Business Law Journal

A California appeals court recently determined that debtors who attempt to avoid debt collection by moving their assets out of state and into a different legal form may be liable for fraudulent transfer under California law.  On January 7, 2021, the California Court of Appeals issued a decision in Nagel v. Western (2021) 59 Cal.App.5th 740.  In Nagel the court held that under California’s Uniform Voidable Transactions Act (the “UVTA”), “physically relocating personal property and transmitting or transporting sale proceeds out of state, then transmuting them into a different legal form, may constitute a direct or indirect mode of parting with assets or one’s interests in those assets.”  This means that such transfers would fall under the fraudulent transfer prohibitions of the UVTA.  In short, debtors can no longer feel safe trying to shield their assets from creditors by moving them out of state and changing their form.  And Creditors have a new mechanism at their disposal to try to access those assets despite such maneuverings on the part of the debtors.

In a recent letter to members of the U.S. Senate Finance Committee, dated February 18, 2021, the United States Treasury Inspector General for Tax Administration (the “Inspector General”) outlined a potential disagreement with the Criminal Investigations Division of the Internal Revenue Service (“Criminal Investigations”) regarding the need for a search warrant to utilize databases containing cell phone users’ GPS data.  On one hand, the Inspector General indicated that courts may use “similar logic” to expand a 2018 Supreme Court decision requiring a search warrant to access cell-site location information to likewise apply to GPS data provided to applications operated by third parties.  On the other hand, the letter provides the stated position of Criminal Investigations, which asserts that “Cell Site Location Information [] is distinct from [] opt-in app data,” in apparent reference to the division’s prior claim that GPS data collected by cell phone applications does not require a search warrant because it has been “voluntarily” provided to a third-party.

On January 6, 2021, the Department of Labor (“DOL”) announced the new final rule for worker classifications called the “economic reality” test. The new DOL final rule provided that two core factors were to be examined to determine whether a worker is properly classified as an independent contractor under federal law: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. As previously discussed here, these requirements are much less stringent than the “ABC” test adopted by California, which requires that the worker perform work outside the usual course of the hiring entity’s business and that the worker is customarily engaged in an independently established business of the same nature.