Scripta Ad Astra Staff, Author at Ad Astra Law Group, LLP

Litigation Tip: Settlement vs. Trial

It has been almost eight years since the Journal of Empirical Legal Studies published “Let’s Not Make A Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations.” The study compared verdict outcomes with pre-trial settlement negotiations in over 2,000 cases between 2002 and 2005. The results of the study support the conclusion that it usually is better to settle a case than to go to trial. In support of this conclusion, consider the following:

Plaintiffs recovered less at trial than they would have recovered by settling in 61% of the cases;
Defendants did worse by going to trial rather than settling in 24% of cases;
Both sides made the right decision to go to trial in only 15% of the cases (i.e., the verdict was between plaintiff’s last settlement demand and defendant’s last offer);
On average, plaintiffs who made the wrong decision to go to trial recovered $43,000 less than the defendant’s last offer;
On average, defendants who made the wrong decision to go to trial ended up liable for $1.1 million more than they had offered;
Plaintiffs were more likely to make “poor” decisions to go to trial in contingency fee cases; and
Defendants were more likely to make “poor” decisions to go to trial where insurance coverage was generally unavailable.

So, although defendants make fewer bad decisions to go to trial, a bad decision is much more expensive on average. Interestingly, the study also found that making the wrong decision to go trial has actually increased over time based on a study of trial outcomes over 40 years through 2004. (You can read more about the study in a New York Times article. You also can purchase a copy of the article at Wiley.)

We do our best to help our clients understand the risks of proceeding to trial. That includes explaining that no two juries are the same and that not all jurors will see a case the same way a client might see it. And, especially for plaintiffs, it includes the likelihood of making the wrong decision. In most cases, it is better to make a deal.

Silicon Valley: “Two in the Box” References Two of Ad Astra’s Cases

Author: Katy M. Young

In HBO’s show Silicon Valley, the story takes place in one character’s home which he opens up to tech entrepreneurs who need a place to live and work in exchange for equity in their companies, called Hacker Hostel. In the episode titled “Two in a Box,” the characters struggle with landlord/tenant issues that are novel in the age of Airbnb. You can read a synopsis of the plot of the episode here.

Ad Astra had a hand in both of the landlord/tenant issues featured in this episode.

First:

“With Pied Piper on its feet, Jared announces he’s moving out of Noah’s guest house and back into his condo, which he’s been renting out on Airbnb. When Jared arrives at his condo he finds his tenant, Ludwig, is still there, claiming he can’t afford to live in the area because people like Jared have raised the cost of living. Ludwig refuses to leave, so Jared begins the long, expensive process of eviction.”

This part of the episode has many similarities to Huang v. Hingorani, Ad Astra Partner Wendy Hillger’s AirBnB-neighbors dispute case which was written up in the San Francisco Chronicle here.

Essentially, the Jared character on Silicon Valley learns the tough truth as the landlord in our case: You get a long, expensive eviction fight. If you rent your property to one who pays to be there for more than 32 days, even if the rental agreement came through AirBnB, the SF Rent Board has held that the renter acquires traditional tenancy rights. Therefore, to remove a short-term vacation renter who pays to stay more than 32 days yet refuses to leave and keeps paying rent, the landlord’s only course of action is an eviction.

Here is the second issue in the episode:

“Erlich shows the Hacker Hostel to a new tenant, and later tries to kick out Jian-Yang so that a new incubee can move into his old room. Jian-Yang doesn’t take the news well and starts freaking out. Later, after Erlich unwittingly reveals why Jared is moving back into the garage, Jian-Yang decides to use California’s tenant laws to his own advantage and also refuses to move out.”

