Friday, May 29, 2015

Record Rainfall, Flooding Creates Chaos on North Texas Roads

Originally published by William K. Berenson.

At Least 35 Dead and Nine Missing In Our Region

We’ve all seen the devastating photos and videos from across Texas. The flooding has caused dangerous conditions on Dallas-Fort Worth roads. By 10:00 this morning, Dallas Fire – Rescue had already responded to 70 auto accidents and hundreds of motorists stranded in high water. Down the street from my office, University Drive at the I-30 underpass was underwater and there have been many other impassable roads all around the Metroplex.

Tragically, at least 35 people in our region have died as a result of the flooding, including 15 people in Texas and 20 in Mexico and Oklahoma, and nine people remain missing.

We have already surpassed the Dallas-Fort Worth record for the wettest May in history and more rain is forecast for tonight and tomorrow. Here’s an interesting fact: tere has been enough rain across Texas during May to cover the entire state nearly 8 inches deep.

Precautions To Take

The road conditions are treacherous so, if possible, restrict your driving or even stay put for the day. If you must be on the road today, the Dallas Fire-Rescue spokesperson advised drivers to not drive through standing water. He recommended mapping out at least two alternative routes to your destination so you don’t feel pressured to take risks. In addition, he reminded drivers to not go around emergency vehicles that are blocking the road because you are putting yourself in the same circumstances from which first responders are rescuing other people.

Also, before heading out on the road, check for National Weather Service flash flood warnings for your area. Seemingly shallow water may actually be quite deep. During a violent storm like we had last night, part of the road may even be washed away. If you try to drive through, your car is likely to stall and waters can quickly rise placing you in serious danger. 

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SCOTX approves a double-derivative shareholder suit over board objections

Originally published by Don Cruse.

With today’s orders list, the Court issued one opinion in a case about closely held corporations.

Shareholders in closely held corporations can bring derivative suits that would be barred to shareholders in public corporations

When family businesses are run as closely held corporations, can a shareholder bring a derivative suit more easily than could a shareholder in a public company? And does organizing a family’s business into different layers of subsidiaries insulate some actions from review?

This derivative suit was brought by the 24% owner of a closely held corporation, against the wishes of that corporation’s board. The suit was prompted by a bad business deal that was actually entered, not by that corporation but instead by a wholly owned subsidiary focused on a specific line of business (making this a so-called “double-derivative claim”).

The trial court dismissed for lack of standing. The court of appeals reversed, concluding that the controlling Texas statute does not impose the same hurdles to bringing a derivative suit for closely held corporations.

The Texas Supreme Court agreed with the court of appeals, remanding to the trial court for the claim to move forward.

Standing: The defendants argued that the deference generally shown to corporate boards in the form of the business-judgment rule should extend to a board decision whether to pursue a claim and, thus, a shareholder lacks standing to bring a claim of which the board disapproves.

The Court acknowledged that the business-judgment rule does indeed apply to protect the general decisions of boards, even boards of closely held corporations. But it rejected the argument that this created a shield against derivative claims.

The Court rested that analysis on the statute governing derivative suits, in which it found a Legislative decision that stakeholders in closely held corporations should have more ready access to derivative suits. The specific provision is former Article 5.14(L),1 which excluded closely held corporations from some of the particular formalities of bringing such suits — including requirements that the potential derivative claims first be presented to the board and giving the board the opportunity to bring them itself. Because the Legislature carved closely held corporations out of those requirements, the Court reasoned, using the business-judgment rule to create a barrier to derivative claims would would contravene the Legislature’s intent.

The Court also rejected the argument that a shareholder must plead and prove particular conduct that violates the business-judgment rule in order to have standing. It noted the longstanding concern in Texas law with carefully distinguishing betweent the jurisdictional concept of standing (which, among other things, cannot be waived) and the more substantive aspects of whether a particular plaintiff has a legally valid claim. In the context of shareholder suits, the Court noted that any “confusion is understandable” because the statute (and the literature about derivative claims) often speak about the substantive aspect of a plaintiff’s claim using the term “standing.”

Double-derivative claims: The plaintiff here was a sharehodler in a parent corporation and sued over a busines deal entered by its wholly owned subsidiary. In doing so, the plaintiff was asserting the corporation’s right to, in turn, step into the shoes of its subsidiary. This type of claim has been dubbed a double-derivative suit.

The question before the Court was whether Texas should permit such a claim.

On this issue, too, the Court’s analysis proceeds from Article 5.14 of the statute, this time from the article’s expansion of the term “shareholder” to also “include[] a beneficial owner whose shares are held in a voting trust or by a nominee on the beneficial owner’s behalf.” Tex. Bus. Corp. Act art. 5.14(A)(2). Placing particular emphasis on the word “includes,” the Court declined to treat this list as exclusive. Instead, the Court viewed this as opening the door to more general concepts of equitable or beneficial ownership, such as a shareholder’s indirect interest in property held by the corporation itself. The Court thus held that Texas law does permit a double-derivative suit.

There is one notable contrast between this statutory analysis and the Court’s analysis of standing: This definition in Article 5.14 is not, structurally, limited to closely held corporations. The same definition of “shareholder” appears, by the text, to apply to all derivative suits. Nonetheless, the Court tells us in footnote 14 that it does not (yet, at least) intend its holding to reach beyond the very limited context here:

We limit our holding to the situation presented in this case in which a shareholder of a closely held parent corporation asserts double-derivative standing to assert a cause of action on behalf of a wholly owned subsidiary.

It is not clear what effect it would have if the subsidiary here had sold a 1% stake to some other investor. Nor is it entirely clear why a shareholder would lose jurisdictional standing to bring a suit merely because a 36th shareholder is added to the books.2

What is clear is that the Court’s immediate concern is with the special problems of closely held corporations. It draws support from its reading of the word “shareholder” in Article 5.14(A) from the Legislature’s decision to exempt closely held corporations from certain procedural requirements for derivative suits. (“Our holding is once again buttressed by the fact that the Legislature made the statutory standing provisions of article 5.14(B) inapplicable to closely held corporations.”). And it frames the policy concerns in terms of the impact on closely held corporations: “Were we to hold otherwise, the directors of a closely held holding corporation could create a wholly owned subsidiary to circumvent the Legislature’s intent to make it easier for shareholders to assert derivative claims on behalf of closely held corporations.”

Still, given that footnote 14 says the Court means to “limit our holding” to a narrow context, it might be inadvisable to extrapolate too much from the Court’s stated reasoning about the definition of the word “shareholder.”

  2. Putting the pieces together a different way, one might note that the definition of a closely held corporation in Article 5.14(L) is written in terms of there being fewer than “35 shareholders,” so an expansion of “shareholders” to include all forms of indirect ownership might result in some uncertainty whether a corporation is closley held at all. 

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Not Really So Much Late, Per Se, as Unduly Delayed

Originally published by Richard Smith.

One of the questions appellate lawyers get from time to time is “What’s our deadline to file for mandamus?” The answer is that there is no formal deadline under the rules, but if you wait too long you may end up waiving your right to mandamus. A short opinion from the Dallas Court of Appeals exemplifies the latter principle. On June 6, 2014, the county court at law granted a motion for new trial. On May 27, 2015, a mandamus petition was filed, seeking to require the trial judge to explain its reasons for setting aside the jury verdict and granting a new trial. With the new trial now scheduled for July 8, the Court of Appeals held that the unexplained delay of almost one year to challenge the new trial ruling was too long to justify mandamus relief.

