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Lawyer-to-Lawyer 2020 THE MAGAZINE OF THE LOS ANGELES COUNTY BAR ASSOCIATION Referral Guide

JUNE 2020 / $5

On the Cover A Model PLUS LASC T(esla) for COVID-19 the Response Future page 30 Los Angeles lawyer International Jason R. Parnell assesses Criminal Court the challenge posed by the direct sales model of Tesla, Case Inc. to traditional U.S. page 18 automobile franchise law in lightlight ofof currentcurrent economiceconomic and technological conditions page 12 EPL Insurers Obliged to Pay page 24 IRS Criminal Tax Enforcement Update page 10

LOS ANGELES LAWYER - THE MAGAZINE OF THE LOS ANGELES COUNTY BAR ASSOCIATION JUNE 2020, VOL. 43 NO. 4

SPECIAL SECTION 35 2020 LAwyEr-TO-LAwyEr rEfErrAL GuIdE Contents

fEATurES dEPArTmENTS 12 7 President’s Page A Model T(esla) A year of many challenges and for the Future creative solutions By Ronald F. Brot By Jason R. Parnell 9 Tesla, Inc.'s direct sales model is Barristers Tips challenging the efficacy of the long- Copyright and choreography standing U.S. federal and state legal in the digital age framework upon which auto dealership franchises have been based By Harmony Gbe 10 18 Tax Tips The USA and ICC: New IRS fraud enforcement office cracks down on tax crime Friends or Foes? By Steven Toscher, Sandra Brown, and Lacey Strachan By Kate Mackintosh

The International Criminal Court Appeals 40 Chamber recently overturned an earlier Closing Argument ruling denying prosecution of alleged Future of ADR after the coronavirus crimes committed in Afghanistan thus By Jan Frankel Schau allowing investigation of potential parties involved, including members of the U.S. SPECIAL fEATurE armed forces and CIA 30 24 Accessing Justice Employer Violates, in a Pandemic Insurer Pays By the Hon. Kevin C. Brazile By Shaun H. Crosner and Sherri R. Carter

A recent California court of appeal case Los Angeles Superior Court has met has held that an employment practices many challenges in the past, but the liability insurer was obligated to defend a rapid spread of coronavirus exerted California employer in underlying class extraordinary pressure to balance action litigation alleging California Labor public health and safety concerns Code and PAGA violations with access to justice

LOS ANGELES LAWYER (ISSN 0162-2900) is published monthly, except for a combined issue in July/August, by the Los Angeles County Bar Association, 1055 West 7th Street, Suite 2700, Los Angeles, CA 90017 (213) 896-6503. Period icals postage paid at Los Angeles, CA and additional mailing offices. Annual subscription price of $14 included in the Association membership dues. Nonmember subscriptions: $38 annually; single copy price: $5 plus handling. Address changes must be submitted six weeks in advance of next issue date. POSTMASTER: Address Service Requested. Send address changes to Los Angeles Lawyer, P. O. Box 55020, Los Angeles CA 90055. COvEr PhOTO: TOm kELLEr REAL ESTATE DISPUTE CONSULTING

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Immediate Past Chair THOMAS J. DALY

JERROLD ABELES (PAST CHAIR) TOM K. ARA MARA BERKE TERENCE R. BOGA SCOTT BOYER NORMAN A. CHERNIN CHAD C. COOMBS (PAST CHAIR) MICHAEL R. DILIBERTO DANA MOON DORSETT GORDON K. ENG MICHAEL A. GEIBELSON (PAST CHAIR) SHARON GLANCZ STEVEN HECHT (PAST CHAIR) COMM’R DENNIS F. HERNANDEZ HON. MARY THORNTON HOUSE NIKKI MEHRPOO JACOBSON DIANA HUGHES LEIDEN LYDIA G. LIBERIO FLAVIA SANTOS LLOYD PAUL S. MARKS (PAST CHAIR) JANA MARIE MOSER COMM’R ELIZABETH MUNISOGLU LINDSEY F. MUNYER CYNTHIA ANN PEARSON GREGG A. RAPOPORT J. D. REES, III JAN F. SCHAU LACEY STRACHAN BRIANNA JOAN STRANGE RONALD TOCCHINI THOMAS H. VIDAL

STAff Editor-in-Chief SUSAN PETTIT Senior Editor JOHN LOWE Art director LES SECHLER director of design and Production PATRICE HUGHES Advertising director LINDA BEKAS

Copyright © 2020 by the Los Angeles County Bar Assoc ia tion. All rights reserved. Reproduction in whole or in part without permission is pro hibited. Printed by R. R. Donnelley, Liberty, Missouri. The opinions and positions stated in signed material are those of the authors and not by the fact of publication necessarily those of the Association or its members. All manuscripts are carefully considered by the Editorial Board. Letters to the editor are subject to editing.

LOS ANGELES LAWYER JUNE 2020 4 LOS ANGELES LAWYER IS THE OFFICIAL PUBLICATION OF THE LOS ANGELES COUNTY BAR ASSOCIATION 1055 West 7th Street, Suite 2700, Los Angeles CA 90017-2553 Telephone 213.627.2727 / www.lacba.org

LACBA ExECuTIvE COmmITTEE President RONALD F. BROT President-Elect TAMILA C. JENSEN Senior vice President BRADLEY S. PAULEY vice President JO-ANN W. GRACE vice President Of diversity, Inclusion & Outreach PHILIP H. LAM Immediate Past President BRIAN S. KABATECK Treasurer KRISTIN ADRIAN Interested in writing Assistant vice President TBD legal articles for Assistant vice President Los Angeles Lawyer TBD For guidelines and article submission, contact Barristers/young Attorneys President Susan Pettit at [email protected] DIANA ARIELLE SANDERS Barristers/young Attorneys President-Elect SHARON GELBART Executive director/Secretary STANLEY S. BISSEY

BOArd Of TruSTEES KRISTIN ADRIAN SARVENAZ BAHAR JULIA L. BIRKEL DAMON MICHAEL BROWN BRANT H. DVEIRIN GARY A. FARWELL JOHN F. HARTIGAN AMOS E. HARTSTON ROY J. JIMENEZ RICHARD L. KELLNER EVE LOPEZ JEFFREY B. MARGULIES JEANNE L. NISHIMOTO ANN PARK BENJAMIN G. SHATZ ED SUMMERS KENDRA THOMAS KEVIN L. VICK

AffILIATEd BAr ASSOCIATIONS ASSOCIATION OF SOUTHERN CALIFORNIA DEFENSE COUNSEL (ASCDC) BEVERLY HILLS BAR ASSOCIATION (BHBA) CENTURY CITY BAR ASSOCIATION (CCBA) CONSUMER ATTORNEYS ASSOCIATION OF LOS ANGELES (CAALA) CULVER MARINA BAR ASSOCIATION (CMBA) EASTERN BAR ASSOCIATION OF LOS ANGELES COUNTY GLENDALE BAR ASSOCIATION (GBA) IRANIAN AMERICAN LAWYERS ASSOCIATION ITALIAN AMERICAN LAWYERS ASSOCIATION (IALA) JAPANESE AMERICAN BAR ASSOCIATION (JABA) JOHN M. LANGSTON BAR ASSOCIATION LGBT BAR ASSOCIATION OF LOS ANGELES (LGBT BAR LA) MExICAN AMERICAN BAR ASSOCIATION (MABA) PASADENA BAR ASSOCIATION (PBA) SAN FERNANDO VALLEY BAR ASSOCIATION (SFVBA) SANTA MONICA BAR ASSOCIATION (SMBA) SOUTH BAY BAR ASSOCIATION (SBBA) SOUTHERN CALIFORNIA CHINESE LAWYERS ASSOCIATION (SCCLA) WOMEN LAWYERS ASSOCIATION OF LOS ANGELES (WLALA)

LOS ANGELES LAWYER JUNE 2020 5 FROM THE CHAIR

Tyna Thall Orren

enry Thoreau decamped ciation, which has been struggling with to Walden Pond to live several chronic problems for several years. “deliberately.”1 Sheltering When COVID-19 hit, courts closed and in place during a chaos reigned in the legal community, Hpandem ic would have LACBA rose to the occasion. Within days of worked just as well. the lockdown orders, LACBA’s website On April 3—day 15 of statewide safer-at- became the wellspring of news for the Los home orders—there were 4,566 confirmed Angeles legal community. I now check the cases of COVID-19 in Los Angeles County, LACBA website daily. I can’t imagine including 89 deaths. Three weeks later, functioning in the current legal environ - there were 19,527 cases countywide, ment without it. including 913 deaths.2 There will be more by LACBA’s practice sections have re - the time this issue of Los Angeles Lawyer sponded to prohibitions on public gather - reaches you. Hopefully, the rate of increase ings by moving programming—at lightning will have slowed. speed in some cases—to web-based Living with the pandemic has taught us venues. That strategy, in the long haul, all a lot about some unexpected things. I promises to solve the chronic problem of have learned to make face masks and bringing LACBA community life to folks in flourless cookies, use Zoom, and check Lancaster and other far-flung parts of the LACBA’s website for updates from the county. Thank you, LACBA leadership and courts before doing anything related to a sections for those miracles. court proceeding. I also have learned a ton We at Los Angeles Lawyer aspire and about living deliberately. These days I intend to continue being a vital part of all deliberate everything—from “Do I really that LACBA does to keep this legal commun - need to rub my eyes?” to “Do I really need to ity connected during the current crisis and send that snarky e-mail?” When beyond. Thanks for reading. Our mission is circumstances are shifting, everything gets to help you, in crisis times and normal times, reevaluated. When that is happening, new find creative approaches and solutions to approaches to chronic problems, as well as the challenges your practice meets. n creative approaches to onrushing new problems, can materialize. 1 HENRY DAVID THOREAU,WALDEN AND CIVIL DISOBEDIENCE 62 Former Chicago Mayor Rahm Emmanuel (Riverside Ed., 1960). 2 See L.A. County Dept. of Public Health, Learn More has taken political flack for applying his About COVID-19, http://publichealth.lacounty.gov 2008 maxim, “Never allow a crisis to go to /media/Coronavirus/. waste,” to COVID-19’s economic fallout.3 But 3 See, e.g., Rahm Emanuel on coronavirus response: the maxim’s point is spot-on. Crises force us “Never allow a crisis to go to waste,” Fox News Channel (Mar. 23, 2020), https://www.foxnews.com/politics to deliberate, or we just plain won’t rise to /rahm-emanuel-on-coronavirus-response-never-allow the immediate occasion. If we do rise to the -a-crisis-to-go-to-waste. immediate occasion, and then have the imagination to apply to long-standing Tyna Thall Orren is the 2019-20 chair problems ideas that started as crisis-focused of the Los Angeles Lawyer Editorial ones, we may, as individuals, communities, Board. She is an appellate attorney and or as a world community, pull ourselves out a partner in the firm of Orren & Orren of some ruts or blaze some new paths. in Pasadena, California. A good example of this is our bar asso -

LOS ANGELES LAWYER JUNE 2020 6 PRESIDENT’S PAGE

Ronald F. Brot

y term as president of the Los enlarged. This year, our members and law were fully engaged, ultimately reporting with Angeles County Bar Association firms throughout the county joined in substantial recommendations. We were ends on June 30, and I am nearly supporting the projects. exhilarated by the level of energy and activ- incredulous that my year of ity. The future seemed more promising than Mstewardship of our beloved bar Practice Groups it had in years. Then, COVID-19 arrived. association will soon be complete. Quite a Our practice sections and committees began As the pandemic struck, we re stricted term it has been. I began with a set of goals the year with a robust slate of planned activi- public access to our headquarters to protect formed over years of service in the practice ties and programs. The newly formed Privacy our staff, then restricted member access, sections, on the board of and Cybersecur ity Section and, then, transferred the entire LACBA staff trustees, and then as promptly launched a year of to remote working status. Seamlessly, our president-elect. Among activities and events. Soon extraordinary staff relocated to their homes these goals were achieving after, LACBA was one of the and were up and running, ready to serve. But financial stability, ending the first major bar associations in who would they serve? And how? Our mem- membership decline, and the country to welcome a bers largely left their offices and began work- developing a strategic plan Cannabis Section. From the ing from home. The flow of justice in our for the future. I was also onset, the LACBA Cannabis court system was reduced to a trickle as our determined to demonstrate Section has been active and courtrooms were available only to the most that LACBA remains a vital prominent, gathering rave urgent matters. What would LACBA do? and relevant organization reviews throughout our com- True to its long history of serving the meeting the needs of the munity and beyond. Likewise, lawyers of Los Angeles County, LACBA lawyers of Los Angeles the revitalized LACBA Small responded to the pandemic in numerous County, regardless of the Firm and Sole Practitioner ways. We began publishing the LACBA Weekly nature of practice, size of Section continued its remark- Response Newsletter designed to provide practice, or location of practice. able resurgence with strong activities and updates from our courts and legal organiza- As the year began, I was thrilled by the events fueled by seemingly endless energy tions. We reached out to our members to palpable new energy and enthusiasm evident and commitment. assure them LACBA would be here for them at the installation dinner last June, which set We also began a Lawyer Well-Being during this critical time. I invited our members an attendance record. Two task forces were Project to assist lawyers facing alcohol abuse, to reach out to LACBA, and to me directly, if formed and charged with missions to insure substance abuse, or mental and emotional there was anything we could do to help. our future: the President’s Task Force on issues. At the same time, in response to the Financial Stability and Sustainability and the State Bar Task Force on Access Through Partnership with the Court President’s Task Force on Membership. I also Innovation of Legal Services (ATILS), LACBA The Los Angeles Superior Court has long appointed a Strategic Planning Committee formed a committee that polled our mem- recognized LACBA as a vital justice partner. charged with developing a strategic plan to bership and voiced a strong response, giving Presiding Judge Kevin C. Brazile selected help guide LACBA to a thriving future. the individual members of LACBA the LACBA to communicate the voice of the We also faced the dilemma of support- strength of a united presence from one of court to the lawyers of Los Angeles County ing the exemplary work of our pro bono the largest local bar associations in the coun- and to the many affiliate, affinity, and other organization, Counsel for Justice (CFJ), try. Our Section Leaders Retreat helped bar associations throughout the county. while recognizing the need for financial self- launch what I believe can become one of our sufficiency. I visited each of the projects most significant membership benefits, our e 2019-20 president of the Los Angeles before my term began. I witnessed firsthand Structured Networking Project which will County Bar Association, Ronald F. Brot the deep commitment of the directors of our operate networking hubs throughout Los pro bono legal services projects: the Dom - Angeles County at no or low cost to LACBA is a founding partner and chairman of estic Violence Legal Services Project, Vet - members. Brot Gross Fishbein and a noted family erans Legal Services Project, Immigration law attorney. He is a past chair of Legal Assistance Project, and AIDS Legal COVID-19 Pandemic LACBA’s Trial Lawyers Section (now the Services Project. The great benefits these LACBA committees were in full swing. LACBA Litigation Section) and Family Law pro bono projects provide to our community sections hummed with activity. The task Section, among others. must be sustained and perhaps even forces and the Strategic Planning Committee

LOS ANGELES LAWYER JUNE 2020 7 LACBA was quickly recognized as the place remain in the throes of the pandemic. be convenient to do so. to learn the latest announcements from the Particularly notable is the Structured Our programming has become more LASC presiding judge, the California Judicial Networking Program’s remote program- accessible as a result of our new web-based Council, and the Chief Justice of the Calif - ming. The networking hub concept was experiences. I anticipate a more robust slate ornia Supreme Court. intended to be a face-to-face experience, of online programming by LACBA and its LACBA was also asked for input on how but the program quickly switched to an sections, including simulcasts where some the court would operate with minimal per- online format. The Virtual Networking members may attend in person while others sonnel and how the court should resume attend online. Our new networking hubs will operations when restrictions are lifted. The be in full operation in the coming year, with presiding judge appointed the LACBA presi- One need only look some operating in person and others meet- dent to the LASC Working Group, and the ing virtually. We expect to have 10 to 20 hubs supervising judge of the Civil Division ap - at the way LACBA in the next 12 months. pointed the LACBA president to the court’s responded to the As LACBA continues to demonstrate its COVID-19 Advisory Council. LACBA is hon- leadership and service to the lawyers of Los ored and privileged to participate in these pandemic to appreciate Angeles County, the courts, and our com- groups on behalf of our members. munity, I also anticipate that an increasing As our community was largely sent home the strength of LACBA’s number of firms will support LACBA mem- and gatherings were unsafe, LACBA activities greatest resource—our bership and involvement in our activities and and events came to an abrupt halt. Section legal services projects. executive committee and other committee members. The dedicated meetings could not take place. Larger pro- response by LACBA Looking Ahead grams and events were postponed indefi- LACBA embarks upon the new year with a nitely or outright cancelled. Among the members has been stable membership base, a realistically bal- casualties was LACBA’s first Outstanding anced budget, and a long-term strategic Service Awards Luncheon where we resilient, resurgent, and plan. Our sections and committees are thriv- intended to present well-deserved honors to remarkable. I have every ing. Our pro bono legal services projects are those individuals and entities who provided serving the needs of our community. LACBA exemplary service to LACBA and to our pro confidence that LACBA’s has regained its position of prominence bono projects during the past year. Also to within the legal community and the commu- be recognized were law firms throughout future will be well nity at large. the county who have supported LACBA by supported by our For more than 140 years, LACBA has enrolling all of their Los Angeles lawyers as stood as an organization of lawyers, by LACBA members. members, who will lawyers, and for lawyers. Our most important asset has always been, and always will be, our Zoom Technology increasingly come from members who find in LACBA the place where LACBA responded to the limitations imposed all parts of our county. we make important personal relationships, by local and state government with creativity professional relationships, and business rela- and determination. Staff was promptly Program is generating rave reviews. tionships. I am pleased to report LACBA’s instructed on Zoom videoconferencing The operation of our legal services pro- membership has again become passionate technology acquired by LACBA, which jects was significantly hampered by the dis- and committed for all that LACBA has been hosted the first public appearance by tancing limitations required in response to and yet will be. Presiding Judge Brazile, Assistant Presiding COVID-19, but each of the CFJ projects Passing the gavel to our new president Judge Eric C. Taylor, and LASC Executive found a way to continue. The needs of our Tamila Jensen will be bittersweet for me. I Officer Sherri R. Carter on the state of the community did not stop with the onset of have truly loved every minute of my presi- court during COVID-19. More than 1,200 the coronavirus and neither has the dency. It is comforting to know that LACBA lawyers attended the program on the Zoom response from CFJ. will be led by such an experienced and capa- platform. Our board of trustees and execu- ble successor. Yet, I will miss the challenges tive committee meetings also moved to Membership Response of each new day, and the satisfaction of Zoom. Not a single meeting was missed as One need only look at the way LACBA working with our staff, officers, and trustees we learned that we could utilize technology responded to the pandemic to appreciate to find solutions to each situation as it arises. to conduct our regular business. It was not the strength of LACBA’s greatest resource— I am grateful for the opportunity to add my business as usual, but we managed to con- our members. The dedicated response by legacy to the contributions of our extraordi- duct all of our usual business. LACBA members has been resilient, resur- nary leaders of the past. It has been an expe- The sections soon followed. Executive gent, and remarkable. I have every confi- rience I will always cherish. In the end, we committees began to meet using the tech- dence that LACBA’s future will be well were interrupted by an unexpected storm of nology of their choice. Most use Zoom. supported by our members, who will i n - unprecedented magnitude. I am grateful to Some choose Webex. Programming using creasingly come from all parts of our have faced the storm and held the wheel as Zoom technology has expanded and is now county. As we have assumed a stronger pres- we maintained our course and charted a offered using online technology, with CLE ence using technology, I expect that more path for a successful future. We will be the credit available. While our sections have the and more members from the heartland of better for it. autonomy to set pricing, as president I have Los Angeles County will be attracted to the As I am so fond of saying, it is a great time encouraged LACBA sections to provide free substantial benefits of membership without to be a member of LACBA, and it was a great programming to our members while we traveling to attend in person when it may not time to be your president. n

