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About the law: answers, info, resources

These legal tips are intended as an informative summary on newsworthy legal topics. The information is not intended as legal advice, and I recommend you consult with me before acting on it.

I am available for consultation or services on any of the following or related topics. Please contact me with any questions. Referrals are always welcome.

Paul Heatherman, Attorney at Law



Changes in LLC rules
The LLC statute has been changed to explicitly ban a member from competing with the LLC, unless authorized by all the members after full disclosure. Also, the LLC operating agreement can no longer dispense with the members' duty of loyalty to the LLC, although the degree of loyalty can be made more limited if the types of activities that a member can engage in are set out in the agreement and are not unconscionable. Finally, the law now makes it clear that the failure of the LLC to observe formalities (such as corporate meetings) is not grounds for imposing liability on the LLC or on its members and managers.

Stop payment actions can cost you
From now on, a person who puts a stop payment on a check without good cause is subject to a lawsuit for damages of $100 or triple the amount of the check (to a maximum of $500) and will be required to pay an award of attorney fees for enforcement on the check. Before, a person could sue and collect damages and attorney fees only if there were insufficient funds in the checking account.

Fine raised for violation of overtime provisions
The state Bureau of Labor and Industries can now impose a $1,000 maximum fine against employers that violate overtime provisions.

When "Paid in Full" …isn’t
In the past, if there was a dispute about the existence or amount of a debt owed between a debtor and a creditor, and if the debtor wrote a check with a statement, "paid in full," that would suffice to constitute a full and final settlement of the matter if the creditor cashed the check. That is no longer the case. The creditor can now cash the check and apply the payment even with that language written on the check.

Employers alert – non-discrimination groups

Note the following groups that cannot be discriminated against in interviewing, hiring and firing:

Race, color, national origin, gender.
Pregnancy-related conditions.
Age (18+ state; 40+ federal).
Physical or mental disability (companies with 6+ employees) .
Family Medical Leave Act (companies with 25+ employees).
Marital status.
Genetic screening.
Retaliation for opposing unlawful employment practices.
Use of lawful tobacco products during off-duty hours.
Medical release as a condition of continued employment.
Expunged juvenile record.

Selling Your Business?
Many business owners decide to sell at one time or another. Sometimes it is done involuntarily, for example the unpredictable illness or injury, etc. Now is the time to keep accurate financial and legal records to facilitate quick reviews by potential buyers. Buyers will want to see two to five years of records. Good summaries of your financial and business records, as well as a record of corporate or LLC meeting minutes show that the business is under control. Uninterested and unsuitable buyers should be eliminated before confidential financial records are disclosed or valuable time is wasted. Consider a confidentiality agreement prior to revealing information.

Old inventory can be gradually sold or reduced. The buyer won’t need as much cash to buy your business if you have less inventory. Streamlining operations and shutting down those activities which do not yield a profit will make your business more attractive. Dispense with unused fixed assets. If the buyer does not have enough cash to buy the entire business you might lease a part of it to the buyer. Buyers might wish to buy the business in a corporate, LLC or family partnership format. The seller might want to have a trust receive the funds, after which the seller will receive installments from the trust. (Estate Planning and tax savings issues).

Sometimes the buyer will not have the cash. You might need to consider: (1) owning some shares of stock or a percentage interest in the business with the buyer managing it; or (2) Establishing a security interest/collateral against the assets or stock as part of a financing deal. Speak with other business owners, visit your CPA about the tax implications and visit your lawyer about legal implications of different forms of deals.

Developers - You Must be Licensed Too
Unlicensed developers may be subject to fines from the CCB for up to $5,000 per violation, i.e., per house. Even if the developer hires a licensed builder to build the house (which is usually the case), then the CCB considers the developer to be a contractor. Not only are penalties possible, but the unlicensed developer is barred from enforcement of any claims he may have against the builder.

Employment Law
Noncompetition Agreement Update
Noncompetition agreements are void and unenforceable unless entered into upon the initial employment of the employee or upon a legitimate advancement/promotion event of the employee. Although there is no express law on the topic, Oregon courts have refused to enforce noncompetition agreements that were not signed on the first day of work. Employers should have the agreement signed immediately upon hiring.

CONSTRUCTION LAW (return to top)

FYI - Builders and Homeowners

Homeowners often resort to the Construction Contractor’s Board (CCB) to address and resolve claims with builders. Be aware that homeowners have a time restriction within which to file claims against builders: one year from occupancy or two years from substantial completion of the house; whichever occurs first. If a claim is therefore not timely, then builders should file correspondence with the CCB to dismiss the claim immediately.

