The firm is pleased to announce that Karine Akopchikyan, Heather Antoine, John De La Merced, Neil Elan, and Celina Kirchner have been named to Thomson Reuters’ prestigious list of 2021 Southern California “Super Lawyers” Rising Stars. Additionally, Heather received enough votes to place her on the “Up-and-Coming 100: 2021 Southern California Rising Stars” and “Up-and-Coming 50: 2021 Women Southern California Rising Stars” lists.
Every year, “Super Lawyers” profiles attorneys in more than 70 different practice areas who have attained a high degree of peer recognition and personal achievements. The list selects the top lawyers in Southern California based on peer nomination, independent research, and peer evaluation. After the "Super Lawyers" research team has completed the screening process, only 2.5 percent of lawyers under the age of 40 years old are granted the title of Rising Stars.
View the Up-and-Coming 100: 2021 Southern California Rising Stars here.
View the Up-and-Coming 50: 2021 Women Southern California Rising Stars here.
Congratulations to SA&M attorney Karine Akopchikyan for her appointment as 2020 Vice President of USC Gould Alumni Association.
“The USC Gould Alumni Association is a community of more than 13,000 alumni worldwide. Its mission is to further the tradition of the Trojan Network by creating and maintaining meaningful connections among alumni and with the law school. All graduates of USC Gould's JD and master's degree programs are automatically admitted to the Association. Led by a volunteer alumni board appointed by the dean, the Alumni Association oversees a wide range of networking, educational, and enrichment programming throughout the year.” – USC Gould Alumni Association
For more information about the USC Gould Alumni Association visit here.
Karine Akopchikyan is a Litigator in the Firm’s Business Litigation Practice group. Karine has extensive experience representing and advising plaintiffs and defendants in a wide range of business and commercial disputes in state and federal courts. She focuses her practice on resolving complex contractual disputes, intellectual property disputes (including copyright, trademark, patent, right of publicity, and trade secret claims), cyber insurance coverage disputes, and disputes involving unfair competition, fraud, and other business torts. In large part, Karine’s success lies in her integrity, diligence, and ability to bring people together.
Outside of the office, Karine is committed to improving the academic and social outcomes for students in her community. With roots as a credentialed public school teacher, Karine helped create the Pasadena Bar Association’s Mentorship Committee, which connects law students with seasoned attorneys. In addition, she regularly volunteers as an attorney proctor for the Los Angeles Superior Court’s Teen Court Program, which focuses on the rehabilitation of juvenile offenders.
Karine earned her law degree from USC Gould School of Law and presently serves as the Chair of the Los Angeles Chapter of the USC Gould Alumni Committee. While in law school, Karine was a Senior Executive Editor of USC’s Business Law Advisor, which is a student-run publication focused on advisory articles relevant to the intersection of business and law. She also served as a judicial extern to the Honorable Ronald S.W. Lew of the United States District Court.
For more information about our Business Litigation Practice or questions contact Karine Akopchikyan at
The halcyon days of start-up companies and the venture community attraction to them hit a hard stop as the COVID-19 lock down spread across the U.S. earlier this year. As the first half of 2020 nears an end – and in the wake of COVID-19 restrictions and the civil unrest our country has recently faced – many companies and their board members are faced with difficult strategic decisions and are confronting the potential for unprecedented corporate action. The financial distress that has now been wrought upon the start-up community has led many businesses to operate well below pre-pandemic budgets and forecasts, and in many instances in or near (sometimes referred to as reaching the “zone of”) insolvency. Many directors are facing pressure to take extraordinary steps to enable their company to access capital or pursue business strategies that were unthinkable just a few months ago, in some instances simply to keep the lights on and try to “live to see another day.”
Individuals join boards of directors of start-ups for a number of reasons, often as founders or operators, as a VC fund or private equity fund representative designated as a result of an earlier funding round, and/or due to industry-specific background relevant to the start-up. Creditors of all stripes have the ability to negotiate payment terms binding the organization, and covenants (including implied covenants of good faith) are indisputably owed to creditors.
