Ninth Circuit Panel Requires Cheek-Type Specific Intent for Civil Willfully Preparer Penalty (8/31/21)

In Rodgers v. United States,   (9th Cir. 7/6/21), CA9 here (unpublished and nonprecedential), the Court held (based on a prior appeal) that the return preparer penalty under § 6694(b)(2)(A) for a “willful attempt in any manner to understate the liability for tax on the return or claim” requires “specific intent to understate tax liability on tax returns or claims.”  Basically, the panel held, the civil penalty requires the same level of intent as § 7206, which is the Cheek-type of intent – specific intent to violate a known legal duty.  (The panel opinion does not cite Cheek, but that is the way I read the opinion.)

The opinion is nonprecedential because, as interpreted by the panel, the Ninth Circuit’s precedent compelled the conclusion.  Accordingly, the panel reversed because the district court held that willful blindness satisfied the test of willfulness.

JAT Comments:

1. A civil penalty statutory willfully “element” often is not interpreted and applied the same as the tax crime willfully “element.” The obvious example for those who follow this blog is the FBAR civil willful penalty under 31 U.S.C. § 5321(a)(5)(C).  The FBAR criminal penalty requires Cheek-type specific intent willfulness.  Ratzlaf v. United States, 510 U.S. 135 (1994).  But the FBAR civil penalty with the same word (willfully), as interpreted and applied by the courts, requires a less specific intent, including willful blindness and reckless conduct.

2. It is not clear to me why, other than the precedent cited by the panel, the return preparer penalty should necessarily include the stronger Check standard of specific intent.

3. I checked the Pacer docket entries and found that the panel was troubled.  Immediately after oral argument, the Court entered this Order:

The parties are ordered to file supplemental briefs addressing the following questions: (1) In Richey v. IRS, 9 F.3d 1407 (9th Cir. 1993), this Court stated that willfulness under 26 U.S.C. § 6694(b) “merely requires a conscious act or omission made in the knowledge that a duty is therefore not being met.” Id. at 1411 (quoting Pickering v. United States, 691 F.2d 853, 855 (8th Cir. 1982)). Is that statement binding precedent? If so, must this panel conclude that § 6694(b)(2)(A) penalties require only a knowing violation—and not a purposeful violation—of the duty not to understate tax liability? (2) Richey also adopts the following as the “correct[] . . . standard for determining willfulness”: “If you find that the plaintiff believed in good faith that the tax returns he prepared were proper and lawful and not submitted in violation of any rule or regulation, then you must find that the plaintiff did not act willfully or negligently in preparing the tax returns, and your verdict will be for the plaintiff.” Richey, 9 F.3d at 1413. Is this statement also binding? If so, is this standard consistent with willfulness blindness? Appellant’s supplemental brief shall not exceed 15 pages and shall be filed within 14 days of this order. Appellee’s supplemental brief shall not exceed 15 pages and shall be filed within 14 days of appellant’s brief.

4. Pursuant to that order, the parties filed Supplemental Briefs.  Rodgers’ Supplemental Brief is here and the U.S. Supplemental Brief is here.  For more fun, I also readers may find the U.S. Answering Brief, here and the oral argument in audio download is here and in video is here.  I have not spent a lot of time reading these briefs or listening to the oral argument, but as I perceive the U.S. Supplemental Brief, it was arguing that the Ninth Circuit precedent did not compel specific intent as the relevant preparer civil penalty standard and that something less than Cheek-type willfulness is required.  The Government argued that the relevant Ninth Circuit authority that might be read to require such specific intent was dicta.  See Richey v. IRS, 9 F.3d 1407 (9th Cir. 1993).  The panel disagreed in its short Memorandum opinion linked at the top of this blog.

5. That still does not answer the question of why the statutory willfully element for a tax civil penalty based on some relationship to the criminal penalty would be different than the statutory willfully element for the FBAR penalty which also has a relationship to the criminal penalty.  Stated otherwise, would all tax civil penalties with a willfully element require the higher Cheek specific intent, at least in the Ninth Circuit?  I am not sure that the U.S. Supplemental Brief engages that issue, although the Order requiring Supplemental Briefing did not request engagement on that issue.  

6. The argument on dicta was interesting to me.  I just this week read Ford v. Peery, ___ F.4th ___, 2021 U.S. App. LEXIS 24628 (9th Cir. 8/18/21), CA9 here,  Judge VanDyke dissented from denial of rehearing en banc attacked the Ninth Circuit’s “binding dicta” rule.  Binding dicta for most of us would be an oxymoron.  But for the Ninth Circuit, apparently (at least according to Judge VanDyke), the Ninth Circuit treats “well-reasoned” dicta as binding.  It is not clear exactly what standard the “well-reasoned” dicta rule sets.  (Maybe something like a Skidmore standard, whatever that is.  See Really, Skidmore “Deference?” (Federal Tax Procedure Blog 5/31/20; 6/3/20), here.)  Those interested in this type of hair-splitting might read Judge VanDyke’s dissenting opinion.

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Customers of Former Worden Capital Management Broker Christ Baltas Request Over $614K in Damages

FINRA Barred New York Financial Advisor Following Unsuitability & Churning Allegations

If you have suffered investment losses while working with ex-Worden Capital Management broker Christ Elias Baltas, you may be able to pursue damages by filing a Financial Industry Regulatory Authority (FINRA) arbitration claim. 

Baltas, who was based out of Melville, New York, is currently named in two pending customer disputes in which the claimants are seeking more than $614K in damage. FINRA barred him in 2020.  

Continue Reading ›

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Cross-Appeals and Jurisdictional Challenges

Zurich won an insurance coverage dispute with Maxim Crane. On appeal, in addition to defending the merits, Zurich argued that the matter should be dismissed entirely because Maxim lacked standing. This argument led to the question whether a cross-appeal was needed to make that point, and the Fifth Circuit concluded:

... although our judgment would be different if we credited Zurich’s standing argument, that does not mean that Zurich needed to file a cross-appeal to present that argument. To be sure, as a matter of standard appellate practice, “[m]any cases state the general rule that a cross-appeal is required to support modification of the judgment,” whereas “arguments that support the judgment as entered can be made without a cross-appeal.” (quoting [Wright & Miller]). But this case falls within an exception to that general rule. A cross-appeal “is not necessary to challenge the subject-matter jurisdiction of the district court, under the well-established rule that both district court and appellate courts are obliged to raise such questions on their own initiative.” Id.

Maxim Crane Works LP v. Zurich Am. Ins. Co., No. 19-20489 (Aug. 20, 2021) (ultimately, certifying the underlying coverage issue to the Texas Supreme Court).

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FREE CLE for Texas Lawyers

Image by mohamed Hassan from Pixabay

If you’re in search of free Texas CLE opportunities, look no further. The Harris County Robert W. Hainsworth Law Library has the resources you seek!

For starters, the State Bar of Texas has a good number of free, for-credit courses, along with several additional recordings that do not carry CLE credit but provide valuable information to support your law practice and keep you up-to-date with current topics in the law. A sample of the courses offered is listed below.

• 2021 Preparing Your Client for Discovery

• Benefits and Challenges of Invoking Force Majeure Clauses in the Age of the Coronavirus

• Dealing with Claims Arising from Freezes/Power Outages & Broken Pipes

• How Lawyers Can Recover from Survival Mode

• Just Ask: How We Must Stop Minding Our Own Business in the Legal World (Suicide & Depression Prevention Essentials)

The Texas Young Lawyers Association is providing another valuable resource for those seeking free CLE credit and an opportunity to improve communication with Spanish-speaking clients. Spanish for Lawyers CLE Course launched a few years ago, but the content is valuable and relevant. The program, which was produced at the Texas Bar CLE Studio, is comprised of 10 web-based classes which are 35-45 minutes each for a total of 9 hours of instruction. The course is approved for 5.25 hours of MCLE credit and includes beginner Spanish instruction focused on the use of legal vocabulary in various subject areas, including employment law, family law, civil law, criminal law, and immigration law. Class 6, which is focused on engagement and providing advice to Spanish-speaking clients, is eligible for 0.5 hours of ethics credit. In addition to the video instruction, each class is accompanied by a presentation, a pre-class vocabulary list, post-class homework, and an MP3 file for oral vocabulary practice.

