In a recent post on the Linkedin group 10,000 Partnerships: For the sake of others, I posted the following comment:

“David Tate, Esq. • Bruce, your reference to “increasing services to the underserved” caught my attention for two reasons: (1) I haven’t heard much lately about “increasing” services – more like doing everything to keep services at current levels or not decrease; and (2) the traditional nonprofit charity funding model doesn’t seem to make sense in an economic downturn – where government and private resource budgets have decreased, and the numbers of people who really need help have increased. A sustainable model needs to be developed, for good times and bad, and, it seems to me, there is need for a platform or resource where people can go to more easily match resources with nonprofit needs. And, have you ever heard of a forum where people in-the-know discuss workable, sustainable models for funding services to the poor now and in the future – is there anything like that?”

As a nonprofit board member, I am also looking for better answers to reliable funding sustainability.

Dave Tate

MF Global filed for Chapter 11 bankruptcy protection on October 31, 2011. Now, I am reasonably sure that the missing money will be traced or that the path of its disappearance will be determined, unless the MF Global internal controls and accounting function are inept, as that is a shoot load of money. Long term however, the demise of MF Global presents an opportunity to evaluate the causes of yet another catastrophic financial collapse, who did and who did not do what, how the collapse should have been avoided.

So, where in the world is the MF Global $1.2 million? Whereas based on past observations I suspect that the subpoena of Mr. Corzine to appear before the Congressional Committee was in essence a political dog and pony show, beside Mr. Corzine, who actually might not know where the money is and might not have ever known, the following are some of the other people or positions that should be asked what they know about the money, internal and accounting controls, and risk management:

The chief financial officer;

The chief internal audit executive, if any;

The chief risk officer, if any;

Legal counsel, in-house and outside legal counsel;

The board of directors;

The audit committee members;

The risk committee members, if any;

The governance committee members, if any;

The independent outside auditor; and

The regulators who oversaw MF Global, if any.

More to follow.

1. PG&E pipes. The San Bruno, California gas pipe explosion was September 9, 2010. It has been over a year. How about a public update? This week PG&E is still testing pipes and finding new holes. Is it safe?

2. News this week is that California’s roadway infrastructure is in bad need of repair and that future funds available are projected to be only half of the billions that will be needed. California roadways were once to be envied. But with no governmental long-term planning and budgeting for the past 50 or so years, even during the “good” years, not anymore. Is it safe?

3. The banking system. There have been two serious banking meltdowns in my lifetime. Both resulted from significantly the same problems: unsafe loans and risks. Is it safe? I would really like to know as I don’t ever want to go through this again. Are current loan standards and practices now safe? Derivatives? Hedges?

4. The California statewide budget. Ongoing deficits. No, we haven’t had and don’t have the required balanced budget. I’m not going to explain. Is it safe?

5. Social security? No more patches – structured to really be sustainable so people can plan and expect?

As you may have heard, Coach Joe Paterno resigned today. The Grand Jury report is sparse as to Coach Paterno’s involvement–he reported to his superior an incident that had been reported to him. The question arises, for people who find themselves in a situation that is similar to Coach Paterno’s position, i.e., they become aware of information indicating that wrongful conduct has occurred, and that depending on the particular circumstances of what actually did occur the wrongful conduct either was or might have been in violation of the law, assuming that the person in Coach Paterno’s position at least handles the situation in compliance with his legal reporting responsibilities, what else, if anything, should the person do, and how far further up the ladder, if at all, should the person in Coach Paterno’s position report the conduct, and to what extent, if any, should he then also follow-up on developments?

Again, assuming that the person at least satisfied his or her legal responsibilities, perhaps the answer in part also depends on the position or stature of the person in Coach Paterno’s position. Although Coach Paterno reported to his superior, Coach Paterno held a position of tremendous stature at the University. But I am not sure that is a fair criterion. For example, would it be deemed or viewed that because of his stature Coach Paterno had a higher reporting and/or follow-up responsibility than would a lower-level employee who had been told the information that Coach Paterno had been told? If that lower-level employee had satisfied his or her legal responsibilities and then had also reported the information to Coach Paterno’s superior, would that employee then be expected to also do more? It can be a tough call, and one that will ultimately be judged in hindsight. Is it also perhaps unfair to Coach Paterno that at least indirectly his conduct might be viewed not based just on what he knew, but also in light of other alleged conduct about which he apparently was not aware.

