ADA tester standing – what three cases in four days tell us.

In the space of three days in early December four different courts took very different … approaches to standing allegations by serial ADA litigants.

A comparison shows there is no certainty in how the law will be applied in ADA cases at the District Court level because neither the Constitution nor the pronouncements of the Supreme Court appear to matter when it comes to standing decisions.

We’ll start in the Western District of Texas.  Joseph Castillo is not among the worlds most prolific serial filers of ADA claims. On the date of this blog he has filed “only” sixteen ADA lawsuits in the last 12 months, all in the Western District of Texas. His lawyers use a form complaint so all sixteen lawsuits have identical allegations concerning his standing to sue. He claims to be a tester and advocate for the disabled, he lives within 30 miles of the defendant property (usually a convenience store on a major street), he wanted to but was unable to take advantage of its goods and services because of some problem with the parking and he plans to go back soon. In Castillo v. Sanchez et al, 2022 WL 1749131 (Dec. 6, 2022) Magistrate Judge Chestney found these allegations were sufficient, and in particular that they met the plausibility standard required by Iqbal and Twombly.

The analysis of the law is interesting because the Magistrate Judge seems to apply two different standards in analyzing the standing allegations. She first discusses the plausibility standard in Iqbal and Twombly:

Under that [the Rule 12(b)(6)] standard, the party seeking the federal forum bears the burden to prove that the complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face. . . Determining plausibility is a “context specific task” requiring application of “judicial experience and common sense” to ascertain whether the facts pleaded permit the court to make “a reasonable inference that the defendant is liable for the misconduct alleged.”

She follows this nod to Iqbal and Twombly with a reference the legal standard in effect before those cases were decided, citing Fifth Circuit opinions from 1990 and 2004 for the propositions that:

On review of the motion, this Court must accept “all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.”

and

“A claim should not be dismissed unless the court determines that it is beyond doubt that the plaintiff cannot prove a plausible set of facts that support the claim and would justify relief”

“Beyond doubt that the plaintiff cannot prove” is hardly the same as “plausible.” Neither of these statements is good law after Iqbal and Twombly because every allegation is subject to the plausibility standard they impose. In any case, the Magistrate Judge makes it clear she has no problem with the plausibility of Castillo’s allegations for she explicitly states that she finds his allegations to be plausible.

But are these kinds of allegation really plausible based on “judicial experience and common sense?” Viewed in isolation they could certainly be true. Castillo might plausibly want to stop at some random convenience store and, if it is on a major street, might plausibly stop there in the future. But sixteen times? Looking at the record this doesn’t seem plausible, but perhaps that doesn’t matter. In Gastelum v. Pinnacle Hotel Circle L.P., 2022 WL 17419366 (S.D. Cal. Dec. 5, 2022) another District Court explicitly rejected the notion that allegations became implausible merely because they were repeated in dozens or hundreds of cases, citing early Ninth Circuit authority to the effect that serial litigation was an intended means of enforcing the ADA.

This brings us to a third case, Johnson v Kuma Kuma LLC, 2022 WL 17418977 (N.D. Cal., Dec. 5, 2022). Decided on the same day as Pinnacle Hotel and a day before Castillo, Kuma Kuma LLC was filed by Scott Johnson, an extremely prolific serial filer, with at least a thousand lawsuits to him name. In Kuma Kuma LLC the defendant defaulted, a reasonable defense strategy to reduce the overall cost of litigation in some cases. Rather than relying on Johnson’s standing allegations the Court required, sua sponte, that Johnson and his counsel submit declarations to substantiate his standing allegations. Then, finding the declarations inadequate, the court scheduled an evidentiary hearing on the subject. The justification for this action in an undefended case could only be a serious concern that Johnson’s allegations were not plausible in light of his litigation history. For this Court, at least, Johnson’s well established past was sufficient to cast doubt on allegations that, in isolation, might have appeared plausible.

In Garcia v. Alcocer,  2022 WL 17538751 (9th Cir. Dec. 8, 2022)[unpublished] we see an example of what happens when the rubber hits the road, or more accurately, when the truth don’t lie,  in terms of standing allegations. In Garcia v Alcocer the District Court not only dismissed the claims of a serial plaintiff, it also awarded fees to the defendant because the lawsuit was “frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so.” Garcia’s standing allegations were very similar to those made by Castillo but there was a difference; by the time of the Alcocer decision Garcia had lost two almost identical lawsuits on standing grounds and the District Court made its decision after an evidentiary hearing. Garcia’s allegations were not merely hard to believe, they were false.

This is not an unusual outcome; in fact, few serial ADA litigants can withstand the scrutiny that comes when standing allegations must be proven. The problem, of course, is that the road to victory for the defendant costs far more than a quick settlement, and most defendants would rather just pay up and get it over with. Decisions like Castillo v. Sanchez and Gastelum v Pinnacle Hotel encourage serial litigation because they eliminate any possibility of a reasonably inexpensive dismissal, forcing the defendant to choose between a cheap settlement and an expensive victory.