In 2015, Ad Astra represented one of the defendants in the lawsuit Housing Rights Committee of San Francisco v. HackerHome. HackerHome is allegedly a company that rents living space to tech entrepreneurs via the AirBnB platform in violation of San Francisco’s short-term rental law. In Silicon Valley, the storyline begins in Erlich Bachman’s “Hacker Hostel,” which mirrors the alleged HackerHome activities in both name and function. While living and working in the Hacker Hostel, the main character Richard develops an algorithm meant to help musicians avoid copyright troubles but ends up creating the world’s most powerful file compression technology and becomes the darling of Silicon Valley investors after winning the Tech Crunch competition. The character who owns the Hacker Hostel wants to remove one of the tenants, Jian-Yang, whose company is underperforming so that he can make room for more people involved with Richard’s more successful business, but upon listening to Jared’s problem with his Airbnb renter, Jian-Yang realizes that he’s lived in the Hacker Hostel long enough to acquire tenant’s rights like Jared’s tenant and announces that Hacker Hostel will have to evict him because he’s not leaving.

Now Erlich Bachman and Jared each experience the same landlord/tenant problems that Ad Astra’s clients have had to tackle, although thus far, no one has sued Erlich Bachman for his Hacker Hostel activities.

I was particularly thrilled by this episode of Silicon Valley because usually it relates to my husband’s work in big data cloud computing and the show’s creator goes out of his way to make the show full of inside jokes relevant to tech workers in the real Silicon Valley. This time, our cases featured prominently in the story line and I got to be on the inside of the inside jokes!

Fee Arbitration: What is a “True Retainer”?

Author: Katy M. Young

Ad Astra Partner Katy Young represented pro bono client R. Martinez in a fee arbitration against her daughter’s former criminal defense attorney and reached a settlement whereby the attorney agreed to pay back every dime that Mrs. Martinez disputed at arbitration- and then some!

Mrs. Martinez’ daughter had been charged with murder in Alameda County. The Martinez family cobbled together nearly everything they had to write a check for the attorney’s $25,000 retainer. Mrs. Martinez alleged that she never signed any written agreement with the attorney, but that the attorney had said he would represent Mrs. Martinez’ daughter up to, but not including, trial. Over the course of the next year, Mrs. Martinez felt that this attorney was not an effective advocate for her daughter and made some crucial substantive and procedural errors.

Eventually, Mrs. Martinez retained The Worthington Law Centre, friends of Ad Astra and stellar criminal defense attorneys with offices in Salinas and San Francisco. When Tom Worthington took over Mrs. Martinez’s daughter’s defense, The Worthington Law Centre contacted Ad Astra for assistance in recovering the unused portion of Mrs. Martinez’ $25,000 retainer which was being held by the previous attorney who maintained that the $25,000 was non-refundable, which in ethics parlance means that he asserted that the $25,000 was a “true retainer.”

In response to Ad Astra’s inquiries, the attorney produced to us a document that he claimed was the written fee agreement between he and Mrs. Martinez, but which listed the $25,000 retainer as having been paid by credit card and non-refundable, but that he would represent the client up until the trial at which point a further retainer would be required. Upon questioning, the attorney eventually admitted that this purported fee agreement had not been signed by his actual client- Mrs. Martinez’ daughter- but nevertheless maintained his position that the agreement was valid and entitled him to keep all $25,000 in the face of Mrs. Martinez’ allegation that he owed her a $19,000+ refund. In the fee arbitration papers, Ad Astra’s Katy Young had argued that the attorney owed Mrs. Martinez over $19,000 for failure to have a signed fee agreement with his actual client (and not just the payor), producing a fraudulent document purporting to be a fee agreement between he and Mrs. Martinez, failing to keep contemporaneous time records, and for improperly characterizing the $25,000 as a true retainer when it did not meet the one criterion for true retainers: the retainer was for his time on the matter up to trial and not for his continued availability regardless of time billed. True retainers are actually quite rare since they simply ensure the attorney’s availability to work for the client and have no bearing on any actual work performed. In other words, if the retainer is payment for work then it is not a true retainer and must be refunded to the extent that the attorney’s work was worth less than the retained amount.

Finally, the parties went to fee arbitration through the State Bar of California. On the day of the arbitration, the appointed arbitrator encouraged the parties to try to settle before commencing the proceeding after expressing doubts about the attorney’s defenses. After 15 minutes of discussions with Katy Young, the attorney agreed to pay back all $19,000 that Mrs. Martinez had requested, plus the filing fee for the arbitration!