While the allure of frothy valuations may have motivated directors and officers to join a start-up, in the wake of COVID-19, many of these individuals now find themselves unexpectedly preparing for an entirely different reality and asking the question: When might a director of a struggling business become personally liable for the debts of the business? Under both California and Delaware law, insolvency is the starting point of the analysis as it respects creditors.
Directors Owe a Duty of Care and Loyalty to the Corporation and its Shareholders
As a general proposition, both directors/officers, as well as member/managers (in the LLC context) (collectively referred to as “directors” for purposes of this article) of Delaware and California corporations, owe two basic fiduciary duties to the entity and its owners (shareholders, members, partners – these terms used here interchangeably)—the duty of care and the duty of loyalty. Directors are subject to these duties regardless of solvency. The duty of loyalty requires that directors act in the best interests of the corporation and its shareholders. Directors cannot use their position of trust and confidence to further their individual interests (or the interests of other constituencies), at the expense of the corporation’s best interests. The duty of care requires that directors consider all material information reasonably available in making business decisions and use the level of care that an ordinarily careful and prudent director would use in similar circumstances.
During these unprecedented times, the duties of directors may well be extraordinarily strenuous and prompt directors to consider whether they should resign. While directors are generally free to resign as they wish, under certain circumstances, resignation does not come with impunity. Directors can face personal liability to the corporation and its shareholders if their resignation amounts to a breach of their fiduciary duties. In one case, for example, directors were tangled in litigation because they resigned from the company’s board after learning that one of the directors stole assets “from under them”. The directors’ resignation left the company in the control of the principal suspected wrongdoer. The court found that such resignation was not free from impunity (at least at the outset of the litigation).1
The violation of either of those duties of care or loyalty may result in shareholders bringing either direct claims, or derivative claims on behalf of the entity against the directors for redress. By asserting direct claims, shareholders assert that the stewards of the business harmed the owners directly; whereas, by asserting derivative claims, shareholders assert that the directors’ breaches harmed the corporation, essentially all owners in the same fashion. Directors most commonly defend against such claims by asserting the business judgment rule, which creates a presumption that directors’ decisions are based on sound business judgment. The business judgment rule, though, is not fail-safe.
Director Liability to Creditors when the Company Is Insolvent
In attempting to weather the economic storm, directors should not forget about another key constituency: Creditors. When a Delaware or California corporation becomes insolvent, in certain limited instances, creditors may have grounds to sue directors, personally – that is, when directors violate their duty of loyalty and/or care.2
To maintain a lawsuit against directors, creditors must establish that the corporation was insolvent at the time of the directors’ alleged wrongful conduct, as opposed to the business being in the “zone” of insolvency (i.e., a concept that had at one point been in judicial favor, in Delaware, however, has been expressly repudiated as a dividing line). Many startups and venture-capital-backed businesses often operate in their early growth stage with tight cash flow, little revenue, and fluctuating valuations; however, these factors which may lead the business to a “zone” of insolvency are insufficient to trigger director liability. This winds up being a “double-edged sword” as circumstances often do not clearly spell out in a binary fashion, solvent/insolvent – with the vagueness resulting in the potential for a delay in the recognition that insolvency has in fact occurred.
Creditors most commonly establish that the corporation is insolvent by demonstrating that, at the time of the challenged conduct (1) the corporation’s liabilities exceed its assets or (2) the corporation is unable to pay its debts as they come due. As any finance major will tell you, either of these standards is elastic; e.g., are “stretching” payables to trade creditors not “paying debts as they come due,” or what about that great IP that has not yet fully commercialized and been shown on the company balance sheet at its “market value” though in an instance where a lot of debt was piled on to create that same IP?