One lesson from these cases is that decisions on Rule 12(b)(6) motions in ADA serial cases depends very strongly on the judge. I obtained the dismissal of a case with standing allegations identical to those in Castillo v. Sanchez in a case in the Northern District of Texas, but an essentially identical motion to dismiss was denied in a different Castillo case in the Western District. The same variation in outcomes can be found in the Ninth Circuit and  Second Circuit at the District Court level. The philosophy of the individual judge or, perhaps, the quality of the briefing, determines the outcome of a Rule 12(b)(6) motion.

This isn’t a necessary situation except to the extent any judge relies on good briefing. The analysis of standing for ADA testers can be straight-forward:

First, Havens Realty Corp. teaches that a tester has statutory standing to sue for a violation of a statute if the tester suffers “injury in precisely the form the statute was intended to guard against.” What injury was Title III of the ADA intended to guard against? 42 U.S.C. §12182(a) prohibits discrimination in the “full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.” To have standing to sue under Title III of the ADA the plaintiff must have been denied the full and equal enjoyment of the goods, services, etc. of the defendant public accommodation. The most liberal reading of this requirement would be that a tester, regardless of motive, has a right to access to a public accommodation so they can enjoy the “facility” by standing inside it or perhaps by parking their car in the parking lot.

Standing to sue under the statute is not, however, enough. The clear message of Transunion and Spokeo is that statutory standing is not the same thing as Article III standing, which requires a concrete and particularized injury. Here the ADA’s definition of “discrimination” becomes important. For most tester cases the ADA violation at issue is found in 42 U.S.C. §12182(b)(2)(A)(iv), which defines discrimination as the failure to remove architectural barriers. A building owner or operator does not fail to remove architectural barriers on a person by person basis. A tester who cannot find an accessible parking space, or who confronts a ramp that is too steep, is confronting exactly the same unremoved architectural barrier that every other person with a disability will confront. If another person suffers their same disability then that other person will suffer exactly the same injury. The tester’s injury is not particularized, it is generic. If the tester wanted to buy cigarettes and could not the injury would be particularized – they would be seeking a different kind of goods or services than some other disabled person might be seeking. But if the only injury is to the statutory right to access then the injury is not particular to them because every other disabled person suffers the same injury.

Moreover, the existence of an architectural barrier does not cause a concrete injury unless its existence has some consequence. In Transunion class members whose false credit information was never disseminated had not suffered a concrete injury because the mere existence of the statutory violation caused them no harm. A disabled plaintiff who cannot find an accessible parking place because a sign is missing has suffered a concrete injury; a disabled plaintiff who finds that accessible space anyway has not. Similarly, a disabled plaintiff unable to make it up a ramp that is too steep has suffered a concrete injury because they could not in fact have access to the facility. A disabled plaintiff who easily negotiates the ramp has not suffered such an injury.

In short, to plausibly allege a particularized injury the plaintiff must first allege some motive for visiting the facility in question that is unique to him or her. Only if they have such a motive is their injury particular to them. For a tester who has filed sixteen cases in a short period of time an allegation of intent to enjoy the goods and services of the facility that merely quotes the statute is not plausible. A plausible allegation of a particularized injury requires some explanation of why the tester wanted to stop at this particular facility to enjoy something more than seeing whether the accessible parking had correct signage or the ramps were too steep.

In addition, to plausibly allege a concrete injury the plaintiff must allege not merely that an architectural barrier existed, but that the barrier at least interfered with their access to the property. Here again plausibility requires specificity when the same allegation is repeated sixteen times in different lawsuits concerning different properties. Using a generic description of difficulty accessing the property is no different than alleging an injury in the exact language of the statute; it is not plausible because it is not specific.

It has to be noted that the requirement that an injury be concrete and particularized is not a particularly hard standard to meet. “I visited the defendant’s store because I was thirsty and wanted a soft drink” isn’t a difficult allegation to make; neither is “the ramp was so steep I couldn’t make it up to the door.” The problem for serial plaintiffs is that specific allegations like this can be proven to be false, and the name of the game for serial plaintiffs is to avoid any allegation so specific they might be found to have made it in bad faith. The risk of being found to have lied, as was the plaintiff was in Garcia v. Alcocer, drives tester plaintiffs to use vague generic allegations that cannot be proven false. It also makes industrial litigation more efficient because it means the tester doesn’t have to take the time to get out of their car and the lawyer doesn’t have to spend even five minutes customizing the complaint.

This brings us back to the central holding in Transunion; that is, that no matter what the intent of Congress might have been, the Constitution requires a real injury for standing. It is very unlikely that Congress intended the current form of industrial ADA litigation as a means to effect the public policy of equal access for the disabled; after all, this litigation only benefits lawyers, and does almost nothing to improve access for the disabled.² However, even if Congress did have such a wasteful and inefficient system in mind, the Constitution limits the federal courts to cases and controversies. A careful analysis of the Supreme Court’s decisions makes it clear that testers who file generic ADA lawsuits have not suffered the required concrete and particularized injury required by Article III of the Constitution.

________________________________________

¹ See my blog, Transunion v Ramirez – has the Supreme Court put an end to cheap standing in ADA litigation?

