Category Archives: Attorneys

Don’t Miss This! June 30th – EXPOSED: Digital Imagery, Drones, Publicity And Privacy

shutterstock_373521769

EXPOSED: DIGITAL IMAGERY, DRONES,
PUBLICITY AND PRIVACY

 

What: 

Join us for a discussion with industry experts about the issues related to Video, Photography, User Generated Content (UGC), and Privacy on the Internet and how it relates to companies here in the Los Angeles entertainment community and Silicon Beach.

When: 

Thursday, June 30th 2016
5:30pm – 8:00pm
Register!

Where:

Parking is in Lot #5 on the corner of 4th Street and Broadway or in the Santa Monica Place Mall

Who:

 

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Stubbs Alderton & Markiles’ Client HelloTech Merges with Geekatoo

hellotech(Los Angeles, CA – May 2016) – SAM client and Los Angeles-based startup HelloTech and rival in-home tech support company Geekatoo have merged, in a sign of consolidation in the hotly competitive on-demand sector.

HelloTech will combine its network of about 150 college students who provide on-demand tech repair to Southern California consumers with Geekatoo’s U.S. network of about 5,000 technicians, the companies said in a joint statement.

The merger connects HelloTech with Geekatoo’s national market and provides Geekatoo with more access to venture capital funding, HelloTech co-founder Richard Wolpert said in an interview.

SAM attorneys that represented HelloTech in this transaction were Scott Alderton and Caroline Cherkassky.

To read the full press release in Fortune Magazine, click here.

About HelloTech

HelloTech is a new on-demand tech support service provided by our fully-vetted team of techs. Each HelloTech Hero is hand-selected, background-checked and completes a variety of tests and assessments. In addition to a complete range of tech support services, we also provide new technology consultation and training. We not only fix problems, we educate and help architect a home’s tech eco-system.

In today’s world of connected devices and the Internet of Things, our mission is to make the newest in technology available and understandable to all. We’re making technology in the home simple.

About Geekatoo

Geekatoo.com offers at-home tech support at prices up to 75% off of Geek Squad. They offer a range of fix-priced services and an auction model for custom jobs.

They work with 6,000+ providers across the US ready to provide service and troubleshoot issues such as smart home product installation, computer repair, virus removal, camera and printer repair, building websites, and home theater installation.

Providers are ranked on Geektitude score, which affects their ability to get work. This score is based on previous job satisfaction, certifications and education.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.

_______________________

For more information about our Mergers & Acquisitons practice and Emerging Growth practice, contact Scott Alderton at (818) 444-4501 or salderton@stubbsalderton.com

Press Contact:

Heidi Hubbeling
Director of Marketing
(310) 746-9803
hhubbeling@stubbsalderton.com

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INCENTIVE COMPENSATION IDEAS

Incentive Compensaton PlanThere are a number of types of instruments that an employer can issue key employees and independent contractors (employees and independent contractors are referred to collectively as “service providers” to signify that the benefit discussed applies to independent contractors as well as employees) to give the service providers a piece of the upside in the enterprise.  This article will a summary of most of the popular ones, their standard terms and their tax treatment for the employer and employee or contractor.

What can be issued depends in large part on the type of entity that the employer is.  There are some instruments like options that both a corporation and a limited liability company (LLC) may issue and some that only one or other may issue.

CORPORATIONS

Corporations may issue incentive instruments that are geared to the value of their stock, like options and stock appreciation rights.  An option is the right to purchase a share of the employer’s stock at an agreed price.  The exercise price should not be less than the stock value as of the date of issuance of the option.  Failure to do so will result in income inclusion to the recipient service provider under Section 409A of the Internal Revenue Code (the “Code”). That income would be able to be included in the year of receipt and annually as the spread between stock value and exercise price increases.  (Treasury Regulation §1.409A-1(b)(5).)  The need to value the stock of closely held employers to maintain compliance with Section 409A has created a demand for “409A appraisals” within the valuation industry.  Treasury Regulation §1.409A-(b)(5)(iv)(B)(2)(iii) affords a safe harbor for an employer that bases its valuation on a good faith written valuation report.

