December 22, 2020
Buried in the 5,300-page law approved in the Senate yesterday is a significant holiday gift for businesses who received PPP loans: Tax deductibility for PPP expenses!
December 22, 2020
Buried in the 5,300-page law approved in the Senate yesterday is a significant holiday gift for businesses who received PPP loans: Tax deductibility for PPP expenses!
On June 17, 2020, the U.S. Small Business Administration and the Department of the Treasury released a revised form of the PPP Loan Forgiveness Calculation Form to implement changes made by the Paycheck Protection Program Flexibility Act of 2020, which was signed by President Trump on June 5, 2020.
Today California’s Judicial Council, headed by California Supreme Court Chief Justice Tani Cantil-Sakauye, was set to vote whether to lift its emergency rules effectively banning residential evictions and judicial foreclosures during the pandemic. It did not. Instead, it voted to “suspend” this vote. As a result, the ban continues.
The bill, referred to as the PPP Flexibility Act, by the House of Representatives is now headed to President Trump’s desk for signature.
The legislation seeks to relax several of the cumbersome restrictions on small businesses’ use of PPP funds. Specifically, the bill would relax the requirement for small businesses to use 75% of PPP loan proceeds on payroll, leaving only 25% of funds to spend on other operating expenses such as rent and utilities. The 75/25 formula would be replaced with a 60/40 formula.
The bill, authored by House Representative Dean Phillips (D-Minn.), and Chip Roy (R-Texas), passed with a 417-1 vote and is now awaiting a Senate vote. The legislation seeks to relax several of the cumbersome restrictions on small businesses’ use of PPP funds. Specifically, the bill would relax the requirement for small businesses to use 75% of PPP loan proceeds on payroll, leaving only 25% of funds to spend on other operating expenses such as rent and utilities. The 75/25 formula would be replaced with a 60/40 formula.
The Proposed New Law introduced by State Senator Scott Wiener (D-San Francisco) and Lena Gonzalez (D-Los Angeles), Senate Bill 939 proposes to give commercial tenants the right not to pay rent without fear of eviction for a full year after the current COVID-19 emergency ends. If it passes, SB 939 will also eliminate late fees and make any “endeavor to evict a tenant of commercial real property” an unfair business practice, and make “harassment or mistreatment of or retaliation against” a tenant refusing to pay rent “punishable by a fine of not more than two thousand dollars ($2,000) for each violation.” SB 939 would do so by adding a new “Section 1951.9” to California’s Civil Code.
As an update to our May 7, 2020 THE SBA AGAIN BACKTRACKS … SIGNALING YET ANOTHER IMPORTANT CHANGE TO PPP RULES Client Advisory, this morning the SBA fulfilled its promise “to provide additional guidance on how it will review the certification prior to May 14, 2020.” This morning’s announcement is big news.
When Congress enacted the CARES Act, and originally allocated $350 billion to save small businesses via the bipartisan Payroll Protection Plan (“PPP”) loan program, it did so while proudly proclaiming “the requirement that a small business concern is unable to obtain credit elsewhere…shall not apply to a [PPP] loan.” This was a major departure from prior law. Under prior law, “[n]o financial assistance” could be extended to a small business if the business could “obtain credit elsewhere.”
Orange County has made national news. In a press conference on April 30th, Governor Newsom singled out Orange County and stated he would order our beaches closed, based on misleading photographs using telephoto lenses, and published in local newspapers and online. Many viewed the decision as political, since the decree targeted only Orange County. Several lawsuits have already been filed challenging the Governor’s decree, including one by my hometown, the City of Huntington Beach.
May 1, 2020
The U.S. Small Business Administration issued another Interim Final Rule on Thursday, April 30, 2020 relating to the Payroll Protection Program under the CARES Act, entitled “Business Loan Program Temporary Changes; Paycheck Protection Program – Requirements – Corporate Groups and Non-Bank and Non-Insured Depository Institution Lenders.”
May 1, 2020
On April 30, 2020, the Internal Revenue Service issued Notice 2020-32 to provide guidance regarding deductibility of otherwise deductible business expenses incurred by taxpayers, receiving covered loans pursuant to the Paycheck Protection Program. The IRS has determined that no deduction is allowed if the payment of the expense results in forgiveness of a covered loan pursuant to the CARES Act, as the income associated with the forgiveness is excluded from gross income for tax purposes.
