We Gon' Be Alright - 5 Ways to Profit Under the Trump Presidency

Like many Americans, investors and business leaders were surprised by the Trump victory in the presidential election. Most were probably finalizing 2017 execution strategies with an expectation that Clinton would win the White House. The notion of a Trump victory was probably only captured as a “risk item” with no real contingency plan.

But, here we are. The unexpected is now reality. I am advising my clients and my friends to move to Plan B quickly. If you had contingency plans, let’s review them. If you did not, let’s create them. Bottom line is there is no reason to sit still for four years. We must excel and profit under a Trump presidency.

To say the least, Trump is unpredictable. But, based on campaign messages that he repeatedly emphasized, here are some areas that may be ripe for profit.

1.                    Taxes/Business Organization. Trump promised an overhaul of the tax code. Sure, we hear that every four years. But, this guy has made tons with tax strategy. He may just be the guy to do it!

His proposals include reducing the number of tax brackets from six to three, revising tax deductions, and eliminating the estate tax altogether. But, I am particularly interested in his proposal to reduce the corporate tax rate from 35% to15%!

With that in mind, I am talking to clients about how their businesses are organized. Many business owners opt for an LLC because of the reduced formalities. However, if this corporate tax rate reduction happens, a corporation may be a better option for businesses that want to accumulate cash.

Remember, LLC’s typically receive pass-through tax treatment. Effectively, the income of the business is added to the personal income of its owners and the owners are taxed at their individual rates. For some, this rate is 33% or more. These businesses can preserve a lot more money by reorganizing as a corporation and paying 18% less in taxes. This may be even more important considering that Trump’s plan includes caps on individual deductions. Let’s keep an eye on this one. 

2.                    Healthcare. You already knew we had to discuss Healthcare. Trump has consistently promised some form of an attack on the Affordable Care Act (ACA). This could mean a full-scale repeal – after all, the Republicans control Congress – or it could mean some significant modifications. Trump also appears to be a proponent of interstate sales of health insurance and more favorable tax treatment on premiums.

Collectively, this could mean a boost for several sectors of the health care industry that were expecting a real hammer blow under a Clinton precedency. I am paying particular attention to pharmaceuticals. Immediately following the election, big drug makers like Pfizer, Merck, and Mylan were up 3% - 8%! I am watching this sector for buying opportunities as the Trump plans materialize.  

3.                    Banking Stocks. Banking stocks have struggled the last few years. But, these stocks saw a seven-day winning streak immediately following the election. There are a couple of reasons I believe banking stocks will continue to benefit from the Trump presidency: reduced regulations and higher interest rates.

Trump has indicated his intent to relax or overturn Dodd-Frank. Congress passed Dodd-Frank to rein in risky behavior by banks in the aftermath of the 2008 financial crisis. The law includes stringent mortgage-lending requirements and limited debit-card processing fees and created the Consumer Financial Protection Bureau. A roll-back of some or all of these restrictions could increase revenues for big banks and reduce their compliance costs. Together, these could lead to unexpected boosts in profits.

Not to discount the effect of Dodd-Frank, but most analysts suggest the biggest impact on bank valuations in the last few years has been the effect of historically low interest rates. Banks make money by investing and lending your money to others. In low interest rate environments, their revenue struggles. However, the Federal Reserve has started to act with a minor interest rate increase in 2015 and an expected bump in December.

Trump has indicated that interest rates have been artificially held low. He alleged that Fed Chair Janet Yellen, who was appointed by President Obama, has artificially kept interest rates low to create the façade that the economy is doing better than it is. With that type of language being on record, I am expecting Trump to pressure the Fed to continue interest rate hikes. As interest rates go up, so should banking stock values.

4.                    Real Estate. In the past, I have discussed three approaches to real estate investments with clients and friends: Traditional investment in properties, Real Estate Investment Trust (REIT) investments, and Tax Certificate investments. Profits under tax certificates are mostly influenced by state level activities. However, the first two investment strategies could be impacted by the Trump presidency.

In the last few years, I have suggested making the decision of whether to invest in a traditional property or REIT’s based on the investor’s tax strategy. Those seeking a tax shelter should look closely at traditional real estate investments. For, those with a long term growth objective that outweigh the need for tax shelter, I suggested REITs. I am still sticking with that basic rule. But, the grey area between the options may get wider under the Trump presidency. Although I think REITs need to remain in the mix, I think it may be time to ramp up traditional real estate investments.

REITs have seen whopping returns in the last few years. This is largely because they are viewed as “defensive stocks” in low interest rate environments. Income investors could make up for low income availability through interest rates with the high dividend payments of REITs. This drove the value of those REITs up year by year. As interest rates rise, some investors may move back to safer areas to park money, such as bond funds and CD’s. I don’t personally expect the rates rises to be impactful enough to totally eradicate REIT investments. But, there may be some impact.

The rising interest rates may also signal a closing window to acquire real estate with historically low cost of capital. Locking in deals with low interest rates now could prove profitable in the future. Every time the rate rises, an investor’s buying power goes down. So, if you are on the fence, or expecting the need for a future tax shelter, it may be time to take a good look at traditional investing.

5.                    Trump Index? Perhaps the biggest reason I have renewed my focus on hard real estate investments is because Donald Trump is a real estate investor.

I believe that what you do speaks so loudly that I can barely hear what you say. Trump has been a man who has taken advantage of every situation he encountered to advance his own interests. Some may say he has broken promises or mistreated other people along the way. I am not weighing in on whether the accusations are true. But, I am suggesting that I expect that he will be true to form as President. I am putting less emphasis on his campaign promises and more emphasis in following the maneuvers of his businesses. For the next four years, the Trump enterprise should be to business as Warren Buffet is to investors. What Trump Enterprises does, you do. I call it the Trump Index.