Attorneys: beware the “true retainer” and always keep contemporaneous time records, even if your case is flat-fee or contingency.

Clients: always get a written agreement with your attorney, be sure to read it and question it where you feel you need more information, and negotiate the terms if anything is unacceptable to you. Make sure you know what you are getting into!

The CFAA’s Double Life: Criminal Application of a Dual Use Statute When the Stakes Are High-Profile

Author: Katy M. Young

Unauthorized access of a computer system can be civilly or criminally actionable under the Computer Fraud and Abuse Act (“CFAA”). One of the most-cited CFAA cases is U.S. v. Nosal, a criminal case brought by the U.S. Attorneys’ Office against David Nosal, formerly a high-level recruiter with Korn-Ferry. The company that Mr. Nosal worked for was high-profile enough to catch the U.S. Attorney’s attention when Korn-Ferry alleged that after leaving his employment with the firm, Nosal accessed the firm’s computer data without authorization. The U.S. Attorney’s office thus brought suit against Mr. Nosal using the criminal application of the CFAA.

The most recent high-profile CFAA case that caught the U.S. Attorney’s attention and resulted in criminal charges was the St. Louis Cardinals/Houston Astros hacking scandal. The Scouting Director for the Cardinals, Chris Correa, plead guilty to five counts of criminal violations of the CFAA for illegally accessing the Ground Control database maintained by former Cardinals executive Jeff Luhnow in his capacity as an executive for the Houston Astros. You can read all about the guilty plea here: http://www.cbssports.com/mlb/eye-on-baseball/25442384/report-former-cardinals-exec-to-plead-guilty-in-astros-hacking

Obviously, America’s pastime is high-profile enough to warrant the government spending resources to prosecute what is essentially private business espionage. But aside from baseball, what is it that catches the government’s attention in these kinds of cases? Ad Astra represents a law firm that has accused another law firm of hacking their third party cloud storage database of client files. The case is filed in State Court in Southern California but has not yet drawn the U.S. Attorney’s attention, although it has been covered by The Daily Journal and Law 360, both legal news outlets. Although not as high-profile as major league baseball, a hacking claim between opposing lawyers should draw the ire of government lawyers in the U.S. Attorney’s office who share Ad Astra’s concern for our esteemed profession. For the time being, Ad Astra will move forward with the civil claims under the CFAA and wait to see if the statute will be applied against the defendants in a criminal law context.

Tips to Help Your Organization Become Data Breach Ready in 2016

Author: Meaghan Zore

Are you ready for a data breach? At least 222 data breaches occurred in 2015 affecting at least 159,436,735 records, according to the Privacy Rights Clearinghouse, a California nonprofit corporation that tracks trends in data privacy. There’s little reason to believe that 2016 is going to see a downtrend in these numbers. Already this year, Time Warner Cable reported a data breach that affected 320,000 of its customers’ records.^{^[1]} Given these numbers, it’s no longer a question of “if” a system will be breached, but “when.”

January 28th is Data Privacy Day. Here are 3 steps to becoming data breach ready in 2016:

Establish a Privacy Training and Awareness Program

When we hear of data breaches, often, the image of a nefarious hacker comes to mind. However, 91 of the 222 data breaches in 2015 were caused by unintentional actions, such as misdirecting emails containing sensitive information, lost laptops or smartphones, and improper disposal of non-electronic data. These poor data handling practices resulted in a minimum of 6,090,152 breached records. Having a world-class privacy policy is useless if your organization’s employees are unable to put the policy into practice. When employees understand your organization’s data handling expectations, including how to effectively implement your company’s privacy policy into their day-to-day work practices, data breach incidents decrease.

Conduct a Privacy Impact Assessment

A Privacy Impact Assessment (PIA) is an analysis of how personally identifiable information is collected, used, shared, and maintained within an organization. Examples of various PIAs can be found on the Federal Trade Commission’s website. You can use a PIA to manage data risks and assess the benefit of engaging in certain data handling practices. Conducting a PIA will help you to better understand and address your company’s vulnerabilities.