The COVID-19 epidemic and the unprecedented economic dislocation triggered by the outbreak and state and federal governments’ extraordinary restrictions on business have prompted what may ultimately prove to be the largest federal spending program in American history, dwarfing the New Deal of the 1930’s and the response to the 2008 financial crisis.
April 21, 2020
The U.S. Senate this afternoon passed “Phase 3.5” of Coronavirus legislation, entitled ‘‘Paycheck Protection Program and Health Care Enhancement Act.” The bill increases appropriations for the popular Payroll Protection Program by $310 Billion to a new total of $659 Billion.
The Orange County Bar Association hosted a web conference yesterday with Orange County Presiding Judge Nakamura, Judge Hernandez and Court Executive Officer David Yamasaki about the Orange County Superior Court’s operations going forward. The conference provided valuable insight on the near-term future of civil litigation practice in Orange County. What follows is a non-exhaustive summary of the most impactful issues for civil cases.
Effective Tuesday, April 14, the Administration, through the U.S. Small Business Administration (“SBA”), issued yet another “Interim Final Rule.” This occurred as the SBA was running out of money to fund Payroll Protection (“PPP”) loans, and as Senate Republicans and Democrats neared impasse on a proposal to infuse an additional $250 billion into the popular PPP loan program. Using its emergency rulemaking authority, this time the SBA provided guidance for self-employed individuals seeking to apply for PPP loans. The rule also addresses eligibility and loan forgiveness issues for certain businesses.
California’s Judicial Council, headed by California Supreme Court Chief Justice Tani Cantil-Sakauye, has now adopted sweeping Emergency Rules. Among other things, they make it virtually impossible for landlords to evict tenants who fail to pay rent or otherwise breach their leases. They make it equally hard for mortgage holders to proceed with judicial foreclosures. The new rules will remain in effect until 90 days after Governor Newsom declares the state of emergency for COVID-19 over or until the Judicial Council changes the rules.
Today, California Insurance Commissioner Ricardo Lara issued an order requiring all insurance companies doing business in California, “to make an initial premium refund for the months of March and April to all adversely [COVID-19] impacted California policyholders.”
Today (Thursday, April 9, 2020) the Federal Reserve announced the details of a new “Main Street Business Lending Program,” designed to supplement existing Small Business Administration (SBA) emergency lending programs such as the Paycheck Protection Program (PPP). This program is part of a larger move by the Federal Reserve to provide up to $2.3 trillion in financing to support the economy during the coronavirus pandemic.
April 8, 2020
Several hurdles have hampered some small businesses furiously attempting to apply for Payroll Protection Plan loans, which first became available on April 3, 2020. As previously reported, President Trump signed the PPP loan program into law on March 27, 2020 when he green-lighted Congress’ unprecedented $2.2 trillion CARES Act. The goal of this and other parts of the bipartisan CARES Act is to stabilize the U.S. economy in the face of unemployment claims skyrocketing to levels not seen since the Great Depression.
Much has been written recently about the plight of small businesses backed by venture capital (“VC”) investors. Like other small businesses who haven’t raised capital in the VC community, they are impacted by the COVID-19 pandemic and resulting stay at home and shut down orders of our federal, state and local government officials. They are in the same position of making difficult decisions about employees, supply chains and customers, and many need a life-line to survive.
As “stay at home” orders now apply to over 200 million Americans, and unemployment claims skyrocket to levels not seen since the Great Depression, scores of commercial landlords and their business tenants ask: Is rent on leased, but now largely unused, commercial space still due? The answer: It depends …
The COVID-19 pandemic and extraordinary governmental response in hopes of containing it, including the forced closure of tens of thousands of “non-essential” U.S. businesses, have inflicted unprecedented harm on our economy. Some analysts project double-digit contractions of U.S. gross domestic product over each of the next two quarters, with unemployment rates and unemployment insurance claims spiking to levels unseen since the Great Depression.