² As I have observed before, if litigation was an effective means to improve access we would not, more than 20 years after passage of the ADA, see the number of lawsuits rise every year.

 

 

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Five Takeaways from the FTX Cryptocurrency Exchange Fallout

 

Cryptocurrency is in the news of late. Its relationship with Texas energy is … significant. As reported by Ryan Dusek and Cooper Ligon at Opportune.com, its because of our abundant energy supply, a mix of oil and gas and renewables, and good government policy.

With that in mind, here is a report by my Gray Reed colleagues that describes the larger cryptocurency phenomena. It is longer than our usual posts but well worth the read.

Blockchain and its related cryptocurrencies were intended to upend a financial system completely reliant on trusted intermediaries. Starting in 2021 the adoption rate of cryptocurrencies skyrocketed. However, most of these new adopters are not making use of the underlying blockchain technology and instead interact with cryptocurrencies using a variety of mostly unregulated intermediaries, including exchanges like FTX.com.

Trust has, therefore, been reinserted for millions of users into a system designed to eliminate such trust. Where trust is required, trust can be abused. And the news is littered with examples of cryptocurrency investors losing money at the hands of these intermediaries.  

Stablecoins appeared to be anything but stable when the Terra network and its algorithmic stablecoin (i.e. a digital asset collateralized by calculations instead of independent reserves of actual dollars) failed. Investors who didn’t understand these types of “stable” coins suffered when the calculations failed. Then the drop in cryptocurrency prices started to expose mismanagement and other risks in many other cryptocurrency companies (e.g. Celsius, Voyager and Three Arrows Capital). Sam Bankman Fried (SBF) and his FTX exchange became the latest very public example— admitting an inability to account for billions of invested capital and filing for bankruptcy. It will take time before the entire impact of the FTX failure and bankruptcy is known. However, here are five things for investors to take away from the recent events involving FTX when considering the future of digital assets. 

1. Beware the cult of personality.

FTX’s explosive growth was driven largely by the popularity of SBF himself and a roster of celebrity promoters—including Tom Brady, Giselle Bündchen, Steph Curry and Shaquille O’Neal. Perhaps most notably, Larry David appeared in a Super Bowl ad touting FTX as a “safe and easy way to get into crypto.” FTX also bought naming rights to the Miami Heat’s basketball arena, which in the eyes of many lent additional credibility to the company. SBF himself shamelessly promoted FTX—for instance, sitting for an “exclusive” CNBC interview in which he discussed surviving the “Crypto Winter” and his purportedly unique investment strategy. This interview aired less than a month before FTX collapsed. If this type of over-the-top promotional strategy conjures up memories of past frauds, it should. Remember Enron Field in Houston? The Stanford-St. Jude Championship and Allen Stanford’s ties to many notable professional golfers? Elizabeth Holmes “firing back at doubters” on CNBC, while popular “Mad Money” host Jim Cramer described her company Theranos as “one of the most exciting privately-held companies in Silicon Valley”?

Fraudsters know that investors are wowed by TV appearances, corporate sponsorships and celebrity endorsements. But TV commentators, corporate marketing departments and celebrities are not vetting these companies. If anything, these parties are blinded by sponsorship dollars or the competition to land an interview with “the next Steve Jobs” (as Holmes was described). And while the SEC’s recent wave of enforcement actions against celebrity crypto promoters like Kim Kardashian is a good message to the market, average investors continue to be fooled. The FTX fraud reinforces the need for skepticism and diligence.

2. Invest in a business, not a cause.

SBF was a major proponent of a movement called “effective altruism.” This philosophy dictated that the end game of SBF’s and FTX’s success was not their own wealth—but rather using that wealth to do good. To wit, SBF pledged to eventually donate substantially all of his net worth to charitable causes. This messaging dovetailed perfectly with much of the philosophy behind the development of cryptocurrencies—in which proponents advocated the “democratization” of the financial world, as power would be decentralized rather than concentrated in powerful financial institutions. Consequently, money poured in from those looking to not only profit, but to do good in the process.

Unbeknownst to these investors, rather than doing good with their money, SBF was misappropriating it to buy himself, his family and his friends 19 Bahamian properties worth roughly $121 million. This reinforces the fact that someone bent on fraud is not above lying about alleged charitable intentions. The FBI, IRS and other agencies for years have warned the general public about those who tug at the heartstrings of their victims in order to get them to part with their money. SBF’s version of this tactic was just more brazen and more public.

The bottom line is that investment decisions should be based first and foremost on the underlying business—not its good intentions. These purported good intentions may just be a vehicle to hide fraud.

3. Garbage in = garbage out.

The FTX exchange, and many other cryptocurrency exchanges, are not really decentralized. For most of the recently failed or bankrupt companies, there is a centralized group of managers interacting on behalf of investors with the actually decentralized networks. Therefore, it is the quality of these managers and their companies, and reserves on hand to protect investors, that must succeed and not the blockchain network used or the associated cryptocurrencies unconnected to the company.