In re Stembridge, No. 05-15-00672-CV

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The Final Waters of the U.S. Rule: Waters That Aren’t Always Jurisdictional by Definition, but Probably Are in Practice

Originally published by Lowell Rothschild.

Yesterday, we started our series of blog posts about the final WOTUS rule by taking advantage of the rule’s increased clarity to identify the waters that would always be considered jurisdictional. The rule’s definitions leave no doubt that certain waters will always be considered jurisdictional by EPA and the Corps. But there’s another group of […]

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Top 10 from Texas Bar Today: Pendulums, Permits, and Penalties

Originally published by Joanna Herzik.

To highlight some of the posts that stand out from the crowd, the editors of Texas Bar Today have created a list from the week’s blog posts of the top ten based on subject matter, writing style, headline, and imagery. We hope you enjoy this installment.

10. Wellness Case Brings Healing for Bankruptcy Court AuthoritySteve Sather of Barron & Newburger, P.C. in Austin

9. A permit system may finally arrive for the Migratory Bird Treaty ActLowell Rothschild of Bracewell & Giuliani LLP @BGEnergy in Austin

8. Supreme Court Allows Convicted Felons to Dispose of Their GunsJohn T. Floyd of John T. Floyd Law Firm in Houston

7. New IRS FBAR Penalty Guidance (5/29/15)Jack Townsend of Townsend & Jones LLP in Houston

6. A Lawyer and a JurorDrew York of Gray Reed & McGraw @GrayReedLaw in Dallas

5. Legal Talk Network App – Emily Lawson, Law Reference/Research Librarian at University of Houston Law Center @UHLAW O’Quinn Law Library in Houston

4.  Supersedeas Pendulum Swings Toward Judgment Debtors – Mike Northrup of Cowles & Thompson PC @CowlesThompson in Dallas

3. Discovery of medical committee records related to a doctor’s claim of unfair competitionDon Cruse @doncruse of Law Office of Don Cruse in Austin

2. Texas AG warns of scams in wake of storm flooding – David Yates, Senior Courts Reporter for Southeast Texas Record @SETexasRecord

1. E-briefs – New Auto-Hyperlinking Feature on TAMESRich Phillips of Thompson & Knight LLP @ThompsonKnight in Dallas

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Arbitration Trends

Originally published by Gene Roberts.

Today’s General Counsel published its Arbitration Trends for 2014. This is a good read.

General counsels were asked why they arbitrate and why they don’t. Respondents said that they arbitrate because (1) it’s required by contract; (2) it’s confidential; and (3) it’s less costly. Interestingly, none of these top responses obtained 50% approval.

When asked why they don’t arbitrate, respondents said they don’t because (1) arbitration can be too quick; (2) arbitrators tend to “split the baby”; and (3) cost and time advantages can be illusory.

Lately, I’ve been thinking a lot about the users (clients) of ADR processes. While Today’s General Counsel has another article summarizing a study showing arbitrators don’t “split the baby”, that perception exists. If the hard numbers show the opposite of perceptions, why do so many users have perception?

What are your thoughts on the state of arbitration? Is arbitration meeting its promise of an alternative to traditional litigation? Or has it become a form of private dispute resolution with the same discovery expenses and motion practices found in traditional litigation? Please share your thoughts.



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New IRS FBAR Penalty Guidance (5/29/15)

Originally published by Jack Townsend.

Heather Maloy, Commissioner, LB&I, has issued a memo dated 5/13/15 titled Interim Guidance for Report of Foreign Bank and Financial Accounts (FBAR) Penalties.  [No link is available, but will be provided when I have one].

The key points of the memorandum that I find interesting are:

1.  The FBAR penalty provisions are “only maximum penalty amounts, leaving the IRS to determine the appropriate FBAR penalty amount based on the facts and circumstances of each case.”  I think we all knew that, but I am glad the IRS is reminding its agents of that proposition.

2.  Attachment 1 provides procedures

developed to ensure consistency and effectiveness in the administration of FBAR penalties. They will help ensure FBAR penalty determinations are adequately supported and penalties are asserted in a fair and consistent manner. Examiners must continue to use their best judgment when proposing FBAR penalties. They must take into account all the available facts and circumstances of a case. See IRM, FBAR Penalties — Examiner Discretion, concerning the use of examiner discretion when proposing FBAR penalties.

3.  The following are from Attachment 1 (bold-face supplied by JAT except for headings):

(2) Penalty Amount for Willful Violations 

For each year for which it is determined that there was a willful violation, examiners must fully develop and adequately document in the examination workpapers their analysis regarding willfulness. The examiner’s report should clearly state the years for which it was determined that an FBAR violation was willful.

For cases involving willful violations over multiple years, examiners will recommend a penalty for each year for which the FBAR violation was willful. In most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. In such cases, the penalty for each year will be determined by allocating the total penalty amount to all years for which the FBAR violations were willful based upon the ratio of the highest aggregate balance for each year to the total of the highest aggregate balances for all years combined, subject to the maximum penalty limitation in 31 U.S.C. § 5321(a)(5)(C) for each year.

Example: Assume highest aggregate balances of $50,000, $100,000, and $200,000 for 2010, 2011, and 2012, respectively. The total penalty amount is $100,000 (50 percent of the $200,000 highest aggregate balance during the years under examination). The total of the highest aggregate balances for all years combined is $350,000. The penalty for 2010 is $14,286 ($50,000/$350,000 x $100,000). The penalty for 2011 is $28,571 ($100,000/$350,000 x $100,000). The penalty for 2012 is $57,143 ($200,000/$350,000 x $100,000). The penalty amounts for each year are subject to the maximum penalty limitation in 31 U.S.C. § 5321(a)(5)(C).

Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregate account balance of all unreported foreign financial accounts based on the facts and circumstances. In no event will the total penalty amount exceed 100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. The examiner’s workpapers must support all willful penalty determinations and document the group manager’s approval.

(3) Penalty Amount for Nonwillful Violations 

For most cases involving multiple nonwillful violations, examiners will recommend one penalty for each open year, regardless of the number of unreported foreign financial accounts. In those cases, the penalty for each year will be determined based on the aggregate balance of all unreported foreign financial accounts, and the penalty for each year will be limited to $10,000.

For some cases, the facts and circumstances (considering the conduct of the person required to file and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting nonwillful penalties for each year is not warranted. In those cases, examiners, with the group manager’s approval after consultation with an Operating Division FBAR Coordinator, may assert a single penalty, not to exceed $10,000, for one year only. The examiner’s workpapers must support such a penalty determination and document the group manager’s approval.

For other cases, the facts and circumstances (considering the conduct of the person required to file and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting a separate nonwillful penalty for each unreported foreign financial account, and for each year, is warranted. In those cases, examiners, with the group manager’s approval after consultation with an Operating Division FBAR Coordinator, may assert a separate penalty for each account and for each year. The examiner’s workpapers must support such a penalty determination and document the group manager’s approval.