LOS ANGELES LAWYER JUNE 2020 8 BARRISTERS TIPS

Harmony Gbe

ne of the best ways to stand out in a control the use and distribution of a copy- hustle step, the grapevine, or the second crowded legal marketplace is to find a righted work, including, for instance, repro- position in classical ballet.10 These movements niche practice. One way a young ducing the work, performing the work publicly, may, however, serve as the choreographer’s attorney can carve out a niche is to and authorizing the creation of derivative basic material in much the same way that Oconsider how his or her background works.3 While the courts will determine words are the writer’s basic material. Choreo - can serve a particular market need. Another whether Epic Games violated any copyright g raphic works are composed of dance-step way is to analyze current market trends and laws in these pending actions, the U.S. Supreme building blocks which together can create resulting legal gray areas, especially in today’s Court has made it clear that copyright owners expression that is eligible for copyright pro- rapidly changing technological landscape. must successfully register their work with the tection. Ordinary motor activities, functional Exploring my own skills and interests as a U.S. Copyright Office before filing an infringe- physical movements, feats of skill or dexterity, former professional dancer exposed me to ment suit.4 Indeed, original choreography is and athletic activities, like a yoga pose, a golf the growing need for choreographers to seek protected by copyright the moment it is cre- swing, or an exercise routine, also are ineligi- copyright protection for their choreography. ated, but the choreographer cannot fully ble for registration as choreography.11 Finally, The popularity of dance has skyrocketed in enforce his or her rights unless it is registered. movement intended to be performed by ani- the last decade. From viral dance challenges Thus, choreographers aiming to claim credit mals, machines, or other animate or inani- dominating social media to such television for a popular dance routine are well advised to mate objects is not copyrightable.12 shows as Dancing with the Stars and So You pursue copyright registration. As dance continues to spread to the masses Think You Can Dance? airing in prime time, Although dance has always been a part of through popular online platforms, choreogra- dance has taken center stage in popular cul- the fabric of American culture, the vast majority phers hoping to reap the financial benefits of its ture. New technologies, including easily of choreographic works did not receive copy- commercialization should obtain a valid copy- accessible video recording devices and broad right protection prior to the Copyright Act of right registration as a first step. Moreover, new digital distribution channels such as Instagram 1976.5 Like all other copyright subject matter, lawyers may find this area of intellectual prop- and TikTok, have increased choreographers’ choreography must be an original work of erty practice, or some other area suited to ini- ability to share unique dance routines with authorship fixed in a tangible medium in order dividual habits and preferences, a viable niche people across the world. However, the to gain legal protection.6 The Copyright Act for their own career paths. n increased exposure through social media also does not define an original work, but the U.S. has made it more difficult for choreographers Supreme Court has set the bar for originality 1 Taylor Lorenz, The Original Renegade, N.Y. TIMES, Feb. 13, to receive credit as the originators of every- using a two-part test: 1) the work is the inde- 2020, available at https://www.nytimes.com/2020/02/13 one’s favorite dance trends. For example, pendent creation of the choreographer; and 2) /style/the-original-renegade.html. 2 when 14-year-old Jalaiah Harmon created the the work exhibits some degree of creativity.7 Elizabeth A. Harris, A Real-World Battle Over Dancing Avatars: Did Fortnite Steal the Floss?, N.Y. TIMES, Jan. 11, Renegade dance in her bedroom in Atlanta Registration also re quires the choreographer 2019, available at https://www.nytimes.com/2019/01/11/arts and posted it online, it quickly went viral. to memorialize the choreographic work by /fortnite-floss-dance-lawsuits.html. However, Jalaiah struggled to receive credit capturing it on film or by using standard dance 3 17 U.S.C §106. as the Renegade’s creator while other influ- notation. The Copy right Office considers sev- 4 See Fourth Estate Pub. Benefit Corp. v. Wall-Street .com, encers performing her dance steps benefitted eral nonexclusive factors typical of copy- 586 U.S.__ (2019). 5 17 U.S.C. §102(a)(4). 1 from brand deals and media opportunities. rightable choreographic works, including the 6 17 U.S.C. §102(a). Unsurprisingly, some dance creators are presence of rhythmic movements from a 7 See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, seeking copyright protection for their moves dancer’s body in a defined sequence and space; 345 (1991). and taking alleged infringers to court to pro- dance patterns arranged into an integrated, 8 U.S. COPYRIGHT OFFICE, CIRCULAR 52: REGISTRATION OF CHORE OG- tect their rights. For example, several com- coherent, and expressive compositional whole; RAPHY AND PANTOMIME (Sept. 2017), available at https://www .copyright.gov/circs/circ52.pdf (last visited Apr. 1, 2020). plainants have accused Fortnite videogame dramatic elements such as story or theme; and Id. at 3 8 developer Epic Games of exploiting their dance musical or textual accompaniment. 10 Id. moves without permission, including Fresh Not every dance move qualifies for copy- 11 Id. at 3-4. Prince of Bel-Air actor Alfonso Ribeiro (for the right protection. Choreographic works do not 12 Id. at 4. use of the Carlton dance), rapper Terrence “2 include social dances and simple routines Milly” Ferguson, (for the use of the Milly Rock), such as the electric slide and other line Harmony Gbe is a law clerk in the United and the mother of Russell “Backpack Kid” dances.9 Likewise, individual movements or States District Court for the Central District Horning, (for the use of the Floss).2 Copyright dance steps by themselves are not copy- of California in Los Angeles. law grants choreographers exclusive rights to rightable, such as the basic waltz step, the

LOS ANGELES LAWYER JUNE 2020 9 by Steven Toscher, Sandra Brown, and Lacey Strachan Tax Tips

to appointment as the direc- and procedures to increase IRS Cracks Down on Tax tor of the new Fraud Enforce - enforcement.8 ment Office, Rowe was the An important part of the executive director of Inter - IRS’s strategies to foster vol- national Operations for the untary compliance with the Fraud by Creating a New division. Previously, he had tax laws is through the rec- served as special agent in ommendation of criminal charge of the Los Angeles and prosecutions and/or civil Enforcement Office Dallas field offices and as fraud penalties against tax- assistant special agent in payers committing tax eva- charge of the New Orleans sion. This includes the IRS’s omparing recent field office. Fraud Referral Program Steven Toscher, Sandra annual statistics of The new Fraud Enforce - under SB/SE, which requires Brown, and Lacey criminal investigations ment Office was created to the identification and devel- Strachan are principals and prosecutions by further efforts by the IRS to opment of potential criminal at Hochman Salkin the Internal Revenue detect and deter fraud while fraud and civil fraud penalty CService seems to suggest that strengthening the National cases to be considered in all Toscher Perez P.C. the agency may be shifting Fraud Pro gram. Through taxpayer examinations.9 If an resources away from criminal additional training, resources, examiner detects possible tax enforcement. In Fiscal and ap plied analytics, the IRS fraud, the IRS procedure is Year 2019, the IRS Criminal aims to thwart emerging for the examiner to consult Investigation Division initi- threats in the area of fraudu- with his or her group man- ated 2,485 investigations and lent filings and related activi- ager and then contact a Fraud recommended 1,893 prosecu- ties.7 The National Fraud Referral Program advisor as tions.1 This continues a trend Program is a program within soon as possible for technical seen in recent years of declin- the IRS’s Small Business/Self guidance and advice. In Fiscal ing criminal investigations by Employed Division (SB/SE) Year 2001, the IRS had cre- the IRS. In 2016, the division responsible for coordinating ated within the SB/SE fraud initiated 3,395 investi gations,2 the estab lish ment of nation- technical advisor groups to and, in 2017, it initiated only wide fraud strategies, policies, assist examiners with the 3,019 investigations.3 In 2018, that number had dropped to 2,886.4 This trend coincides with a continuing decline in criminal investiga- tion special agents—in 2019, the division had the fewest special agents since the early 1970s.5 However, it would be a mistake to conclude that the focus at the IRS is shifting away from criminal tax enforcement. To the contrary, the IRS announced on March 5, 2020, the creation of the Fraud Enforcement Office, to be led by Damon Rowe, a veteran of the IRS Criminal Investigation Division.6 Prior RICHARD EWING

LOS ANGELES LAWYER JUNE 2020 10 development of potential fraud cases.10 extraction of data from proprietary receiving notable global attention in Despite these procedures under SB/SE financial software (such as tax prepara- recent years. Two years ago, the Joint for identifying potential fraud cases, tion software), internet activity and his- Chiefs of Global Tax Enforcement (J5) referrals from the IRS’s civil side was the tory analysis, and website preservation.20 was formed with leaders of tax enforce- source of only 7 percent of criminal The criminal investigation division has ment authorities from five countries: cases in 2019.11 Of these, fraud referrals been building its cybercrimes program Australia, Canada, the Netherlands, the from revenue officers handling collec- since 2015.21 United Kingdom, and the United States. tions cases accounted for most of the In late 2017, during closing arguments Noteworthy Trends accepted referrals—an extraordinary for the Organisation for Economic Co- statistic. The largest source of criminal Two recent trends in IRS criminal en - operation and Development (OECD), a cases was the U.S. Attorney’s Office (28 forcement are worth noting. The division five-point action plan was announced.28 percent), other federal agencies (26 per- classifies its investigations into the fol- Point one of that plan called for a focus cent), and investigations that originated lowing program and emphasis areas of on targeted responses to professional with the criminal investigation division fraud: abusive return preparer enforce- enablers of international tax evasion. (15 percent).12 ment, abusive tax schemes, bankruptcy Recognizing that professional advisors However, the IRS’s continued com- fraud, corporate fraud, employment tax and intermediaries can play an impor- mitment to SB/SE’s role in enforcement is enforcement, financial institution fraud, tant role in helping the financial system demonstrated by the July 2019 appoint- gaming, general fraud investigations, run smoothly (or not), recent big data ment of Eric Hylton as commissioner of healthcare fraud, identity theft schemes, leak stories, such as the “Panama SB/SE since he has extensive background international investigations, money laun- Papers” of 2016, reflected that a number and experience in criminal enforcement. dering and bank secrecy act, narcotics- of professionals were enabling some of Indeed, before being appointed to lead related investigations, non-filer enforce- the most complex and global forms of SB/SE, Hylton was the deputy chief of ment, public corruption crimes, and tax crime. As a matter of priority, the the Criminal Investigation Division as questionable refund.22 Although the OECD pledged to increase efforts in this well as executive director of the divi- number of criminal investigations are area of international criminal tax sion’s Office of International Opera - down overall, the Criminal Investigation enforcement. tions.13 Regarding his appointment, Division has been increasing the number The J5 was formed in response to the Hylton stated he is “excited to work of investigations initiated in two of these OECD’s call for action by countries to with the SB/SE team to bring a laser emphasis areas of fraud: 1) employment do more to tackle the enablers of tax focus on our enforcement strategies and tax enforcement and 2) non-filer crime.29 It was created as a platform for initiatives.”14 enforcement.23 the five countries to work together to Employment tax enforcement gather information, share intelligence, data Analytics includes a variety of employment tax conduct operations, and build the capac- Although employee numbers in the evasion schemes, including pyramiding, ity of tax crime enforcement officials. Criminal Investigation Division have in which a business withholds taxes from The ultimate and greater goal, however, been declining, it is focused on making its employees but intentionally fails to is for the J5 to share its successes, new up for that loss by increasing the use of remit them to the IRS; employee leasing, approaches, and findings from its joint data analytics, among other strategies.15 in which a business contracts with out- efforts with the broader international tax Don Fort, chief of the Criminal side businesses to handle their staffing enforcement community. Investigation Division, stated that the needs, but the employee-leasing com- To increase the potential for more division is “working smarter using data pany fails to pay over to the IRS the col- immediate success, as well as, arguably, analytics to augment good old-fashioned lected employment taxes; paying to send a clear message that the J5 coun- police work and find those cases that employees in cash, which also has impli- tries are invested in this venture, each J5 have the biggest impact on tax adminis- cations for the taxpayer’s entitlement to country’s participation is being spear- tration.”16 He has explained that the future social security or Medicare bene- headed by its respective top criminal tax “future for CI [criminal investigations] fits; filing false payroll tax returns and leaders, viz. the heads of tax crime and must involve leveraging the vast amount failing to file payroll tax returns.24 In senior officials from the Australian of data we have to help drive case selec- 2019, initiated employment tax enforce- Criminal Intelligence Commission tion and make us more efficient in the ment investigations increased by over 50 (ACIC) and Australian Taxation Office critical work that we do.”17 Deputy percent to 250 from 162 in 2017.25 (ATO), the Canada Revenue Agency Chief of Criminal Investigation Division Non-filer enforcement is targeted at (CRA), the Dutch Fiscal Intelligence and Jim Lee stated that in 2019 the division individuals who refuse to comply with Invest i gation Service (FIOD), Her “solidified units designed to better use their obligation to file required tax Majesty’s Revenue & Customs (HMRC), data to aid[ ] in finding and solving the returns and pay any taxes due and and Internal Revenue Service Criminal best financial crime cases.”18 This owing, generally based on the long- Investigation (IRS-CI).30 process included seizing 1.25 petabytes rejected arguments that taxes are volun- On June 5, 2019, the first anniversary of digital data in 2019.19 As part of its tary or illegal.26 In 2019, investigations of formation of the J5, these respective cybercrimes program, the division’s initiated of non-filers increased by almost criminal tax leaders met in Washington, forensic analysis for electronic crimes 40 percent to 271 from 206 in 2017.27 D.C. After just one year of working includes dark web activity, encryption together, it was publicly noted that they Enforcement Efforts Go Global and password recovery, deduplication of were all better equipped to conduct joint large data sets, recovery of hidden and Beyond the IRS’s local enforcement operations in the fight against those who deleted data and damaged disk drives, efforts, criminal tax evasion has been Continued on page 38.

LOS ANGELES LAWYER JUNE 2020 11 Cover Story

By JASON r. PArNELL A model T(esla) for the future California, unlike most states that directly prohibit manufacturers from selling vehicles, takes a more balanced approach of addressing manufacturer-dealer potential for competition at the retail level

HE U.S. AUTO INDUSTRY— Crisis taught the Big Three lessons leading national marketing efforts and product sup- a nexus of corporate man- to profound changes in how they do busi- port assist the local dealer in effectively ufacturers, independently ness. After the Financial Crisis bailout, and merchandising (and today, often servicing owned dealers, suppliers, now fallout from the recent coronavirus post-sale) the dealership’s vehicles.4 and workers dominated by (COVID-19) pandemic, a change to current The long-standing relationship between TFord, Gen eral Motors, and Chrysler (De - state laws prohibiting direct sales from U.S. manufacturer and local dealer is a fran- troit’s “Big Three” automakers)—has been auto manufacturers to consumers could chisor/franchisee relationship governed by a staple of the Am erican economy for the lead to greater long-term financial stability a “dealer agreement” outlining each party’s last century. For several decades this busi- in the U.S. auto industry. rights, duties, and responsibilities.5 The ness model generally had much success; New car sales in the United States tra- agree ments generally govern how a dealer however, the latest financial crisis and ditionally have been conducted via a fran- will sell and service the manufacturer’s worst reces sion since the Great De pression chising process in which local dealers act cars, meet sales targets and customer service (the Financial Crisis) necessitated govern- as franchisees under contract with auto objectives, and under what circumstances mental intervention to resuscitate the indus- manufacturers.2 These manufacturers try perform certain warranty services.6 Dealer try, which had become characterized by to exert control over the ways in which agreements also carefully outline the man- saturation, high labor costs, and over- (and the rates at which) their products are ufacturer’s right to terminate a dealer’s expanded dealer networks.1 Revived U.S. sold at the retail level while simultaneously franchise.7 automakers face a unique quandary: to avoiding many of the common-law respon- Congress has legislated many aspects continue the relatively comfortable, cen- sibilities typically associated with a princi- concerning how dealer agreements are en - tury-old business model that nearly led, pal-agent relationship.3 In the automobile forced. In particular, federal law permits save governmental action, to the demise industry context, dealers receive significant dealers to sue manufacturers for damages of the industry or to seek alternatives to benefits in return for giving up so much caused by a failure to act in good faith producing cars and selling those cars control over their business operations. when performing or complying with the through local dealerships. The Financial Additionally, the automobile manufacturer’s express terms of a dealer agreement.8 The

Jason R. Parnell is a corporate associate in the Los Angeles office of Winston & Strawn LLP where he represents public and private companies, investors, entrepreneurs, and investment funds. He is licensed to practice law in California and Florida and is a member of the Executive Committee for the Barristers Section of the Los Angeles County Bar Association (LACBA) as well as the Board of Directors for the LACBA Counsel for Justice. MICHAEL CALLAWAY

LOS ANGELES LAWYER JUNE 2020 12

“Automobile Dealers’ Day in Court Act”9 agreement stating the franchise is non- law provisions in a dealership agreement gives dealers the explicit right to sue a transferrable and solely between the man- (usually the law of the manufacturer’s manufacturer for arbitrarily terminating ufacturer and the dealer.22 Also, some home state) illegal or unenforceable and or otherwise failing to renew the dealer’s dealership statutes restrict the manufac- making that state’s dealership act applic- franchise without good cause.10 By cre- turer’s right of first refusal that is included able.38 Even when the choice of law pro- ating a statutory cause of action apart in the dealership agreement.23 In most visions of the dealership agreement are from traditional contract claims, the Day dealership agreements, a manufacturer enforceable, the dealer in the dispute will in Court Act permits courts to review has a right of first refusal allowing it to still fall within the auspices of the state franchisor behavior without regard to any step into the shoes of a willing buyer if dealership act, again allowing the dealer dealer agreement provisions that seek, the dealer chooses to sell the franchise.24 to override any choice of law provisions among other concerns, to unfairly expand Some courts have interpreted the right of in the dealership agreement.39 or contract the common-law rights of first refusal provisions to be in direct con- Ostensibly, the public policy behind contractual waiver or estoppel and gen- travention of the transfer provisions of a these state laws regulating the relationship erally limit the manufacturer’s liability state’s dealership act and, as such, have between manufacturer and dealers is to and how and where cases can be liti- found them to be void.25 prevent manufacturers from abusing, and gated.11 Through the Day in Court Act, With respect to warranty services, in competing with, their own dealers. Other- Congress has sought to curtail the heavy most instances, the manufacturer has spe- wise, manufacturers would take advantage economic advantages of manufacturers12 cific repair and replacement obligations of the information asymmetry between enabling them to coerce and intimidate as warrantor of the vehicles.26 Some state the two parties and create more productive dealers.13 The Day in Court Act also pre- laws, however, require the manufacturer sales locations for themselves.40 Most vents manufacturers from forcing dealers to use dealers to perform these services,27 states’ franchise laws explicitly prohibit to accept automobiles, parts, accessories, which serves as an additional business manufacturers from directly selling vehi- and supplies, which dealers did not need, advantage for potential franchisees to pur- cles to consumers at a physical store in want, or believe could be absorbed in sue an auto dealership venture. Some leg- the state, which, at least in theory, would their specific markets.14 islatures also require manufacturers to be in direct competition with the manu- reimburse dealers, dollar for dollar, at facturer’s franchisee dealers.41 State franchise Laws whatever rates the dealers charge retail macro Issues State legislatures are involved in dealer customers.28 These laws represent a shift franchise law as well. In most states, it is from typical manufacturer-dealer practices On a macro level, the Big Three had slowly unlawful for manufacturers to cancel or in which reimbursement obligations for been losing market share to foreign com- refuse to renew a dealer’s franchise without warranty parts and labor would typically petitors for years.42 Rising fuel prices fur- “good cause,”15 as is defined by each be provided in, and governed by, the deal- ther softened demand for American cars state’s dealership act.16 For example, under ership agreement.29 in the United States while the rising legacy California law good cause to terminate a State dealership acts also address how costs of the Big Three constrained each franchise can exist in a variety of carefully manufacturers may allocate new vehicles company’s ability to increase its compet- defined circumstances, including the trans- to dealers across the state30 to prevent itiveness in the global market.43 These fer of a dealer’s equity ownership interests manufacturers from forcing dealers into legacy costs—retiree costs the automobile without the manufacturer’s consent, dealer purchasing unwanted vehicles and prod- companies pay their former employees— misrepresentations when applying for the ucts while ensuring that manufacturers include healthcare for life (an extra $16- franchise, and dealer insolvency, among do not discriminate between dealers in 18 per hour above employees’ hourly others.17 Good cause also may be found allocating more desirable vehicles and wages).44 Problems in the financial sector when a dealer has breached the material products.31 In these states, manufacturers precipitating the credit crunch45 made it terms of the dealership agreement.18 utilize a predetermined formula for allo- more difficult for consumers to get vehicle Some state dealership acts provide deal- cating vehicles based on each dealer’s pro- financing, resulting in lower consumer ers with the right to protest a franchise jected and actual sales.32 spending and reduced demand for termination, allowing the dealer an auto- Lastly, state dealership acts sometimes American cars.46 By 2008, U.S. automotive matic stay without requiring the dealer govern the forum in which disputes be- sales had fallen to their lowest levels since to file for injunctive relief.19 The dealer tween manufacturers and dealers may be 1982.47 will then have to make a prima facie case heard and the laws that may be ap plied.33 Congress promulgated the Emergency showing the termination was unlawful For example, many states require special Economic Stabilization Act of 2008, estab- and, if the dealer meets this requirement, administrative boards and agencies to hear lishing the Troubled Asset Relief Program the burden of persuasion will switch to and oversee manufacturer-dealer disputes (TARP, or more popularly known as “the the manufacturer to show the termination as well as potential violations of the state’s bailout”).48 The secretary of the U.S. Treas- was for good cause.20 dealership act.34 Federal and state courts ury was authorized under TARP to pur- State dealership statutes also govern usually have concurrent jurisdiction with chase troubled assets to restore confidence more detailed aspects of the manufac- these special administrative boards and in the economy and stimulate the flow of turer-dealer relationship. In California, in agencies, allowing the party to choose its credit.49 Congress authorized the Treasury addition to being able to prevent their forum.35 In the interest of fairness, the to loan more than $700 billion in funds own terminations, dealers can also block special administrative boards and agencies to aid the ailing financial industry and, the relocation or addition of another dealer are usually composed of both manufac- according to Henry Paulson, former Sec - within a certain mile radius of their fran- turer and dealer representatives.36 Some retary of the Treasury, “support financial- chise.21 Some statutes govern the sale or state dealership acts also regulate the law market stability”50 and, more importantly, transfer of the dealer’s franchise, despite that is applied in a manufacturer-dealer save jobs, protect the U.S. economy, and express contractual terms within the dealer dispute,37 thus rendering the choice of prevent the deepening of the Financial