• For even more free CLE options, we recommend the courses listed below. We also suggest this newsletter: FreeCLETexas.substack.com, an outstanding resource that led us to the On Demand CLE content provided in this blog post. This substack, which is curated by Abdul Farukhi, an attorney in the Houston area, is intended for “lawyers looking to stay current on free accredited continuing legal education webinars and on-demand content.” Sign up for email alerts to receive content updates and information about networking opportunities in the legal community. (Mr. Faruki also maintains a Facebook page and a private Facebook Group called Free CLE for Texas Lawyers.)

• 2021 Texas Lawyers Technology CLE Webinar – On Demand (20 hours CLE)
  

• 2021 Texas Victims CLE Webinar – On Demand (20 hours CLE)

• 2021 Texas Modern Mediation CLE Webinar – On Demand (20 hours CLE)

One final resource for free CLE opportunities can be found at 4freeCLE.blogspot.com. Search the State-by-State page for courses that carry content in the jurisdiction of your choice. This page is maintained by Randy Winn, an attorney in Washington state.

And as always, you can keep up with free CLE events from our Legal Tech Institute, including our popular Vendor Visits from Westlaw and Lexis representatives. Our Training and CLE Opportunities Calendar tracks even more events, both local and online, including live training sessions, on-demand webinars, and other opportunities to learn from and connect with the legal community.  

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What Is a Trade Secret?

We put so much into developing our businesses. We design products, systems, and specialties to help our businesses grow, succeed, and to set ourselves apart from the competition. With so much time and money that is invested into the development and fine tuning of so many aspects of our businesses, it can be very stressful to consider the possibility of our closely held secrets falling into the hands of competitors or potential competitors. Is there protection available out there to guard against this sort of thing? Trade secret protection might fit the bill.

What is a Trade Secret?

In intellectual property protection law, patents offer strong protections for those with proprietary inventions. There are, however, limits to patent protection. For instance, patents do not last forever. In fact, they only last for twenty years. Furthermore, applying for a patent requires disclosing the invention itself which could, obviously, make many people uncomfortable to do so.

On the other hand, trade secret protection lasts forever and there is no need to disclose the secret itself as it is, of course, a “secret.” It is difficult to pin down a precise definition as to what a trade secret is mainly due to the fact that trade secrecy law developed in so many different places and at the federal and state level. There are, however, some consistencies across trade secret definitions developed in various places. For instance, a trade secret is a part of a company that is not known or readily accessible by competitors. It is also something that has commercial value or provides the company with a competitive advantage within its marketplace. The trade secret is protected from disclosure through reasonable efforts aimed at maintaining its secrecy. All of these elements must be met in order for a trade secret to exist and be eligible for protection. Should any of these elements be absence, then the trade secret does not exist or ceases to exist.

It is more common than not for a company to have trade secrets. This is due, in part, to the fact that there is a broad range of things eligible for trade secret protection. It covers a broad range of subject matter, including those pieces of information that would otherwise be ineligible for patent, trademark, or copyright protection. Because of this broad range, trade secrets are becoming even more popular as a kind of intellectual property protection. Additionally, it does not necessitate exposing the secret through a patent application or going through the uncertainty of the patent application process. There is no time limit to the protection of a trade secret and, so long as the essential element continue to be met, the protection will endure. One of the main difficulties with a trade secret, however, is that it requires constant vigilance to maintain secrecy.

Business Law Attorney

While many businesses have trade secrets, it is not uncommon for owners to not even be aware of them or the available protection they could access. Talk to the knowledgeable team at The Kumar Law Firm about what aspects of your business may be eligible for trade secret protection and develop a plan to keep these trade secrets secure. Contact us today.

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The White Collar Defense Report® | August 2021 News Roundup

The White Collar Defense Report^® provides updates on cases, policy developments and trends in the white collar area, including federal criminal matters as well as civil cases such as qui tam cases and SEC enforcement actions.

If you would like to receive future reports via email, please subscribe here.

Health Care Fraud & False Claims Act

Grayson County Woman Who Stole and Sold Protected Health Information Sentenced to 2½ Years in Federal Prison

Amanda Lowry, 40, of Sherman, was sentenced to 2½ years in federal prison after pleading guilty to conspiracy to obtain information from a protected computer. According to court documents, Lowry and two co-defendants breached a health care provider’s electronic health record system to steal confidential patient information, which they “repackaged” in the form of fraudulent physician orders and sold to durable medical equipment providers and contractors for more than $1.4 million. Lowry and her co-defendants used the money to purchase sport utility vehicles, off-road vehicles, and jet skis.

Arkansas Man Sentenced to Prison and Ordered to Pay Almost $6 Million in Restitution for His Role in TRICARE Fraud Scheme

Theodis Lamond Jefferson, 37, of Arkansas, was sentenced to 24 months in prison and ordered to pay $5.9 million in restitution for his role in a scheme to defraud TRICARE, a health care program of the U.S. Department of Defense. According to court documents, Jefferson received more than $5.9 million from January 2015 to June 2015 from pharmacies and groups that provided and marketed compounded medications. Jefferson allegedly defrauded TRICARE by making and receiving unlawful payments for the prescription of compounded drugs to TRICARE beneficiaries. Jefferson paid bribes to prescribing physicians and kickbacks to TRICARE beneficiaries, who unlawfully enriched themselves from TRICARE reimbursements for covered compounded drugs.

EEG Testing and Private Investment Companies Pay $15.3 Million to Resolve Kickback and False Billing Allegations

Two Texas companies — Alliance Family of Companies LLC and Ancor Holdings LP — have agreed to pay a combined $15.3 million to resolve allegations of kickbacks and other misconduct resulting in the submission of false claims to federal health care programs. According to the settlement, Alliance, a national electroencephalography (EEG) testing company based in Texas, will pay $13.5 million to resolve allegations that it submitted or caused to be submitted false claims to federal health care programs that resulted from kickbacks to referring physicians or that sought payment for work not performed or for which only a lower level of reimbursement was justified. According to the settlement, Ancor will pay over $1.8 million for causing false billings resulting from the kickback scheme through its management agreement with Alliance.

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Could your business already be in DOJ’s crosshairs?

Health care fraud investigations and prosecutions are on the rise, and scrutiny of physicians and other medical professionals can lead to career-ending charges. A mere investigation can cause untold damage to one’s reputation, to say nothing of the possible criminal penalties. Health care professionals and executives in Texas and across the country are encouraged to seek experienced counsel if they receive any indication they are being investigated.

At The Law Offices of Dan C. Guthrie, Jr., we have decades of experience both prosecuting and defending individuals in white collar crime cases, including many major health care prosecutions that ended in no indictment for our client.

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Texas PPP & Coronavirus Fraud

Coppell Man Sentenced for $24 Million COVID-19 Relief Fraud Scheme

Dinesh Sah, 55, of Coppell, was sentenced to more than 11 years in prison for wire-fraud and money-laundering offenses in connection with his fraudulent scheme to obtain approximately $24.8 million in forgivable Paycheck Protection Program loans. He was also ordered to pay $17 million in restitution. According to court documents, Sah submitted 15 fraudulent applications, filed under the names of various purported businesses that he owned or controlled, to eight different lenders seeking approximately $24.8 million in PPP loans. He claimed that these businesses had numerous employees and hundreds of thousands of dollars in payroll expenses when, in fact, no business had employees or paid wages consistent with the amounts claimed in the PPP applications. Sah received over $17 million in PPP loan funds and diverted the proceeds for his personal benefit, using them to purchase multiple homes in Texas, pay off the mortgages on other homes in California, and buy a fleet of luxury cars, including a Bentley convertible, Corvette Stingray, and Porsche Macan.

Houston Man Guilty in $317 Million N95 Mask Scam

Arael Doolittle, 56, of Houston, pleaded guilty to a scheme to fraudulently sell 50 million non-existent N95 face masks to the Australian government. The Australian government was supposed to pay over $317 million for the masks, but authorities disrupted the transaction before it was completed. Doolittle faces up to five years in federal prison and a possible $250,000 fine.

Financial Fraud

Sentence More Than Doubled for Man Who Committed Fraud While on Pretrial Release in Separate Fraud Case

Stewart Kile Williams, 31, of Sweetwater, had almost nine years tacked onto his sentence for perpetrating a $12.3 million fraud while on pretrial release in a separate fraud case. Williams pleaded guilty in March to two counts of wire fraud and two counts of money laundering. He was also ordered to pay roughly $7.4 million in restitution. According to court documents, Williams committed these crimes in 2018 and 2019, while on pretrial release for selling non-existent cattle to a ranch in Decatur for $2.5 million. He eventually pleaded guilty to four counts of wire fraud and was sentenced to 70 months in federal prison and ordered to pay more than $2 million in restitution.