In no event will the total amount of the penalties for nonwillful violations exceed 50 percent of the highest aggregate balance of all unreported foreign financial accounts for the years under examination. A nonwillful penalty will not be recommended if the examiner determines that the FBAR violations were due to reasonable cause and the person failing to timely file correct and complete FBARs later files correct and complete FBARs.

* * * *

(4) Co-Owned Accounts 

Where there are multiple owners of an unreported foreign financial account, examiners must make a separate determination with respect to each co-owner of the foreign financial account as to whether there was a violation and, if so, whether the violation was willful or non-willful. For each co-owner against whom a penalty is determined, the penalty will be based on the co-owner’s percentage ownership of the highest balance of the foreign financial account. If examiners are unable to determine a co-owner’s percentage ownership, the penalty will be based on the amount determined by dividing the highest account balance equally among the co-owners. If examiners believe, based on the facts and circumstances of a particular case, that the penalty should be allocated among the co-owners in some other manner, they may do so with the group manager’s approval after consultation with an Operating Division FBAR Coordinator. The examiner’s workpapers must support such a determination and document the group manager’s approval.

 JAT Comments:

  1. The willful penalty mitigation in multiple years is just a general rule.  I suppose this leaves some discretion in the agent and manager to imagine egregious willfulness for multiple year assertion of a 50% penalty in each year.  There are some procedural approvals required, so hopefully this signals some notion that the IRS will not be punitive.  To quote Alexander Pope: “Hope springs eternal in the human breast,”
  2. Attachment 1 also reminds agents of the availability of IRS Counsel and the Fraud Technical Adviser in appropriate cases.  The FTA becomes involved upon perceiving potential criminal investigation potential for the matter.
  3. Attachment 2 has some procedural requirements.

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Thursday, May 28, 2015

Pitch Perfect 2

Originally published by The Movie Court.

New from The Movie Snob.

Pitch Perfect 2  (B-).  Second verse—same as the first!  Anna Kendrick (Into the Woods) returns as Beca, a leading member of the national-championship-winning Barden Bellas.  (That’s a college a capella singing group, in case you missed the first one.)  A wardrobe malfunction during a performance attended by President Obama gets the Bellas suspended from stateside competitions, and their only shot at redemption is to win the world championship.  You can guess at the trials and tribulations that pad out the movie.  And I do mean “pad”; at 115 minutes, the film suffers from several long dead spots.  And, like the original, it is unnecessarily vulgar—especially in scenes involving Fat Amy (Rebel Wilson, Bridesmaids).  But there are also several chuckles to be had, and the elaborate musical numbers are pretty entertaining.  Although most of the Bellas graduate from college during this installment, new freshman member Emily (Hailee Steinfeld, The Homesman) can provide a bridge to future sequels if Pitch Perfect 2 turns out to be an artistic triumph makes a ton of money.  Elizabeth Banks (Our Idiot Brother) both appears and makes her feature-film directorial debut.

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Seven Ways to Make Mediation More Successful

Originally published by Guest Blogger.

Difficult as it may be to believe, Texas lawyers have been using mediation to resolve disputes for more than 25 years. Mediators, during this time period, have developed a broad array of methods of resolving even the most complex problems. Texas lawyers have also received training in mediation advocacy, negotiation, and utilizing various alternative dispute resolution processes. 

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Is Overtime Pay Higher Than Normal Wages In Texas?

Originally published by Vethan Law.

As an hourly paid employee, you are entitled to overtime pay as long as you are considered a non-exempt employee. Exempt employees are usually those who earn a yearly salary as opposed to a hourly wage, commissioned salespeople, computer professionals, farmworkers, and more. For more details on exemptions, check out the Department of Labor’s website.

For non-exempt, hourly employees, overtime pay can provide an incredible source of extra income. Not only does it mean that the employee is working more hours, but those hours are paid at a higher rate.

What Qualifies for Overtime?

To earn overtime, an employee must work over 40 hours in a single workweek. If an employee works for 42 hours in a single workweek, the additional 2 hours worked are considered overtime. These two hours are paid at a higher rate in Texas, as well as the rest of the country.

A lot of confusion comes from people misinterpreting overtime as working over eight hours in one day. If you continue at this pace for five days a week, then you will earn overtime. However, working nine hours in a day does not automatically mean that you will receive overtime. Additionally some people mistake working over the weekend or working the night shift as somehow qualifying as overtime hours. This is unfortunately not the case. Overtime comes from the sum total of hours worked in a week that eclipses forty hours.

How Much More do You Earn?

Currently, the overtime pay rate is one and one half your normal rate. This applies to every state in the United States. Unlike minimum wage, there are not any states that have chosen to pay more than time and a half for overtime work. Therefore, if you earn $8 per hour for your standard rate of pay, your overtime rate is $12 per hour.

So to make a long story short and answer the most important question, yes, overtime pay is higher than normal wages in Texas. In fact, it is a lot more.

For any questions regarding minimum wages, contact Vethan Law Firm by calling our Houston office at 713-526-2222, our San Antonio office at 210-824-2220, or our Dallas office at 972-458-2222.

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Yellowbook seeks summary judgment in breach of contract suit

Originally published by David Yates.

imgres-12Yellowbook is seeking summary judgment against a roofing company in a breach of contract lawsuit.

As previously reported, Hibu Inc., formerly known as Yellowbook Inc., filed a lawsuit Oct. 17 in Jefferson County District Court against Hector Crosby Jr., individually and doing business as Aztec Roofing.

According to the complaint, Hibu provided goods or services to the defendant which have not been paid for, with more than $5,100 owed, plus interest. The defendant is accused of breach of contract, or, in the alternative, unjust enrichment.

Court records show that on April 20 Hibu filed a motion for summary judgment, seeking to be awareded the amount owed plus interest, attorney fees and costs of court.

In its motion, Hibu maintains it can prove each element of its cause of action as a matter of law.

A hearing on the matter has been slated for June 12.

Attorneys Sean S.V. Homrig, Don M. Barnett, Matias Eduardo Garcia, Ian A. McCarthy and Lawrence J. Falli of Barnett and Garcia in Austin represent it.

Jefferson County District Court case number: D-196281

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Supreme Court Allows Convicted Felons to Dispose of Their Guns

Originally published by John Floyd.

Until recently, the case of Tony Henderson sort of flew under the radar despite raising a significant gun rights issue. The former U.S. Border Patrol agent […]

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What’s in the new EPA Clean Water Rule?

Originally published by Stephen R. Miller.

As most folks probably know, EPA issued its final Clean Water Rule yesterday. I found the following summary table from EPA helpful:

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SCOTUS: Postpetition wages escape the trustee

Originally published by David Coale.

In Harris v. Viegelahn, No. 14-400 (May 18, 2015), the Supreme Court resolved a split between the Third and Fifth Circuits and held 9-0 (contrary to the Fifth’s position) that “by excluding postpetition wages from the converted Chapter 7 estate (absent a bad-faith conversion), 11 U.S.C. § 348(f) removes those earnings from the pool of assets that may be liquidated and distributed to creditors.”

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Texas AG warns of scams in wake of storm flooding

Originally published by David Yates.