LOS ANGELES LAWYER JUNE 2020 14 Crisis.51 Post-bailout, the U.S. auto industry ufacturers and dealers at the retail level. commission’s decision and allowing Tesla has thrived, creating 640,000 new jobs Generally, California Vehicle Code Section to sell vehicles directly to consumers.75 and seeing record sales for each of the Big 11713.3(o)(1) makes it unlawful for a Connecticut’s Department of Motor Three.52 manufacturer to “compete with a dealer Vehicles ruled that Tesla was selling cars in the same line-make operating under an out of its Greenwich “gallery” without a The Tesla Challenge agreement or franchise from a manufac- new car dealer’s license in violation of state A new entrant into the U.S. auto industry, turer or distributor in the relevant market law.76 The company immediately appealed Tesla Motors, Inc. combines automotive area.” “Relevant market area” is defined the ruling, citing that it was an “unfortunate and energy technology to manufacture in Vehicle Code Section 507 as “any area circumstance for Connecticut consumers.”77 electric vehicles.53 Despite Tesla’s early suc- within a radius of 10 miles from the site According to the company, the State of cess, the car company has faced some of a potential new dealership.” Connecticut loses $5 million in tax revenue nearly insurmountable obstacles to its oper- Cases arising under laws that challenge per year from consumers who go to New ations in the United States,54 in that, as a Tesla’s ability to operate within a state York to buy Tesla automobiles.78 This pro- manufacturer, it directly sells to consumers have been brought to courts and legislatures consumer and pro-state argument was suc- rather than using a third-party franchise under several legal theories.65 In New York, cessful for the company in New York, dealer.55 This innovative business model a motor vehicle administrative board issued Massachusetts, and Rhode Island, all of is accomplished through the establishment a permit to Tesla that would have allowed which recently approved Tesla’s direct-to- of manufacturer-owned dealerships56 in the manufacturer to establish a manufac- consumer marketing system.79 which a customer goes to a Tesla service turer-owned dealership in the state.66 In Utah, Tesla sought to operate under center or online and chooses a vehicle from Dealer interest groups brought suit under current dealership law and built a $3 mil- Tesla’s online catalogue. Within months, a local law banning direct sales in New lion store in Salt Lake City in 2015, but Tesla delivers the vehicle to the service cen- York, claiming the permit issuance was the full-fledged store was demoted to a ter or the customer’s home or business.57 unlawful. However, the case was dismissed gallery two weeks before opening when While this business model may seem ben- on standing grounds before the merits of the Utah Attorney General’s Office ruled eficial to consumers, it has faced opposition the case could be decided.67 the gallery was against the state’s no “direct in the United States from state legislatures, In Texas, Tesla initially sought a leg- sales” law.80 Since the ruling, the company administrative agencies, and dealer asso- islative carve-out to the state’s blanket pro- obtained a used car dealer license and sued ciations alike.58 hibition on direct sales from manufacturers for the right to sell in Utah. However, Tesla As previously discussed, most state fran- to consumers for high-end electric vehicles lost its direct sales lawsuit in the Utah chise laws explicitly prohibit manufacturers only.68 To enhance the likelihood of leg- Supreme Court in 2017.81 The company and producers from directly selling their islative approval, Tesla sought to completely then tried sought direct sales approval vehicles to consumers at a physical store eliminate the prohibition altogether, allow- through the Utah legislature, which more in the state.59 In 2002, right before Tesla ing manufacturers to sell vehicles of any recently approved a bill allowing direct came on the scene, over forty states had weight, class, size, or shape directly to con- sales to consumers.82 this type of prohibitive law in place.60 For sumers.69 In such proposals, Tesla faced A Time for Change example, Section 320.645 of the Florida fierce opposition from the Texas Auto - Statutes provides: “No licensee, distributor, mobile Dealers Association, which argued Even the Federal Trade Commission (FTC) manufacturer, or agent of a manufacturer that the state’s prohibition prevents monop- has expressed its disdain for these so- or distributor, or any parent, subsidiary, olies and promotes competition in vehicle called “no direct sales” laws on its blog: common entity, or officer or representative pricing and service to the consumer, citing “[S]tates should allow consumers to choose of the licensee shall own or operate, either state tax and employment benefits for the not only the cars they buy, but also how directly or indirectly, a motor vehicle deal- current law.70 As a workaround, Tesla they buy them.”83 The FTC described how ership in this state for the sale or service opened various service centers or “galleries” the marketplace itself is able to police inef- of motor vehicles….”61 The text of the throughout Texas where customers could ficient or unsupported distribution prac- Florida law is fairly representative of lan- speak with Tesla representatives and view tices, such that the government should guage used by most state legislatures.62 In the online catalogue without the ability to not intervene unless extreme circumstances those states a company like Tesla may only actually purchase the vehicle.71 Each cus- warrant intervention.84 sell vehicles directly to consumers through tomer was then directed to go online to Currently, Tesla and its business model an indirect medium, such as by phone or purchase a vehicle and, when the vehicle are slowly but surely winding their way via the Internet. Thus, a prospective buyer was delivered to the Texas customer, it through courts and legislatures. Although can only view and test drive a Tesla vehicle arrived with California registration.72 the legal battles and legislative proposals if the prospective buyer travels to one of As a greater victory, Tesla successfully are not yet settled, the company seems to the few states that allows such a company fought New Jersey legal reform aimed at be injecting a new perspective as to how to establish physical stores or galleries.63 shutting down Tesla company stores in the cars can be sold as lawmakers begin to These statutes do contain several exceptions state.73 The New Jersey Motor Vehicle recognize that the advent of the Internet to the “no direct sales” rule, but none of Commission amended state law such that has made the dealer-only system of car the exceptions applies to a manufacturer, any party seeking a dealership license in sales antiquated.85 Those involved in the such as Tesla, seeking to establish a per- the state was required to “produce evidence U.S. auto industry and the public have manent sales location.64 that the applicant or licensee is a franchisee” begun to question whether the current Unlike most states, California does not to obtain a license—something that Tesla franchise dealer system can continue to directly prohibit manufacturers from selling would not be able to produce.74 In response, function as it has and whether dealers vehicles. Instead, California law takes a the New Jersey State Assembly’s Consumer should continue their traditional role. more balanced approach and addresses Affairs Committee sponsored and unani- Tesla has introduced a simpler sales the potential for competition between man- mously enacted a new bill reversing the process, which appeals to manufacturers LOS ANGELES LAWYER JUNE 2020 15 and consumers (assuming that manufac- numbers that prevailed in the late Financial Economic Analysis of State Restrictions on Automobile turers, of course, can restructure to account Crisis. 98 Distribution, 25 J.L. & ECON. 125, 139 (1982); Walter F. Forehand & John W. Forehand, Motor Vehicle for all costs related to taking on their own If the Big Three intend to avoid another Dealers & Motor Vehicle Manufacturers: Florida local distribution). This simpler sales model bailout, adjust to the Internet age, continue Reacts to Pressures in the Marketplace, 29 FLA. ST. U. could eliminate the saturated, costly, labor- sales during unanticipated market fluctu- L. REV. 1057, 1096 (2001) [hereinafter Forehand & heavy, and overly expanded dealer net- ations—e.g., pandemics—and remain Forehand]; Carla Wong McMillian, What Will It Take works that bogged down the Big Three, viable and competitive, the current fran- to Get You in a New Car Today?: A Proposal for a New Federal Automobile Dealer Act, 45 GONZ. L. pre-Financial Crisis.86 Empirical data indi- chisee dealer system and its supporting REV. 67, 76 (2009) [hereinafter McMillian]. Under cate that the franchise dealer system adds legal framework may need to become a some state dealership acts, manufacturers are required 5 to 10 percent to the cost of each vehicle thing of the past, or the U.S. auto industry to prove the sale unless the manufacturer has a legiti- produced,87 making U.S. vehicles more may become a thing of the past. n mate business reason not to approve the potential expensive and the Big Three less competi- buyer. Id. at 76-77. 23 See, e.g., ALA. CODE §8-20-4(3)(k) (2020); ARIZ. tive in a global market. 1 Matt Egan, 2008: Worse Than the Great Depression, REV. STAT. ANN. §28-4459 (2020); VEH. CODE CNN Money (Aug. 27, 2014), http://money.cnn For example, the Big Three’s Japanese §11713.3(t) (2020); DEL. CODE ANN. tit. 6, §§4910(c)- .com. The recession underlying the associated events competitor, Toyota, with its superior auto- (d), 4914(a) (2020); GA. CODE ANN. §10-1-663.1 described will be referred to as the “Financial Crisis” mobiles and more efficient manufacturing (2020); IDAHO CODE ANN. §49-1613(6) (2020); 815 in this discussion. ILL. COMP. STAT. ANN. 710/7 (2020); IND. CODE ANN. processes, thrived in all markets during, 2 See Friedrich Kessler, Automobile Dealer Franchises: §9-23-3-22(c) (2020); IOWA CODE ANN. §322A.12(2) before, and after the Financial Crisis, Vertical Integration by Contract, 66 YALE L.J. 1135, (2020); KAN. STAT. ANN. §8-2416(e) (2020); LA. REV. including in the United States.88 In 2008, 1135-36 (1957) [hereinafter Kessler). STAT. ANN. §32:1267(B) (2020); ME. REV. STAT. ANN. 3 Id. at 1136; see Stephen M. Fox, Two Roads Di - Toyota replaced General Motors as the tit. 10, §§1441, 1174(3)(I), 1177 (2020); MASS. GEN. verged: Tesla, Interruption, and the Commerce Clause, world’s largest automobile manufacturer, LAWS ch. 93B, §10(a) (2020); MINN. STAT. ANN. 22 B.U.J. SCI. & TECH. 152, 155 (2016) [herein after §80E.13(j) (2020); MISS. CODE ANN. §63-17-109(1), giving Toyota a reason to oppose the Fox]. 89 (2) (2020); MO. REV. STAT. §407.825(7)(c) (2020); bailout of its largest U.S. competitors. 4 See Kessler, supra note 1, at 1136; Roger M. Quin - MONT. CODE ANN. §61-4-141(1) (2020); NEV. REV. More over, Japanese manufacturers do more land, Has the Traditional Automobile System Run out STAT. §482.36419 (2020); N.H. REV. STAT. ANN. §357- 90 of Gas?, 16(3) FRANCHISE LAWYER (2013), available with less. In terms of sheer numbers, C:3(III)(n) (2020); N.J. STAT. ANN. §§56:10-13.6, - at https://www.americanbar.org. U.S. automobile manufacturers have over 13.7 (2020); N.M. STAT. §§57-16-5(U), 57-16-8 (2020); 5 See Dale Baker Oldsmobile, Inc. v. Fiat Motors of N.Y. VEH. & TRAF. LAW §466(1) (2020); N.C. GEN. 20,000 dealerships across the U.S., while North Am., Inc. 794 F. 2d 213, 214 (6th Cir. 1986); STAT. ANN. §20-305(18) (2020); OKLA. STAT. ANN. their Japanese counterparts have eaten up Freedman Truck Ctr., Inc. v. General Motors Corp., tit. 47, §565(B) (2020); OR. REV. STAT. ANN. market share with only a few hundred 784 F. Supp. 167, 177 n.6 (Dist. N.J. 1992). §650.162(5) (2020); 63 PA. CONS. STAT. ANN. §818.16 91 6 See DaimlerChrysler Motors Co. v Clemente, 668 dealers nationwide. (2020); R.I. GEN. LAWS §31-5.1-7 2018); S.C. CODE S.E. 2d 737, 742 (Ga. Ct. App. 2008). If the outcome of the Financial Crisis ANN. §56-15-70 (2020); S.D. CODIFIED LAWS §32-6B- 7 See Chrysler Motors Corp. v. Thomas Auto Co., is any indication of things to come, the 84 (2020); VA. CODE ANN. §§46.2-1569.1, 46.2-1977 Inc., 939 F. 2d 538, 541 (8th Cir. 1991). (2020); WASH. REV. CODE §46.96.220 (2020); W. VA. U.S. auto industry has long been function- 8 See 15 U.S.C. §§1221-1226. CODE §17A-6A-10(2)(q) (2020); WIS. STAT. ANN. ing in a financially volatile way. The bailout 9 The “Automobile Dealers’ Day in Court Act” is a §§218.0114(9)(a)(4), (9)(d), 218.0116(1)(u) (2020); popular name for the Federal Automobile Dealers did not change this fact, as most, if not WYO. STAT. ANN. §31-16-108(g) (2020). Franchise Act. Id.; see Kotula v. Ford Motor Co., 338 all, automobile dealerships are still highly 24 McMillian, supra note 22, at 78. F. 2d 732, 733 (8th Cir. 1964). leveraged against the vehicles they are sell- 25 Bob Zimmerman Ford, Inc. v. Midwest Auto. I, 10 See 15 U.S.C. §1222; see also Hoffman Motors L.L.C., 679 N.W. 2d 606, 611 (Iowa 2004); Bayview ing. Of even greater concern is the fact Corp. v. Alfa Romeo S.P.A., (S.D. N.Y. 1965) 244 F. Buick-GMC Truck, Inc. v. General Motors Corp., 597 that the reasons for the bailout in the first Supp. 70, 77. So. 2d 887, 890 (Fla. Dist. Ct. App. 1992). 92 11 See Alfieri v. Willys Motors, Inc., 227 F. Supp. 627, place are still present. If anything, sub- 26 McMillian, supra note 22, at 78. 629-30 (E.D. Pa. 1964); see also Fox, supra note 3, at 155. sequent safety scandals and ignition switch 27 Id.; see also ALA. CODE §8-20-4(3)(s)(2018). 12 Randy’s Studebaker Sales, Inc. v. Nissan Motor fatalities have further diminished the pub- 28 McMillian, supra note 22, at 80. Corp. in U.S.A., 533 F. 2d 510, 515 (10th Cir. 1976). 93 29 Id. at 79. For parts, manufacturers have historically lic’s perception. Dealer markets remain 13 Colonial Ford, Inc. v. Ford Motor Co., 592 F. 2d paid a predetermined mark-up over the dealer cost oversaturated with studies indicating dealer 1126, 1129 (10th Cir. 1979). for the parts. Id. For labor, manufacturers will typically systems add 5 to 10 percent to the cost of 14 See Woodward v. General Motors Corp., 298 F. reimburse dealers. Id. at 80. 94 2d 121, 128 (5th Cir. 1962); see also S. Rep. No. each vehicle produced. 30 Id. at 82; see also FLA. STAT. ANN. §320.64(18)– 2073, at 2 (1956). See also FTC, ANNUAL REPORT OF While dealers and their proponents (19), (22) (2018). THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR claim they are in place to protect the con- 31 McMillian, supra note 22, at 82. There also may ENDED JUNE 30 1939 26 for the oppositional position 95 be antitrust issues associated with certain requirements. sumer, consumers tend to appreciate of the FTC, which helped lead to passage of the W. MICHAEL GARNER, FRANCHISE AND DISTRIBUTION options and freedom of choice. The alter- Automobile Dealers’ Day in Court Act in 1956. LAW AND PRACTICE §§11:1-11:9, 11:16-11:19 & 11:24 15 See, e.g., Chrysler Motors Corp. v. Thomas Auto native direct sales model appears to achieve (2017). Co., Inc., 939 F. 2d 538, 541 (8th Cir. 1991). this goal and also eliminates extra franchise 32 McMillian, supra note 22, at 82. Manufacturers in 16 See, e.g., VEH. CODE §§3060(a)(2), 3061 (2019); dealer costs passed along to consumers. Florida are required to go a step further and provide see also ARIZ. REV. STAT. §§28-4452(A), 28-4457(D)- each dealer with an “equitable supply” of new vehicles Moreover, recent events related to the (E), 28-4493(A)(10) (2019) and FLA. STAT. §320.641(3). based on model, mix, or colors. Id.; see, e.g., FLA. COVID-19 pandemic have caused the Big 17 VEH. CODE §3060(B). STAT. §320.64(18) (2018). The term “equitable supply,” 18 See, e.g., GA. CODE ANN. §10-1-651(b) (2018). See Three and other U.S. auto manufacturers however, is not defined in the statute and raises addi- Robert W. Emerson, Franchise Terminations: “Good to close plants and shut down production, tional questions, including whether a dealer would be Cause Decoded, 51 WAKE FOREST L. REV. 103, 116- mounting even more pressure to sell cars compared with only other Florida dealers when deciding 137 (2016) (showing a statistical review of hundreds 96 what constitutes an “equitable supply,” and whether in a different way. Dealers also feel the of court cases concerning franchise terminations and the size of the dealer should be taken into account pinch as “shelter-in-place” orders keep interpreting “good cause” standards). when deciding what is “equitable” and what is not. 19 See, e.g., FLA. STAT. ANN. §320.641(b)(7) (2018). people at home and out of crowded show- McMillian, supra note 22, at 82-83. 97 20 See, e.g., FLA. STAT. ANN. §320.697 (2018). rooms. As customers hold off making 33 McMillian, supra note 22, at 84; FLA. STAT. ANN. 21 See, e.g., VEH. CODE §3062(a)(1) (2019). large purchases due to market uncertainty, §320.64(31) (2018). 22 Richard L. Smith II, Franchise Regulation: An the U.S. auto industry may see the type of 34 McMillian, supra note 22, at 83.

