News and Insights

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Most people know very little about what bankruptcy really is. People from the “old school” may tend to view filing bankruptcy as a shameful act by those irresponsible who do not know how to manage their money. Or, even worse, an easy escape from debt they ran up intentionally and simply do not care to pay. But to the contrary, in reality, I find that my bankruptcy clients have often done almost everything possible to avoid bankruptcy–unfortunately sometimes to their own detriment.

As partner at Radix Law, most of my bankruptcy clients, including business owners, have tried their best in life and have done most things right. They have tried to manage their risks. They have tried to make responsible investment decisions. They have worked hard, become educated, grown businesses, saved money for retirement and have taken care of their health and their families. Some have been wildly successful but one thing no one has is a crystal ball.

Even the most successful businesses can fall flat in a struggling economy. People guarantee business debt because banks require them to, never thinking their carefully researched and well-structured business could fail. House and land values can plummet, like in the recent recession. People lose even the most seemingly secure high-paying jobs—even in a recovering economy. Those sorts of jobs can be the most difficult to replace. People get very sick and they also get divorced.

When things start to take a turn for the worst, most people wait longer than they should to consider bankruptcy options. For example, money saved in qualified retirement plans, like 401K accounts and IRAs, is protected in bankruptcy. Most people can keep their homes and their equity. Some (but not all) inheritances are also protected. But some people will go through their entire nest egg or sell their homes to avoid the perceived shame or stigma of bankruptcy, leaving them extremely financially vulnerable and emotionally spent.

So, while bankruptcy should remain something people should want to avoid, it is not always something they should avoid. It is intended to help honest, but unfortunate people who need a fresh start. Often that fresh start is a new business through which people can begin to contribute once again to the economy. Sometimes people or businesses reorganize their debt through a Chapter 13 or 11 because they just need a little breathing room. Considering bankruptcy is often the most responsible thing a person or a business can do.

May 8th, 2017

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PHOENIX – The Frutkin Law Firm has become the first Arizona practice to take advantage of the state bar’s trade name rule. It announced it will rebrand as Radix Law on Jan. 1 2017.

There is a long tradition in the practice of law: the name of a firm includes the surnames of the most prominent partners. As law has become such a big business over the past decade, the largest practices in the world are names of partners who have long since passed away.

This tradition was also required by the Arizona Bar until recently. Now, firms can ditch the commas in favor of a more universal trade name.

Radix, in Latin, means “root.” It can mean the root of a tree, the root of knowledge or the root of a number. While the firm’s attorneys come from all over the world, they have decided to be rooted in Arizona.

“Our new name reflects our values,” says Principal Jonathan Frutkin. “We are a business law firm that helps our clients pursue opportunities and fights for them when challenged – and we are rooted right here in Arizona. It is also an acknowledgement that we have grown from being a solo legal practice into a business law firm with almost a dozen lawyers.”

The Frutkin Law Firm was formed in 2007 and now has 11 attorneys with decades of experience. They serve companies, individuals and families throughout Arizona in business and corporate law and related areas, ranging from taxation and asset protection to bankruptcy and estate planning. Radix Law leads the Valley of the Sun in estate planning and trust administration law. Radix Law’s attorneys are respected sources in their field and contribute to local and national media.

About Radix

Radix Law, formerly The Frutkin Law Firm, was founded in 2007 by attorney Jonathan Frutkin with the goal of providing exceptional legal representation to clients throughout Arizona in business and corporate law and related areas. Radix helps businesses, individuals, and families in Phoenix and throughout Arizona with their corporate and business law, bankruptcy, taxation, asset protection, wills, trusts, and estates, and litigation needs. The firm is located at the Kierland Commons in Scottsdale. For more information, visit radixlaw.com

December 30th, 2016

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For the first time in four years, the Arizona Department of Health Services is opening applications for medical marijuana dispensary licenses this summer. Commercial landlords will have a golden opportunity to lease space to marijuana businesses, which have plenty of capital and a high demand for their product. But these businesses pose unique challenges to a commercial landlord.

The federal government regulates drugs through the Controlled Substances Act, which does not recognize the difference between medical and recreational use of marijuana. Under the CSA, it is illegal to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance. Marijuana is designated as a Class One Controlled Substance, just like heroin, and under federal law is not approved for sale or distribution in the State of Arizona. Marijuana production and distribution continue to be federal crimes even in Arizona, where in November of 2010, voters passed the Arizona Medical Marijuana Act (“AMMA”). This conflict between state and federal law has created significant amounts of litigation in practice areas ranging from real estate to bankruptcy. This is because an exemption from prosecution under state law does not obstruct the federal government’s ability to investigate and prosecute an individual for a violation of federal law.

Federal law has not been strictly enforced for several years. This has been due to temporary moratoriums on federal funding for enforcement as well as federal policies outlining conditions under which the federal government will not interfere with state marijuana legalization programs. Federal enforcement of what is otherwise the legal production, distribution and sale of marijuana at the state level has been a low priority. This qualified “hands off” approach may be comforting to those inclined to lease facilities to a marijuana business.

But there is a definite balancing act—does the landlord determine the risks of civil forfeiture of its property or other penalties are too great and choose not to engage in any cannabis related business, or does the landlord calculate that risk into the costs it charges to the marijuana entrepreneur? There are many factors that must go into this decision, with just a few discussed below.