Katy Resident Admits to Fraud

Angelica Garcia Dunn, 47, of Katy, pleaded guilty to scheming to defraud British Petroleum by diverting over $2.2 million in vendor payments to her own business accounts. She worked as a contract escrow agent with BP. As part of her duties, she provided third-party services by making vendor payments to BP’s railcar lessors and repair vendors. Dunn received lump sum payments from BP to make vendor payments through a bank account over which she had sole authority. It was from these funds that she took approximately $2.2 million in BP funds that were supposed to be for vendors.

Nigerian Money Launderer Sentenced to Prison for Defrauding Texas Employees Retirement System

Olumide Bankole Morakinyo, 38, a Nigerian national residing in Canada, was sentenced to eight years in prison and repayment of $975,863 in restitution to multiple victims for conspiracy to commit money laundering. According to court documents, Morakinyo conspired with Lukman Shina Aminu, a resident of New Hampshire, to create unauthorized accounts for participants in the Employees Retirement System of Texas (ERS) internet portal. Personally identifiable information (PII) of various ERS participants was used to make changes to their accounts in the ERS internet portal. Bank deposit information on file in the system was changed to re-route retirement payments to debit cards controlled by Aminu, who used the money for personal expenses and for buying used vehicles to be shipped overseas to Nigeria and Benin for resale.

Texas Public Corruption & Drug Trafficking

Former Richardson Mayor and Land Developer Husband Convicted in Public Corruption Trial

Laura Jordan, also known as Laura Maczka, 56, and Mark Jordan, 54, both of Plano, were found guilty of bribery, conspiracy to commit bribery, tax fraud, and conspiracy to commit tax fraud. Maczka is a former Richardson mayor and Jordan is a land developer. According to court records, Maczka and Jordan conspired to devise and execute a scheme to commit bribery. Maczka allegedly supported and repeatedly voted for controversial zoning changes sought by Jordan, ultimately allowing for the construction of over 1,000 new apartments in Richardson near other Richardson neighborhoods. In exchange, Jordan paid Maczka over $18,000 in cash, an additional $40,000 by check, and paid for over $24,000 in renovations to Maczka’s home. Jordan also paid for luxury hotel stays and airfare upgrades for Maczka, and provided Maczka lucrative employment at one of Jordan’s companies. According to court testimony, Maczka and Jordan failed to disclose to the public that they had coordinated to affect the zoning changes Jordan wanted and that Jordan had provided a stream of benefits to Maczka.

Defense Attorney Convicted in Drug Trafficking Case

Eric S. Jarvis, 48, of Mission, pleaded guilty to unlawfully accessing federal documents to assist a known drug trafficking organization. Jarvis, a criminal defense attorney in McAllen, admitted to assisting drug trafficker Angel Aziel Herrera and his successors in Mexico by obtaining documents that provided information regarding co-conspirators during the ongoing investigation. Jarvis knew criminal complaints had documented loads that law enforcement seized from the organization. He also knew Herrera and his successors could and would provide the complaints to their sources of supply to continue receiving drugs from their sources of supply for importation and distribution into the United States.

Colombian National and Cartel Member Sentenced in Texas for Conspiracy to Import Cocaine into the United States

Manuel Camilo Renteria Lemus, 37, of Colombia, was sentenced in Texas to nearly three decades in federal prison for drug trafficking violations. According to court records, Lemus was the head of the Panamanian cell of the Clan Del Golfo (CDG) Cartel operating in Colombia, Panama, and elsewhere and was responsible for receiving maritime shipments of cocaine in Palmira, conducting enforcement operations, and collecting taxes and tributes for the CDG. Lemus was apprehended and prosecuted as part of “Operation Dragoneante,” a multinational anti-drug investigation.

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How A Will Affects the Minor Children of Houston, Texas Families

Being in a situation where you pass away with young children is enough to cause many a sleepless night. As a parent of three young children myself, this is not a concern that I actively consider every day, but it is a consideration that has popped into my mind from time to time. What will happen to my kids after I pass away? Will my wife be able to manage without me? Any parent who can think ahead is capable of thinking this way. The real division between parents is between those who will work to do what it takes to prepare for an event like this and those that will only worry but won’t take any steps to protect their families.

What are some solutions in wills for preparing for life after you pass away?

As much as you may not like to think about it, the level of success and certainty for your family after you pass away is directly related to your willingness to plan. If this is not a strong suit of yours, you need to be honest with yourself and enlist the help of those who can assist in this regard. Having a support group of people around you who are willing and able to talk with you honestly is a good place to start. Do you have a family member or friend who can speak honestly into your life and help you plan for your future and that of your child? Maybe all it takes for you is a “wake-up call” from a trusted friend or family member?

Next, many people begin to work with experienced probate and estate planning attorneys to better map out a course for their lives to take. Even a person knowledgeable in the field of probate or estate planning law would benefit greatly from the assistance and advice of an experienced estate planning attorney. Creating a trust, will, or testamentary trust within a will for your minor children can help to increase the likelihood that you can sleep through the night and not worry about life events harming you and your family both now and in the future.

Creating separate assets for your spouse and children?

One method of distributing property that seems to work well for blended families is to provide assets to your surviving spouse and two of your children. This solution works for blended families and traditional families alike. Let’s assume that you want to be able to provide for your surviving spouse and your children and the children you had with a second person. You would be able to provide for both the children and the children of your first marriage and your surviving spouse outside of a trust.

Many people have heirlooms or family memorabilia that they are especially concerned with getting a property to children and their spouses after their passing. Think about the items in your own home. Even if they are not valuable or worth a lot of money, it could be that they still have some sentimental value or other value in your eyes. As a result, you may want to ensure that these items can successfully be handed down to your spouse or children. To ensure that this occurs, you could include specific language in your will.

The attorneys with the Law Office of Bryan Fagan have previously suggested that clients include language in their will that gives all family memorabilia to that specific family. For example, even if you are in a blended or mixed family, heirlooms or memorabilia from a specific family should be able to go to that family. By this, I mean that your current family with a second spouse should not be able to end up with heirlooms from your initial marriages family. Things like photographs, decorations, art, trophies, and souvenirs are all examples of memorabilia or heirlooms that I have in mind.

To better illustrate this point, let’s discuss a hypothetical situation that you and your family could be facing. Suppose that you were married to your spouse for 30 years and raised a family. Your spouse then died and gave all of their property to you. Your spouse has passed away occurred back in the year 2000. One year after your first spouse’s death, you remarried. You have remained married to your second spouse since 2001, and you are now visiting with one of our attorneys to determine how to best plan for your estate once you passed away.

The first thing that our attorneys would probably be curious about is how close you and your children are. In this case, let’s assume that you and your children are not all that close. In that case, it could be beneficial for your will to include language that gives any family heirlooms from your first marriage in your family check go to those children or the relatives of your deceased first wife. Likewise, any heirlooms or memorabilia from your current marriage should stay with your surviving spouse and their children and family.

Another hypothetical situation could involve you being married to your spouse for nearly 50 years; in those 50 years, you had children and raised a family together. Sadly, your spouse died a few years ago, and one year ago, you remarried. What could a brainstorming session look like for you and your family if you found yourself in these circumstances? Again, an attorney from our office could suggest to you that you will include language that all family memorabilia and heirlooms should go to the children of your first marriage period; this would avoid any situation where misconceptions could occur over where your property is to go at the time of your death. In that case, your children would not have any surviving parents. They would run the risk of having memorabilia or heirlooms of their family be counted among the property that would otherwise go to your current spouse.

How can a will impact your family if you all do not get along with one another?

The sad reality for many families is that you and your children may not get along well together. Consider a situation even if you only have minor children. For example, while your children might be in high school and technically count as minors, the reality of the situation is that they will soon become adults if not in maturity level, then certainly in age. In that case, you cannot simply assume that everything will turn out fine and that they will mature as they get older.

If your family does not get along, then you may want to consider using a revocable trust to protect yourself, your potential beneficiaries under a will, and your spouse. If you foresee a situation where your children do not get along well with one another or with you and your spouse, then the odds certainly increase that there will be a problem when probating the will. A full-on contest of the will is increasingly likely as the stakes rise due to increased acrimony or increased value of the property included in the will. You may even be accused of having had people influence you unduly in creating the will or even being of an unsound mind and, therefore, unable to create a valid will.