There are two kinds of options that a corporation may issue, incentive stock options (“ISOs”) and non-qualified options (“NQOs”).   The benefits of ISOs are (a) the exercise of an ISO does not result in ordinary compensation income for the option holder and (b) income, in the form of capital gain, is not recognized until the stock is disposed of.  (Code Section 422(a).)  If the optionee holds the stock for at least two years from the date of issuance of the ISO and at least one year from date of exercise of the ISO, the gain on the sale of the stock would be long term capital gain.

To be an ISO the option must have been issued to an employee (not an independent contractor or outside director) of an employer corporation; the option must have been issued pursuant to a plan approved by the corporation’s shareholders within 12 months of the adoption of the plan by the corporation’s board;  the option may not have more than a 10 year term from the date of issuance; the option may not be transferable and may not be issued to a 10% or more shareholder (the option must have an exercise price of more than 110% of the stock’s value on the date of issuance if the option is issued to a 10% or more shareholder).  (Code Section 422(b).)

Exercise of an NQO results in income for the service provider in the difference between the value of the stock and the exercise price on the date of exercise.  That benefit is tempered by the inclusion of the difference between stock value and exercise price of an ISO in alternative minimum taxable income, potentially implicating the alternative minimum tax for the option holder.

A stock appreciation right (SAR) is the right of a service provider to receive a cash bonus in the amount of the stock value on the date of exercise over the stock value on the date of issuance.  Exercise of the SAR may be limited to certain events or may exercisable at any time by the service provider, both employee and independent contractor.  To avoid the reach of Section 409A, the SAR must be based on appreciation over the value of the stock on the date of issuance of  the SAR.

Phantom stock rights and restricted stock units (RSUs) are the right to receive a cash bonus equal the value of the employer’s stock.  (“A RSU provides a right to receive an amount of compensation based on the value of stock that is payable in cash, stock, or other property.”  (Treas. Dec. 9716 (Apr. 1, 2015).)  Because Section 409A applies to the right to receive a cash bonus, payments with respect to phantom stock rights and RSUs effectively have to be limited as follows:

(1) the service provider’s “separation from service”, subject to a six-month delay requirement for separation from service of a “specified employee” (generally an officer or highly compensated employee of a public company);

(2)  the date the service provider becomes “disabled”;

(3)  the service provider’s death;

(4)  a specified time or fixed schedule specified under the plan at the date of the deferral of the compensation;

(5)  a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the corporation’s assets; or

(6)  the occurrence of an “unforeseeable emergency.”

Grants of equity or any property (options are excluded from the term property for this purpose) to a service provider result in compensation income upon the earlier of issuance of the property or the lapse of any restrictions on the grant.  (Code Section 83(a) and Treasury Regulation §1.83-3(a)(2).)  The recipient service provider has the ability to include the value of the unvested equity grant in income as of the date of receipt.  (Code Section 83(b).)  In a start up, the election is almost always made to include the value of the equity grant in income as of the date of issuance, despite the risk that the vesting requirements might never vest, but with any gain on the sale of the equity eligible for long term capital gain treatment if the holding period of one year is met.

 

LIMITED LIABILITIES COMPANIES

Limited liability companies (LLCs) as well as limited partnerships and general partnerships may offer all of the incentive compensation instruments that a corporation can except for ISOs.  But, LLCs may offer profits interests which are probably the best incentive compensation instruments available.

A profits interest is an interest in an LLC that by definition would yield the recipient no share of the proceeds if the LLC’s assets were sold at fair market value and then the proceeds were distributed in a complete liquidation of the LLC. This determination generally is made at the time of receipt of the LLC interest.  (Revenue Procedure 93-27, 1993-2 C.B. 343.)  The profits interest treatment is only open to interests granted for services to the LLC.  The concept of a profits interest as not being includible in the recipient’s income on receipt is beneficial as the benefit is not dependent on the valuation of the interest granted, but on the assets of the LLC.

When a profits interest is granted, the LLC values its assets and sets that value as the “base value” or the “threshold amount.”  Once the LLC has made cumulative distributions equal to the base value/threshold amount, the profits interest participates along with the other holders of the class of LLC interest granted.  If the LLC sells an asset and recognizes long term capital gain, the profits interest holder recognizes long term capital gain as well.

Unlike an ISO in the corporate context, there is no income on grant of the profits interest (either for regular tax or alternative minimum tax purposes).

