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We are one week in to the second stay-at-home work-from-home order. The order began August 27 and is currently set to end on September 9. To ensure that the order does not get extended, please do not gather with those outside of your household. Keep this in mind especially with the upcoming Labor Day weekend. Also, follow the CDC guidelines of wearing a face covering when in public spaces, maintaining 6 feet distance from others, and frequent hand-washing.

The new order has many of us questioning what we can and cannot do. Confused about what’s open and closed? See the below list:

Open

  • Essential Businesses
  • Restaurants: take-out or delivery
  • Public Schools, UH Manoa
  • Child Care
  • Construction
  • Religious services, graveyards

Closed

  • Retail Businesses/Bars
  • Personal Services: Hair salons, Tattoo Shops
  • Beaches
  • City & state Parks/Hiking Trails
  • Gyms
  • Golf Courses
  • Private Schools

As an essential business we are open with new operating procedures. We have adjusted to a rotating work schedule. Only two staff members will be present in the office at a time for social distancing measures, while the rest work remotely. We are available to assist you by phone, e-mail and ZOOM conferencing (upon request) during our normal business hours.

Unfortunately, during the first stay-at-home work-from-home order many local businesses had no choice but to shut down. It is anticipated that this new order will lead to more closures. As we work with many small to medium sized business owners in Hawaii, we understand the stress that is caused when making the call to close shop permanently.

If you are considering closing your business, check out our two latest blog posts Throwing In the Towel: Legal Issues to Closing Your Business – Part 1 and Part 2. We hope to be a source of information for you during these uncertain times as we provide a variety of free resources including, blogs, videos and webinars.

Stay safe and healthy!

In last week’s bLAWg: Throwing in the Towel: Legal Issues to Closing Your Business – Part 1, I discussed the duties and obligations of closing a business. If you have recently decided to close your business or are looking for alternative options to closing; the below checklist should provide a basic map of what you need to consider. Remember each business is unique and do not consider the below checklist a substitute for professional advice or as a definitive, exhaustive list.

What steps should I consider to Close my Business?

When closing your business, you want to take time to plan things, and a checklist helps organize that process. In general, the goal is to account for assets and liabilities, and make sure you are using the business assets to pay off its liabilities. You want to eliminate liabilities, prior to dissolving the corporation or terminating the LLC. Consider the following:

  1. If you have advisers, you should talk to them as they can assist or offer advice
    • Attorneys, accountants, Bankers, HR specialists, Financial Advisers, Business Mentors
  2. Sell off your inventory and collect on your accounts receivables – consider during this pandemic you may have to discount or negotiate as cash for others is also tight
    • Finish off your obligations to your clients/customers
  3. Provide notice to the major creditors or those businesses that support your operations;
    • Bank, lenders, suppliers, service providers, and utilities
      • Time your cancellation of credit cards and subscription services
      • Prepare to close your bank accounts
    • Landlord – in this case you may wish to review your commercial lease as these tend to be lengthy conversations depending on the terms
  4. Discuss with your employees and pay them out, and remember payroll deposits
  5. Liquidate everything else possible*
  6. Settle and paying off your debt, as much as possible**
  7. Do Accounting and Recordkeeping
  8. Pay off ALL taxes or prepare what you will need to file for returns
    • For example, in Hawaii, if you sell off all your inventory or certain other assets there is a Bulk Sales Tax Form
  9. Cancel permits and licenses with appropriate government agencies
  10. Consider providing contact information for forwarding purposes related to the closing business so people may contact you if you miss taking care of something
  11. If there is any money or other assets leftover review the internal governance documents (like an Operating Agreement for LLCs) and divvy up accordingly to the business partners – yes, this comes toward the end
    • Overpaying yourself to the detriment of creditors or taxes you owe is again subjugating yourself to personal liability
  12. Dissolve the Corporation or Terminate the LLC – ideally, after this you should be done with your business

What’s with the asterisks? Are there other options?*

Strategically, the decision by a business owner to close just means they are personally done with the business. However, consider just because they do not see value in continuing operations that doesn’t mean there is not value in the business. Consider that you could sell the business or its assets to another. For example, maybe a new restaurant owner wants a deal on kitchen hardware, or the landlord is willing to assign the lease to someone who wants to take over the space. Or consider a budding entrepreneur that sees an opportunity to take an established business and rebrand, so selling off the intellectual property and brand to them.