LOS ANGELES LAWYER JUNE 2020 16 35 Forehand & Forehand, supra note 22, at 1066. Franchise Laws and the Threat to the Electric Vehicle 2018, available at https://www.theday.com. 36 Id. Market, 18 VA. J.L. &. TECH. 185, 189 (2014) [herein- 78 Hladky, supra note 76. 37 See, e.g., ALASKA STAT. §45.25.020 (2020); COLO. after Barmore]. 79 Id. REV. STAT. §12-6-122.5 (2020); DEL. CODE ANN. tit. 56 See Nick Chambers, Tesla is Turning the Car Sales 80 See Fred Lambert, Tesla Takes a Win for Direct 6, §4917 (2020); FLA. STAT. ANN. §320.64(31) (2020); Model on Its Head, Autotrader (Nov. 2011), http:// Sales in Utah, Bill to Allow Operating Its Own Stores GA. CODE ANN. §10-1-624 (2020); IDAHO CODE ANN. www.autotrader.com/car-news/tesla-is-turning-the Goes to the Governor, Electrek (Mar. 9, 2018), https:// §49-1632 (2020); LA. REV. STAT. ANN. §32:1269 -car-sales-model-on-its-head-132587. electrek.co/2018/03/09/tesla-direct-sales-win-utah-bill/ (2020); MASS. ANN. LAWS ch. 93B, §15(e) (2020); 57 See Tesla, How Ordering Works, https://www.tesla [hereinafter Lambert]. MICH. COMP. LAWS ANN. §445.1573(h) (2020); N.Y. .com (last visited Nov. 26, 2018). 81 See Tesla Motors UT, Inc. v. Utah Tax Comm’n, VEH. & TRAF. LAW §463(2)(t) (2020); N.C. GEN. STAT. 58 See Empie, supra note 40, at 18; Macy Cotton, 398 P. 3d 55 (Utah 2017). ANN. §20-308.2 (2020); W. VA. CODE R. §§17A-6A- Electric Avenue: How Texas Should Reform the Way 82 Lambert, supra note 80. 2, 17A-6A-18 (2009); WYO. STAT. ANN. §31-16-124 Cars Are Sold and Allow Tesla to Sell Directly to 83 Marina Lao, Debbie Feinstein, & Francine La - (2020). Consumers, 16 TEX. TECH. ADMIN. L.J. 419, 439-40 fontaine, Direct-to-Consumer Auto Sales: It’s Not Just 38 McMillian, supra note 22, at 84. (2015); Claudia Assis, Tesla Vows to Keep Selling About Tesla, FTC, Competition Matters (May 11, 39 Id. at 84-85. Cars Directly to Missouri Customers, MarketWatch 2015), https://www.ftc.gov. 40 See Derek E. Empie, The Dormant Internet: Are (Sept. 8, 2016), https://www.marketwatch.com/story 84 Id. State Regulations of Motor Vehicle Sales by Manu - /tesla-vows-to-keep-selling-cars-directly-to-missouri 85 Id. facturers on the Information Superhighway Obstructing -consumers-2016-09-08 [hereinafter Assis]; Brent 86 Kate Linebaugh, The Trials of the Auto Dealer: Long Interstate and Internet Commerce?, 18 GA. ST. U. L. Snavely, Auto Dealers Chief Wars of Tesla Direct a Road to Wealth in Towns Across America, Selling REV. 827, 851 (2002) [hereinafter Empie]. Sales Model, USA TODAY, Oct. 6, 2016, available at Cars Has Turned into a Struggle to Survive, Not Always 41 Alan Ohnsman & Mark Niquette, Tesla’s Direct- https://www.usatoday.com [hereinafter Snavely]. Successful, WALL ST. J., Jan. 3, 2009, available at http:// Sales Push Raises Auto Dealers’ Hackles, BLOOMBERG 59 Ohnsman & Niquette, supra note 41. www.wsj.com/articles/SB122969965719421799. For (Mar. 10, 2014), available at http://www.bloomberg. 60 See Empie, supra note 40, at 827. example, General Motors had 6,426 U.S. dealers in com. [hereinafter Ohnsman & Niquette]. 61 FLA. STAT. ANN. §320.645 (2018). 2008 while competitor, Toyota, had only 1,461 U.S. 42 Staff of Cong. Oversight Panel, 111th Cong., 62 See Empie, supra note 40, at n.153. dealers. Id. Despite having significantly fewer dealers, September Oversight Report: The Use of TARP Funds 63 Barmore, supra note 55, at 192. Toyota’s U.S. sales still equaled about 85 percent of in The Support and Reorganization of The Domestic 64 Id. at 194. the General Motors’ sales. Id. Automotive Industry 1 (2009) [hereinafter Congres - 65 See, e.g., Brief for Petitioner-Appellant at 4, Tesla 87 Brett Berk, Do We Really Need Car Dealerships sional Report]; see also John D. McKinnon & John Motors v. N.J. Motor Vehicle Comm’n, No. A-3213- Any more?, POPULAR MECHANICS, July 30, 2013, avail- D. Stoll, U.S. Throws Lifeline to Detroit, WALL ST. J., 13T2 (N.J. Super. Ct. App. Div. Mar. 28, 2014); H.B. able at http://www.popularmechanics.com [hereinafter Dec. 20, 2008, available at http://www.wsj.com 3351, 83d Leg. (Tex. 2013); S.B. 327, 2013 N.C. Sess. Berk]. /articles/SB122969367595121563 [hereinafter Mc - Laws 1 (proposing to amend N.C. GEN. STAT. ANN. 88 Michael Huemer, The True Costs of Government Kinnon & Stoll]. §20-286(11)(a) (2013)). Bailouts, 11 GEO. J.L. & PUB. POL’Y 335, 337 (2013). 43 Congressional Report, supra note 42; see also 66 See Matthew Sturdevant, Tesla Clashes with Auto 89 Drake Bennett, GM, Ford, and Chrysler: The Detroit McKinnon & Stoll, supra note 42. Dealers Over Direct-To-Driver Sales in Connecticut, Three Are Back, Right?, BLOOMBERG, Apr. 4, 2013, 44 Jenny Gold, Cutting Worker Costs Key to Auto - HARTFORD COURANT, Mar. 8, 2015, available at http:// available at http://www.bloomberg.com; see also Nick maker’s Survival, NPR (Dec. 23, 2008), http://www www.courant.com. Bunkley, Toyota Ahead of G.M. in 2008 Sales, N.Y. .npr.org. Compare the extra $16-18 per hour paid for 67 Rob Schwartz, Tesla, Vertical Integration, and TIMES, Jan. 21, 2009, available at http://www.nytimes legacy costs by American companies to the $3 paid Incumbent Legal Disadvantages in the New Car .com. per hour by Japanese companies. Id. Retailing Market, 60 WAYNE L. REV. 567, 590 (2014). 90 Weighing the Costs and Benefits of Car Dealership 45 See Congressional Report, supra note 42, at 2-9. These cases have been dismissed for lack of standing Franchising, NuWire Investor (Mar. 1, 2011), http:// 46 Congressional Report, supra note 42, at 3; see also in other states as well. But see Amy Wilson, Tesla www.nuwireinvestor.com. McKinnon & Stoll, supra note 42. Reaches Deal to Keep 5 N.Y. Stores, Automotive News 91 Id. The amount has declined slightly. See I. Wagner, 47 Congressional Report, supra note 42, at 3; see also (Mar. 28, 2014), http://www.autonews.com. Auto dealers in the U.S. - Facts & Statistics, Statista, McKinnon & Stoll, supra note 42. The lowest point 68 Patrick Svitek, Tesla Tries a New, Ambitious Ap - https://www.statista.com/topics/3594/auto-dealers-in for auto sales apparently came the following year, in proach at Texas Capitol, TEXAS TRIBUNE, Mar. 10, -the-us/ (last visited Nov. 26, 2018) (stating that there 2009, before, they started to pick up. Bertel Schmitt, 2017, available at https://www.texastribune.org. were a little over 18,250 new light vehicle dealership U.S. Car Sales in 2009: Worst in 27 Years, The Truth 69 Id. outlets in 2017). About Cars (Jan. 5, 2010), http://www.thetruthabout- 70 Jeff Mosier, Why Texas’ $2,500 Electric Car 92 Edward Niedermeyer, Did the Auto Industry Learn cars.com; Chris Isidore, Auto Sales Worst in 26 Years, Incentive Won’t Apply If You Buy a Tesla, DALLAS Anything from the Bailout?, BLOOMBERG, Dec. 17, CNN Money (Feb. 3, 2009), http://money .cnn.com MORNING NEWS, June 11, 2018, available at https:// 2014, available at https://www.bloomberg.com /2009/02/03/news/companies/auto_sales/index.htm?post www.dallasnews.com. /opinion/articles/2014-12-17/did-the-auto-industry version=2009020314; Nick Carey & David Bailey, 71 Id. -learn-anything-from-the-bailout. U.S. Auto Sales Seen At 27-Year Low, Reuters (Jan. 72 Id. 93 Id. See Chris Isidore & Evan Perez, GM CEO: 13, 2009), http://www.reuters.com/article/us-autoshow- 73 Mike Ramsey, Tesla Cleared to Sell Vehicles from “‘People Died in Our Cars,” CNN Money (Sept. 17, autosales-outlook-sb-idUSTRE50C3T420090113. Company-Owned Dealerships in N.J., WALL ST. J., 2015), http://money.cnn.com; Chris Isidore, Death 48 12 U.S.C. §§5201 et seq. (2008). Mar. 18, 2015, available at http://www.wsj.com Toll for GM Ignition Switch: 124, CNN Money (Dec. 49 See In re Chrysler LLC, 405 B.R. 84, 89 (Bankr. /articles/tesla-motors-cleared-to-sell-vehicles-from 10, 2015), http://money.cnn.com. S.D. N.Y. 2009). -company-owned-dealerships-in-n-j-1426708761. 94 Berk, supra note 87. 50 McKinnon & Stoll, supra note 42. 74 Eric D. Stolze, A Billion Dollar Franchise Fee? Tesla 95 See, e.g., Assis, supra note 58; Snavely, supra note 51 Id. According to President Bush, “[u]nder ordinary Motors’ Battle for Direct Sales: State Dealer Franchise 58; Amy Wilson, State Franchise Laws, Sparked by economic circumstances, I would say this is the price Law and Politics, 34 FRANCHISE L.J. 293, 298 (2015). Tesla, Go Too Far, Other Automakers Charge, Auto - that failed companies must pay,…[b]ut these are not 75 Id. motive News (June 16, 2014), http://www.autonews - ordinary circumstances. In the midst of a financial 76 Gregory B. Hladky, Legislative Battles Renewed .com. crisis and a recession, allowing the U.S. auto industry Over Tesla Car Sales, HARTFORD COURANT, Mar. 5, 96 Phil LeBeau & Noah Higgins-Dunn, General Motors, to collapse is not a responsible course of action.” Id. 2018, available at http://www.courant.com [hereinafter Ford and Fiat Chrysler to temporarily close all US 52 David Kiley, As Obama Takes Victory Lap over Hladky]. factories due to the coronavirus, CNBC (Mar. 18, Auto Industry Rescue, Here Are the Lessons of the 77 Id. For the fourth year in a row, a bill allowing 2020) https://www.cnbc.com; see also Sean Szym - Bail out, FORBES, Jan. 20, 2016, available at http:// Tesla to bring its direct-to-consumer business model kowski, COVID-19 and plant closures: The automotive www.forbes.com. to Connecticut cleared a General Assembly committee industry’s response to the pandemic, Roadshow (Apr. 53 To learn about Tesla’s business model and products, only to be stalled at the legislative level because Tesla 30, 2020), https://www.cnet.com. go to http://www.teslamotors.com. has been unable to reach some middle ground with 97 Nathan Bomey, Why most auto dealers, service 54 See Katie Fehrenbacher, 7 Reasons Why Tesla Insists dealers, who have insisted the company abide by exist- departments are open for business during coronavirus, on Selling Its Own Cars, FORTUNE, Jan. 19, 2016, ing franchise rules that require sales through dealerships. USA TODAY, Mar. 24, 2020, available at https://www available at http://fortune.com. See also Benjamin Kail, Tesla, Dealers Remain at Odds .usatoday.com. 55 See Cynthia Barmore, Tesla Unplugged: Automobile as Lawmakers Urge Compromise, THE DAY, Mar. 25, 98 Id.

LOS ANGELES LAWYER JUNE 2020 17 By kATE mACkINTOSh TheUSAandICC: FRIENDSorFOES? while playing a significant role in founding the International Criminal Court, the united States— like russia, China, India, Pakistan, North korea, and most middle Eastern countries—has never become a member

n March 5, 2020, the Appeals amendment—the crime of aggression. The Chamber of the International United States did, however, play an active Criminal Court (ICC) autho- and important role in drafting the founda- rized the opening of an inves- tional Rome Statute and stewarding it to tigation “in relation to alleged successful conclusion in the summer of Ocrimes committed on the territory of Afghan - 1998.1 Indeed, President Bill Clinton signed istan in the period since 1 May 2003, as the statute on December 31, 2000, in order well as other alleged crimes that have a to remain influential in the court’s devel- nexus to the armed conflict in Afghanistan opment, leaving open the possibility of later and are sufficiently linked to the situation ratification should outstanding U.S. concerns and were committed on the territory of be addressed.2 Sixteen months later, however, other States Parties in the period since 1 President George W. Bush announced that July 2002.” The parties to be investigated the United States would not ratify and that include the Taliban, the Afghan National the signature had no legal effect, effectively Security Forces, and members of the U.S. disassociating the United States from the armed forces and Central Intelligence Agency court.3 How then, seventeen years later, is (CIA). The decision overturned the contro- the prosecutor investigating Americans? versial April 2019 ruling by a pre-trial cham- The ICC became operational in 2002, ber of the court, which denied the prosecutor and today has 123 members, or states par- permission to proceed. ties. Canada and almost all Latin American The United States is not a member of states have joined, along with Australia, all the ICC, which was set up by treaty in 1998 of Western Europe, and most of Africa. to prosecute genocide, crimes against Countries which, like the United States, are humanity, war crimes and—by subsequent not parties include Russia, China, India,

Kate Mackintosh is the inaugural execu tive director of the Promise Institute for Human Rights at UCLA School of Law. Since starting her career as a lawyer in private practice in London, England, Mackintosh has worked to support human rights in a wide range of postings, including serving as deputy registrar of the International Criminal Tribunal for the former Yugoslavia. AMANE KANEKO

