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socrateaser
socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 33551
Experience:  Retired (mostly)
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ToCustomer... Yes I understand your comments about the

Resolved Question:

ToCustomer... Yes I understand your comments about the auditors, etc. They have been charging us more and more every year....I suspect because they have to spend more and more time on getting 'the books' in order for us. So...we get double penalized, eh? (But, in an audit, they will opt out and say...we only work with the info we were given.)

The situation is...many homeowners in the community feel that the truck issue is a hot bed of contention and that our general manager abuses the truck at the homeowners expense. Our water rate goes up, less money gets put to the benefit of the community, or better yet gets put into an R3 savings or put away in case of emergencies, all to benefit one man...their friend...not even a resident. Our little water district is valued at over 1.2 million...(defined as retained earnings.) A funky clubhouse originally valued at 438K on the deprec schedule....going to hell from no maintenance. (We turned into a low income community...it's a long story how our community evolved....) Our gm used to threaten to quit because he was going to get upset and just who was going to run the w/d for us? So he's quite the @#$%^!! He's a matster at opposum. Ask him a question and he doesn't know anything....."oh, well, I don't know...." is a very typical response.

So the new board coming in will change all this, but there is the fear that he will complain to EDD or sue us over this contract. The clause in the contract that states ...

Notwithstanding any other provisions of this agreement, in the event that the actions by one or more members of the board of directors cause such interference with the gm's duties as prescribed in paragraph 2 above, as to make it impossible, in the opinion of the gm, to adequeately and properly fulfill his obigations under this agreement and under water code, on 72 hours written notice to the district, the gm may terminate this agreement. (..about written notice why he is terminating) In the event of such termination, the district shall pay to the gm all amounts due under this agreement, including fringe benefits.

Most people were thinking he was going to quit the first day of the contract and walk out with 123K.....I don't think so....people are fearful ( and stupid!!!) But what we want to be sure of...when we start requiring mileage logs...daily logs, puming reports, a balanced budget, restricting his trips into town...HOLDING HIM ACCOUNTABLE FOR THE JOB HE DOES...we do it in a way he can't use the penalty clause. If he does try it....he gets to arbitrate it....goood luck!!

He used the water district's attorney with the help of the board members to draw this contract up to screw the new board members....(mostly me)...So....finding out the IRS requires reports, and if he doesn't do the reports we are going to require is grounds for his termination helps more than you know. XOXO
Submitted: 2 years ago.
Category: California Employment Law
Expert:  socrateaser replied 2 years ago.
I believe that the contract language beginning with "Notwithstanding..." is unconscionable and unenforceable under California law, because it represents a contractual forfeiture, completely within the subjective control of the party for whose benefit it is written.

Law

Civil Code §1442 provides: "A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created." Forfeiture of contract rights is not favored, and conditions will be construed to avoid a forfeiture if at all possible. See Chase v Blue Cross (1996) 42 CA4th 1142, 50 CR2d 178.

A finding of unconscionability involves a two-step analysis. To be unenforceable by reason of unconscionability, the clause or clauses at issue must have been both procedurally unconscionable and substantively unconscionable at the time the contract was made. Discover Bank v Superior Court (2005) 36 C4th 148, 16.

Procedural unconscionability exists when the manner in which the contract was negotiated subjected the beleaguered party to oppression and surprise. Discover Bank v Superior Court (2005) 36 C4th 148, 160, 30 CR3d 76; Little v Auto Stiegler, Inc. (2003) 29 C4th 1064, 1071, 130 CR2d 892; Armendariz v Foundation Health Psychcare Servs., Inc. (2000) 24 C4th 83, 114, 99 CR2d 745. Oppression may be found in unequal bargaining power between the parties and an absence of real negotiation or meaningful choice by the weaker party. See Nyulassy v Lockheed Martin Corp. (2004) 120 CA4th 1267, 1281 n11, 16 CR3d 296.

Substantive unconscionability exists when the terms of the contract are so one-sided as to shock the conscience of the court asked to enforce them. See Little v Auto Stiegler, Inc. (2003) 29 C4th 1064, 1071, 130 CR2d 892; Trend Homes, Inc. v Superior Court (2005) 131 CA4th 950, 32 CR3d 411. Substantive unconscionability may take many forms, but can be described generally as "overly harsh" or "unfairly onesided" contract terms. Discover Bank v Superior Court (2005) 36 C4th 148, 160, 30 CR3d 76. The key factor is lack of mutuality. See Abramson v Juniper Networks, Inc. (2004) 115 CA4th 638, 656, 9 CR3d 422.

Analysis

The "notwithstanding" clause purports to place the absolute power to determine through one party's subjective opinion, whether or not the other party is in breach of contract. I can think of no provision which could be more one-sided or unfairly harsh. In effect, the contract is not a contract at all. It is a grant of one year's salary, because all the employee must do is claim breach and under the contract, he/she is due the entire salary payment. This is absurd to the extreme, and I do not believe that any court would enforce the contract provision.

Naturally, you don't want to end up paying for a legal defense, but it would be cheapter than paying the contract as written, so , it is at least an option that is available.

I still think that the previous board could be sued for breach of fiduciary, because it agreed to this contract. I don't believe that any rational businessperson would make such a contract -- it's simply ridiculous.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

Customer: replied 2 years ago.

ToCustomer...WOW...that really helps!!! You mention that the past board can be sued for breach of fiduciary. Can the new board do this without the gm quiting or causing the district harm? I can't believe an attorney for the w/d would review/write this contract and OK it. Is there anyway to get the attorney fee's back from the board members who had this contract drawn up?

 

Boy...I wish I knew more about how to write up a law suit! I think they call it pro se (not sure of spelling.)

Expert:  socrateaser replied 2 years ago.
You would probably have to sue the GM for rescission of the contract as part of the breach of fiduciary action. Otherwise, the GM could claim that a later lawsuit was barred as "res judicata" (already adjudicated), because it arose from the same transactions and occurrences as did the fiducicary breach.

Of course, when you sue the GM, he will probably claim that the lawsuit itself breaches his contract and then he will countersue for his salary (and, he will probably quit immediately). So, this is pretty much an all or nothing proposition.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


socrateaser, Lawyer
Satisfied Customers: 33551
Experience: Retired (mostly)
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