The bottom line is just closing, selling off assets, and squaring away liabilities, does not have to be the only route. While it is likely the case during COVID-19’s economic downturn that your business will not be as valuable as you want, sometimes you being done with your business does not mean its assets, operations, or brand cannot be of value to another.

What if my Debts and Liabilities are More than My Assets? What about Bankruptcy? **

According to the U.S. Bankruptcy Court in Hawaii, 151 residents and businesses filed for bankruptcy protection in June (up 22%). In July, Hawaii bankruptcies flattened to 140 which is just two fewer than the previous year’s findings. Although, federal and state assistance programs have helped during the shutdown, filings may continue to rise during the next few months and even into the next years as aid slows down and ends.

In instances, where you are truly underwater and the debts and liabilities appear to be insurmountable and/or the creditors are not budging in negotiations where they are demanding the full amount and you cannot pay, then yes, the other option is bankruptcy. If this is something you are considering, then understand that this is an even more significant decision than just closing your business.

Some of the steps to filing for bankruptcy include compiling financial records, credit counseling and filing the petition. Consider working with a bankruptcy attorney to make sure you understand what is required to file for bankruptcy, and feel free to contact us for referrals in the Honolulu area.

Anything Else to Consider?

None of the foregoing comments and lists are exhaustive. Every business, and its business owners are unique and may sometimes have special circumstances. If you have a situation that needs specific legal advice, then consult with an attorney, as soon as possible.

However, if you are still considering your options or want to learn more about the steps to close a business and alternative options, then consider joining our upcoming webinar – Throwing in the Towel: Legal Issues to Consider for Closing Your Business on Thursday, September 3, at 12 pm HST. Register here!

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained in the post without seeking the advice of an attorney in the relevant jurisdiction. Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Are you a business owner thinking of closing your store, restaurant, or bar? You are not the only one who has thought about it. In fact, many already have.

In Honolulu, walk around any neighborhood whether it is Downtown, Kalihi, Haleiwa, or Mōʻiliʻili and you will see that some businesses are gone. In some cases, for good. Surveys conducted indicate that approximately 900 businesses in Honolulu have closed either permanently or temporarily since the COVID-19 pandemic has started. Additionally, we know that the pandemic is not subsiding prompting the government to step up its regulations. Just recently bars on Oahu have been forced to close for an additional three weeks due to Mayor Caldwell’s Emergency Order 2020-23.

This post is for those thinking that it might be best to get out of the business they are currently in and some of the legal issues they must consider before “throwing in the towel.”  

The decision to close your business is not something to take lightly. While, you may have been one of those people that woke up one day and said, “I’m going to start a business,” while learning how to run the business along the journey. This wisdom and experience should have also taught you that the process of closing a business is not necessarily easy or straightforward. It is a process.

The worst decision to make is running and hiding from responsibility or closing too quickly without wrapping up your duties and obligations.

What are my Duties and Obligations?

If you’ve been running a business for several years, especially one that has some physicality to it, such as a storefront, inventory, or employees that report to you, then you realize all the responsibilities you have. First, you should make a checklist of the relationships that you as the business owner and the business itself has with others. This will help you map out all the people you will need to deal with as you wind down operations and move to closing the business. Especially, if you have an LLC or corporation that exist, then understand that your limited liability protection comes from the fact these entities are separate legal persons from the owners. The entity is on the hook for some of the contractual obligations and duties set at law.