LOS ANGELES LAWYER JUNE 2020 18

Pakistan, North Korea, Iran, and most including an ICC investigation.12 This cir- Charles Taylor, for crimes committed dur- other countries of the Middle East.4 A cumstance has occurred in two situations ing the conflict in Liberia,20 and it would country that becomes party to the Rome so far: the 2005 referral of the situation provide authority to prosecute Americans Statute is subject to the court’s jurisdiction in Darfur, Sudan, following reports of mass for international crimes before foreign over genocide, crimes against humanity, crimes including potential genocide there, domestic courts. and war crimes (and in some circumstances and the 2011 referral of Libya. As one of The Afghanistan situation was not acts of aggression) committed either by its the five permanent members of the Security referred to the court by a state or the UN nationals or on its territory.5 However, this Council wielding veto power, the United Security Council. In 2007, the ICC prose- jurisdiction will not be exercised 1) if the States could have blocked either referral. cutor announced that he was carrying out crimes alleged are already being investi- Instead, it abstained on Darfur,13 and co- a preliminary examination to determine gated by the state concerned, 2) if the state sponsored the Libya referral, which was whether Rome Statute crimes had been has investigated and decided not to pros- passed unanimously.14 committed in the context of the Afghan ecute, or 3) if a trial has already taken conflict since May 2003, when Afghanistan Territorial Jurisdiction place—unless the state is determined to be joined the court.21 By 2012, it was clear unwilling or unable to genuinely investigate However a situation comes before the ICC, that this included examination of possible or prosecute the case.6 the court’s territorial jurisdiction means torture by international military forces.22 These last criteria reflect the important that a U.S. national suspected of atrocity In November 2017, a full 10 years after principle of complementarity in the Rome crimes committed on a territory being the preliminary examination was initiated, Statute. States that created the court, includ- investigated by the court falls under the current ICC Prosecutor Fatou Bensouda ing the United States, had to decide whether court’s authority. In response to this, the asked the judges for authorization to com- it would have primary or complementary U.S. State Department took a number of mence an investigation23 into crimes com- jurisdiction. Earlier international criminal preemptive measures to shield U.S. nation- mitted by the Taliban, the Afghan govern- courts—such as the post-World War II als when the court became operational, ment forces, and members of the U.S. courts at Nuremberg and Tokyo, as well most notably through bilateral “non-sur- military and CIA, the latter for “acts of as the international criminal tribunals for render” agreements and the passage of the torture, cruel treatment, outrages upon Rwanda and the former Yugoslavia—had American Servicemembers Protection Act personal dignity, rape and sexual violence primary jurisdiction, giving them authority of 2002.15 Under the agreements, also against conflict-related detainees in Afghan- over any case they selected. In drafting the termed “Article 98 agreements” after a istan and other locations, principally in ICC statute, states went the other way. At provision in the Rome Statute, countries the 2003-2004 period.”24 the heart of this new system was the idea agree not to surrender U.S. nationals to Applying a test set out for her in Arti- that courts at the national level would deal the ICC.16 Over 100 of these agreements cle 53 of the Statute, and based on her with atrocity crimes, with the ICC’s step- have been signed, including with some preliminary examination, the prosecutor ping in only as a last resort.7 states parties to the ICC, although far considered that there was a reasonable The statute adds a test of gravity to fewer have been ratified in the foreign basis to believe that crimes within the these complementarity concerns to deter- jurisdiction, and it is unclear whether those jurisdiction of the court had been com- mine whether a case is admissible.8 How - signed with ICC states parties would be mitted and that the requirements of com- ever, even when jurisdiction and admissi- valid as a matter of international law.17 plementarity and gravity were met. She bility are satisfied, the prosecutor does not The American Servicemembers Pro- based her complementarity assessment have unfettered authority to open an inves- tection Act of 2002 is primarily intended on the apparent lack of domestic inves- tigation proprio motu. Preliminary exam- to exempt U.S. military actors serving over- tigation or prosecution of the crimes inations may be opened based on infor- seas from ICC jurisdiction and includes a out lined, following President Barack mation received, but the authorization of number of provisions to that effect, includ- Obama’s decision to block prosecution a panel of three judges in the pre-trial ing prohibiting cooperation with the court, of the waterboarding, physical beating, chamber is needed to proceed to a full requiring UN peacekeeping operations to mock executions, and other abuses re - investigation.9 Most cases at the court have specifically exempt U.S. personnel from ported by the CIA Inspector-General.25 started not on the prosecutor’s motion but ICC jurisdiction and, somewhat notori- Finally, as re quired by Article 53, she had as a result of referrals by states parties and ously, authorizing the U.S. president to use considered and rejected whether there have been concerned with crimes allegedly all means necessary and appropriate to were nonetheless substantial reasons to committed within a state’s own territory, bring about the release of detained U.S. believe that an investigation would not such as in Uganda, the Democratic Re- and allied personnel—colloquially known serve the interests of justice. public of Congo, Central African Republic, as the “Hague Invasion clause.”18 The prosecutor’s request led U.S. and Mali.10 None of these actions alters the basic National Security Adviser John Bolton to The UN Security Council can also refer principle of territorial jurisdiction, whereby threaten the court with sanctions and its a situation for investigation if it determines a U.S. or other national committing a crime officials with prosecution if the investiga- there is a threat to international peace and on foreign soil is subject to the authority tion were allowed to proceed.26 On April security and, acting under Chapter VII of of that nation’s courts. Moreover, they do 5, 2019, Secretary of State Mike Pompeo the UN Charter, decides that an ICC inves- not affect the application of universal juris- preemptively revoked Prosecutor Ben - tigation will avert this threat.11 In these diction, whereby any state can prosecute souda’s visa, marking a new low in relations circumstances, the Security Council is not an individual on its territory for war crimes, between the court and the United States, restricted to nationals or territories of states crimes against humanity, torture, and geno- as well as hampering Bensouda’s regular parties, as having determined to act to cide, regardless of nationality or where the travel to U.N. headquarters in New York maintain or restore international peace crimes were committed.19 This principle City. and security it is empowered to impose all was the basis for the Miami prosecution On April 12, 2019, the judges of the necessary measures on UN member states, of Chuckie Taylor, son of Liberian President pre-trial chamber refused the prosecutor’s LOS ANGELES LAWYER JUNE 2020 20 request, finding that, although there was the prosecutor was granted leave to appeal commander Jean-Pierre Bemba, formerly a reasonable basis to believe that crimes the pre-trial Chamber decision.37 vice-president of the Democratic Republic under the jurisdiction of the court had When the ICC Ap peals Chamber of the Congo, for the actions of his soldiers been committed and that the requirements handed down its verdict in March, revers- in Central African Republic,44 and the dis- of gravity and complementarity had been ing the decision of the pre-trial chamber missal of the case against Laurent Gbagbo, met, an investigation into the situation in and authorizing the prosecutor to com- former president of Côte d’Ivoire, at the Afghanistan at this stage would not serve mence the investigation,38 the Appeals no-case-to-answer stage in January 2019.45 the interests of justice.27 The decision was Chamber clarified that the test to be applied Mem ber states have commissioned an inde- widely condemned as legally flawed and by a pre-trial chamber in reviewing requests pendent expert review of the court’s per- potentially politically influenced.28 to open investigations is set out in Article formance which should produce its rec- The legal criticism centered on the test 15. This corrects the practice of pre-trial ommendations in the fall.46 The acts of applied by the pre-trial chamber. Two dif- chambers to date and authoritatively dis- the incoming prosecutor will be critical in ferent articles of the statute were potentially misses the idea that an investigation can determining the success of the institution applicable—Article 15 and Article 53— only proceed if the pre-trial chamber deter- as it approaches its twentieth anniversary, each prescribing a different standard. Ac - mines it to be in the interests of justice.39 and the Afghanistan decision has made cording to the plain wording of these arti- The Appeals Chamber decision has been U.S.-ICC relations central to that project. cles, Article 53 prescribes the test for the welcomed by scholars and observers of Will the United States ever join the ICC? prosecutor to apply in determining whether the court as legally robust. Nevertheless, When he spoke at UCLA School of Law to ask for authorization to proceed29 and the prosecutor has a difficult path ahead. in 2019, President Chile Eboe-Osuji of the Article 15 the test to be applied by the Investigations into the actions of all parties court quoted chief Nuremberg prosecutor pre-trial chamber in adjudicating the re - will be hard. The situation on the ground and U.S. Attorney General Robert H. quest.30 In this case, the pre-trial chamber in Afghanistan is fragile, and cooperation Jackson:47 applied Article 53,31 following the practice from the U.S. authorities is highly unlikely It is futile to think…that we can have of earlier decisions concerning Kenya, Côte to be forthcoming. Having earlier cancelled an international law that is always d’Ivoire, Georgia, and Burundi, 32 with the prosecutor’s U.S. visa, Secretary of working on our side. And it is futile the judges in the Kenya case attributing State Mike Pompeo went so far as to name to think that we can have interna- the discrepancy between the tests in articles and threaten two individual staff members tional courts that will always render 15 and 53 to sloppy drafting.33 It was, of the court for “helping drive ICC pros- the decisions we want to promote however, the first time that the pre-trial ecutor Fatou Bensouda’s efforts to use this our interests. We cannot successfully chamber had interpreted the standard to court to investigate Americans” after the cooperate with the rest of the world “include a positive determination to the appeals decision came down.40 Lacking its in establishing a reign of law unless effect that investigations would be in the own police force or authority over any ter- we are prepared to have that law interest of justice.”34 This requirement is ritory, the court depends on the cooperation sometimes operate against what not apparent from Article 53, which re - of states. would be our national advantage.”48 quires a negative consideration on the Another sensitive case is looming as the American international lawyers are part of the prosecutor—whether there are ICC prosecutor squares up to investigate exploring options for the United States to “substantial reasons to believe that an war crimes in the occupied Palestinian ter- constructively re-engage with the ICC.49 investigation would not serve the interests ritory, also known as Palestine. The situa- However, the path from Jackson’s vision, of justice,” nor from the earlier cases, tion was referred to her office by the State and the leadership role the United States which found that “[i]t is only when the of Palestine, which acceded to the Rome has historically played in international jus- Prosecutor decides that an investigation Statute in 2015,41 having been accorded tice, to the posture of the current admin- would not be in the interests of justice the status of nonmember observer state at istration seems long indeed. n that he or she is under the obligation to the United Nations in 2012. As a referral notify the Chamber of the reasons for such from a state party, no authorization is 1 Int’l Crim. Ct., Rome Statute and other agreements, a decision, thereby triggering the review required for the investigation to begin.42 Rome Statute of the International Criminal Court, power of the Chamber.”35 The judges did The prosecutor has indicated that all the available at https://asp.icc-cpi.int/en_menus/asp not address this adverse precedent in their requirements of Article 53(1) are met but /RomeStatute/Pages/default.aspx [hereinafter Rome Statute]. See also David Scheffer, Staying the Course decision. has asked the pre-trial chamber for a ruling with the International Criminal Court, 35 CORNELL Coming as it did in the face of the on the court’s territorial jurisdiction in INT’L L.J. 47-100 (2001-2002) [hereinafter Scheffer]. threats from the U.S. administration, this Palestine, in view of the disputed status of 2 Scheffer, supra note 1, at 55-68. unexplained departure from the language that territory.43 The decision is likely to 3 Id. at 48 n.3. 4 of the Rome Statute and the practice of be controversial. A list of states parties can be found at Int’l Crim. Ct., States Party to the Rome Statute, https://asp.icc- the court’s was seen with dismay by many Supporters of the court are hoping cpi.int/en_menus/asp/states%20parties/pages/the%20 observers as the court bowing to political that it manages to navigate these difficult states%20parties%20to%20the%20rome%20statute pressure. It was also seen to buttress accu- cases in a way that adds to its credibility .aspx (last accessed Apr. 22, 2020) [hereinafter States sations that the court only prosecutes actors as an institution of impartial global jus- Party to the Rome Statute]. 5 from weak states. This criticism has been tice. Another opportunity is offered by Rome Statute, supra note 1, art. 12. 6 Id., art. 17(1). most prominently voiced by African nations the election of a new prosecutor, for a 7 See id., art. 1: “An International Criminal Court (and the African Union), remarking on the nine-year term, in June, 2021. The current (“the Court”) is hereby established. It shall be a per- number of African cases before the court office has been plagued by questions manent institution and shall have the power to exercise and suggesting that far from contributing about the quality of its work—some dat- its jurisdiction over persons for the most serious crimes to global respect for human rights, the ing back to the first prosecutor, Moreno- of international concern, as referred to in this Statute, and shall be complementary to national criminal juris- ICC has become a tool the powerful deploy Ocampo—after two high-profile acquittals: dictions. The jurisdiction and functioning of the Court 36 against the powerless. In September 2019, the ac quittal on appeal in 2018 of military shall be governed by the provisions of this Statute.” LOS ANGELES LAWYER JUNE 2020 21 8 Id., art. 17 (1)(d). 20 Belfast v. United States, No. 12-20754—CIV, 2013 2. The Prosecutor shall analyze the seriousness 9 Id., art. 15. WL 594023 (S.D. Fla. Feb. 14, 2013). of the information received. For this purpose, 10 Id., art. 13, which provides: 21 States Parties to the Rome Statute, supra note 4, he or she may seek additional information The Court may exercise its jurisdiction with Afghanistan, Ratification and Implementation Status, from States, organs of the United Nations, respect to a crime referred to in article 5 in accor- available at https://asp.icc-cpi.int/en_menus/asp/states intergovernmental or nongovernmental orga- dance with the provisions of this Statute if: %20parties/asian%20states/Pages/afghanistan.aspx nizations, or other reliable sources that he or (a) A situation in which one or more of such (last accessed Apr. 22, 2020). she deems appropriate and may receive written crimes appears to have been committed is 22 See Int’l Crim. Ct., Sixteenth Report of the Prosecutor or oral testimony at the seat of the Court. referred to the Prosecutor by a State Party in of the International Criminal Court to the UN Security 3. If the Prosecutor concludes that there is a accordance with article 14; Council Pursuant to UNSCR 1593 (2005) ¶28 (Dec. reasonable basis to proceed with an investi- (b) A situation in which one or more of such 13, 2012), available at https://www.icc-cpi.int gation, he or she shall submit to the Pre- crimes appears to have been committed is /iccdocs/PIDS/statements/UNSC1212/Report-UNSC - Trial Chamber a request for authorization referred to the Prosecutor by the Security December2012-ENG.pdf. of an investigation, together with any sup- Council acting under Chapter VII of the 23 Rome Statute, supra note 1, art. 15. porting material collected. Victims may make Charter of the United Nations; or 24 INT’L CRIM. CT., SITUATIONIN AFGHANISTAN: representations to the Pre-Trial Chamber, in (c) The Prosecutor has initiated an investigation SUMMARY OF THE PROSECUTOR’S REQUEST FOR AUTHO- accordance with the Rules of Procedure and in respect of such a crime in accordance with RISATION OF AN INVESTIGATION PURSUANT TO ARTICLE Evidence. article 15.... 15 3/16 (Nov. 20, 2017), available at https://www.icc 4. If the Pre-Trial Chamber, upon examination 11 Id., art. 13(b). -cpi.int/itemsDocuments/Afghanistan/171120-afgh- of the request and the supporting material, 12 U.N. Charter art. 39, ch. VII. art_15-app-summ_ENG.pdf. considers that there is a reasonable basis to 13 U.N. Press Release, Security Council, Security Council 25 CIA OFFICE OF INSPECTOR GENERAL, COUNTERTERROR - proceed with an investigation, and that the Refers Situation in Darfur, Sudan, To Prosecutor Of ISM DETENTION AND INTERROGATION ACTIVITIES (SEP - case appears to fall within the jurisdiction of International Criminal Court (Mar. 31, 2005), available TEMBER 2001 - OCTOBER 2003) (May 7, 2004), avai l - the Court, it shall authorize the commencement at https://www.un.org/press/en/2005/sc8351.doc.htm. able at https://fas.org/irp/cia/product/ig-interrog.pdf. of the investigation, without prejudice to sub- 14 U.N. Press Release, In Swift, Decisive Action, Security 26 BBC News, John Bolton threatens ICC with US sequent determinations by the Court with Council Imposes Tough Measures on Libyan Regime, sanctions (Sept. 11, 2018), https://www.bbc.com regard to the jurisdiction and admissibility of Adopting Resolution 1970 in Wake of Crackdown on /news/world-us-canada-45474864. a case. Protesters (Feb. 26, 2011), available at https://www 27 Decision pursuant to Article 15 of the Rome Statue 31 Paragraph 30 of the Afghanistan Decision, supra .un.org/press/en/2011/sc10187.doc.htm. on the Authorisation of an Investigation into the note 27, reads: 15 American Service-Members’ Protection Act, Pub. Situation in the Islamic Republic of Afghanistan, No. Unlike the scenario where the situation is L. No. 107-206, 116 Stat. 931 (2002) [hereinafter ICC-02/17 (Apr. 12, 2019), available at https://www referred to the Court by a State or by the American Service-Members’ Protection Act]. .icc-cpi.int/CourtRecords/CR2019_02068.PDF [here- Security Council, the Pre-Trial Chamber is 16 Article 98 of the Rome Statute, supra note 1, inafter Afghanistan Decision]. vested with a specific, fundamental and decisive “Cooperation with respect to waiver of immunity and 28 See, e.g., Gabor Rona, More on What’s Wrong with filtering role in the context of proceedings consent to surrender,” reads: the ICC’s Decision on Afghanistan, Opinio Juris (Apr. under article 15. The Pre-Trial chamber must 1. The Court may not proceed with a request 15, 2019), https://opiniojuris.org/2019/04/15/more consider, on the exclusive basis of the infor- for surrender or assistance which would -on-whats-wrong-with-the-iccs-decision-on-afghanistan/; mation made available by the Prosecutor, require the requested State to act inconsistently Christian de Vos, No Investigation in Afghanistan: A whether the requirements set out in article with its obligations under international law Bad Decision with Big Implications, International Justice 53(1)(a) to (c) are met. with respect to the State or diplomatic immu- Monitor (Apr. 15, 2019), https://www.ijmonitor.org 32 Corrigendum of the Decision Pursuant to Article nity of a person or property of a third State, /2019/04/no-icc-investigation-in-afghanistan-a-bad 15 of the Rome Statute on the Authorisation of an unless the Court can first obtain the cooper- -decision-with-big-implications/; Patryk I. Labuda, A Investigation into the Situation in the Republic of ation of that third State for the waiver of the Neo-Colonial Court for Weak States? Not Quite. Kenya, No. ICC-01/09-19-Corr (Mar. 31, 2010) [here- immunity. Making Sense of the International Criminal Court’s inafter Kenya Decision]; Corrigendum to “Decision 2. The Court may not proceed with a request Afghanistan Decision, EJIL: Talk! (Apr. 13, 2019), https:// Pursuant to Article 15 of the Rome Statute on the for surrender which would require the re - www.ejiltalk.org/a-neo-colonial-court-for-weak-states Authorisation of an Investigation into the Situation quested State to act inconsistently with its -not-quite-making-sense-of-the-international-criminal in the Republic of Cote d’Ivoire, No. ICC-02/11-14- obligations under international agreements -courts-afghanistan-decision/. Corr (Nov. 15, 2011); Decision on the Prosecutor’s pursuant to which the consent of a sending 29 Article 53 of the Rome Statute, supra note 1, reads: request for authorisation of an investigation [Situation State is required to surrender a person of that 1. The Prosecutor shall, having evaluated the in Georgia], No. ICC-01/15-12 (Jan. 27, 2016); State to the Court, unless the Court can first information made available to him or her, ini- Decision Pursuant to Article 15 of the Rome Statute obtain the cooperation of the sending State tiate an investigation unless he or she deter- on the Authorisation of an Investigation into the for the giving of consent for the surrender. mines that there is no reasonable basis to pro- Situation in the Republic of Burundi, No. ICC-01/17- 17 See Georgetown Law Library, International Crim - ceed under this Statute. In deciding whether X (Oct. 25, 2017). inal Court—Article 98 Agreements Research Guide, to initiate an investigation, the Prosecutor shall 33 “In order to explain such a redundancy, it is worth Countries that have Signed Article 98 Agreements with consider whether: recalling that: (i) articles 15 and 53 of the Statue were the U.S., available at https://guides.ll.georgetown.edu (a) The information available to the Prosecutor dealt with by different working groups during the /c.php?g=363527&p=2456099. provides a reasonable basis to believe that a Rome conference; (ii) there was no time at the end of 18 American Service-Members’ Protection Act, supra crime within the jurisdiction of the Court has the Rome Conference to reconcile both texts and even note 15, §2008. Representatives of the United States been or is being committed; these provisions were not finally considered by the acted to restrict all forms of foreign jurisdiction over (b) The case is or would be admissible under drafting committee; and (iii) many fundamental ques- the acts of the United States and other peacekeepers article 17; and tions remained unresolved until the very end of the when Darfur and Libya were referred to the ICC. At (c) Taking into account the gravity of the Rome Conference including, inter alia, article 15 of the insistence of the U.S. mission, a clause was included crime and the interests of victims, there are the Statute….” Kenya Decision, supra note 32, ¶ 67. in the resolutions providing that nationals of non- nonetheless substantial reasons to believe that 34 Afghanistan Decision, supra note 27, ¶ 35. states parties (apart from Sudanese and Libyans) would an investigation would not serve the interests 35 Kenya Decision, supra note 32, ¶ 63. be subject to the exclusive jurisdiction of their state of of justice. 36 See, e.g., M. Cherif Bassiouni et al., Is the ICC nationality for any acts committed as part of a UN- If the Prosecutor determines that there is no Targeting Africa Inappropriately?, ICC Forum (Mar. authorized force. UN Security Council resolutions reasonable basis to proceed and his or her 17, 2013), available at https://iccforum.com/africa. 1593 (2005) and 1970 (2011). determination is based solely on subparagraph 37 Request for Leave to Appeal the “Decision Pursuant 19 For more on the principle of universal jurisdiction, (c) above, he or she shall inform the Pre-Trial to Article 15 of the Rome Statute on the Authorisation see Douglass Cassel, Universal Criminal Jurisdiction, Chamber. of an Investigation into the Situation in the Islamic Am Bar Ass’n (Jan. 1, 2004), https://www.americanbar 30 Article 15, Rome Statute, supra note 1, reads in full: Republic of Afghanistan,” No. ICC-02/17-34 (June .org/groups/crsj/publications/human_rights_magazine 1. The Prosecutor may initiate investigations 7, 2019). The victims’ application for leave to appeal _hme/human_rights_vol31_2004/winter2004/irr_hr proprio motu on the basis of information on was denied. _winter04_universal/. crimes within the jurisdiction of the Court. 38 Judgment on the appeal against the decision on the

LOS ANGELES LAWYER JUNE 2020 22 authorisation of an investigation into the situation in the Islamic Republic of Afghanistan, No. ICC-02/17 -138 (Mar. 5, 2020), available at https://www.icc-cpi .int/CourtRecords/CR2020_00828.PDF. 39 Id., ¶ 1. Article 15(4) of the Statute requires a pre-trial chamber to determine whether there is a rea- sonable factual basis for the Prosecutor to pro- ceed with an investigation, in the sense of whether crimes have been committed, and that potential case(s) arising from such investigation appear to fall within the Court’s jurisdiction. The pre-trial chamber is not called under article 15(4) of the Statute to review that Prosecutor’s analysis of the factors under article 53(1)(a) to (c) of the Statute 40 Secretary of State Michael R. Pompeo’s Remarks to the Press, U.S. Dep’t of State (Mar. 17, 2020), avail- able at https://www.state.gov/secretary-michael-r -pompeo-remarks-to-the-press-6/. 41 ICC Press Release, The State of Palestine accedes to the Rome Statute (Jan. 7, 2015), available at https:// www.icc-cpi.int/Pages/item.aspx?name=pr1082_2. 42 Article 15 of the Rome Statute requires authorization of the pre-trial chamber only when the prosecutor acts proprio motu. 43 Prosecution request pursuant to Article 19(3) for a ruling on the Court’s territorial jurisdiction in Palestine, No. ICC-01/18-1222 (Jan. 2020), available at https:// www.icc-cpi.int/Pages/record.aspx?docNo=ICC-01/18 -12. WELCOME 44 Judgement on the appeal of Mr. Jean-Pierre Bemba TO OUR Gombo against Trial chamber III’s “Judgement pur- suant to Article 74 of the Statute,” No. ICC-01/05- NEWEST 01/08-3636-Red (June 8, 2018), available at https:// www.icc-cpi.int/Pages/record.aspx?docNo=ICC-01/05 MEMBERS -01/08-3636-Red. Following his acquittal and release, Mr Bemba filed a claim for $77.7 million dollars to compensate him for the time spent in detention and Ellen P. Aprill Scott Paul Leimgruber losses arising from what he characterizes as misman- agement of his frozen assets. See Second Public Amneh Nabil Ataya Daniel D. McMillan Redacted Version of “Mr. Bemba’s claim for com- pensation and damages,” No. ICC-01/05-01/08-3673- Jonathan Jay Brown Monique D. Moncayo Red2 (Mar. 19, 2019), available at https://www.icc- cpi.int/Pages/record.aspx?docNo=ICC-01/05-01/08 Alana Chazan Christopher W. Moore -3673-Red2. Kristen Chic Heather Diana Nicholson 45 Reasons for oral decision of 15 January 2019 on the Requête de la Défense de Laurent Gbagbo afin Sally Coffey Asya Ovsepyan qu’un jugement d’acquittement portant sur toutes les charges soit prononcé en faveur de Laurent Gbagbo Mark Derflinger Jenny Park et que sa mise en liberté immédiate soit ordonnée, No. ICC-02/11-01/15-1263 (July 16, 2019), available Virginia Griffin Donnell Mark Kazuo Robbins at https://www.icc-cpi.int/Pages/record.aspx?docNo Nayiri Betty Emirzian Marisol Rojo =ICC-02/11-01/15-1263.The decision is under appeal. 46 ICC Res. ICC-ASP/18/Res.7, Review of the Inter - Ian Fusselman James Sargent national Criminal Court and the Rome Statute system, ¶¶ 6-12 (adopted at 9th plenary meeting, Dec. 6, 2019, Daniel L. Gardner Gordon Keith Sattro by consensus), available at https://asp.icc-cpi.int/icc Karina A. Gutierrez-Ramos Melissa J. Schmitt docs/asp_docs/ASP18/ICC-ASP-18-Res7-ENG-ICC -Review-resolution-17Dec19-1530.cln.pdf. Elizabeth Harrier Adrian Matthew Slipski 47 UCLA Law, Int’l & Comparative Prog. International Criminal Court President Visits UCLA Law (Jan. 31, Trenton E. Hartzler Noah Solomon 2019), https://law.ucla.edu/centers/international-law -and-human-rights/international-and-comparative-law KeAndra Z. Hoffman Amy Nashon Stalling -program/news/2019/01/international-criminal-court John Lenior Jackson, IV Lance S. Strumpf -president-visits-ucla-law/. 48 Address by Hon. Robert H. Jackson, Assoc. Justice, Gaurav Bobby Kalra Lorraine S. Tong U.S. S. Ct., on the Rule of Law Among Nations to Am. Soc’y Int’l Law (Apr. 13, 1945), available at https:// Nora Yvette Kaprielian Craig Steven Walkon www.roberthjackson.org/speech-and-writing/rule-of -law-among-nations/. Annie Ksadzhikyan 49 Mark D. Agrast, Revisiting U.S. Engagement with the ICC: Notes from the Executive Director, AM. SOC’Y INT’L LAW NEWSLETTER 2-3 (Jan./Mar. 2020), available at https://www.asil.org/sites/default/files /NEWSLETTER_CURRENT.pdf.

