CIVIL LITIGATION MONDAYS: LIMITED CIVIL CASE DISCOVERY

Here are the Answers to Your Basic Limited Civil Case Discovery

documents

1.  What kind of discovery methods can you use in a limited civil case in California?

Discovery, also known as the evidence gathering phase of a lawsuit, is governed by special rules in limited civil cases. They are called the “economic litigation rules.” They can be found in the California Code of Civil Procedure Sections 90 to 98. Unlawful detainer cases are governed by a different set of discovery rules.

2.  Why do we have “Economic Litigation Rules” in limited civil cases?

It used to be that each county had both municipal and superior courts. Discovery for cases heard in the municipal courts were governed by the economic litigation rules. Now, the cases that used to be in the municipal courts are called limited civil cases. Those cases, limited civil cases, are still governed by the economic litigation rules. (See the commentary to Code of Civil Procedure Section 91 for more information.)

3.  What are the “Economic Litigation Rules?”

The rules are found at California Code of Civil Procedure Section 94.

  • One Deposition: Each party, Plaintiff and Defendant, are allowed to take one deposition of each other.
  • The “Grabbag Rule of 35”:
    •  You can use no more than 35 of any combination of interrogatories, requests for admissions, or demands for inspection/production.
    •  You cannot use the Judicial Council  General Form Interrogatories
    •  You may use the Judicial Council Form Interrogatories if your case is an unlawful detainer, personal injury, and contract action. But beware use of these form interrogatories counts against your 35!
  • You can use subpoenas deuces tecum.
  • You can conduct physical, mental, and blood examinations without limitation.
  • You can discover the other sides’ expert witness.

4.  How does the Grabbag Rule work?

You can use a combination of requests for admissions, notice to produce, and interrogatories. For example, you could send out 10 requests for production of documents, 15 interrogatories, and 10 requests for admissions. (10 + 15 +10 = 35!)

Use them wisely! Write out a discovery plan before you use up your precious 35!

5.  Are there discovery methods unique to limited civil cases?

Unlike civil unlimited cases, you can send a case questionnaire with your complaint. (CCP Section 93.) You can also request a statement of witnesses and evidence a party intends to offer at trial. (CCP Section 96.) Study these responses very carefully. They will guide your use of the limited 35 requests.

6.  What if I want to do more Discovery than is allowed by the Economic Litigation Rules?

You can file a motion to request additional discovery, but you must make a “good cause” showing. Meaning, you need to show the court you used all available discovery methods in good faith and that you will not be able to defend or prosecute your case without additional discovery. (CCP Section 95.)

Caution—before you file a motion requesting additional discovery, think about whether you really need additional discovery or are you just trying to harass the other side? If you are trying to harass, annoy, or delay the other side, consider that you can get sanctioned for that kind of conduct.

Before you send out discovery, use the case questionnaire when you send out your complaint, review it carefully, and then come up with a discovery plan to determine what you’re absolutely going to need at trial. If you need additional discovery, try talking to the other side and asking them to agree to additional discovery or a document sharing arrangement. It can cut costs and maybe lead to an eventual settlement of all issues!

Resources: Cal. Civ. Ctrm. Hbook. & Desktop Ref. § 21:33 (2013 ed.); Cal. Prac. Guide Civ. Pro. Before Trial Ch. 3-A; Cal. Code of Civ. Procedure Sections 90, et seq.

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.

CIVIL LITIGATION MONDAYS: LIMITED CIVIL CASES 101

3 Things to Know About Limited Civil Cases in California

medium_5554026789

1.  What is a limited civil case?

Generally speaking, a limited civil case is a civil case where the “amount in controversy” does not exceed twenty-five thousand dollars ($25,000). California Code of Civil Procedure Section 85 states that the “‘amount in controversy’ means the amount of the demand, or the recovery sought, or the value of the property, or the amount of the lien, that is in controversy in the action, exclusive of attorneys’ fees, interest, and costs.” (C.C.P. §85.)

The easy way to remember this is to look at your contract. Is it for $25,000 or more? Did they fail to pay $25,000 or more? Or when they damaged my car, did it cost me $25,000 or more to fix or replace it? The general rule of thumb is if the “amount in controversy” is more than $25,000, your case should be filed as unlimited. If the amount in controversy is $25,000 or less, your case should be filed as limited.