When a corporation becomes insolvent under Delaware law, creditors (whether secured or unsecured creditors, bondholders, or any other lienholder) have standing to assert breach of fiduciary duty claims against the directors on behalf of the corporation, the reasoning being that interests of stockholders become subordinate to creditors. Plainly stated, and bankruptcy issues to the side, once the corporation becomes insolvent, creditors may file a derivative lawsuit on behalf of the corporation for breach of fiduciary duties against directors, personally.
It is important to note that, while creditors of Delaware corporations can bring derivative actions against directors, creditors of Delaware limited liability companies or limited partnerships cannot bring any such derivative action.3
By comparison to Delaware law, when a corporation or LLC becomes insolvent under California law, creditors cannot assert derivative breach of fiduciary duty claims on behalf of the corporation (or LLC) against directors (or members of the LLC).4
As a practical matter, however, this distinction between California law and Delaware law is largely meaningless. To explain, while creditors of an insolvent California corporation cannot file breach of fiduciary duty claims against the directors, California recognizes the “trust fund doctrine” (which may result in the imposition of a constructive trust of the insolvent corporation’s assets for the benefit of creditors).5 In asserting the trust fund doctrine, creditors may sue directors if the facts establish that the directors diverted, dissipated, or unduly risked the insolvent corporation’s assets, and the duties created require directors to take creditor interests into account, in decision-making. Thus, while California’s “trust fund doctrine” is technically not a breach of fiduciary duty claim, it is effectively ‘a rose by another name’ – i.e., another theory under which creditors can assert to hold directors personally liable for mismanaging assets of insolvent corporations.
Especially in these perilous times, directors/managers of California and Delaware business entities should take care to consider the implications of their actions on the entity’s creditors, and should be sensitized to creditors’ availability of claims against them — even if the directors/managers did not have any direct dealings with the creditors.
For example, one group of creditors may include the employees of a business who have claims against the business for unpaid wages and salary. More specifically, California employees — without claiming any breach of a fiduciary duty or showing of the company’s insolvency — may assert direct claims of wage and hour violations against those directors who “caused” such violations. In such a situation, the directors could be personally liable for the unpaid wages and salary, in addition to civil penalties. Whether the director “caused” the wage and hour violations depends on the unique circumstances of the director’s involvement (e.g., whether the director acted with awareness of a decision to not pay wages and to instead prefer a different creditor).
Similarly, directors can be liable for unpaid employment taxes if the director is “responsible”, i.e., the director “had a duty to account for, collect, and pay” the taxes (including a person such as a director, with the authority to exercise significant control over a company’s financial affairs) and “willfully” failed to do so.6 Again, the particulars of the director’s involvement and responsibilities will determine whether the director was “responsible” for the company’s payment of the employment tax and “willfully” failed to pay it.
In further analyzing their potential liability to creditors, directors should give thought to additional considerations that may impact the analysis, including the governing law (e.g., while directors may be operating the business in California, the corporate bylaws may require the application of Delaware law). To minimize exposure to personal liability, directors should be aware of the substance of the corporate governance documents, regularly assess the corporation’s financial position, and seek guidance from other directors and professionals, as appropriate.
Best Practices to Guard against Director Exposure
While a director’s duties and obligations depend on the specific facts and applicable law, directors of (potentially insolvent) companies should consider the following measures to minimize exposure to equity holders and, in certain situations, creditors:
• Obtain Information about the Corporation’s Financial Performance. This would oftentimes require consultation with the CFO and outside accountants. Arguably, when in doubt about solvency/insolvency, prudence may lead to a conclusion of insolvency.
• Make Informed Decisions. Clearly this requires active engagement in the decision-making process and obtaining needed information and consultation with others, both inside the organization, and outside (accountants and legal counsel). Recognition of transactions that involve conflicts of interest of interested parties is important. Similarly, the use of a special committee of the Board may be appropriate in focusing on solvency issues.
• Document the Board’s Decision-Making Process. The board should obtain all relevant information in writing, and questions, objections, inquiries, board meetings and other communications should be recorded.