____________________________________________

Michael Shaff joined the firm in 2011 as Of Counsel. He is chairperson of the Tax Practice Group. Michael specializes in all aspects of federal income taxation. Mr. Shaff has served as a trial attorney with the office of the Chief Counsel of the Internal Revenue Service for three years. Mr. Shaff is certified by the Board of Legal Specialization of the State Bar of California as a specialist in tax law. Mr. Shaff is a past chair of the Tax Section of the Orange County Bar Association. He is co-author of the “Real Estate Investment Trusts Handbook” published annually by West Group.

For more information about the Incentive Compensation Plans and the Tax & Estate Planning Practice at Stubbs Alderton & Markiles, LLP, contact Michael Shaff at mshaff@stubbsalderton.com

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Stubbs Alderton & Markiles’ Client Zephyr Receives $31M Investment from Frontier Capital

Press Release_Frontier-Capital-investmentLos Angeles, CA – May 13, 2016 Stubbs Alderton & Markiles announces that it represented its client D-Software, d/b/a Zephyr, one of the software industry’s fastest-growing providers of real-time, on-demand enterprise test management solutions, in an investment deal of  $31M from Frontier Capital.

Based in Newark, Calif., in the epicenter of the software industry, Zephyr provides more than 8,500 customers in over 100 countries with innovative applications, seamless integrations and unparalleled, real-time visibility into the quality and status of their software development projects. With additional operations in London and Bangalore, the company has more than doubled its customer base in the past 12 months by helping companies like LG Electronics, Adobe, HSBC, Honda, Oracle, Citibank, Amex, GE, Starz and Hyundai drive down costs and bring higher quality software to market faster.

The $31 million investment from Frontier Capital will be used to fund key growth initiatives for the company like enhancing the product portfolio and scaling sales and marketing capabilities, according to Zephyr founder and CEO Samir Shah.

“Partnering with Frontier Capital will help us realize our potential by investing in the critical business functions that will fuel our growth,” said Shah. “Their business acumen and experience helping similar next-stage growth companies achieve their goals will be just as, if not more, valuable to us than the money they have invested. We are excited to have Frontier on board as an engaged partner and look forward to working with them to build a market leader.”

SAM Partner Scott Alderton has represented D-Software, d/b/a Zephyr, since its inception and Stubbs Alderton as a whole is very proud of their success.  SAM Partners that led this deal include Scott Galer, Scott Alderton, Nick Feldman and Adam Bagley.

To read the full Zephyr press release, click here.

About Frontier Capital

Frontier Capital is a Charlotte-based growth equity firm focused exclusively on software and technology-enabled business services companies. Founded in 1999, Frontier partners with management teams that can benefit from capital to accelerate growth, fund acquisitions or generate shareholder liquidity. The firm makes minority and majority equity investments in high growth companies and has built an excellent track record of delivering returns to both investors and management partners. For more information, please visit frontiercapital.com.

About Zephyr

Zephyr is a leading provider of on-demand enterprise test management solutions, offering innovative applications, seamless integrations and unparalleled, real-time visibility into the quality and status of software projects. Zephyr products are the fastest-growing agile test management products in the world, with more than 8,500 global customers in over 100 countries. Their feature-rich products address today’s dynamic and global needs across a variety of industries including finance, healthcare, media, automotive, IT services and enterprise software. Zephyr is headquartered in Newark, Calif., with offices in Europe and India. For more information, please visit www.getzephyr.com.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm. For more information, please visit www.stubbsalderton.com.

Media Contact:
Heidi Hubbeling
(310) 746-9803
hhubbeling@stubbsalderton.com

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SAM Alert- Employers Must Now Provide Notice of Whistle Blower Immunity

Important Business News
from
Stubbs Alderton & Markiles, LLP

Employers Must Now Provide Notice of Whistle Blower Immunity

New Federal Trade Secrets Law Requires Immediate Changes to Employee and Contractor Agreements

Starting May 12, 2016, all agreements with employees and individuals that are independent contractors or consultants governing the use of trade secrets or confidential information must include a notice of immunity for the disclosure of a trade secret to the government or in a court filing.  Under the Defend Trade Secrets Act (“DTSA”), the disclosure of a trade secret will be immunized from civil and criminal liability if it is made (i) in confidence to a Federal, State or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a lawsuit complaint or other court documents filed under seal.  Failure to comply with this new legal requirement may preclude a company from recovering punitive damages or attorneys’ fees in a lawsuit against an employee or contractor for trade secret theft.  Also, it is possible government agencies could bring regulatory enforcement actions and employees could bring class action lawsuits against companies that fail to provide this notice.