First, most commercial mortgages prevent tenants from operating illegal businesses on a subject property. This can reduce the pool of potential lessors to the small minority of properties that carry no commercial bank loan. Also there are certain commercial landlords who for moral reasons will not consider leasing to a marijuana business. As a result, the industry’s demand is concentrated into a small percent of the otherwise available market. Some research shows that rents for a cannabis based business can be three to five times higher than market levels. In this regard, the commercial landlord can reap huge rewards. Another consideration is whether marijuana operations violate use restrictions in other leases, declarations or other recorded covenants that affect the property.

Because banks are federally regulated, and in spite of some recent easing of certain restrictions, most marijuana businesses still do not have access to financial services and tend to do business entirely in cash. A commercial landlord should expect to receive its rent and other charges in cash, and normal boilerplate lease language will need to be drafted to permit this mode of payment.
Also, water and energy bills will be large if a grow facility is involved. As a commercial landlord, the allocation of these costs must be considered as well as other costs unique to a marijuana business, such as security. Additionally, if there are common areas, issues such as ventilation, waste products and use of marijuana on-site must be addressed.

As a commercial landlord, it would be advisable that any lease relating to a cannabis related business contain clauses that specifying the selection of venue and applicable governing law. It is important to provide that interpretation of the lease and adjudication of the parties’ rights be limited to current state law, to avoid the argument that the lease should be considered void as against public policy or contrary to existing law.

To be fair, a landlord might expect a savvy tenant to address what would happen in the unlikely but potentially catastrophic event of federal intervention. It might indeed be fair to expect a negotiated provision for an early termination event permitting the tenant to cancel the lease without any further financial obligation, if the federal government attempted seizure or other intervention.

Suffice it to say that assuming a commercial landlord determines it wants to both assume the risks and enjoy a possible lucrative lease with a marijuana business, simple boilerplate leases are simply not sufficient. Both the tenant and landlord have to navigate carefully through this changing landscape.

May 4th, 2016

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Be careful what you tweet. With the growth of social media outlets come more opportunities not only to express oneself but also to defame others. Let’s face it, Twitter has made posting potentially defamatory comments so very easy. The universe of potential publishers on Twitter is virtually everyone. The spreading of defamatory content can be instantaneous.

“Twibel” is a libelous tweet, and making this social media blunder can have serious legal consequences.

A California appeals court recently upheld a jury‘s verdict determining that Courtney Love Cobain did not defame her former attorney in a tweet. The case was filed by an attorney who formerly represented Love. The case is remarkable because it appears to be the first of its kind—involving “Twibel”- to actually go to trial. After the death of Love’s husband, Kurt Cobain, she hired an attorney, Rhonda Holmes, to investigate and file a lawsuit involving fraud in connection with Cobain’s estate. Love and Holmes had serious disagreements regarding the handling of the case. In fact, they even disagreed about whether the attorney eventually quit or was told by one of Love’s representatives to discontinue the representation. In the context of this strained relationship, Love sent a tweet to two individuals, which she deleted less than 10 minutes later. It suggested that Holmes had been “bought off.” Specifically, the tweet stated: “@noozjunkie I was … devastated when Rhonda J Holmes Esq of San Diego was bought off @fairnewsspears perhaps you can get a quote.”

According to the appellate court, Love testified at trial that she never meant to suggest that Holmes had actually taken a payment in the nature of a bribe, but believed at the time, based on the attorney’s explanation of the delay in filing suit, that Holmes, “had been ‘gotten to’ or ‘compromised’ in some manner.” Considering the evidence in the light most favorable to Love, the appellate court said the jury could well have found that Holmes failed to prove by clear and convincing evidence that Love knew her tweet contained false information or had serious doubts about its truth.

Under traditional common law notions of defamation, a plaintiff need only prove a statement was a 1) defamatory statement, 2) made about another person by someone who had the intent to publish without any applicable privilege, or at least was negligent in publishing, and 3) this statement resulted in damages and/or harm to the subject’s reputation. After the 1964 Supreme Court case of New York Times v. Sullivan, defamatory statements about those classified as public figures must meet an actual malice standard requiring clear and convincing evidence for liability to attach. This higher standard for celebrity Courtney Love undoubtedly contributed to her victory.

Social media is now considered a legitimate form of publishing. Libel law only requires that a statement was published to a third party, and whether it was seen by one person or many does not matter. Additionally, a tweet is not protected by the fact that it only existed for a few minutes and can be removed, like the one in Love’s case.

The Twitter user, not the social media site, is liable for any defamatory statements made. Social media sites like Twitter are protected by Section 230 of the Communication Decency Act and are not liable for defamatory content that people post using its site. The bottom line is that the user is responsible for his tweets and is not immune to liability simply because he is not a professional journalist. Courts appear willing to apply traditional defamation principles to potentially libelous tweets from all social media users. Private individuals publishing content in non-traditional forums, such as on Twitter, should not expect to be treated differently from traditional publishers simply because the use of social media is thought of as fun and informal communication. While courts do consider the context of a tweet and surrounding circumstances, a court’s interpretation of a tweet may not coincide with the intention of the person who tweeted in a spontaneous moment. Although recent decisions suggest that tweets typically contain protected opinions rather than actionable statements of fact, as more courts are asked to consider claims arising from statements made through social media, it is possible that any initial bias in favor of the casual Twitter user may change. So, think before you tweet.

March 1st, 2016

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December 3rd, 2016

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