In any event, as there is a natural tendency to judge actions and inactions in hindsight, and there is a need by higher-ups to protect the organization, not appear to condone wrongful conduct, and to take actions that will also reflect well on and protect their reputations, the best advised course of action for someone in Coach Paterno’s position, again assuming that he satisfied all legal requirements, is CYA–after considering the seriousness of the allegations and your position of stature or ability or authority to make things happen, make sure that you have done everything necessary so that someone looking at your actions in hindsight would conclude that you took all reasonable actions that were necessary to report to others to investigate the incident and protect the victim and potential other victims, and to see that higher-ups were then taking the actions necessary to handle the situation. This would include reporting and following up in writing which apparently was not done in this case. The Grand Jury report is significantly based on he said, she said. If you are exercising CYA, why leave want you did and what you reported to guess work or he said, she said?

Poorest poor in US hits new record: 1 in 15 people,  Click Here.

Bay Area domestic violence shelters struggle to meet greater need amid budget cuts,  Click Here.

CALCRIM 581, Involuntary Manslaughter: Murder Not Charged

The defendant is charged with involuntary manslaughter.

To prove that the defendant is guilty of this crime, the People must prove that:

1. The defendant committed a crime or a lawful act in an unlawful manner;

2. The defendant committed the crime or act with criminal negligence; and

3. The defendant’s acts caused the death of another person.

The People allege that the defendant committed the following crimes or unlawful acts: __________________ .  Instructions
tell you what the People must prove in order to prove that the defendant committed those alleged crimes or unlawful acts.

The People also allege that the defendant committed the following lawful acts with criminal negligence: _______________________________.

Criminal negligence involves more than ordinary carelessness, inattention, or mistake in judgment. A person acts with criminal negligence when:

1. He or she acts in a reckless way that creates a high risk of death or great bodily injury; and

2. A reasonable person would have known that acting in that way would create such a risk.

In other words, a person acts with criminal negligence when the way he or she acts is so different from the way an ordinarily careful person would act in the same situation that his or her act amounts to disregard for human life or indifference to the consequences of that act.

An act causes death if the death is the direct, natural, and probable consequence of the act and the death would not have happened without the act. A natural and probable consequence is one that a reasonable person would know is likely to happen if nothing unusual intervenes. In deciding whether a consequence is natural and probable, consider all of the circumstances established by the evidence.

There may be more than one cause of death. An act causes death only if it is a substantial factor in causing the death. A substantial factor is more than a trivial or remote factor. However, it does not need to be the only factor that causes the death.

Great bodily injury means significant or substantial physical injury. It is an injury that is greater than minor or moderate harm.

The People allege that the defendant committed the following crimes and unlawful acts with criminal negligence: __________________.

You may not find the defendant guilty unless all of you agree that the People have proved that the defendant committed at least one of these alleged acts and you all agree on which act he committed.

