May It Please The Court: Weblog of legal news and observations, including a quote of the day and daily updates
 Bookstore:        |
Quote of the Day - I began wearing hats as a young lawyer because it helped me to establish my professional identity. Before that, whenever I was at a meeting, someone would ask me to get coffee...
Directors And Shareholders Can't Switch Hats During An Adversarial Shareholder Derivative SuitIt's a fact-specific nightmare to unravel, but when a director of a small, closely-held corporation files a shareholder derivative action against the company, the shareholder can't just switch back to his or her position as a director and demand unfettered access to all corporate documents. That's double true, especially documents protected by the attorney-client privilege, even where the attorney at one time represented the corporation. Here's how the court of appeal in Tritek Telecom, Inc. v. Superior Court put it: "Mak filed this action to enforce his inspection rights as a director after he filed the shareholder action against Tritek [the corporation] and Rerolle [the other shareholder/director] in his individual capacity as a shareholder to vindicate his personal rights. Accordingly, Mak is not a disinterested director and the presumption of good faith does not apply. Additionally, enforcing Mak's "absolute" inspection rights in this case is problematic because it gives him access to documents he could not obtain via discovery in the shareholder action." The court continued, "Although Mak is still a Tritek director, his filing of the shareholder action makes him Tritek's adversary. Mak cannot take off his 'shareholder's hat' and swap it for his 'director's hat' and claim an absolute right to access all corporate documents. In this situation, a court may properly limit a director's inspection rights because the director's loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director's personal interest in obtaining damages against the corporation. (La Jolla Cove Motel and Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 787-788 [corporate counsel has no duty to disclose privileged information to dissident director with which the corporation has a dispute].)" Finally, the court ruled, "Accordingly, we conclude that a corporate director does not have the right to access documents that are covered by the attorney-client privilege and were generated in defense of a suit for damages that the director filed against the corporation." Just follow the bouncing ball. It all makes sense then. Insurers Not Allowed To Avoid Covering The State For Environmental LiabilitySix insurers issued insurance policies to the State of California during the sixties and seventies for a two- or three-year period. Using an argument called "anti-stacking," the insurers sought to limit their coverage for pollution claims arising from the Stringfellow Acid Pits in Riverside to just one year. The cost to clean up the Acid Pits is estimated to be as high as $700 million. It's important to date these policies, because prior to 1973, most insurance policies defined an "occurrence" as "an accident or a continuous or repeated exposure" and provided coverage for environmental pollution or contamination. After 1976, the coverage switched to "sudden and accidental," which somewhat limited pollution coverage, but not completely. Insurers were still required to defend their customers against claims for contamination. In this lawsuit, State of California v. Continental Insurance Company the six carriers tried to convince the court that the State should not be allowed to "stack" its policies - one on top of the other - in order to gain what they alleged amounted to more coverage than the State was entitled. In other words, the insurers tried to limit the state to recovering only under one policy instead of two or three, limiting their coverage to $48 million. As an added bonus to the insurers, since the State had already collected $120 million from other carriers, they claimed an offset, essentially reducing their liability to the State to zero. That's zero, zip, nada, butkus, nothing, also commonly known as $0.00. The Court didn't see it that way, and allowed the State to stack its policies, clearing up what had previously been conflicting court of appeal rulings on the issue. As a consequence of this conflict, however, we can expect that the insurers will appeal to the California Supreme Court, which may elect to take the case to eliminate the ambiguity. The Court ultimately ruled, "If an occurrence happens entirely within one policy period, the insured has paid one premium and can recover up to one policy limit; however, if an occurrence is continuous across two policy periods, the insured has paid two premiums, and can recover up to the combined total of two policy limits. We see nothing unfair or unexpected in this." The court said that none of the policies had an "anti-stacking" provision in them, and the court wasn't going to rewrite the policies to add one. Therefore, the insurers are going to have to pay a lot more than the zero they got in the trial court, and a lot more than the $48 million they claimed as a maximum limit - more than likely over $80 million by MIPTC's estimate. That's zero to 80 in just one appeal. Almost a speed record. 