Santa Barbara. Lawyer. Official Publication of the Santa Barbara County Bar Association November 2013 Issue 494

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1 Santa Barbara Lawyer Official Publication of the Santa Barbara County Bar Association November 2013 Issue 494

2 2 Santa Barbara Lawyer

3 November

4 Donna Lewis President 789 N Ontare Rd Santa Barbara, CA T: ; F: Scott Campbell President Elect Rogers, Sheffield & Campbell, LLP 427 E. Carrillo Street Santa Barbara, CA T: ; F: Matthew Clarke Secretary Christman, Kelley & Clarke 1334 Anacapa Street, Suite B Santa Barbara, CA T: ; F: Naomi Dewey Chief Financial Officer Buynak, Fauver, Archbald & Spray 820 State Street 4th Floor Santa Barbara CA T: Catherine Swysen Past President Sanger, Swysen & Dunkle 125 E De La Guerra St Ste 102 Santa Barbara, CA T: ; F: Emily Allen Legal Aid Foundation 301 E. Canon Perdido Street Santa Barbara, CA T: Santa Barbara County Bar Association Officers and Directors Michael Denver Hollister & Brace P O Box 630 Santa Barbara, CA T: ; F: Danielle De Smeth Bamieh & Erickson 692 E. Thompson Blvd Ventura, CA T: Katy Graham Senior Research Attorney 2nd District Court of Appeal, Div E Santa Clara St Ventura, CA T: James Griffith Law Offices of James P. Griffith 1129 State St Ste 30 Santa Barbara, CA T: ; F: Lauren Joyce Attorney at Law 209 E Anapamu St Santa Barbara, CA T: Brandi Redman Attorney & Counselor at Law 1021 Laguna St. Apt 8 Santa Barbara, CA T: ; Mission Statement Santa Barbara County Bar Association Angela Roach Santa Barbara Lawyer University of California, Santa Barbara Employee & Labor Relations 3101 SAASB Santa Barbara, CA T: James Sweeney Allen & Kimbell, LLP 317 E. Carrillo St Santa Barbara, CA T: ; F: Shelley Vail Santa Barbara Lawyer University of California, Santa Barbara Employee & Labor Relations 3101 SAASB Santa Barbara, CA T: LAUREN WIDEMAN Price, Postel & Parma, LLP 200 E. Carrillo St., Ste. 400 Santa Barbara, CA T: Lida Sideris Executive Director 15 W. Carrillo Street, Ste. 106 Santa Barbara, CA T: ; F: The mission of the Santa Barbara County Bar Association is to preserve the integrity of the legal profession and respect for the law, to advance the professional growth and education of its members, to encourage civility and collegiality among its members, to promote equal access to justice and protect the independence of the legal profession and the judiciary. Santa Barbara Lawyer A Publication of the Santa Barbara County Bar Association 2013 Santa Barbara County Bar Association CONTRIBUTING WRITERS James Griffith Robert W. Olson, Jr. Robert Sanger EDITOR Angela D. Roach ASSISTANT EDITORS Lida Sideris Shelley Vail MOTIONS EDITOR Michael Pasternak VERDICTS & DECISIONS EDITOR Lindsay G. Shinn PROFILE EDITOR James P. Griffith PHOTO EDITOR Mike Lyons DESIGN Baushke Graphic Arts PRINT PRODUCTION Wilson Printing Submit all EDITORIAL matter to with submission in the subject line. Submit all MOTIONS matter to Michael Pasternak at Submit all advertising to SBCBA, 15 W. Carrillo Street, Suite 106, Santa Barbara, CA phone , fax Classifieds can be ed to: 4 Santa Barbara Lawyer

5 Santa Barbara Lawyer Official Publication of the Santa Barbara County Bar Association November 2013 Issue 494 Articles 6 An Interview with Santa Barbara County Superior Court s New Court Administrator, Darryl Parker, By James Griffith 10 Lawyers Giving Thanks! 12 Professional Group Practice Options, By Robert W. Olson, Jr. 19 The New Rules for Admissibility of Expert Testimony: Part II, By Robert Sanger Sections 8 Legislation Signed 9 Review Pending 23 Section Notices 24 Verdicts and Decisions 26 Motions 26 Classifieds 30 Calendar About the Cover A Fall day at the Pumpkin Patch (Mike Lyons photo) George Eskin retirement event. For more photos, see page 17. The dedication of the John T. Rickard airport terminal featured local dignataries. For more photos, see page 16. November