On Wednesday, May 27, Attorney General Ken Paxton warned Texans of the risk of fraud and common scams that may follow in the wake of the severe weather that began May 4, impacting communities across the state.

“The loss of lives as a result of these deadly storms is a tragedy for our state, and our thoughts and prayers are with the victims and their families,” Paxton said in a written statement.

“The extreme flooding and dire storms have devastated communities across the entire region, destroying homes and property in its path and posing a severe safety threat to countless Texans. Disasters such as these can unite communities and, as we are seeing, bring out the best in people. However, everyone should be aware of bad actors looking to take advantage of the circumstances. My office will continue working to protect Texans from deceptive acts, and will carefully monitor the situation as Texans rebuild and recover.”

Paxton said Texans should consider the following tips when in need of businesses or contractors to help in the cleanup and rebuilding process:

– Only do business with licensed or bonded contractors or builders;

– Consult the Better Business Bureau to ensure you are working with a trustworthy business;

– Contact an insurance adjuster to get an estimate of the damage and repair cost;

– Be wary of contractors who solicit services door-to-door, especially those that are unfamiliar or from out of town;

– Know that under Texas law, the door-to-door seller must advise you orally and in writing that you have a right to cancel the sale within three days;

– Get the salesperson’s license plate number;

– Don’t rush into signing a contract, and never pay up-front for promised work;

– Secure the terms of any warranty work in writing; and

– Ask for references, or rely on recommendations from friends or relatives who have had experience with honest contractors.

Although Texas’ price gouging law prohibits vendors from illegally raising prices to reap exorbitant profits during a disaster, it does allow retailers to pass along wholesale price increases to customers. Thus, in some cases, increased prices may not necessarily signal illegal price gouging.

Texans in affected counties who believe they have encountered price gouging should call the Office of the Attorney General’s toll-free complaint line at 800-621-0508 or file a complaint online at

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The Administration Finalizes the WOTUS Rule.

Originally published by Lowell Rothschild.

Yesterday, the Obama administration finalized the waters of the US rule it proposed last spring. There’s a lot to be said about the final rule, and so this will be the first in a series of blog posts (just like for the proposal). But because the new rule creates a few immediate obligations, we’ll start […]

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Legal Talk Network App

Originally published by Emily Lawson.

Looking for a way to stay up to date on legal news and practice tips during your commute?  Or maybe during your morning walk?  If so, you should check out the Legal Talk Network app, which provides access to podcasts of legal talk shows.  Currently the app has podcasts from over 20 different legal talk shows on variety of topics.  For instance, the popular Lawyer 2 Lawyer podcast discusses current legal news, the Kennedy-Mighell Report covers legal tech issues, New Solo provides resources for these types of attorneys, and ABA Journal: Modern Law Library features top legal authors.  With the app you can access recent episodes as well as the episode archives.

This app is free to download and the podcasts are free as well.  Currently, it is available for both Apple and Android devices.  To learn more about the app and the Legal Talk Network, visit their website. 

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Is There A Duty To Test A Chicken McNugget?

Originally published by Kyle White.

A Chicago man recently filed a lawsuit against McDonald’s to recover damages incurred after he allegedly bit into a chicken nugget which contained shards of bone. Lawsuits over objects in food which are not supposed to be there are common, so no surprise there.  The interesting part is that the man has reportedly joined a cause of action for failure to test the chicken nugget:

The suit contends that McDonald’s employees failed to inspect and test the Chicken McNugget in question for bone fragments prior to serving it to Anderson.

This is where he is going to lose those initially sympathetic to his cause. How does one test a chicken nugget for bone shards before serving it to the customer? Is McDonald’s supposed to use the x-ray machine that TSA uses at the airport? Is there a chicken nugget bone shard test kit that we don’t know about?

On a personal note, I know that I have been using this purported duty to test for a while now to trick my daughter. I make her a sandwich, then tell her that I need to take a bite first to make sure it’s not poisoned. It works every time, probably because she is three. I’ve been concerned that any day now she’s going to detect the ruse and I won’t be able to perpetrate the scheme any longer. However, if this suit goes anywhere, I may be forced to continue to take a test bite of every sandwich before serving it . . . for liability reasons . . . .

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On Second Try, Ninth Circuit Holds Actress’s Performance isn’t Individually Copyrightable

Originally published by Klemchuk LLP IP Blog.

The Ninth Circuit reversed course on May 18, holding that an actress could not issue a copyright takedown notice on an entire film simply by nature of her appearance in that film. The ruling reversed a previous injunction—decried by many commentators—to keep the film, titled “Innocence of the Muslims,” off of sites such as Google and YouTube and reversed an order to have every copy of the film destroyed.
An actress named Cindy Garcia had appeared in “Innocence of the Muslims,” which attracted worldwide criticism because of its depiction of the Muslim faith. Afterward, Garcia tried to get the movie removed by alleging that the movie violated her personal copyright. A Ninth Circuit judge agreed that she had a copyrightable interest in the film and that th…

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Wednesday, May 27, 2015

Supreme Court Rules Belief Of Invalidity Is Not A Defense To An Induced Infringement Claim

Originally published by Steven Callahan.

Yesterday, the Supreme Court issued its decision in Commil v. Cisco (available here). The Court reversed the Federal Circuit, and held that a defendant’s belief regarding patent validity is not a defense to a claim of induced infringement. This is a (relative rare) victory for patent holders.

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Charities Cashing in as Venture Capitalists?

Originally published by Nonprofit Blogger.

Continuing from yesterday’s post, it looks like donors are not the only ones looking for a return on their investment. Private foundations are acting more like venture capitalists these days. Today Fortune featured an article on the ability of foundations…

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B.B. King’s Children Face Long Complex Legal Battle

Originally published by Gerry W. Beyer.

I have previously discussed the dispute over the estate of B.B. King. The late blues is currently survived by 11 living biological and adopted children. King’s children are currently in a high profile dispute with LaVerne Toney, the Musicians former…

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US Supreme Court To Hear Major Insurance Subrogation Case

Originally published by William K. Berenson.

Judge's gavel

Does the Plaintiff Have to Turn Over His Entire Damage Recovery to His Health Insurance Company?

When an injured party has a health insurance policy which pays his medical bills, does he have to automatically repay his provider for those benefits? If so, can his attorney’s fees and expenses to collect damages be deducted before the insurance company is repaid? Depending on the size of the verdict or settlement, the difference can be substantial.

The Supreme Court has agreed to wade into these murky waters by hearing a rare subrogation case in its October 2015 session. The court will interpret the reimbursement clause of the Employee Retirement Income Security Act (ERISA) which often gives the health insurance company the right of first reimbursement of amounts paid for a participant’s medical bills should the participant recover damages. The decision will have huge consequences for insurance companies, their policyholders, and attorneys on both sides of the docket.

The insurance companies argue that the statute did not intend that the reimbursement be reduced by attorneys’ fees or consider whether the beneficiary was made whole. Further, tese companies estimate they recover about $1 billion every year in reimbursements and need these funds to keep premium rates in check.