• Consider Obtaining D&O Insurance and Director Indemnification
Agreements. While expensive, directors may mitigate potential liability by purchasing D&O insurance and seeking indemnity from the company, as long as the insurance and indemnity agreements are in place before the occurrence of the board decision triggering a shareholder or creditor claim. Care should be taken in the review of the insurance policy, in advance, to provide comfort that the policy provides coverage for breach of fiduciary duty claims of this nature. While having D&O insurance may be attractive to creditors looking for deep pockets (i.e., the insurance carrier’s pockets) and could also create the unintended consequence of encouraging litigation against the directors personally, the D&O policy is intended to shield the director – who is likely not judgment proof – from personal liability. The D&O insurance should be reviewed carefully because some policies include contract or insolvency exclusions that may bar coverage for claims from creditors. Directors may consider seeking express contractual indemnity from the VC-fund or private equity sponsors, as well, entities presumptively with greater creditworthiness than the subject entity.
Ultimately, director liability will depend on the unique circumstances of the case, including whether the director put his or her own interests before that of the company, and whether the company was solvent during the transaction or board decision at issue. While this analysis can be complicated and ambiguous, directors and LLC managers looking to limit their potential liability to creditors (and others) should let the following precept guide their conduct: Always act in the best interests of the business entity including all creditor constituencies, without preference to any.
This article was featured on SocalTech.com, to view the article on their site visit here.
For more information about this topic or issues relating to our Business Litigation Practice please contact, Michael Sherman at .
Authors:
1 See In re Puda Coal, Inc. S'holders Litig., C.A. No. 6476–CS 15–17, Feb. 6, 2013 (Transcript)
2 Quadrant Structured Products Company, Ltd. v. Vertin (Del. Ch. 2015) 115 A.3d 535, 546 (“After a corporation becomes insolvent, creditors gain standing to assert claims derivatively for breach of fiduciary duty.”)
3 CML V, LLC v. Bax (Del. 2011) 28 A.3d 1037, 1043, as corrected (Sept. 6, 2011) (“Only LLC members or assignees of LLC interests have derivative standing to sue on behalf of an LLC— creditors do not.”)
4 See Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1041 (“there is no
broad, paramount fiduciary duty of due care or loyalty that directors of an insolvent corporation owe the corporation’s creditors solely because of a state of insolvency.”)
5 Id. at 1041 (“the scope of any extra-contractual duty owed by corporate directors to the insolvent corporation's creditors is limited in California, consistently with the trust-fund doctrine, to the avoidance of actions that divert, dissipate, or unduly risk corporate assets that might otherwise be used to pay creditors claims.”)
6 26 U.S.C. § 6672 (“Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax [. . .] shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.”)
(Updated as of May 20, 2020)
On May 8, 2020, California’s stay-at-home order was modified to reflect the state’s entering Stage 2 of its COVID-19 pandemic response, where businesses in the retail, manufacturing, and logistics industries can reopen, subject to certain restrictions (e.g., delivery and curbside pickup only). Earlier this week, Governor Gavin Newsom also hinted that entering Stage 3 “may not even be a month away.” Below are some questions and answers for issues that may arise as businesses reopen.
In California, workers’ compensation benefits are the exclusive remedy for injuries that a worker sustains from a condition of their employment. Some states’ workers’ compensation statutes exclude coverage for “non-occupational diseases” or “ordinary diseases of life,” such as a cold or flu, which may arguably encompass COVID-19. However, California’s Labor & Workforce Development Agency (“LWDA”) has clarified that workers are eligible for workers’ compensation benefits for injuries resulting from COVID-19.
However, generally speaking it is the worker’s burden to show that they were exposed to and contracted COVID-19 during their regular course of work. This showing will ultimately depend on the unique circumstances of each claim, including, for example, whether there were any known cases of COVID-19 infections at their workplace, whether the premises were contaminated with the virus, and whether the employer implemented safety and social distancing provisions.
