California

City Council Votes in Richmond, CA, Mortgage Eminent Domain Proposal and UPDATE

By Christopher Hammond, J.D. Candidate 2015 | Posted on

After a seven-hour meeting that dragged into early Wednesday morning, the Richmond City Council voted 4-to-3 to continue pursuing its plan to condemn underwater mortgages using the city’s eminent domain power.  The development is just the latest in an ongoing and high-stakes dispute over a novel property law argument. 

Here is the background:  The city of Richmond, California, has long-faced deteriorating property values.  Once a shipbuilding powerhouse for the U.S. Navy during World War II, the region’s declining industrial based has hit Richmond particularly hard.  City leaders have struggled to attract redevelopment capital, as businesses have largely opted for other booming Bay Area locations.  And when the mortgage crisis hit, Richmond’s communities experienced rampant foreclosures.

In response, the City has considered a novel move:  mortgage condemnations through the power of eminent domain.  That is, the City’s proposl would condemn the underwater mortgage obligations, but not the real estate itself.  If implemented, banks would be forced to write down large portions of a borrower’s principal.  The Network has previously covered the mortgage eminent domain proposal and Mortgage Resolution Partners, which had backed Richmond’s plan.  And last September, the Berkeley Center for Law, Business and the Economy and Berkeley Business Law Journal hosted Adjunct Professor Bill Falik—who is a partner at MRP—to discuss the innovative (though controversial) scheme.  The Network covered counterarguments as well.

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FTC Wins Injunction Against Defendants Promising Mortgage Relief

By Sarah G. Nowland, J.D. Candidate 2014 | Posted on

Recently the FTC won injunctive relief after filing a complaint against ten phony mortgage relief operations.  The complaint alleges that three individuals and seven companies “prey on financially distressed homeowners by luring them into membership programs or loan modification services with promises that they will receive legal representation . . . to save their homes from foreclosure.”  Defendants charged up-front fees and then failed to follow through on their promise of services.  A temporary restraining order was issued against Defendants, freezing their assets and shutting down their businesses and websites.  (more…)

Social Entrepreneurship Panel: A Recap

By Libby Hadzima, J.D./M.B.A. Candidate 2015 | Posted on

On April 3, 2013, the Berkeley Center for Law, Business and the Economy (BCLBE) hosted a Social Entrepreneurship: Legal, Financial and Public Policy Dimensions panel moderated by Professor Eric Talley.  Panelists included legal experts R. Todd Johnson (Partner, Jones Days), Jonathan Storper (Partner, Hanson Bridgett), Kyle Westaway (Founder of Westaway Law) and Jordan Breslow (General Counsel at New Island Capital) as well as Vince Siciliano (CEO and President of the New Resources Bank).

Talley began by asking for a definition of social entrepreneurship.  Johnson offered “any organization that makes money and does social good” and Siciliano added “maximizing distribution [for a given product] while being profitable” as social enterprises attempt to maximize social impact for a given product or service.  Breslow, who works for an impact investment advisor, talked about how one of the downsides of a nonprofit, as compared to a social enterprise, is that “in giving money away [investors] lose control.”

Measuring profits is straightforward but measuring social impact is not always so easy.  However, as Johnson notes, “we need to get past the head-scratching period of asking ‘how do we measure impact’ that comes from looking at social entrepreneurship as a sector. It’s not a sector. It’s a way of doing business.”  Social impact can be applied to any business sector — health care, education, technology, etc. For some sectors, the impact equation is simple. For example, d.light solar sells solar light and power products so it is “relatively easy to calculate how much kerosene and therefore CO2 is avoided by its products.”  It is harder for other sectors, such as services, or where impact is based upon human transformation or long-term goals. “Sometimes the outcome should be obvious, but is simply hard (or expensive to capture) such as greening of supply chains.”  Westaway agreed noting that he “applauds the idea of standardization but it is hard to do.”

