Lubin Olson Quoted in National and Local Media Regarding Victory in High-Profile Case.

Kyle Withers, litigation partner at Lubin Olson & Niewiadomski LLP, was quoted in several publications, including the Wall Street Journal, the San Francisco Chronicle, the San Francisco Business Times, and the Real Deal, relating to news coverage of the Firm’s $50 million arbitration victory on behalf of investors in a real estate fund managed by Gregory Malin of Troon Pacific. The Wall Street Journal article, which was subtitled “A San Francisco developer has been ordered to pay more than $50 million to investors who alleged he misused and mismanaged their money,” appeared online on May 10, 2024 and in the print edition on May 17, 2024. The article states: “Kyle Withers, an attorney for investors in four of Troon’s developments, said in a statement that Malin is clinging to a ‘false narrative’ that has been rejected by the arbitrator. … Malin sent quarterly reports that painted a ‘rosy picture’ of Troon’s projects, said Withers. But construction deadlines and projected sales dates were repeatedly extended. … Eventually, investors in the four projects demanded a look at Troon’s books, and what they saw concerned them, Withers said. ‘The underlying financials tipped them off to the unfortunate reality, including that Malin had been taking millions of dollars in previously undisclosed fees,’ Withers said.”

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Lubin Olson Obtains $50 Million Arbitration Award in Real Estate Fraud Case

Kyle A. Withers and Ian E. Browning obtained a $50 million arbitration award on behalf of our clients. Judge Garcia of JAMS issued the Final Award—a sixty-page, single-spaced tome—after a 13-day evidentiary hearing with nearly thirty witnesses and over 1,500 exhibits. Judge Garcia found that Gregory Malin of Troon Pacific had engaged in fraudulent self-dealing, corrupted the UNI SF VII fund, and wantonly breached his fiduciary duties to our clients and the other investors in that fund.

United States Supreme Court to Review Grants Pass: Is Relief on the Way for Cities and Property Owners Contending with the Effects of Homelessness?

On Monday, April 22, the United States Supreme Court will hear oral argument in City of Grants Pass, Oregon v. Johnson to review the decision of the Ninth Circuit affirming a district court’s certification of a class of homeless persons alleging they were unlawfully fined for violating city ordinances that were typical of anti-vagrancy laws that commonly exist in local jurisdictions.  Following its decision in Martin v. City of Boise, 920 F.3d 584 (2019), the Ninth Circuit held that, under the Eighth Amendment, “a person cannot be prosecuted for involuntary conduct if it is an unavoidable consequence of one’s status.”  Johnson v. City of Grants Pass, 72 F.4th 868, 893 (2023).  Homelessness was deemed to be such a status.

State and local governments have been following this case closely in the hope that the Supreme Court will restore their authority to make legislative judgments about how best to address homeless issues, and property owners will in turn be anxious to know whether the government will have the authority to help them with their particular concerns.

To briefly summarize the development of the law in this area, in Robinson v. State of California, 370 U.S. 660, 667 (1962), the Supreme Court held that a state law making it a crime to be addicted to the use of narcotics violated the Eighth Amendment’s prohibition on the infliction of “cruel and unusual” punishments because the law was based on the person’s mere status as a person addicted to drugs rather than any act involving narcotics within the State.  So began the “status-act” distinction whereby only an act could be the basis for the application of criminal laws.  Six years later, the Supreme Court issued a fractured decision whereby the plurality appeared to limit Robinson to its unusual facts and upheld a conviction under the Texas penal code against a defendant convicted of being drunk in public.  Rejecting the efforts of the defendant to fall within Robinson’s protection against being convicted of a mere “status,” the four-member plurality of the Court found that “the present case does not fall within that holding, since appellant was convicted, not for being a chronic alcoholic, but for being in public while drunk on a particular occasion.”  Powell v. State of Texas, 392 U.S. 514, 532 (1968). However, the four-member dissent contended that the defendant “was accused of being in a condition which he had no capacity to change or avoid” in that he was suffering from the “disease of chronic alcoholism.”  Id. at 568.  The plurality responded that it would be revolutionary for the criminal law to require an inquiry into whether a defendant acted under compulsion or in a manner that was morally blameworthy; an unlawful act was enough to find guilt.  See id. at 545.

The question of whether, and to what extent, a defendant could claim that he was being unconstitutionally punished for a “status” in violation of the Eighth Amendment lay largely dormant for decades until, in the context of homelessness, it exploded with the Martin case in 2019.  Since the Martin decision, litigation between cities and homeless advocates has made clear the tension between the desire of governmental authorities to enforce their police powers for the public good and the desire of homeless advocates to protect the homeless from criminal and civil penalties for the need to find somewhere to sleep.  Critics of the Martin decision have argued that the complex policy judgments involved must be left to the legislature and that Martin and its progeny usurp the authority of legislatures to weigh competing needs of the public and the homeless.