            At the end of the day, I want you all to remember this. It is undeniable that some hateful people want to use the Trump election as a symbol of triumph. Many have struggled financially and hope Trump will punish others for their problems. But, let be honest: many of these folks are too busy celebrating to realize how to actually profit under the Trump presidency. They think the battle ended on November 8. The best way to prevail is to advance yourselves – ourselves – in the next for years. It is my goal to help us all do so.

On the other hand, there are millions who voted for Trump because they believe he will unlock corporate America and unleash its growth. So, if you supported Trump, let’s get busy getting the profit you voted for. If you were disappointed by the election, let’s get even by getting richer. Either way, let’s focus on our futures.

Happy Profit-Making. 

Mama's Baby - Do the Courts Favor Mothers in Custody Battles?

The Mom always gets the kids in a custody battle!

If the courts took her kids and gave them to Dad, she must have been a terrible mother!

She got pregnant on purpose. She knows she’ll get the kids have get child support for 18 years!

Dads get screwed in Family Court!

If you are like me, you have probably heard one of the above statements, or something similar, for several years. Perhaps you have made similar statements yourself. They all seem to point to the same widely held belief:

The courts favor mothers over fathers in custody disputes.

But, is that true? Do the courts REALLY favor women over men? If so, this raises many other disturbing questions. Is the favoritism because of prejudices against men as parents or stereotypes against women as homemakers? Is it legal? Is it morally correct? Does it violate the 14th Amendment which guarantees equal protection regardless of gender? Do children suffer in the process by being placed with a less fit parent? Or maybe it’s true that women are generally better parents.

If you have read my blogs before, you are used to my response: I don’t know. It depends. But, it’s interesting to see what the law and our courts have really said.

The Doctrine Maternal Preference

Prior to 1977, the Louisiana legislature provided little guidance to our courts in making child custody decisions. At that time, Civil Code Article 157, which governed the original award of permanent child custody, provided in pertinent part that "the children shall be placed under the care of the party who shall have obtained the separation or divorce unless the judge shall, for the greater advantage of the children, order that some or all of them shall be entrusted to the care of the other party." Without legislative guidance, the courts developed several jurisprudential precepts to guide their decisions and give some consistency between different courts in different parts of our state. They are best pronounced in Fulco v. Fulco, (259 La. 1122, 254 So.2d 603 (1971)).

1. The best interest of the children principle. The paramount consideration in determining custody is always the welfare of the children;

2. The maternal preference rule. Generally, it is in the best interests of the children to grant custody to the mother, unless she is morally unfit or otherwise unsuitable;

3. The trial Judge’s discretion.  The determination of the trial judge in child custody matters is entitled to great weight, and his discretion will not be disturbed on review in the absence of a clear showing of abuse.) Estes v. Estes, supra, and jurisprudence therein citedand jurisprudence therein cited.

With minimal research, I traced the Doctrine of Maternal Preference back to three 1952 Louisiana Supreme Court cases: White v. Broussard, 206 La. 25, 18 So.2d 641; Withrow v. Withrow, 212 La. 427, 31 So.2d 849; Kieffer v. Heriard, 221 La. 151, 58 So.2d 836 (La., 1952). The Doctrine of Maternal Preference was stated in various ways. However, the gist of it was as follows:

It is generally in the best interest of children – especially young children - to grant custody to the mother. In fact, the mother should not be denied custody unless she is morally unfit or otherwise unsuitable. It is only in exceptional cases that awarding custody of children to their fathers is in the best interest of the children.

The Court stated, “It is also well established that the paramount consideration in determining to whom the custody of a child should be given after the divorce is the welfare and the best interest of the child, and under this rule this court has consistently awarded the custody of minor children to the mother unless she has been found to be morally unfit or unless she is incapable of taking care of the children.”

I must point out that the Doctrine of Maternal Preference does not appear to have been the final and absolute word in making child custody decisions. However, it was a presumption in favor of the mother that could be overcome with evidence that the father could best serve the interests of the children. For those of us who deal with family law, we know that a presumption is a very powerful term that can be very difficult to overcome. Hence, I feel safe in saying that fathers faced a disadvantage and an uphill battle in obtaining custody of their children.

Best Interest of the Child Factors

In 1977, the Louisiana legislature passed Act No. 448 of 1977, which amended Civil Code article 157 to put an end to Doctrine of Maternal Preference and establish the Best Interest Principle as the only consideration in making child custody decisions. The new Civil Code article 157 read, in pertinent part, that “In all cases…permanent custody of the child or children shall be granted…in accordance with the best interest of the child or children ..." The legislative aim of this act seems clear--simply to codify the jurisprudential best interest principle and to reject statutorily the jurisprudential maternal preference presumption. (Bergeron v. Bergeron)

The Court in Bergeron noted that decisions after the 1977 amendment did not clearly reflect the legislative intent to get rid of the Doctrine of Maternal Preference. This may be part of the reason that the Louisiana legislature passed several subsequent acts addressing the issue, including Act No. 307 of 1982, which introduced what is now referred to as the Best Interest Principles used in child custody decisions. The current factors are:

(1)  the love, affection, and other emotional ties between each party and the child;

(2)  the capacity and disposition of each party to give the child love, affection, and spiritual guidance and to continue the education and rearing of the child;

(3)  the capacity and disposition of each party to provide the child with food, clothing, medical care, and other material needs;

(4)  the length of time the child has lived in a stable, adequate environment and the desirability of maintaining continuity of that environment;

(5)  the permanence, as a family unit, of the existing or proposed custodial home or homes;

(6)  the moral fitness of each party, insofar as it affects the welfare of the child;

(7)  the mental and physical health of each party;

(8)  the home, school, and community history of the child;

(9)  the reasonable preference of the child, if the court deems the child to be of sufficient age to express a preference;

(10)  the willingness and ability of each party to facilitate and encourage a close and continuing relationship between the child and the other party;

(11)  the distance between the respective residences of the parties; and

(12)  the responsibility for the care and rearing of the child previously exercised by each party.