Ask yourself about these relationships and what contractual and/or legal obligations and duties you have to:

  1. Business Owners – who needs to decide to go through with closing the business? Consider business entities that require votes by the partners, members, or shareholders to formally begin the process.
  2. Customers/Clients
  3. Vendors/Suppliers
  4. Landlord
  5. Financial Institutions, Banks, and Credit Card Companies
  6. Utilities and Service Providers
  7. Other Lenders (e.g. friends and family give you a loan?)
  8. Employees and Contractors
  9. Federal, State and County Governments (e.g. your taxes, licenses, and permits)
  10. Outstanding Lawsuits (if your business is currently in a lawsuit you may have to delay your plans of closing the business till this is resolved)
  11. Business Owners (e.g. if you are Managing-Member of an LLC members group, you have certain obligations to them prior to closing the LLC)
  12. Anyone other creditors

Consider that anyone of these may have a cause of action (lawsuit) against you or the business if you do not properly deal with them. Many of them are creditors and in some instances if you don’t pay or do what you are supposed, they will sue you to attempt collect their money. Did you give your customers coupons to use? Did you buy inventory on credit? Is the credit card paid off? How long is left on the term lease? Do you have enough money to cover payroll? And so forth.

The business owner is responsible to figure out how to end these relationships and the outstanding liabilities on them. However, what you should not do is run to dissolve the business entity first just because the liabilities are so big and onerous.

Why is Proper Notice so important?

Too many times I have seen LLC members think it is a good idea to terminate their LLC when they have not notified their creditors. They don’t understand doing the “hard stuff,” that is notifying creditors is really saving them from personal liability. They have a duty to notify creditors that they are closing to limit debt, not terminate the LLC and run and hide. This latter choice creates personal liability – in effect, you are causing the business entity to cease to exist without taking proper steps, thus eliminating the limited liability shield.

Anything Else to Consider?

None of the foregoing comments and lists are exhaustive. Each business, and its owners are unique and may sometimes have special circumstances. If you have a situation that needs specific legal advice, then consult with an attorney, the sooner the better.

However, if you are still considering your options or want to learn more about how to close a business, then consider joining our upcoming webinar – Throwing in the Towel: Legal Issues to Consider for Closing Your Business on Thursday, September 3, at 12 p.m. Register here!

Also, stay tuned for our bLAWg next week, that will cover: (i) a checklist of steps to consider when closing your business; (ii) other options instead of closing your business; and (iii) what to do when the business’s debts and liabilities vastly exceed its assets.

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained in the post without seeking the advice of an attorney in the relevant jurisdiction. Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Can a business add additional fees and charges to a bill due to COVID-19?

Yes. Consider the additional costs to build barricades, close off every other table, provide enough disinfectant, and sanitizer. Also supplying disposable personal protective equipment (PPE) for employees. Obviously, that costs money.

Additionally, for those of you in the food industry you are already aware of the shortages in supplies. For example, COVID-19 has slowed the U.S. meat production for months due to closures: https://www.wsj.com/articles/coronavirus-to-slow-u-s-meat-production-for-months-ceo-says-11589540400.

What does a restaurant owner do in the face of rising costs, mandatory expenses, and limited customer base? Charge additional fees. Some businesses already have begun charging a COVID-19 fee to help cover these costs and expenses. Specifically, it appears as a line item on receipts. The economic justification is the COVID-19 fee is for the things like the PPE, plastic barricades, and other social distancing requirements placed by government regulation.

If the business is being transparent and disclosing the potential customer or client that additional fees will be charged, then the business can pass along those fees. Obviously, there are caveats to this, such as reasonableness and what is sufficient notice prior to the assessing such a charge. For example, kind of like how restaurants would notify you of automatic gratuity charge for parties over a certain size in their menu or putting a sign at the grocery store entrance to charge for providing a bag.

I understand for consumer-minded people that this is a shock, a deviation from the norm. Going from a couple of months of lockdown to added fees for some basic activities like dental cleaninings and haircuts is a bit much.  However, the overall sentiment is that, yes, a business can assess an additional fees due to COVID-19 social distancing expenses.