A revocable trust can help because a trusted this sort is generally thought to be more difficult to set aside. The fact is that a revocable trust exists even while you are still alive. The terms of a will only go into effect after you pass away. Thus, since you lived under a revocable trust, it is more difficult to argue that you did not understand what you were entering into or creating. This is especially true if you have named an independent trustee to look over the trust rather than serving as trustee yourself. If you can have a relationship with your trustee, then the likelihood that the trust will be held up in court increases that much more.

You may have heard of a situation where a race to the courthouse occurs when a person passes away with a will. Whomever you have named as the executor of your will wants to be able to have the will admitted to probate and obtain letters testamentary. In that case, any costs associated with defending the will come out of your estate rather than out of your executor’s pocket. However, if a relative can contest the will before the will is admitted to probate, then your executor will have to pay the costs of defending the will at least until they can seek reimbursement under the estate after they are named as the official executor.

When it comes to a revocable living trust, the person who acts as trustee will be able to continue to serve in that capacity once you pass away. If someone challenges the trust, then the assets can be used to defend the trust. This is as opposed to a probating of a will where there is a 10 day waiting period from when the will is offered for probate and when the hearing can be held over that 10 days. The application to probate the will invites someone to file a contest. This increases cost, time devoted to the case, and the acrimony between parties that may already be unhappy with one another. When it comes to a revocable living trust, there is no 10-day waiting period before a trustee can begin to serve, as well as there has not been any filing at the courthouse.

What happens when one child is favored over another?

Unfortunately, one of the issues that tend to come up occasionally during probate and estate planning cases is our problems with children that are strange from the family. These are issues that affect adult children more frequently the minor children, but I think the subject matter still bears mentioning in a circumstance like this. Would you please begin to think about possible issues your family could encounter due to family dynamics and other at play issues? Bear in mind that even minor children may still be old enough to have problems with you or with your spouse. In that case, there is a real possibility of having a child completely left out of a will or at least minimized for estate planning purposes.

As we just mentioned, circumstances where one child is favored over another are not uncommon in families. Usually, you don’t see situations like this in her eyes when it comes to minor children. However, if your children were to develop a rift with you or your spouse, this is a possibility for you to consider. You may end up favoring one child over another if there has been a divorce from their other parent where your child resents you or your other parent due to the divorce. The reality is that while I would not recommend disinheriting in a child, for this reason, that may be something that you would attempt to do.

One thing that I would make sure that you speak to your attorney about is that if you do plan to favor one child over the other for any reason within your will, then you should make sure that the favored child is not someone that you have consulted with throughout the process in creating your will. If you choose to consult with your favorite child in creating the terms of your will, you are putting yourself in a position where your child may invite a challenge to your will on undue influence grounds. If the unfavored child comes back in an attempt to argue that they were cut out of your will by undue influence from your sibling, then this could invalidate the entire will.

Another factor to keep in mind is that if you name a child as a beneficiary under your will and are strange from that child, this may create problems in administering the distribution of your property. When it comes time to probate your will, the court will likely appoint an attorney ad litem. An attorney ad litem is an attorney who represents the court’s interests in attempting to complete the court’s business as far as administering the will in distributing property. Part of this responsibility is the need to locate all beneficiaries.

They need to locate all potential beneficiaries is a major hassle for a core and can take a period; meanwhile, relatives and beneficiaries of yours who may need immediate assistance from the property will be left wanting because an estranged relative cannot be located. You should speak to your attorney about the possibility of anticipating such a problem and consider changes that can be made to your will to ensure that the will be probated is not delayed because a child or relative of yours cannot be readily located.

Unfortunately, another reason why you may consider not having a child list in your will is that that child has serious health problems and is not expected to live much beyond the time where your will is created. In this situation, you may be better off having you are child be provided within annuity in the will rather than be handed property. You can also create trusts and other types of arrangements to protect your child’s interests.

A second is related to physical health problems; mental health problems can present the same issues involved with substance abuse. Your child’s situation may not even be one that they created. However, many parents want to ensure that their child is interested in getting better to leave them in the will. This is another great opportunity to leave money in a trust for your child rather than let them inherit the property outright. Appointing someone to overlook the money and ensure that it is taken care of for your child is also a good idea for many families. To create more complex arrangements, you certainly should consider speaking with experienced probate in estate planning attorney. This will allow you all to map out any potential problems that come to be and solve any issues that need to be sorted out in the short term. You may also want to get an experienced attorney’s perspective so that you all will not miss out on considering the different outcomes that are possible and the different creative problem-solving solutions that you can conceive of.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning and probate law attorneys offer free of charge consultation six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas probate law and how your family circumstances may be impacted by different events surrounding probate in estate planning matters.

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Willful Blindness As Permitting Only an Inference of Knowledge (8/30/21)

I have written on the question of whether the willful blindness concept permits conviction of a knowledge element crime upon the finding of willful blindness or, instead, permits only an inference of the knowledge element upon showing willful blindness.  See blog entries here.  In other words, if the criminal statute requires a knowledge element, will a showing of willful blindness requireconviction or only permit conviction. 

The key in jury cases is the instruction.  In United States v. Henson, ___ F.4^th___, 2021 U.S. App. LEXIS 24818, at *37-38 (10th Cir. Aug. 19, 2021), CA10 hereand GS here, the Court affirmed a challenge to the following instruction for an offense requiring knowingly as an element (a less rigid intent element than willfully for tax crimes):

The term “knowingly” means that defendant [*38]  realized what he was doing and was aware of the nature of his conduct and did not act through ignorance, mistake, or accident.

When the word “knowingly” is used in these instructions, it means that the act was done voluntarily and intentionally, and not because of mistake or accident. Although knowledge on the part of the defendant cannot be established merely by demonstrating that the defendant was negligent, careless, or foolish, knowledge can be inferred if the defendant deliberately blinded himself or herself to the existence of a fact. Knowledge can be inferred if the defendant was aware of a high probability of the existence of the fact in question, unless the defendant did not actually believe the fact in question.

I have bold-faced the key language.  To which I say, exactly!

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Silence ≠ Representation

Prime argued that fraudulent inducement tolled limitations on its fraud claims, citing an email in which the defendant said: “I ask that you extend this [deadline] to at least 90 days or some other requirement so we have the chance to find another investor, do the paperwork, and get his funding.” The Fifth Court disagreed, stating that the “request to extend the time to ninety days by itself is simply not a representation, promise, or an agreement that would extend the accrual of a cause of action.” Prime United Petroleum Holding Co., LLC v. Malameel, LLC, No. 05-20-00032-CV (Aug. 24, 2021) (mem. op.) (emphasis in original).

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What is a Mediated Settlement Agreement in Texas?

Most cases settle out of court. In fact, the family law settlement rate is more than 90 percent. Frequently, informal discussions result in a settlement. Sometimes, the two sides do not even meet face to face. However, if the sides are far apart on key issues, most Tarrant County judges appoint professional, third-party mediators. These individuals know how to translate agreement on broad principles, like the best interests of the child, to agreement on specific issues, like a weekly time-sharing division.

Even if a judge appoints a mediator, a Fort Worth divorce mediation attorney is still an important part of the process. All mediators are experienced, but not all of them have the same kind of experience. It’s important to work with a mediator who is not only fair but also is familiar with the issues in your case. Otherwise, divorce mediation might be a waste of time.

Benefits of Mediation

Sometimes, a trial is preferable to an out-of-court settlement. That’s especially true in evidence-based divorces. Some spouses want or need a judicial declaration that the other spouse was at fault. However, in most cases, an MSA is a better alternative.

• Cost: According to the Department of Justice, mediation saves civil litigants over $10 million a year. Additionally, mediation reduces the noneconomic costs of divorce. Since the case ends earlier, litigants spend less time worrying about it.
• Civility: Usually, parents need to be at least civil towards one another. Constant fighting and disparagement is usually bad for the children. On a related note, if divorce mediation is successful, many parents gain the confidence they need to resolve future disputes in this way.
• Control: The parties have almost complete control over an MSA’s contents. Most judges approve most settlement agreements without requiring hearings. This control usually increases voluntary compliance, which normally means fewer expensive motions to enforce. So, all these benefits are related.

Collaborative law, a non-litigation alternative that could be described as ongoing mediation, is a good option in some situations. Instead of going to court, the parties meet once a month with their Fort Worth divorce mediation attorneys to work out the issues in the case.

