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Mia R. BowlerA durable power of attorney is a common part of an estate plan. However, the purpose of the power of attorney is often misunderstood.

The power of attorney names an agent to handle financial affairs for the principal. The Uniform Statutory Form comes with a number of options that the principal can check conferring authority on the agent, for example for real property transactions, banking and financial institution transactions, tax matters, and several other categories. The Uniform Statutory Form does not need to be used, and custom power of attorneys can be drafted; however, use of the Uniform Statutory Form is helpful as it provides options for the most common issues.

Naming an agent under power of attorney is a tool that can prevent a conservatorship if the principal is unable to manage her affairs.

Where an individual has a living trust in place, the power of attorney may be unnecessary if all of the assets are properly titled. But it is generally recommended to include a power of attorney in a living trust package as it is common for individuals to fail to transfer all of their assets into the trust and the agent under power of attorney can transfer assets inadvertently held outside of the trust to the trust in the event of the principal’s incapacity.

A power of attorney is only effective during the life of the principal. If a power of attorney is “durable” it continues even in the event of the incapacity of a principal. An agent’s authority can be effective immediately or at a later date, usually upon the incapacity of the principal. If the power of attorney is effective upon incapacity, the power of attorney must set forth the standard for determining incapacity. A default standard is not provided in the California Probate Code.

There is no affirmative duty for an agent under power of attorney to act on behalf of the principal. Thus, simply naming an agent does not mean that the agent will act and the agent has no liability for refusing to act. An agent assumes fiduciary duties to the principal only in limited circumstances. An agent is under a duty to act if he agrees in writing to act. Thus, principals should consider having their named agent agree to act in writing. An agent also is under a duty to act when the agent undertakes a transaction on behalf of the principal such that the agent is obligated to compete that transaction. Choosing an agent carefully, and naming a successor agent, is critically important. If the agent refuses to act, then the power of attorney may be of no use.

An agent who does act must do so at his own risk. Acting agents are fiduciaries and subject to scrutiny of their actions. The agent must act in the best interests of the principal and manage the assets in a manner consistent with the standard of care that would be observed by a prudent person. The agent must keep accurate records of transactions. Under certain circumstances, the agent may be required to account to the principal or others. An agent who breaches his fiduciary duties could face troubling penalties including double damages and payment of the other party’s attorney fees.

The Power of Attorney

Ronald P. WargoIn the entire spirit of the #Metoo movement a client sues her employer and receives a $1,000,000 judgment. Her attorneys take a customary 33% of the judgment ($300,000) after also deducting case costs. Unfortunately, taxes will take a further bite from this award. Many people do not realize that even under current law the client likely pays federal and state taxes on the full $1,000,000. Taking out $500,000 (50%) of the total award in taxes, the $100,000 case costs, and the $300,000 attorney fees leaves the client with only $100,000 from such a large award. On top of that, the attorney also must pay tax on the money received from the client. In effect, the federal and state governments would actually receive $650,000, or 65% of the total judgment, while the client only receives 10%.

The new Tax Cuts and Jobs Act of 2017 (“2017 Tax Act “) does not change this result. In fact, the Act now makes the outcome the same for smaller cases. Before this year, the client might have deducted some attorney fees as miscellaneous itemized deductions, unless a large award would have pushed the client into the Alternative Minimum Tax (AMT) regime. The 2017 Tax Act completely eliminates miscellaneous itemized deductions for all matters no matter how small, so the client would not be able to deduct her attorney fees or case costs even if the award were only $100,000.

Generally, attorney fees used to be possibly deductible as a miscellaneous itemized deduction if they produce or result in the collection of taxable income or are in any way related to taxes. Such a deduction also had to exceed 2% of the client’s adjusted gross income to be deducted. Clients receiving tax advice, clients consulting an attorney regarding alimony, or clients with an emotional distress or harassment case might have been able to deduct their attorney fees if they were not subject to AMT. Those deductions have largely been eliminated under the new Tax Act.

Some Deductions Still Available

Fortunately, for businesses the law is unchanged. A sole proprietorship can still fully deduct attorneys’ fees for business matters on Schedule C of the individual’s tax return. Partnerships, limited liability companies and corporations also may deduct attorney fees for matters related to the business.