Isn’t this gouging?

Not likely. The law in Hawaii, which is Hawaii Revised Statute 127A-30 is specific about when it is prohibited to increase of prices during a state of emergency and similar situations. By the very nature that the economy is reopening, that would indicate the emergency is ending. Specifically, HRS 1270A-30 prohibits “any increase in selling price of any commodity, whether at the retail or wholesale level, in the area that is subject of the proclamation [state of emergency] or the severe weather warning;”

In the case of personal beauty service providers it would be hard to argue that their service is a “commodity.”

Additionally, the law makes clear that “any additional operating expenses incurred by the seller [] because of the emergency or disaster or the severe weather, and which can be documented may be passed on to the consumer.” Again, we have that key term “documented”.  So another out for these fees to documenting the decision in how to apply them. Business owners considering COVID-19 fees would be wise to do planning and accounting of how they are derived. Showing the correlation between the fees assessed and the social distancing requirement expenses may be critical in defending the practice.

Business owners should always be aware of actions that may be perceived by the public as unfair or deceptive. The reason is that consumer protection laws do consider unfair or deceptive acts or practices as unlawful. Therefore, a business owner needs to communicate effectively with potential clients and customers about their COVID-19 fees.

Is there an example of this in other industries?

The COVID-19 pandemic aside, disasters whether natural or man-made have always disrupted supply chains and causing problems for business owners. There are industries where detailing out the contractual relationship in these kinds of situation is the norm. One example is contractors and homeowners for the price of supplies.

Consider, if there is a forest fire that destroys a large supply of lumber. Then the lumber supplies for home building decreases, but demand goes up. So the contractor has to source the wood supplies from others. For business lawyers, we would look to see if this situation is in the contract. Is there an Escalation/Unit Price clause? This clause would be show there was an explicit understanding between the parties. It would indicate if the contractor is entitled to adjust the material price of an item due to an event impacting their bottom line. Like short supply of lumber due to a fire disaster.

Stores, restaurants, beauty services, and dental offices unused to such jumps in operating expenses obviously shock their consumers when they pass COVID-19 fees. Obviously, customers and clients also do not an expect a lengthy written contract that spells it out. Instead they just get the bill for it. The business owner then gets a lot of angry comments.

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Where is the Hawaii economy for reopening? Where can an owner get guidance to reopen?

So here in Hawaii the economy is beginning to reopen. In Honolulu, hair, nail, lash, and in general beauty operators and services were allowed to re-open past Friday. In Maui, most businesses will be allowed to reopen on June 1st, whereas in Hawaii island personal services and restaurants (excluding bars and night clubs). On Kauai, salons and barber shops, retail and mails, and cleaning and construction have been reopened since May 22nd.

In general, what is clear is the Hawaii economy is heading toward reopening, with the likelihood of gyms, bars, night clubs, and large gathering places where intimate contact is involved of remaining closed until government officials can come up with plans and guidelines. This is something determined between the governor and the mayors, as the mayors submit their proposals to the governor for approval. Therefore, the industry re-openings are not uniform between the islands.

The best thing for a Hawaii business owner that needs guidance as they consider reopening is to review the State of Hawaii COVID-19 resources, and then depending what county you are in, review the county orders and guidelines. Further, for many industries their trade groups and associations, provide industry-specific guidelines on dealing with these regulations. Finally, of course professional advisors, such as attorneys and human resource companies are there dealing with the customer/client and employee aspects of reopening.

Is there a place where the local rules and regulations are at?

Yes, the State of Hawaii and the 4 counties have websites going over the various order, mayoral proclamations, and guidelines to assist businesses in their reopening and future plans to reopen the economy. Of course this information constantly changes due to the virus. Further, the government frequently issues clarifications on unclear rules or plans as people and businesses provide feedback.

