Month: February 2014

In the News: Despite Changes, the Sriracha Hot Sauce Legal Battle Still Burns

In our In the News series, we use an article or topic that has been featured recently in the news as a potential learning opportunity.

Last year the Los Angeles Times reported that the city of Irwindale, California had sued Huy Fong Foods (“HFF”), the manufacturer of Sriracha hot sauce, after residents complained of physical malaise. According to HFF’s website, “Sriracha is made from sun ripen chilies which are ground into a smooth paste along with garlic and packaged in a convenient squeeze bottle.” The lawsuit followed alleged complaints by several city residents that HFF’s factory was emitting offensive and noxious fumes leading to burning eyes, irritated throats, coughing, and headaches. Some residents apparently complained the fumes even prevented them from going outside at times.

In its lawsuit, Irwindale asserts that the emission of these odors constitutes a public nuisance. Although California law will apply to determine the outcome of this lawsuit, Texas also recognizes legal claims for nuisances. A nuisance is a condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities. Texas law distinguishes public and private nuisances. A public nuisance is a condition that amounts to an unreasonable interference with a right common to the general public. A private nuisance is a non-trespassory invasion of another’s interest in the private use and enjoyment of land.

A variety of different activities (or lack of activities) may constitute nuisances. Some arguably obvious examples include incessant loud noise during late hours, the discharge of inordinate amounts of dust or dirt, bright lights, and possessing or making controlled substances. Less obvious examples in Texas include, for example in unincorporated areas of a county, the following: keeping refuse on premises in a neighborhood unless it’s entirely contained within an enclosed receptacle, keeping rubbish on premises in a neighborhood or within 300 feet of a public street for ten or more days unless it’s completely enclosed within a building or isn’t visible from a public street, allowing weeds to grow on premises in a neighborhood if the weeds are located within 300 feet of another residence or commercial establishment, and maintaining a flea market that constitutes a fire hazard. And there are many, many other actions or inactions that may be alleged to constitute nuisances.

At the outset of its case, Irwindale asked the judge to shut down all of HFF’s factory operations during the pendency of the lawsuit. The judge, however, believed that request was over broad. Instead, he ordered that HFF was prevented from “emitting anything that causes odors or are odors in themselves,” and that HFF was “to immediately make changes in its site operations reducing odors and the potential for odors consistent with” certain air quality mitigation measures. This order did not conclusively determine the outcome of the lawsuit. It was only intended to preserve the status quo of the subject matter of the litigation, taking into account the health and safety allegations, until there is a trial on the merits.

On Friday, the Pasadena Star-News reported that HFF recently made changes to its odor filtering system and has invited the city’s Community Development Director to the factory to observe the changes. Nevertheless, the city of Irwindale has stated that it plans to add a breach of contract claim to their lawsuit. The case is scheduled for trial this autumn. Ironically, if this lawsuit causes a decrease in HFF’s production, it may actually help HFF’s business under traditional market principles of supply and demand.

A Quick Glance at the Protecting Tenants at Foreclosure Act

leaseTrue or false? The Protecting Tenants at Foreclosure Act (“PTFA”) allows a person who rents a residence that is foreclosed to live rent free in that home. False. The PTFA requires a foreclosing party to honor a sham lease. False. The PTFA doesn’t apply to military service members. False. It has been about five years since the PTFA was enacted and much confusion about the law still abounds.

  • What is the Protecting Tenants at Foreclosure Act?

The PTFA (Pub. L. No. 111–22, §§ 701, 702, 123 Stat. 1632, 1660–61 (2009); 12 U.S.C. § 5220 note) is a federal law that applies in all 50 states and the District of Columbia. Its stated purpose is to protect tenants from eviction because of foreclosure on the properties they occupy.

  • What does the PTFA generally require?

The PTFA basically requires two things. First, it requires an immediate successor in interest to foreclosed, residential property (referred to here as the “foreclosing party” for simplicity) to give a person who is leasing that property at least 90 days’ notice to vacate the premises. Second, it generally requires a foreclosing party to honor a good faith lease that was in effect on the date of the notice of foreclosure.

