Spring, 1995
Headline, San Jose Mercury News: "Drunken Driver Gets 10 Years".
The 1995 new year has brought a number of statutory changes and new laws. The impaired driver laws have now become so severe, no rational justification exists for mixture of the two activities, in any degree. First and second offense yardsticks now span a "seven year" period, meaning the frolics of youth can come back to haunt a person with working and family responsibilities. Mandatory jail time, fines, court costs, restitution, license suspension, and intensive alcohol programs dominate the penalty schemes. First offense, with summary probation requires a minimum 48 hour jail stay; while a second within seven years means at least 10 days jail time. Further "bite" in the law is added by the enhancement provisions: mandatory court cost assessments, up to 60 days additional jail time for conduct which includes driving 20/30 mph over the freeway/residential speed limits respectively; limitation of probation terms where the BA is .20% or greater; mandatory installation of a certified interlock device; and potential designation as a "habitual offender".
Other laws: The legislature by enactment of Civil Code Section 1708.7 has established the tort of "stalking", allowing for the recovery of compensatory and punitive damages. The elements of the tort include engaging in a pattern of conduct with the intent to alarm, follow, or harass, and with the result that the victim reasonably fears for his or her safety or the safety of an immediate family member. In pure legal terms, it is my opinion this is a bold but welcome move on the part of the legislature. The threat and cost of litigation is a much needed embellishment of the traditional "stay away orders"-civil harassment statute.
The State legislature has amended Civil Codes Sections 1102 and 1102.6, of interest to property sellers and Realtors. The disclosure requirements contained in those statutes are now mandatory, and cannot be contractually waived.
The potential liability of parents for the intentional or willful misconduct of their minor children, which results in injury to person or property of another has been increased from $10,000 to $25,000. Motivation for the statute has been, in part, prompted by the cost of graffiti and vandalism cleanup and repair. (Civil Code Section 1714.1)
Effective January 1, 1995, California law prohibits employers from "knowingly and intentionally" permitting any person to smoke tobacco products in most enclosed workplaces. The "smoking ban" can yield fines from $100 to $500 for violators, depending upon the number of violations in a calendar year.
Of course, there have been so many changes, it would be impossible to catalogue all in this brief newsletter. If you are interested in further review, please be sure to mention the "Sacramento Digest" the next time you have an appointment or happen to be in the area. The publication is available for review in our conference room.
On October 22, 1994, the new law making several changes of interest to consumers and small business went into effect. Generally applying to only bankruptcies filed after that date, some of the provisions apply retroactively.
Here are a few of the changes that could potentially have affect on evaluation of your bankruptcy decision: Personal property lessors and lessees have received additional protections.
In the usual bankruptcy of a small business or consumer, the estate may include leased property such as vehicles and equipment. Those commercial transactions generally involve security agreements, thus generally preventing the discharge of the entire indebtedness. Like a secured property purchase transaction, a debtor must ultimately decide whether to maintain the transaction or treat it as terminated and surrender the property pursuant to the security agreement. In leasing legalese the choice is one of either "assuming" a lease or "rejecting" it. Assuming a lease requires a curing of all arrearages. The Reform Act of 1994 now makes that easier for consumers by excluding any penalty increments to the lease rate.
The more flexible Chapter 13 case (the repayment plan option as opposed to a Chapter 7 complete liquidation) will now be available for wealthier debtors. The eligibility ceiling on unsecured debt increased from $100,000 to $250,000, and on secured debt (like a home mortgage) from $350,000 to $750,000.
The new Act also proposes periodic increase in code dollar values. Every three years there will be an adjustment for inflation. The first is scheduled for implementation in 1998. The importance here will be as to the exemption levels, or for that property which can be segregated from the debtor’s estate and protected. I have written on this subject a number of times. It concerns the increasing degree with which I see credit card companies attacking as "nondischargeabe" debt which was run up in the period immediately preceding filing. The new Act now increases certain "presumption of nondischargeability" periods. Consumer debt for "luxury goods or services" and credit card cash advances will now be presumed nondischargeable if incurred within 60 days of the case. The old law provided for a 40 day presumption period for "luxuries" and 20 days for cash advances.
Finally, the new Section 340(e) has completely altered the law in the area of family law and divorce related obligations. Alimony, maintenance and child support was already non-dischargeable. However, "spousal indemnity" agreements, usually part and parcel of divorce settlements used to be dischargeable. A subjective test has now been added to the process. Spousal indemnity obligations will not be discharged if it would benefit the debtor unduly compared to the detrimental consequences to the former spouse or child of the debtor. Plus, the automatic stay will no longer block commencement or continuation of proceedings to enforce alimony and child support obligations during the pendency of the bankruptcy case. This represents a significant change.