However the practice has led to substantial hardship for injury victims who are forced to pay an inequitable amount of money awarded to them through trial or out of court settlement. Detractors argue that insurance companies basically get free services if the plaintiff”s attorneys’ fees are not taken into account and that the burden of paying a lawyer to recover damages should not fall solely on the shoulders of the injury victim. And the victim is justifiably angry because he and/or his employer paid expensive premiums to Blue Cross or CIGNA for them to absorb the risk.

The Case

Robert Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan
involves a dispute between policyholder Robert Montanile and his auto insurance company. Mr. Montanile was severely injured when a drunk driver ran a stop sign and plowed into his vehicle. He suffered severe back injuries that required a spinal fusion procedure. His insurer paid $121,000 of his medical bills for the surgery and treatments.

The drunk driving victim negotiated a $500,000 settlement with the DWI driver. Mr. Montanile paid more than half of the settlement award to his attorney for fees and expenses. National Elevator sought the full $121,000 from Mr. Montanile based upon its interpretation of the reimbursement clause in the ERISA policy. Mr. Montanile hired another lawyer to negotiate a settlement with the insurance company. After eight months of unsuccessful negotiations and upon receiving no response from the insurer, the attorney released Mr. Montanile’s settlement funds, from which the injury victim paid his legal fees and expenses and spent the rest on his family’s living expenses and on his own care.

Circuit Courts Have Split on the Issue

The Eleventh Circuit ruled that National Elevator was entitled to the settlement funds, even if the money had already been disbursed. The Eleventh Circuit decision followed five other circuits in favor of the insurance companies’ position. The Eighth and Ninth Circuits have reached the opposite conclusion: the insurers are not entitled to funds from participants who had used the money to pay for medical bills and living expenses.

Hopefully the U.S. Supreme Court will protect the rights of injury victims to receive full compensation for their losses.

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A permit system may finally arrive for the Migratory Bird Treaty Act

Originally published by Lowell Rothschild.

For years, Federal Courts have held that individuals can be held criminally liable under the Migratory Bird Treaty Act (MBTA) for the death of birds regardless of whether they intended to harm them. While several courts have recently called into question this precedent, yesterday, the Fish and Wildlife Service (FWS) started a process that could […]

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Supersedeas Pendulum Swings Toward Judgment Debtors

Originally published by Mike Northrup.

The Supreme Court of Texas has clarified the phrase “compensatory damages” as used in the supsersedeas statute (Civil Practice and Remedies Code Section 52.006) and Appellate Rule 24.  In In re Longview Energy Company, the court held that disgorgement damages are not compensatory damages and therefore need not be superseded to stay enforcement of the judgment during an appeal.

The plaintiff in this case recovered a judgment against multiple defendant for $95.5 million dollars, for breach of fiduciary duty.  The damages apparently consisted of disgorgement of past production revenue derived from shale assets.  The defendants appealed and collectively posted a $25 million bond.  Plaintiff contended that the defendants each were required to separately post the lesser of $25 million or 50% of their net worth.  It appears that the supreme court originally took this case to address whether the caps on the amount of supersedeas are to be applied per defendant or per judgment.   Instead, the court analyzed a different question that was raised on appeal–whether disgorgement damages are “compensatory damages.”

The supreme court first questioned whether the damages might be punitive because the trial court had initially signed a judgment that characterized them as such, but subsequently issued a second judgment that awarded the same damages but without the explanation as to how they were derived.  The plaintiff argued that the award was remedial, but the supreme court rejected that argument stating, “We cannot conclude that the award is compensatory when it cannot be explained.”  The court reasoned that disgorgement is an equitable forfeiture of benefits wrongfully obtained.  The court found that disgorgement is compensatory in the same sense that attorney’s fees, interest, and costs might be compensatory, but disgorgement is not damages.  Thus, the court held that the defendants were not required to post security in an amount to cover disgorgement damages.

The court went on to discuss the question of whether the the plaintiff was entitled to discovery relating to defendant Huff Energy’s operations.  The Supreme Court held that Appellate Rule 24 entitled the plaintiff to such discovery without the requirement of showing a threat of dissipation of assets.

The court’s opinion may be found here.

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Make Sure To File A Reply Brief

Originally published by Steven Callahan.

I just came across Judge Lindsay’s Order in Martin v. Trend Personnel Services (available here), which provides two pieces of important guidance:

1. File a reply brief: “The court notes that Defendants filed no reply. A reply should always be filed, even if it is brief, as the court can take the failure as a concession that Plaintiffs’ position is correct.”

2. Don’t ignore scheduling order deadlines simply because there is a motion to dismiss pending. Instead, ask for a stay of pretrial deadlines.

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A Lawyer and a Juror

Originally published by Drew York.

Jimmy StewartThis month I am flushing the format to talk about jury duty. I recently got selected to serve on a jury in a civil case. The experience fascinated me because, as a civil trial lawyer myself, it gave me the opportunity to see a trial from a juror’s perspective in the courtroom and in the jury room. My case lasted four days. Here are several observations to keep in mind for the next time you find yourself as a party in a trial.

It is a Civic Duty

When one of your friends tells you they received a jury duty notice in the mail, it’s usually not with a joyful tone. Rather, it’s with an exasperated huff. I think there is a simple explanation for that reaction: people have a daily routine, with existing obligations, and jury duty disrupts their schedule. But once selected, my fellow jurors took their responsibility seriously. Litigants should keep in mind that jurors want to see that the parties are taking the case as seriously as they are.

Courtroom Technology: An Asset and a Liability

Today’s technology has radically changed the way litigants can present their case. One hundred years ago, parties presented their evidence through oral testimony, usually without any documentary evidence, and almost certainly without any visual aids. Now parties can show videos, photographs, and documents and can “self-edit” to show the jury what evidence is important to their side of the case. Parties should take advantage of these capabilities. Technology is a “change of pace” in the courtroom and keeps the jury attentive. While jurors take the case seriously, it is tough to sit in a chair for a couple of hours listening to a lawyer and a witness talk back and forth –especially when the lawyer is sitting in his or her chair as well. Also, some jurors may be visual learners. Putting the document up on a screen, instead of simply reading the language, may help a juror better understand your case.

A word of caution about technology in the courtroom. If you are going to use it, you need to make sure it works in the courtroom before trial starts, and you need to know how to use it. Technology problems are distracting and kill your momentum. Think of yourself as the director of a movie – you want to show the jury the final, finished product. To put it another way, follow the Scout Motto: Be Prepared.

Jury Deliberations: Behind the Curtain

When the jury goes to deliberate they are given the “jury charge,” which contains the questions they are asked to answer. The jury charge also contains instructions and legal definitions. Sometimes these questions can be complicated. Nonetheless, it is important to know that jurors will make every effort to “get it right” with their verdict. This doesn’t mean they will decide the case based on sympathy, bias or prejudice. Rather, juries seek to render a verdict that is based on a common sense assessment of the facts.

Tilting the Scales in Your Favor

My service has reconfirmed my belief that the jury system works. If you end up as a party in a jury trial, respect the jury’s decision no matter the outcome. And if you are selected for jury duty, thank you for your service.

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No Non-Compete Agreement? No Problem! – What Texas Companies Can Learn from Oculus Rift Lawsuits

Originally published by Leiza Dolghih.