Our recommendation for adapting to the new law:

  • Update agreements with employees, independent contractors and consultants. The required notice must be included in any contract or agreement with an employee or individual that is an independent contractor or consultant that governs the use of a trade secret or other confidential information.  This includes employee confidentiality and intellectual property assignment agreements, independent contractor agreements, consulting services agreements, professional services agreements, advisory board member agreements, intern agreements and nondisclosure agreements, and any amendments and renewals of such agreements entered into prior to the date the new law went into effect.  Instead of stating the immunity notice in each agreement, the agreement may cross-reference to a policy document (e.g., employee handbook) containing the company’s reporting policy for a suspected violation of law.

How Stubbs Alderton & Markiles, LLP can help.  We are a business law firm with expertise in intellectual property law. Our standard employee, independent contractor, nondisclosure and advisory board member agreements have been updated to comply with the DTSA’s notice of immunity requirement.  We can help update your employee and independent contractor agreements.

Kevin_DeBre
Kevin D. DeBré
leads the firm’s Intellectual Property and Technology Transactions Practice Group advising entrepreneurs and growth companies on how to use technology and intellectual property in building successful businesses.  For more information, email Kevin at kdebre@stubbsalderton.com.

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SAM Client HitFix Acquired by Woven Digital

HitFix

Stubbs Alderton & Markiles’ client HitFix, a fan-focused publisher of entertainment news, reviews and video, has been acquired by Woven Digital.  Terms are undisclosed.

With the acquisition HitFix’s 17 employees are joining Woven, including CEO Jennifer Sargent, editor-in-chief Richard Rushfield, CTO Anurag Jain and TV critic Alan Sepinwall. Woven plans to boost HitFix’s video output, with higher production quality and frequency, and they believe that HitFix’s focus on the 18-34 year old market will help them expand the company’s reach into the highly sought demographic.

Prior to the acquisition, HitFix had raised $6.8 million. The company’s investors included Gordon Crawford, Golden Seeds, Angel Capital Entrepreneurial Fund, Liquid Capital Group and Tech Coast Angels. In 2008, Sargent co-founded HitFix with Gregory Ellwood, who left the company last September.

SAM attorneys on the deal included Louis Wharton, Scott Galer and Mariam Karson.

To view further press on the transaction, visit:
Variety
Hollywood Reporter 

About HitFix
HitFix is the fastest growing entertainment news brand, driving discovery, conversation and choices for passionate entertainment fans via breaking news, expert analysis, engaging reviews, recaps and live, on-the-scene event coverage of the biggest entertainment events across film, TV, music and more. HitFix offers partners access to an unparalleled editorial and video distribution network spanning desktop, mobile, social, video and out-of-home digital displays to the tune of 90+ Million interview streams and 300+ Million viewers each month. HitFix is truly everywhere.

About Woven Digital
Woven Digital is an award-winning digital media and content company. Woven’s unique approach to storytelling through a mix of documentary-style video and authoritative journalism covers subject-matter and individuals often overlooked by traditional broadcast and media. Through our brands, we engage with millions of young male consumers on a daily basis. Woven’s flagship destination, UPROXX, is a top-25 mobile site that delivers original programming celebrating humans and human culture (HUMAN), exploring tech and innovation (LUMINARIES), breaking the undiscovered in music (UNCHARTED) and covering the unknown stories in sports (UNDERBELLY). For more information about Woven, visit www.woven.com.

About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.

Press Contact:

Heidi Hubbeling
Director of Marketing
Stubbs Alderton & Markiles, LLP
hhubbeling@stubbsalderton.com
(310) 746-9803

 

 

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“How to Tighten Contracts & Minimize the Expense of Litigation” by Ryan C.C. Duckett

Simple Contract Drafting and Negotiation Tips

From the inception of creating a contract to the closing prior to execution, word accuracy and term clarity helps shield contracts from that not so slim chance that, my contract won’t be litigated.  Do not be so quick to “Frankenstein” a contract with a myriad of cut and pastes. A little precaution can save your client a great deal of fortune.