Section 86 of the California Code of Civil Procedure contains a more detailed and specific list of civil cases and proceedings that are civil limited cases.

2.  What is the monetary difference between a small claims case and civil limited case?

Small claims court has a general monetary limit of $5,000.00. (C.C.P. 116.220.) In addition to that limitation, “natural persons” meaning an individual who is not a business, may bring a small claims action demanding an amount of up to $10,000.00. (C.C.P. 116.221.) Personal injuries related to automobile accidents are limited to $7,500.00. (C.C.P. 116.224.)

The easiest way to understand the difference between unlimited, limited, and small claims is based on the amounts demanded.

Unlimited –> $25,000 or Higher

Limited –> $25,000 or less

Small Claims –> $10,000 or less

With some exceptions, you have a choice between filing your case that is $10,000 or less in limited civil or small claims.

3.  If I choose to file in limited civil, how will that affect my case? Or If I choose to file in the small claims division, how will that affect my case?

  • Advantages to Filing in Small Claims:
    • You don’t have to hire a lawyer because only self-represented people can present claims in the small claims division.
    • It is less formal.
    • Lower filing fees.
    • Less time.
    • The paperwork is a set of easy to understand forms.
  • Disadvantages of Small Claims
    • You lose the right to be represented by an Attorney.
    • The losing side may be ordered to pay the winning side.
    • Only the Defendant can appeal a small claims case.
    • There are some types of cases that cannot be brought in small claims.
    • You have to give up your right to receive more than $10,000.
    • You are limited in the number of small claims you can file each year.
  • Advantages of Limited Civil
    • You can have an attorney represent you.
    • It is more formal than small claims.
    • Both the Plaintiff and Defendant have the right to appeal.
    • You have a higher amount that you can recover.
  • Disadvantages of Limited Civil
    • If you choose to have an attorney, you have to pay for one.
    • The filing fees are higher than in small claims.
    • If you could have filed in small claims, you may have to pay the other side’s attorney’s fees if you lose.
    • Takes more time to resolve than a small claims case.

If you are not quite sure how to calculate the “amount in controversy,” consult an attorney. 

If the other side has to file a motion to reclassify your case, it may end up costing you money in the long run. Know how your case should be classified before you file!

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.

Photo Credit: <a href=”http://www.flickr.com/photos/tabor-roeder/5554026789/”>Phil Roeder</a> via <a href=”http://photopin.com”>photopin</a&gt; <a href=”http://creativecommons.org/licenses/by/2.0/”>cc</a&gt;

FASHION FRIDAYS: FABRIC SOURCING FOR STARTUP DESIGNERS AND HANDICRAFT ARTISANS

medium_3024443886

        My goal as an attorney is to help small business startups. I have a special place in my heart for startup fashion designers and handicraft artisans so many of my Friday Blog Posts will be uniquely geared toward issues that those small business owners face. So while this is not a purely law related post, I believe it will be helpful.

          I went to a gathering of Etsians last week. They are all based in the Inland Empire and each shared a common struggle—Fabric Sourcing! Most, if not all, of the ladies that were there produce their items from home. So their fabric struggles are likely only issues that small home manufacturers face. Here is some wisdom these ladies were willing to share with me and I am passing it on to you.

1. DO NOT SIT ON LARGE AMOUNTS OF FABRIC

Oh, I know it is tempting to go the Los Angeles Garment District and buy 10 yards of the first wildly beautiful print that catches your eye. You get it home and make a sample that takes about 2 yards. You add it to your online retail shop and then your customers don’t quite see the fabric the way that you did. Now you are stuck with 8 yards of fabric that you slowly are beginning to hate!  OR…

You buy 10 yards of fabric with no plan at all! You get it home and put it with your fabric stash. There the fabric sits.

Friendly Advice: If you are producing small runs, consider buying smaller amounts of fabric. Go fabric shopping with a plan! Yes, fabric can sometime inspire design, but it can also inspire some bad business decisions.

2. BUY WHOLESALE FOR FABRIC AND MATERIALS THAT YOU NEED IN LARGE AMOUNTS

You may respond, “But, Judith isn’t it better to buy wholesale to decrease the costs of my items?” Yes, you should buy wholesale. Yes, you should buy in bulk. But, you should also buy smart!