The courts retained the older precept that a trial judge’s discretion should be heavily respected. There should not be a mechanical application of the factors. The trial judge is free to give more weight to some factors over others, depending on the circumstances of the particular case before her.

Surely the point of this extensive legislative action was to create a level playing field and ensure child custody arrangements are based only the best interests of the children involved. The point was to kill maternal preference once and for all, right? So why is it that we still commonly refer to maternal advantages in custody decisions? Why is it that people who were not even born when the 1952 Louisiana Supreme Court established the Doctrine of Maternal Preference still speak of it as if it is alive and well?

Primary Caretaker Principle

I offer that although the Doctrine of Maternal Preference is dead and gone, a new principle has emerged that may make it just has hard for many fathers to obtain primary custody of their children over the mother. I refer to it as the primary caretaker principle.

Pay close attention to the Best Interest Factors – especially factor 12. Although the Court has discretion regarding the weight of each factor, Louisiana courts have considered prior responsibility for the caretaking and rearing of the child a “significant factor” in determining the custody arrangement that is in the best interest of the child. (See the Comments of Civil Code article 134 which provides the Best Interest Factors). To see the principle in action, consider the following cases:

·      In Quinn v. Quinn, the Court awarded sole custody of the minor child to her primary caretaker even though more of the best interest factors weighed in favor of the other parent.

·      In Nale v. Nale, the Court provided insight as to why the relationship between a child and her primary caretaker has such weighty influence. There, the Court stated the desire to continue minor children “in the care of the parent who, …, has provided the degree of continuous care and affection which creates such a close bond that it would be harmful to the children to alter that relationship.”

·      The First Circuit signaled in Elliot v. Elliot that caution must be taken before reducing the time a minor child is accustomed to spending with her primary caregiver.

·      In Martello v. Martello, the First Circuit reinforced the standard of a showing of detrimental impact on a child before interfering with the relationship between the child and her primary caretaker. There, the Court awarded the parents joint custody of their minor children, designating the mother as the domiciliary parent. Although the father had been the primary financial supporter of the children, the mother had always been their primary caretaker. The Court rejected the argument that the mother’s habitual lifestyle choices of partying, staying out late, and sneaking into the window were sufficient reasons to remove her as domiciliary parent. The Court reasoned that, despite the depravity of the alleged behavior, there was no showing of a detrimental impact on the child.

In short, the traditional lifestyles and roles many mothers and fathers play in providing for children may still be problematic for fathers who choose to challenge the mother for primary custody of their children. I admit that in my household, I am an attentive father and I provide for my family. However, I cannot begin to claim that I am their primary caregiver. My wife has always been light years ahead of me in caring for them when they are sick, ensuring schoolwork is done, bathing them, putting them to bed, getting them dressed for school, and kissing those bruised body parts and emotions. So if I foolishly challenged her for primary custody, I would come face to face with the primary custody principle.

THE BOTTOM LINE: It is true that our courts once openly gave preference to mothers in child custody battles. This was based on the presumption that children were more accustomed to their mothers as their primary caregivers. Although the law has changed, we have not changed with it. In many households, mothers are still the primary caregivers. While the courts are gender-neutral, they do not ignore the fact that children are generally better off in the hands of their primary caregivers. My opinion is that only those men who are equally or more involved in nurturing their children should expect the Best Interest Factors to weigh in their favors. 

It’s Cheaper to not to Beat Her

Disclaimer: In this article, I will often refer to a domestic violence victim as “she” and the abuser as “he.” That is done for simplicity and is based on my client base and the issues I am seeing. I am well aware that there are males who are also domestic violence victims and I, in absolutely no way, mean to minimize their pain or experiences. For the purpose of understanding this article, I invite you to interchange the sexes if necessary in order to understand this information and how it may apply to other situations.

There may be a thought out there that the only penalty for battering a dating partner is a broken relationship or maybe a quick trip to the parish jail. If she is truly tired of it, maybe there will be a restraining order. Well, I would like to take a moment to discuss some of the remedies available under the law that may surprise some about how steep the penalties can actually be.

At an early age, most of us learned that violence against another person is wrong. The law certainly agrees. Violence is one of the main behaviors the law seeks to prevent and punish when needed. This is made clear by the fact that violence is one of the few behaviors that is punishable under both criminal and civil law. Therefore, domestic abusers may face what I call the Triple Whammy.

Criminal Penalties

Violence against a person can trigger a number of criminal charges, depending on the severity of the violence and whether any objects were involved. Charges can range from assault to first degree murder. I won’t attempt to go into them all, so I will stick with the basics.

Battery. The first, and somewhat obvious criminal charge is battery. Hitting another person without permission is a crime punishable by law. That charge can be elevated to aggravated battery if a “dangerous weapon” is used. Now don’t be limited into thinking that only a gun or a knife can be considered a dangerous weapon. Some argue that a floor or a sofa will suffice if it causes injuries to the victim. The charge can be elevated to second degree battery if there is reason to believe the abuser intended serious bodily injury. Guess what, depending on the relationship and living arrangements of the abuser and victim, there is a second charge under the law for domestic violence – domestic abuse battery.

 In all cases, the abuser can face financial penalties and jail time. For this article, let’s say $500 in financial penalties.

Assault. In most cases, a victim sees the abuser coming to hit her. Or maybe he threatened her before hitting her. Well, that’s illegal too. The law calls that an assault.

Like the battery example above, a simple assault charge may be elevated to aggravated assault if a weapon is used in the threat. Also like the battery example, there is an additional charge available under some domestic violence situations – domestic abuse aggravated assault.

Again, the penalties may include jail time and financial penalties. We will again say $500

Other crimes. Depending on the nature of the abuse, there may be additional charges. In one case I handled, the defendant was also charged with stalking and attempted burglary because he repeatedly came to my client’s home uninvited and attempted to enter.

Let’s throw another $500 financial penalty, (in addition to jail time), on the stalking charge.

So, without counting the cost of bail, attorney’s fees, and lost wages because of the jail time, the criminal penalties alone can cost $1500. We can assume another $3000 for the other costs. (And that’s probably on the low end).