http://www.navsource.org/archives/08/0875305.jpg

http://www.navsource.org/archives/08/08753.htm

One Bad:  A new article about social security.  Currently funds will be exhausted by 2037 (but I have read other places that they will be exhausted much sooner).  I don’t know if these facts are correct, but, workers retiring this year will receive typically 30 to 45% of their working wage–workers who earned more receive a lower percentage.  The average monthly benefit is $1,180 or about 28% of median US monthly household income.  No, I am not out protesting these days.  But, really, the social security system is a boondoggle (to my knowledge “boondoggle” is not a legal term).  In my many years of working, considering my contributions to the system, my employers’ matching contributions, and typical safe prudent investing, even in government bonds, it is clear that there should be $500,000 to $1,000,000 or more in the “fund” due to my working.  Didn’t we hear something about a lockbox?  And, yes, I know the system doesn’t work like that.  And I also know that the problem gets worse with every passing day.  There is no easy resolution.  Why doesn’t everyone call for everyone who has had oversight responsibility, President’s and Congress, to be fired, and for them to lose their pensions?  Sort of like a SOX 304 clawback.  People who run pensions are held to a high fiduciary legally duty.  I have been lied to and robbed, and it will continue tomorrow, and the next day, and the next day . . . .  Worse still, younger people who are paying into the system have no hope.  If I am wrong, great, fantastic.  But, let’s have someone who is now responsible give us the plan, no, not for bankruptcy in the next 15-25 years–a real plan where the funds are not exhausted–what would it take to get us to that point?  You can tell me.  I can take it.  Because right now I would rather not give another dime to this “fund,” which truthfully isn’t that at all.  Who in their right mind would continue to give to a fund that they already know is projected to not be there?  Only if compelled to do so by force of law, which is what we have now.

Video of a big protected bird at Ocean Beach, San Francisco, this morning (just for fun)  Click Here.

But we seem to have entered into a new paradigm wherein executive officers (CEOs and CFOs) and boards and their committees can face increased risks, penalties and public relations damage when something goes wrong even without personal fault.  For example, those increased risks are evidenced such as by some of the legal actions involving the banking and healthcare industries, the SOX Section 304 clawback, and mounting public discourse by some people who find it to their benefit to demonize supposed and sometimes vague or contrived categorizes or classes of people without actually establishing the propriety of the referenced category or class, or wrongdoing or personal fault by people who might fall within that category or class.  So, with that environment in mind, while the PCAOB’s Alert is a helpful summary of existing auditor requirements, it should also be acknowledged that the Alert does not create and should not be used as a standard of care or conduct for audit committees or boards.

-Does the charitable deduction matter—economic research shows that tax incentives do play an important role in giving decisions (that makes sense to me);

-Giving watchdog disputes bank’s charity claims in merger bid;

-Gifts to former (Name of City)’s first lady’s charity questioned by city watchdog (discussing charitable donations from developers who were required to make charitable gifts);

-Policy making at the fore as funds seek to improve schools (discussing foundation possible role in shaping education policy); and

-Nonprofit trustees urged to get involved in public policy (urging board members to speak about how budget cuts could hurt their organizations).

Different topic, also reported today, California Court of Appeal, Yuin University v. Korean Broadcasting System, holding that in the circumstances of the case, a news broadcast characterizing a university as a “degree factory” was not defamation as it was an expression of opinion.  But be careful in this area as it can be difficult to determine whether a statement is an opinion or not.

Dave Tate, Esq. (San Francisco)
Website
Intro Video, Click Here.

This post is the first in what will be a series of three or four posts outlining a set of possible rules and procedures and a timeline to which parties can stipulate to effectively litigate small dollar business disputes.  Of course, the parties can also make changes to these rules and procedures, or can make or use different rules such as by the American Arbitration Association.  This post covers the Initial Actions and the Pleading/Claims phases.  I would define small dollar disputes as business to business and business/customer disputes generally involving less than $200,000 in dispute and often involving substantially less than $100,000.  Later posts will cover discovery, trial and other issues including attorneys’ fees.

The bottom line is that it is difficult to effectively litigate small disputes if the parties do not stipulate to special rules and procedures.  Even if the parties agree to arbitration, such as using the American Arbitration Association rules, or agree to the new California Expedited Jury Trials rules, without additional specific rules to speed and simplify the process the cases can take too long to litigate to resolution, and they costs too much in time, disruption and attorneys’ fees.  But it is also important that the parties have a fair opportunity to conduct discovery and to present their claims.  Simply cutting discovery and/or the length of time allowed to present evidence at trial or arbitration is not satisfying.  The below rules and procedures also can be used in conjunction with other rules such as the California Expedited Jury Trials Act rules, rules of the American Arbitration Association, or other established rules.

As indicated above, later posts will cover discovery, trial and other issues including attorneys’ fees.  The following is a set of possible rules and procedures and a timeline for the Initial Actions and Pleading/Claims phases of the litigation.  Of course, the parties can also mediate or reach settlement at any point in the dispute.