6 Legal News J An Interview with Santa Barbara County Superior Court s New Court Administrator, Darryl Parker By James Griffith ames Griffith (JG): Thank you for meeting with Santa Barbara Lawyer, Mr. Parker. First of all, what exactly does a court administrator do? Darryl Parker (DP): It seems to change every day. Generally, a court administrator is responsible for all non-judicial functions everything except the judges getting themselves on the bench to call their cases is the responsibility of the court administrator. The facilities are a major function for us: making sure the lights operate and that someone empties the trash every night, as well as making sure it gets locked up. We also handle security. There is a lot to getting a courtroom operating on a daily basis. In the courtroom itself, there is a quasi-employee/ entrepreneur court reporter. There is a courtroom clerk, and also an interpreter on many occasions. The deputy in the courtroom is not an employee of ours, of course, but the state provides funding to the sheriff to ensure that there is a deputy in each courtroom. All the record keeping, all the files, the jury operation, all the notifications, all the clerks offices, all the evidence: all of that is the responsibility of the court administrator. JG: How did you come to be the court administrator? DP: I had a traffic ticket when I was in college, and didn t deserve the ticket. I stopped at that stop sign; I was certain of it. And so, I went in pro per and fought my traffic ticket. It went to trial, my girlfriend at the time testified on my behalf, and it all felt dramatic and fun to me. When the judge took my case under submission, I knew from the look in the city attorney s eyes that I had won my case. I thought, This is kind of a fun thing to do! In college, I was a political science major and interested in government. I thought I wanted to be an attorney, but my college advisor discouraged me from becoming an attorney because he said that there were a lot of dissatisfied attorneys. One day, sitting outside his office, I found a pamphlet on a masters degree in judicial administration you get a masters in public administration with a certificate of specialization in judicial administration which I saw as an interesting niche which I had never thought about. I did not have to be an attorney, but I could still work in courts. I saw that as a wonderful combination for myself, and decided to pursue it. I got accepted that fall to go to USC s program in public administration and judicial administration. I moved to California, drove out here with my brother, had a fun time in my twenties driving across the US, and settled in the LA area. So I headed into this not by accident, it was a field I wanted to get into, I got professionally trained, and I have enjoyed it ever since. JG: So, we all know the dire financial situation faced by the state and its component agencies. What are the specific financial constraints that you are currently facing, and how are you addressing them? DP: The most significant issue on my plate is how to deal with the financial constraints that we have. And I have to say, Gary Blair did a good job of building the court s reserves to try to weather this storm. But the governor imposed a 1% cap on reserves for all trial courts in the state, and for us that means we can only keep one percent of our revenues in reserve, no matter what we have in the bank at the end of the fiscal year. So for us, that translates to $270,000 we can keep in reserves. We have annual revenue of $27 million, but we were spending over $30 million a year since we had that bank account to draw on. With that [one percent reserve] limitation, we won t have the bank account to draw on any longer, and $270,000 is frankly an unworkable reserve when our payroll is $914,000 every two weeks. So the lion s share of our expenditures is related to employee salaries and benefits. A lesser amount of the operating budget goes to things like post-it notes, library updates, and furniture every now and then. But there are a lot of other contracts, and they amount to about $5 million. We need to bring our spending in line with our revenues, which means we will need to see further reductions in our expenses. There are some ways to do that. Some of it is a further consolidation of services. It has been my goal to avoid layoffs. We used voluntary separations last year to offer employees an economic incentive to leave sooner than they would have. That costs you some money in the first year, but keeping those positions open is a long term savings. I have discussed that with the supervisors and managers, and they are wringing their hands, asking, How we can possibly further reduce staff? The problem is, we have a structural deficit. We cannot have an organization that costs over $30 million when we are only receiving $27 6 Santa Barbara Lawyer