Contractors - Do you have an Indemnity/Hold Harmless Clause?

Recently, insurance companies for builders have been insisting that general contractors have language in their subcontractor agreements which require the subs to indemnify or hold them harmless for defects and other damages. Insurance companies have become very concerned about too much exposure to liability, and often will not renew the policy without the new language. If you are a general contractor, even if your insurer does not require the new language, it could help control some of the liability and damages in any legal action if you had the correct clause addressing this in your contracts.

Contractors - Beware of AAA
Many, if not most, construction contracts have a clause that forces the parties to go to what is called mandatory arbitration and to follow the rules pursuant to the American Arbitration Association. The purpose is that, in case of a dispute, the parties would go to arbitration, rather than a trial, to save money. Sounds good? Think again.

In cases with low dollar amounts at stake, it is good. But, once the claims (or counterclaims) get large, the costs skyrocket. Example: In a case with a claim for over $250,000, both parties would have to split a $3500 arbitration fee upfront, plus pay a private arbitrator at least $150 per hour, plus pay a $150 per day administration fee.

Compare that to a regular lawsuit at the courthouse, which would run $167 for a filing fee plus $120 day for a jury fee and no fees are paid to the judge (the taxpayers pay that).

You say that you would never have to file a claim that large so that it would never trigger these types of fees? That doesn't prevent your opponent from doing so. Come see me if you wish to explore rewording the arbitration clauses in your construction contracts.

Scheduling clauses in construction contracts
Homeowners - you could insert a clause in your contract imposing money damages on a daily basis for every day that the contractor goes beyond scheduled completion.

Builders - you could insert a clause in your contract imposing a monetary reward on a daily basis for every day that you beat the scheduled completion date.

Landscape Contractors: Good News

The revised Oregon Statutes now will permit landscape contractors to plan and construct ornamental water features, and to install backflow devices for the water features.

Subcontractors: Get More Out of the General’s Bond

The revised Oregon Statutes will now permit subcontractors to get up to $3,000 against the general contractor’s bond. Until now, it was $2,000.

Contractors - And Developers Beware
Although Oregon law prevents recovery by contractors or subcontractors who are not licensed and timely registered with the CCB, what about developers? The law is currently unsettled, but a recent trial court held that a Portland developer could not recover against a builder for poor workmanship because the developer was not licensed and registered with the CCB. Although there is an exemption for developers who farm the work out to independent contractors, the statutory definition of a "contractor" (essentially any person or company that offers or arranges to prepare a bid or submits a bid to improve a development or any improvement to real estate), suggests that a developer is a contractor, which then invokes the licensing and registration requirements.

A safer course would be for the developer to get licensed and registered with the CCB, in order to prevent the complete inability to file a claim for defective work.

Contractors: Dealing with CCB hearings
Remember that either party, the homeowner or the contractor, may object to the CCB claims examiner’s recommendations or the proposed order and request a hearing. If the CCB claims examiner is unable to issue a proposed order due to conflicting evidence in the file, he or she may send the matter to a hearing.

Hearings are held before an administrative law judge who specializes in resolving construction disputes. Decisions may be appealed to the CCB appeal committee, which is a three-person subcommittee of the CCB. Contractor registration fees fund the agency’s claim services. Attorneys need not participate, although representation may be advisable.

Construction Law Update
If a contractor is licensed with the CCB as a sole proprietor and then changes to a corporation or an LLC, does the new entity have a new CCB license number? Not necessarily. Although the CCB rules require that a new entity must "register anew," the rules do not specify that the new entity must have a new CCB license number. In response to contractor interest, the CCB takes the position that there is no bar to giving the new entity the same license number as the sole proprietor. This means that a consumer can pull up the CCB license information on an entity that was formed in 2002 and learn that it had been "continuously licensed since 1992."

Some Bills at the Legislature that may become Law Soon
House Bill 2210 increases the amount of the surety bond requirement.

House Bill 2232 will allow the CCB to charge fees for filing claims with the CCB.

House Bill 2590 allows a real estate broker to claim a lien on commercial real estate for fees.

House Bill 3468 requires a licensed contractor to display its business name and license number on vehicles.

Senate Bill 298 requires that in order to foreclose on a construction lien, suit must be filed within 120 days and a notice of tendency of an action must be filed against the property.

Assuming that your monthly construction draw payments to your contractor automatically mean your contractor is paying the subcontractors’ and material suppliers’ bills can be a costly mistake.

If the subs and suppliers aren’t paid, you could end up paying twice for the same house.

Tip: Put the address of the project site on your check. Better yet, pay the subs and suppliers directly.