While the legal debate may be interesting to lawyers as a matter of constitutional law, property owners have much more practical matters to confront.  Whether in the context of multifamily, office parks or residential, owners have faced an array of problems from the increasing presence of homelessness in both urban and suburban environments.

The urban multifamily landlord faces the complaints of tenants who are unhappy with the harassment they may face at the front door where homeless persons congregate.  “I don’t pay rent to have to wade through a homeless camp into the building” is a common refrain heard by landlords in San Francisco.  Tenants may threaten to file suit under the San Francisco Rent Ordinance and common law if the landlord fails to provide reasonable security.  When landlords install security cameras, some tenants appreciate it, while other tenants complain that security cameras invade their privacy.  When landlords take steps to try to reduce homelessness near an apartment building, such as by installing planters on the sidewalk, homeless advocates may contact the San Francisco Department of Building Inspection to cite the landlord for installing an alleged sidewalk obstruction.  In addition to the complaints of tenants, landlords have to consider the complaints of employees who manage the building and vendors who supply it, including potential safety issues that may arise when mentally ill or addicted persons loiter near the building.  In this manner, the landlord is put in the unenviable position of trying to comply with contradictory legal obligations to protect tenants while allowing for homelessness, all in the midst of a massive social problem that cannot be cured by the landlord.  When the landlord appeals to the city for aid, the city often states that its hands are tied by the Martin decision and its progeny, as exemplified by an injunction issued by a San Francisco federal court that enjoined San Francisco from enforcing its anti-encampment procedures whereby it would offer shelter and, if the offer was refused, require homeless persons to move out of encampments.  See Coalition on Homelessness v. City and County of San Francisco, 90 F.4th 975 (9th Cir. 2024).

The suburban multifamily landlord often faces a very different situation.  Most of the courts’ attention has been focused on the question of whether a homeless person on the urban sidewalk has the right to sleep on the sidewalk and, if so, whether the person also has the right to set up a tent and thereby obstruct the sidewalk by creating an encampment.  In contrast, very little attention has been paid to the question of whether a person living in an RV, van or car has the right to park on a city street indefinitely instead of renting a space for the vehicle.  Once a street becomes known as a location for vehicle campers, it often can attract dozens of other vehicles, many of which are nearly broken down or become broken down during extended stays.  Such lines of vehicles can appear in front of office buildings or industrial parks, creating an unattractive and potentially dangerous environment for employees, vendors and customers and also increasing property crime on the business. Again, the landlord is faced with complaints and the threat of litigation by persons negatively impacted by such vehicle encampments.

Courts have generally held that a city has the obligation to “bag and tag” the possessions of a homeless person when offering shelter, so that the person may reclaim his possessions later.  See, e.g., Coalition on Homelessness v. City and County of San Francisco, 647 F.Supp.3d 806 (N.D. Cal. 2022).  In Grants Pass, the Ninth Circuit equated persons living on streets to persons living in vehicles and concluded, without meaningful analysis, that they were affected in the same way by anti-vagrancy ordinances.  Grants Pass, 72 F.4th at 888.  However, there is a practical distinction unaddressed by the Ninth Circuit: How is a city supposed to offer shelter to a person living in a vehicle, including the requisite “bagging and tagging” of the person’s possessions?  A large RV cannot simply be bagged; it would have to be impounded.  Many such RVs are broken down; thus, assuming the person has a right to reclaim the RV after living in a shelter for some period of time, how does he do so if, as is often the case, the RV is not even drivable?  Removing a vehicle encampment may present a greater challenge than a sidewalk encampment.

In regard to persons camping in vehicles, Grants Pass raises more questions than it answers.  The Ninth Circuit held that a city may ban the use of tents by homeless persons because there is only a constitutional right to sleep, not maintain a structure.  Grants Pass, 72 F.4th at 895 n.34.  If so, then should a city have the right to ban sleeping in a vehicle?  Separately, the district court in Grants Pass said it was “remarkable” that the city would argue that vehicle campers could instead camp on federal or county property outside city limits because, the court observed, such camping on federal property was illegal: “Homeless people who attempt to live on BLM land are subject to trespass prosecution under 43 C.F.R. 2808.10, fined $330, and summoned to this Court. Likewise, Josephine County does not welcome non-recreational camping in its parks.”  Blake v. City of Grants Pass, 2020 WL 4209227, at *7 (D. Or. 2020).  But if the Constitution requires cities to allow vehicle camping on city property, why does the Constitution not similarly require the federal government to allow it on federal property?  The federal government seems to be delegating the homeless problem to local authorities while at the same time, in the view of a dissenting judge, imposing federal restraints on their legislative judgments and thus exhibiting a “disregard for the state and local authorities that our constitutional system entrusts as the primary protectors of the health, safety, and welfare of our communities.”  Grants Pass, 72 F.4th at 933.