On May 6, 2020, Governor Newsom changed the forgoing general presumption and issued an executive order that creates a rebuttable presumption for a period of 60 days (May 6 - July 5) that may entitle workers who work outside their homes to workers’ compensation benefits if they contract the coronavirus. The California State Insurance Fund (“State fund”) currently estimates that the added benefits from the Governor’s recent executive order will require approximately $115 million in funds.
Under the recent executive order, it will be presumed that the worker contracted COVID-19 during their regular course of work if (1) the employee tested positive with COVID-19 within 14 days after working at their place of employment; (2) the last day must have been on or after March 19, 2020; (3) the worker’s place of employment is not their home; and (4) the worker’s diagnosis of COVID-19 must be by a licensed physician and the diagnosis must be confirmed with further testing within 30 days of the diagnosis.
It will be up to the employer to establish that the worker did not contract COVID-19 at work by producing evidence that the injured worker did not satisfy one of the above four criteria or that the injured worker contracted the virus by another cause. The employer must produce such evidence within 30 days of the filing of the claim by the worker. After 30 days, an employer can produce evidence to rebut the presumption with evidence discovered after the 30-day period.
Overcoming the presumption will likely be difficult given the many variables in tracing how and where a worker has been exposed to the virus and obtaining evidence to disprove the worker’s claim. Further, employers and insurers will likely challenge the executive order due to the difficulty of proving that the employee contracted the coronavirus elsewhere. How is the employer supposed to establish this? Can the employer demand to know everyone the employee came into contact with outside of work and if those people were contagious? Can the employer go even further and inquire where the employee has been? And on and on down the line In short, there are a myriad of open issues and no guidance as of yet.
In California, workers compensation and unemployment compensation are typically only available to employees. However, workers who believe they were misclassified under recently enacted AB-5, and applicable case law, may be eligible for both of these benefits. To learn more about misclassification under AB-5, check out “The Evolution of the California Independent Contractor.”
Additionally, independent contractors who have voluntarily contributed to unemployment insurance Elective Coverage and made the required contributions or had a past employer contribute to the unemployment insurance fund on their behalf in the past 18 months, may also qualify for unemployment compensation. Further, the Pandemic Unemployment Assistance (“PUA”) program of the CARES Act gives states the unprecedented option of extending unemployment compensation to independent contractors and other workers who are ordinarily ineligible. On April 28, 2020, California’s Employment Development Department (“EDD”) followed suit and expanded the availability of unemployment compensation via the federal PUA program to business owners, self-employed individuals, independent contractors, and gig economy workers.
Workers who opt not to return to their positions when their employers reopen amid the COVID-19 pandemic will likely not remain eligible for unemployment compensation. Generally, individuals receiving regular unemployment compensation must act upon any referral to, and accept any offer of, suitable employment. A request that a furloughed employee return to his or her job very likely constitutes an offer of suitable employment.
Specifically, the U.S. Department of Labor outlines the conditions an individual has to meet to refuse to return to work in order to remain eligible for PUA, as provided by the CARES Act. The list includes (i) a COVID-19 diagnosis, restrictions due to childcare availability, (ii) caring for an ill family member, or (iii) health “complications that render the individual objectively unable to perform his or her essential job functions, with or without a reasonable accommodation” as a result of having recovered from COVID-19. However, voluntarily deciding to not return to work out of a general concern about exposure to COVID-19 is likely tantamount to the employee having quit and will likely eliminate PUA eligibility.
The EDD similarly requires applicants to be “able, available, and actively seeking work” to collect unemployment benefits. Accordingly, a worker’s decision to not return to work out of general health concerns related to COVID-19 would likely not satisfy this requirement. If, however, a worker declines to return given their underlying health conditions and thus an increased chance of significant illness if exposed to COVID-19, then the worker may be entitled to maintain unemployment compensation subject to the EDD’s discretion.