New procedures on filing new construction defect cases with the CCB - As of January 1, 2004, for all claims that homeowners intend to file against contractors, they must first issue a written notice to the contractor within 30 days of filing, stating their intent to file a claim. This must be sent via certified mail to the contractor.

On a related note, if the homeowner wishes to file a lawsuit or arbitration claim against the contractor, the homeowner must first send the contractor a “notice of defect.” This must be sent via registered (not certified) mail.

By the way, previously, all CCB claims were free. As of January 1, 2004, the homeowner must send a $50 fee with the claim form. (Not applicable to commercial jobs).

Note also that effective January 1, 2004, for projects lasting more than 60 days, an owner must pay progress payments within 14 days after the contractor submits his billing. Many more changes have been enacted; call me with questions.

REAL ESTATE (return to top)

New home warranty – clarification
Attention homeowners, contractors and subcontractors: Contrary to popular belief, a contractor need not issue a warranty for new home construction in this state. It is an optional and therefore a negotiable matter. (See me if you would like to have a warranty drafted).

Real Estate: properties with an abandoned oil tank
From now on, sellers of a residential property with an abandoned underground oil tank are responsible to the buyer for emptying the tank of oil and providing documentation to the buyer that the tank has been emptied.

Important change in eviction laws

The 72-hour period that landlords had within which to evict the tenant after having obtained a notice of restitution (a court ordered eviction) has been extended to 96 hours. Therefore, do not post the trespass notice until after four, not three, days following the posting of the notice of restitution. Otherwise, landlords could be liable for unlawful entry and subject to damages.

Now, essentially anyone, whether in a position of trust or care to an elderly person or not, who steals money or property from an elderly person can be subject to a claim for "elderly abuse."

Recover more attorney’s fees in foreclosure
Previously, a person who filed for a nonjudicial (out-of-court rather than foreclosure by trial) foreclosure could charge the debtor a maximum of $550 in attorney fees. It has now been raised to $1000.

Legalities of dealing with out-of-state Real Estate brokers
A realtor may share a commission with an out-of-state realtor in commercial real estate transactions (which includes multiplexes with 5 + units), but brokers must agree in writing that the acts of the out- -of-state broker will be under the supervision and control of the Oregon broker.

Another tactic to avoid estate taxes
Need to avoid estate taxes? Form a family partnership or LLC, or acquire assets in a new S-corp. and make gifts of common stock to your children.

Buying or Selling a Business or Real Estate? Negotiation Tips.

Try reacting visibly when you hear the price. Flinch! You’ll be surprised with positive results...Don’t be too smart. You’re better off acting dumb rather than acting as if you know more than everyone else. Remember Columbo from the TV show. Don’t let them get their guard up...

Impasse v. deadlock - a deadlock is an exit without a key; an impasse is a dead end. With a deadlock, there is always a key out.

Try setting aside the object of the contention and work on the small issues, building momentum to eventually solving the big issues.

Beware - Notes about Living Wills
A living will, otherwise known as an advance directive to physicians, is the document that gives specific instructions to the doctor on what type of nourishment and medical care to provide for you should you be unable to communicate instructions due to incapacity (coma, severe pain, advanced progressive illness, etc.) This document is important because doctors, out of liability concerns, will not make life and death decisions such as whether to provide food and water, only water, pain medication, etc. without express written instructions in a form set out in the format provided under Oregon law.

ESTATE PLANNING (return to top)

Estate planning - cohabitation
Effective January 1, 2000, just because someone has cohabitated with another for at least 10 years, that person is not entitled to receive part of the other’s estate upon death of the other. These situations (as well as most situations), should therefore include a properly drafted will or trust.

Changes in the "Death with Dignity Act"
Recently, there have been some changes in the law called the "Death with Dignity Act." Although the complete Act is quite complex, here are some highlights: The Act only applies to adults who are Oregon residents and are capable of making and communicating health care decisions to health care providers.

The patient must make a written request for the "medication". There must have been some counseling prior to making the decision. The patient must be informed with the facts about the person’s medical diagnosis, prognosis, and the side effects and risks of taking the medication. Another doctor must confirm the diagnosis. The disease must be incurable and irreversible, and within reasonable medical judgment produce death within six months.

It is recommended to the patient that the next of kin be notified of the decision. Also, the patient is counseled about having another person with them during the process. The request may be withdrawn at any time and in any manner. There are many more details to this controversial law and more changes will probably occur in every legislative session.