Introduction of Contracts: The introductory clause of a contract is as critical as the body because it identifies the parties of an agreement. What seems so simple is easy to overlook. For instance, in a 2015 celebrity case dismissed on 9/11, and affirmed in 2016 by the California Court of Appeal, Kanye West and Kim Kardashian filed suit against Chad Hurley and AVOS Systems, Inc. for broadcasting confidential video of Kanye’s marriage proposal to Kim in violation of a confidentiality provision precluding publishing any video of Kanye’s proposal before it was published by Kim’s reality TV show Keeping Up With The Kardashians. The case was decided on whether Hurley’s tweet with a link to video of the proposal was a breach of the agreement by AVOS. Although Hurley was CEO of AVOS, he never signed the agreement on behalf of AVOS – according to him – and, whether someone is acting on behalf of a company is a question of facts, which means, it’s for a jury to decide[1]. Hurley was found liable but his company AVOS got off scot-free. Seriously? How could it be more obvious what was intended by Kanye and Kim? Simple…A quick definition defining all parties at the onset of the contract removes any question of fact, making it clear who the agreement binds.

Terms of Contracts: The terms of a contract should be as black and white as the paper it’s on. Many common words such as “material”, “full disclosure” or “efforts,” originally thought of as pinpointing the intentions, recently are vastly becoming more diluted from overuse, leaving too much room for interpretation. For example, what is material to one may not be so material to another, especially in contracts when interests are adverse and what one cares about, the other does not. Unfortunately, parties wait until the heat of litigation until clarifying what was originally intended.

By way of another example: Q. How are best efforts different from reasonable efforts?When parties enter into an exclusive distribution agreement, they like to set the tone for the distributor about the “efforts” the distributor must apply. Although California courts have yet to divulge into intricacies behind levels of effort, New York courts have and find it “murky.” Under the Uniform Commercial Code § 2-306(2), the producer may want to remain silent on the degree of effort to be expended by the distributor because it requires “best efforts…unless otherwise agreed.” In an original case defining best efforts, Falstaff Brewing Co. bought Ballantine brewing labels, trademarks, and everything else but the beer, with a promise to use “best efforts” to distribute it. Well, along came Guinness beer with an unprecedented low price. Falstaff intuitively succumbed to distributing the lower priced beer. Falstaff, however, was held in breach for failing to continue selling Ballantine, even though Falstaff was forced to incur an economic loss by doing so.[2]

Where parties have contracted to use a lesser degree of efforts, such as ”reasonable efforts” or “commercially reasonable efforts,” the courts held that such efforts are “interchangeable” with “best efforts.”[3]  Bottom line being to expressly articulate criteria intended to qualify as meeting your client’s “justifiable expectations,”[4]instead of leaving it to a precarious chance by courts’ “case by case” rulings.

Dispute Resolution of Contracts:  At the negotiation stage, many parties try to rush through the dispute resolution terms in the face of a breach, hoping this will never be the case. Coincidentally, this is the best and only time to negotiate such difficult terms. In a February 18, 2016 case initiated by Allstate Insurance for an insured’s alleged breach, the Defendants successfully dismissed the action immediately when the trial court ruled that a pre-litigation demand letter adequately satisfied the terms to enter into “good-faith negotiations” before filing a lawsuit.[5] Literally, “good faith negotiations before filing a lawsuit” really means an agreement to try to agree, but requires no back and forth process. If you want more good faith interaction before someone races to file a lawsuit, the contract should explicitly state each step a party must take.

Although, only a few primary examples are discussed, there are frequent circumstances that ultimately lead to litigation resulting from contracts using common pitfalls. Taking the time to contact an attorney like those at Stubbs Alderton & Markiles, LLP, may be the solution to tighten a contract enough to minimize the potential expense of litigation.