What if an employer offers a temporarily furloughed employee who is receiving unemployment compensation an otherwise similar role that provides, for example, hourly wages instead of the employee’s previous salaried compensation? Will this be considered “suitable work,” and would the adjusted compensation create “good cause” to refuse this position”? More generally, if the employer changes the terms of the employment – at what point does it constitute good cause to voluntarily quit and be eligible for unemployment compensation?
Whether an employee has good cause to not return to work or quit and be eligible for unemployment compensation is determined on a case-by-case basis and the burden of proving eligibility is on the claimant. The EDD provides the following framework in determining whether good cause exists for the claimant to have voluntarily quit and remain eligible for unemployment compensation:
“Once the claimant's reasons for leaving are determined, the interviewer must apply a three-part test to determine the presence of ‘good cause’: (1) Is the reason for leaving ‘real, substantial, and compelling’? (2) Would that reason cause a ‘reasonable person,’ genuinely desirous of working, to leave work under the same circumstances? (3) Did the claimant fail to attempt to preserve the employment relationship, thereby negating any ‘good cause’ he/she might have had in leaving?... ‘Compelling,’ in this sense merely means that the claimant's reasons for quitting exerted so much pressure that it would have been unreasonable to expect him or her to remain with the employment. The ‘pressures’ exerted upon the claimant may be physical (as with health), moral, legal, domestic, economic, etc.”
A relatively insignificant reduction in salary due to a worker’s being reassigned to a different hourly role has been found to not constitute good cause to terminate voluntarily. In one case, for example, a California court found that a reduction in the employee's wages by roughly 7% did not, by itself, constitute good cause for voluntarily leaving employment. However, the California Supreme Court has held that a 25% wage cut constituted a “substantial reduction in earnings” and that reduction was regarded as good cause for leaving employment.
Also uncertain is what happens in the situation where a salaried employee is offered an hourly position with no guarantee of actual work. This would likely serve to support a claimant’s argument that good cause exists to reject the offer of employment and remain eligible for unemployment compensation. Moreover, in some situations, an employee may be deemed to be partially unemployed and thereby entitled to partial unemployment compensation. Thus, hourly employees with reduced workloads may still receive partial unemployment compensation to supplement lost hours. Each of these situations must be evaluated on a case by case basis.
If a worker believes their employer has not adequately addressed COVID-19-related concerns, other limited remedies are available. Per California’s Department of Industrial Relations, employees deemed non-essential who believe they were terminated or otherwise retaliated against for refusing to go to work while the stay-at-home order is in effect may file a retaliation claim with the Labor Commissioner’s Office. Similarly, essential workers who feel their employer has not taken steps to ensure a safe work environment may also file a claim with the Labor Commissioner. These claims can lead to damages and penalties against the employer if it is found to have treated an employee adversely or fired an employee for refusing to work in (or complaining of) an unsafe work situation.
Under the federal Occupational Safety and Health Act, enforced through the Occupation Safety and Health Administration (“OSHA”), employees can refuse to work if they reasonably believe they are in imminent danger, which means they must have a reasonable belief that there is a threat of death or serious physical harm likely to occur immediately or within a short period. In the context of COVID-19, this will likely require a specific fear of infection that is based on fact—not just a generalized fear of contracting COVID-19 infection in the workplace, and that the employer cannot address the employee’s specific fear in a manner designed to ensure a safe working environment.
California’s counterpart to OSHA(“Cal/OSHA”), requires every employer to develop and implement a written safety and health program tailored to the specific workplace. Among other things, recent Cal/OSHA guidance mandates that all California employers must determine if COVID-19 infection is a hazard in their workplace, and if it is, implement prevention measures and training. Workers can file confidential complaints with OSHA or Cal/OSHA if they believe their employer is non-compliant, which could lead to on-site investigations, various civil penalties, and/or special orders requiring employers make changes to their workplace.