Civil Penalties

As I discussed earlier, violence is punishable under both Criminal and Civil law. In the civil law, the defendant is sued for money. The law provides that a battery and assault are causes of action that an abuser can sue for. The damage awards vary greatly depending on the nature of the abuser’s actions and the damages he caused. But the damage calculation can include pain and suffering, lost wages, medical bills, the victim’s lost time with those she loves, and more.

Let’s be nice and say the award is $2000 for this article.

Protective Order

You probably know that a domestic violence victim can seek a protective order against her abuser. But, did you know that if a permanent protective order is granted, the abuser can be charged with court costs and the victim’s attorney’s fees? If the defendant has an attorney, of course he will need to pay those fees.

I’ll go on the lower end and estimate $2500 for those costs. (By the way, there are other consequences to the protective order. The abuser could lose gun rights and will be entered in a database of abusers.)

So, there you have it. On a relatively low cost day, the price of domestic violence could be as much as $9000 or more!!!

The Message: Hopefully, our childhood training and human decency is enough to restrain us from hurting each other. But, when that fails, be aware that the blows to her can be a blow to your pocket AND your m

HOW TO DEAL WITH YOUR HOMEOWNER’S ASSOCIATION

With the rise of subdivisions in our country and state has come a new relationship that affects many homeowners – the relationship between the resident and the homeowner’s association. Like all relationships, the relationship between the resident and the association may include love, hate, satisfaction, or frustration. Likewise, as laws were developed to peacefully resolve relationship conflicts, (example: family law, wills & estates, employment), there are laws that govern conflicts between residents and homeowner’s associations. The most notable is the Louisiana Homeowner’s Association Act.

Unlike the other relationships, the institution of homeowner’s association is rather young and the law is less defined. Unfortunately, the law will continue to evolve and become more defined as more disputes between residents and associations are decided in our courts.

But, let’s take a look at what we know now.

Louisiana law defines a homeowner’s association (HOA) as a “nonprofit corporation, unincorporated association, or other legal entity, which is created pursuant to a declaration, whose members consist primarily of lot owners, and which is created to manage or regulate, or both, the residential planned community”.  (La. R.S. 9:1141.2). Key characteristics are:

·      It is a legal entity separate from its members;

·      It is created by declaration or legal documents;

·      It manages or regulates the subdivision.

Some may argue that because our state has a specific body of law dedicated to homeowner’s associations, commonly referred to as the Louisiana Homeowner’s Association Act, that this body alone governs. In my humble opinion (or IMHO as my teenager says), this body of law heavily favors the HOA.

However, based on the above characteristics, I suggest that the relationship and disputes that arise between the resident and HOA are governed by Contract Law and Business Law and SHAPED by the Louisiana Homeowner’s Association Act. I will discuss these in turn.

Contract Law

Under contract law, I envision the resident and the HOA as completely separate entities with the resident standing outside of the HOA.

Generally, a contract is the law of the parties. This means that as long as the provisions of a contract are not unenforceable according to law, the provisions have the power of law between the parties to the contract. Yes - the power of law! That means those provisions may be enforced by either party in the courts of law and violations may be penalized by monetary damages or injunctions. That notion is reinforced in the Louisiana HOA Act, which states,  “the community documents of residential planned communities shall have the force of law between the homeowners association and the individual lot owners and as between individual lot owners.  The remedies for breach of any obligation imposed on lot owners or the association shall include damages, injunctions, or such other remedies as are provided by law.” (La. R.S. 9:1141.8)

So the first place I look when determining the right of my client is to the documents that form and govern the HOA. What are the stated duties of the HOA? What are the stated duties of the residents? Are any of the duties breached?

The third question is one of great importance because, as a general matter, a party in breach of a contract cannot enforce the contract against the other party.

So let’s say a client is being sued over nonpayment of HOA dues. The client-homeowner refused to pay dues because of non-repair of sidewalks in front of her home and falling signs. The HOA charter provides that the HOA is responsible for the upkeep of signs, sidewalks, and common areas. The charter also provides that each homeowner is responsible to pay dues and assessments on time.  

Under that simple example, I would first challenge the HOA’s right to bring its suit because it is also in breach of its obligation to maintain the sidewalks and signs in the neighborhood. I would argue that it must bring these items into good repair before it can seek enforcement of the payment of dues.  

Likewise, I would advise my client to consider paying the dues. Why? Because by resolving his breach of her duty, she may now have standing to seek a court order mandating the HOA to bring the items into good repair.

Louisiana Business Law

Under the Louisiana Business Law, I envision the resident standing inside the HOA as a member or stockholder of the HOA.

We saw above that an HOA is a legal entity – either a corporation, unincorporated association, or otherwise.  The owners of the entity are the homeowners themselves. First, it is important to remember that ownership does not necessarily mean the power to govern the entity’s action. You may be a stockholder and part owner of Wal-mart, but I doubt your order to reduce all prices by 50% will be honored.

However, there is a vast body of law that governs the relationship between owners with no management rights and the manager of the legal entity. It is so large, it would take a full law review article to discuss all of the nuances. So, this will be a very brief and superficial pass.

One of the places I will look is the owner’s voting power. Is there behavior by the association that can be changed or stopped by a simple vote of the homeowners? The charter and by-laws of the HOA will largely govern this. However, Louisiana reserves some activities that can only be modified by the owners.

Next I will look at whether the managers of the HOA acted in good faith when they committed the act that offended my client. Generally, the managers of a legal entity are protected from personal liability is some way. The depth of the protection will largely depend on the type of entity. However, to be entitled to those protections, the manager must have acted in good faith. What is good faith? You guessed it. It’s a matter to be determined by the courts.

Under the Louisiana Homeowner’s Association Act, I would also look for the offensive action by the manager was “willful or wanton” misconduct. The Act provides that these actions are also unprotected. (La. R.S. 9:1141.7)

Next, I will look to see whether a writ of mandamus is appropriate. This is a writ that requests the court to order the HOA to carry out its legal duties.