Small business owners looking for lifelines to keep their operations running are scrambling to apply for a Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). PPP Loans have caught the eye of small business owners because they provide for favorable terms, quick access to cash to support their operations, and the prospect of both deferment of repayment and outright forgiveness of the loan, for qualifying businesses eligible for the program.
The following is an update on the ever-evolving, inconsistent and therefore inherently confusing array of California, Delaware and Nevada court orders as related to the impact of the COVID-19 pandemic on civil (non-criminal) matters. As these orders are likely to continue to change, the reader is urged to visit each court’s website (at the URLs provided below) for future updates.
The spread of COVID-19 continues to threaten small businesses throughout the United States. As employees fall ill, the public is urged (and in many cases ordered) to stay at home and employers are forced to close their physical operations to the public.
April 1, 2020
With “social-distancing” and “self-isolation” directives mounting to slow the spread of COVID-19, one question rises to the surface: how will people and businesses pay rent if they are required to stay home or “close shop?” On March 16, 2020, Governor Newsom issued Executive Order N-28-20, encouraging local governments to restrict landlords from evicting residential and commercial tenants.
If you have less than 500 employees, the answer is probably “yes.” Here’s why:
Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) now en route to President’s Trump’s desk to be officially signed into law, any “small business concern’’ (generally speaking, but not absolutely, defined as one with 500 employees or less) is entitled to apply for and receive a “Paycheck Protection Loan” from a Small Business Administration (“SBA”) approved bank or credit union where, as a result of COVID–19, it experienced
In 1965, Intel cofounder Gordon Moore predicted “the number of transistors incorporated into a chip will approximately double every 24 months.” What would later be coined as “Moore’s Law,” proved true in the following decades. Futurist Ray Kurzweil would subsequently refer to this rapid acceleration of technological advancement as the “Law of Accelerating Returns.” Kurzweil predicts that in the 21st century, humans will achieve 1,000 times the technological advancement of the 20th century.
In the era of Coronavirus and “social distancing” law firms and businesses have had to utilize available technologies to move entire workforces into a work-from-home model. Of particular concern, many of these employees are non-exempt hourly wage earners. Done at rushed pace and in a haphazard manner, there has been little time to contemplate the legal ramifications of socially distant employees.
March 26, 2020
As our federal, state, county and local governments more aggressively take actions designed to reduce potential exposure and spread of COVID-19, employers are suddenly confronted with difficult decisions. In many cases, whole industries are being required to shut down or discontinue operations, and public gatherings of any size in business establishments are now being prohibited by law, with exceptions only for essential activities.
March 25, 2020
As previously noted (https://www.ecg.law/blog/everything-has-shut-down-is-my-contract-still-enforceable), the first place to look is the force majeure (act of God) clause in your contract. This, of course, raises the question: Does your contract have a force majeure clause? If so, what does that clause say? Does it, expressly or impliedly, cover pandemics? Many list “epidemic” or “pandemic” among the typical laundry list of qualifying events. See Aukema v. Chesapeake Appalachia, LLC, 904 F.Supp.2d 199, 206 (N.D. NY 2012) (stating the “term ‘force majeure” as used herein shall be Acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, riots, epidemics, lightning, earthquakes, explosions, accidents ….”)
March 18, 2020
I hope this finds you, your families, friends and coworkers safe and well. These are indeed unprecedented times. On Monday, my partners and I authorized all ECG personnel to work, via our real-time collaboration technology, remotely from home. THIS SHOULD NOT IMPACT OUR CONTINUING SERVICES, NOR HINDER ECG's ABILITY TO COMMUNICATE WITH OR SERVE YOU. You can still reach any ECG employee by calling ECG’s main line, our respective ECG direct dial numbers, or our cell phones. Likewise, we continue to be connected by email and text. The only slight improvement is you can now attach a document of any size to a text directed to our respective ECG direct dial numbers.
March 17, 2020
It depends. First, it depends on whether our courts will ultimately consider the present COVID-19 crisis an “Act of God” or, what is more modernly is considered grounds for asserting either the “impossibility” or “frustration of purpose” defenses. Second, it depends on whether your contract already allocates the risk of such widespread illness to one party or the other. Such risk allocation often occurs in “force majeure” clauses.