________________________________

151215-Stubbs-116-retouched_600x400For any further information on tips or avoiding litigation, contact Ryan C. C. Duckett at rduckett@stubbsalderton.comor 818-444-4546. Ryan Duckett is an attorney of Stubbs Alderton & Markiles, LLP. Ryan’s practice focuses primarily on employment, commercial, intellectual property and entertainment litigation. He has successfully litigated cases for both plaintiffs and defendants with trials and appellate experience that has secured over millions of dollars in jury verdicts for his clients, to arguing California jury instructions that were created by the case he second chaired.  He manages and handles all aspects of civil actions from pre-litigation matters to law & motion to trials, post-trials & appeals.

 

[1] Pacific Concrete Products Corp. v. Dimmick (1955) 136 Cal.App.2d 834, 838.

[2] Bloor v. Falstaff Brewing Co. (1979) 601 F.2d 609, 609-613.

[3] Samson Lift Tech., LLC v. Jerr-Dan Co. (Sup. Ct. 2014)

[4] E. Allan Farnsworth, Contracts § 7.17 (3d Ed. 2004)

[5] Allstate Ins. Co. v. Berg (Cal.1st.Dist., Div. 4, Feb. 2016 – affirmed)

The contents of this article do not constitute legal advice and are not intended to be used as a substitute for specific legal advice or opinions.

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“How to Tighten Contracts & Minimize the Expense of Litigation” by Ryan C.C. Duckett

Simple Contract Drafting and Negotiation Tips

From the inception of creating a contract to the closing prior to execution, word accuracy and term clarity helps shield contracts from that not so slim chance that, my contract won’t be litigated.  Do not be so quick to “Frankenstein” a contract with a myriad of cut and pastes. A little precaution can save your client a great deal of fortune.

Introduction of Contracts: The introductory clause of a contract is as critical as the body because it identifies the parties of an agreement. What seems so simple is easy to overlook. For instance, in a 2015 celebrity case dismissed on 9/11, and affirmed in 2016 by the California Court of Appeal, Kanye West and Kim Kardashian filed suit against Chad Hurley and AVOS Systems, Inc. for broadcasting confidential video of Kanye’s marriage proposal to Kim in violation of a confidentiality provision precluding publishing any video of Kanye’s proposal before it was published by Kim’s reality TV show Keeping Up With The Kardashians. The case was decided on whether Hurley’s tweet with a link to video of the proposal was a breach of the agreement by AVOS. Although Hurley was CEO of AVOS, he never signed the agreement on behalf of AVOS – according to him – and, whether someone is acting on behalf of a company is a question of facts, which means, it’s for a jury to decide[1]. Hurley was found liable but his company AVOS got off scot-free. Seriously? How could it be more obvious what was intended by Kanye and Kim? Simple…A quick definition defining all parties at the onset of the contract removes any question of fact, making it clear who the agreement binds.

Terms of Contracts: The terms of a contract should be as black and white as the paper it’s on. Many common words such as “material”, “full disclosure” or “efforts,” originally thought of as pinpointing the intentions, recently are vastly becoming more diluted from overuse, leaving too much room for interpretation. For example, what is material to one may not be so material to another, especially in contracts when interests are adverse and what one cares about, the other does not. Unfortunately, parties wait until the heat of litigation until clarifying what was originally intended.

By way of another example: Q. How are best efforts different from reasonable efforts? When parties enter into an exclusive distribution agreement, they like to set the tone for the distributor about the “efforts” the distributor must apply. Although California courts have yet to divulge into intricacies behind levels of effort, New York courts have and find it “murky.” Under the Uniform Commercial Code § 2-306(2), the producer may want to remain silent on the degree of effort to be expended by the distributor because it requires “best efforts…unless otherwise agreed.” In an original case defining best efforts, Falstaff Brewing Co. bought Ballantine brewing labels, trademarks, and everything else but the beer, with a promise to use “best efforts” to distribute it. Well, along came Guinness beer with an unprecedented low price. Falstaff intuitively succumbed to distributing the lower priced beer. Falstaff, however, was held in breach for failing to continue selling Ballantine, even though Falstaff was forced to incur an economic loss by doing so.[2]

Where parties have contracted to use a lesser degree of efforts, such as ”reasonable efforts” or “commercially reasonable efforts,” the courts held that such efforts are “interchangeable” with “best efforts.”[3]  Bottom line being to expressly articulate criteria intended to qualify as meeting your client’s “justifiable expectations,”[4] instead of leaving it to a precarious chance by courts’ “case by case” rulings.