Finally, I will look to determine whether a derivative action is appropriate. A derivative action is a legal action brought by the owners of the HOA brought against it by its members.

Under extreme circumstances, I may consider whether an action to force dissolution of the HOA is appropriate.

So there you have it. There is a reason we call it the practice of law. Different attorneys approach things different ways. But, I would advise looking beyond the HOA Act to the powerful and more defined bodies of law to approach any dispute. The goal is to help alleviate some of the uncertainty of decisions that may result from looking at disputes of the young and rarely challenged HOA law.

A Promise Made is a Debt Unpaid

There is a Hebrew Proverb that “a promise made is a debt unpaid.” Well, if you made the promise in Louisiana, it may be very true!

Unlike the other 49 states, Louisiana practices the Civil Law system. The other states practice Common Law. There are several key differences. One of the most important is the way our state treats promises.

At common law, an enforceable contract generally requires consideration. This means that each party to the contract must give something to the other. For example, in car sale, the seller gives consideration to the buyer – the car. The buyer gives consideration to the seller – the money. But, what if the seller simply promised to give the car to the buyer for no money. In a common law state, the seller’s promise may not be enforceable.

NOT SO IN LOUISIANA. In our state, the seller’s promise may be enforceable under several theories. First, there is the concept of cause. It is a Louisiana term that can almost be considered the replacement for consideration. Essentially, as long as the seller has a reason – or cause – to enter into the agreement, his promise may be enforceable against him. His cause could be a gratuitous feeling.

Now don’t run out and sue everyone who broke a promise to you. Under the concept of cause, certain formalities must be met. In most cases, the promise must be written and notarized before two witnesses.

Negligent Misrepresentation

But, there are other theories that come into play. One theory comes in under tort law. (Tort law general deals with injuries people cause to each other through fault. For example, car accidents generally fall under tort law).

Under the theory of negligent misrepresentation, a promisor may be liable for damages another person incurs because of his promise. Now, this only comes into play if the promisor was negligent in making the promise. As you can imagine, whether a person was negligent is not a straightforward determination. Many court battles have been held to determine whether a person was negligent or not. But, if the promisor was negligent and the other person incurred damages because of the broken promise, the promisor may be required to compensate the other person for those damages.

Detrimental Reliance

One last theory that comes into play is the notion of detrimental reliance. This theory is related to contract law, but comes into play when no actual contract was formed. For example, if the formalities of a written and notarized promise don’t exist, this theory may still come into play.

Similar to the theory of negligent misrepresentation, the promisor may be liable for a broken promise if the other person incurred a loss because of the broken promise. Generally, to recover, the person must show he reasonably relied on the promise and he suffered damages. The battle here will be over whether reliance on the promise was reasonable.

So if our car seller promised to give you a brand new Lexus for no money if you take the bus downtown to pick it up, you probably can’t recover the bus fare if he breaks it. Reliance on the promise was not reasonable. But, if he promised you $2000 off if you took the bus in the next hour to pick it up, maybe you have a case.

In short, we 90’s kids used to jam to Christopher Williams’ song “Promises.” But, as grown folks, we need to know that breaking promises is not cool and we could be financially liable for breaking them.

 

 

BEWARE OF DOG: HE MAY BE A LEGAL NIGHTMARE

Many of us in my neighborhood have probably noticed a couple of unleashed dogs that seem to constantly roam the subdivision unsupervised. As a homeowner, I find it a disturbing nuisance. As an attorney, it makes me wonder if the owners really understand the extent of liability they could face if one of the dogs bites someone. If he bites someone in my household, I most certainly will help the homeowner become educated. But, I decided to write this article in hopes that it never comes to that.

Greater Risk for Dog Owners

In Louisiana, liability for harm caused by dangerous animals is generally determined under a negligence standard. In a nutshell, this typically requires some showing that the owner of the dangerous animal knew or should have known the animal was dangerous and failed to take reasonable action to prevent the harm the animal actually caused. Key to the definition is the knowledge requirement.

However, where the animal causing the harm is a dog, the liability of the owner is determined under a strict liability standard. In short, this means there is NO knowledge requirement. A person who sues a dog owner for harm caused by the dog does not generally need to prove the dog owner had any knowledge of the dog’s dangerous character.

This is an important concept because the most likely first excuse from a dog owner whose dog just bit someone is “he has never bitten anyone before.” Well under a strict liability standard, that may not mean a thing and may not protect you from liability.

So when you add it all up, the owner of a dog may have a tougher time defending himself than the owner of a pet alligator. At least a person bitten by the pet alligator would have to prove the owner knew of the pet’s dangerous character (which, admittedly, is probably not too hard).

Liability of the Victim

Now, in fairness, the victim is not totally absolved of responsibility to act reasonably around dogs. Two concepts come to mind here: provocation and comparative fault.

If a person bitten by a dog actually provoked the attack, the strict liability standard may not apply. I don’t think this lets the owner of the hook. It just means the dog bite victim may have to prove the dog owner knew or should have known of the dog’s dangerous character (negligence standard).

What constitutes provocation? Well, that’s an issue of fact to be determined in court. But, I would expect actions like stomping at a dog, throwing things at it, or attempting to scare, harm, or aggravate it are examples.

The other issue is comparative fault. In Louisiana, the fault of ALL persons – including the victim – are taken into consideration when determining liability for injuries or harm. That means that liability for damages assessed to the dog owner could be reduced by a percentage equal to the victim’s fault in causing the bite. Here is a story to illustrate the point.

In Howard v. Allstate, an eleven year old child was bitten by her neighbor’s dog. We will call her Dolly. The dog was kept in a double fenced area. A “Beware of Dog” sign was posted on the gate of the outer fence, but no sign was posted at the entry of the second fence.  The eleven year old victim was visiting the dog owner’s home to play with their child. We will call her Jane.