LOS ANGELES LAWYER JUNE 2020 23 by Shaun H. Crosner

EmPLOyErINSurEr vIOLATE PAS,yS

SoCal Pizza may be the most instructive in a growing body of cases regarding EPL policy exclusions for alleged wage-and-hour law violations

n Southern California Pizza Co., LLC v. Certain Under - and failed to maintain all payroll and employment records required writers at Lloyd’s, London Subscribing to Policy Number by statute. Employees commonly seek a wide range of relief, 11EPL-20208 (SoCal Pizza),1 the California Court of including damages, wages, statutory and civil penalties, interest, Appeal recently held that an employment practices liability and attorneys’ fees. (EPL) insurer was obligated to defend a California employer When facing such claims, employers often seek coverage under Iin underlying class action litigation alleging violations of the EPL policies that provide coverage for a wide range of employ- California Labor Code and the Private Attorneys General Act of ment-related claims. However, historically, EPL insurers typically 2004 (or PAGA).2 Although SoCal Pizza is the first published denied or contested coverage for claims alleging Labor Code and decision from the court of appeal on the subject, it follows several PAGA violations. In denying or contesting coverage, these insurers pro-insured decisions from state trial courts and federal district relied primarily on policy exclusions, including exclusions for courts in recent years confirming that, contrary to what insurers claims alleging violations of so-called “wage and hour” laws. frequently contend, EPL policies often provide coverage for the They also relied on the fact that, by and large, EPL insurance costs of defending and settling lawsuits alleging violations of the policies do not expressly cover violations of the California Labor Labor Code and PAGA. Code or PAGA. In recent years, class action lawsuits alleging violations of the As confirmed in SoCal Pizza and several trial court decisions California Labor Code and PAGA have been among the most that came before it, these commonly asserted defenses to coverage frequently filed lawsuits in California.3 Although the precise alle- are not always valid. Rather, under the rules of insurance policy gations and claims asserted vary from claim to claim, employees interpretation and the principles governing an insurer’s duty to commonly allege that their employers failed to pay all the minimum defend, EPL policies can—and frequently do—provide coverage or overtime wages owed, failed to provide required meal and for claims alleging violations of the California Labor Code and rest breaks, failed to provide compliant itemized wage statements, PAGA. failed to reimburse necessary business expenses, failed to timely Preliminarily, because SoCal Pizza and other relevant case law pay all wages due upon termination or discharge of employees, turn on the rules of insurance policy interpretation and the principles

Shaun H. Crosner is a partner in the Manhattan Beach, California office of Pasich LLP and represents insureds in complex insurance coverage matters, including matters concerning insurance coverage for lawsuits alleging violations of the California Labor Code and PAGA. He is lead counsel for Southern California Pizza Company in Southern California Pizza Co. v. Certain Underwriters at Lloyd’s, London. KEN CORRAL

LOS ANGELES LAWYER JUNE 2020 24 governing an insurer’s duty to defend, it is lawsuit can “by no conceivable theory raise duration worked and/or remuneration important for practitioners to have a basic a single issue which could bring it within received in exchange for work.”23 understanding of these concepts. the policy coverage.”16 After determining the scope of the Furthermore, if there is even one poten- “wage and hour law(s)” exclusion, the Governing Insurance Law Principles tially covered allegation or claim in an court turned to the specific California Under California law, the fundamental underlying complaint, an insurer generally Labor Code violations alleged in the under- goal of interpreting insurance policies, as will be required to fund a defense to the lying litigation. The court stated that with all contract interpretation, is to ascer- entire lawsuit—even if most of the alle- although the exclusion applied to some tain and effectuate the intention of the gations and causes of action are uncov- claims, “many of the disputed underlying parties.4 If the contractual language is clear ered. Indeed, in evaluating the duty to lawsuit claims are potentially subject to and explicit, it governs.5 However, if the defend, California courts “look not to coverage.”24 policy’s language is ambiguous, its words whether noncovered acts predominate in Specifically, the court held that the are to be construed in the insured’s favor, the third party’s action, but rather to underlying claims alleging violations of consistent with the insured’s reasonable whether there is any potential for liability California Labor Code sections 2800 and expectations.6 under the policy.”17 2802—which obligate employers to reim- The insured bears the burden of estab- Moreover, once triggered, an insurer’s burse certain business-related expenses lishing that a claim is within the basic duty to defend continues “until the under- incurred by their employees—fell outside scope of the policy’s coverage, and the lying lawsuit is concluded or until it has the scope of the “wage and hour law(s)” insurer bears the burden of establishing been shown that there is no potential for exclusion. The court stressed that “[n]either that a claim is specifically and clearly e x - coverage.”18 “Any doubt as to whether the statute mentions wages or hours, nor cluded.7 Coverage grants are “interpreted facts establish the existence of the defense do they appear in the parts of the Labor broadly so as to afford the greatest possible duty must be resolved in the insured’s Code titled ‘compensation’ or ‘working protection to” the insured.8 Policy exclu- favor.”19 hours.’”25 The court held that the pur - sions and limitations, in contrast, are con- Finally, given the breadth of an insurer’s poses of sections 2800 and 2802 were to strued narrowly and are “strictly construed duty to defend, an insurer cannot rely on ensure that employers bear the costs of against the insurer and liberally interpreted a policy exclusion to avoid its defense duty conducting their businesses and do not in favor of the insured.”9 unless the exclusion bars coverage for all pass their operating costs on to their Furthermore, exclusions or limitations claims and allegations in the underlying employees by not reimbursing employees on coverage must be both conspicuous action. Put differently, “an insurer that for appropriate work-related expenses.26 and “plain and clear in order to be given wishes to rely on an exclusion has the bur- The court also noted that the California effect.”10 In fact, the California Supreme den of proving, through conclusive evi- Supreme Court previously had character- Court has “declared time and again ‘any dence, that the exclusion applies in all pos- ized expense reimbursement claims as exception to the performance of the basic sible worlds.”20 “non wage” claims.27 The court specifically underlying obligation must be so stated referenced Smith v. Rae-Venter Law Group, SoCal Pizza as clearly to apprise the insured of its a 2002 California Supreme Court decision effect.’”11 “This means more than the tra- In SoCal Pizza, the California Court of in which the Court referred to expense ditional requirement that contract terms Appeal reversed a trial court’s judgment reimbursement claims as “nonwage” claims be ‘unambiguous.’ Precision is not enough. in favor of Certain Underwriters at Lloyd’s, on nine different occasions throughout the Understandability is also required.”12 To London (Underwriters), holding that Un - opinion.28 that end, provisions that constrict coverage der writers were obligated to defend their The SoCal Pizza court further held that otherwise available under the policy are insured in underlying employment class the business expense reimbursement claim subject to the “closest possible scrutiny.”13 action litigation alleging violations of the fell within the policy’s broad coverage for One of the most valuable provisions in California Labor Code and PAGA. claims alleging “Inappropriate Employ- an EPL policy is the provision obligating The SoCal Pizza court began its analy- ment Conduct”—which was defined, in an insurer to defend its insured, or to pay sis by reciting the familiar principles gov- pertinent part, to include “any…employ- its insured’s defense costs, in a lawsuit or erning an insurer’s duty to defend and the ment related workplace tort.” The court claim that is potentially covered. This may rules gov erning policy interpretation in stressed that, interpreted broadly, the term be especially true with respect to class California. The court stressed that a “‘lia- “tort” encompassed “‘any wrong, not con- action lawsuits alleging violations of the bility insurer owes a broad duty to defend sisting in mere breach of contract, for California Labor Code and PAGA, which its insured against claims that create a which the law undertakes to give to the can cost hundreds of thousands or millions potential for indemnity,’”21 adding that injured party some appropriate remedy of dollars to defend. exclusions must be clear and ambiguities against the wrongdoer.’”29 Because the A leading decision regarding the duty in the policy must be interpreted “to protect causes of action alleging violations of sec- to defend is the California Supreme Court’s the objectively reasonable expectations of tions 2800 and 2802 were not grounded decision in Gray v. Zurich Insurance Co., the insured.”22 in the breach of a contract, the SoCal Pizza in which the court held that an insurer Applying these well-established insur- court held that they could fairly be con- “must defend a suit which potentially seeks ance principles, the SoCal Pizza court nar- strued as alleging employment-related damages within the coverage of the pol- rowly construed the policy’s exclusion for workplace “torts.”30 Given its holding in icy.”14 As the California Supreme Court claims alleging “violation(s) of any… this regard, the court noted that it did not has subsequently explained, “a bare ‘poten- state…wage and hour…law(s).” The court, need to reach the insured’s alternative argu- tial’ or ‘possibility’ of coverage [is] the relying largely on dictionary definitions, ment that the expense reimbursement trigger of a defense duty.”15 Thus, as a concluded that “using the ordinary mean- claims also alleged a “failure to adopt, practical matter, an insurer cannot escape ings of the words, the phrase ‘wage and implement, or enforce employment related its duty to defend unless an underlying hour…law(s)’ refers to laws concerning policies or procedures.”31 LOS ANGELES LAWYER JUNE 2020 26 The court also held that Underwriters employers. In construing this exclusion nify and will not necessarily turn on could not escape their defense duty simply narrowly to bar coverage only for alleged whether the amounts sought by the under- because the expense reimbursements might violations of laws “concerning duration lying plaintiffs are themselves covered. For themselves not be covered. The court stated worked and/or remuneration received in this reason, an EPL insurer may owe a that “whether the reimbursement amounts exchange for work,” the SoCal Pizza court duty to defend even if the underlying are covered losses is neither here nor there,” provided much-needed guidance to the claimants seek only wages, penalties, or stressing that Underwriters’ duty to defend state’s trial and district courts.36 The deci- other relief that the insurer contends is is broader than their duty to indemnify.32 sion also resolved a split in the California uncovered. Indeed, SoCal Pizza makes The court also observed that the policy state and federal trial courts37 as to whether clear that when an EPL policy covers expressly defined “loss” to include defense “wage and hour law” exclusions bar cov- “Loss” and defines “Loss” to include costs, adding that such expenses are “by erage for claims alleging violations of sec- defense costs (as is usually the case), defense their very nature, …necessarily…amounts tions 2800 and 2802. costs will be covered if the underlying law- paid ‘on account of a Claim.’”33 More broadly, the SoCal Pizza court suit includes allegations falling within the SoCal Pizza provides insureds and insurers alike with a framework for evaluating insurance coverage for so-called “derivative” PAGA claims based on other alleged violations of the California Labor Code.

Finally, the SoCal Pizza court addressed reiterated the well-established rule that policy’s coverage and outside the scope of coverage for the underlying PAGA cause policy exclusions must be construed nar- any policy exclusion. of action, as well as the claim alleging rowly. Although the exclusion at issue in Finally, SoCal Pizza provides insureds unfair business practices in violation of SoCal Pizza concerned alleged violations and insurers alike with a framework for California Business and Professions Code of “wage and hour law,” California courts evaluating insurance coverage for so-called Section 17200. The court held that because have applied the same interpretive princi- “derivative” PAGA claims based on other these are “derivative claims based, in part, ples in construing other exclusions in alleged violations of the California Labor on defendant’s alleged failure to reimburse the context of lawsuits alleging violations Code. As explained by the SoCal Pizza business-related expenses,…they are, to of the California Labor Code and PAGA. court, coverage for PAGA claims generally that extent, potentially within the scope For instance, California courts have held will depend on the nature of the employer’s of the Policy and not excluded.”34 that exclusions for the Fair Labor Standards alleged Labor Code violations. If such The SoCal Pizza court went on to re- Act and “similar provisions” of state law alleged violations would themselves fall verse the trial court’s judgment in Under - do not bar coverage for alleged violations within the coverage provided under an writers’ favor and remanded the case for of California Labor Code sections 201-203 EPL policy, then so, too, will derivative further proceedings. Underwriters subse- (governing the payment of wages upon PAGA claims. Accordingly, when evaluat- quently petitioned for review in the Calif - termination or discharge), 226 (govern - ing coverage for PAGA claims in the wake ornia Supreme Court. On January 2, 2020, ing itemized wage statements), and 2802 of SoCal Pizza, courts are likely to focus the California Supreme Court denied (governing reimbursement of business on the nature of the employer’s alleged Underwriters’ petition. expenses).38 wrongful conduct and the specific Labor Furthermore, in holding that certain of Code provisions that the employer is key Takeaways for Insured Employers the claims at issue could be construed as alleged to have violated. SoCal Pizza is the most recent addition to alleging employment-related workplace Thus, SoCal Pizza and other decisions a growing body of case law confirming “torts,” the SoCal Pizza court emphasized that came before it confirm that EPL polices that claims alleging violations of the and applied the familiar principle that cov- can afford coverage for lawsuits alleging California Labor Code and PAGA can be erage grants be interpreted broadly and in violations of the California Labor Code covered under EPL insurance policies.35 favor of coverage. In this regard, several and PAGA. As these decisions demonstrate, As these decisions make clear, the broad California courts have applied this inter- coverage for such claims turns on the spe- coverage provided by EPL insurance poli- pretive rule and held that lawsuits alleging cific facts, allegations, and policy terms at cies may be triggered by allegations con- California Labor Code and PAGA viola- issue. n cerning the failure to pay overtime wages, tions can fall within the broad coverage failure to provide meal and rest breaks to provided by EPL insurance policies. For 1 Southern Cal. Pizza Co., LLC v. Lloyd’s, London, employees, failure to provide accurate item- instance, California courts have held that Policy No. 11EPL-20208, 40 Cal. App. 5th 140 (2019). ized wage statements, failure to reimburse such alleged violations can trigger coverage 2 Under PAGA “aggrieved employees”—defined as necessary business expenses, failure to in EPL policies for “employment-related current or former employees against whom a viola - tion of the California Labor Code allegedly was com - 39 timely pay wages due at termination, and misrepresentations,” employment-related mitted—are granted a private right of action to seek other alleged violations of the California “discrimination,”40 “failure to adopt, civil penalties on behalf of the California Labor and Labor Code and PAGA. implement or enforce employment related Workforce Development Agency. See LAB. CODE SoCal Pizza is likely to be most instruc- policies or procedures,”41 and “false impris- §2699(a), (c). In most cases, 75 percent of any civil tive with respect to EPL policies containing onment.”42 penalties recovered are distributed to the Labor and Workforce Development Agency, with the plaintiff exclusions for alleged violations of wage In addition, the SoCal Pizza court con- employee and other “aggrieved employees” retaining and hour law, which in recent years has firmed the scope of an EPL insurer’s duty the remaining 25 percent. Id. at §2699(i). become one of the more common exclu- to defend, emphasizing that the duty to 3 SEYFARTH SHAW LLP, CAL-PECULIARITIES 2019: HOW sions in EPL policies issued to California defend is broader than the duty to indem- CALIFORNIA EMPLOYMENT LAW IS DIFFERENT §5.14 LOS ANGELES LAWYER JUNE 2020 27 (David Kadue & Colleen Regan eds. 2019), available inate or generate the claim. Instead, California courts (SSx), 2010 WL 4123786 (C.D. Cal. Sept. 22, 2010); at https://www.seyfarth.com/images/content/7/1/v1 have repeatedly found that remote facts buried within Royalty Carpet Mills, Inc. v. Ace Am. Ins. Co., No. /7137/2019-Cal-Peculiarities.pdf (“The number of class causes of action that may potentially give rise to cov- SA CV 16-0658-DOC, 2017 WL 4786107 (C.D. Cal. action lawsuits alleging violations of the California erage are sufficient to invoke the defense duty.” (citation July 17, 2017). Labor Code has continued to rise.”). omitted)). 36 Southern Cal. Pizza, 40 Cal. App. 5th at 148. 4 CIV. CODE §1636; AIU Ins. Co. v. Superior Ct., 51 18 Montrose, 6 Cal. 4th at 295 (emphasis in original). 37 Compare Hanover, 2016 WL 6698936, at *3-5 Cal. 3d 807, 821 (1990); accord Karen Kane Inc. v. 19 Id. at 299-300. (EPL policy exclusion for claims alleging a violation Reliance Ins. Co., 202 F. 3d 1180, 1188 n.3 (9th Cir. 20 Atlantic Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. of any state law “that governs wage, hour and payroll 2000) (objectively reasonable expectations of parties App. 4th 1017, 1039 (2002). policies and practices” inapplicable to alleged violation are touchstone for interpreting insurance contracts 21 Southern Cal. Pizza Co., LLC v. Lloyd’s, London, of LAB. CODE §2802 for reimbursement of reasonable under California law); see also CODE CIV. PROC. §1859. Policy No. 11EPL-20208, 40 Cal. App. 5th 140, 146 business expenses) and PacPizza, No. C18-00249, 5 CIV. CODE §638. (2019) (emphasis in original). Order at 7-9 (exclusion for “wage and hour or over- 6 Safeco Ins. Co. of Am. v. Robert S., 26 Cal. 4th 758, 22 Id. time” claims does not bar coverage for employer’s 763 (2001); Kazi v. State Farm Fire & Cas. Co., 24 23 Id. at 148. alleged failure to reimburse necessary business expenses Cal. 4th 871, 879 (2001); AIU, 51 Cal. 3d at 822. 24 Id. at 144. in violation of LAB. CODE §2802) with Admiral Ins. 7 MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 25 Id. at 150. Co. v. Kay Auto. Distrib., Inc., 82 F. Supp. 3d 1175, 648 (2003); see also Clemmer v. Hartford Ins. Co., 26 Id. at 150-51. 1181-82 (C.D. Cal. 2015) (holding “wage and hour 22 Cal. 3d 865, 880 (1978). 27 Id. at 151. law” exclusion barred coverage for expense reimburse- 8 MacKinnon, 31 Cal. 4th at 648. 28 See Smith v. Rae-Venter Law Group, 29 Cal. 4th ment claims) and Phase II Transp., Inc. v. Carolina 9 Delgado v. Heritage Life Ins. Co., 157 Cal. App. 3d 345, 353, 354, 358, 371 (2002). Cas. Ins. Co., 228 F. Supp. 3d 999, 1006 (C.D. Cal. 262, 271 (1984); see also Garvey v. State Farm Fire 29 Southern Cal. Pizza, 40 Cal. App. 5th at 153 (quoting 2017) (same). & Cas. Co., 48 Cal. 3d 395, 406 (1989). Denning v. State, 123 Cal. 316, 323 (1899)). 38 See, e.g., PHP, 2015 WL 4760485, at *8 (LAB. CODE 10 Travelers Prop. Cas. Co. of Am. v. Superior Ct., 30 Id. at 152-53. §226 has no parallel in the Fair Labor Standards Act 215 Cal. App. 4th 561, 575 (2013). 31 Id. at 152. (29 U.S.C. §203)), aff’d on other grounds, 708 F. 11 Haynes v. Farmers Ins. Exch., 32 Cal. 4th 1198, 32 Id. at 154. App’x 921 (9th Cir. Jan. 17, 2018); California Dairies 1204 (2004). 33 Id. Inc.. v. RSUI Indem. Co., 617 F. Supp. 2d 1023, 1045- 12 Id. at 1211. 34 Id. 47 (E.D. Cal. 2009) (the Fair Labor Standards Act is 13 Id. at 1212. 35 See, e.g., Hanover Ins. Co. v. Poway Acad. of Hair not similar to LAB. CODE §§201-203, 226, 2802). 14 Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 (1966). Design, Inc., No. 3:15-cv-00536-BTM-DHB, 2016 39 See, e.g., Prof’l Sec. Consultants, 2010 WL 4123786, 15 Montrose Chem. Corp. v. Superior Ct., 6 Cal. 4th WL 6698936 (S.D. Cal. Nov. 14, 2016); PacPizza, at *3 (coverage for “any employment-related misrep- 287, 295 (1993). LLC v. Certain Underwriters at Lloyd’s, London Sub - resentation” triggered by allegation employer “[d]issem- 16 Gray, 65 Cal. 2d at 275 n.15. scribing to Policy Nos. 11EPL-20191 and 12EPL- inated false information [regarding overtime compen- 17 Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 20281, No. C18-00249 (Contra Costa Super. Ct. July sation to] employees”). 1076, 1084 (1993) (citation omitted); see also Pension 12, 2018); PHP Ins. Serv., Inc. v. Greenwich Ins. Co., 40 See, e.g., PHP, 708 F. App’x at 922. Trust Fund v. Fed. Ins. Co., 307 F. 3d 944, 951 (9th No. 15-CV-00435-BLF, 2015 WL 4760485 (N.D. Cal. 41 See, e.g., PacPizza, No. C18-00249, Order at 12- Cir. 2002) (“The duty to defend does not usually turn Aug. 12, 2015); Professional Sec. Consultants, Inc. v. 13. on whether facts supporting a covered claim predom- United States Fire Ins. Co., No. CV 10-04588 SJO 42 See, e.g., Royalty, 2017 WL 4786107, at *11.