I understand the desire to buy wholesale so that you can decrease costs per item. I also understand the desire to have the certainty that if your items sell through you have enough fabric on hand to reproduce more. The problem is when you make bold fabric choices and have a ton of fabric on hand that you will never use.

Friendly Advice: Buy materials wholesale that you know you will need no matter what you are making. If you make handbags, then yeah it probably is smart to buy feet for your bags en masse. If you make jeans, then yeah it probably is a smart idea to buy your zippers and serger threads in bulk. If you have had success selling a beautiful wool jacket, then yeah you probably want to buy that fabric wholesale.

Caution: If you can only afford to buy a small amount of fabric at a time and even a wholesale order is cost-prohibitive, make sure you know where you can get more of the fabric once your supply runs out. This is a common problem if you are buying fabric retail in downtown L.A. What is there today may not be there tomorrow. If you are in love with a fabric, ask for wholesale information!

3. ONLY BUY FROM A CHAIN FABRIC RETAILER WHEN YOU ARE IN A PINCH

Sometimes you have to suck it up and go to JoAnns, Michaels, Walmart, or Hancock for fabric because you just ran out! But that may mean you will not profit on an item or the item may end up costing you money. So when you are pricing your items, consider what profit that late night run to Walmart will cost you in the long run. Coupons are always helpful, but that makes your pricing inconsistent.

I know it is so easy to go to JoAnns and pick out that cute apple print because you know if you need more it will be there next week at a reliable price. The problem is that 100,000 other handicrafters or designers thought the same thing and your unique items become homogenized.

Friendly Advice: Try not to buy your fabric at retail prices from chain stores when possible. Keep those purchases to times where you already have a pending order with a due date that you will not be able to meet unless you make that retail store run. See if your buyer is willing to delay delivery (possibly for a small discount), while you obtain fabric at the price you used in generating your cost sheet. If they are unwilling to accept a later delivery date, you may just have to eat the increased costs.

To all the fashion designers and handicraft artisans out there, what fabric/material sourcing advice would you give to those who are just starting out?

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.

Photo Credit: <a href=”http://www.flickr.com/photos/roboppy/3024443886/”>roboppy</a&gt; via <a href=”http://photopin.com”>photopin</a&gt; <a href=”http://creativecommons.org/licenses/by-nc-nd/2.0/”>cc</a&gt;

BUSINESS WISDOM WEDNESDAYS: PARTNERSHIPS 101 SERIES – 3 REASONS YOU SHOULD TALK MONEY BEFORE YOU START A PARTNERSHIP

  1. Partners Share Losses and Profits Equally

Many of my small business clients that are operating as general partnerships usually do not have a problem with the concept of sharing profits and losses generally. There is no problem understanding this concept, except when they actually have to do it.

The default rules, meaning the law that applies when you don’t have a partnership agreement, states that each partner “is entitled to an equal share of the partnership profits and…is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.” Corp. Code, § 16401. You can always modify the default rules, but most people usually don’t. They begin operating the business and then when the problems start to roll in and the default rules actually have to be applied in reality, the problems begin.

As usual, I advise all persons wanting to operate as a general partnership to get a partnership agreement! Here is the situation many of my clients face:

One partner has put up the actual money to start the business (“capital”) and the other has put in the “sweat equity.” Sweat equity means that partner has done the actual work. In the case of our example floral shop, Irma put up the money and Bob has done all of the work. For the month of April, the floral business had some losses. Irma wants those losses to go to Bob—after all he hasn’t put in a dime. Bob of course says, “To Heck with that! I’ve been doing all of the work.” Unless, they expressly agreed to some other arrangement, the default rules come in. Their accounts are going to reflect an equal share in the losses in proportion to their share in the profits. If they have taken no further steps to change the default rules, if their share in profits is 50:50, then their share in losses will be 50:50.

      2.  Yes, I really meant it when I said, “Share Profits Equally.”

Sometimes I have clients that have no issue with sharing in losses. They seem to take the downside of owning a business well. They are gracious losers. Then comes the upside and they turn into sore winners.

It does not matter if Irma put up the money and Bob is doing the work. Absent an agreement that changes the default rules, the law will presume that Bob and Irma intended to share in the profits equally, regardless of the inequality in how much each contributed to the floral shop.

       3.   Partners Are Not Entitled to Compensation

The default rules under California Corporations Code Section 16401, subsection (h) is that, “a partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership.” Corp. Code, § 16401.