What are some of the specific requirements a business owner needs to prepare for reopening?

For the business owner that is committed to reopening soon, and especially dealing with direct interactions with clients and customers if you’ve reviewed some of the state and counties’ guidelines, then you know there are a number of changes you will have to make. This is especially true for retail, restaurants and food courts, beauty and personal health services. The following are some of the social distancing requirements a business owner in these industries need be keenly aware about:

  • 6-feet distancing;
  •  Limited occupancy;
  •  Face coverings
  • Providing of hand sanitizer and sanitizing products
  • Regular disinfecting; and
  • of course signage to notify all employees and customers of these requirements.

Again, this is a partial and general list and so a business owner needs to spend some research and review time for their business plan to reopen. One Oahu has a Business Guidance Page: https://www.oneoahu.org/business-guidance

CDC Reopening Guidance for Cleaning and Disinfecting Public Spaces, Workplaces, Businesses Schools, and Homes: https://www.cdc.gov/coronavirus/2019-ncov/community/reopen-guidance.html

DISCLAIMER: This post provides general information, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

I’d like to share some of my views on Fred Korematsu Day of Civil Liberties and the Constitution. California created this special day, held every January 30, posthumously for Fred T. Korematsu. It is also celebrated in Hawaii and a number of other states. The Day commemorates Fred Korematsu’s birthday and his contributions as a Japanese American civil rights activist. It recognizes his contributions in fighting the injustice of Japanese interment during World War II, but in general recognizing civil liberties under the U.S. Constitution.

Manzanar War Relocation Center, California was the internment camp for Japanese Americans during World War 2.

Background and Context

In Korematsu v. United States, 323 U.S. 214 (1944), the Supreme Court sided with the U.S. government in upholding Executive Order 9066. An order that forced Japanese Americans into internment camps during World War II regardless of citizenship. The Korematsu case decision showed how deeply ingrained racism was and still is in our government and society. Racial profiling and the stripping of citizens of their civil liberties is not gone from the American experience. This conversation is still going on as we can see in today’s politics and news.

For example, author Lily Rothman poignantly observes in her Time’s article that knowing the history of Japanese internment matters a great deal. While the internment of Japanese Americans took place nearly 80 years ago, the themes of racial exclusion and stigma still linger today.

Therefore, I think I should share some of my views on this matter so you can understand the value’s of the firm and the kind of law that we practice.

This is a monument to Japanese interred at Manazar.

 

Words of Ryan K. Hew

I am sure people are wondering what impact does Fred Korematsu day have to do with a business attorney. Isn’t business law all about contracts or stymieing people’s rights in transactions?  I would probably respond that: (a) that nearly 90% of businesses in the U.S. are small businesses (20 workers or less); and (b) the government tramples the rights of the business owners as it did with the Japanese Americans during internment.  Japanese American business owners were forced out of business and into the camps. Nowadays, many immigrant business owners fear the law or lack access to legal assistance.

None of this is new, making Fred Korematsu Day an important symbol to remember and continue his legacy. I was a history major during my undergraduate days and even prior to the events of World War II and the unjust internment of Japanese Americans I learned about the Chinese Exclusion Act of 1882. This was one of the first major pieces of U.S. law to restrict immigration. Similar to today’s arguments on immigration, the Act was born out of fear of Chinese workers. Fears of them causing unemployment, depressing wages, and bringing other problems due to their ethnicity. The law acted to effectively ban Chinese immigration into the United States and prevent them from becoming U.S. citizens.  For me, this other dark piece of history is no different than the Japanese internment. It represents laws based on fear and bias.

Japanese Americas were forced to close their businesses and relocated to the internment camps.