Although technically not a deduction, real estate costs reduce the sales price of real property and are subtracted from the capital gain received from the property. Further, employment discrimination fees and costs are taken out “above-the-line,” meaning that neither AMT nor the 2017 Tax Act affect the tax-free attorney fees for those cases.

Finally, attorney fees for personal injury matters involving physical harm are not taxable, since the awards in those cases are not subject to any income tax. This tax-free treatment likely encompasses most fire-related litigation matters where there is some physical injury, such as smoke inhalation.


Overall, attorney fees and costs are less deductible than under the previous tax law, but the change mostly affects smaller cases. Some larger cases were already not deductible for other reasons. Payments from some cases were always and remain fully deductible. For any specific matter, a client should consult a tax professional before jumping into litigation and again before signing any settlement agreement.

Deducting Attorney Fees After The 2017 Tax Act

Marci A. ReichbachDid you know that you can record your trademark with U.S. Customs & Border Protection? U.S. Customs & Border Protection (“Customs”), a bureau of the Department of Homeland Security, maintains a trademark recordation system for marks registered at the United States Patent and Trademark Office. Trademark owners who register their marks on the Principal Register may record these marks with Customs to assist Customs in its efforts to prevent the importation of goods that infringe registered marks. The recordation database includes information regarding all recorded marks, and includes images of these marks. Customs officers monitor imports to prevent the importation of goods bearing infringing marks, and can access the recordation database at each of the more than 300 ports of entry. Customs has the legal authority to make infringement determinations relating to trademark infringement, and it is empowered to detain and seize, and even forfeit, infringing goods.

A few important points include that a trademark on the supplemental register is not eligible for recordation. 19 C.F.R. § 133.1(a). A separate application is required for each recordation sought. The application fee for trademarks is $190.00 per International Class of goods, per trademark. A check or money order shall be made payable to the United States Customs Service. 19 C.F.R. § 133.3(b). Recordation is effective on the date the recordation is approved, as shown on the recordation notice issued by Customs. 19 C.F.R. § 133.4 (a). Applications for recordation are processed in the order in which they are received. Applicants and recordants will be notified of the approval or denial of an application. 19 C.F.R. §133.1(b). Recordation runs concurrently with the remaining duration of the underlying trademark registration (i.e. up to ten years for registrations issued on or after November 16, 1989). Recordation must be renewed when the trademark registration is renewed, and recordation with Customs is canceled if the registration is canceled or revoked. 19 C.F.R. § 133.4.

Although there is a paper recordation application, in October 2005, Customs released the Intellectual Property Rights e-Recordation (“IPRR”) system. The IPRR System allows trademark holders to electronically file recordation applications. According to Customs, this will “greatly decrease the amount of time and paperwork normally required, thus providing more timely enforcement of your intellectual property rights.”

Recordation of Trademarks with U.S. Customs and Border Protection

John FriedemannWe have a unique opportunity presented to us as a community to evaluate how home owner’s insurance providers treat their customers following a fire loss. Usually, one person’s experience is anecdotal and not sufficient to indicate how any particular insurance carrier generally treats its insureds. But, following the Northern California Fires, we have the potential to create a large database of experience that will provide a guide to others in making purchase decisions. The work by this firm with fire victims has certainly put us in a position to express some opinions, but it would be great to collect even more complete information about claims handling, make comparisons among carriers, and draw conclusions about which carriers are best and which are worst. I already know that I am changing my insurance company.

Some patterns have become clear. First of all, every insurance company starts with sweetness and light. That first adjuster is your buddy and makes it seem like the insurance process will be a dream. Then you get a new adjuster. Adjuster two is not as nice. The first adjuster was “mistaken” when you were told certain things. No, they will not be paying policy limits until you have documented everything. That slide into unpleasantness continues until the fire victim is an insurance victim; worn down to the point of no resistance by an insurance company that seems to specialize in creating frustration.