Dispute Resolution of Contracts:  At the negotiation stage, many parties try to rush through the dispute resolution terms in the face of a breach, hoping this will never be the case. Coincidentally, this is the best and only time to negotiate such difficult terms. In a February 18, 2016 case initiated by Allstate Insurance for an insured’s alleged breach, the Defendants successfully dismissed the action immediately when the trial court ruled that a pre-litigation demand letter adequately satisfied the terms to enter into “good-faith negotiations” before filing a lawsuit.[5] Literally, “good faith negotiations before filing a lawsuit” really means an agreement to try to agree, but requires no back and forth process. If you want more good faith interaction before someone races to file a lawsuit, the contract should explicitly state each step a party must take.

Although, only a few primary examples are discussed, there are frequent circumstances that ultimately lead to litigation resulting from contracts using common pitfalls. Taking the time to contact an attorney like those at Stubbs Alderton & Markiles, LLP, may be the solution to tighten a contract enough to minimize the potential expense of litigation.

________________________________

151215-Stubbs-116-retouched_600x400For any further information on tips or avoiding litigation, contact Ryan C. C. Duckett at rduckett@stubbsalderton.com or 818-444-4546. Ryan Duckett is an attorney of Stubbs Alderton & Markiles, LLP. Ryan’s practice focuses primarily on employment, commercial, intellectual property and entertainment litigation. He has successfully litigated cases for both plaintiffs and defendants with trials and appellate experience that has secured over millions of dollars in jury verdicts for his clients, to arguing California jury instructions that were created by the case he second chaired.  He manages and handles all aspects of civil actions from pre-litigation matters to law & motion to trials, post-trials & appeals.

 

[1] Pacific Concrete Products Corp. v. Dimmick (1955) 136 Cal.App.2d 834, 838.

[2] Bloor v. Falstaff Brewing Co. (1979) 601 F.2d 609, 609-613.

[3] Samson Lift Tech., LLC v. Jerr-Dan Co. (Sup. Ct. 2014)

[4] E. Allan Farnsworth, Contracts § 7.17 (3d Ed. 2004)

[5] Allstate Ins. Co. v. Berg (Cal.1st.Dist., Div. 4, Feb. 2016 – affirmed)

The contents of this article do not constitute legal advice and are not intended to be used as a substitute for specific legal advice or opinions.

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Five Stubbs Alderton & Markiles’ Attorneys Listed as 2016 Southern California Super Lawyers

Stubbs Alderton & Markiles, LLP is proud to announce that five of their attorneys have been listed in the 2016 Southern California Super Lawyers edition.  Congratulations to Scott Alderton, Joe Stubbs, Kevin DeBré, Tony Keats, and Michael Sherman.

What is Super Lawyers? Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process includes independent research, peer nominations and peer evaluations.  To view the digital publication, click here.

A little bit more about the attorneys:

Scott_AldertonScott Alderton – a founding partner of the Firm, Managing Partner, and a member of the Firm’s Executive Committee.  Scott is co-chair of the Firm’s Venture Capital and Emerging Growth Practice Group and chair’s the Firm’s Interactive Entertainment and Video Games Group.  Scott advises both public and private clients across a number of industries, including technology, manufacturing and distribution of goods in commerce, finance, the Internet, interactive video games, and new media industries.

Joe_StubbsJoe Stubbs –  Joe Stubbs is a founding partner of the Firm, and a member of the Firm’s Executive Committee.  He is co-chair of the Firm’s Venture Capital and Emerging Growth Practice Group, and of the Firm’s Mergers and Acquisitions Practice Group.  Joe practices in the areas of corporate and securities law, emphasizing the corporate representation of both publicly-held and privately-held emerging growth and middle-market companies, venture capital and private equity firms, angel investment groups and investment banks.  He acts as outside general counsel to numerous emerging growth and technology companies, advising on a wide range of legal and strategic issues at all stages of their evolutionary path.  He particularly concentrates on advising companies in preparing for and successfully completing their angel, venture capital, private equity and debt financing transactions, their merger, acquisition and divestiture transactions and their initial and follow-on public offerings.  He also serves as outside general counsel to various publicly-held companies, providing advice on all aspects of their business activities, including securities law compliance and corporate governance matters.  His experience also includes corporate partnerships, restructurings and technology licensing.