There are two exceptions to the general rule that a foreclosing party must honor a good faith lease that was in effect on the date of the notice of foreclosure. A foreclosing party may terminate the lease, after giving the 90-day notice, on the date of the sale of the property (1) to a purchaser who will occupy it as a primary residence; or (2) when the lease is terminable at will under state law.

Moreover, even if a foreclosing party must honor the lease after foreclosure, should the tenant default in his or her obligations under the lease after the foreclosure (like not paying rent), the foreclosing party may initiate eviction proceedings after giving proper notice.

If the PTFA doesn’t apply then a foreclosing party must still comply with state law regarding eviction notices and procedures. Furthermore, regardless of whether the PTFA applies, a foreclosing party must still comply with all other laws regarding foreclosures and evictions.

  • When does the PTFA apply?

The PTFA only applies to a foreclosure on a “federally related mortgage loan” or on any dwelling or residential real property. Further, it only applies to leases and tenancies made in good faith. A good faith lease is statutorily defined as one: (1) in which the debtor on a mortgage (the “mortgagor”) or the child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) that was the result of an arms-length transaction; and (3) that requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a federal, state, or local subsidy.

In other words, the PTFA does not apply if (1) the foreclosure involves non-dwelling, non-residential property that is not the subject of a federally related mortgage; (2) the mortgagor or his/her child, spouse, or parent is the tenant; (3) the lease isn’t the result of an objectively independent, legitimate transaction; (4) the lease requires rent that is substantially less than fair market value; or (5) the unit’s rent is reduced or subsidized by the government. In addition, the PTFA will not apply if the lease wasn’t in effect at the time of the notice of foreclosure.

  • Are there other notable items?

The PTFA also provides additional protections to tenants in residential housing who receive rental voucher assistance under Section 8 of the United States Housing Act of 1937 that aren’t discussed here. Those provisions should be consulted in situations involving foreclosures of these properties.

  • What does the future hold?

The PTFA is set to expire in December 2014. Will it? Or will Congress extend it again such that it assumes a more familiar, quotidian role in future residential foreclosure/lease situations? Time will tell.

Law 101: What is Construction Law – Part 3?

In our “Law 101″ posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more involved and complex discussions.

In Law 101: What is Construction Law – Part 2, we explained that in the construction context as a whole, obligations arise both by force of law and by agreement. Here is a list of some of the more typical legal issues that arise in construction matters.

  • Non-Payment for Labor or Materials Providedfile491275303162 (2)
  • Defective Construction
  • Defective Design/Engineering
  • Product Liability
  • Time Delays
  • Contract Disruptions or Accelerations
  • Differing Site Conditions
  • Scope of Work/Extra Work/Change Order Disputes
  • Contract/Contractor Termination
  • Contract/Contractor Abandonment
  • UCC Claims/Foreclosures of Personal Property
  • Personal Injury
  • Workers’ Compensation
  • Texas Construction Trust Fund Claims/Misapplication of Trust Fund Claims
  • Warranty Claims
  • Misrepresentation Claims
  • Insurance and Surety Bond Claims
  • Mechanic’s & Materialman’s Liens
  • Texas Residential Construction Liability Act Claims
  • Bid Reliance/Bid Mistakes
  • Environmental Assessment & Impact
  • Occupational Safety & Health Administration Regulation Compliance

In future posts we will flesh out the source of the obligations of each of the above issues, their meaning, and their implications in greater detail.

Random fact: The Texas Department of Licensing and Regulation, the state’s umbrella occupational regulatory agency, does not require licensure or regulate “General Contractors” in the state of Texas. Some argue doing so would rein in trouble contractors; others argue it would only result in increased costs to consumers and more bureaucracy for everyone.

E-Guide: Five Secrets to Hiring a Dependable Contractor on Small Projects

Have you ever felt you were the victim of an unscrupulous contractor? Here are five secrets we’ve distilled—after more than a decade representing both contractors and project owners in construction, repair, and remodeling disputes—to reduce the odds of working with an undependable contractor on a small project.

Five Secrets to Hiring a Dependable Contractor