7 Legal News million, and we will not be able to keep anything in reserve any longer. So that constraint will dictate further cuts to the organization. Most of our cuts have come through the hiring freeze and the voluntary separations. As positions have come open, we have left them open. And that has made its way into the courtroom; people feel the hit, because the back office staff is where the majority of the vacancies are. So that means delays in processing. For instance, default judgments that once took seven days are now taking six to seven weeks, or even longer. I get s from attorneys saying Really? It s taking this long to process my judgment? We have kept the courtrooms running, so the front of the interface with the legal community looks healthy, but what they do not see is that the back office, where the work ends up, is not healthy. There are good people still working hard, but they do not have the resources any longer to process the work in as timely a manner that they once did. So we have to figure out a way to further improve the efficiency of our operation. One of the ways to do that is technology. We have talked a lot about electronic filing, where you could send your pleadings electronically from your office and populate our case management system just by sending over the requisite data fields so that we can electronically receive it and not have to file, stamp, conform copies, etc. We are wedded to paper in this industry, but not everybody is. Others have already converted; Orange County is a good example of a court that has gone to electronic filing and done it well, and many people point to the federal system PACER and say Why can t you do that? Well, we are trying. We have a serious effort with our current vendor, and we re exploring other opportunities to move to a more electronic world. JG: Are you working on anything else to streamline operations? DP: Yes. In February, I became the Chief Deputy of Operations while Gary Blair was still here, and my job was to analyze the organization from a county-wide perspective. Traditionally, this county has functioned as two separate entities, so to speak, and there are redundancies and inefficiencies in that. If you can eliminate redundancies and inefficiencies by looking at it as a single county, as a unified system, you can make improvements. I assembled twelve task teams comprised of employees who met with other employees from the other end of the county. The reports are just now coming in. I expect within the next thirty days to present a list of recommendations to the court s Executive Committee on the additional consolidations of services we can make and that I think we need to make. At the end of this fiscal year, we need to have our reserves down. There is an effort at the state level, and the Bar has been great at putting pressure on the legislature and the governor, to try and increase that one percent, because most people believe it is nonsensical. It is a silly number to give a business to operate with. You cannot operate with $270,000 in reserves when your cash receipts are not received in twelve even amounts every month. The child support commissioner s position and associated staff are traditionally six to eight months behind in payments. Well, those people have mortgage payments and grocery bills, and we pay them out of our reserves. But at $270,000, we are going to have to do something different. There will not be enough to make those payments. Frankly, I do not think the Legislature is the problem; it is the governor s office that has imposed this. But there was a change in the director of the Department of Finance. Ana Matosantos was the previous director, and was rigid in her position that courts had to spend their reserves. The problem was that the governor s office saw this large amount of reserves statewide and said Well, they re fat and happy. We re just going to cut their funding to about equal to what they have in reserves, and force them to spend that money, before we talk about giving them anything else. Now there is a new director of finance, and early conversations between the Chief Justice and the head of the Judicial Council indicate that they are open to having a conversation. They are not saying no, they are not saying they ll raise it, but they are willing to have a conversation, which I think is an indicator that there is room to move. JG: Can you tell us a little bit about yourself away from work? Where do you live, what kind of things do you like to do? DP: I am married and just celebrated my 24th anniversary with my wife Jolene, a wonderful support for me. We met in the LA court clerk training program. She lived in Pomona and I lived in Glendale, and I would offer to drive her home, telling her it was not out of my way. Of course, it was totally out of my way, but I did it then and I would still do it now. I have three kids. My oldest is in culinary arts school here at Santa Barbara City College, which is great because she brings her homework home. My daughter Fallon is in high school. She is 16, is fond of horses and has two of them. My son Sean just started as a freshman in high school, Continued on page 21 November

8 Legal News Legislation Signed E ditorial Note: During October, Governor Jerry Brown signed a significant number of bills into law. Thus, this month, the Legislation Signed feature is replacing the Legislation Pending feature of previous issues. California Immigration Legislation Update On October 5, 2013, Governor Brown signed the following bills: AB 4 by Assemblymember Tom Ammiano (D-San Francisco) Prohibits law enforcement officials from detaining an individual on the basis of a United States Immigration and Customs Enforcement (ICE) hold after that individual becomes eligible for release from custody, unless specified conditions are met. AB 35 by Assemblymember Roger Hernández (D-West Covina) Provides that immigration consultants, attorneys, notaries public, and organizations accredited by the United States Board of Immigration Appeals are the only individuals authorized to charge a fee for providing services associated with filing an application under the U.S. Department of Homeland Security s deferred action program. AB 524 by Assemblymember Kevin Mullin (D-South San Francisco) Provides that a threat to report the immigration status or suspected immigration status of an individual or the individual s family may induce fear sufficient to constitute extortion. AB 1024 by Assemblymember Lorena Gonzalez (D-San Diego) Allows applicants, who are not lawfully present in the United States, to be admitted as an attorney at law upon certification by the examining committee of the State Bar of California that the applicant has fulfilled the requirements for admission to practice law. AB 1159 by Assemblymember Lorena Gonzalez (D-San Diego) Imposes various restrictions and obligations on persons who offer services related to comprehensive immigration reform. SB 141 by Senator Lou Correa (D-Santa Ana) Requires that the California Community Colleges and the California State University, and requests that the University of California, exempt a United States citizen who resides in a foreign country, and is in their first year as a matriculated student, from nonresident tuition if the student demonstrates financial need, has a parent or guardian who was deported or voluntarily departed from the U. S., lived in California immediately before moving abroad, and attended a secondary school in California for at least three years. SB 150 by Senator Ricardo Lara (D-Bell Gardens) Authorizes a community college district to exempt pupils attending community colleges as a special part-time student from paying nonresident tuition. SB 666 by Senator Darrell Steinberg (D-Sacramento) Provides for a suspension or revocation of an employer s business license for retaliation against employees and others on the basis of citizenship and immigration status, and establishes a civil penalty up to $10,000 per violation. Patient Protection and Affordable Care Act (ACA) and Health Benefit Exchange On October 1, 2013, Governor Brown signed the following bills: AB 362 by Assemblymember Philip Y. Ting (D-San Francisco) Until January 1, 2019, excludes from gross income, any amounts received by an employee from an employer to compensate for additional federal income taxes that are incurred by the employee on employer-provided healthcare benefits because, for federal income tax purposes, the same-sex spouse or domestic partner of the employee is not considered the spouse of the employee. AB 422 by Assemblymember Adrin Nazarian (D-Sherman Oaks) Requires information on Covered California s health care coverage and the continued availability of Medi- Cal options to be included on the National School Lunch Program (NSLP) notifications that school districts may provide to students, as specified, effective on January 1, AB 1180 by Assemblymember Richard Pan (D-Sacramento) Updates California law implementing the federal Health Insurance Portability and Accountability Act of Santa Barbara Lawyer