Mediation Nuts and Bolts

Family law mediation is usually an informal process. There is no judge and no court reporter. In fact, family law mediation normally happens in an office building instead of a courtroom.

The day or half-day session begins with brief opening statements from both lawyers. Since the mediator has already reviewed the file, the mediator is already generally familiar with the parties and issues involved.

Then, the two sides retire to separate rooms as the mediator conducts shuttle diplomacy between them. As settlement offers and counter-offers are exchanged, the parties move closer toward an agreed settlement.

During mediation, the parties have a duty to negotiate in good faith. So, instead of simply going through the motions, they must earnestly want to settle the case. Furthermore, they must be willing to make some compromises. “All or nothing” is not a good-faith negotiation posture.

Special accommodations are available in special situations. For example, if there is a history of domestic violence in the marriage, a Zoom mediation might be more efficient than a live mediation.

Reach Out to a Dedicated Attorney

A Mediated Settlement Agreement may be the best way to resolve a family law dispute. For a confidential consultation with an experienced Fort Worth divorce mediation attorney, contact Orsinger, Nelson, Downing & Anderson, LLP. We routinely handle matters in Tarrant County and nearby jurisdictions.

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I Was Denied Social Security Disability. How Long Do I Have to File an Appeal?

You have very little time to file an appeal after the Social Security Administration (SSA) denies your application for disability benefits. Since the vast majority of applicants do not get an award of benefits on their initial application, most people have to go through the appeals process to get the benefits they deserve.

It can help to work with a Texas disability lawyer on your appeal. An attorney can help you navigate the appeal and answer your questions about things like how long you have to file an appeal after a denial or Social Security benefits.

The 60-Day Deadline

You have to file an appeal within 60 days of receiving the notice of the adverse decision to file for any kind of Social Security disability appeal. You cannot extend the time limit by leaving the envelope unopened because the SSA will assume that you received the letter within five dates after the date on the letter.

To overcome this assumption, you will have to prove that you got it at a later date. Proving when mail gets delivered can be difficult, so you should open any correspondence from the SSA right away and take action if you do not agree with the decision. You can appeal a denial or the amount of the benefit.

Missing the 60-day deadline can cost you the right ever to contest the SSA decision. You could be stuck with the adverse ruling permanently.

Some people file a new application instead of appealing the adverse ruling. Doing this could cause you to lose some benefits. Generally, an applicant needs new facts or issues to succeed on a new application.

The Four Stages of Appeals of Social Security Disability Decisions

You can appeal an adverse decision of an application for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits up to four times, each to the next level.

The four stages of appeals when you disagree with the SSA’s decision on your request for disability benefits are:

• Reconsideration. Someone at the SSA will perform a complete review of your application. This individual will not be anyone who took part in the initial decision.
• Hearing by an Administrative Law Judge (ALJ). If you are not happy with the result of the reconsideration stage, you can request that an administrative law judge (ALJ) grant you a hearing. The ALJ will be someone who did not participate in either previous stage.
• Request for review by the Appeals Council. The Appeals Council could agree to review the ALJ’s decision if you file a request, but they have the right to decline the review if they do not think the ALJ made a mistake.
• Federal Court review. If the Appeals Council does not grant your request for a review, or they review your case and you disagree with the result of their review, you can then file a lawsuit in a federal district court.

You cannot skip any of these stages. You have to go through the appeals process in this order; in other words, you cannot file a lawsuit in federal court (the fourth stage) before exhausting the first three stages.

Appellate rules are strict and unforgiving. The SSA or federal court could throw out your appeal at any stage because of a procedural rule, even if you did not know about the rule. Working with a Texas disability lawyer can help you avoid this and many other problems. Contact us today.

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There’s More to Learn from Jeopardy! than Trivia

Q: This household-name company allowed an insider to lead a high-profile executive search only to end up hiring himself for the job. It then failed to perform basic vetting that might have uncovered the new guy’s embarrassing history of insensitive ... Continue reading →

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Never Line of Cases for Internet Accessibility Makes a Come back

Today’s blog entry is something I came across by way of my subscription to the Wait A Second blog, which focuses on all things in the Second Circuit and can be found in my blogroll. The case of the day is Winegard v. Newsday LLC decided by United States District Court of the Eastern District of New York on August 16, 2021. It talks about whether a place of public accommodation can be an Internet based business. As you may recall, there are several lines of jurisprudence regarding this: never; always; gateway; if one of the businesses in 42 U.S.C. §12181(7) is involved; and never but that isn’t the question (11^th Circuit). This particular case shows how the never line of cases is beginning to make a comeback. Will it last? Personally, I don’t think so providing attorneys start making use of South Dakota v. Wayfair, which we discussed here. As usual, the blog entry is divided into categories and they are: facts; court’s reasoning; important footnotes; and thoughts/takeaways. Of course, the reader is free to concentrate on any or all of the categories.

 

I

Facts

 

Plaintiff is a deaf individual residing in Queens New York. Newsday distributes newspapers throughout New York, but it operates no physical retail operations. The newspaper is also available on Newsday’s web site along with other web-based content. Plaintiff alleged that he visited Newsday’s website to watch various videos, including programs entitled “Dumpling Craze Hits Long Island: Feed Me TV,” and “High And Mighty: Feed Me TV,” but was unable to view them because the videos lack close captioning. Defendant moved to dismiss for failure to state a valid ADA claim.

 

II

Court’s Reasoning

 

1. At common law, the phrase “public accommodation,” referred to a subset of businesses that had heightened duties of service-often relating to lodging and transportation-because of the public nature of their physical facilities.
2. Antidiscrimination statutes like the ADA have used the term “place of public accommodation,” for over a century. In fact, you can find the phrase in a New York statute passed in 1895.The ADA’s definition of “public accommodation,” is consistent with that history.
3. Of the 50 examples found in 42 U.S.C. §12181(7), at least 49 of them are indisputably physical places.
4. Congress could have said, “all businesses operating in interstate commerce,” or “retail,” or “service,” operations. However, it didn’t do that and chose to focus on physical places instead. If Congress had wanted to capture business operation rather than places, it could have said as much but didn’t. Congress could easily have also included newspapers but didn’t. All of this demonstrates Congress’s decision to apply the ADA’s antidiscrimination provision to physical places rather than to business operations generally.
5. Countless types of businesses operating outside of brick-and-mortar premises existed in 1990, including some that had been in operation for decades. For example, the Sears Roebuck catalog dated back to 1888. If Congress had wanted to, it could easily have required catalog to be printed in braille and TV shows to include closed captioning by including such media within the scope of the phrase, “public accommodation.”
6. While it is true that each of the categories in 42 U.S.C. §12181(7) has a residual clause, that clause must be read in light of the specific list it follows. Ejusdem generis teaches that a residual clause’s meaning should be confined to the characteristics of the specific items listed before it.
7. Other Circuits (9^th and 11^th), have limited 42 U.S.C. §12181(7) to physical places.
8. Dictionaries overwhelmingly define “place,” to mean a physical location.
9. United States Supreme Court in a non-disability discrimination case talked about a physical place being a public accommodation. Since that decision came down after the ADA in 1990, places of public accommodation are presumptively physical locations in federal court.
10. PGA Tour v. Martin also emphasized a physical location.
11. No allegations exist that Newsday operates public-facing physical places where newspapers or any other goods or services are sold.
12. Cases saying that a website is a place of public accommodation in its own right just don’t add up according to this particular judge because it would mean allowing considerations of policy to divorce from the statute’s text and purpose to override its meaning, which is not something a court should do.

 

II

 

Important Footnotes

 

In law school, they teach you to always read the footnotes. In law school anyway, I tried not to do that because it meant a lot of additional time. As a lawyer, that is a mistake and this case illustrates the point. Let’s take a look at several of the footnotes.