The children were initially playing across the street. But, after becoming bored – as children do – Jane invited Dolly to come into the second fenced area to play on the swing set. Remember the German shepherd was kept there. At trial, Jane claimed she asked Dolly to wait until she could get her parents to lock up the dog. Dolly claimed there was no such warning.

Dolly proceeded into the second fenced area and was immediately attacked by the dog. No need to discuss the details of her injuries, but the court assessed damages at $28,000.

Applying a comparative fault analysis, the court found Dolly was 10% at fault. Consequently, Dolly’s recovery against the dog owner was reduced to $25,300.

-Howard v. Allstate, 580 So. 2d 962 (La. 2nd Cir. 1991).

So, I wrote all of this to say only a couple of things. First, if you live in my subdivision and your dogs are running lose, please take control of them. The rest of us don’t think it’s cute.

Second, if you are a dog owner, please be apprised of your liability. The law is actually very strict. Even more strict than if you traded Fido in for a pet alligator!

The Notorious R.B.G. and Her Crew Take on Rap Music and Facebook

Can rappers threaten people in their lyrics and be protected by the First Amendment? What if the lyrics are posted on social media networks like Facebook? Well the Supreme Court recently heard oral arguments in a case that may get us closer to the answers. 

The case is Elonis v. United States.  

Anthony Elonis of Pennsylvania was once married with children and worked at a local theme park. In 2010, his wife left him, taking the children with her. Soon after, he was fired from his job for complaints of sexual harassment.

In response, he became a Facebook rapper, posting threatening lyrics about his former coworkers, his ex-wife, and law enforcement officers. He also threatened to cause harm at local elementary schools. He posted:

I have sinister plans for all my friends… I’m not going to rest until your body is a mess, soaked in blood and dying from all the little cuts… I’ve got enough explosives to take care of the state police and the sheriff's department…I’m checking out and making a name for myself Enough elementary schools in a ten mile radius to initiate the most heinous school shooting ever imagined ... The only question is ... which one? 

Pull my knife, flick my wrist, and slit her (female FBI agent) throat Leave her bleedin’ from her jugular in the arms of her partner.

His “lyrics,” some loosely based on lyrics by Eminem, led to a federal conviction for using the internet to threaten to injure the person of another.  He has appealed his conviction all the way to the highest court in the land. 

Ok lawyers, the issue is whether the First Amendment requires a conviction for threatening another person is based on proof of the defendant's subjective intent to threaten. See Virginia v. Black.  Or, is it sufficient to prove that a “reasonable person” would feel threatened by the statements in question. 

Elonis argued that a conviction must be based on a “subjective” or actual intent to threaten. In other words, the government would have to prove he truly intended to cause others to feel threatened. The government says it need only prove that “a reasonable person” would feel threatened by the posts. Because the federal circuits are split, the Supreme Court took up the case to clarify the standard.

The moral of the story is this. Regardless of how the Supreme Court rules, Elonis could face serious consequences for his Facebook posts. The First Amendment freedoms are NOT freedoms to say ANYTHING you want. There can be consequence. At DassauColeman.com, one of the first things we check are the social media posts of our clients and opponents. Flexing on Instagram, Shooting up Youtube, or Frontin on Facebook could have real world consequences. So don’t do it and don’t let your kids do it either. 

 

 

Don't "Pete Carroll" Your Business! Avoid 5 Bad Calls Entrepreneurs Typically Make

We all saw it. A few seconds left on the clock. The Seahawks were within a yard of winning the Superbowl. Luckily, they have one of the best running backs in the the league in Marshawn Lynch. Or, so we all thought. Coach Pete Carroll instead made the decision to pass the ball. It was intercepted and the rest is Superbowl history.

While it is easy to criticize Pete, the real question is how many costly bad calls are you making in your own small business? You started your company out of passion. You nurtured and grew it out of love. It means the world to you - much more than the Superbowl. Yet you may be subject to the same bad play calling that could limit your profits, stunt your growth, or cause the loss of your business and personal assets!

So, here are some costly mistakes to avoid at all cost:

 

  1. Porous VeilMany entrepreneurs form a business entity, such as a limited liability company or corporation, to add a sense of prestige and professionalism to their business. However, the most important feature of these entities is the ability to protect your personal assets from business liabilities. If someone is injured because of your business efforts or there is a dispute over a contract or debt, your personal assets could be seized to pay the obligation. This may include your money, cars, personal belongings, or your home! A business entity can protect your assets - but only if managed correctly!!!!! Failure to meet the legal requirements of managing your business could cause the court to ignore it all together and place your personal belongings at risk. Forming your business on an internet site or one-size-fits-all form and walking away may be a very bad call!
  2. Single Business Enterprise. Some entrepreneurs have more than one company. They are smart enough to place them in different entities. One LLC may handle taxes. Another LLC may sell products. Great so far. the problem comes in when they fail to maintain the right degree of separation. Similar to above, a dispute may cause the assets of one company to be seized to pay the obligations of the other because the court will consider them one company owned by you! Managing multiple businesses without the property formalities? Bad call Pete! Bad call!!
  3. Weak ContractsThe terms are in writing and they signed it. Got a contract, right? Maybe not!! Just because its in writing doesn't make it a contract!!! Louisiana law has certain requirements of a contract. Additionally, different types of agreements require different formalities. Some must be written. Some must be notarized. The elements change if the contract is a lease, a sale, or a donation, etc. Thinking you have a contract because you wrote something and signed it may be a horrible, horrible call!!! This one is such a big deal, I give tips on my website, DassauColeman.com.
  4. Promises and GuaranteesIf you are in business, the law imposes certain guarantees on you - AUTOMATICALLY. You need to know what they are because, in some cases, you can contract out of them. In other cases, the law protects you from certain guarantees. However, if you present your product or services in certain ways and under certain conditions, you may waive your legal protections and become obligated for much more than you otherwise would have been. Depending on the circumstances, your business actions could cause you to be sued under contract law as well as for negligence! Talking without knowing your legal rights may be the worst call of all!!
  5. Ignoring MoneyThe Tax Code can be a friend of a business or its biggest enemy. Of course, tax mistakes can be costly. But, did you know that incorporating the tax code in your business decisions can actually make you more money??? People, LLCs, corporations, and partnerships are all taxed differently. If you understand them, you may be able to pocket more of the money you are currently shipping off to Uncle Sam. Imagine increasing your profits without having to sell or do more.  I changed my mind. Failure to use the Tax Code is the absolute worst call of all. Shame on you Pete!