9 Legal News (HIPAA) and other individual coverage rights related to losing group coverage to conform with the federal ACA. The bill also requires health plans and health insurers to notify specified individuals about the availability of guaranteed issue coverage through Covered California. SB 28 by Senator Ed Hernandez (D-West Covina) Furthers implementation of the State s expansion of Medi- Cal, authorized and required by the ACA, by giving the Department of Health Care Services greater flexibility in issuing all-county letters until regulations are adopted, and updating the budgeting methodology for Medi-Cal county administrative costs. SB 138 by Senator Ed Hernandez (D-West Covina) Requires health care service plans and health insurers to take specified steps to protect the confidentiality of an insured individual s medical information for purposes of sensitive services, or if disclosure will endanger an individual, as specified. SB 161 by Senator Ed Hernandez (D-West Covina) Establishes new regulatory requirements for stop-loss insurance sold to small employers, but allows stop-loss insurance issued prior to September 1, 2013, to be renewed or reissued by the same or different insurer under the same terms and conditions, without meeting the new requirements. SB 249 by Senator Mark Leno (D-San Francisco) Authorizes the Department of Public Health and qualified entities to share health records involving the diagnosis, care, and treatment of human immunodeficiency virus (HIV) or acquired immunodeficiency syndrome (AIDS) related to a beneficiary s enrollment in federal Ryan White Act (RWA) funded programs to coordinate care and enrollment as beneficiaries transition to new health coverage programs. SB 332 by Senator Bill Emmerson (R-Redlands) Makes Covered California s contracts and rates of payment to vendors and contractors, and other board and staff work open to public inspection under the California Public Records Act (PRA), except for health plan contracts and their rates, which are made public in three and four years respectively. SB 353 by Senator Ted W. Lieu (D-Torrance) Requires health plans and health insurers that provide essential health benefits to translate specified coverage documents in the same language they use to market or advertise to an individual or small employer, if that language is not already required to be translated under existing law. SB 800 by Senator Ricardo Lara (D-Bell Gardens) Requires the Department of Health Care Services to provide Covered California with information about parents or caretakers of children enrolled in the Healthy Families program (HFP) or the targeted low-income Medi-Cal program, in order to conduct outreach to potentially eligible individuals. Transfers specified employees of the Managed Risk Medical Insurance Board (MRMIB) to Covered California and DHCS, as specified. Review Pending Highlighting Public Information About Cases of Local Interest Under Review Case: In re Garcia on Admission (S202512) Original proceeding; OSC re Committee of Bar Examiners motion for admission of Sergio C. Garcia to the State Bar of California California Supreme Court Status: Argued and submitted Sept. 4; an opinion is due. Issue: This case concerns whether an undocumented immigrant who has graduated from law school and passed the California bar examination may be admitted to the California Bar or whether such admission is precluded by any federal statute or for any other reason. Oral argument can be viewed on YouTube: watch?v=uzegyfn-eek After oral argument, Petitioner Garcia moved to vacate submission due to pending legislation. On October 7 th the State Bar alerted the Court that the Governor has signed AB No (See Legislation Signed, page 8.) Lawyer Referral Service Santa Barbara County s ONLY State Bar Certified Lawyer Referral Service A Public Service of the Santa Barbara County Bar Association November