 

1. In footnote 1, the court says that “travel service,” appears to refer to travel agencies and to facilities, such as American Express counters, offering traveler’s checks, currency-exchange services and the like. Those businesses routinely operated out of physical facilities when the ADA was adopted and still do to a lesser extent.
2. In footnote 2, the court refers to the District Court decision in National Association of the Deaf v. Netflix when that court stated that since web-based services did not exist when the ADA was passed in 1990, web-based services could not have been explicitly included in the Act.
3. In footnote 3, the court said that Congress knew well by 1990 that the Internet was coming. The Senate held hearings in 1989 to explore the potential of a national information superhighway. Even so, the ADA wasn’t written to account for that.
4. In footnote 11, the court notes that the ADA was amended in 2008 and that Congress could have easily amended the definition to clarify the inclusion of the Internet with the 2008 amendments but it did not do so.
5. In footnote 12, the court says the maxim noscitur a sociis says that individual items appearing in the list should be read to share common attributes.
6. In footnote 14, plaintiff argues that Newsday has its own television and video Internet studio in addition to its publishing and advertising production facilities and offices. However, plaintiff does not allege that those facilities are open to Newsday’s customers, or that Newsday sells it newspapers or any other goods or services that those locations.
7. In footnote 16, the court notes that plaintiff is a serial plaintiff having filed at least 44 ADA lawsuits in the Eastern District of New York alone as of August 16, 2021.
8. In footnote 17, the court says that while many district courts within the Second Circuit have held that websites qualify as a place of public accommodation under the ADA, the reasoning goes too far. Absent some limiting principle, their reasoning means that every operator of the website-every blogger, vlogger, and the like-must provide closed captioning and any other accommodation required by the ADA. The argument that such a rule would only apply to websites offering goods and services also does not wash because the textual basis for such a limitation in the ADA is unclear.

 

III

Thoughts/Takeaways

 

1. The two strongest arguments in favor of the never line of cases are that Congress did not add phrasing that would include the Internet in 2008, and the term “place,” presumptively refers to physical places.
2. The counterargument is that the United States Supreme Court has recognized technological evolution in other contexts, such as free speech, which we discussed here, and taxation, which we discussed here (As we know, South Dakota v. Wayfair is very recent. So by the logic of the court in this opinion, the term place would not presumptively refer to physical locations).
3. Very curious why South Dakota v. Wayfair was not raised in this decision. For lawyers advocating that the Internet is a place of public accommodation, failure to raise South Dakota v. Wayfair may border on malpractice (see this blog entry discussing legal malpractice). Perhaps, on appeal plaintiff will raise S.D. v. Wayfair then.
4. DOJ in the Trump administration, as we discussed here, strongly suggested that they were going to take the approach of Internet sites having to be accessible if it was of the type of business operating in 42 U.S.C. §12181(7). I would suspect that under a Biden administration that approach would continue.
5. There clearly is a circuit court split already (9^th-Gateway v. 11^th never but that isn’t the question) and more to undoubtedly come. When it goes to the Supreme Court, all bets are off with respect to the never line of cases succeeding, particularly in light of South Dakota v. Wayfair. To my mind, the Supreme Court would be more likely to go with the gateway theory or, relying on South Dakota v. Wayfair, with the of the type of business theory.
6. That plaintiff is a serial plaintiff should not affect the analysis. However, it isn’t unusual for a court’s analysis to be affected by that fact in subtle ways, sometimes significantly so.

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State Bar Executive Committee to meet on August 31

The State Bar of Texas Executive Committee will meet at 10:30 a.m. CT on Tuesday, August 31. Members and the public can watch the meeting live on the State Bar of Texas YouTube page.

The agenda for the meeting may be viewed here. To sign up to speak during the meeting, please email amy.starnes@texasbar.com or call (800) 204-2222, Ext. 1706 (toll free) before 5 p.m. CT on Monday, August 30.

 

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Lone Star Ambulance Sued by EEOC For Sexual Harassment and Retaliation

EEOC Charges that San Antonio Critical Care Transportation Company Maintained Hostile Work Environment Based on Sex

Lone Star Ambulance, a San Antonio critical care transportation company, violated federal law by subjecting female employees to sexual harassment, the U.S. Equal Employ­ment Opportunity Commission (EEOC) charged in a lawsuit filed last week. One of the employees was fired in retaliation for complaining about the harassment; another female employee was forced to quit because of the abuse.

According to the EEOC’s lawsuit, female employees were subjected to repeated sexual harassment by the executive director and a supervisor. The abuse included not only verbal sexual harassment but also physical acts such as unwanted sexual touching and forced submission to sex as a condition of employment. These working conditions became so intolerable that one of the female employees felt compelled to resign. Another female employee was terminated shortly after she rejected sexual advances from a supervisor and then complained about the sexual harassment.

Such alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits sub­jecting an employee to a hostile work environment and discharging her because of their sex, as well as retaliating against an employee for opposing harassment. The EEOC filed its lawsuit (EEOC v. Lone State Ambulance, Case No.5:21-CV-00797 in U.S. District Court for the Western District of Texas, San Antonio Division, after first attempting to reach a pre-litigation settlement through its pre-litigation conciliation process. The EEOC is seeking full relief, including reinstatement, back pay, compensatory and punitive damages, and other measures to prevent sexual harassment of employees in the future. 

“No worker should be forced to endure sexual harassment in order to make a living, or suffer retaliation for opposing the harassment,” said EEOC Trial Attorney Esha Rajendran. 

Eduardo Juarez, supervisory trial attorney for the EEOC’s San Antonio Field Office, added, “Federal law gives employees the right to work in an environment free from sexual harassment and a hostile work environment, and the EEOC will continue to defend that right.” 

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Would’ve

The practical problems cause by conversion of a Rule 12 motion to one for summary judgment were examined in Lexon Ins. Co. v. FDIC, where the nonmovant argued that “had it received [proper] notice, it would have submitted different evidence of the value of its ‘lost collateral,’” but the Fifth Circuit rejected that argument because the nonmovant “never pleaded nor argued in the district court that its damages could be anything less than the full value of the letters of credit ....” No. 20-30173 (Aug. 2, 2021).

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How to Protect Yourself or Your Client from Denial of Judicial Recognition of Obergefell Retroactivity in Common Law Marriage

If you haven’t already read my blog post on Obergefell retroactivity, I would go back and look at it from yesterday.

Fret not; these cases are sporadic. You must be in a gay relationship, which predated June 26, 2015, and has not gotten married, seeking a divorce, or someone has passed away. If you do, however, find yourself in this precarious situation, consider the following:

1. Get Married

This is the most simple and obvious answer. If you are married, then common law marriage is never an issue for you, and you don’t have to worry about the issue entirely.

2. Venue is Key

If you are not a resident of any common law marriage states, consider moving to one that recognizes common law marriage. Texas and Colorado, Iowa, Kansas, Montana, New Hampshire, Oklahoma, Rhode Island, Utah, and the District of Columbia recognize common law marriage. Becoming a resident of these jurisdictions differs from one state to another, but living in a state for three months is a good rule of thumb. Make sure you get a driver’s license from your new state.

3. Civil Procedure is Everything

Make sure your Jury Charges are airtight. See the Texas case Hinojosa v. Lafredo , No. 05-18-01543-CV (Tex. App. Jun.2, 2021).

If you lose, file a writ of Habeus Corpus in Federal court for a Due Process claim.

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Qualifying for Section 1244 Stock Losses

The Tax Cuts & Jobs Act of 2017 changed the choice of entity decision quite a bit. It affords corporate taxpayers the benefit of the lower flat 21 percent tax rate. It provides non-corporate businesses a 20% qualified business income deduction. There were other changes too. This is in addition to the existing tax rules...Continue...Continue readingQualifying for Section 1244 Stock Losses

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End of Life Documents

Unfortunately, I’ve received several questions recently from people needing to know what end of life documents they need to have in place if a loved one ends up ill or incapacitated.  These topics are never fun to think about, but they are extremely important for everyone to have in place.  While there is countless information about the various tools that can be used and options for someone to consider in determining how best to leave their estate, there are a couple of end of life documents that everyone needs to have in place.  If you’d like to hear more about these documents, click here to hear a podcast interview with myself and Andrew Crocker, an Extension Specialist focused on gerontology and health.

Also, for those of you sending students off to college this fall, don’t over look the need for these documents!  We’ve discussed the importance of powers of attorney and HIPAA releases for college students previously here.

I will beg you–do not wait until you’re in an emergency situation before you get these documents in place.  Sitting in a hospital room is never the time you want to try and figure out how to get these documents executed.

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Medical Power of Attorney

A medical power of attorney allows the person executing the form (the “principal”) to appoint another person (the “agent”) to act on the principal’s behalf to make medical decisions in the event the principal is incapacitated. For example, if a person is knocked unconscious and is unable to make decisions regarding treatment or testing, the medical power of attorney would allow the appointed agent to make such decisions.

It is important to carefully consider who a person chooses to designate as his or her agent to make medical decisions. Serving in this role could lead to an agent having to make very difficult, painful decisions, and ensuring someone is selected who is capable of making the decisions the principal would want is critical.  Also, it is extremely important to have conversations with the person selected as the agent to ensure they understand what your wishes would be in various potential situations.