To fire victims out there I have this message: Don’t give up, don’t give in, don’t settle for less than you are entitled to receive. Be persistent. Be pushy. Be polite. Communicate in writing and tell your adjuster again and again how hard and frustrating it is to meet their endless requirements. By expressing your frustration while giving them what they ask for, you will be building a paper trail that will ultimately cause the insurance company to give in.

Don't Give Up, Don't Give In

Casey J. Edmondson“Fake” is a popular word these days—I probably don’t need to tell you why. Part of our education, from our parents and teachers and peers, is learning how to avoid being taken by a fake. Spotting fakes is the survival skill that the gatherer uses to miss the poisonous berry, the merchant uses to buy the genuine article, and that the spy uses to flush out a double-agent.

What does any of this have to do with the law? Consider the United States Supreme Court. On the bench sit brilliant, well-educated, experienced legal minds. The scales of justice remind us that balancing things is a judge’s core role. How strong is one argument versus another? Which party met its burden of proof or persuasion by adding enough pebbles to its side of the scale? Citations of fact add weight to an argument; the amount of weight depends on a fact’s certainty plus its persuasiveness. But when a court can’t tell the truth from fiction, and a fake goes onto the scale, the law can tip in irrational, harmful ways.

The independent investigative journalism group ProPublica reports that Supreme Court opinions contain an unsettlingly high number of factual errors. The ProPublica team found many errors that, although embarrassing, are not always consequential—say, undercounting the number of U.S. states that have passed a given law.

Other errors are startling.

In one case, the Court recited a fact that “88 percent of all private companies in the country conduct [background] checks,” to deny a lawsuit by Caltech scientists who worked at the Jet Propulsion Laboratory on a contract basis. The scientists argued that the background checks (featuring intrusive questions about sensitive health matters, and questionnaires sent to scientists’ friends and family) were intrusive enough to infringe on protected rights. But the Court reasoned that a practice followed by 88 percent of private companies must not be very intrusive.

Here’s the problem—nobody knows where that number came from, including the attorneys who filed the amicus brief containing that “fact.”

Some errors are even worse. The Court cited fake data about drug-sniffing dogs to water down constitutional requirements for search and seizure. The Court cited a fake fact – that no-bail imprisonment of immigrants awaiting trial averaged 4 months – to validate the practice. But in truth, the average length of detention was 13 months.

Maybe we shouldn’t be too surprised. After all, the Supreme Court’s brilliant minds have gotten a lot of important things wrong over the years. Spotting what you might call fake logic – fallacies – is hard too for the sharpest people; the ability to do it is impaired by biases we carry through our lives. And yet, observation-based facts should be different and easier to keep straight. That is the promise of the scientific method. In the end, blame probably lies with the most pernicious fallacy of all – confirmation bias. People, judges included, don’t spot a fake where the fake matches their expectations or supports their values. “A man hears what he wants to hear and disregards the rest.”

The ProPublica piece referred to here is available at:

Fake Under Submission

Casey J. EdmondsonCannabis businesspeople have hoped, worked, and lobbied for a “safe harbor” for their industry. These tireless efforts have produced results, but the “safe harbor” which currently exists is, to extend the metaphor, filled with shallow water, difficult to enter, and has plenty of reefs.

Federal law is the supreme law of the land, and where it conflicts with state law, federal law controls. But if Congress refuses to budget money to the executive branch so that it can enforce a law, that law exists in a twilight state—it is unenforceable as a practical matter, but still “supreme.” That is what Congress has done in budget amendments in recent years with laws such as the Controlled Substances Act that would intrude on states’ medical cannabis laws. A recent opinion of the Ninth Circuit Court of Appeals has held that while the Controlled Substances Act is still the law, in-state California operators are (for now) beyond prosecution. So exactly how safe is the harbor under the circumstances?

First, the shallows: the federal government, via the DEA, FBI, financial crimes enforcement, and prosecutors at the Department of Justice, still has funding to go after recreational and “adult use” cannabis users, distributors, processors, and cultivators. Next, getting in: only medical cannabis enjoys the limited protection, regardless of state law. Finally, the reefs: the limited protection depends on Congress continuing to pass budgets that do not fund enforcement, and depends on strict compliance with state and local laws.