Regardless of the Supreme Court’s ruling, problems involving homelessness will remain.  For property owners, the outcome of the case may have a substantial impact on whether local governments will have authority to seek legislative solutions and will be able to partner with property owners and other stakeholders to address social ills that affect their properties as well as their employees, customers, vendors, tenants and others.

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Update on Corporate Transparency Act: Federal Court in Alabama Holds CTA Unconstitutional

On March 1, 2024. a U.S. federal court in Alabama declared the Corporate Transparency Act (CTA) to be an unconstitutional exercise of congressional authority, and suspended its enforcement against the plaintiffs in that case.  National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.).  The CTA requires all companies to file a beneficial ownership information report (BOIR) by the end of 2024.  Companies formed in 2024 must file within 90 days of formation, unless an exemption applies.  Other court challenges to CTA requirements are emerging to raise questions of when or if a company is required to file. We expect the appeals process in these cases to stretch well toward the end of the year, or more likely into 2025.  Unless there is a nationwide order, companies remain required to file BOIRs for 2024 while cases make their way through the system.

The expectations of FinCEN itself are clear – companies will be required to comply with CTA.  FinCEN issued a release notifying companies that the reprieve granted in the NSBU case applies only to the NSBU plantiffs.  https://fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448  The NSBU case may be one of several cases that could cause companies to hesitate in their CTA processes.  Confusion caused by these court challenges may cause companies to delay analysis of their CTA obligations and/or collection of necessary information, making a filing on a timely basis difficult or impossible.  Meanwhile, the safest course is for companies to continue their BOIR filing processes, while the Government has appealed the NSBU decision.

The appeal will turn on the NSBU’s challenge to, among other things, the nexus between the regulated activity and interstate commerce.  Such Commerce Clause challenges have been considered long shots in the past, because settled law provides that the Commerce Clause doctrine supports federal regulation of “intrastate activities that substantially affect interstate commerce.”  Here, the stated purpose of the CTA is to “help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States.”  Legislative purposes far less connected to interstate commerce have survived judicial scrutiny, and money laundering activity is logically an activity that affects interstate commerce.  In the end, the NSBU court concluded that Congress lacked authority to enact the CTA because “[t]he proximity and degree of connection between the formation of an entity and its activities is too attenuated[.]”  Essentially, the argument is that merely forming a company does not suggest that it will operate in interstate commerce.  At the same time, the Court noted that Congress could have “easily” written the CTA to pass constitutional muster, raising the possibility that Congress may choose to modify the legislation.  Further, the NSBU court acknowledged that FinCEN’s 2016 Customer Due Diligence rule “provide[s] FinCEN with nearly identical information.”  As such, the NSBU court struck down the CTA while acknowledging a similar rule that provides nearly identical information is constitutionally acceptable.

The NSBU court also rejected other bases for Congressional power to enact the CTA legislation, including Congress’ broad powers to oversee foreign affairs and national security and impose taxes and related regulations.  The NSBU court concluded that the lack of constitutional authority to pass the act in question was “clearly demonstrated.”

In finding that Congress was not acting within the scope of its foreign affairs powers, the NSBU court reasoned that “[n]o principle of corporation law and practice is more firmly established than a State’s authority to regulate domestic corporations.”  It found that foreign affairs authority did not extend to purely internal affairs, such as formation of corporations under state law.  While the court conceded that the CTA is not a direct regulation of corporate formation, it decided that there was not adequate nexus between the purpose of the act and the foreign affairs power.  The NSBU court found objectionable that the CTA was a federal reporting requirement imposed on entities that voluntarily incorporate solely under state law, and that might operate exclusively within their state’s borders.

The NSBU court likewise rejected Government arguments that Congress was acting within its taxing power in enacting the CTA.  The Government argued that “the collection of beneficial ownership information is necessary and proper to ensure taxable income is appropriately reported.”  The law expressly allows the Department of the Treasury to access BOIRs for tax administration purposes.  The court concluded that providing access to the CTA’s database for tax administration purposes is not enough to establish a sufficiently close relationship to the Constitution’s grant of taxing power to Congress.