In Texas, the legislature has drafted a statutory form Medical Power of Attorney  that is available online.

To be valid, Texas law allows a Medical Power of Attorney to either be signed before a Notary Public or to be signed in the presence of two adult witnesses.  If the principal elects to use witnesses, there are certain rules with regard to who may serve in that role.  One of the witnesses may not be the person designated as agent; a person related by blood or marriage; a person entitled to any part of the estate after death by will or operation of law; the principal’s physician; an employee of the principal’s physician; an employee of a healthcare facility of which the principal is a patient if the employee is an officer, director, partner, or business office employee  of the facility; or a person who has a claim against the principal’s estate after death.

Directive to Physicians and Family or Surrogates (aka Advanced Directive)

An advanced healthcare directive provides instructions to a physician regarding the patient’s desire for artificial, life-sustaining measures to be taken in the event the patient is diagnosed
with an irreversible or terminal condition.  Importantly, this document only becomes effective upon a diagnosis the patient is terminal or has an irreversible condition, which differs greatly from the medical power of attorney discussed above which is effective upon incapacity. Under Texas law, “terminal” is defined as “an incurable condition caused by injury, disease, or illness that according to reasonable medical judgment will produce death within 6 months, even with available life-sustaining treatment provided in accordance with the prevailing standard of medical care.”  An “irreversible condition” is a condition, injury, or illness that “may be treated, but never cured or eliminated; that leaves a person unable to care for or make decisions for the person’s own self; and that, without life-sustaining treatment provided in accordance with the prevailing standard of medical care, is fatal.”

In Texas, the legislature has drafted a statutory form advanced directive available online.  It may be signed by two witnesses, with the limitations on whom may do so as noted above in the Medical Power of Attorney section or signed before a Notary Public.

The main consideration for a person executing an advanced directive is whether he or she wishes for treatments other than those needed to make the patient comfortable to be discontinued or withheld or whether the patient wants to be kept alive using available life-sustaining treatment.  It is critical to communicate these wishes to family members to ensure that the person’s wishes are respected and followed.

What’s the main difference between a Medical Power of Attorney and an Advanced Directive?  A Medical Power of Attorney basically authorizes someone to act on your behalf in medical decision-making.  An Advanced Directive expresses your wishes for yourself and requests physicians and family members honor those wishes.

Durable Power of Attorney

As the name suggests, a durable power of attorney functions much like the medical power of attorney, except it allows decisions to be made and actions to be taken with regard to financial assets and business matters, rather than medical decisions.  Thus, the principal who executes the document will appoint an agent to carry out financial and business matters on behalf of the principal.  Generally, this includes the authority to do things like executing contracts, paying debts, and purchasing or selling property, although a principal certainly may place limits or restrictions on these powers.

In Texas, the legislature has drafted a statutory form Power of Attorney that is available online.   Texans may simply fill in the blanks and check the appropriate boxes on the form to draft a valid Power of Attorney.  Once the Power of Attorney has been completed, it must be signed before a Notary Public.  Witnesses are not sufficient for valid execution.

There are a number of decisions that a principal must make when completing the statutory durable power of attorney form.  First, the principal may limit any powers granted to the agent.  Second, the principal can determine whether the agent will be compensated for his or her service.  Third, if the principal appoints more than one agent, the principal must decide whether those co-agents may act independently of each other.  Fourth, the principal must determine when the durable power of attorney will take effect.  It may either go into effect immediately upon signing, or can go into effect only upon the incapacitation of the principal.

Do keep in mind that a statutory durable power of attorney ends at death or if a court appoints a legal guardian for the principal.  Once someone dies, there will have to be an executor appointed for his or her estate in order to take action with regard to the estate’s business and finances.

 

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Texas Informal Marriage: Agreement to Be Married

A Texas common-law marriage can occur when the parties agree to be married, subsequently live together as married within the state, and represent themselves as married.  Tex. Fam. Code Ann. § 2.401. The agreement to be married is a separate requirement that must be proven, although it may sometimes be inferred from evidence of the other two requirements.

CLAIM OF INFORMAL MARRIAGE

In a recent case, a woman appealed the dismissal of her claim of common-law or “informal” marriage. The parties had previously been married and were divorced in 2014.  They subsequently rekindled their relationship later that year.  The alleged wife petitioned for divorce in May 2016, claiming they had “rendered a common-law marriage” in December 2014 and had stopped living together around the time she petitioned for divorce.

The man denied that there was an informal marriage and filed a motion for summary judgment, seeking the trial court to find that the woman had failed to establish its existence.  The affidavit the woman attached to her response stated the parties reconciled and agreed to be married on or about December 14, 2014.  She said they moved in together and represented themselves as married.  She also attached affidavits from others. She also submitted an email from the man to his child’s teacher in which he referred to her as his wife.  She also provided a number of documents in support of her position. Following a hearing, the court granted the man’s motion for summary judgment.

AGREEMENT TO BE MARRIED

The woman appealed, arguing there was a genuine issue of material fact regarding the parties’ agreement to be married.  The appeals court noted it was undisputed that the parties lived together and represented themselves as married.  The man’s motion for summary judgment was based on whether there was evidence they had agreed to be married.

The man argued the woman had not raised an issue of fact because she first claimed they agreed to be married on December 14, 2014 and later acknowledged he did not have the intent to agree to be married at that time.  The appeals court noted, however, that the language the man referenced was part of the woman’s alternative claim.  She indicated that, if the court found the man did not have an intent to agree to be married, she would argue in the alternative that they had entered into a putative marriage, or “attempted informal (common-law) marriage.”  Because it was part of the woman’s alternative claim, the appeals court found it was not an acknowledgment the man did not have an intent to agree to be married.

The man argued the woman was unable to give a date when the agreement occurred, but instead referred to how their relationship continued after they were divorced.  The appeals court noted, however, that an agreement to be married can be proven by direct or circumstantial evidence that the parties intended to have a permanent marital relationship and agreed to be spouses.  The appeals court found the woman’s testimony that they had never specifically stated they agreed to be man and woman did not mean there was not an agreement to be married.

The man argued that there must be evidence showing the agreement by both parties.  The appeals court found there was some evidence he had agreed to be married.  The woman testified he had said she was “his wife.”  She said he had her broken wedding ring fixed and gave it back to her to wear.  There was evidence the man sent an email to a teacher referring to her as his wife.  There was also evidence of a text he sent to the woman referring to her as his “beautiful wife.” The appeals court found there was some evidence the man had agreed to be married, raising an issue of fact as to whether there was a present agreement to be married.

The appeals court reversed the portion of the judgment dismissing the woman’s informal marriage claim and remanded the case back to the trial court.

ENDING A POTENTIAL INFORMAL MARRIAGE? CALL MCCLURE LAW GROUP TODAY

This case shows that the parties to an informal marriage do not necessarily have to each specifically state “I agree to be married.”  It also shows that the party alleging the existence of an informal marriage does not necessarily have to prove that the agreement occurred on a specific date.  If you are considering ending a relationship that could potentially be an informal marriage, you should see the advice of an experienced Texas family law attorney.  Schedule your consultation with McClure Law Group by calling our office at 214.692.8200.