U.S. Senate Majority Leader Mitch McConnell has stated that any additional federal aid bill for state and local governments should make the money contingent on states providing liability protection to businesses and hospitals providing services amid the COVID-19 pandemic. Indeed, on May 12, Senator McConnell stated that he is overseeing the drafting of legislation that would “create a legal safe harbor for businesses, nonprofits, governments and workers and schools who are following public health guidelines to the best of their ability.” However, he was clear that the bill would not provide absolute immunity, and that “there will be accountability for actual gross negligence and intentional misconduct.”
The U.S. Chamber of Commerce has also made several suggestions on this topic, including safe harbors from: privacy laws for employers who inquire about health status, age and disability bias laws if companies follow guidelines regarding at-risk employees, and simple negligence claims for COVID-19 exposure if businesses follow government health guidance. Manufacturers have also suggested (i) raising the legal standard for plaintiffs’ claims that a business failed to protect them from COVID-19, (ii) giving additional protections to businesses making new products to address the COVID-19 crisis, and (iii) shielding businesses from privacy suits if they reveal a worker’s COVID-19 diagnosis for safety reasons. Currently, the extent to which any liability protections will be extended remains unclear.
Businesses must consider the extent and manner in which they will reopen. As best practice, and in compliance with Cal/OSHA requirements, businesses should establish safety protocols, update employee and company handbooks to reflect the safety protocols (and provide handbooks to workers), and enforce compliance with the protocols. The State Fund has established the Essential Business Support Fund and the Returning California to Work COVID-19 Safety Protocol Fund, both of which provide $50 million in grants on a first-come, first-serve basis. State Fund policyholders operating an essential business can apply for a grant to help with safety-related expenses, including reimbursement for costs for goggles, masks, gloves, cleaning supplies and services, and worksite modifications. Each grant can total up to the lesser of $10,000 or twice the amount of the businesses’ premium. The State Fund will make applications for the Returning California to Work COVID-19 Safety Protocol Fund available after statewide stay-at-home restrictions are lifted.
Businesses can also turn to the California Department of Public Health (“CDPH”) for guidance on how to reopen their businesses and provide a safe working environment for their workers. While business can use effective alternative or innovative methods to provide a safe work environment, such as implementing guidance from the Centers for Disease Control and Prevention, the CDPH guidelines are helpful as they are industry specific and cover employee training, cleaning and disinfecting protocols, physical distancing guidelines, and a big-picture plan for creating and implementing the safety protocols.
Important and recommended practices include establishing policies and practices for maintaining a healthy work environment and social distancing. Employers can maintain a healthy work environment by, for example, providing and mandating use of personal protective equipment, such as masks and gloves, regularly sanitizing high-frequency touched surfaces, providing napkins and hand sanitizers to employees, limiting access to common areas such as break rooms and kitchens, increasing ventilation and outdoor air circulation, and requiring employees to report travel outside the state.
Social distancing means avoiding large gatherings and maintaining 6 feet distance from others when possible. Social distancing protocols can include providing flexible worksites (e.g., telework) and work hours (e.g., staggered shifts), increasing physical space among employees and between employees and customers at the worksite, implementing flexible meeting and travel options (e.g., postpone non-essential meetings or events, use video conferencing, etc.), and providing alternative delivery methods, including curbside pick-up for products and utilizing phone, video, or web for services.
We will continue to closely monitor developments regarding these matters. You can view prior alerts and additional guidance regarding COVID-19-related matters at our resource center.
For more information on these matters, please contact our COVID-19 Task Force at or one of our attorneys at SA&M.
Authors:
Jeffrey Gersh
Karine Akopchikyan
Garett Hill
Force Majeure provisions in an agreement may excuse performance by one or both parties to a contract as a result of events that can neither be anticipated nor controlled. These provisions range from simple and boilerplate to extraordinarily detailed. But you may also be excused from performance of a contract if performance of the agreement impossible or impracticable.