I advise all my business clients in Texas to have non-compete and non-solicitation agreements with their key employees. Why? Well, first of all, because Texas courts enforce such agreements, so it only makes sense to take advantage of them. Second, because clear, specific, and reasonable non-compete and non-solicitation restrictions are usually a fair trade for providing key employees with access to customer lists, confidential information or expensive specialized training.

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No false representation = Discharge.

Originally published by David Coale.

huskyinternationalHusky, a seller of electronic components, sued Ritz, a director of a company that owed Husky $163,999.38.  Ritz was denied a bankruptcy discharge as to that debt based on 11 U.S.C. § 423(a)(2)(A), which excludes from discharge “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud[.]”   The Fifth Circuit reversed, finding that this statute did not apply “where, as here, the debtor made no false representation ot the creditor.”  Husky International Electronics v. Ritz, No. 14-20526 (May 22, 2015).

Specifically, the Court rejected the Seventh Circuit’s contrary reasoning in McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000), both as inconsistent with Fifth Circuit precedent, and with the Supreme Court’s reasoning about the level of reliance required by this section in Field v. Mans, 516 U.S. 59 (1995).  The Court acknowledged the argument that “actual fraud” is one of three scenarios listed in the statute, but found that the canon of construction supporting this argument was a “guide[] that need[s] not be conclusive.”  The Court also noted that the fraudulent transfer provisions of the Code addressed situations where the debtor did not make a direct misrepresentation.

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Wellness Case Brings Healing for Bankruptcy Court Authority

Originally published by Steve Sather.