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Texas Law and Business Disparagement

This article discusses Business Disparagement under Texas law. This article does not discuss the tort of defamation or slander of title. Although similar to defamation or slander of title, the false assertion in a business disparagement case instead harms the economic interests of the business.[1] Texas law refers to this type of action as “business disparagement”[2] while the Restatement refers to it as “injurious falsehood.”[3]

The Elements of Business Disparagement in Texas

To prove an action for business disparagement under Texas law, the plaintiff must establish five elements: (1) that the defendant published disparaging words, (2) the words were false, (3) the defendant published the words with malice, (4) without privilege, and (5) the plaintiff must prove special damages.[4] These elements are more stringent than those of defamation because disparagement protects against pecuniary loss.[5]

Disparaging Words

A plaintiff must first prove that the defendant published disparaging words to a third party about the plaintiff’s economic interests.[6]  The Restatement Second of Torts asserts that words are disparaging (1) if they cast doubt upon the quality or ownership of another’s land, chattels or intangible things, or upon the existence or extent of his property in them, and (2) that the defendant intended the words to cast doubt, or a third party reasonably understood the words to cast doubt.[7] Moreover, the Restatement rule notes that the disparagement may be by an expression of opinion or a statement of fact.[8]

Falsity

To prove an action for business disparagement, a plaintiff must plead and prove that the published words were false.[9] In a business disparagement case, there is no presumption of falsity; instead, the plaintiff has the burden of proving the falsity of the publication as part of its cause of action and, likewise, the defendant has no such burden to prove the publication is true.[10] However, a showing by the defendant of the substantial truth of a publication negates the essential element of falsity, and thus entitles the defendant to summary judgment.[11]

Malice

To prove an action for business disparagement, the plaintiff must prove that the defendant published the disparagement with actual malice. Proof of actual malice can be put forward in several different ways, but requires sufficient evidence to permit the conclusion that, at the time of publication, the defendant either: knew the statement was false, “acted with ill will or intended to interfere in the economic interest of the plaintiff,” entertained serious doubts as to the truth of the publication, or “acted with reckless disregard” for the truth.[12]

Actual malice, in this context, “is a term of art.” In the words of the Forbes court, it is not ill will, spite, or evil motive.[13] When the plaintiff in a business disparagement cause of action is a public official or figure, that plaintiff has the burden of proving by clear and convincing evidence that the disparaging words were published with knowledge that they were false or with reckless disregard as to whether or not they were true.[14]

A public figure, however, cannot satisfy the malice requirement merely by demonstrating the defendant’s ill will or intent to interfere with its economic interests.[15] In contrast, a private individual may demonstrate malice merely through the defendant’s “negligence.”[16] Note, however, that a media defendant’s poor choice of words or content, without evidence of deliberate falsity, does not amount to actual malice under Texas law.[17]

Privilege

In the context of business disparagement, privilege means that the defendant has some form of recognized legal immunity that protects them, even from the consequences of making a defamatory statement with malice.[18] In general, privilege may be absolute or conditional.[19] However, because conditional or qualified privilege would be defeated by a finding of malice, and malice is a necessary element of a business disparagement cause of action, such privileges are irrelevant in the context of business disparagement.[20] An absolute privilege, however, is applicable and may more properly be thought of as an immunity because it is based on the personal position or status of the actor.[21]

Special Damages

Texas law requires proof that the disparagement caused a direct pecuniary loss.[22] Proof of special damages is perhaps the most essential element in a business-disparagement claim—as without proof of special damages, there is no claim.[23]  Special damages are pecuniary losses that the plaintiff has suffered that have been realized or liquidated (e.g., loss of specific sales).[24] Furthermore, the disparaging communication in question must play a substantial part in inducing others not to deal with the plaintiff with the result that special damage, in the form of the loss of trade or other dealings, is established.[25] Finally, Texas courts have held that the pecuniary loss must be greater than the attorney fees incurred to bring the business-disparagement claim.[26]

Remedies

A plaintiff in an action for business disparagement can recover actual damages representing commercial harm or pecuniary loss to the plaintiff’s economic interests.[27] Actual damages in a business-disparagement action are “special damages” and must be specifically pleaded.[28] Other remedies include expense of counteracting publication, exemplary damages, equitable relief, interest, court costs, but notably not attorney fees or damages for personal injury.[29] Plaintiffs can also recover damages for the loss of a specific sale, loss of credit, or even loss of business if its business was completely destroyed.[30] The measure of damages for the loss of business is the market value of the business on the date of the loss rather than the loss of expected profits.[31]

Defenses

Defenses against a business disparagement action include limitations, proportionate responsibility, immunity and privilege.

Limitations

The limitations period for an action for business disparagement is two years.[32]  But when the sole basis of a business-disparagement claim is a defamatory injury to reputation and there is no evidence of special damages, the one-year statute of limitations for defamation applies.[33]

Proportionate Responsibility

The defendant can assert the defense that the plaintiff’s own acts or omissions caused or contributed to the plaintiff’s injury.[34]

Immunity & Privilege

Privilege as a defense to a business-disparagement claim, is supported by the Restatement which states that “the defendant has the burden of proving ... the publication was absolutely or conditionally privileged.”[35] A defendant in a business-disparagement action can assert any absolute privileges that would be available in a defamation action.When the privilege is absolute, the actor’s motivation is irrelevant.[36] Such immunity, however, attaches only to a limited and select number of situations which involve the administration of the functions of the branches of government, and thus is only applicable in the business-disparagement claim when the defendant is a public official or figure.[37] The absolute privileges in defamation and business disparagement are “in all respects the same.”[38] This is not the case, however, for conditional or qualified privilege. Because conditional or qualified privilege would be defeated by a finding of malice, and malice is a necessary element of a business disparagement cause of action, a defendant cannot assert the defense of a common-law qualified privilege.[39]

 

[1] Hurlbut v. Gulf Atl. Life Ins., 749 S.W.2d 762, 766 (Tex.1987); Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill, Inc., 434 S.W.3d 142, 152 (Tex. 2014) (defining pecuniary and non-pecuniary harm).

[2] Id.

[3] Restatement (Second) of Torts § 623A, comment a (1977).

[4] Hurlbut, 749 S.W.2d at 766; Innovative Block v. Valley Builders Sup., 603 S.W.3d 409, 417 (Tex.2020); San Angelo Cmty. Med. Ctr., LLC v. Leon, 03-19-00229-CV, 2021 WL 1680194, at *8 (Tex. App.—Austin Apr. 29, 2021, no pet. h.).

[5] Hurlbut, 749 S.W.2d at 766.

[6] Id.

[7] Restatement (Second) of Torts § 629 (1977).

[8] Restatement (Second) of Torts § 629, comment a (1977); but see First Amendment of the United States Constitution and Art. I, § 8 of the Texas Constitution (note that statements of opinion are not actionable under the Lanham Act because opinions are protected.)

[9] Hurlbut, 749 S.W.2d at 766.

[10] Astoria Indus. of Iowa, Inc. v. SNF, Inc., 223 S.W.3d 616, 625 (Tex. App.—Fort Worth 2007, pet. denied), abrogated by Dallas Symphony Ass’n, Inc. v. Reyes, 571 S.W.3d 753 (Tex. 2019).

[11] See Granada Biosciences, Inc. v. Forbes, Inc., 49 S.W.3d 610 (Tex. App. Houston 14th Dist. 2001), order withdrawn, (Sept. 26, 2002) and judgment rev’d on other grounds, 124 S.W.3d 167 (Tex. 2003).

[12] Granada, 49 S.W.3d at 617; Bentley v. Bunton, 94 S.W.3d 561, 591 (Tex.2002).

[13] Forbes Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 171 (Tex. 2003) (internal citations omitted).

[14] Forbes, 124 S.W.3d at 170.

[15] Id.

[16] Id.

[17] Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 490, 104 S. Ct. 1949, 1954, 80 L. Ed. 2d 502 (1984).

[18] Hurlbut, 749 S.W.2d at 768.

[19] Id.

[20] Granada, 49 S.W.3d at 619.

[21] Id.

[22] Johnson v. Hosp. Corp. of Am., 95 F.3d 383, 391 (5th Cir. 1996) (citing Hurlbut, 749 S.W.2d at 767).

[23] Waste Mgmt., 434 S.W.3d at 155; Hurlbut, 749 S.W.2d at 767.

[24] Hurlbut, 749 S.W.2d at 767.

[25] Id.

[26] C.P. Interests, Inc. v. California Pools, Inc., 238 F.3d 690, 696 (5th Cir.2001).

[27] Hurlbut, 749 S.W.2d at 767.

[28]Id.

[29] Hurlbut, 749 S.W.2d at 767; Dallas Symphony, 571 S.W.3d at 753; Dwyer v. Sabine Mining Co., 890 S.W.2d 140, 143 (Tex.App.—Texarkana 1994, writ denied) (damages for mental distress and injury to reputation are not recoverable in action for business disparagement).

[30] Hurlbut, 749 S.W.2d at 767.

[31] Id.

[32] Glassdoor, Inc. v. Andra Grp., 575 S.W.3d 523, 527 (Tex.2019).

[33] Nath v. Texas Children’s Hosp., 446 S.W.3d 355, 370 (Tex.2014).

[34] Tex. Civ. Prac. & Rem. Code Ann. § 33.000-4.

[35] Restatement Second, Torts § 651(2).

[36] Hurlbut, 749 S.W.2d at 768.

[37] Id.

[38] Restatement Second, Torts § 635, comment a.

[39] Granada 49 S.W.3d at 619, citing Hurlbut, 749 S.W.2d at 768.

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