Kevin_DeBreKevin DeBré – Kevin D. DeBré is the chair of the Firm’s Intellectual Property & Technology Transactions Practice Group.  Kevin advises entrepreneurs and companies that use intellectual property to build their businesses.  Kevin has particular expertise in structuring and negotiating technology commercialization and patent licenses, strategic alliances, research and development collaborations, trademark licensing and brand merchandising agreements and manufacturing, distribution and marketing arrangements.  He also counsels clients on compliance with data security and privacy laws and regulations.  Kevin is a business lawyer, a registered patent lawyer and a former engineer.  He focuses on representing software companies, semiconductor design firms, mobile commerce businesses, e-commerce enterprises, electronics and hardware manufacturers, media companies, content developers and publishers, biotechnology companies and medical device manufacturers both in the United States and abroad.

Tony-Keats-v2Tony Keats – Tony Keats is a partner of the Firm and Co-chair of the Trademark and Copyright Practice Group. He was a founding partner of Keats, McFarland & Wilson LLP, in Los Angeles, and intellectual property practice team leader for the national law firm Baker & Hostetler. Tony’s almost three decade legal career has focused on both the legal and business protection of brands and creative content from consumer products to entertainment, from designer goods to the Internet. Since he commenced practice, he has provided counsel and has litigated cases on behalf of many of the world’s largest consumer product and entertainment companies, as well as individual entrepreneurs, actors, and musicians. Tony’s litigation background also includes related commercial matters involving unfair competition, contract disputes, rights of publicity violations, business torts, domain name infringement, and idea submission claims. Tony developed intellectual property protection programs for some of the largest entertainment properties in Hollywood history.

Michael_ShermanMichael Sherman – Michael Sherman is a Partner of the Firm and Chair of the Business Litigation practice group.  Michael is an accomplished trial lawyer in high-stakes, “bet-the-company” litigation, and has represented both large and early-stage companies as well as entrepreneurs in all facets of business and complex commercial litigation. He has evenly split his litigation practice on both the plaintiff and defense side of cases, has first-chaired numerous trials in complex matters in industries as varied as energy, securities, healthcare, environmental, consumer products, technology, project development/finance, advertising, real estate and apparel, and is highly skilled in class actions and unfair competition law. Michael’s trial skills and courtroom success resulted in his being named several years ago to the “Top 100 Lawyers” in California list, published by the Daily Journal newspaper chain. He has consistently been named to “Best Lawyers in America”.  Michael has been recognized as a leading trial lawyer by his peers and featured in the press for some of his significant victories on behalf of clients. He is a recent past president of the Los Angeles Chapter of the Association of Business Trial Lawyers. He is a frequent speaker and writer on business litigation and trial advocacy.

For more information about Stubbs Alderton & Markiles, contact Heidi Hubbeling at hhubbeling@stubbsalderton.com or (310) 746-9803.

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SAM ALERT: FEDS TAKE ACTION AGAINST TRADEMARK PROTECTION SCAMS

Trademark RegistrationClients have received unsolicited official-looking mail notifications offering to register their trademarks with various international registries or to have additional trademark protection work done by the soliciting company. The notices often require the trademark holder to pay thousands of dollars for the promised services. As set forth in a federal grand jury indictment unsealed on Wednesday, January 20th, two individuals in Los Angeles, Artashes Darbinyan and Orbel Hakobyan doing business as Trademark Compliance Center and Trademark Compliance Office, were indicted for mail fraud and aggravated identity theft in addition to other related crimes.

The sophistication of these frauds is outlined in detail in the indictment including use of call-answering and mail-forwarding services in multiple cities in California and the Washington,D.C. metro area; setting up these accounts under false names; setting up banking accounts under false names with at least one account transferring funds to a gold dealer, and use of VoIP phone lines which are harder to detect. The indictment is seeking forfeiture of at least $1,850,000 of illegal proceeds in addition to other penalties.

If you receive these types of unsolicited offers and before signing up for such trademark protection services or a listing in a trademark directory, please contact SAM’s trademark and copyright attorneys (818) 444-4500 or info@stubbsalderton.com.

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