I.  Initial Actions

The parties must stipulate to the rules and procedures that the parties will be using.  Note that all necessary parties to the dispute will need to stipulate likewise.  These procedures probably will not work if all necessary parties to the dispute do not stipulate as in that circumstance multiple difference litigation proceedings might be impractical or reach contradictory results, and an adjudication probably would not be binding on a party or parties that do not stipulate and participate.

At the time of stipulation or soon thereafter as agreed upon the parties also select an arbitrator or panel of arbitrators if the dispute will be adjudicated by arbitration.  If the dispute will be adjudicated in the court system there is no need to select an arbitrator or panel of arbitrators.

At the time of the stipulation or soon thereafter as agreed upon the parties also select a referee, whether the dispute is to be adjudicated by arbitration or in the court system.  If the dispute is to be adjudicated by arbitration, the referee can be the arbitrator or panel of arbitrators, or it can be a different person.

II.  Pleadings/Claims Phase

Plaintiff serves the complaint or claims on defendant(s) by mail, and by fax or email, and files with the court or arbitrator.

Optional, within 5 business days Defendant(s) can request a more definite statement of claims, by mail.  If a more definite statement is requested, Plaintiff provides the statement within 5 business days.

Within 20 business days of the original service of the complaint Defendant(s) serves the answer including affirmative defenses to the complaint or claims on Plaintiff, and the cross-complaint or claims, if any, by mail and by fax or email, and files with the court or arbitrator.

Optional, within 5 business days of the service of the answer and cross-complaint or claims, if any, Plaintiff/Cross-Complainant(s) can request a more definite statement of the answer and cross-complaint or claims, by mail and by fax or email.  If a more definite statement is requested, Defendant(s)/Cross-Complainant(s) provide the statement within 5 business days.

Within 20 business days of the service of the answer and cross-complaint or claims, if any, Plaintiff/Cross-Complainant(s) serves the answer including affirmative defenses to the cross-complaint or claims, and any additional cross-complainant or claims, by mail and by fax or email, and files with the court or arbitrator.

Additional answers, cross-complaints or claims and optional requests for more definite statements continue on the same timeline until completed.

The goal is that this process, the Pleading/Claims process, should take two months or less.  Of course, in unusual circumstances the process could take longer depending on the number of new parties that are brought into the action by cross-complaint or claim.

There are no demurrers, or motions to strike or dismiss.  These issues or processes, and motions for summary or directed judgment can be brought at trial, and will be briefly discussed in later posts.

At any point in this Pleadings/Claims process any party can request the assistance of the referee to resolve a problem that arises, such as a claim that the complaint, a cross-complaint, or an answer remains indefinite despite a request and a more definite statement.  The parties are required to meet and confer in good faith prior to submitting an issue to the referee for adjudication.  The referee shall promptly adjudicate a request for assistance.  The request for assistance is made in writing and served by mail, and by email or fax, limited to no more than five pages double spaced. Within 5 business days the opposing party(s) serves (by mail, and by email or fax) the opposition or response limited to no more than five pages double spaced.  Thereafter within 3 business days the moving party has the option of serving a reply limited to no more than 3 pages double spaced, to be served by mail, and by email or fax.  The hearing on the matter is held by phone conference call unless the parties agree otherwise.  The referee shall render a written order, and shall re-adjust the subsequent pleading schedule if necessary.

The referee has the option of awarding sanctions against any party on any issue, or on multiple different issues that the referee is asked to adjudicate for the parties.  Sanctions should be awarded against any party that presents an argument that is not reasonably supportable, and against any party that fails to meet and confer in good faith prior to submitting an issue in dispute to the referee.  As guidance, sanctions in an amount between $1,000 and $3,000 are deemed not inappropriate in each instance where sanctions are warranted against a party; and appropriate circumstances multiple instances might be appropriate.  However, the referee has sole discretion to award sanctions or not, and, if sanctions are awarded, the amount and number of times of sanction award(s).

* * * * *