March 16, 2020
Orange County Election Results for the March 3, 2020 Primary Election are still being tabulated and, as has become customary, it could be a couple of weeks or more before results are certified and official. Among other things, preliminary election results demonstrate one certainty – ballot propositions involving an increase to property tax obligations are not for the faint at heart.
March 16, 2020
There is hardly a more iconic song in rock history than Led Zeppelin’s Stairway to Heaven. That makes it a fitting song to serve as the subject of an important En Banc opinion recently issued by the Ninth Circuit Court of Appeals. Stairway’s iconic opening acoustic guitar notes bear a resemblance to a similar acoustic guitar part appearing in a song titled Taurus, written in 1967 by Randy Wolfe. Just how similar, and whether Stairway’s similarity crossed the line into copyright infringement, was the subject of a lawsuit filed in 2014 by the trustee of Randy California’s trust, reaching a five-day jury trial in 2016.
September 30, 2019
By popular demand, the following breaks down more precisely how Assembly Bill 1482 (aka, the “Tenant Protection Act of 2019”) is anticipated to impact owners of California residential rental property. 1
September 13, 2019
California’s rent cap bill, AB1482, now makes rent control the law of the land in California. The bill was passed by the California Senate on September 11 and is now headed to Governor Gavin Newsom’s desk. He has publicly stated he intends to sign it.
California is the third state to impose statewide rent controls. Oregon passed a measure limiting annual increases to 7% plus inflation in March. New York state enacted rent controls in June.
Lawsuits are often filed claiming company managers, officers, board members or those “in control” are stealing from the businesses entrusted to their care, or are running those businesses for their individual benefits to the detriment of minority shareholders or other equity owners (e.g., LLC members). Many times, these lawsuits are warranted. Equally often, they amount to “sour grapes” by those who got outvoted or didn’t get their way. Regardless, a large number of these cases are dismissed without any judicial determination of right or wrong. Why? Because the parties bringing the lawsuits forgot to ask the simple question, “Who ‘owns’ the claim?”
August 7, 2019
Depending on the circumstances, the answer to this question could be worth millions of dollars. It could also spell the difference between success and disaster: e.g., the possible collapse of the modern day on demand cyber economy (Uber, Lyft, grocery delivery, etc.) Thus, every day scores of lawsuits are fought over this very point. For many, the business of filing and prosecuting such lawsuits is “big business.”
According to one scholar, “misappropriation of trade secrets” lawsuits are frequently used to crush start up competitors. (James H. Pooley, The Uniform Trade Secrets Act: California Civil Code 3426, 1 Santa Clara High Tech. L.J. 193 (1985).) This often occurs when a senior level officer, manager or employee leaves to form his or her own business. Even though California law overwhelmingly favors competition—and does not require former executives or employees to magically “forget” everything they learned in their former positions— start up competitors are often falsely accused of stealing trade secrets simply because they continue to practice their trade or profession. Hence the irony: A tool designed to safeguard competition is often used to crush or destroy it.
Until last year, California employers with five or more employees could pre-screen applicants using criminal background checks or by asking questions on a job application. A new law, however, called the Fair Chance Act (Govt. Code 12952) prohibits employers from asking applicants about criminal history before the employer makes a job offer. Employers are now limited to conducting criminal background checks only after making a job offer to an applicant.
ECG would like to bring to your attention active email scams that malicious actors are distributing and the scam is creating emails that impersonate inside company personnel. Scammers do this to convince people to send money or gift cards to the sender. Some are impersonating company personnel of authority, being so bold as to request wire transfers to be completed. This often occurs by hackers associating the names of inside personnel to outside free email accounts, such as those set up on Gmail, Yahoo and AOL. This type of scam is aimed at getting the recipient to transfer money or send sensitive information to a hacker acting as a trusted source.
October 2, 2018
Despite all the invective political banter, surprisingly few know the answer to this question. Many assume it is because President Trump is unhinged (or being controlled by the Russians). Others think it is because Governor Brown and the Democratic super majority who control California public policy are out of control. Surprisingly, though, the current legal battle is just the latest chapter in our Nation’s long struggle to define the boundary between state sovereignty and federal supremacy.
But what triggered this latest round of a long-standing dispute?