I will apply the default rule to our floral shop example. Bob is not entitled to be paid an hourly wage for doing the floral shop deliveries, unless he and Irma have an agreement to the contrary. The default rules say Bob is only entitled to share in the profits. Just like Irma will not be compensated for keeping the floral shop books. She is only entitled to share in the profits.

Bottom line:

These are common money problems I see with general partnerships.  Most of the problems between partners in general partnerships are centered on money issues. There is the rare personality conflict, but usually it comes down to the money. The default rules often take my clients by surprise. They are ready to sue and then I have to inform them about the default money rules.

If you don’t like the default rules—sharing in profits, losses, and no compensation, then speak to your partner before things get nasty and the business falls apart. Get a partnership agreement that details how you intend to deal with these issues before they become massive problems! For a partnership agreement checklist click here and for more information about general partnerships click here.

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.

BUSINESS WISDOM WEDNESDAYS: PARTNERSHIPS 101 SERIES – WORKING WITH FAMILY

Partnersworking

Owning a” mom-and-pop” shop with a group of family members can seem like a good idea until…

Your mom decides to take over the accounting books and will not share them with anybody. Then your dad decides he can order large amounts of inventory because he thinks every store needs 1,000 pieces of widgets A, B, and C. You have no idea where the money is, where it went, or who really is in charge!

Before you and your family members take the family dream from an around the table chat to reality, here are at least 3 things you should know and at least 1 thing you absolutely SHOULD DO.

3 THINGS YOU SHOULD KNOW BEFORE YOU START A BUSINESS WITH FAMILY MEMBERS:

1.   DEFINITION OF A PARTNERSHIP

A partnership is “an association of two or more persons to carry on as co-owners [of] a business for profit.” Corp. Code, § 16101.  When you set up shop with your family members, BAM! You are now a partnership. There are of course exceptions to this, but I am over generalizing to make a point. If you do not incorporate, form a limited liability corporation, or take any additional steps to create a business entity when you and “two or more persons” in your family get together to start a business, by default you are a general partnership.

I have had clients tell me, “But, Judith we are not selling any products.” That does not matter! The definition of business under the California Corporations Code is pretty broad. “Business includes every trade, occupation, and profession.” Corp. Code, § 16101. So whether you are selling your mother’s famous cupcakes at a stand or are selling wedding planning services, if you have not taken additional steps to create a business entity you and your family members are by default a general partnership.

What you choose to call yourselves does not matter. Courts will look to the “nature of the parties relationship” when determining whether you and your family members are a partnership. It is important to know that a general partnership is the default if you and your family members do not take any additional steps because with that “default” status also comes “default” corporation code provisions. What started as the family dream can quickly turn into your own personal episode of Jerry Springer!

2.   RIGHT TO SEE THE BOOKS

Your Auntie Irma who is good with numbers may not be the best person to do your accounting if she is also known for being stingy and bossy.

In our somewhat silly example, Auntie Irma as a partner of the business is required to give all partners, their agents, and attorney’s access to the partnership’s books and records. The books and records cannot be kept at Auntie Irma’s house for her eyes only. The books must be kept at the partnership’s “chief executive office.” Auntie Irma cannot tell you that she is keeping track of the numbers in her head. The books and records must be kept in writing or in some form that can be converted into something tangible.

For more information on books and records check out California Corporations Code Section 16403.

 3.   THE PARTNERSHIP IS LIABLE FOR ACTS OF THE PARTNERS

Do not feel bad if you have to tell your Drunk Uncle Bob that he cannot be the driver for the family’s new floral delivery business. The partnership is liable “for losses, injuries or penalties incurred as a result of a wrongful act or omission or other actionable conduct of a partner acting in the ordinary course of the partnership’s business or with the authority of the partnership.” Corp. Code, §16305.

If while acting in the ordinary course of the partnership’s business, in our example delivering flowers, Drunk Uncle Bob runs somebody over, the partnership is now responsible for the losses, injuries, and penalties that result. The drastic consequence in our example is that all partners of the partnership are also on the hook for Drunk Uncle Bob’s “accident.” In legal terms—“each partner is jointly and severally liable” for everything that the partnership is responsible for. If you are going to work with family, make sure the family members you choose to work with are reliable and understand the consequences.