The Government is appealing the decision in NSBU, and some commentators have read the NSBU case as providing a roadmap for Congress to amend the CTA to more clearly invoke the Constitution’s grants of lawmaking authority.  This issue may ultimately be decided by the United States Supreme Court.  While there may be interest in challenging well-settled Commerce Clause jurisprudence, few justices have gone as far as Justice Thomas, who has argued that “post-1937 Commerce Clause jurisprudence is unfounded and un-originalist.”  While it may be possible to curtail Congress’s power to pass laws affecting interstate commerce, such efforts still face an uphill battle.  Meanwhile, companies need time to collect information and process filings, and do what they need to do to avoid FinCEN penalties.

We will continue to provide updates on this case and others that may emerge, as well as provide guidance on the application of the CTA.  Unless a more definitive nationwide decision is reported, FinCEN has stated that it intends to continue its enforcement of the CTA.

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Lubin Olson Celebrates Women’s History Month

It’s Women’s History Month. Partner Cherie Song sat down with Ellen Cirangle, former managing partner and litigation department chair at LON to ask about how she got started in law, the biggest influences on her career and her advice to younger attorneys.

  1. What is the most important lesson you’ve learned over your career?

Not to let your ego interfere with the process. Litigation is a team sport, and the client will always be better represented through a team effort, as different individuals bring different perspectives and ideas to issues. Being able to recognize and accept that someone else has a better approach than you to a problem is key to providing clients with the best representation.

  1. What’s the most important personality trait someone would need to be successful in law/litigation?

To care about the client, the case, the result.  If you do not love the law and what you are doing, you will not be a successful litigator.

  1. Can you talk about a mentor or someone who has played a significant role in your legal career?

In my first law firm job I was able to participate as part of a team of lawyers in several significant trials. There were two senior partners – Fred Bartlit and Don Scott – one an amazing writer, and one a renowned trial lawyer. They both spent significant amounts of time teaching me to advocate through writing and how to prepare for trial and how to win. I have taken those lessons with me throughout my career, and they have had a tremendous impact on my abilities, and I will always be grateful for the time they took to mentor me.

  1. What’s the best piece of advice you’ve ever received, and how has it influenced you?

Law is a service business.  We are here to serve the clients, and we need to understand what drives them and what a “win” looks like to them, rather than litigating in a vacuum without that understanding and goal. I try with all my clients to understand their needs, and to keep communication flowing so that we are working for the same goals.

  1. What is one piece of advice you’d give to someone starting out in law?

Litigation is an incredibly rewarding job – it’s mentally challenging and stimulating, and you get a chance to interact with interesting people and situations, and to help people navigate their legal issues. If you enjoy being a litigator, it’s a great and rewarding career. Seek out mentors early on who can help you grow your skill set.

  1. What was your first legal job?

I was a law clerk for the Honorable Ann Aldrich in the United States District Court, Northern District of Ohio in Cleveland. Being able to see court in action for a year before starting in private practice gave me tremendous confidence that I could be a successful trial attorney.

  1. What’s been the most memorable moment of your career so far?

There have been so many! I have been lucky to have a lot of interesting cases and clients and high-profile cases. But one case I think of often was when I was practicing in Denver, I heard on the news that a local animal rescue group was being evicted immediately and they had no place for the dogs to go.  I stopped by their property, introduced myself and offered to help. I was able to get an injunction stopping their eviction for several months and negotiate a time frame for them to get the animals new shelter.  Anyone who knows me knows I am a huge dog lover so the fact I was able to help has always stuck with me.

I have also been very proud of the successes our team has had going against large firms with vast resources and obtaining victories against market manipulators.

  1. Who did you look up to growing up?

My mom. She worked full time as a nurse while raising three of us. At the age of 40 after my parents divorced she went back to school to obtain her Registered Nursing degree so she could better herself and her earning potential to support our family.

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Lubin Olson Congratulates Bay West Group for Their Real Estate Deal of the Year Achievement

Lubin Olson congratulates our clients, Bay West Group and Pacific Development, Inc., for their achievements at this year’s San Francisco Business Time’s Real Estate Deals of the Year award ceremony on March 28, 2024. Their project, the Launch at Alameda Marina, is a 368 unit multifamily rental project that is the first building to deliver as part of the larger Alameda Marina Master Plan, which has been in the works for over a decade.