Some clients have told me that their spouse will tell the doctor what to do. I remind them what would happen if the spouse is not around, for example, if the spouse was involved in the same accident. Other clients have told me that they have already prepared one of these documents at the hospital. I remind them that another client recently told me that a major hospital lost their document. (I keep this and all of your estate planning documents in a large fireproof safe, and give you a card for your wallet or purse instructing medical personnel to contact me for a copy of the document). Remember too, that if you have had one prepared before 1985, it is probably invalid. Call me for a free consultation.

Important change in eviction laws

The 72-hour period that landlords had within which to evict the tenant after having obtained a notice of restitution (a court ordered eviction) has been extended to 96 hours. Therefore, do not post the trespass notice until after four, not three, days following the posting of the notice of restitution. Otherwise, landlords could be liable for unlawful entry and subject to damages.

Spouses, Did You Know...
Attention husbands and wives - review your wills. You can be cut out of a will; there is no law against it. And if that happens, Oregon law only protects you for up to 1/4 of the probate assets, and even that is deducted by any gifts the spouse gave to you during his/her life plus any joint property.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRR)
What's that? That is the tax relief legislation recently signed by the President. There are some tax breaks, perhaps the most important being the repeal of the estate, or death tax. That means in 2010, there will no longer be an estate tax for those of you who leave too much when you go. But please note, because you won't hear this from the politicians - the EGTRR "sunsets" at the end of 2010. What that means is that the tax relief expires at the end of 2010, and the tax laws of 2000 simply "kick-in" again. Now what do we do - plan our demise in 2011? If you think you're going to have too much in the way of assets and don't want to pay 37% - 55% in estate taxes call me for a consultation.

Another tactic to avoid estate taxes
Need to avoid estate taxes? Form a family partnership or LLC, or acquire assets in a new S-corp. and make gifts of common stock to your children.

The Importance of Living Wills
A living will, or an Advance Directive as they are now known in Oregon, permits a person to specify his or her intent regarding conditions upon which life-sustaining procedures should be used. Many health care providers are hesitant to end life-sustaining procedures due to possible exposure to legal risk. This can result in additional health care costs to the family and needless pain and suffering to the patient.

An Advance Directive can also reduce emotional trauma for family and friends because the decision about whether to use life-sustaining procedures has already been made. This document can be customized to your wishes about life-sustaining care, for example tube-feeding or not, and/or pain medications or not.

Beware - Notes about Living Wills
A living will, otherwise known as an advance directive to physicians, is the document that gives specific instructions to the doctor on what type of nourishment and medical care to provide for you should you be unable to communicate instructions due to incapacity (coma, severe pain, advanced progressive illness, etc.) This document is important because doctors, out of liability concerns, will not make life and death decisions such as whether to provide food and water, only water, pain medication, etc. without express written instructions in a form set out in the format provided under Oregon law.

Powers of Attorney - What are They?
Before I went to law school, I thought of these documents as basically unnecessary because I thought they only applied in cases where someone needed to close a real estate transaction, but could not be present in person; therefore executed one of these documents in order to get the deal closed. But in fact, a power of attorney is a useful estate planning tool. A will is helpful to get property transferred with clarity and certainty. But a will does not activate until one dies. Often, more than we would like to think, people become disabled and are temporarily unable to make financial decisions, manage the checkbook, etc. A power of attorney authorizes someone you trust; usually your spouse or an alternate family member if the spouse is also incapacitated or no longer present, to make these important day-to-day decisions. Without one, creditors often jump into the picture because finances aren't handled. And if you (or your parents) are wealthy and there are multiple family members, sometimes fights arise as to who will manage assets. That could cause a court battle to establish a conservatorship to handle finances. Once we prepare them, our policy is to retain these documents in our safe at the office and as always, their contents are kept in confidence.

Set-up Your Business to Protect Your Estate Planning Needs and to Save Taxes
Estate planning requires decisions as to how the business will be operated or preserved during the administration of the owner's estate. It is important to select a personal representative who has the ability and is willing to operate the business for some period of time and who resides in a location that is convenient for operation of the business. Both may be necessary to grant special powers to the personal representative to permit the business to be operated in the most effective and efficient manner. oThe same considerations also apply to the selection of a trustee (and the trustee's powers) in the event the business will be held in a trust after death or during a period of incapacity. Difficult issues may arise in situations where not all the younger-generation family member-beneficiaries will be active in the business after the death of the owner. While the owner may want each of his or her beneficiaries to receive a fair and equal share of the owner's overall estate, tensions may arise between active and inactive business owners. For example, the inactive owners may rightly have concerns that the active owners will retain the profits from the business in the company, rather than making current distributions, or that earnings generated by the business will be dissipated by compensation payments to the active owners. Possible planning strategies in this area include: Giving the non-business assets of the estate to children who are not active in the business and business assets to the children who are active in the business; Giving inactive children an interest in the business with options in the active children to buy their interests; or Giving inactive children an interest in the business but restricting their right to participate in management.

