by Justin Tollefsen | Apr 5, 2016 | Administrative US, Administrative WA, Attorneys, Blog, Business Law, Corporate Law DL, Entrepreneurship, Regulatory Compliance, SEC, Securities Law WA, Securities US, Tollefsen Law
At some point, nearly every regulatory client has asked me, in a tone of incredulity, why “such a little thing” mattered to a regulating agency. Often the client also asks why a government regulator focuses on the “little guy” when big business appears to skate through regulatory compliance with no issues. The second answer is far simpler but answering it first leads us to part of the answer for the first question. How Big Businesses Treat Regulatory Compliance Big businesses appear to skate through regulatory matters without issues, in a sense, because they are big. Being big, they hire regulatory compliance experts to eliminate issues and quickly correct any problems that do come up. They have support personnel to do the actual work. The proactively address most problems before they get to the point of administrative sanctions or lawsuits. This is not to say big businesses don’t have regulatory problems: many do. Some businesses simply don’t bother to comply and have problems as a result. But most big businesses place an emphasis on regulatory compliance. They recognize that compliance failure can be a business-ending proposition. They place a priority on regulatory compliance. Simply making regulatory errors can put a company under heightened scrutiny, causing more frequent examinations and other disruptive and costly consequences. A series of errors, or repeated errors, may also raise questions that lead to more serious investigations or prosecutions. Each situation drags at a company’s bottom line and pulls focus from the company’s mission and vision. As a result, most big businesses solve their regulatory issues quickly. They hire staff to address compliance. They include it...
by Justin Tollefsen | Jun 9, 2015 | Attorneys, Blog, Business Law, Real Estate WA, Tollefsen Law, Washingon State
Merry v Nationstar –Wn App 324745-III Background to Deed of Trust In 2007, Sharon Weirich borrowed $205,440 from Countrywide Home Loans, Inc. and executed a Deed of Trust on her real property as security. The deed identified Countrywide as the lender, Landsafe Title of Washington as the Trustee, and the Mortgage Electronic Registration Systems, Inc. (MERS) as “a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns.” In Bain v. Metropolitan Mortgage Group, 175 Wn.2d 83, 93, 285 P.3d 34 (2012), the Supreme Court of Washington held that the MERS registry’s business practices in creating and transferring beneficial interests with regard to mortgages conflict with the requirements of Washington’s Deed of Trust Act. Beginning in 2011 MERS made a number of assignments and changes in ownership of the note, beneficiary, and trustee using the business practices found to conflict with the Deed of Trust Act. Following these changes, in October 2012, Northwest Trustee Services, Inc. served Mrs. Weirich with a notice of default on behalf of Bank of America. The same month Ms. Weirich executed a deed of trust to Thomas Merry. This deed of trust secured payment of a $68,000 promissory note. Ms. Weirich also executed a power of attorney and an assignment of legal claims to Mr. Merry. In December 2012, Ms. Weirich received a notice of trustee’s sale informing her that her property would be sold on April 19, 2013 to satisfy her promissory note she originally gave to Countrywide. However, property was not sold on April 19, 2013 and no sale was rescheduled within the 120-day window...
by John J. Tollefsen | Mar 5, 2015 | Blog, Business Law, Business Torts WA, Real Estate WA
McKown v Simon Property Group, Supreme Court of Washington, March 5, 2015 Decision: 050405-McKnown-v-Simon-Properties After 40 years of practicing U.S. law, I have grown to appreciate the gift we received from our colonizing parent, the common law. The civil law systems suffer from the same rigidity that all statutes impose: one size fits all. The legislature drafts a statute as a solution to a perceived problem not understanding how it might be unjust in a different fact situation. The common law can smooth out these injustices by providing court-made law which reacts to the facts and needs of justice in a particular case. The negatives of the common law system that has decisions made by juries include unpredictability and indefensible awards. The common law has invented tools to minimize the negatives. One of those tools is “foreseeability”. It allows a court to claim that no one could have foreseen the harm so the defendant is not liable. Foreseeability is often the only legal barrier protecting a business from liability. Unfortunately it has proven to be a two-edged sword. The limits of foreseeably was highlighted in McKown v Simon Property Group. On Sunday, November 20, 2005, Dominick S. Maldonado walked into the Tacoma Mall and opened fire on shoppers and mall employees, injuring seven people. Maldonado wore a dark trench coat concealing a MAK-90 rifle and an Intratec Tec-9 pistol, and carried a guitar case filled with ammunition. McKown, an employee at one of the retail stores, tried to stop Maldonado, but was shot and wounded. Simon Property Group owned the Tacoma Mall. Under Washington Law, the Tacoma Mall is liable to McKown...