10 Legal Community Lawyers Giving Thanks! I m thankful for Tom Hinshaw, husband of mine and man that I adore. I am also thankful for Magna Carta, pasta, science, Tom, Girl Scout Thin Mints, the 2013 SBCBA Board and Executive Director, Tom, computers, NPR, sfogliatelle, and clothing with pockets. And Tom. - Donna Lewis I am grateful for my great staff and for the chance to be of service as an immigration attorney, to provide clients with information so they can make good decisions, and for the opportunity to give them empathy and assist them in achieving their goals. - Arnold S. Jaffe As life grows increasingly busy, I appreciate time to reflect on all there is to be thankful for wishing everyone more of those moments in the coming year! - Daniele DeSmeth I am thankful to be a member of the outstanding legal community in our humble little fishing village. - Mischa Barteau I feel grateful for the gift of life shared with family, friends, and colleagues my gratitude made bittersweet as I see others too soon deprived of this gift. - John Hager I am grateful for my wonderful wife, my two beautiful daughters, and for being able to live and practice law in Santa Barbara. I also grateful that over the past 14 years I ve been able to learn from and practice law alongside two of Santa Barbara s finest lawyers, my partners, Thomas Foley and Pete Bezek. - Robert Curtis I am thankful for a fantastic husband, a wonderful business partner, great family and friends, and the Best of the West LOS ANGELES DODGERS! - Renee Fairbanks I am thankful this year for the ongoing and continuing health and happiness of my family and friends, the ability to live and work in Santa Barbara, and for the upcoming national championship in football for The Ohio State University. - Garry M. Tetalman I am thankful for my health, a sense of humor, those I love, and good wines! - Philip I. Moncharsh Serenity House hosted our family during the final moments of my father s precious life. We were respected and supported while surrounded by fresh air, the sounds of nature, and Dad s beloved Japanese prints. I am deeply grateful to the staff for their grace and to the donors for their vision. - Anonymous This year, I am thankful for Santa Barbara s great legal community especially our outstanding judges who give so much of themselves both inside the courtroom and in their spare time, the concern shown over those members who passed away or faced health or wealth challenges this year, my friends, my parrots, and the opportunity to practice law and live in this wonderful county. - Betty L. Jeppesen Title Searches/Reports Title Consulting/Research Oil, Gas, Mineral Land Consulting Water, Geothermal, Wind & Solar Management/Administration Leasing & Land Contracts Title Engineering Right-of-Way Consulting Environmental Studies Subdivisions/Parcel Maps Permits/Regulatory Compliance Expert Witness & Due Diligence Map Drafting / AutoCAD P E T R U C O R P O R A T I O N A FULL SERVICE LAND COMPANY T I M O T H Y B. T R U W E Registered Professional Landman Registered Environmental Property Assessor 250 Hallock Dr., Suite 100 Santa Paula, CA (805) Fax (805) Santa Barbara Lawyer

11 Named a 2012 Southern California Superlawyer! 25 Focused on Franchise Law Serving Santa Barbara Attorneys Since 1982 John L. Taylor & Associates Private Investigations KURTZ LAW GROUP A Professional Corporation TM Franchise Law First and Foremost Dedicated to the principles of integrity, trust, and discretion. (PHOTO) 831 State Street, Suite 230 Santa Barbara, California Oxnard Street, Suite 500 Woodland Hills, California Barry Kurtz Certified Specialist, Franchise & Distribution Law The State Bar of California Board of Legal Specialization Candice L. Lee Bryan H. Clements Mark Melton T T F Civil / Criminal / Personal / Business Sub Rosa / Surveillance Infidelity, Personal Injury, Child Custody, Fraud Full Scale Asset Searches Banks & Brokerage Accounts, Property, DMV People Searches Witnesses, Skip Trace, Dead Beats, Lost Family P.O. Box Santa Barbara CA Tel: (805) Fax: (805) CA. Lic November

12 Legal News Professional Group Practice Options By Robert W. Olson, Jr. There are many ways licensed professionals (such as attorneys and dentists) can work together in group practice. In California, the available mechanisms are Corporations, LLP s (limited liability partnerships), Partnerships, Group Solo s (expense sharing), and Subleases. These mechanisms also can be combined in various ways to meet more of the group s goals. Other entities such as LLC s (limited liability companies) and PA s (professional associations) are not available to California professionals, and LLP s are available only to California attorneys, CPA s, architects, engineers, and land surveyors. Those considering group practice should have detailed discussions to confirm they have complementary individual and group goals before looking at any other specifics. The best combination also requires review of tax issues, limited liability concerns, compensation, income and expense allocations, and succession planning, with the group s long term viability and success being the ultimate target. Each entity and combination has its own advantages and drawbacks (Subleases discussed separately), starting with an Executive Summary: * ** ** * Assumes no S election. LLPs with an S election are like Corporations but with less simplicity and higher cost. ** When shared employees are paid directly by only one professional, Group Solos and Subleases hide the risks of employment law violations (e.g., benefits, worker s compensation, discrimination claims). Simplicity, Flexibility and Autonomy: A Partnership of Corporations is the most complex combination, since three separate entities and tax returns are required, but that complexity provides the best avenue to reduce taxes and professional discord, and increase autonomy, expansion and third party sale opportunities. A Group Solo of Corporations provides more autonomy, is less complex (with one less entity and tax return), and has similar flexibility benefits. A single Corporation or LLP is the simplest structure, but professionals can no longer act independently, and tax/ financial/ professional disputes increase with identical treatment of dissimilarly situated professionals (less so for LLP s than Corporations). Cost 1 : A new Corporation or LLP without buyout arrangements (on death, disability, loss of license or other departure) is the least expensive option ($1,800 or more; add the $800 1 st year franchise tax for LLP s). A single Corporation or LLP with buyout arrangements costs about the same as a Partnership or Group Solo if professionals already have personal Corporations in place ($3,500 or more; add $800 for LLP s). Partnerships or Group Solo s without existing personal Corporations require $1,800 or more per new Corporation. Annual tax returns and regulatory compliance typically cost $2,000 and up per Corporation or LLP and $1,000 and up per Partnership. Limited Liability: Insulating personal assets from liability created by employees, managers, and other professionals is of paramount concern, so a limited liability entity must exist somewhere between the professional and the group. This can take the form of a Corporation, LLP, Partnership 12 Santa Barbara Lawyer