Many of us love our pets and treat them as a member of our family. But we don’t include them in our estate plans. What would happen if the family passed away all at once, for example, while on vacation? Most likely if a distant relative didn’t adopt it, then your pet would probably end up at the pound. Here’s some tips:

1. Find a trusted friend or relative who knows the pet and is willing to care for it. Secure an agreement in advance and pay the person in advance to keep the agreement enforceable.

2. Appoint a guardian for your pet in your estate planning documents and make a conditional bequest. In other words, if the person is unable to take the pet, the money does not go to him or her.

3. Give written instructions to a friend or relative (and don’t forget to give that person the house key) for your pet should you be unable to get home or provide care over a long period. Write a letter of authorization to handle expenses and take custody of the pet in the event of death or incapacity. Confirm this in your power-of-attorney.

“People don’t fight over money, they fight over memories. People think, ‘I’m not a millionaire so why should I worry?’ Then their heirs end up fighting over a watch.”

Experts say families that communicate before death, can avoid such family-wrenching spats. So, ask the kids. Or, kids, tactfully speak with your folks about this.

Plan for goodwill; don’t assume it. (Source: The Bulletin, 9/21/03 p. G3)

GENERAL LAW (return to top)

Small claims court raised to $5,000

The 1999 legislature passed a law raising the small claims jurisdictional limit to $5000. Attorneys are not permitted in small claims court. That means fairly large claims can now be handled by laypersons in this forum. Some cases are fairly easy and can be taken care of in small claims court. But $5000 is not small change and if there is any doubt about presenting your facts or knowing the applicable law, it seems that an attorney should always be contacted for a consultation prior to proceeding on your own when the dollar amount at stake is that high. Also you should know that unlike the higher courts, small claims court does not allow for appeals. So you are stuck with the result, win, lose or draw.

Elder Law - "Elderly Abuse"
Previously, a person who is in a position of trust or care to an elderly person who stole money or property of the elderly person could be subject to damages plus attorney fees for "fiduciary abuse."

Now, essentially anyone, whether in a position of trust or care to an elderly person or not, who steals money or property from an elderly person can be subject to a claim for "elderly abuse."

When you get sued outside of Deschutes County
Recently, I represented a client who got sued over a commercial lease dispute. No one likes to get sued. But the lawyer sued her in Lane County (Eugene). Of course it would be very inconvenient to travel to Eugene to defend against a lawsuit. On top of that, the lawyer was from Eugene and so he knew more about the local practices in the Eugene courts.

The client did not know she could avoid traveling to Eugene. Before preparing a defense I warned the lawyer that it was improper for him to file suit in Eugene. I recited the rules of venue (venue rules govern where disputes shall be heard) and alerted him to the fine print in the lease, which also governed that any disputes needed to be heard in Bend.

Does the "Lemon Law" Apply to You?
Most of you have heard of the Lemon Law. Unfortunately, this does not apply to the purchase of used vehicles. Nor is there a three-day right of rescission for new or used car buyers, in the event the buyer has remorse over the purchase.

For this law to apply, the consumer must report each pertinent problem to the manufacturer, its agent or authorized dealer for repair purposes within one year after the original delivery date of the vehicle or before the vehicle milage reaches 12,000. Also, the manufacturer must have received direct written notification from or on behalf of the consumer prior to the repair attempt or the first day out of service and have had an opportunity to correct the defect.

A vehicle is considered a "lemon" if, after notification, the manufacturer is unable to conform the vehicle to the applicable expressed warranties. However, the nonconformity has to substantially impair the use, market value, or safety of the vehicle. The problem cannot be the result of abuse, neglect or unauthorized modification or alterations of the vehicle.

The law provides that you must allow the manufacturer ample opportunity to repair the problem, this means that the nonconformity has been subject to repair 4 or more times, or the vehicle has been out of service by reason of repair for a cumulative total of 30 or more business days.

Get it in Writing
Where there is neither a written agreement nor a preponderance of the evidence to establish the existence or the material terms of an alleged oral contract, courts will not enforce the alleged agreement. The proponent of an alleged contract has the burden of establishing its existence and its terms by a preponderance of the evidence.

Today’s emails are easily tomorrow’s trial exhibit. I’ve seen many instances of emails with opposing parties, prior to hiring the lawyers, blast each other with accusations and name-calling, which often results in unintended admissions in their case or demonstrates personality traits that a Judge would not appreciate.

Avoid sending an email when you are angry. Have someone else proofread it first. Your emails will be “on the record.”

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