There is a sixth mistake. It's admitted lief serving, so I did not include it in the list. The mistake is thinking you can't afford legal advice to avoid the mistakes above. In many cases, you can get FREE consultation that can help you decide whether you need more help. Don't let a few dollars cost you your whole business. 

 

I hope you find this helpful. You have worked too hard to get here. Don't blow it at the one yard line!

 

What Does Redhibition REALLY Mean?

 

Most real estate sales contracts in Louisiana contain a Redhibition clause. I remember being a realtor and fumbling through the explanation of the clause to my clients. I knew it had something to do with whether the sale was "as-is" or whether the seller guaranteed the condition of the home after the date of the sale. But, that was about it.

It wasn't until I became a lawyer that I realized the law of redhbition was MUCH MUCH bigger than that. My clients and I had entered a fairly significant area of Louisiana's law and hadn't quite realized it. So I decided to give a quick overview here to at least make it clear to other realtors, buyers, and sellers that the law of redhibition is something to take seriously. Get help understanding it if you need to.

In a sales contract, a seller has certain obligations provided by law. Some can be modified by contract. Some cannot. Among the legal obligations, the seller warrants a buyer against redhibitory defects. (La. CC art. 2520) What is a redhibitory defect? It can be one of two things.

  1. It could be a defect causes the thing to be useless. A significantly cracked foundation may be redhibitory if the crack is so severe, the home cannot be occupied. 
  2. It could be a defect that makes use of the thing so inconvenient that the buyer would not have bought it had she known of the defect. Or, even is she bought it, she would have paid a significantly lower price. (La. CC art. 2520) There is lots of case law that goes into determining whether a particular problem is a redhibitory defect. Consult a professional if you have a question. 

SELLER'S LIABILITY/BUYER'S RIGHTS

So, what's the seller's liability when he sold something with a redhibitory defect? Well, this is where the analysis gets very complicated. The determination of liability depends largely on what the seller AND buyer knew, or should have known about the defect before the sale. But, the seller could be made to repair or correct the defect. He could also be made to return the purchase price. (La. CC art. 2531) In other cases, the seller could be made to pay expenses and attorney fees of the buyer who sues him to undo the sale. (La. CC art. 2545) 

THE WAIVER

This article started out referring to the waiver of redhibition. So, that's a big hint that the seller's obligations can be waived. But, the waiver is not a simple as it sounds. 

The law allows a seller and buyer to agree that the seller will not be bound by the laws of redhibition. But the waiver must meet certain legal requirements of form and contain particular wording. (La. CC art. 2548) I won't go into it here; but, if you are attempting a waiver, I would strongly suggest getting help. An improper waiver may be unenforceable. Sellers who thought they sold a property as-is may find themselves in hot water - and very unhappy with their realtor!

Another important point is that the protections of a proper waiver my still be lost of the seller, or the seller's agent, overstep the bounds in giving the sales pitch of the home. So be careful what you say!

SELLER'S RIGHTS & PROTECTIONS

A seller may have some defenses if he is sued under the law of redhibition. I will talk about three.  I discussed the (1) Waiver above. Here, I will also mention (2) Notice, (3) Buyer's knowledge. 

A seller may be entitled to notice of a defect before the buyer spends her own money to repair it. (La. CC art. 2522) Again, whether the seller has a legal right to notice depends largely on how much the seller knew about the defect. If the buyer repaired the defect at her own cost, the seller may defend reimbursing the buyer if he can show he could have made the repairs or made them cheaper had the buyer given him notice. (La. CC art. 2522)

A seller may also defend himself if the buyer knew or had reason to know of the defect before the sale. This is a fairly complex determination. But, in its simplest form, obvious defects are less likely to be covered. Waivers of certain inspections may also prevent the buyer from seeking relief under the law. (La. CC art. 2521) Question is - will the buyer who loses here now come after the realtor for errors and omissions? Be mindful when advising them on inspections. A simple "do as you want" may not protect you. 

There you have it. A brief overview. Who knew so much law was under that simple clause on the real estate purchase contract. But, please, please remember - this is only a simple overview. There is a lot of written law and case law that must be considered when addressing an issue of redhiibition. My goal here was to make you aware of its depth and to encourage you to get help when you need it. Protect yourself!  

 

WHY INVEST IN LOUISIANA’S REAL ESTATE LIENS? HOW ABOUT A LOW RISK 17% RETURN?

For the most part, serious investors buy real estate tax liens to make money! Real estate liens are a really unique investment because of their low risk nature and high returns.  But here are 9 reasons to invest in real estate liens.

1.     Sky-high Returns. The best reason to invest in real estate tax liens is the potential for a sky-high return on your investment dollar. Louisiana sets a 17% annual yield, depending on the time of redemption. The investor is offered 12% simple interest annually plus 5% paid to the investor as a penalty to the delinquent taxpayer.

2.     Low Risk Investment. Tax Lien Investments are administered by the government and protected by real estate. Think about that for a second.

When you invest in a tax lien, you are GUARANTEED to receive either the repayment of your investment plus interest (12%) and penalties  (5%) or a deed to the property. In most cases, you will receive penalties and interest. But sometimes, you will receive the property, which could be valued 20 times what you invested!

3.     Secured Investment. If you have ever dealt with a mortgage lender, you know the power of securing an investment with real estate. Mortgage lenders have been known to risk up to 80-85% of the value of a real estate parcel when lending. A Tax Lien Investor would likely only risk 3-4%!! That means up to 97% of the value of the real estate is protecting your investment!