Develop a Data Breach Response Plan

A data breach response plan is a course of action intended to reduce the risk of unauthorized data access and to mitigate the damage caused if a breach does occur. At a minimum your data breach response plan should consist of the following: (1) a point person to take charge in the event of a data breach and act as a liaison between various stakeholders and partners; (2) contact information for relevant stakeholders and third-party service providers; (3) procedures for analyzing and containing the damage caused by a suspected data breach; (4) measures to mitigate the damage done and prevent future breaches; and (5) relevant insurance and credit bureau information.

In 2015, companies incurred an average cost of $154 per breached record and were exposed to a consolidated total cost of $3.8 million per data breach.^{^[2]} Breaches are going to happen, but preparation will be key to minimizing the damage done to your organization and your clients in 2016 and beyond.

About the author: Meaghan Zore, founder and principal of Zore Law, advises entrepreneurs and emerging companies on a wide range of legal matters such as business formations, intellectual property issues, commercial agreements and data and privacy considerations. In addition to her practice, she teaches Advanced Civil Procedure: Electronic Discovery and Information Privacy law at Indiana University Robert H. McKinney School of Law. She may be reached at www.zorelaw.com meaghan@zorelaw.com. Tel: 415-347-0004

^{^[1]} http://www.privacyrights.org/data-breach

^{^[2]} http://www-03.ibm.com/security/data-breach/

A Case of Mistaken Identity

Author: Katy M. Young

Nearly every entrepreneur has fretted over selecting a name for her business. Once selected, enormous amounts of resources are dedicated to building a brand behind that carefully selected name. Some savvy business owners even go so far as to obtain trademark protection for the name of their business and the goods or services they offer. But what happens when even the most conscientious entrepreneur is faced with unscrupulous competition in the marketplace in the form of a similar business that insists upon using your name? Trademark lawyers can add another real risk to the parade of horribles that can occur when there is marketplace confusion over a business name: wrongfully being named in a lawsuit. Behold the story of mistaken identity, and how Ad Astra took care of the problem quickly and inexpensively.

Ad Astra’s client is a consulting business in Oakland, we’ll call them ABC, Inc. for the purpose of this story. ABC, Inc. registered a trademark for its name for the provision of consulting services. After some time, another business called ABC Partners, which sometimes went by the name ABC Brokerage, started offering similar services, but in Southern California instead of Northern California. ABC, Inc. sometimes gets phone calls for people trying to reach ABC Partners/Brokerage, and at one point, ABC Partners/Brokerage copied ABC, Inc.’s website and used it as their own! ABC, Inc.’s trademark lawyers have written letters to ABC Partners/ABC Brokerage demanding that they stop using the name “ABC,” but they haven’t had the money to bring a trademark infringement lawsuit.

As if the confusion in the marketplace weren’t bad enough (i.e. phone calls for one business going to the other), ABC Partners/ABC Brokerage became involved in an allegedly illegal medical cannabis dispensary in Upland, California and when the City of Upland sued to shut down the dispensary, it named ABC, Inc. as a defendant right along with ABC Partners and ABC Brokerage! Even being named in a lawsuit that you had nothing to do with can be devastating to a business because of the high cost of participating in litigation.

As ABC, Inc.’s General Counsel, Katy Young called the City Attorney for the City of Upland within 15 minutes of the complaint being served and gently explained that this is a case of mistaken identity, and ABC, Inc. has nothing whatsoever to do with the matter—except that ABC, Inc. also had a cause of action against ABC Partners/ABC Brokerage. When the City Attorney became obstinate and insisted on keeping ABC, Inc. in the litigation, forcing them to prove a negative, Ms. Young declared her intention to file a motion under California Code of Civil Procedure Section 128.7, which would have told the Judge that ABC, Inc. felt the litigation was frivolous. It also would have forced the City plaintiff to come forward with affirmative evidence showing why it thought that ABC, Inc. was a proper defendant even after being faced with the information that ABC, Inc. was a competitor of ABC Partners/Brokerage. No such information existed. The City had simply been lazy about the investigation and cast too wide a net.