In the case of the outbreak of the current coronavirus (“COVID-19 Pandemic”), there are several terms or phrases to look for in an agreement, including a Force Majeure provision, when considering whether an event may provide a party with the ability to be excused from performance. However, you must also review the entirety of the applicable agreement to determine if there is any specific exclusion or exception to certain events that do not constitute a Force Majeure or otherwise justify non-performance.
California Courts’ Interpretation of Force Majeure Provisions
Foreseeability Standard For “Open-Ended”- Catch-All” Provisions
Reasonable Control Requirement
Interpretation of Force Majeure Provisions in Other States
Force Majeure and the COVID-19 Pandemic
Impossibility or Impracticability of Performance
Authors: Jeffrey Gersh
Celina Kirchner
Crystal Jonelis
Karine Akopchikyan
If you have questions regarding Force Majeure, please contact our COVID-19 Task Force – .
Stubbs Alderton & Markiles' Attorneys Heather Antoine and Karine Akopchikyan have been featured in the Los Angeles Business Journal's "Perspective" column discussing the Patagonia lawsuit dismissal based on claims of fame. The article is titled "Patagonia Survives Dismissal in Trademark Suit Based on Claims of Fame" and to read the full article, click here.
About Patagonia
Patagonia, Inc. is an American clothing company that markets and sells outdoor clothing. The company was founded by Yvon Chouinard in 1973, and is based in Ventura, California. Its logo is the outline of Mount Fitz Roy, the border between Chile and Argentina, in the region of Patagonia visit https://www.patagonia.com/
Heather Antoine is a Partner and Chair of the Firm’s Trademark & Brand Protection practice and Co-Chair of the Privacy & Data Security practice group. Heather’s practice focuses on protecting a company’s intellectual property; a fundamental feature of every business. Heather is also focused on guiding businesses through the ever-expanding maze of privacy laws, both domestically and internationally.
Karine Akopchikyan is a Litigator in the Firm’s Business Litigation Practice group. Karine has extensive experience representing and advising plaintiffs and defendants in a wide range of business and commercial disputes in state and federal courts. She focuses her practice on resolving complex contractual disputes, intellectual property disputes (including copyright, trademark, patent, right of publicity, and trade secret claims), cyber insurance coverage disputes, and disputes involving unfair competition, fraud, and other business torts. In large part, Karine’s success lies in her integrity, diligence, and ability to bring people together.
For more information about our Trademark Practice, contact Heather Antoine at .
Stubbs Alderton & Markiles’ attorney Karine Akopchikyan, who chairs the LA committee of the USC Gould Alumni Association, was featured in USC Gould News this past week. Karine’s commitment to helping students goes beyond the law school [USC Gould]. With roots as a credentialed public-school teacher, she helped form the Pasadena Bar Association’s Mentorship Committee, which connects law students with seasoned attorneys. She also regularly volunteers as an attorney proctor for the Los Angeles Superior Court’s Teen Court Program, which focuses on the rehabilitation of juvenile offenders.
To read the full article visit here.
Karine Akopchikyan is a Litigator in the Firm’s Business Litigation Practice group. Karine has extensive experience representing and advising plaintiffs and defendants in a wide range of business and commercial disputes in state and federal courts. She focuses her practice on resolving complex contractual disputes, intellectual property disputes (including copyright, trademark, patent, right of publicity, and trade secret claims), cyber insurance coverage disputes, and disputes involving unfair competition, fraud, and other business torts. In large part, Karine’s success lies in her integrity, diligence, and ability to bring people together.
Outside of the office, Karine is committed to improving the academic and social outcomes for students in her community. With roots as a credentialed public school teacher, Karine helped create the Pasadena Bar Association’s Mentorship Committee, which connects law students with seasoned attorneys. In addition, she regularly volunteers as an attorney proctor for the Los Angeles Superior Court’s Teen Court Program, which focuses on the rehabilitation of juvenile offenders.