Stick with the picture of your cannabis business as a ship. Is your ship more exposed when it is off by itself, or when it is in a convoy? Through the ages, staying in tight formation has provided maximum protection from attacks. Putting this into practice in the cannabis business means doing a few things.

One, cannabis business leaders need to maintain the solidarity and camaraderie that have defined the industry for decades. Keeping in touch with your peers—staying plugged in—is key. Two, in an emerging industry, the standards for compliance with local and state law are being created and tested every day. Reliance on experts, officials, and knowledgeable insiders is essential to avoid inadvertently falling out of compliance with state law.

Finally, it means keeping an eye to the sky and a finger to the wind to sense new risks. Recently, the Rules Committee of the House of Representatives advanced an appropriations bill that would not, for the first time in years, any longer include the crucial amendment that prevents federal enforcement against state-legal medical cannabis operators. The House bill still must be reconciled with a Senate appropriations bill that includes the provision, so there is reason to stay hopeful.

On top of everything, cannabis businesses need to deal expertly with everything other businesses handle, from operations, to marketing, to public relations, to unique and general tax issues alike. The increasing public emergence of the industry creates more points of contact with the general public and with government.

As ever, we are in fast-changing times, but there is a great opportunity to stay on top of the state of the industry. Friedemann Goldberg LLP, a business law firm with offices in Santa Rosa, San Francisco, and Sacramento, has organized an event involving “cannabiz” industry leaders in Santa Rosa on Saturday, September 23, 2017. The lineup features John Friedemann, an attorney with decades of banking, business, litigation and real estate law experience, Jim Wood, a California Assemblymember and one of the principal architects in writing California’s marijuana regulations, Hezekiah Allen, Executive Director of the California Growers Association, Tawnie Logan, Chair of the Board for the Sonoma County Growers Alliance, Jamie Garzot, a highly regarded cannabis consultant with Roots Consulting, Tim Ricard, Program Manager with the Sonoma County Economic Development Board, Craig Litwin, Founder of the 421 Group, Jeffrey Titus, an industry tax attorney, and Daniel Garcia, Jr., an insurance broker with Vantreo.

Attendees will hear a full day of insight and have several opportunities to talk to speakers and attendees in a free-form environment. The event is from 9:00 AM to 4:30 PM and will be held at the Friedman Center in Santa Rosa. To register for the event, visit or call (707) 543-4944.

Looking For a Cannabiz Safe Harbor

John N. MacLeodIf you’re a pet owner, chances are you love and care for your pets like they’re people. You might even care for them more than people. I’m not judging.

But you don’t have to be a pet owner to be a pet lover. Even if you don’t own pets, you likely understand the bond that exists between pets and their owners.

Of course, pets rely on their owners for all their needs, including food and shelter, exercise, affection, and overall health and well-being.

And like us, from time to time, pets need medical attention, including routine checkups and vaccinations, or for serious injuries or health issues. Veterinary bills can be an unexpected blow to your budget, especially for emergency surgeries and treatment. While our pets are worth the cost, the reality is that finances play a role in whether a person opts for medical treatment.

California has proposed a new law that would provide a substantial tax write off to pet owners for veterinary costs for dogs and cats. Assembly Bill No. 942, as amended, would provide a tax credit equal to one-half of the amount paid or incurred for qualified veterinary costs, not to exceed two thousand dollars. Qualified veterinary costs means amounts paid for medically necessary expenses paid to a licensed veterinarian, including, but not limited to, vaccinations, annual check-ups, surgeries, and drug prescriptions.

The proposed law would increase the health and quality of life of our pets by incentivizing pet owners to opt for medical treatments, including expensive surgeries and life-saving treatments. The proposed law would also encourage adoption of pets, including older pets more likely to require medical attention. Dogs and cats are not just pets, they are family. And, according to Jules from Pulp Fiction, “Dogs got personality. Personality goes a long way.”

Personality Goes A Long Way

Mia R. BowlerThird party irrevocable spendthrift trusts are considered a means of asset protection for the beneficiaries; however, California already allows for many exceptions to the general rule that a creditor of a beneficiary cannot access the assets of such a trust.