I must return to a subject I have addressed before and offer some words of caution. Shrinking court budgets, delay, unpredictable consequences, new "three strike" laws, and the scourge of drug violations have basically limited the civil litigants to less than 10% of the court facilities in most metropolitan locations. These forces are leading to an ever increasing trend in any number of industries, companies, and occupations to "contractualized dispute resolution" more aptly described as binding arbitration. Banks, stock brokerages, employment disputes in many major corporations, health maintenance organizations, and most all of the professions incorporate to some degree the trend towards alternative dispute resolution very often based on contracts formed and agreed to at a time when the concept of a dispute is rarely considered.
I urge my clients to take caution and recognize the potential affect of such "arbitration" provisions. In the beginning stages, very often you can affect the content of such provisions. Binding arbitration in California is basically empowered, regulated and enforced through a body of law in the Code of Civil Procedure. The most notable features of binding arbitration are the sacrifice or waiver of trial by jury, or in a court of law, and the waiver of right to appeal. The law has been in effect for some time. A great body of literature has now developed reflecting studies of the entire process, and, frankly, some of the studies are fairly critical. Binding, as opposed to non-binding arbitration or mediation, can often have crucifying and devastating affects.
The courts have basically yielded, carte blanche, empowerment of the Arbitrator. Because of the absence of procedural challenge, the lack of formal mechanisms or services tracking the career, bias or decisions of Arbitrators, and the competitive atmosphere among arbitrators and their organizations for insurance and other "industry" business, a binding arbitration agreement can and will take on more and more significance if current court trends continue. Except in the presence of outright fraud, or provable bias or conflict, it is virtually impossible to overturn a binding arbitrator’s award. Binding arbitrators have the power to issue injunctions, provisional or "take away" and stop orders, and, even punitive damages, costs and attorneys fees. One of the greatest problems is the "renegade" or aberrant arbitrator. A litigant can find themselves "at the mercy" of a personality conflict between their lawyer and the arbitrator, as an example. Often, subtle connections bordering on outright conflict of interest, despite California’s disclosure requirements, can go undetected.
Here are some general concepts to refer to in the event you are faced with having to consider an agreement, investment, business opportunity, or other financial transaction involving a "binding arbitration clause":
1. Does the binding arbitration clause describe or contemplate industry related processes or traditional judicial type arbitration? The significance is that a merchant’s, trade or professional organization process as opposed to independent selection of qualified arbitrator often skews the potential outcome unfavorably. If this is vague, consider an example. A jewelry merchant’s trade association makes "binding arbitration" available to members and customers. You have a dispute which arises over a purchase of a fairly expensive piece of jewelry against one of the members. You are presented with the option of submitting to binding arbitration. Although not opposed to "binding arbitration" of such a dispute per se, I would advise taking the arbitration to an independent, non industry related forum. There are numerous such organizations, the oldest of which is the American Arbitration Association. If you need the names of others, I can provide you with at least a half dozen.
2. Governing Law: Very often the law of a jurisdiction is arbitrarily designated. Realize that you may have some ability to negotiate or insist upon a change in the state law designated. The importance is that the governing law selected has more to do with economics than fairness or independence of outcome.
3. High/Low/Floor/Ceiling Amendments: If confronted with uncertainty, determine in advance, based on the value of the transaction to either side, if the clause can be amended to allow for limits on any potential award. If you find yourself defending in a dispute, you can prevent the "runaway". If you are bringing the dispute, you have just provided yourself with one more rational justification for the arbitration process. The floor/ceiling need not be revealed to the Arbitrator.
4. Prearbitration mediation by an independent: If you find yourself in a situation which could be particularly volatile, you may be able to insist upon amending the provision to allow for intervening mediation, with penalties attached in terms of costs or attorney fees if the mediator’s "award" (non-binding) is not accepted.
5. Pay attention to the selection of arbitrator process as well as number of arbitrators to be designated. Most binding agreements will set forth an agreed process. Depending upon the value of the transaction, only one arbitrator may not be appropriate. Realize that there are a variety of arrangements and with or without counsel, this may be a worthwhile time to consult an attorney for suggestions. For instance, some processes allow for the selection of one arbitrator by either side, who then select the presiding arbitrator. The AAA’s rules for conducting arbitrations allow for multiple member panels where the dispute exceeds a certain dollar value. Because of the ongoing legal activity in this area of law (procedure), I will be revisiting this topic periodically.
My further updates will follow.
With best regards and a Happy Easter to all,, Gerald Spala March 14, 1995