Multiple commentators have indicated that FTX was horribly mismanaged and its books were beyond inaccurate. Including, as mentioned above, misplacing billions of dollars. The amounts invested don’t matter if the exchange, as FTX claims, can’t find and return the money invested when asked. There were advisors and accountants involved, but it didn’t appear to matter. There were little to no internal controls, the apparent outside controls of auditors also failed, and there were no regulatory reporting or other compliance requirements that might have signaled a problem. If the investment is going into a faulty company with a faulty system, it has very little, if any, chance of success.

Customers and legislators are almost guaranteed to demand more of the digital asset companies and exchanges going forward. This will likely require proof of adequate reserves and more public disclosure and reporting to both oversight government agencies and investors.

4. Compliance is a good investment.

The collapse of FTX has ushered in a significant change in dialog within the cryptocurrency community. After years of antagonism towards regulators (a two-way street, to be sure, as many regulatory agencies have been likewise antagonistic towards the industry and unfairly painted it with a broad brush), many within the community are now acknowledging that regulation could be a good thing. And whether it’s a good thing or not, it’s coming. FTX’s collapse has, predictably, led to calls for tighter regulation.

This reinforces that compliance is a good investment and a potential competitive differentiator. For instance, Coinbase stands out as a cryptocurrency exchange that has taken a markedly different compliance approach from FTX. Coinbase is a U.S.-based, publicly traded company. This requires it to comply with SEC and NASDAQ rules and regulations, to provide audited financials to the public, etc. This is not to say, of course, that every cryptocurrency or blockchain company can or should go public. These companies should, however, ensure that they have made the investment needed to both understand and meet certain compliance obligations demanded by the government and/or their investors. This will not only keep them out of trouble but also set them apart from their competitors.

5. Blockchain and digital assets will survive.

Bitcoin has a history of being discounted as a fad and has been pronounced dead multiple times. However, it always seems to survive, and the failure of specific digital asset companies are unlikely to be the demise of Bitcoin and other digital assets.

The blockchain technology, the networks employing that technology and the associated cryptocurrencies are built to be trustless, and they remain trustless. The blockchain technology and its underlying cryptocurrencies provide something that millions of new users flocked to in 2021 and are still adopting, albeit at a slower rate. There is clearly a demand. The intermediaries failed, not the blockchain networks.

In an ironic twist, the failure of centralized cryptocurrency intermediaries further supports the need for the actual decentralized financial exchange system. What users need is an easier way to access the actual blockchain network without the need for intermediaries acting on their behalf. Access to the actual blockchain system remains remarkably difficult for an average user, and that’s how intermediaries flourished and recruited customers by offering a user-friendly way to invest.

However, as a new innovation, it will hopefully become easier to access and use as the technology develops. Then users will not need to rely as heavily on outsiders to act on their behalf.  

FTX, mostly because of its penchant for publicity, is a very public failure, but it is not the entire blockchain and digital asset ecosystem—it’s just one piece. Investors must be careful but shouldn’t necessarily give up entirely on blockchain and digital assets because of recent events. Instead, they should demand more business and compliance formalities common in other industries to ensure that the risks involved are adequately disclosed and considered. Investors should also demand more protections, accountability, and punishment for companies acting on their behalf.

There will always be risks, but risks can be managed if the company and the investor deal in good faith with knowledge and understanding of all the facts. That should be the goal going forward.

Musical interludes, your choice

Christmas

Advent

 

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Raising Capital & Securities Law Basics

Introduction

Capital raising involves significant legal risks and complex securities law issues. All sorts of ownership interests sold in exchange for investments and payment rights constitute “securities” and their sale is subject to substantial state and federal regulation. This includes corporate stock, membership interests in LLCs, partnership interests, other investment contracts, and can even include promissory notes.[i]

Under federal law, the offer or sale of securities is unlawful unless the offering has been registered with the SEC or falls within an exemption from registration. Because of this broad general prohibition and the potentially severe consequences of violations, business owners and entrepreneurs must be mindful of securities laws when seeking investment capital. In most cases, they should not sell securities without the assistance of qualified counsel.

The Core Objectives of Securities Law

The U.S. Securities Act of 1933 (the “Securities Act”), similar state laws, and related administrative regulations—have two core objectives:

1. To protect investors by ensuring they receive adequate information concerning securities, and
2. To prohibit deceit, misrepresentations, and other fraud in the sale of securities.

Generally, information is adequate and accurate if it meaningfully enables the investor to evaluate the characteristics and qualities of an investment—including the associated risks.

The Registered Offering Requirement

One mechanism by which securities law achieves these objectives is the requirement that a prospective sale of securities (an “offering”) is registered with the SEC prior to any “public sale.” The interpretation of that term can be surprisingly broad. Unfortunately, however, registering an offering is a very expensive proposition. Additionally, registration subjects companies to onerous SEC reporting requirements. As a result, registered offerings are often not a viable option for many ventures.

On Exemptions from the Registration Requirement

Thankfully, federal law provides several exemptions from the requirement to register offerings. These exemptions seek to balance investors’ needs for protection with the needs of businesses by lowering the cost of offering securities. In doing so, the Congress and the SEC seek to foster access to capital for relatively smaller ventures. When it comes to smaller capital raises, these exceptions can be said to “swallow” the general rule prohibiting unregistered offerings: most capital in the United States is raised by way of exemptions. Notwithstanding, registration exemptions are not a “free for all.” Despite their wide availability, the complexity and associated burden of compliance is significant.

