PRACTICE TIP - Lien Litigation
PRACTICE TIP - LIEN LITIGATION
Our firm highly recommends that you perform a Business Search on the Secretary of State website prior to your lien litigation and settlement efforts. If a lien claimant has failed to properly pay or file their taxes, the business will be listed as FTB Suspended on the Secretary of State website. Ensure that you examine the claim forms and billing to determine the proper business information. The lien claimant may have a different UAN on EAMS compared to the actual billing facility/provider. As evidenced below, this is a simple search that can be completed on each lien and can potentially save you thousands of dollars.
Recently, Leigh Finch, a Partner in our Inland Empire Office was able to successfully obtain costs payable to our client from a very litigious lien claimant. Mr. Finch was able to use this unique argument regarding the Franchise Tax Board (FTB) suspension. As a result of his argument, the WCAB opinion awarded costs to his client and advised the lien claimant that their actions were sanctionable (see below).
Specifically, California Revenue and Tax code provides certain provisions for when a corporation fails to pay its franchise taxes, fails to file the required annual information, or fails to timely file a tax return. Pursuant to California Revenue and Tax Code § 23301, “Except for the purposes of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or to set forth a new name, the corporate powers, rights and privileges of a domestic taxpayer may be suspended, and the exercise of the corporate powers, rights and privileges of a foreign taxpayer in this state may be forfeited” when a corporation fails to pay a tax, penalty interest, or liability. A corporation is further suspended from exercising their powers, rights and privileges when failing to file the required tax return. (Cal Rev & Tax Code § 23301.5).
This means that a FTB suspended corporation is not able to appear at the WCAB, file a Declaration of Readiness to Proceed, or pursue their lien at the Workers' Compensation Appeals Board. Mr. Finch has previously used this argument extensively at both Lien Trial and Lien Conference to obtain dismissal of FTB suspended liens who were not legally permitted to appear and litigate their lien.
Our firm’s attorneys are constantly looking for innovative legal arguments to save our clients money. We encourage you to reach out to us if you have any questions regarding this legal argument or potential claims that we can assist you with.
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