Resolving an issue left open by two prior decisions, the Supreme Court ruled that the right to entry of a final judgment by an Article III court, like the right to trial by jury, is a personal right which can be waived or consented away (subject to supervision by an Article III Court).    The decision left Chief Justice Roberts, whose broad language in Stern v. Marshall spawned a plethora law review articles, in the minority, while Justice Sotomayor wrote for the six justices in the majority.   Wellness International Network, Ltd. v. Sharif, No. 13-935 (5/26/15).
The Stern Problem
Article III of the Constitution states that the judicial power is vested in courts created under that Article, which is to say, judges appointed by the President, confirmed by the Senate and enjoying life tenure.    Over the years, Congress created many other judges, such as U.S. Magistrate Judges, Administrative Law Judges and Bankruptcy Judges, to help with the workload of the federal courts.   These judges were not appointed by the President or confirmed by the Senate and did not enjoy life tenure.    While they were under the supervision of Article III Judges, some of these legislatively created judges enjoyed great levels of independence.
In Stern v. Marshall, 564 U.S. ___, 131 S.Ct. 2594 (2011), the Court said that Congress did not have unlimited power to create adjuncts to assist the Article III judges.   Specifically, the Court said that the Bankruptcy Court did not have the power to enter a final judgment on a state law counterclaim brought by a debtor against a creditor.    Judges, practitioners and academics alike wondered whether the system of independent Article I Bankruptcy Judges could survive this ruling.    This uncertainty was engendered by the narrow scope of the actual issue decided and the sweeping language used by Chief Justice Roberts to support it.   Taken to its fullest extent as suggested by the dissenting justices in that case, it could have meant that Bankruptcy Court’s lacked the power to decide anything that could have been decided by courts of law in 1789 and parties lacked the authority to consent to a different result.
 Life After Stern
The sky did not fall following Stern and the Bankruptcy Courts continued to operate.   However, there was a split of authority as to whether parties could consent to entry of a final judgment by a Bankruptcy Court in a Stern case.    Last year, in Executive Benefits Ins. Agency v. Arkison, 134 S.Ct. 2165 (2014), the Court ducked the consent issue.   Instead, it found that regardless of the Bankruptcy Court’s authority to enter a final judgment, it could hear cases within its jurisdiction and submit a report and recommendation to the District Court which could review it on a de novo basis. This was important because the Bankruptcy Court decision was a summary judgment which the District Court was bound to review on a de novo basis in any event.   As a result, even if the Bankruptcy Court lacked authority to enter a final judgment, the District Court’s ruling on appeal was the functional equivalent of entry of a final judgment by that court.
This ruling preserved the ability of Bankruptcy Courts to hear disputes in the first instance.   However, it left open the question of whether Bankruptcy Courts could issue final orders in all matters with consent or by waiver.   The consent issue had enormous practical significance.    If parties could not give valid consent, they could have an advisory trial in the Bankruptcy Court and then request a do-over in the District Court if they didn’t like the result.    There was also the possibility (although I am not aware of this actually happening) of a party agreeing to litigate in Bankruptcy Court and ignoring the result on the basis that it had never been approved by the District Court.
The issue split the circuit courts.   The Fifth, Sixth and Seventh Circuits nixed consent while the Ninth Circuit permitted it.   Today’s decision resolved that split and established that parties can consent to entry of a final judgment by a Bankruptcy Judge.   The decision also acknowledges the practical reality that without legislatively created courts, “the work of the federal court system would grind nearly to a halt.”   Opinion, p. 2.   In a footnote, the Court noted that the 349 Bankruptcy Judges hear twice as many cases as all of the District and Circuit judges combined.
What Happened
Sharif was a distributor for Wellness International Network, a manufacturer of health and nutrition products.    Sharif sued Wellness but wound up owing $650,000 in attorneys’ fees after he failed to comply with discovery and other litigation obligations.    When Sharif filed bankruptcy, Wellness wanted to know about the $5 million in assets he had listed on a loan application in 2002.   Sharif glibly admitted that he had lied about owning the assets and said that they really belonged to a trust which he administered for his mother and sister.
Wellness filed an adversary proceeding against Sharif seeking to deny his discharge and establish that the trust was an alter ego.   Sharif answered and conceded that these claims were core proceedings.   Once again, Sharif failed to provide responsive discovery answers.   As a result, the Bankruptcy Court entered default judgment against him and denied his discharge.   The Bankruptcy Court also found that the trust was his alter ego because the Debtor “treats [the Trust’s] assets as his own property.”
Sharif appealed to the District Court.   While his case was pending, the Stern decision came out.   He asked to supplement his briefing to assert that the District Court should treat the Bankruptcy Court’s ruling as a report and recommendation.   The District Court denied the request for additional briefing as untimely and affirmed the Bankruptcy Court.
The Seventh Circuit affirmed in part and reversed in part.  It upheld denial of the discharge as something that the Bankruptcy Court had the authority to grant.   However, it reversed the ruling on the alter ego claim.   It held that not only did the Bankruptcy Court lack authority to enter a final judgment, but that it might have lacked authority to even hear the case in the first place.   (The latter ruling was based on the fact that 28 U.S.C. Sec. 157 did not authorize Bankruptcy Courts to issue reports and recommendations in core proceedings.   In Executive Benefits, the Supreme Court clarified that Bankruptcy Courts could issue a report and recommendation in any case in which it could not issue a final judgment, thereby eliminating the so-called statutory gap).
The Majority Ruling
Justice Sotomayor began her discussion of consent by stating, “(a)djudication by consent is nothing new.”    Opinion, p. 8.    After discussing cases, the Court held that the right to an Article III tribunal is both a personal one which may be waived and a structural one that must be respected.  Justice Sotomayor wrote:
The entitlement to an Article III adjudicator is “a personal right” and thus ordinarily “subject to waiver,” (citation omitted). Article III also serves a structural purpose, “barring congressional attempts ‘to transfer jurisdiction [to non-Article III tribunals] for the purpose of emasculating’ constitutional courts and thereby prevent[ing] ‘the encroachment or aggrandizement of one branch at the expense of the other.’” Id., at 850 (citations omitted). But allowing Article I adjudicators to decide claims submitted to them by consent does not offend the separation of powers so long as Article III courts retain supervisory authority over the process.
Opinion, pp. 11-12.    In reaching this formulation, Justice Sotomayor resolved a question which had been dividing commentators for years:   was the right to an Article III Court personal and thus waivable or was it structural and therefore immutable?   Although the Court answered “both,” it did so in a way that set a low bar for satisfying the structural concerns of the Constitution.   So long as the Article III judiciary retained “supervisory authority” over the legislatively created courts, separation of powers was not violated.    Stated another way, Congress can create judicial helpers for the Article III Courts but cannot create an entire independent system out of whole cloth.
Under this standard, it is clear that Bankruptcy Courts are under the supervisory authority of the Article III Courts.   Bankruptcy Judges are appointed by Article III judges and may be removed by them.   They are a unit of the District Court and enjoy their authority by virtue of an order of reference from the District Courts.   The District Courts also have the power to withdraw that reference.   Indeed, if a District Court wished to do so, it could revoke the order of reference completely and decide all bankruptcy matters.    Decisions of Bankruptcy Courts are reviewed by either the District Courts or by Bankruptcy Appellate Panels (with consent).   However, Bankruptcy Appellate Panels only exist if created by the Court of Appeals.
The Court further noted that the Bankruptcy Courts do not possess “free-floating authority to decide claims traditionally heard by the Article III Courts” but instead may hear “a narrow class of common law claims” which are incidental to their primary bankruptcy powers.   Finally, the Court noted that Bankruptcy Courts were not created by Congress “to aggrandize itself or humble the Judiciary.”   Instead, the Court noted the practical benefit to the Article III Judiciary from having Bankruptcy Courts:
Congress could choose to rest the full share of the Judiciary’s labor on the shoulders of Article III judges. But doing so would require a substantial increase in the number of district judgeships. Instead, Congress has supplemented the capacity of district courts through the able  assistance of bankruptcy judges. So long as those judges are subject to control by the Article III courts, their work poses no threat to the separation of powers.
Opinion, pp. 14-15.
Having ruled that consent was possible, the Court ruled that it need not be express.
Nothing in the Constitution requires that consent to adjudication by a bankruptcy court be express. Nor does the relevant statute . . . mandate express consent; it states only that a bankruptcy court must obtain“the consent”—consent simpliciter—“of all parties to the proceeding” before hearing and determining a non-core claim.
Opinion, p. 18.
Thus, the Court remanded the case to the Seventh Circuit to decide the question of whether consent had indeed been given.
The majority opinion was joined in by Justices Kennedy, Ginsberg, Breyer and Kagan. Justice Alito concurred in the judgment with the demurrer that he would not have reached the issue of whether consent could be implied.
The Chief Justice and Justices Scalia and Thomas dissented.
The Dissents
At thirty-nine pages, the dissents are nearly twice as long as the majority opinion.    The dissenting justices (each of whom was in the majority in Stern) did not agree that supervisory authority satisfied separation of powers.   The Chief Justice expressed his preference that the Court would have once more avoided deciding the consent issue.   He warned that by deciding the larger issue, the Court was descending a slippery slope.
By reserving the judicial power to judges with life tenure and salary protection, Article III constitutes “an inseparable element of the constitutional system of checks and balances”—a structural safeguard that must “be jealously guarded.”(citation omitted).
Today the Court lets down its guard. Despite our precedent directing that “parties cannot by consent cure” an Article III violation implicating the structural separation of powers, (citation omitted), the majority authorizes litigants to do just that. The Court justifies its decision largely on pragmatic grounds. I would not yield so fully to functionalism. The Framers adopted the formal protections of Article III for good reasons, and “the fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone,will not save it if it is contrary to the Constitution.” (citation omitted).
The impact of today’s decision may seem limited, but the Court’s acceptance of an Article III violation is not likely to go unnoticed. The next time Congress takes judicial power from Article III courts, the encroachment may not be so modest—and we will no longer hold the high ground of principle. The majority’s acquiescence in the erosion of our constitutional power sets a precedent that I fear we will regret. I respectfully dissent.
Roberts, C.J., Dissenting, pp. 1-2.    The Chief went on to quote significant amounts of his opinion from Stern.  He effectively established that despite his protestations to the contrary, he never intended for Stern to be a narrow ruling.   Instead, he sought to interpose the Article III Judiciary as a bulwark against Congressional interference in the bankruptcy arena no matter how difficult or impractical this might be.   His dire sermon concluded with an allusion to the Bible.
Ultimately, however, the structural protections of Article III are only as strong as this Court’s will to enforce them. In Madison’s words, the “great security against a gradual concentration of the several powers in the same department consists in giving to those who administer each department the necessary constitutional means and personal motives to resist encroachments of the others.”The Federalist No. 51, at 321–322 (J. Madison). The Court today declines to resist encroachment by the Legislature.  Instead it holds that a single federal judge, for reasons adequate to him, may assign away our hard-won constitutional birthright so long as two private parties agree. I hope I will be wrong about the consequences of this decision for the independence of the Judicial Branch. But for now, another literary passage comes to mind: It profits the Court nothing to give its soul for the whole world . . . but to avoid Stern claims?
 Roberts, C.J., Dissenting, p. 20.
Justice Thomas complained that both the majority and the Chief Justice had failed to answer the question of “whether a violation of the Constitution has actually occurred.”    Justice Thomas does not appear to answer this question either.   Instead, he appears to conclude that the parties did not brief the proper issues and that those issues “merit closer attention by this Court.”   As a result, Justice Thomas would have decided the case on the narrow ground of whether an alter ego claim is in fact a Stern claim.
What It Means
This case has two main impacts:  the practical and the political.
On a practical level, Wellness has brought healing to the uncertainty wreaked by Stern.   We now have a pretty solid flow chart for knowing what Bankruptcy Courts should do with matters brought before them.
  1. Is there jurisdiction under 28 U.S.C. Sec. 1334?   If yes, proceed to #2.   If no, stop.
  2. Has the District Court withdrawn the reference?  If yes, stop.  If no, proceed to #3.
  3. Must or should the Court abstain?  If yes, stop.   If no, proceed to hear the matter.
  4.  Is the claim one which could have been heard by the courts of law in England in 1789?  If no, proceed to enter a final judgment.  If yes, proceed to #5.
  5. Have the parties consented to entry of a final judgment, either expressly or implicitly?  If yes, proceed to enter a final judgment.   If no, enter a report and recommendation
While I may be oversimplifying this, I think it captures the general idea of where we are today.
On a political level, Justices Breyer, Ginsberg, Sotomayor and Kagan have made the journey from  the dissent in Stern to the majority in Wellness.   They were able to make this transition because Justices Alito and Kennedy changed positions.  While this is rank speculation, it is entirely possible that Justices Alito and Kennedy could see the harm in giving the Bankruptcy Courts unlimited power to rule on state law counterclaims and therefore joined the majority in Stern, but did not want to jeopardize the authority of U.S. Magistrates or other consent-based mechanisms.   If the Chief  had gotten his way, the magistrate system, which operates on referral and consent, could well have fallen.
An older definition of conservative is to conserve, to observe respect for existing institutions.    In his desire to assert the dignity of the Article III Judiciary, the Chief Justice could have torn down decades of smoothly functioning institutions, jeopardizing not only Bankruptcy Judges but Magistrate Judges and possibly arbitrators as well.    Thus, Justices Alito and Kennedy could have joined both majorities out of a sense of conservatism.


