radio and television programs discussing criminal justice and has written extensively on capital punishment and debated the subject from Oregon to Mexico to Brussels.

Posted by J. Craig Williams on Saturday, January 28, 2006 at 23:23. Comments Closed (0) |

Can Skiers And Snowboarders Co-exist In The Slopes Of The Court Of Appeals?

MIPTC is off to the local slopes tomorrow for a bit of the (unfortunately mostly man-made) white stuff, but this case gave me a bit of pause before going.  Regular readers know that I've been skiing since college and previously qualified as an almost-official ski bum, having taught my way through school and on-and-off since then when I can get away.

No, I don't snowboard, and yes, they whizz by me almost as fast as I whizz by them (in self-defense, of course) and there are always two thin, long planks tied below this skier's feet, now somewhat shaped to add some depth to those carved turns.  When I stop and watch those crazy snowboarders, though, I sometimes think of the attendant liability associated with skiing and snowboarding, especially when the two collide.  It's the bane of being a lawyer.  I see risk where others ignore it.

Every season, the obligatory appellate case(s) come out and remind us that skiing and snowboarding are dangerous sports.  They each cite back to the general rule that you assume the risk of injury unless the resort does something grossly negligent to increase your risk.  Those waivers on the back of your ticket actually work.  Most ski resorts do nothing of the kind, and consequently, the plaintiffs who bring "I-was-injured-on-your-slopes-so-you-owe-me-lots-of-money"cases frequently lose.

I haven't conducted a scientific survey, but since I've been a lawyer, I've read most of these cases because of my interest in skiing and believe that something like 95% of them are losers for the plaintiff.  Yet they keep coming.  So when I read a second recent case, again involving Mammoth Mountain, I was surprised that the Plaintiff won, but actually not too surprised.

So go ahead, snowboarders, get your pen at the ready and your keyboard warmed up to complain. 

I wasn't surprised because both cases turned on one fact:  the courts ruled for the plaintiffs, and sent the cases back to the trial court to determine whether the snowboarder's conduct was so reckless that there was no assumption of the risk.  In the first case, a snowboarder ignored his coach's instructions, went on a steep run he'd never skied before, "raced" against his friends, didn't pay attention to where he was headed, and at the last minute smashed into a skier standing alongside the run, and hit the skier so hard that they both flew 50 feet in the air. 

Here's how the court put it the resulting damage:  the standing skier "suffered severe injuries. The impact shattered her ankle and broke her lower leg into 16 pieces. Her right tibia and pelvis were fractured, the muscles and tendons in her thigh were torn, and she was bruised throughout her body.  The surgeon who operated on her equated her bone fractures with those suffered in a car or motorcycle accident."

The snowboarder was unhurt.

Is it hard to imagine why snowboarders are held liable?

Posted by J. Craig Williams on Friday, January 27, 2006 at 21:44. Comments Closed (0) |

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