Recently, in United States v. Harris, the Ninth Circuit held that any current or future distributions from an irrevocable trust to the beneficiary were subject to a continuing writ of garnishment payable to the United States as a result of a $646,000 restitution judgment owed by the beneficiary for a felony conviction.

In Harris, the defendant was the beneficiary of two California irrevocable trusts. By the terms of the trusts, the defendant could not assign his interest in the trusts and the trustee had the sole discretion to make or withhold distributions of principal and income.

The key issue was whether the garnishment statute in the Federal Debt Collection Procedures Act could be used to attach defendant’s interest in an irrevocable trust. In order to determine whether the asset fits within the definition of property, and are subject to attachment, the court looks at the asset and the laws of the state governing the asset.

The decision of the Ninth Circuit to allow a continuing writ of garnishment is generally consistent with California law and policy. California Probate Code Section 15305.5 discusses the availability of trust assets to satisfy a restitution judgment and subparagraph (c) specifically provides that “Whether or not the beneficiary has the right under the trust to compel the trustee to pay income or principal or both to or for the benefit of the beneficiary, the court may, to the extent that the court determines it is equitable and reasonable under the circumstances of the particular case, order the trustee to satisfy all or part of the restitution judgment out of all or part of future payments that the trustee, pursuant to the exercise of the trustees discretion, determines to make to or for the benefit of the beneficiary.”

However, in its analysis of California law, the Ninth Circuit did not focus on California Probate Code Section 15305.5 and instead based its decision on its finding that despite distributions being subject to the sole discretion of the trustee, the defendant had a right to compel distributions from the trust to fulfill the trust purpose. Empire Props. v. County of Los Angeles, 44 Cal. App. 4th 781 (1996), provides that a beneficiary of an irrevocable trust has a “vested and present beneficial interest in the trust property.” The Ninth Circuit found that under California law, a beneficiary has a right to compel a trustee to make a distribution using California Probate Code Section 17200. On that basis, the Ninth Circuit found that California state law creates a sufficient interest in a beneficiary of an irrevocable trust to satisfy the requirements of the federal lien provisions.

As a matter of California law, the discussion in the case regarding a beneficiary’s ability to compel distributions from an irrevocable discretionary trust, opens the door for an increase in the amount of petitions by beneficiaries to compel distributions despite specific language in the trust giving the trustee the sole discretion over distributions.

While the decision in Harris mentions that “the government is not attempting to compel distributions from the trusts” without any further discussion of whether such an action would be available, it leaves the question of whether a creditor of a beneficiary, including one with a federal lien, can seek to compel a trustee to make a distribution to a beneficiary if the creditor believes that the failure to make such a distribution is inconsistent with the terms of the trust. In Young v. McCoy, 147 Cal. App. 4th 1078 (2007), a creditor, holding a restitution judgment against the beneficiary of an irrevocable trust, sought to compel the trustee to make a discretionary distribution to the beneficiary. The decision in Young did not address whether a creditor had the standing to seek the relief, but decided that the trustee had not abused her discretion because the beneficiary was receiving adequate support from the state while in jail.

Irrevocable Trusts - Vehicles for Asset Protection?

Casey J. EdmondsonHenry Ford was not used to hearing “no.” But that is what the Michigan Supreme Court told him in 1919, when Ford tried to reinvest huge capital reserves of Ford Motor Company into wages and new facilities instead of shareholder dividends. Despite the “business judgment rule” that ordinarily prevents courts from overturning lawful business decisions, the Court did just that, finding that Ford altogether ignored the principle of maximizing shareholder value. Since this famous decision, business leaders have accepted shareholder value as the north star.