by Justin Tollefsen | Feb 3, 2015 | Company Formation, Tax Issues US
Although many company founders are reluctant to take the plunge into creating a corporate entity, often putting this step off for as long as possible, there are some good reasons to consider forming as soon as possible. Holding Period Stock Value The IRS will look at the time between forming and value given for stock at that time, and the company’s value at any financing or liquidity event. Hypothetically, if founders gave $.01 of value for their shares at formation, and they receive a funding round that values the company at $.50/share a week later, they need to be able to convince the IRS in an audit that they created enough value in the company in that one week to warrant the 50x increase in the value of the company. In a situation like this, your company is more than likely to arouse the suspicion that you sold yourselves shares at below market value. The General Partnership Many states, including Washington, have ratified some version of the Uniform Partnership Act (UPA). Washington’s is codified as chapter 25.05 of the Revised Code of Washington. Although the preferred form of entity for most startups is a C corporation, a founder should also be attentive to the provisions of the UPA or its equivalent in his or her state. The reason for this is that many of these acts contain provisions similar to the following from RCW 25.05.055: (1) Except as otherwise provided in subsection (2) of this section, the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not...
by John J. Tollefsen | Oct 30, 2014 | Blog, Business Law, Business Torts WA, Consumer Protection WA
Lyons v U.S. Bank National Association (WA SC October 30, 2014) Decision: 141030-Lyons-v-US-Bank Lyons defaulted on the note secured by a trust deed on her home. In October 2011, Lyons filed bankruptcy, and in January 2012 she applied for a loan modification with Wells Fargo. On March 30, 2012, while Lyons was waiting for a response regarding her application for a modification, she received a notice of trustee’s sale from NWTS informing her that her property was scheduled to be sold on July 6, 2012. On April 5,2012, Wells Fargo told Lyons’ attorney that the in-house modification had been approved. On April 19,2012, Lyons received the letter confirming the modification. The terms required her to pay $10,000 by May 1,2012. Wells Fargo informed Lyons they would discontinue the sale upon receipt of this payment. She paid this amount to Wells Fargo as required. However, on March 29, 2012, Wells Fargo had sold Lyons’ loan to U.S. Bank National Association as trustee for Stanwich Mortgage Loan Trust Series 2012-3 with Carrington Mortgage Services LLC as the new servicer of the loan. This was to become effective on May 1,2012. NWTS received notice of the sale and service release on April 12,2012. Lyons received notice of this sale on April 26, 2012. On April 26, 2012, Lyons’ attorney spoke with a representative of NWTS to inform it that Wells Fargo no longer had any beneficial interest in the loan after the sale, that Carrington was the new servicer of the loan, and that Lyons had received a loan modification so she was no longer in default. On June 11, 2012, Lyons’...
by John J. Tollefsen | Jun 21, 2014 | Blog, Business Law, Corporate Law DL
ATP TOUR, INC., Etienne De Villiers, Charles Pasarell, Graham Pearce, Jacco Eltingh, PerryRogers, and Iggy Jovanovic, Appellants, v. DEUTSCHER TENNIS BUND (German Tennis Federation), Rothenbaum Sport GmbH, and Qatar Tennis Federation, Appellees. Supreme Court of Delaware, May 8, 2014 Decision: 150508-ATP-Tour-v-Bund The general rule in the United States is that each party pay its own legal fees and costs unless there is a contract or statute that provides otherwise. The “American Rule” as this is known is prevalent throughout courts and arbitrations in all 50 states. The Delaware was asked to decide whether a bylaw making dissident shareholders pay legal fees when they lose violated public policy. The court said it did not unless it was being used for an inequitable purpose. It did not matter that the bylaw was completely one-sided. It did not make the corporation liable for the dissident shareholders’ legal fees if the corporation lost the case. Excerpts from the decision: A fee-shifting bylaw, like the one described in the first certified question, is facially valid. Neither the DGCL nor any other Delaware statute forbids the enactment of fee-shifting bylaws. A bylaw that allocates risk among parties in intracorporate litigation would also appear to satisfy the DGCL’s requirement that bylaws must “relat[e] to the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees.” The corporate charter could permit fee-shifting provisions, either explicitly or implicitly by silence. Moreover, no principle of common law prohibits directors from enacting fee-shifting bylaws. The third certified question asks whether the bylaw is...