The various exemptions applicable to unregistered offerings contain different guidelines. Relative to one another, certain exemptions mandate enhanced disclosure, or other additional requirements, to satisfy a perceived need for greater investor protection. Typically, the larger the capital raise and the more available the offering is to persons who don’t qualify as accredited investors, the stronger the investor protections built into the applicable exemption’s guidelines.

Whether a capital raiser should use a specific exemption depends on several factors. These factors include:

• the amount of investment sought;
• how broadly the company wishes to promote the offering;
• eligibility requirements, such as the stage of the development of the company or its business plan;
• SEC filing requirements;
• restrictions applicable to resale of the stock; and
• whether the preemption of state securities laws is necessary or convenient.

Available Exemptions & Compliance with Disclosure Requirements

Exemptions from the federal registered offering requirement include the following:

• Private Offerings (or Private Placements) under Section 4(a)(2) and Rule 506(b) of Regulation D.[ii]
• General Solicitation Offerings under 506(c) of Regulation D.
• Limited Offerings under Rule 504 of Regulation D.
• Regulation Crowdfunding Offerings.
• Intrastate Offerings under Section 3(a)(11) of the Securities Act, Rule 147, and Rule 147A.
• Regulation A Offerings.

In every offering, issuers must comply with the anti-fraud provisions of the Securities Act in addition to complying with the guidelines of a registration exemption. Doing so means accurately disclosing all material information relevant to the investors’ decision to purchase securities.

Some exemptions expressly include disclosure requirements, but many do not. Securities practitioners have developed standard practices that aid in offering mechanics, including the tradition of creating a private placement memorandum or disclosure statement which address the material terms of an offering and other matters.

However, in certain industries when sophisticated investors conduct significant due diligence, issuers sometimes rely only on representations and warranties in stock purchase agreements to comply with anti-fraud provisions. In evaluating compliance with the anti-fraud requirements of the Securities Act, issuers should consider the basis objectives of securities laws. To prepare to meet the disclosure obligations associated with an offering, capital raisers can reference publicly available tools, such as the model disclosure form created by the North American Securities Administrators Association titled Form U-7 “SCOR” (Small Company Offering Registration).

 

 

[i] Note the breadth of the term “security” as defined in the Securities Act: 15 U.S. Code § 77b(1)

[ii] A prior blog by the author discussing these exemptions is available here: Fundraising for your Business through Private Placements & Rule 506(b) – Freeman Law

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What is Probate vs. Non-Probate Property?

When a person dies, their property must go through a process called probate. Probate is the legal process of distributing a deceased person’s property. The court will appoint an executor to oversee the probate process and distribute the deceased person’s assets according to their will or, if they didn’t have a will, according to Texas […]

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Texas Bar Journal: A Look at Texas Law in 2022

The Texas Bar Blog’s must-reads are back with the latest issue of the Texas Bar Journal. Our December issue is live and features a year in review of Texas law, a guide to the Texas grievance process, a Q&A with attorneys whose work netted hardworking musicians millions, and a look at 2022’s Texas Capitol ornament. Don’t forget to check out Movers and Shakers, Disciplinary Actions, and Memorials.

2022 Year in Review

What Texas Lawyers Need to Know About the Texas Grievance Process
Part Two: Litigation
Written by Michael S. Truesdale and Seana Willing

To The Tune of $45 Million
Two Texas attorneys filed a federal lawsuit to ensure a music fund distributed $45 million in royalties to more than 60,000 musicians.
Interview by Eric Quitugua

‘Willkommen zum Saengerfest’
The 2022 Texas Capitol ornament honors the musical traditions of Austin’s early settlers.
Written by Will Korn

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Hahn v. ConocoPhillips — another case on fractional vs. fraction of royalty

Last week the Corpus Christi Court of Appeals issued a decision on a long-running dispute over reservation of a royalty interest in a deed. This is the court’s second opinion in the case.

In the court’s first opinion in 2018, the court construed the following royalty reservation:

SAVE AND EXCEPT and there is hereby reserved to [Hahn] herein, his heirs and assigns, an undivided one-half (1/2) non-participating interest in and to all of the royalty [Hahn] now owns, (same being an undivided one-half (1/2) of [Hahn’s] one-fourth (1/4) or an undivided one-eighth (1/8) royalty) in and to all of the oil royalty, gas royalty and royalty in other minerals in and under and that may be produced from the herein described property.

Continue reading →

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Am I Exempt or Non-Exempt from Stacks of Holiday Green?

Dallas Employment Lawyer Paige Melendez

During the holiday season around my college campus, there was “common knowledge” that one of the biggest benefits of working retail on holidays like Black Friday was that you’d be entitled to time and a half solely because you worked on that day. Cut to becoming an employment lawyer and it’s time to debunk that myth. There are a few things that factor into working during the holiday season, which traditionally kicks off with Thanksgiving and more importantly, Black Friday. The first is whether a non-exempt employee can be forced to work on a holiday, then whether there are any additional benefits to working on a holiday that may make it worth it, and finally whether an exempt employee has access to these same considerations.