Ms. Young also reached out to the other defendants named in the matter, including ABC Partners/Brokerage, and politely asked them to call the City’s attorney to explain that ABC, Inc. was not involved, else ABC Partners/Brokerage would face a cross-complaint for trademark infringement and equitable indemnity. Recognizing the danger of fighting a two-front war, ABC Partners/Brokerage’s attorney contacted the City Attorney and averred that ABC, Inc. is not affiliated with ABC Partners/Brokerage in any way. Within 10 days from service, the City’s attorney dismissed the complaint against ABC, Inc., thereby saving Ad Astra’s client countless thousands of dollars in litigation expenses. The tactic here was Teddy Roosevelt style foreign policy: speak softly but carry a big stick.

The Legislature’s (Temporary) Overhaul of the Demurrer Procedure

Author: Scripta Ad Astra Staff

A party in a civil action may object to a complaint, cross-complaint, or answer by demurrer. (See Cal. Code Civ. Proc. § 430.10.) Demurrers are typically filed when the responding party alleges the pleading fails to state a cause of action. Unless the complaint fails to state a claim based on any legal theory, and the defect cannot reasonably be cured by amendment, the court will give the responding party leave to amend. Subsequent amended pleadings are vulnerable to subsequent demurrers, and extend the time the case is pending. This motion work is expensive to litigants, and clogs the already over-burdened court system.
The Legislature passed amendments to the demurrer procedure effective January 1, 2016 through January 1, 2021, at which point the statute will self-repeal its provisions. (See Cal. Code Civ. Proc. §§ 430.41, 472, and 472a.) In most civil actions,[1][1] the parties are now required to engage in a specific meet and confer process before filing a demurrer. The court has the authority to order the parties to a conference to continue the meet and confer process. The amendments also create a “three-strikes-and-you’re-out” limit to the number of times a party can amend its complaint in response to a demurrer filed before the case is at issue, and place a new time limit on the responding party’s ability to file an amended pleading prior to the hearing on demurrer. Now, the amended pleading must be filed and served before the date for filing an opposition to the demurrer. The amendments also limit the grounds upon which a party demurrers to an amended pleading following a sustained demurrer to issues that could not have been raised by the prior demurrer.

Time will tell whether these amendments will provide a substantive filter to the demurrer process, and help decrease the court backlog in Law and Motion Departments.

[1][1] This section does not apply to the following civil actions: (1) An action in which a party not represented by counsel is incarcerated in a local, state, or federal correctional institution; and (2) A proceeding in forcible entry, forcible detainer, or unlawful detainer

Four Key Ways Attorneys Can Help an Expert Witness Perform their Best

Scripta Ad Astra is extremely pleased to present a guest post by Michal Longfelder, Esq. Ms. Longfelder is an expert witness in the field of HR law and workplace investigations.

Author: Michal Longfelder, Esq.

We, as expert witnesses, often provide a necessary and critical part of your litigation strategy. By speaking to unique questions or facts, we can be a significant element of a successful outcome.

1. Know why you want me as your expert witness and for what purpose

Like most expert witnesses, while I can opine on a range of subject matters; I need to know exactly how I can be most helpful. Take the time to learn about and understand my background so you are sure that I am best suited for this case. For example, many attorneys do not realize that the HR function has evolved into specific areas of specialization and, as a result, many HR professionals no longer have a broad generalist background but rather, a narrow, expertise in a particular HR function such as organizational development. If your case requires expertise in disability accommodations, make sure that the expert has substantial experience in that particular sphere of the HR function.

2. Retain me as a consultant in advance of retaining me as an expert

Many attorneys, in an earnest effort to keep litigation costs down, do not retain an expert until shortly before depositions begin. By retaining me as a consultant early on and under your direction, earlier, we will both know how I view your case’s relative strengths and weaknesses without being subject to discovery. Questions such as whether there are enough “good facts” to make it worth litigating are better answered sooner than later. Retaining me early as a consultant also affords you the opportunity to consider the settlement value of your case or whether my opinions have implications for other aspects of your litigation strategy.

When carefully selected and utilized, expert witnesses can strengthen your case to opposing counsel and a jury. By planning in advance why, when and how to make the best use of my expertise and experience, you and your client will have confidence in the expert witness you have selected.