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LOS ANGELES LAWYER JUNE 2020 28

Special Feature

by the honorable kevin C. Brazile and Sherri r. Carter Accessing Justice in a PANdEmIC

under current LASC leadership, court personnel acted swiftly and efficiently to respond to state-mandated security measures regarding COvId-19

ourts, and the justice system generally, are accustomed to having adequate time within which to make thoughtful, deliberate, and carefully planned changes. The coronavirus (COVID-19) pandemic of 2020 eliminated the luxury of time, while still demanding careful, deliberate, and well-thought- out responses. In a court the size of the Los Angeles Superior Court, with C580 judicial officers, 4,600 employees, and 38 courthouses, the intense pressure for rapid adjustment to extraordinary public health concerns placed unprecedented demands on the creativity, commitment, and conscientiousness of judges, court employees, and superior court stakeholders. This is the story of the first 30 days of these efforts. On March 4, 2020, in response to the spread of COVID-19, Governor Gavin Newsom declared a state of emergency in California. On March 13, President Donald J. Trump declared a national emergency. Just days later, on March 16, California counties, including Los Angeles, began issuing shelter-in-place or stay-at-home orders. On March 19, Governor Newsom issued Executive Order N-33-20, requiring all Californians to stay home, subject to certain limited exemptions.1 Courts are included in this exemption as they provide essential services to the community; therefore, courts are required to remain open during this crisis. Public Health agencies, including the Centers for Disease Control and Preven tion (CDC), the California Department of Public Health (DPH), and local county health departments have recommended increasingly stringent social distancing measures of at least six feet between persons. Further, they have encouraged vulnerable individuals to avoid public gatherings and spaces and recommended the size of social gatherings be

Kevin C. Brazile is the presiding judge of the Los Angeles Superior Court. Sherri R. Carter is the executive officer/clerk of court for the Los Angeles Superior Court. HADI FARAHANI

LOS ANGELES LAWYER JUNE 2020 30 limited to less than 50, or even 10. English and Spanish to encourage social The continuous operation of the courts distancing, initiated more intensive custodial is an essential element of our constitutional cleaning, and notified employees of the form of government, providing due process The Superior importance of hand washing and remaining and protecting the public. However, courts at home if at-risk and when sick. are clearly public spaces with high risks Court of Los To provide a foundation for long-term during this pandemic because they require Angeles County is planning, and relying upon authority newly gatherings of judicial officers, court staff, granted by Chief Justice of California Tani litigants, attorneys, witnesses, defendants, committed to Cantil-Sakauye, on March 16, Judge Brazile members of law enforcement, and juries, “ announced (and made official in his General all of which include numbers well in excess providing equal Order of March 17) that all 38 of Los of those allowed for gathering under cur- Angeles County courthouses would be rent executive and health orders. access to justice closed to the public March 17 to 19, and By early March, the dilemma was clear: through the fair, that those days would be declared court whether to remain open to provide access holidays for purposes of computing filing to justice or to shut down to protect the timely and and other deadlines.2 The March 17 health of the public and find other ways to General Order further stated that when the maintain essential services, using technol- efficient resolution courthouses reopened, most courtrooms ogy and other means to provide access to of all cases. would remain closed through April 16, justice while enforcing social distancing. except for those handling time-sensitive Reinventing the largest court in the However, it is and essential functions, including: protective nation during a pandemic crisis required orders; ex parte matters in civil and family an extraordinary effort. Full-time working imperative that we law; emergency writs in family law, probate, groups in every litigation area, and across mental health, and criminal law; certain the court’s administrative areas, worked continue aligning criminal and juvenile hearings necessary tirelessly to create solutions, guided by a our Court with the for the protection of civil and constitutional common set of principles: 1) preserve essen- rights; and a small number of other matters. tial functions, 2) find ways to support those most recent The March 17 General Order also provided functions in a manner that supports social for extensions of statutory time periods distancing of at least six feet, 3) appropri- directives and across different areas of litigation. ately delay non essential functions that can- As Judge Brazile stated: not be safely supported, 4) craft solutions guidelines issued The Superior Court of Los Angeles that are supported by key stakeholders and by our national, County is committed to providing authorized by law, and 5) implement equal access to justice through the changes rapidly albeit in a way that can state and local fair, timely and efficient resolution be sustained throughout the crisis. Court of all cases. However, it is imperative leadership had to figure out what it means public health that we continue aligning our Court to stay committed to access to justice while officials. with the most recent directives and also being committed to flattening the curve. guidelines issued by our national, state and local public health officials. Laying the foundations Let me be clear: we will continue to As Governor Newsom and Los Angeles serve the needs of the most vulner- Mayor Eric Garcetti issued orders to imple- able people in Los Angeles County— ment social distancing, Presiding Judge our children, the elderly, domestic Kevin Brazile took the first of a series of violence victims, people whose life actions designed to implement social dis- ” and liberty interests are at stake, and tancing in the court. On March 13, relying in many other emergent cases as is on the inherent and limited authority the possible and safe.3 court had at that time, Judge Brazile rec- The court that reopened its doors to the ommended to all judicial officers that jury public on Friday, March 20, was a very trials be continued to a future date. Two different court. As Judge Brazile stated on days later, the court closed self-help centers March 19, “The Court has used the last while encouraging telephonic appearances three days to plan for measures to adhere and online assistance. Perhaps most sig- to and promote social distancing. The public nificantly, the court also suspended the is reminded that when they return for court issuance of juror summons—recognizing business tomorrow, we are seeking their that the summonsing, selection, seating, help to remain at least six feet away from and deliberations of juries were inherently any other person.”4 Therefore, by March incompatible with the mandated level of 20, the world was looking like a different social distancing since, on an average day, place, and this was reflected in the Los approximately 10,000 jurors may be sum- Angeles Superior Court system. moned to appear in one of the 38 court- To put these changes in perspective, houses in Los Angeles County. The court in February, nearly 60,000 people went also immediately implemented signage in through a weapons screening station at a LOS ANGELES LAWYER JUNE 2020 32 Los Angeles County courthouse every day. In addition, nearly together justice system partners to solve shared problems. Court 3,000 new non-traffic cases were filed daily. A Los Angeles cour- justice partners have agreed upon lists of persons to be released thouse was a busy place full of people. In contrast, by mid- by the court, reflecting their best efforts to balance the public March throughout California and the world restaurants and bars health needs of the jail population and the public safety needs were closing, schools were shuttering, businesses of all kinds of the community. The prosecutorial agencies and defense bar were closing their doors–all in the interest of social distancing to brought joint motions (10 in all) seeking court orders to release prevent people from congregating. As an essential service, the specified inmates on stipulated lists—inmates who will not be court had to instantly reinvent ways to stay open safely. brought to court for a hearing until a future date but who will be released upon review and execution of multiple orders by Online Services Judge Sam Ohta, who serves as supervising judge of the Crim - One of the more dramatic ways in which the court changed was inal Division of the Los Angeles County Superior Court. The the closure of clerks’ offices by court Executive Officer and Clerk lists were vetted and agreed upon by the Los Angeles County of Court Sherri R. Carter, until further notice.5 Intended to District Attorney’s Office, Los Angeles County Public Defender’s support the 4,600 employees and the public in accordance with Office, Los Angeles County Alternate Public De fender’s Office, increasingly strict guidelines for social distancing, the implemen- Indigent Criminal Defense Appointments (ICDA Bar Panel), tation of this measure was far less disruptive than it might have and the Los Angeles County Sheriff’s Department, representing been, given the technological innovations and improvements an extraordinary consensus and collaboration in response to an made by the court over the past several years. extraordinary situation. Telephonic services from newly developed local calling centers, In the midst of the crisis, it was reported that “[t]he Los staffed with teleworking employees ready to assist, were created Angeles County Sheriff’s Department is releasing inmates from to handle essential services, such as restraining orders, without its jails and cutting down on how many people it books into the need for a person to enter the courthouse. Drop boxes were custody to protect those housed in close quarters from the growing installed outside courthouses for those who needed to file paper coronavirus pandemic.”6 The court re sponded with a revised documents. Fortuitously, long—and potentially health-threaten- bail schedule on March 27, 2020: ing—lines of litigants seeking to file papers and retrieve documents The Court’s revised bail schedule, as recommended by the had already been reduced by e-filing and online document access [Chief Jus tice of California], lowers bail on many misde- and services. meanors and low-level felonies to $0. This means, for By March 30, those 60,000 daily public entries were reduced those offenses where the bail amount is $0, instead of by 90 percent, to 6,000. As witnessed in other areas of life during taking the arrested individual into custody and setting a the pandemic—from video streaming to online courses at uni- bail amount, the person would be released with a return versities—online services have flourished to fill the gaps created date to Court. This will assist in reducing incoming work- by social distancing. The court is no exception. load on arrests which, in all likelihood, would result in a In concert with justice system partners, including the district release at a bail hearing.7 attorney, the public defender, probation department, the depart- As in other areas, what cannot be handled remotely must be ment of children and family services, and other agencies, the delayed. Over the weekend of March 28-29, the governor, chief court immediately launched crash programs in several areas, justice, and the Judicial Council of California acted in concert to seeking to replace in-person appearances with telephonic and strengthen the ability of the superior courts to delay criminal video appearances. As of this writing, criminal courtrooms are matters. In the words of the chief justice, such an action followed conducting video arraignments. Dis cussions are in progress to “careful consideration, balancing the constitutional due process determine if those systems can be extended to felony preliminary rights of parties in both criminal and civil proceedings with the hearings while protecting a defendant’s right of confrontation health and safety of these parties, the public, court staff, judicial and cross-examination of witnesses, the right to be in the court- officers, attorneys, witnesses, jurors, and others present at these room, and the right to the assistance of counsel. Litigants and proceedings, among other considerations….”8 attorneys in dependency and delinquency courtrooms now use Using the authority granted by the chief justice’s March 30 remote video appearances for hearings when permitted by law. order, Judge Brazile issued an order on April 2 extending the For the small number of urgent ex parte matters in civil and time limits for arraignments, preliminary hearings, and criminal family law allowed under the March 17 General Order, video trials, providing much needed relief to those involved in ongoing and telephonic appearances can be used. Video appearances also criminal cases that could not be handled remotely.9 can be made in hearings regarding domestic violence restraining Civil, family, and Probate orders in the family law courts and for those regarding civil com- mitments in the mental health courts. Outside of the tightly scheduled world of the criminal courts, and apart from essential and time-sensitive matters, delay is in- Criminal Courts escapably more prevalent. Such delays will be addressed as more One of the court’s most serious responsibilities is to preserve knowledge and experience are gained about the pandemic and public safety and individual rights throughout the criminal jus - as what is allowable is further identified. tice process. The dilemma posed by the COVID-19 pandemic is With eviction cases, public policy dictated the response. The particularly problematic in the criminal arena in which delay is initial extension of deadlines for responses in eviction cases (in not just bothersome but may constitute a possible violation of Judge Brazile’s General Order of March 17) became a moratorium. statutory or constitutional rights. In the case of defendants held Judge Brazile’s Order of March 19 explained: in custody prior to trial, delay is potentially life-threatening if In light of Governor Newsom’s Exec utive Order urging the virus spreads in the jails. Video appearances are helpful but emergency action to promote housing stability and security, cannot be done at sufficient scale to avoid this dilemma. the moratoriums on evictions imposed in both the County In crisis planning, as in a specific case, the court plays a of Los Angeles and the City of Los Angeles, and the court’s crucial role in a delicate and important balancing act, bringing inability to hold unlawful detainer related hearings throughout LOS ANGELES LAWYER JUNE 2020 33 the emergency period, the court finds good cause to continue Recent developments are fast-moving and will continue to all unlawful detainer trials without a determination pursuant happen at warp speed. Court leadership is in constant contact to Code of Civil Procedure section 1170.5(c).10 with the Judicial Council of California and the chief justice, Not everyone who provides access to justice does so in a helping to ensure an effective statewide response and to secure courtroom, or even behind the window at the clerk’s office. the appropriate authority for the actions needed in Los Angeles Thousands of court employees perform functions that are con- County. Court leaders maintain continuing close contact with sidered essential. A major challenge is to provide a safe environ- all county partners, gathering information from the CDC, the ment within which they can continue to do their work. Here DPH, and the county Office of Emergency Management. again, recent technological innovations and improvements came As public officials and health experts learn more about effective to the rescue. For many court employees, essential services plus responses to the pandemic, the court’s strategies will shift as safe-at-home equals remote telework. needed. Meanwhile, the court must keep litigants, stakeholders, It was 10:00 A.M. on Friday, March 13, when Carter learned and the public informed. The court’s Website (lacourt.org) is that the Los Angeles Unified School District and many other dis- regularly updated with the latest changes in court services, and tricts across the county would close their schools the following frequent news releases help the media keep their readers informed. Monday. By 4:00 P.M. that day, Carter had created and offered a The court has created a page dedicated to the latest and most new telework program to all employees, especially focusing on comprehensive information about the court’s responses to the those employees with children at home or who were over 65, or pandemic. otherwise at risk. A Threat Like No Other Recent efforts at creating a more efficient and electronic envi- ronment (e.g., through e-filing, paperless case files, and enhanced As the largest trial court system in the nation, one that serves online services for court users) have yielded an enormous payback such a diverse, dynamic—and, at times, unique—community, the in the current crisis by supporting a telework environment. More court has seen its share of challenges. In the 1990s, riots threatened and more of the work done by clerical staff and others is com- courthouses and swelled criminal courtrooms to the breaking puterized. With provisions for secure logins and the recent focus point. Earthquakes have rattled and damaged courthouses. Sudden on online security, many court staff can effectively and securely and severe financial collapses have forced sudden and severe serve the public from home. budget contraction twice in the past two decades. Through it all, Of the court’s 4,600 employees, more than 90 percent are cur- the court endured and continued to provide access to justice. The rently able to telework safely from home, thus supporting access doors that were open may have been fewer, but they remained to justice. In the court’s administrative units (technology, human open as decades of court leaders refused to turn people away. resources, budget and finance), managers were able to quickly The current pandemic has turned that commitment on its head. shift staff to remote work, where they not only continue their Suddenly, open doors are more of a threat to the public than closed normal support activities but also have completed dozens of crash ones. There could be no preparation for a threat like this. Rapid, projects that support the court’s pandemic responses. For example, creative, and bold responses have been required, tempered always the newly created call center automatically routes calls to the by respect for the rule of law, the rights of individuals, and the correct clerical employee—currently working at home—who can demands of justice. Such responses will continue to be needed in schedule a courtroom appointment for urgent matters or inform the coming months. Indeed, the “reopening” of the court, whenever the caller of relevant delays or other provisions that affect his or it comes and at whatever pace it takes, may prove as challenging her matter. A local call center is available for each of the court’s as was its sudden reinvention in March. Nonetheless, the court 38 courthouses. endures and will always remain open to the degree circumstances Courthouses have long reflected the community outside, and permit in order to assure access to justice. the quiet streets of Los Angeles County are reflected in depopulated Indeed, Presiding Judge Brazile and Executive Officer Carter courthouse hallways. In February, during normal court operations, stand committed to serving the public and providing access to about 568 courtrooms were opened for business. As of this justice in the current environment and to meeting whatever chal- writing, 175 courtrooms are operating, with plans for that number lenges the future may bring. n to be reduced even more. The remaining courtrooms are not empty, but they are safer. 1 Exec. Order N-33-20, State of California, Mar. 4, 2020, available at https://covid19 Time-sensitive, essential functions that must be done in person .ca.gov/img/Executive are being done in more sparsely populated spaces. The court has -Order-N-33-20.pdf. 2 Press Release, COVID-19, Only Authorized Persons Allowed to Enter Any Superior arranged increased janitorial services in all courthouses, adding Court of Los Angeles County Courthouse (Mar. 17, 2020), available at http://www a second daily cleaning and disinfection of public areas, including .lacourt.org/newsmedia/ui/covid19NewsCenter.aspx [hereinafter Press Release]. restrooms, public counters, and high-touch areas—right down 3 Id. to elevator buttons, elevator handrails, escalator handrails, door- 4 Id. 5 knobs, push-pull handles, and visitor benches in the hallways. Id. 6 Alene Tchekmedyian et al., L.A. County releasing some inmates from jail to combat Weapons screening remains a key feature of courthouse security, coronavirus, L.A. TIMES, Mar. 16, 2020; see also COVID-19 Press Release, supra so the court and sheriff provide in creased disinfecting of the note 2. screening stations, and the court provides screening attendants 7 Letter from Supervising Criminal Judge Sam Ohta to law enforcement agencies with disinfectant wipes to frequently wipe down high-touch sur- in Los Angeles County re Interim Revised Bail Schedule (Mar. 27, 2020). 8 faces, such as the bowls used to carry small items through the Judicial Council Of California, Statewide Emergency Order By Hon. Tani G. Cantil-Sakauye, Chief Justice Of California And Chair Of The Judicial Council screening machine. (Mar. 30, 2020), available at https://newsroom.courts.ca.gov/. For those who have a scheduled matter and need to enter a 9 Press Release, supra note 2. courthouse, and for those inside as well, social distancing is 10 Administrative Order of Presiding Judge (Kevin C. Brazile) Re Covid-19 Pandemic, enforced. Sheriff and court public safety staff monitor hallways, General Order, L.A. County Superior Ct. (Mar. 19, 2020), available at http:// lobbies, and courtrooms, as well as direct visitors, to stay at least www.lacourt.org/pdf/2020-GEN-005-00AdministrativeOrderofPJreCOVID-19 -031920.pdf. six feet apart inside and outside the courthouses. LOS ANGELES LAWYER JUNE 2020 34 2020 LAWYER to LAWYER referral guide