For starters, when I use the phrase “non-exempt” and “exempt” I am referring to the Fair Labor Standards Act (FLSA) denotation for employees who are entitled to overtime (and therefore “non-exempt”) and employees who are not entitled to overtime (and therefore “exempt.”) We are going to focus on non-exempt employees because that’s where the myth of extra pay originates. Turning to whether non-exempt employees can be required to work on a holiday like Thanksgiving or a federally recognized holiday, the short answer is: unfortunately, yes. The FLSA does not require employers to give employees days off even on a federally recognized holiday. Individual employers, of course, can decide to have truncated days or allow employees to request those days off, but there is no law requiring them to do so. There are a few exceptions to that rule, and they mostly involve employees that are allowed to have days off because of a different allowance like observing a religious holiday or where there is a collective bargaining agreement (union contract with employer) that allows those days off. Without an exception, the non-exempt employees are at the mercy of their employers. (There’s also that meme that says requests for days off are simply polite notices of non-attendance, but I would not recommend that strategy.)

Continue reading ›

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A Texas Fight Over Competing Leases

Let’s proceed directly to the takeaways from Fort Apache Energy, Inc. v.  Short OG III, Ltd., et al, a Southern District of Texas bankruptcy district court opinion. (Gray Reed partners Jim Ormiston, Gabe Vick and Kristen Kelly represented Short OG III)

The other guy’s operations will not extend your lease beyond the primary term.

Texas law does not allow an oil and gas lessee to rely on a cotenant’s production to extend the term of the lease. Fort Apache and Short et al owned competing leases on 112 acres in Tyler County. The Southern Star lease expired because Fort Apache did not operate on the land during the primary term and could not rely on its lack of operations to extend the lease. Fort Apache testified that it was not economically viable to drill its own well on already developed land and it had no intention to develop the lease. The fact that an operation is uneconomical is not a reason to justify a lack of production. As cotenant Fort Apache had equal rights and access to produce.  

If you sue me, I have standing to assert lease expiration

Fort Apache argued without success that Short et al lacked standing to challenge a motion for summary judgment on expiration of the Southern Star lease because they were not third-party beneficiaries or contracting parties. Their standing was derived from their defense against Fort Apache’s trespass claim.

No trespass by a cotenant

A cotenant has the right to possess land to extract minerals and only owes an accounting of the proceeds less reasonable costs in production and marketing. Short et al, as owners of a competing lease, did not trespass because they were cotenants. Fort Apache’s trespass claim failed because it did not offer evidence to show that Short et al dispossessed it from the land.

Reliance on repudiation?

A lessee who never intends to drill a well cannot rely on its lessor’s repudiation of an oil and gas lease.

Background

In this limited space I will try (sub-optimally) to do justice to the maze of facts and events behind this ruling. Let’s just say, generally speaking, the following happened:

Hranivitz, Sr. and McBride each owned half of the land and signed competing leases. People died. Their descendants and successors signed some leases and ratified others, some with authority and some without, some timely and some not. More people died, leading to a legal tug of war over who had legal title to the property and the right to dispose of it: the administrator of the estate or the testamentary trustee?

Fort Apache sued alleging seven assorted causes of action: Short et al counterclaimed.

Working interest owner (with Short et al) Aztec filed for bankruptcy. The working interest owners’ counterclaims and third-party claims are still pending in a baknruptcy adversary proceeding.

The Bankruptcy Court issued an opinion that the Southern Star lease was superior to the Miller lease and ratification of the Miller lease was void, but at the time the prevailing lease might have expired.

Conclusion, for now

Short et al’s claim for expiration of the Southern Star lease prevails. Because Fort Apache never conducted operations on the lease after trying and failing to negotiate a joint development agreement with Short et al., the lease expired. Fort Apache’s partial summary judgment motion on trespass is denied.

*

Your musical interlude.

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How to Prove That a Decedent Lived in a Specific Texas County

Introduction When it comes to proving that a decedent lived in a specific county in Texas, there are a few things you’ll need to do. First, you’ll need to gather any and all documentation that would show where the decedent resided at the time of their death. This could include things like a lease agreement, […]

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Independent Contractor: the Eye of the Beholder

For some 10-15 years, employers have been trying to save some money by transforming traditional employees into independent contractors.  Different entities use different tests to determine whether an employee is truly an independent contractor. I previously wrote about the various tests here. One commonly used test is that employed by the Texas Workforce Commission. The TWC test looks at:

• Who tells the employee how to do the job: a true independent contractor determines himself how he will accomplish a given task.
• Training: who provides the training: a true independent contractor provides his own training.
• Integration: the services of an independent contractor are easily separated from that of the larger employer.
• Services rendered personally: a true independent contractor can assign the task to a subordinate and need not perform the service personally.
• Hiring, supervising: an independent contractor can hire, select, pay the workers himself.
• Continuing relationship. The work of an independent contractor is usually of a definite time period. It does not continue in perpetuity.
• Set hours of work: an independent contractor sets his own hours.
• Full time required: an independent contractor need not work for the employer exclusively.
• Location of services: an independent contractor performs the work where he chooses.
• Order of sequence. An independent contractor is concerned only with the final product. The sequence in which the work is performed do not concern him
• Oral or written reports: an independent contractor is usually not required to submit regular reports or updates.
• Payment by hour, week or month: an independent contractor is generally paid by the job, not by a set time period.
• Payment of business & travel expense: an independent contractor is normally paid for his/her business and travel expenses.
• Tools & equipment: an independent contractor provides his own tools.
• Significant investment: an independent contractor has a significant investment in his business. An employee has little or no investment in the business for whom the work is performed.
• Profit or loss: an independent contractor can realize a profit or loss from one job depending on the result.
• Working for more than one firm at a time: an independent contractor often works for more than one business at a time.
• Making service available to the public: an independent contractor generally makes his services available to the public at large. An independent contractor may hang a shingle or advertise his services.
• Discharge without liability: if the work satisfies the contract terms, an independent contractor cannot be fired without incurring liability for breach of contract.
• Right to quit without liability: an independent contractor is legally responsible for job completion. If he quits, he becomes liable for breach of contract.

These are 20 factors in the TWC test. The other tests also include many different factors. But, generally, the courts look to a few factors more than most: right to hire/fire; providing one’s own tools and equipment for the work; freedom to take on other work; how integral is the work to the business; and how the employee is paid are probably the most important factors.

If the work to be performed is so integral to what the business does, the courts are less likely to see the work as a true independent contractor. For example, if a bakery hires someone to bake a certain type of pastry, that worker is likely to be viewed an an employee. But, if the same Baker hires someone to install a new electrical lamp, that work will be seen as not integral to the sort of work normally performed by that bakery.

See the TWC website here for more information.

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Why You Should Always Consider Mediation Before Litigating a Divorce

Divorce is a complex process that can bring feelings of anger or sadness to everyone involved. Conflict in the divorce can mean more emotional and economic pain, for the litigants and any children involved.

Mediating a divorce is an excellent decision to help avoid an expensive legal battle and reduce that stress by providing the parties to the suit with more control over the case’s outcome.

Learn why mediation is better than divorce, then contact our Dallas divorce mediation attorneys for more information.

Divorce Mediation Overview

Divorce mediation allows separating couples to meet with a neutral third party, with or without counsel, to resolve any issues or items of contention in a divorce. Mediation is preferable to litigation because it is less upsetting and almost always less expensive. Divorce mediation also usually allows the parties to finish their case quicker than a standard divorce.

Another important benefit to mediation is that you and your partner have the ultimate say—subject to agreement and the confines of the law—over your contested issues. Outside of extreme circumstances when mediation may not be the best course of action, any agreement reached in mediation is binding on the Court. This means that you both can keep the power and control over your relationship, and the Court is not making ordering things that no one asked for.

How Mediation Works

Divorce mediation starts when you and your partner agree and select a mediator, or the Court appoints one. While divorce mediation is voluntary in most states, Texas courts have the power to order the parties to mediate their case. This is the limit to what the Court can do, as the Court cannot force parties to reach agreements.

While mediation is highly successful in resolving cases, it is most effective when both parties are willing to negotiate their contentious divorce issues. Usually, the mediator will set up an appointment in a neutral setting with the spouses (and counsel, if any). During this initial meeting, the spouses can talk about their views on common divorce topics that, include:

• Division of assets
• Child visitation and custody
• Child support
• Alimony

The first discussion helps your mediator to understand how realistic a possible resolution to the case is via mediation. As a further means of “keeping the peace” during these sessions, the mediator will generally have each side in a separate room (or Zoom room, if being done electronically).

There is no time limit on divorce mediation in Texas. Everyone can continue working with the mediator to reach an agreement until an agreement is reached, or the process becomes unworkable. If the issues are too complex or the conflict is too high for agreements to be reached, litigation is still possible. Still, mediation is almost always less expensive than a lengthy divorce fought out in the courts. Parties can save thousands of dollars—and ever-valuable time—by resolving their case through mediation.

Is Mediation An Option?

Mediation is possible if there is a chance you and your partner will agree to the terms of a divorce. Also, both sides need to be open on finances, and agreement is required on child custody matters. However, mediation is not usually advisable if there is a history of domestic violence.

Contact Our Dallas Divorce Mediation Attorneys Today

Divorce is painful, and a contentious divorce can be emotionally and financially devastating. Everyone is better off when both sides can agree to divorce terms without an extended legal quarrel. Divorce mediation is a great choice to reach these agreements, whether the issues are alimony, child custody, or division of property.

The Dallas divorce mediation attorneys at Orsinger, Nelson, Downing & Anderson can help with mediating your divorce to bring your case to an agreeable conclusion without a lengthy legal battle. Our attorneys are proud to serve the communities of Dallas, Fort Worth, Frisco, and San Antonio. Please contact our Dallas divorce mediation attorneys at (214) 273-2400.

The post Why You Should Always Consider Mediation Before Litigating a Divorce appeared first on ONDA Family Law.