13 Legal News of Corporations, or Group Solo of Corporations. Single person LLP s (and therefore Partnerships or Group Solos of one-professional LLP s) are not available in California. Tax Benefits: In general, Corporations (whether alone or combined with a Partnership, LLP, or Group Solo) provide the most tax benefits. Tax benefits of various combinations are highly dependent on the types of income and expenses incurred, and the professionals financial goals and personal tax situations. Issues to be considered include (among others) availability of specific tax deductions and tax-free benefits, reduction of payroll taxes, and choice of fiscal year. The sometimes counter-intuitive tax ramifications of anticipated buyouts, buy-ins, and earn-ins also must be considered. 2 The tax issues are relatively easy to understand, but each professional must talk to its own accountant before choosing the ultimate form of group practice. Disparate Tax Approaches: If each professional benefits equally from deductible expenses and benefits, and is equally aggressive in claiming specific deductions and benefits, then a single Corporation or LLP can work. However, when professionals are at significantly different stages of their careers, will receive significantly disparate values from deductible expenses and benefits, or differ significantly on how aggressively to deduct expenses and benefits, a Partnership or Group Solo of Corporations is a better approach. Compensation & Profit: If any professional believes their overall contribution to the group practice is not adequately addressed in the compensation and profit structure, the group will not survive. Some professionals may work less time, attract less business, produce less income, generate higher expenses, or have competing or conflicting business ventures. Circumstances change over time, and so too will the conflicts and differences, so compensation formulas need to adjust to changed circumstances. Will base pay be fixed, based on experience/ billings/ collections, or some combination? Will profit distributions be based on ownership, business generation, or some combination? LLP s, Partnerships, and Group Solos are far better able to address these issues than a single Corporation. Non-Compete Issues: California permits non-compete agreements (including reasonable employee non-solicitation and similar provisions) when associated with a Partnership, Corporation, LLP, or practice buyout. 3 There is no such protection in a Group Solo practice except on a practice buyout. Trade secrets and proprietary information have the same level of protection no matter what entity combination is used, although the group itself may own that information. Succession Planning / Buyout Values: Setting a fair purchase price and tax allocation for practice buyouts (on death, disability, loss of license or retirement) generally is only possible with LLP s, Partnerships, and Group Solos, as opposed to Corporation stock buyouts. This is because stock buyouts are not tax deductible, dropping the fair market value of stock to approximately 2/3 of an LLP, Partnership, or Group Solo interest, and is a major problem for a practice with significant goodwill or equipment value. Subleases: Subleases are the least costly ($1,000 or more) and most simple approach to group practice. A Sublease also maintains a high degree of tax, financial, and practice autonomy. However, it has no particular limited liability 2 or tax benefit, income/ expense/ profit sharing, succession planning, or non-compete protection. It also does not provide any security to remain on-site beyond the Sublease term, or easily allow for a practice sale to a third party. Recommendations: A Partnership of Corporations generally is preferred for practices with significant buyout value. Disparate time commitments and income generation are easily accommodated, different tax and financial incentives and approaches are easily separated, buy-ins are tax deductible, buyouts are at full value, and each professional maintains limited liability. Formation and maintenance costs are higher than that of a single entity, but the overall tax savings and additional group stability are worth far more in the long term. A single Corporation or LLP has lower formation and maintenance costs. However, this approach works well only if each professional (1) receives substantially similar tax benefits, (2) shares the same posture on tax avoidance, and (3) has an insignificant buyout value. Also, tax benefits are more limited for LLP s than Corporations. Group Solo s are unlikely to have significant advantages over a Partnership or Sublease. They have similar benefits to Partnerships, but risk (1) having an undesirable replacement imposed on the remaining professional, (2) violating employee benefits and employment practices laws due to the false impression that only one professional is the employer, (3) being viewed by the landlord as an unapproved Sublease (risking an eviction or higher rent), (4) creating de-facto partnership liability by co-signing for group obligations, or sharing employees or signage, and (5) intraprofessional poaching of clients/patients, staff, or referral sources. These problems subside if the professionals have no significant (goodwill or equipment) buyout value, keep separate work areas and employees, do not co-sign on any significant group obligation, and receive formal landlord approval of the arrangement. However, this situation is nearly identical to a Sublease, which is significantly less expensive than a Group Solo. Continued on page 21 November