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Website: over 400 jury trials among them. Keller/Anderle points and authorities and briefs. Honey has www.kelleranderle.com. Contact Kay is rated Tier One by U.S. News and World Report. been counsel in a number of landmark cases; she Anderle. Keller/Anderle LLP is among the The firm is 100% women-owned. See display ad has written and spoken extensively in the areas premier boutique trial firms in California. The on back cover. of family law, appellate law and procedure, and firm handles high-stakes litigation of all types legal writing. including commercial, intellectual property, EmPLOymENT & LABOr LAw securities, bad faith, class actions, white collar BAd fAITh LITIGATION criminal defense, entertainment/sports, legal LAW OFFICE OF ELI M. KANTOR malpractice, and insurance recovery. Keller/ 9595 Wilshire Boulevard, Suite 405, Beverly Hills, KELLER3ANDERLE LLP Anderle LLP attorneys have won over $925 CA 90212, (310) 274-8216, fax (310) 273-6016, 18300 Von Karman Avenue, Suite 930, Irvine, million in judgments, and successfully defended e-mail: [email protected]. Website: www CA 92612, (949) 476-8700, fax (949) 476-0900, many other clients. Members of the firm have .beverlyhillsemploymentlaw.com. Contact Eli e-mail: [email protected]. Website: over 400 jury trials among them. Keller/Anderle Kantor. We specialize in all aspects of labor and www.kelleranderle.com. Contact Kay is rated Tier One by U.S. News and World Report. employment law, including sexual harassment, Anderle. Keller/Anderle LLP is among the The firm is 100% women-owned. See display ad wrongful discharge, employment discrimination, premier boutique trial firms in California. The on back cover. wage and hour, as well as class action litigation. firm handles high-stakes litigation of all types

LOS ANGELES LAWYER JUNE 2020 35 ENTErTAINmENT/SPOrTS INSurANCE rECOvEry including commercial, intellectual property, LITIGATION securities, bad faith, class actions, white collar KELLER3ANDERLE LLP criminal defense, entertainment/sports, legal KELLER3ANDERLE LLP 18300 Von Karman Avenue, Suite 930, Irvine, malpractice, and insurance recovery. Keller/ 18300 Von Karman Avenue, Suite 930, Irvine, CA 92612, (949) 476-8700, fax (949) 476-0900, Anderle LLP attorneys have won over $925 CA 92612, (949) 476-8700, fax (949) 476-0900, e-mail: [email protected]. Website: million in judgments, and successfully defended e-mail: [email protected]. Website: www.kelleranderle.com. Contact Kay many other clients. Members of the firm have www.kelleranderle.com. Contact Kay Anderle. Keller/Anderle LLP is among the over 400 jury trials among them. Keller/Anderle Anderle. Keller/Anderle LLP is among the premier boutique trial firms in California. 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See display ad on [email protected]. Website: www page 37. LEGAL mALPrACTICE .ROSSmediation.com. Contact Barry Ross, Esq. or Debby Mannino (Case Manager). LAW OFFICE OF ELI M. KANTOR KELLER3ANDERLE LLP Mediation and Arbitration Focus Areas: Civil & 9595 Wilshire Boulevard, Suite 405, Beverly Hills, 18300 Von Karman Avenue, Suite 930, Irvine, Commercial Disputes, Torts & Contracts, Real CA 90212, (310) 274-8216, fax (310) 273-6016, CA 92612, (949) 476-8700, fax (949) 476-0900, Estate, Business, Labor & Employment, Personal e-mail: [email protected]. Website: www e-mail: [email protected]. Website: Injury, and Professional Liability. Barry Ross is .beverlyhillsemploymentlaw.com. Contact Eli www.kelleranderle.com. Contact Kay recognized nationally and internationally as a Kantor. Specializes in all aspects of business, Anderle. Keller/Anderle LLP is among the leading conflict resolution professional. 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LOS ANGELES LAWYER JUNE 2020 36 Fellow of the International Academy of both LACBA’s Entertain ment and Intellectual represents agencies that serve water to more Mediators. Mediator since 1993. Arbitrator since Property Section as well as International Law than 21 million people, in addition to advising 1977. California Attorney since 1976. California Section. See display ad on page 37 . developer, agricultural, and manufacturing Real Estate Broker since 1973. ROSS Mediation clients. We aid in the acquisition, development, Services® has offices in Los Angeles, California, wATEr LAw and maintenance of surface and groundwater and in Dallas, Texas. Barry conducts ADR in- rights—including California’s Sustainable person, on Zoom and via other teleconferencing BEST BEST & KRIEGER LLP Groundwater Management Act—and navigate platforms. See display ad on page 4. 300 South Grand Avenue, 25th Floor, Los issues related to regional management of water Angeles, CA 90071, (213) 617-8100, fax (213) 617- supplies and water transfers. BB&K also provides SECurITIES 7480, e-mail [email protected]. Website: www critical counsel in regulatory compliance, .BBKlaw.com. Contact Eric L. Garner. From its including water quality matters, and identifying KELLER3ANDERLE LLP roots helping to implement the California State and developing innovative funding strategies for 18300 Von Karman Avenue, Suite 930, Irvine, Water Project, Best Best & Krieger is now a water supply, conveyance, quality, treatment CA 92612, (949) 476-8700, fax (949) 476-0900, nationally and internationally recognized force and reclamation, flood control, investment, and e-mail: [email protected]. Website: in water supply and water quality law. The firm recycling projects. www.kelleranderle.com. Contact Kay Anderle. Keller/Anderle LLP is among the premier boutique trial firms in California. The firm handles high-stakes litigation of all types including commercial, intellectual property, securities, bad faith, class actions, white collar criminal defense, entertainment/sports, legal malpractice, and insurance recovery. Keller/ Anderle LLP attorneys have won over $925 million in judgments, and successfully defended many other clients. Members of the firm have over 400 jury trials among them. Keller/Anderle is rated Tier One by U.S. News and World Report. The firm is 100% women-owned. See display ad on back cover.

SPECIAL EduCATION LAw VALERIE VANAMAN Newman Aaronson Vanaman, 14001 Ventura Boulevard, Sherman Oaks, CA 91423, (818) 990- 7722, fax (818) 501-1306, e-mail: vvanaman @navlaw.net. Website: www.navlaw.net. Contact Intake Department. For four decades, Valerie Vanaman has been providing knowledgeable and compassionate representation to people who need help obtaining services from school districts and regional centers. Since the inception of her firm, Newman Aaronson Vanaman, in 1981, she has been the acknowledged leader in representing clients at IEP meetings, due process mediations and hearings, and related federal court actions. She also assists families with school discipline matters and in securing eligibility and services from regional centers.

TrAdEmArk LAw LAW OFFICE OF PAUL D. SUPNIK 9401 Wilshire Boulevard, Suite 1250, Beverly Hills, CA 90212, (310) 859-0100; fax (310) 388-5645, e-mail: [email protected]. Website: www.supnik .com www.NotSoBIGLAW.com. Trademark litigation in federal courts; local counsel for out- of-town firms; trademark registration in the United States; trademark registration inter - nationally in association with foreign counsel; trademark availability searches; Trademark Trial and Appeal Board proceedings; licensing; right of publicity; domain name matters. Past chair of

LOS ANGELES LAWYER JUNE 2020 37 TAx TIPS agencies from different jurisdictions to Central American financial institution Continued from page 11. work together while respecting each suspected of facilitating money launder- other’s local autonomy. Organizations ing and tax evasion for customers commit, promote, and enable interna- can jointly connect information, without “across the globe” and collectively exe- tional tax crimes and money laundering. needing to surrender data or control to a cuting search warrants, interviews, and The J5 also announced the following col- central database. FCInet does not collect subpoenas expected to result in further laborative results:31 data; it connects data.33 criminal, civil, and regulatory action • Collective work on more than 50 The J5 made clear it would focus on being taken by law enforcement in each investigations involving sophisticated shared areas of concern and cross- country.36 international enablers of tax evasion, national tax crime threats, including The investigation began with infor- including a global financial institution cybercrime and cryptocurrency as well as mation obtained by the Netherlands.37 and its intermediaries who facilitate tax- enablers of global tax evasion while The coordinated enforcement action payers to hide their income and assets. working to share intelligence and data in garnered leads on hundreds of • Cooperation on cases covering crimes near real time. Australians who were identified as from money laundering and the smug- clients of the bank. The amount of tax The web Is Not All That dark gling of illicit commodities to personal evasion and money laundering involving tax frauds and evasion. As criminals continue to find new meth- the institution’s clients was estimated at • Hundreds of data exchanges between ods to commit tax fraud and launder more than £200 million in the United J5 partner agencies with more data illegal proceeds, the J5 also has commit- Kingdom alone.38 being exchanged in the past year than ted to keep pace with investigating these Offshore evasion is an internation al the previous 10 years combined. egregious financial crimes. Tax fraud on issue that calls for joint international The first year of the J5 clearly sig- any level, including international, is not solutions. In just two years, the collec- naled the emphasis on working together a new crime. The sophistication with tive actions of the J5 appear to be a to leverage each country’s cap a bilities which criminals commit tax fraud has significant and effective step in that and access to information, within exist- significantly increased through cyber- direction. Taken together with the ing treaties and laws, so as to enhance related activities in recent years. Data IRS’s recent domestic fraud enforcement the overall effectiveness and success breaches, intrusions, takeovers, and efforts, the IRS has demonstrated its with one goal in mind: to combat cross- compromises are the new tools that commitment to combatting criminal border financial tax crimes. Financial criminals use to commit tax crimes. tax evasion, both domestically and crime occurs on a global scale with pro- True to its word, in November 2019, internationally. n ceeds of crime transferred among juris- the J5 publicly turned its focus to cryp- dictions, or, stated another way, tax tocurrency as experts from each country 1 I.R.S., IRS: CRIMINAL INVESTIGATION ANNUAL crime crosses international borders. gathered in Los Angeles with the mis- REPORT 2019, 100 YEARS 1919-2019 73, available at In a relatively short amount of time, sion of optimizing data from a variety https://www.irs.gov/pub/irsutl/2019_irs_criminal the J5 leaders have been able to facilitate of sources available to each country to _investigation_annual_report.pdf [hereinafter CRIMINAL INVEST IGATION ANNUAL REPORT 2019]. their respective countries’ abilities not identify and hold accountable tax cheats 2 I.R.S. New Release IR-2017-47 (Feb. 27, 2017), only to share information and open new and other criminals who attempt to use available at https://www.irs.gov/newsroom/irs cases but also to more rapidly develop the dark web and cryptocurrency to -criminal-investigation-releases-fiscal-year-2016 existing cases. Working to reduce the commit financial crimes.34 Specific -annual-report. 3 time it takes to do one’s job is good busi- training was provided on virtual cur- CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 73. ness. Facilitating international law rency, blockchain, and the dark web, as 4 Id. enforcement’s ability to avoid duplica- well as advanced training concerning 5 I.R.S. News Release IR-2019-199 (Dec. 5, 2019), tion of efforts and share information in cryptocurrency tracing and open source avail able at https://www.irs.gov/newsroom/irs real time to more efficiently and timely intelligence. -criminal-investigation-releases-fiscal-year-2019 disrupt crime on a global level is better Using various analytical tools, mem- -annual-report-celebrates-100-years [hereinafter IR -2019-199]. business. bers of each country were put into teams 6 I.R.S. News Release IR-2020-49 (Mar. 5, 2020), To achieve this goal, the J5 partners tasked with generating leads and finding available at https://www.irs.gov/newsroom/irs have focused on building the domestic tax offenders using cryptocurrency based -criminal-investigation-veteran-selected-as-new skillset of like-minded international tax on the new data available to them to -fraud-enforcement-director. administrations and law enforcement make connections when current individ- 7 Id. 8 Memorandum from Michael R. Phillips, Deputy agency partners to collectively develop ual efforts would take years to make Inspector Gen’l for Audit, A Corporate Approach Is 35 strategies to combat global tax cheats. those same connections, if ever. Cut - Needed to Provide for a More Effective Tax-Exempt The J5 has focused on platforms that ting through red tape and using the J5 as Fraud Program (Audit #200810024) (Ref. no. 2009- enable each country both to share infor- a force multiplier, this J5 gathering facili- 10-096) to Comm’r, Tax Exempt & Gov't Div. (July mation and to do so in a more organized tated real investigators, using real data, 6, 2009), available at https://www.treasury.gov manner. One such platform is FCInet, finding real criminals through leads, /tigta /auditreports/2009reports/200910096fr.html. 9 Memorandum from Michael R. Phillips, Deputy which each country has invested in to trends, methodologies, and investiga- Inspector Gen’l for Audit, Management Has further that goal.32 tions that encouraged all the J5 countries Emphasized the Fraud Program, but Opportunities A decentralized virtual computer net- to further current and future investiga- Exist to Further Improve It (Audit #200630009) work enabling agencies to compare, ana- tions under the J5 umbrella. (Ref. no. 2007-30-179) to Comm’r, Small Business/ lyze, and exchange data anonymously, On January 23, 2020, the J5 an- Self-Employed Division (Sept. 18, 2007), available at https://www.treasury.gov/tigta/auditreports/2007 FCInet helps users to obtain the right nounced that they had carried out a reports/200730179fr.html. information in real-time and enables “day of action” targeting an unnamed 10 Id.

LOS ANGELES LAWYER JUNE 2020 38 11 CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 9. 12 Id. 13 I.R.S. News Release IR- 2019-137 (July 31, 2019), available at https://www.irs.gov/newsroom /veteran-irs-enforcement-leaders-selected-to -lead-sbse-tege-hylton-ripperda-to-serve-as -commissioners. 14 Id. 15 IR-2019-199, supra note 5. 16 Id. 17 I.R.S. News Release IR-2018-219 (Nov. 14, 2018), avail able at https://www.irs.gov/newsroom/irs -criminal-investigation-releases-fiscal-year-2018 -annual-report. 18 CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 4. 19 Id. at 8. 20 Id. at 14. 21 Id. at 13. 22 I.R.S., Program and Emphasis Areas for IRS Criminal Investigation, https://www.irs.gov /compliance/criminal-investigation/program-and -emphasis-areas-for-irs-criminal-investigation [hereinafter IRS CI Program/Emphasis Areas]. 23 CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 73-74. 24 IRS CI Program/Emphasis Areas, supra note 22; I.R.S., Employment Tax Evasion Schemes, https:// www.irs.gov/compliance/criminal-investigation /employment-tax-evasion-schemes. 25 CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 73. 26 IRS CI Program/Emphasis Areas, supra note 22; I.R.S., Overview - Nonfiler Enforcement, https:// www.irs.gov/compliance/criminal-investigation /overview-nonfiler-enforcement. 27 CRIMINAL INVESTIGATION ANNUAL REPORT 2019, supra note 1, at 74. 28 O.E.C.D., Fifth OECD Forum on Tax and Crime: A Whole of Government Approach, Closing Statement (Nov. 8, 2017), available at http://www .oecd.org/tax/crime/closing-statement-oecd-forum -on-tax-and-crime-november-2017.pdf. 29 AUSTRALIAN CRIMINAL INTELLIGENCE COMM’N, AUS TRALIAN CRIMINAL INTELLIGENCE COMMISSION ANNUAL REPORT 2017-18, Feature: Joint Chiefs of Global Tax Enforcement (J5), available at https://www.acic.gov.au/feature-joint-chiefs-global -tax-enforcement-j5 (last viewed Apr. 30, 2020). 30 Id. 31 Press Release from Joint chiefs of Global Tax Enforcement, One Year In, J5 Making a Difference (June 5, 2019), available at https://www.irs.gov /pub/irs-utl/j5-media-release-6-5-2019.pdf. 32 Id. 33 Id. 34 Press Release from Joint chiefs of Global Tax Enforcement, J5 Countries Host Crypto “Challenge” in Search of Tax Criminals (Nov. 8, 2019), available at https://www.irs.gov/pub /irs-utl/j5-media-release-11-08-19.pdf. 35 Id. 36 Press Release from Joint chiefs of Global Tax Enforce ment, Global tax chiefs undertake unprece- dented multi-country day of action to tackle interna- tional tax evasion (Jan. 23, 2020), available at https://www.irs.gov/pub/irs-utl/j5-media-release -1-23-2020.pdf. 37 Id. 38 Press Release from Her Majesty’s Rev. & Customs, HMRC spearheads worldwide tax fraud probe, mynewsdesk (Jan. 23, 2020), available at http://www.mynewsdesk.com/uk/hm-revenue -customs-hmrc/pressreleases/hmrc-spearheads -worldwide-tax-fraud-probe-2963706.

LOS ANGELES LAWYER JUNE 2020 39 by Jan Frankel Schau ClosingArgument

he 1976 Pound to the origins of ADR. Conference offered The Future of ADR After Professor Sanders envi- a revolutionary “big sioned a “multi-door court- bang” concept of house” where disputes were Alternative Dispute the Coronavirus resolved in the courts or TResolution (ADR) and through arbitration and transformed the American mediation. With ZOOM, legal justice system. Chief there are no doors or walls. Justice of the Supreme called for the pressing need desired, and can easily join There is no limit to how Court Warren Burger articu- to “overcome the deadly the parties together or sepa- many cases can be medi- lated a vision for a more drag of status quoism” and rate them into private ated: conference space is “informal” justice system to seek a new paradigm for breakout rooms. unlimited and free. that included qualitatively problem solving. Undoubtedly, once the Intimate Connections better options and a broader Enter the coronavirus of courts reopen, there will be range of substantive reme- 2020 when, in the span of Oddly, there is something a considerable backlog. dies. Harvard Law Professor one week, the courts, law intimate about a mediation Clients will appreciate the Frank E.A. Sander envi- offices, and all nonessential on ZOOM. One can learn a ability to mediate those dis- sioned a system in which the businesses were ordered to lot about people when they putes without waiting for parties would be empow- close. Initially, the only are observed in their own the traditional wheels of ered in procedure and option seemed to be to con- comfortable surroundings. justice to churn. process, democratizing the tinue all previously sched- A client who speaks directly, Self-Empowerment way justice was attained. uled mediation hearings, looking at a camera on his but, soon, there was a mad or her own computer screen, In 1994, Joseph P. Folger Efficient and Timely dash to adapt by using can make a clear “connec- and Richard A. Baruch University of California, ZOOM or other online tion” that is in some ways Busch wrote a seminal Irvine Law Professor Carrie platforms as a substitute for better than the one made in book, The Promise of Menkel-Meadow saw ADR face-to-face hearings. a sterile conference room Mediation, in which they as a “co-optation” of the Using ZOOM is any- space. There is a safety in suggest that people not only more formal and legalistic thing but status quo, and, communicating through a have a chance to reach approach to problem-solv- yet, there are many attrib- screen but also an intimacy agreements and solve prob- ing. Mediation offered both utes that suggest this may when the parties are lems but also to transform quantitative efficiency, by be the new alternative to required to be free of dis- themselves in the midst of making justice more accessi- conventional ADR. ZOOM traction and focused on the conflict. This would give ble, cheaper, and faster, and is easily accessible on any narrative at hand. disputants a greater sense qualitative satisfaction, by smart phone and can be Just as the popularity of of their own efficacy and an allowing the parties to used without the need for videotaped depositions has increased openness to oth- redress the legal claims and travel. The platform itself exploded, the chance to ers, valuing personal defenses as well as the flattens the hierarchy: each hear the parties’ narrative in strength and compassion underlying interests and participant occupies the the confidential confines of above all. needs of the parties. same geographic space on a mediation via the safety of The hallmark of ADR In 2016, the original the screen. The mediator a visual platform can pave has always been to promote Global Pound Conference can control participation by the way to better under- open-mindedness, exchange resumed through a series of placing the participants on stand the other’s perspective perspectives, and solve meetings worldwide mute or hiding their faces, if in ways that were essential problems with creativity, designed to examine and flexibility, and efficiency. If shape the future of ADR. Jan Frankel Schau is a mediator with ADR Services, Inc., online dispute resolution Michael Leathes, who heads specializing in mediation of employment, tort, and business can foster those values, this the International Mediation new paradigm may be here disputes. Institute at the Hague, to stay. n

LOS ANGELES LAWYER JUNE 2020 40