September 20, 2018
Our legislature “desires to direct special attention to the needs and problems of elderly persons, recognizing that these persons constitute a significant and identifiable segment of the population and that they are more subject to risks of abuse, neglect, and abandonment.” (Wel. & Inst. Code § 15600(b).) Accordingly, an elder or dependent adult may seek a restraining order to prevent another from abusing them pursuant to Welfare and Institutions Code section 15657.03. Subdivision (c) of that provision states: “An order may be issued under this section, with or without notice, to restrain any person for the purpose of preventing a recurrence of abuse, if a declaration shows, to the satisfaction of the court, reasonable proof of a past act or acts of abuse of the petitioning elder or dependent adult.” (Emphasis added.) But what proof is required if an elder or dependent adult obtained a restraining order, and wishes to renew the restraining order before it expires?
September 14, 2018
In late June of this year, the California legislature passed the California Consumer Privacy Act (AB 375) (“CCPA”) to protect the confidentiality of personal information collected by businesses. The CCPA is effective on January 1, 2020, giving businesses a little over a year to get ready to comply with the new law. Given the breadth of the law and the potentially steep statutory damages allowed under the CCPA, companies should begin to prepare now.
The California Supreme Court recently issued an opinion in Liberty Surplus Insurance Corporation et al. v. Ledesma & Meyer Construction Company, Inc., et al. which could drastically alter the scope of insurance coverage for claims involving intentional conduct. The case involved a general liability policy of L&M, a construction company. L&M was hired by San Bernadino Unified School District on a construction project. A student at the school sued the company alleging that one of its employees had sexually abused her. The lawsuit alleged that the company was negligent in hiring and supervising the alleged abuser.
July 19, 2018
Two of the most common, albeit frequently abused, claims in business lawsuits are “fraud” and “conspiracy.” Despite their pejorative connotation, all too often both go down in flames at or before trial.
On Wednesday, June 27th, Associate Justice of the Supreme Court Anthony M. Kennedy, 81 and an appointee of President Reagan, announced his intention to retire from the Court after over thirty years of service. Over the course of his tenure, but especially after the 2006 retirement of Justice Sandra Day O’Connor, Justice Kennedy earned a well-deserved reputation as a swing voter. His majority opinions gratified and confounded legal scholars across the legal spectrum on a host of hot-button issues, along with his colorful prose on the meaning of the Constitution and the individual’s role in our constitutional order.
June 20, 2018
Businesses frequently find themselves in legal disputes with insurers about whether a loss is covered under the insurance policy. Among the many recurring debates between insurer and insured is whether an insured “knew” about the loss prior to initiating insurance coverage. The legal rule prohibiting insurance coverage of existing losses is the “known-loss doctrine” or “loss-in-progress doctrine,” and has been described by courts as the common-sense rule that, “one may not insure against loss of a building after the building has burned down.” Travelers Cas. & Sur. Co. v. Neth. Ins. Co., 312 Conn. 714, 748, 95 A.3d 1031, 1054 (2014). While the prudence of this legal rule is easy to understand, its application is complicated. As a result, many businesses and individuals may be leaving valuable insurance dollars on the table by not understanding how courts determine whether an insured “knew” of a loss.
June 8, 2018
Having worked a lifetime to build your personal wealth, at some point you make the decision to plan for the transfer of your property to the next generation. To avoid leaving it to a court to determine who will receive the benefits of your life’s work, you decide to create a trust so you can designate a trustee who will help transfer your estate to the beneficiaries you select. Over time, you amend your trust to reflect changing personal and financial circumstances and you might add beneficiaries as your extended family grows. Ideally, the trustee and the beneficiaries will all share in your understanding about how your estate should be distributed upon your passing. But what if a beneficiary of your original trust, in an attempt to obtain a larger share of your estate, files a lawsuit claiming you were manipulated into creating trust amendments that benefitted others? Is there anything you can do to prevent disputes like this from arising?
This week, California labor relations were rocked again … this time by a seismic change in how California courts will decide who is an employee and who is an independent contractor. The distinction is crucial since, among other things, employees are protected by a vast number of laws and wage protection benefits whereas, generally speaking, independent contractors are not.