14 2014 Membership Application Member Name: Check here if you do not want your name and office address disclosed to any buyer of Bar Assoc. mailing labels. Check here if membership information is the same as last year. If so, the rest of the form may be left blank. Check here if you do not want your address disclosed to SBCBA sponsors. Office Address: City: State: Zip: Address: Phone Number: Fax Number: Home Address: City: State: Zip: State Bar #: Year Admitted to Bar: Your member dues include a subscription to Santa Barbara Lawyer. SCHEDULE OF DUES FOR 2014 Active Members $130 Student Members $30 New Admittees (First Year Attorneys Only) $00 Affiliate Members (non-attorney members only) $65 Santa Barbara County Bar Foundation donation Total amount enclosed $. $. AREAS OF INTEREST OR PRACTICE (check box as applicable) ADR Estate Planning/Probate Civil Litigation Criminal Debtor/Creditor Elder Law Family Law In-House Counsel & Corporate Law Intellectual Property/Tech. Business Real Property/Land Use Employment Law Taxation I am interested in receiving information about the SBCBA Lawyer Referral Service Mail completed form along with check to: Santa Barbara County Bar Association, 15 West Carrillo Street, Suite 106, Santa Barbara, Ca Tel: (805) Donations to the Santa Barbara County Bar Foundation are tax deductible to the full extent provided by law to a 501(c)(3) non-profit organization. 14 Santa Barbara Lawyer

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16 Unveiling of the offical plaque. A capacity audience at the Rickard dedication. The John T. Rickard Airport Terminal Dedication Judge Frank Ochoa recounts the impact Judge Rickard had on his career. Historian Erin Graffy presents the highlights of Judge Rickard s many achievements. SBCBA President Donna Lewis speaks of Judge Rickard s accomplishments. 16 Santa Barbara Lawyer

17 Judges Dandona, Anderson, Eskin, Herman, and Comm. Pauline Maxwell State Senator Hannah-Beth Jackson and Judge George Eskin Judge George Eskin Judge Arthur Garcia (second from the right) and friends Judges Kip Anderson, Brian Hill, Tom Adams and Jim Herman November

18 18 Santa Barbara Lawyer

19 Criminal Justice The New Rules for Admissibility of Expert Testimony: Part II By Robert Sanger As described in the last Criminal Justice column for the Santa Barbara Lawyer magazine, the California Supreme Court s opinion in Sargon Enterprises v. University of Southern California, 55 Cal. 4th 747, 149 Cal. Rptr. 3d 614 (2012) made it clear that California is now, (and perhaps unsuspectingly has been for some time), a Daubert 1 jurisdiction. This requires the trial court be the gatekeeper and make a determination as to the admissibility of scientific or expert testimony and to determine the limits of any testimony, if it is introduced. The Court held that there are essentially three criteria: The first criterion (1) is the matter on which an expert may rely; the second (2) is the reasons supported by the materials upon which the expert may rely; and the third (3) is the fact that the expert s opinion may not be based on speculation. As indicated in last month s column, those criteria are not only consistent with the four part test proposed in articles published here several months before Sargon, 2 but that the four part test is really required by both Sargon and Daubert. We ended Part I of this column by asking where do we go from here? We can agree, in general, that the Court in Sargon is saying that the trial judge is the gatekeeper and expects her or him to regulate what goes through the gate. The Court makes the valid point that, The trial court s gatekeeping role does not involve choosing between competing expert opinions. Therefore, going forward, there needs to be a rule that makes sense and is easy to apply. The four part rule, previously suggested remains as a valid application of the opinion in Sargon as well as the jurisprudence following Daubert. That is what we will explore in more detail in this Part II. Sargon s requirements: The Court in Sargon breaks admissibility down into three criteria. Unfortunately they are stated in negative terms: the trial court acts as gatekeeper to exclude expert opinion testimony that is (1) based on matter of a type on which an expert may not reasonably rely, (2) based on reasons unsupported by the material on which the expert relies, or (3) speculative. These three criteria are somewhat vague, or at least, appear to be. Nevertheless, it is possible to unpack these criteria and attempt to make a rule. That rule seems to actually include the four stage analysis referred to above, that is: 1) Is it a science (or area of expertise)? 2) Is the witness a scientist as to this science (or expert as to Robert Sanger this area of expertise)? 3) Is the data reliable? 4) Based on this science (expertise) and this reliable data, what can a scientist (expert) report to the jury? So, we will take each of the stages of the proposed rule and compare them to the law under Daubert and Sargon. Is it a Science? This is the basic Kelley/Frye question and is also included in Evidence Code section 801. This first stage of the analysis is the same as the first criteria of Sargon. The content of the first stage is based on the analysis proposed by the United States Supreme Court in Daubert. If it is a science or area of expertise, is it something that is falsifiable and is not mere opinion? Is it something that is subject to peer review? Is there an acceptable error rate? Would it be accepted in the current scientific community? This means that the concept of a new science under Kelley/Frye is really irrelevant and so is the argument by the party proffering the evidence that this is always admitted or that the expert has been qualified multiple times. Under Sargon and Daubert, the question now has to be asked anew. Is this Witness a Scientist as to this Area of Science? This is a question that is posed by the case law and not specifically addressed in Sargon, although Sargon s ukase about not speculating and Daubert s invocation of relevance, implies that the only admissible opinion would have to be formulated by someone with the appropriate expertise. In addition, the Court in Sargon says, Other provisions of law, including decisional law, may also provide reasons for excluding expert opinion. There is extensive decisional law on whether a medical doctor, for instance, can testify outside her or his particular area of expertise in civil cases. It is reasonable that the Court consider this question as a November