LAUNCH @ Alameda Marina is the first phase of a massive redevelopment of a 44 acre historic World War II Shipyard along the Oakland Estuary. The project overcame numerous challenges involving industrial site conditions, sea-level rise, a difficult political climate, initial opposition from multiple neighborhood organizations, historic and cultural sensitivities, and negotiations with multiple agencies asserting their jurisdictional authority. The project involved the rezoning from Industrial to Mixed-Use Multifamily on an island which previously prohibited multifamily (Measure A). The project sponsor worked with the City of Alameda to execute a 66-year Tidelands and Marina Lease agreement, which requires that the entire site be protected from end of century sea level rise. The master development constructed a ¾ mile long seawall at a cost of $35M. The project involved 13 different agency approvals, including approvals from the US Army Corps of Engineers, the Bay Conservation and Development Commission, and the Alameda County Department of Environmental Health.

Lubin Olson attorneys Charles Olson and Carolyn Lee provided their advice and counsel throughout the entitlement process of this multi-phase project. Mark Lubin, Beth Anderson, Lorraine Madera, Audrey Baker and Leon Tuan advised our clients in matters related to the project’s acquisition, financing, commercial leasing and joint venture formation.

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Sweeping Victory for Lubin Olson Land Use Group

In a sweeping victory for the University of California, San Francisco, the California Supreme Court has denied the petition for review filed by appellants in Yerba Buena Neighborhood Consortium, LLC, et al v. Regents of the University of California/San Franciscans for Balanced and Livable Communities v. Regents of the University of California (2023) 95 Cal.App.5th 779, a partially published opinion of the First District Court of Appeal, which upholds the University’s Environmental Impact Report for the
Comprehensive Parnassus Heights Plan (the “CPHP”).

The CPHP is a planning proposal for a set of individual projects and goals to be completed at the Parnassus Heights campus over the next thirty years, including as its centerpiece the construction of a new state-of-the-art hospital. By denying the petition for review, the Supreme Court has affirmed the First District’s decision in full, which upholds the trial court’s denial of all issues alleged under CEQA by Petitioners.

Lubin Olson attorneys Charles Olson, Carolyn Lee, and Philip
Sciranka represented the University in the preparation of the EIR, trial court litigation, and appeal.

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Client Alert Regarding the Corporate Transparency Act

On January 1, 2024, a new law went into effect that requires the attention of every corporation, limited liability company, limited partnership, or other legal entity formed in the United States.  Unless an exemption applies, the Corporate Transparency Act (the “CTA”) will require entities that register with any Secretary of State in the United States to file personal ownership information with the US Department of Treasury –Financial Crimes Enforcement Network (FinCEN).

For each affected entity, the CTA requires a separate federal filing disclosing personal information of every individual who is considered a “beneficial owner” of the entity, meaning those persons who directly or indirectly own (or have the right to receive) 25% or more of the entity or who have significant authority or influence over important business decisions – board members, and senior officers and other persons or entities who are important decision makers.   For many entities, the determination of who would be considered a “beneficial owner” of the entity under the CTA is not obvious and may require detailed analysis.

The new law also requires new entities to provide personal information for “company applicants,” meaning (a) the individual who is responsible for filing the documents that created the entity or (b) the individual who is primarily responsible for directing or controlling the filing of the relevant formation or registration document by another. Legal counsel can be considered a company applicant if they meet these criteria.

Entities formed prior to 2024 will have until January 1, 2025 to make their initial filing.  Entities formed in 2024 must make their initial filing within 90 days after formation.  Entities formed in 2025 and after will have only 30 days after formation to make the filing.  Filers must report changes to information for an entity within 30 days after a change.  Willful failure to comply with the filing requirements can result in civil and criminal penalties, and those penalties can flow to individual senior officers of an entity.

We can assist in determining whether exemptions from the new filing requirement apply.  The broadest exemption will be for entities that employ 21 or more full time employees, have a physical office and have annual gross receipts or sales of at least $5,000,000.  Other exemptions exclude public companies, banks, insurers and certain individuals or entities that already report personal information, such as nonprofits, insurance brokers, accountants, venture fund advisors and securities advisors.  Each entity, including subsidiaries and affiliates, must register or qualify for an exemption.

We recommend that each of our clients adopt provisions for company bylaws, operating agreements, limited partnership agreements and/or equity issuance agreements, as applicable, authorizing the collection and reporting of personal information.  Amendments should be broad enough to allow the entity to make necessary FinCEN filings while still remaining in compliance with applicable privacy laws.  The firm has forms of amendments ready for our clients’ use that also obligate beneficial owners to report any changes to required information so that the entity can inform FinCEN of any changes within the 30-day window to report any changes.

The provisions of the CTA are detailed and the registration process itself can be confusing, as evidenced by FinCEN’s own 57-page compliance guide.  We are happy to provide advice to determine whether the filing requirement applies, to answer questions on how to file and to advise on any other questions relating to the new law.

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