2009 Legal News: The Fourth Annual Legal Louie Awards2008: The Legal Year In ReviewLooking back on this past year in legal news, there's been a lot of ups and downs even though the economy has spiked that graph chart in a downward direction. MIPTC once again jumps into the fray of those with 20/20 hindsight vision with its Fourth Annual Legal Louie Awards, a tongue-in-cheek look at last year's legal news. Why a "Legal Louie?" Louie was my grandfather's barber, who always had an opinion about legal shenanigans. Grandpa Walker called him "three-spin Louie," because once you sat in the barber chair, just three spins later you were out. Here's a round-up review of the legal news for 2008 and the resulting awards for the best and worst, in multiple categories: Worst TV Legal Show: Last time, Boston Legal won. This year, it qualifies for this category only because ABC took it off the air. What were they thinking? Don't ask me. Write to ABC. Best line from the show? "Maybe we can find a new network that cares." No kidding. Best TV Legal Show: Perry Mason via the beta Google video network. Sometimes, nostalgia is good, especially when there's few current worthwhile choices for this category. Worst Legal Decision: The California Supreme Court decision(s) upholding same-sex marriage, Proposition 8 outlawing it and then the California Supreme Court's election to hear challenges to Prop 8. Who's in charge here? Best Legal Decision: The California Legislature passed a law outlawing texting while driving, as a follow-up to the earlier law requiring hands-free cell phone devices while driving. My only question -- why didn't they think of both laws at the same time? Runner up? We still have a Second Amendment, thanks to a 5-4 Supreme Court decision. Worst Jail Sentence (pending): Eliot Spitzer. Here's a guy who takes on the world, starts to shut down the bad guys and then can't keep his zipper up. Best Spitzer joke? "He's the only politician who went to D.C. and left with less money than he came with." Runners up? There are almost too many to count. "Rudyard Rod" Blagojevich (current Illinois governor who is alleged to have senate seats for sale - he's almost a tie with Spitzer just on the basis of chutzpah). Former [yes, it's capitalized because it's now become a title, not an adjective] Senator Ted Stevens (convicted of making false statements on a financial form). Senator Larry Craig (weaseling out of a guilty plea that he solicited gay sex in a public bathroom at an airport). Then there's former White House Press Secretary Scott McClellan. (his book and PR tour admits he helped his bosses lie to us about policy decisions). Notice the consistency here? They're all politicians. Surprise! Best Jail Sentence: Nine to 33 years. Finally, O.J. gets a sentence he deserves. Best line of the sentencing hearing? "I didn't know whether Mr. Simpson was arrogant or ignorant or both. During the trial, I got the answer, and it was both." Worst part of the hearing? Figuring out how long O.J. will be in jail. I listened to Clark County Judge Jackie Glass as she sentenced O.J., but along with the rest of the legal community, it took a call to her Court Clerk to figure out what she meant. Worst New Legal Trend: MySpace crimes. It's hard to believe that the anonymity of the Internet has sparked crime sprees [tongue planted firmly in cheek here]. Best New Legal Trend: Online legal directories, such as Avvo and the consolidation of legal blogs and podcasts. The blawg is coming of age and starting to make money. Saddest Legal-related Event: The departure of Heller Erhman, Thelen, Brobeck and a host of other big-firm dissolutions. The economic shakeout hit the seemingly impervious business of law. Most Hopeful Legal Event: A Nebraska State Court judge dismissed a lawsuit against God, saying he wasn't served properly. But if God is all-knowing . . .? Worst Government Moment: Sarbanes-Oxley, the omnipresent reporting requirement where company lawyers and government overseerers worried about whether to report a janitor taking a roll of toilet paper, all while Wall Street lay waste to the world's economic system, starting with a 10.5 richter-scale earthquake otherwise known as the subprime crises. Can't wait for those aftershocks. Runners up? Madoff, Mark Dreier, any one of the Big 3 CEOs on a private jet to Washington, D.C. to ask for bailout money, AIG executives enjoying a $440,000 spa trip