20 Criminal Justice basis to include or exclude a particular expert s testimony. In this regard, the trial court would look at the training, education, and experience of the expert as to the particular science or expertise involved. Is the witness certified or otherwise qualified in the particular tests or subject matter? Has the witness s work been proficiency tested and has her or his work been peer reviewed? Is the laboratory or facility associated with one side or the other in the litigation? Is the Data Reliable? The third stage of the rule is encompassed in the second criteria in Sargon -- whether the opinion is based on reasons unsupported by the material on which the expert relies. In other words, the reasons for the expert s opinions must be based on data that is reliable. To determine if the data is reliable, the trial court needs to ask the following types of questions: Was the source of the data reliable? Were proper scientific collection techniques employed? Were control samples taken? Was the chain of custody maintained? Were protocols used to avoid contamination? Was equipment clean, maintained, and properly calibrated? Were controls used during testing? Was this witness and this laboratory subject to proficiency testing? Was the testing double blind? Based on this Science and Reliable Data, what can a Scientist Report to the Jury? The fourth stage is captured by the Sargon Court s concern about speculation. However, this is also where the most work needs to be done by the trial court. It is also where trial courts traditionally have not followed through and finished the job. The Court warned that the trial judge not just choose between competing experts but did not specifically call out how the trial judge should go about determining what is speculation. Approached methodically, and based on a rule, it is not that daunting a task. The true expert testifying based on reliable data will really have a much more limited scientific opinion than is usually offered by experts who are called by advocates. In Sargon itself, the court concluded that the expert went beyond the field of expertise and expressed an opinion that advocated for the plaintiff but was not based on science. The Court concluded that the trial judge was correct in excluding the testimony, not because there was no area of expertise and not because the witness was not qualified in some general sense, but because the proffered opinion claimed way too much. It should also be acknowledged that the unintended consequence of the adversarial process is that experts become biased in favor of the party calling them this is called the allegiance effect. A recent study showed that, even experts who were simply told what side they were doing the analysis for, interpreted the same data differently. 3 These were not experts who were not well meaning or who had been hired and coached by lawyers in preparation for litigation. This allegiance effect, exacerbated by preparation and coaching during the adversarial process, is the precursor to the kind of speculation held inadmissible in Sargon itself. As proposed in more detail in the April 2012 Criminal Justice column, it is critical that the trial court fulfill this fourth stage analysis by limiting the expert to stating hypotheses that could be supported by the data. This may involve acknowledging hypotheses that cannot be ruled out that support the contention of the party opposing the party proffering the testimony. But that is what scientists and experts actually do when not being compromised by advocacy. The following types of questions should be asked in stage four: Can the witness describe the data? Can the witness offer a sound scientific hypothesis? Did the witness attempt to test the hypothesis? What alternative hypotheses are properly reported based on the data? Is the opinion as to the data and the possible hypotheses derived from the data helpful to the jury in determining the issues in the case? If the trial judge determines that the witness can offer a true expert opinion based on her or his expertise and based on reliable data, then the judge should admonish the witness and the party proffering the witness s testimony to restrict the testimony accordingly. In other words, the expert witness must be admonished not to be an advocate, not to argue for a position, and to restrict her or his testimony to the specific observations and conclusions that a true expert or scientist could report in a non-adversarial setting based on reliable data. Conclusion The National Academy of Sciences 4 and the Federal Judicial Center 5 have both warned that far too much unsupported expert opinion is getting into the courtroom and in front of juries. In criminal cases, far too many wrongful convictions included scientific opinions offered by the prosecution that were testified to with great authority but which reached the wrong conclusion. It is important to note that this is not just junk science for which there is no real basis for scientific conclusion (although there is some of that) but it is overreaching by witnesses who are advocates for one side or another rather than testifying as true experts or scientists giving proper expert or scientific reports. The trial judge is charged as the gatekeeper and it is up to the trial judge to control what the jury hears from the 20 Santa Barbara Lawyer

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