4.     Earn a Return without the Risk of Ownership.  Amazing! A real estate tax lien investment is secured by real estate without the risks that come along with owning real estate that landlords typically encounter. No worries about repairing damage, property maintenance, or chasing tenants for rent!   No mortgage payment! No tenant background checks! Just a sky-high return on your investment without the headaches of owning and renting.

5.     Little Upfront Cash. Some smaller real estate tax liens can be purchased for $1000 - $5000. Use the smaller deals to get comfortable with the process, work out your system, and grow capital for even bigger deals.

6.     Lien Priority. Worried that the real estate securing your lien is also encumbered by other mortgages? Stop worrying. It probably won’t matter. Tax liens generally take priority over other mortgages and liens on the property. So, if you need to sell the property to protect your investment, the lower liens will be wiped out! The good news there is that you have more people standing in line to redeem the lien. If ABC Bank’s s lien will be wiped out if you sell, guess who will be standing in line to protect its investment – ABC Bank!

7.     It’s Easy. The process may seem a little intimidating at first. The laws governing tax lien investments in Louisiana involve revised statutes, the civil code, and even the Louisiana State Constitution. There are multiple organizations involved, including the tax assessor, the clerk of court, and the sheriff. Whew!

And this is where we provide a shameless plug. Dassau & Coleman (DassauColeman.com) is here to help you through the process. We can advise and guide you through each step to make it simple and painless. Visit our Real Estate Investment page to sign up for a FREE Consultation on how we can help.

Now that the plug is over, let me reassure you that, despite the multiple steps in the process, you will likely find this easier than stock investing or landlording. Once you establish your team and your system, you can repeat the process over and over again and acquire those sky-high returns.

8.     Less Competition. My bet is that, because tax lien investment seems complicated on the surface, many smaller investors assume they cannot afford it or understand it. Consequently, they stick with traditional higher risk investment approaches, such as property rehab and foreclosures. The good news is you will probably see less competition for the top investments than you would see if it was a rehab or foreclosure. Lower demand equals a better deal!

9.     Diversification. Most investment experts will advise you to diversify your investment portfolio. Tax lien investment offers a great option for a return on capital that is buffered from the stock market and easier to monetize that buy-and-hold real estate strategies. 

5 Links and 5 Reasons to Make Solid New Year's Resolutions

This is the time of year many people decide to take the plunge and start a business. Some people drop their resolutions by the first of February and never follow through. Others - the people whose time as truly come - launch in head first and become entrepreneurs. If you are toying with the idea, here are some helpful links to help you decide whether you are a January Dreamer or a 2015 Entrepreneur. 

  1. "7 Steps for Making a New Years Resolution and Keeping It" by Annabel Candy
  2. "Ten Resolutions the Most Successful People Make and Then Keep" - Forbes Magazine
  3. "5 Reasons to Make Starting a Family Business Your New Year's Resolution" by Daphne Mallory
  4. "7 Tips to Help Your New Year's Resolution Stick" by Amanda Prischak
  5. "7 Secrets From People Who Kept Their New Year's Resolutions" by Lauren Vanderkam

The links above provide opinions and information of how to keep your resolutions. Here are five reasons to make them:

  1. Wealth Building - Because of favorable tax laws, entrepreneurs typically keep more of their money than wage earners. 
  2. Tax Shelter - High income earners should consider whether a small business or home office can cut down on their tax bills. 
  3. Security - If there is one thing the economic downturn should have taught us, it's that there is no such thing as job security. The only security is the ability to produce income independently. 
  4. Lifestyle - Ever had to work on a major holiday or at a time that was personally painful for you? Would that have happened if your only boss was you?
  5. Legacy - No matter how far you climb up the ladder of another's company, you cannot pass your job on to your kids. They will still have to start from the bottom. 

If you have resolved to start your business, CLICK HERE to incorporate for $150. 

You've Incorporated but Are You Really Protected?

Piercing the Corporate Veil – Consensual Creditors

So you have formed your corporation or your limited liability company and are now conducting business. Of course you are hoping things are problem free. But, if you are like most small businesses, you formed a separate company to protect your assets in case something goes wrong. But just how protected are you?

In some cases, small business owners have a false sense of security that their personal assets are protected by the existence of a business entity. But, the truth is there are other steps that must be taken to prevent creditors or plaintiffs from reaching your home, savings accounts, and other personal assets in the event of a problem. This is an overview of factors that should be considered in protecting your personal assets from business problems. 

A corporation is an entity separate from its owners. It is a legal person but is owned by shareholders. Generally, the shareholders are not individually liable for its debts.

However, there are important exceptions that may allow creditors to access the personal assets of the shareholders. 

The first is pretty straightforward. It applies when the shareholders are guilty of fraud. There, an alter ego exception applies. If fraud is proven. the courts may allow the defrauded creditor to access the shareholders' assets to satisfy a debt. 

In the absence of fraud, alter ego exception applies when corporate formalities have been disregarded to the extent that corporation ceased to be distinguishable from its shareholders.

Factors to be considered when piercing the corporate veil:

1.    commingling of corporate and shareholder funds

2.    failure to observe statutory formalities

3.    undercapitalization

4.    failure to provide separate bank accounts and book keeping records

5.    failure to hold regular shareholder and director meetings

6.    ownership of all shares by a single shareholder

Some factors weigh more heavily than others under particular situations. There is no magic bullet here. The court will consider the totality of the circumstances!!!

The factors above apply mostly to corporations because the case law on corporations is long and extensive. Limited liability companies are still new but there are indications that the veil of an LLC may also be pierced under similar circumstances. 

The key is to be careful with your business operations. Consult your attorney to ensure your operational practices are not destroying the advantages you may otherwise be entitled to by owning a business entity. 

For additional information on this article, contact the attorneys of Dassau & Coleman. Dassaucoleman.com.