3. Take the time to prepare me for deposition

I am also an attorney, so counsel often assumes I do not require much, if any, prepping for deposition. Here, you are the expert on the case and I need to learn from you. Tell me about the weaknesses you perceive will be a challenge. Most importantly, tell me what questions I should expect from opposing counsel so I can think about how I will respond.

4. Think about my role at trial

Will you want me in the role of “storyteller” who summarizes the relevant information and provides guidance as to how the jury should assess and interpret the information presented by others? Or would I be more useful testifying on a discrete but critical issue in the case? Perhaps I will be part of building the facts necessary to effectively try or defend the case? Finally, consider whether I will be more effective testifying for a shorter or extended period of time.

Summary:

Michal Longfelder, founder and principal of Employment Matters, is an employment attorney with an exclusive focus on workplace investigations, internal mediations and executive coaching. She may be reached at WWW.EMPLOYMENTMATTERS-ML.COM michal@employmentmatters-ml.com

Tel: 415-297-3285

2014 ABC Desk Guide

The Insolvency Law Standing Committee of the Business Law Section of the State Bar of California recently published the “2014 ABC Desk Guide,” coauthored by Anne Smiddy of Ad Astra Law Group LLP. Ms. Smiddy co-authored the Desk Guide with Patrick Costello, Esq. of Vectis Law Group, Diana Donabedian Herman, Esq. of McKenna, Long, Aldridge LLP, and Justin E. Rawlins, Esq. of Winston & Strawn LLP, with Peter C. Califano, Esq. of Cooper, White & Cooper as editor. The Desk Guide provides a convenient compilation and outline of the relevant state and federal statutes and cases affecting the operation of assignments for the benefit of creditors under California law. The practice guide is available for purchase from the State Bar of California.

Ad Astra Law Group, LLP

Controlling Your Client’s Web Presence is Key for Plaintiffs

Author: Katy M. Young

I had previously blogged about the dangers of blowing your defense (or even inviting a lawsuit) based on social media activities. This post will examine the importance of controlling your client’s web presence when your client is the Plaintiff. In a lawsuit, the Plaintiff usually has the harder job because it is Plaintiff’s burden to prove each element of her cause of action and her damages by a preponderance of the evidence. Defendants sometimes have an easier time since a verdict in Defendant’s favor can be achieved by knocking out elements of a Plaintiff’s claim. Evidence comes in many forms, and these days, the internet is fertile ground for evidence gathering.

Recently, I represented a Defendant in a lawsuit filed by someone he used to be very close to. The Plaintiff claimed millions of dollars in damages and even put on expert witness testimony to justify the multi-million dollar demand. Both parties had previously been very active internet users, but once he was named in the lawsuit, my client heeded my advice to shy away from social media lest he make matters worse for himself. Plaintiff’s lawyers were able litigators and I am certain that they gave their client the same warning, but their client did not listen. Perhaps she didn’t understand that information found online is akin to shouting the same message in ye olde public square. Perhaps she was lulled into believing her activities would go undiscovered because she didn’t use her real name as her username and the damning information was located on a dating website. Perhaps she underestimated Ad Astra Law Group’s abilities to track her online. What is certain is that Plaintiff posted information on her online dating profile which directly undercut her expert witness’ testimony about the extent of her damages. Perhaps she was lying to her potential dates about the true state of things. Perhaps she lied to the expert witness who rendered the opinion on her damages. What is certain is that she lied to someone, and all that mattered was that she lied. It didn’t so much matter whether what she posted was true, it was simply that what she posted contradicted her expert’s testimony on damages. Even if she could have proven that the Defendant was liable for her harm, the jury wouldn’t have known what to believe about the extent of her damages. The Plaintiff had badly damaged her own credibility. The case settled quickly after our online discovery.

A word to the wise: the web is the modern town square and anything you say there can come back to haunt you. Whether Plaintiff or Defendant, the best practice is to cease your online activity entirely- but don’t delete what you previously posted, for you may end up spoliating evidence…but that is a blog post for another time!