The idea that shareholder value was the only thing business leaders should care about was enshrined in the doctrines of Milton Friedman and the Chicago School of Economics – dominant for decades. But today’s business leaders often care about more: their employees, their customers, the environment, and their communities. When protecting these constituencies clashes with shareholder value, the custom has been to rely on the business judgment rule for protection by framing every decision as profit-maximizing regardless of true motive. Recognizing that semi-fiction, state legislatures have begun blessing “hybrid” corporations that operate for profit but may consider important outside concerns. In California, these are the “benefit” and “social purpose” corporations (“BC” and “SPC”). California introduced these hybrid forms beginning with the Corporate Flexibility Act of 2011, and has updated the law several times since. By way of example, two well-known benefit corporations are Kickstarter (Delaware) and Klean Kanteen (California). Though awareness of benefit and social purpose corporations has grown in the legal and business world, they still make up a tiny fraction of corporations overall.

BCs and SPCs are not non-profits, and they are taxed according to their general status (C or S corp.). Yet BC and SPC forms exist to protect business leaders whose choices defend important social values that may be in tension with a laser focus on maximizing profit.

As described by California’s Supreme Court, directors and officers have the duty “to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it.” Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 345 (1966). However, the statutes governing BCs and SPCs require directors and officers to consider matters above and beyond the shareholders’ profit interests. Because they must consider these matters, these statutes provide added protection from shareholders trying to impose liability for choices resulting in less-than-maximum profits.

Most California corporations have, in their articles of incorporation, generic statements of purpose that authorize the corporation to engage in all lawful activity. But BCs and SPCs must add statements about their public and social benefit purposes. The choice of language, particularly for SPCs, is critical in setting the scope of a director’s duties and protections.

BCs face stricter regulation than SPCs, are less flexible, and may give rise to greater exposure to claims than do SPCs. BCs provide more explicit statutory protections, however, for directors and officers who consider impacts on public stakeholders, particularly in the context of a potential takeover. SPCs are flexible, limited, and easier to administer. They offer more clarity to corporate leaders who can apply a more bright-line standard to corporate decisions than the very broad (almost limitless) set of concerns required to be considered by BCs.

BCs must consider many different social values, but SPCs are largely free to pick and choose among permissible values. A BC must analyze the impact of its major business decisions and strategies on not only shareholders, but also the environment, and society. Because the SPC can have narrowly-tailored public benefit purposes, its officers’ and directors’ duties are limited to considering just impact on those listed purposes.

The relative novelty and infrequent use of the BC and SPC forms leaves doubt as to how the statutory standards will be applied by courts in the future. Most questions will be matters of first impression, meaning that a court has little guidance from precedent. However, these innovations in law show that entrepreneurs are, more and more, trying to straddle the line between economics and politics.

Ford Couldn’t, But You Can: Hybrid Corporations for Social Goals

Kyle M. FisherMost of us were raised by our parents to say “please” and “thank you.” In today’s society, these simple words seem to be used less and less. Worryingly, this trend includes the country’s political discourse which has become increasingly harsh and insensitive.

This lack of civility overlooks the power of these magic words. Saying “please” makes a respectful request of the other person and empowers that person to respond to your request. Studies show that using the word makes it much more likely that your request will be granted. More fundamentally, it demonstrates a basic recognition of the human dignity of the other person.

Saying “thank you” is the simplest form of practicing gratitude. It helps prevent the other person from feeling under-appreciated and taken for granted. Like with saying “please,” studies show that saying “thank you” makes people more willing to do something for you again in the future.

This creates a cycle of good will which can be very powerful. Indeed, in at least one extreme situation, it made the difference between life and death.

During a polar expedition between 1914 to 1916, an Englishman, Ernest Shackleton, and his crew became trapped in the ice on their boat. Months went by and the ice still held. Eventually, the pressure of the ice crushed the hull of the ship and left the men trapped on the ice. Their epic adventure to survive was only beginning. It is an inspiring story. I apologize for ruining the ending, but everyone made it home safely, which is my point.

Shackleton proved himself to be an amazing leader in many respects. However, one trait in particular kept the group cohesive. He was always polite to the men and expected them to be polite to each other as well. The social lubricant that this created helped keep the men civil to and cooperative with each other, which literally saved their lives.

This is an obviously extreme example, but our ability to sincerely say “please” and “thank you” has a dramatic and beneficial impact on how we relate to each other. Besides, it will make your parents proud of you!

Thank you for reading my submission. I appreciate it.

The Power of Politeness

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