This list of things you should BEWARE of before you go into business with family members is just the tip of the iceberg. Please see my previous post here about the pros and cons of a partnership.

ONE THING YOU SHOULD DO BEFORE YOU START A BUSINESS WITH FAMILY MEMBERS:

If you cannot afford to create a corporation or limited liability corporation before you go into business with family members, at the very least PUT A PARTNERSHIP AGREEMENT IN WRITING!!! Please see my previous post here about the basics of a partnership agreement.

If you have your own version of Auntie Irma and Drunk Uncle Bob, then perhaps you should think twice about starting a family run partnership. Sometimes even the best partnership agreement will be of no use if you do not have family members that will respect it.

What are your thoughts? We’d love to hear from you. Post comments below.

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.

BUSINESS WISDOM WEDNESDAYS: PARTNERSHIPS 101 SERIES


PARTNERSHIP AGREEMENT CHECKLIST

1. What is a partnership agreement?

A partnership agreement can be oral, written, or implied. The agreement addresses issues as it relates to the partners themselves or between the partners and the partnership. The partnership agreement can also include amendments.

3. Benefits of a Partnership Agreement

A partnership agreement can prevent a lot of unnecessary litigation and bickering. It will not prevent all lawsuits, but a well-drafted partnership agreement can certainly aid in reaching a settlement because it can spell out the available remedies if a dispute arises between partners.

2. Why do I need a partnership agreement?

A lot of business startups begin as family owned operations which can lead to any number of fights and disagreements between partners. Even if the business partners are not relatives, it is always a good idea for every business to have a written document that outlines each person’s responsibilities and obligations to each other and to the organization itself. Each partner should know her role as it relates to the other partner and the partnership.

In addition to defining the roles and relationships of the partners, partnership agreements also help outline a course of action in the event of one partner’s death or illness. It can plan for an eventual buyout of one partner’s interest.

A partnership is not defective if the partners never formally sit down and draft a partnership agreement. If a dispute arises between the partners, then the default rules under the Uniform Partnership Act (Cal. Corp. Code Section 16100, et seq.) will help define the partners’ rights and duties.

PARTNERSHIP AGREEMENT CHECKLIST

I.  Organization

  • Name and address of each partner
  • Partnership Address
  • Duration of Partnership

-Commencement Date

-End Date

  • Purpose of Partnership

II.  Capital Contributions

  • Amount of contributions required from each partner
  • Type of Capital Contribution: cash, services, property
  • Value of each contribution

III. Rights, Duties, and Liabilities of Each Partner

  • Management Decisions

-Decision making structure: partner, committee, majority

-Responsibility of each Partner

-Authority of each Partner

-Limitations on authority

  • Voting Power

-Percentage interest or per capita

-General and specific actions requiring a vote

-Tie-Breaking

IV. Financial Issues

  • Allocation of Profit and Loss
  • Assumption of Debts by Partners and/or the Partnership
  • Tax Issues
  • Distributions to Partners

-Right to Distribution

-Frequency of Distribution

  • Record Keeping
  • Accounting
  • Compensation of Partners

-Salaries

-Loans to Partner and from Partner

-Vacations

-Expenses

V. Transfer

  • Admitting new Partners
  • Limitations on admission

VI. Dissociation : Procedures and Effect on Partnership

  • Withdrawal
  • Death
  • Withdrawal
  • Buyout
  • Retirement
  • Expulsion
  • Confidentiality provisions after disassociation

VII. Winding up, Dissolution, and Liquidation

  • Procedures
  • Authority
  • Distribution of Assets
  • Allocation of Debts

VIII. Disputes Between Partners

  • Remedies and Settlement of Disputes
  • Attorney’s Fees

This is not a complete list. A partnership agreement should be rigid enough so the partners know what they can and cannot do. It should also be flexible enough to allow the partners to deal with unexpected issues as they arise. If you need help drafting your agreement, please contact an attorney licensed to practice in your jurisdiction.

Disclaimer: The contents on this blog are informational only and not meant, intended, nor should be considered legal advice, advertisement, or solicitation for business. The material posted on this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Furthermore, the information contained on this blog is not specific to any particular set of circumstances. All links to outside information are meant to provide further information on the topic addressed, I make no warranties, express or implied, as to the accuracy of the information contained herein or in the attached links.