My Personal History and Connection to What I Do

For me, reading about this history from as an undergraduate to a law student, did have personal relevance. My mother always told me stories of how my grandfather owned a popular shop in Chinatown Honolulu. However, unfortunately cancer took him at an early age. Soon after, my widowed grandmother was exploited due to her lack of English and inability to understand the law. Eventually she lost the business and much more due to the loss of income. To me the U.S. government forcing Japanese Americans from their homes and businesses was no different. Both scenarios arose out of the lack of justice and exploitation of the law. This is why I launched my own practice, why I enjoy educating small business owners with a variety of backgrounds on their business rights, and why I do pro bono with the Business Law Corps, whose motto is lawyers for economic justice, at the Patsy T. Mink Center for Business and Leadership.  The fight for civil liberties also means giving people fair chance at starting and owning their own business.

Final Words

I would like to extend my appreciation and thanks to Fred T. Korematsu and the Fred T. Korematsu Institute for continuing his legacy. At the firm I’m with, we fight for individual rights, economic justice, and civil liberties in our own way. Fred Korematsu Day highlights the need for us to remember and educate. Thank you for reading this post.

Handshake between business partners.

Talk about your business relationship, reduce it to a written agreement, sign it, then get to work with your partner.

When assisting business partners form their entities or when my litigation partner is consulting with me on a case I see the following scenario often:

A business partnership starts with a money person and an idea person. The idea person has a fantastic business plan and the money person has the cash. They think it is perfect. They rush to form a LLC or corporation, downloading an Operating Agreement or Bylaws from the Internet. It even might be worst, they do not even bother with a document. After that, they are running their business, but then several months into it they are fighting.

What do Business Partners Fight About?

Usually, they do not see eye-to-eye on major business decisions.  Decisions like:

  1. how much money should each person contribute;
  2. who has the authority to sign checks or what is the dollar limit each partner has for contract obligations;
  3. where should we locate our offices;
  4. when do we pay ourselves;
  5. what happens when one of us wants to leave; and
  6. so many other issues …

Business owners hate hearing this from their attorneys: slow down! They should be deliberative in their collaboration with their business partner. I sometimes remind people that getting a business partner is basically getting married. Also partnering with a friend is different than being a friend, you sometimes do not know their work ethic. This is why we urge business owners to get things in writing with their partners.

The goal when drafting Operating Agreements, Bylaws, and employment agreements* should be what are the processes that governs decision-making, what happens when there is disagreement, or if an owner wants to leave, etc. … Basically, preempt the fights by setting up contractual arrangements. *By the way, if an owner of a business wants to contribute work instead of capital, then the partners should consider an employment agreement. It is solely not just for contract law purposes, but for tax and accounting issues.

Business partners think that their idea will be a money-maker and that their partner is going to make it happen.  They fail to calculate that even in success that their business partner may have other ideas on the direction of the business.  There is nothing wrong with differences of opinion, but when decision-making is paralyzed it could stop the business from moving forward. Further, for its employees, vendors, and service-providers, knowledge of an ongoing dispute amongst the business owners can make them question the survivability of the business.

Protect your Business Relationship by Communicating

It is easy. Talk about it, come to an agreement, and then get it in writing before the business starts. Many people just want us attorneys to give them their documents or download their own forms for the Internet. They think it saves them time and money.  I’d contend that is the wrong way to look at it. The time and money spent on your governing documents is an investment in the relationship. They are a contractual foundation.

If not, you are just pushing disputes to a later date. Consider that when the money has been spent, you’ve worked countless days and nights, and now you are arguing.  Then you realize all you have for your contract rights is a poorly drafted document … or worst yet, you don’t have one at all.  So do yourself a favor, have the conversation now and plan for the future.  Communicating when you are on good terms with a partner is easier, then when you are fighting.

DISCLAIMER: This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained in the post without seeking the advice of  an attorney in the relevant jurisdiction.  Hew & Bordenave, LLLP expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

 

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Today’s Post is Not About Sledgehammer Time: It’s Only Focused on the Shopping Cart Law

Hey all, I decided to jump on the bandwagon (may be the shopping cart?) and talk about shopping carts.  However, I am not going to get into whether Rep. Brower’s actions exposes him to civil or criminal liabilities or if they were right or wrong.  I think Civil Beat, attorney Marcus Landsberg, and the news outlet and social media has already beaten that cart into disrepair (yeah, I am going to keep trying to hammer away with the lame jokes and puns).