at the St. Regis here in Dana Point. I could go on, but you get the point. Runner up? Maybe the SEC. Best Government Moment: The FCC's auction of the wireless band spectrum. Finally, we get some innovation. Runner up in the oxymoron department? Citified wi-fi. Whatever happened to the promise of universal wireless coverage? Guess there was no money in that service. With that, we wrap up this year's awards, with three spins of the barber's chair. To relive those old barbershop times, if you'd like to share your comments, the comment feature below is open.Finally, The Name Equality Act Of 2007 Goes Into EffectNow, if you're a man and want to adopt your wife's last name, it's legal without having to pay the fees and costs to go through a name change. It's the Name Equality Act of 2007, and while it was signed by the Governator in 2007 and went into effect in 2008, it didn't start applying to marriage licenses issued after January 1, 2009. So now, all you Snodgrasses out there can legally adopt Smith (if that's your wife's name). Congratulations and best wishes. I never know which one applies to the man. Don't Take A Page From This Book: How To Ignore The Government In Three Easy StepsJohn and Ned Roscoe owned The Customer Company in Galt, California. The company operated an underground storage tank that leaked some 3,000 gallons of gas. A TCC employee, John Johnson, properly notified the Sacramento County Environmental Management Department of the leak. The SCEMD turned around and sent letters, notifing TCC that it had to clean up the fuel that leaked. Unfortunately, John Roscoe treated these notifications as "form letters" and simply routed them on to Johnson, but neither Roscoe nor Johnson did anything to follow up on the County's orders to clean up the fuel. Had TCC timely cleaned up the fuel, it would have cost the company about $400,000. Because the "clean up" dragged on unattended for so long and without any progress, the SCEMD decided to remediate the problem itself. Largely due to the delay, the fuel spread out over a wider area and cost more to clean up. A total of $1,500,000. To recover these costs, SCEMD filed a civil case against TCC and the Roscoes individually. After a 12-day court trial, the judge issued a 44-page opinion, which assessed TCC and the Roscoes with $2,493,250 in penalties. Ouch. The Roscoes filed an appeal, seeking to avoid personal liability under the "responsible corporate officer doctrine." They argued, essentially, that they were shielded from liability by the corporation. The Court observed that the SCEMD had to prove three things to find the Roscoes individually liable: (1) the individual is in a position of responsibility that allows the person to influence corporate policies or activities; (2) there must be a connection between the individual's position and the violation in question allowing the individual to influence the corporate actions which constituted the violations; and (3) the individual's actions or inactions facilitated the violations. Here, the Court found the Roscoes neatly fit all three elements, and imposed the penalties. Plus, they observed that the Court fined the Roscoes only $1,000 a day when the statute allowed a maximum penalty of $5,000 a day for the violations. Such a deal for a series of form letters. Happy New Year! Especially If You Just Woke UpThe tame new year rolled in last night one second late, but many of us who watched the ball drop used up more than that extra second this morning. Hope you had a safe, pleasant last night, and a healthy, prosperous new year! Way to go Hawkeyes in the Outback Bowl - 31 to 10 over South Carolina (yes, it played here on the left coast at 8:00 a.m.) Now we just need Penn State to beat USC. Lawyer2Lawyer Internet Radio Gazes Into The 2009 Crystal BallWhat a year it has been! From the economic crisis, to the auto industry bailout, foreclosures, the collapse of Lehman Brothers, the election of Barack Obama and many important court decisions. Please join me and my fellow Law.com blogger and co-host, Robert Ambrogi, as we welcome returning guest and prediction guru, Stephen L. Kaplan, partner in the Orange County, California office of Hicks, Mims, Kaplan and Burns to discuss his 2009 predictions and you'll find out his track record! Give a listen and send in your own predictions! 
Shameless Self-promotion: Vote For Lawyer2Lawyer PodcastJust in case you haven't voted yet (yes, it's way past November), here's your chance. The American Bar Association Blawg 100 nominated Bob Ambrogi and my podcast, LawyerLawyer for the top podcast for 2008. So hustle on over to the ABA Blawg 100 vote-for-your-favorite-podcast site, and click on Lawyer2Lawyer as your favorite podcast. It's the most fun you can have with a vest on. Thanks for checking the box!
|
|||||||||||||||||||||
| Text-Only Site | ||||||||||||||||||||||