Talley asked the panelist to assess whether these types of enterprises are more risky than others, that perhaps, do not consider their social impact. Siciliano suggested that some social enterprises may be considered risky by traditional investors because they are not well understood.  “As a commercial bank, one of the New Resource Bank’s competitive advantages” he explained “is its sector expertise.” He offers that it is not about the risk of the underlying business model as much as that traditional commercial banks assess high risk to these enterprises because of their limited exposure to some of the new sectors these enterprises are operating in. “We don’t view these companies as risky because we better understand their markets and stage of growth.” Specific industry examples include organic products, alternative energy, energy efficiency retrofits, green real estate, and nonprofits.

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AT&T Mobility LLC v. AU Optronics Corp.: Out-of-State Price Fixing Still Actionable Under California’s Cartwright Act

By Valerie Ramos, J.D. Candidate 2015 | Posted on

The Ninth Circuit recently held that the Cartwright Act, California’s antitrust law, applies not only to “the indirect purchase of price-fixed goods,” but also where “the conspiratorial conduct that led to the sale of those goods” occurs in California.  AT&T Mobility v. AU Optronics Corp.  The civil action follows on the heels of a DOJ criminal investigation that resulted in more than $890 million in fines.  In 2001, AU Optronics Corporation and other Asian manufacturers of liquid crystal display (LCD) panels had met secretly and agreed to exchange information regarding shipping, production, supply, and demand.  The complaint alleges the result was fixed prices of LCDs in the U.S. and other regions.

Unlike federal antitrust law, California’s Cartwright Act provides a private cause of action for damages caused by indirect purchasers of price-fixed goods.  The Cartwright Act thus reaches beyond the Sherman Act in the sense that its focus has always been on “the punishment of violators for the larger purpose of promoting free competition.”

The plaintiffs, all of which are companies that provide voice and data communication services and sell mobile wireless handsets, sued a collective of manufacturers and distributers of LCD panels.  Plaintiffs alleged that from 1996 to 2006, “they purchased billions of dollars worth of mobile handsets containing Defendants’ LCD panels” at artificially inflated prices due to a global conspiracy to fix the LCD panel prices.  The sale of these LCD panels did not occur in California.

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Firm Advice: Your Weekly Update

By James Kollar and Joseph Santiesteban | Posted on

The False Claims Act historically has been used to prosecute procurement and healthcare fraud that result in losses to the government.  Over the past four years, however, plaintiffs have expanded their use of the statute to include cases of complex financial fraud in which the government is in indirectly involved. In a recent client alert, Latham & Watkins explains how New York is now using its state version of the False Claims Act to prosecute tax fraud. In the first such action, New York targeted Sprint-Nextel alleging a $100 million underpayment of state taxes. The Client Alert is available for download here.

The Financial Services Oversight Council has proposed for public comment three alternatives for structural reform of money market mutual funds (MMFs).  Alternative one would require MMFs to have a floating net asset value per share. Share prices would not be fixed at $1, but rather would reflect the actual market value of the underlying portfolio holdings. Alternative two would continue to fix the net asset value at $1, but would require MMFs to maintain a buffer of 1% to absorb day-to-day fluctuations.  Alternative three would also continue to fix the net asset value at $1, but would have a 3% buffer requirement in combination with other risk reducing measures such as diversity requirements or minimum liquidity levels. In a recent Financial Services Alert, Goodwin Proctor has a more in depth summary of the alternatives.

California Attorney General Kamala Harris has begun sending warning letters to approximately 100 mobile app developers notifying them that their privacy policies do not comply with California law. The California Online Privacy Protection Act requires developers to post easily identifiable and reasonably accessible privacy policies. Penalties include up to $2500 per download of each app by California consumers. Major app companies Amazon, Apple, Google, Hewlett-Packard, Microsoft, and Research in Motion have already agreed to ensure their mobile app privacy policies are in accordance with California law. As Wilson Sonini explains in a recent Client Alert, letter recipients have 30 days respond with how they intend to comply.