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Legal hotline, online resources offered for Texas flood victims

Originally published by Lowell Brown.

Victims of the recent flooding and other severe weather in Texas can call (800) 504-7030 to find answers to their basic legal questions and get connected with a local legal aid provider.

The State Bar of Texas is offering the legal hotline, along with this online resources page, to assist residents of the areas affected by recent thunderstorms, flooding, and tornadoes.

Read the State Bar news release for more information.

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Tuesday, May 26, 2015

E-briefs – New Auto-Hyperlinking Feature on TAMES

Originally published by Rich Phillips.


Posted by Rich Phillips

A new feature in TAMES (Texas Appeals Management and E-Filing System) automatically adds hyperlinks to case and statute citations in briefs filed electronically in Texas state appellate courts. Within 10 minutes after the clerk adds the brief to the court’s server, the process will automatically run, identify the citations, and add hyperlinks. The process will run only on documents that are uploaded as “briefs” in PDF format that are text-searchable. This is similar to a process that the Fifth Circuit has been using.

I spoke to Blake Hawthorne (the clerk of the Supreme Court) about this new feature. He confirmed that it is already active on the courts’ internal TAMES system. The process recognizes pin (jump) cites and will link directly to the cited page. Also, it can process both short citations (i.e., “999 S.W.3d at 2″) and “Id.” citations. Blake did say that an issue could arise with “id.” citations in footnotes, because the system does not distinguish between body text and footnote text. It will just scan back up the page for the first recognizable citation and assume that the “id.” points to that citation.

There is also a key caveat for citing unpublished opinions. Apparently, the functionality used to create these links is not accessible on Lexis, so the links will be to Westlaw only. Therefore, for unpublished cases, it would probably be a good idea to convert any Lexis citations to Westlaw citations (or at least include the parallel Westlaw citation) so that they will be properly linked.

Finally, this feature works only on the courts’ internal systems. So, the automatic hyperlinks will not appear in the version of the brief that is posted to the court’s on-line docket. They will be available only to the judges and court staff.

Last week on Twitter, Blake posted a link to a training video about this and some other new features in TAMES. If you’d like to see what the hyperlinks look like and some additional details about the process, you can watch the video here.

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No End in Sight

Originally published by Richard Smith.

One of the messiest cases in recent memory has resulted in a 79-page opinion and judgment that disposes of the case in almost every way imaginable: “Our decision in this case is to vacate, in part, affirm, in part, dismiss, in part, and reverse and remand to the trial court, in part.” The case arose out of a lease executed by Fitness Evolution, its subsequent acquisition by Headhunter Fitness, a series of personal guarantys, assignments, representations, and just about everything else one might find in a bar exam essay question. Since this one pretty much defies summary, we will instead report that while summary judgment was affirmed on some claims, the end result is that most everybody involved will be remanded to the Collin County trial court for additional proceedings.

Fitness Evolution, LP v. Headhunter Fitness, LLC, No. 05-13-00506-CV

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NO STAY in immigration appeal

Originally published by David Coale.

ICE logoIn a 2-1 decision, the Fifth Circuit has denied the federal government’s request to stay the district court’s injunction against key elements of President Obama’s immigration policy. Texas v. United States, No. 15-40238 (May 26, 2015).  Judge Higginson’s dissent concludes that the issues before the Court are nonjusticiable.  Judge Smith’s majority (joined by Judge Elrod), made these key points:

  • On standing — “Texas’s forced choice between incurring costs and changing its fee structure is itself an injury: A plaintiff suffers an injury even if it can avoid that injury by incurring other costs.  And being pressured to change state law constitutes an injury,”‘
  • On the statutory merits — “[E]ven granting ‘special deference,’ the INA provisions cited by the government for that proposition cannot reasonably be construed, at least at this early stage of the case, to confer unreviewable discretion,” and
  • On the APA issue — “But a rule can be binding if it is ‘applied by the agency in a way that indicates it is binding,’ and the states offered evidence from DACA’s implementation that DAPA’s discretionary language was pretextual.”

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Texas Senate passes bill aimed at ending asbestos double dipping, House signs

Originally published by David Yates.


A bill seeking to restrain fraud in asbestos litigation has passed both houses of the Texas Legislature.

In February, state Rep. Doug Miller, R-New Braunfels, introduced House Bill 1492, relating to consideration of asbestos or silica trust claims in actions asserting asbestos or silica injuries.

On Friday, May 22, the Texas Senate voted to pass the bill. The House had approved the measure on May 11 and was signed in the House on Monday, May 25, according to LegiScan.

Not long after the bill was filed, state tort reform groups, such as Texans Against Lawsuit Abuse, launched campaigns asking Texans to urge their legislators to support the bill and stop personal injury lawyers from “double-dipping.”

Double dipping in asbestos cases occurs when personal injury lawyers sue a company and claim its products harmed their clients while simultaneously filing claims with asbestos trusts blaming other products for the same exact harm.

Other groups who have been supporting HB 1492 include Texans for Lawsuit Reform, Citizens Against Lawsuit Abuse and the U.S. Chamber of Commerce.

If Gov. Greg Abbott signs off on the bill, the new law would require asbestos claimants to serve notices of their trust claims.

Under the law, if a claimant received compensation from a trust for an asbestos-related injury that also gave rise to a judgment against a defendant but the plaintiff failed to provide notice, the trial court can impose sanctions, including vacating the judgment.

The post Texas Senate passes bill aimed at ending asbestos double dipping, House signs appeared first on Southeast Texas Record.

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Originally published by Baili Rhodes.

One big question that comes up when work-life balance is discussed, is “How do you work, have a family, and give time to your community?”

There are many answers to this question, but one great way to do it is to share existing Texas Young Lawyers Association projects. Anyone can do it (you don’t have to be a “young” lawyer), materials can be obtained through our website or by contacting the TYLA office.  We even have guides to give you an idea of how to share (or “roll-out”) these projects with members of your community.

The TYLA Tuesday posts will feature TYLA projects, old and new.  If you would like more details, please visit the TYLA website!

This week, our featured project is BSAFE: Battle Substance Abuse for Everyone.  BSAFE is a multimedia project that addresses substance abuse issues on multiple levels – one geared to children/teens, one to parents/ educators, and one to those involved in the drug court system.

If you wold like more information about this or any other project, you can contact TYLA at  If you have shared this project, let us know by sending an email or commenting below.


Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

from Texas Bar Today
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