Anyway, what I would like to do is take a look at this matter from a business establishment perspective (those that put out the carts) and what the legislature has put forth as a law on point (looking at what is on the books.  It turns out that we have enacted a law specifically for shopping carts.  HRS § 633-16 discusses the unauthorized removal of shopping carts.  Further, as it is in Chapter 633, it puts this matter in small claims court.  

Breaking Down the Law

So looking at the law, as currently stated, it makes it a violation for a person to remove a shopping cart (including baskets and other devices) from the premises of business establishment (that owns the cart), if they are unauthorized.  The premises include the parking lot as well as the sidewalks adjacent to the business establishment’s premises.

The business establishment is the person who has the ability to bring a claim under this law if there is damage to the business or property.  The business may sue for damages and win an award equal to the replacement value of the cart (and keep in mind the average cost of a cart ranges from $100 – 250), basket, or device plus the cost of the suit.  The establishment can also sue to enjoin the unauthorized act.

So in order for a business to win in small claims court (under this law) the must nail down these elements: 

  1. they are the lawful owner of the cart, which has been identified;
  2. they gave notice, which means posting a conspicuous sign where the carts are stored that says the carts are not to be removed;
  3. that the cart was removed from the business location without proper authority; and
  4. the person accused of violating this law is in possession or had control of the cart.

Practicalities of the Law

In terms of policymaking it is understandable why the legislature gave such a legal action for business owners of these carts (as they are expensive).  However, in terms of reality is if these carts are being taken by people who are unable to pay the damages or the business cannot track them down its effectiveness as a law should be looked into.  In addition, how many shopping cart owners utilize this law for these purposes? All I know at this point though is that the bang of the gavel in your favor is a better sound than a squeaky cart on uneven pavement!

A Final Word

Although this post was focused on shopping carts, business owners for any type of legal action should always consider the cost of pursuing claims in court versus that of implementing practical solutions (where possible), or possibly a combination of legal and practical action, such as drafting contracts, policies, procedures, and other preventative measures.  Anyway, that’s it for this post.  Mahalo!

Business Entity Formation Talk at ING Direct Cafe in Waikiki

August 1st – I will be holding my Business Entity Formation Talk from 6:00 – 7:00 pm. Come learn the differences between the entities at ING Direct Cafe.

By the way, you may have noticed, contract law there are a lot of terms that describe the parties involved that end with “or” or “ee”. For example, offeror and offeree from this week’s Draw the Law.  If you see this in a long legal document you can immediately recognize the relationship of the parties involved.
The ”or” person is the originating person of the action.  It starts with them, and then ends with the “ee” person.  Like’s take the example of offerror and offeree.  The offeror is the one making the offer, whereas the offeree is receiving the offer.

This works for other relationships like in an assignment, where there is the assignor, the one assigning property or interest rights in something, and the assignee, the one receiving the property or interest rights.  Some relationships, do not necessarily follow this categorization, as you will see below (i.e. trustor and trustee).

Consider the following pairs:

  • Offeror/offeree – offeror makes an offer to the offeree
  • Payor/payee – the payor makes payment to the payee (i.e. the payee is the one who endorses a received check)
  • Lessor/lessee – the lessor leases property (or the right to use property) to the lessee
  • Licensor/licensee – the licensor grants a license of the right to use something (IP) to the licensee
  • Assignor/assignee – the assignor transfers rights or property to the assignee (via an assignment)
  • Grantor/grantee – the grantor grants title in real property to the grantee
  • donor/donee – the donor donates (gifts something) to the donee)
  • *Settlor (trustor)/trustee – the settlor creates the trust, which the trustee holds and manages for the benefit of the trust’s beneficiaries