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We are Forever Grateful and Moving On…

I received a text today from a lawyer I coached,. He asked how I was doing. It is a very long story, and in journalism there is a rule that I suggested for blogging: “Don’t bury the lead.” So I won’t.

I had surgery in February to remove cancer from my neck. After surgery I had chemo and radiation with all the expected side effects. By July I thought I was recovering. But, I had pain in the other side of my neck with it shooting down my right arm. I had surgery in Cabo and almost died from pneumonia afterwards. As a result we sold our home in Cabo and we are building a home in Fort Worth.

Here are the details of my story.

Many people I know have been through far greater challenges than me, and haven’t shared their stories. In that way I feel selfish sharing mine. I believe I share not to help lawyers I coached and lawyers who read my blog over 15 years. Instead, at this point I feel like I share my 2022 for those lawyers to help me by understanding my angst and just by saying hello. (I no longer use my business email as I have retired.)

After radiation and chemo I had more side effects than anticipated. I recovered from those, was cancer free, and moved to our new home at Diamanté Cabo San Lucas. In July I had severe pain in my neck. Nancy took me to a Cabo hospital where I was given pain medicine such that Nancy was afraid to put me on an airplane to return to Texas. She rightly thought I would create a ruckus and we would be on the no fly list for the rest of our lives.

A Cabo surgeon removed and replaced three discs. Before the surgery, I wrote a text that I don’t remember writing. I asked in the text why I was spending a second night in the hospital.

After surgery I got bacterial pneumonia and almost died. I was on a ventilator for five days. My first memory was our daughter Jill holding my hand. I spent 18 days on the hospital and lost 40 pounds. I was an extremely unpleasant patient. I was delirious and had the most crazy thoughts you could ever imagine. None of my thoughts were favorable towards anyone working at the hospital. I didn’t realize what it was like for our daughter Jill,  and especially Nancy. She had spent the entire 2022 caring for me, driving me to doctors, helping me get up in the middle of the night, and worrying about whether I would survive.

I was brought home in Cabo in an ambulance and brought in our casita in a wheel chair. I fell trying to lie down. I spent the following weeks trying to walk, and sorting through what was real during my hospital visit and what was not. It was a mental struggle. Not wanting the trauma or cost of another health incident in Cabo, we sold our Casita in one day and we will be back in Arlington, Texas November 30.

 

Throughout my life, I have been inspired by words. This is especially the case when times have been tough for me, like they have been this year. When I was down I needed to hear someone essentially tell me to get up and work harder to get better. At 75, I was challenged.

Graduation speeches are purposely designed to inspire the graduates to go out and change the world. One graduation speech that inspired me was Steve Jobs graduation speech at Stanford in 2005. I have likely included the YouTube video of it in a past blog post and if you haven’t watched it, I encourage you to do so. If you don’t have time, this Forbes article gives you the highlights.

There is a second graduation speech I strongly recommend you watch. It is Admiral McRaven at a University of Texas graduation. He was the Chancellor of University of Texas before stepping down because of health issues. Read about him here. But, please take time to watch and listen to what he told graduating students. I like this YouTube version of it.

These two gentlemen inspire me to make myself better each and every day. I am walking sometimes as much as a mile. I still struggle because the surgery to replace my discs paralyzed my vocal cord on the right side, meaning it never touches the left vocal cord, meaning my voice is a mess, I sometimes can’t swallow. my mouth is dry, and I get out of breath easily. This article describes my situation. Down the road they can do something to help my situation.

Like I said we are here at Diamante until the end of November. I am able to play golf from the most forward tees. In many ways we are sad to be leaving our dream retirement home. It was wonderful for the few months we were here, but, more important than our beautiful home, we will always remember the people who work here.

There are too many incredibly nice people to name, and I would for sure miss one or more. Let me say the guys and gals who work at the front gate greet us by name and chat with us. The caddies, especially Javier who has worked with us for many years, make our golf experience unique and special. The gals who work at the comfort stations greet us and take care of us. The guys and gals who work at the Diamante restaurants take great care of us. The valets who park our car greet us, smile and take care of us. The incredible gals who work in the two pro shops have for twelve years helped us and our guests with tee times. The golf pros and assistant pros we have known over the years have embraced us, taught us, and worked us in on busy days. Each Diamante staff person we met over the twelve years called us by name and made us feel part of their family. They never expected anything back from us other than a smile of appreciation. Nancy and I will be forever grateful for their kindness.

So, we are setting out on a new adventure. We are building a home in Fort Worth. It is minutes from my many doctors, downtown Fort Worth  and The Retreat Golf Resort where we play golf. I keep saying to you that this is my last blog post, and maybe this time I may be telling the truth. I am at a point when I am not sure I have anything to say that will help you enjoy your career.

 

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2023 Estate and Gift Tax Update

Part 1 of a 3-part series

The IRS has announced 2023’s estate and gift tax numbers. To understand them in context, we must look at 1) the Basic Exclusion Amount, 2) the Unlimited Marital deduction, 3) how the IRS will handle taxes after 2026. These ideas are interrelated and may affect your planning options.

The Basic Exclusion Amount

The basic exclusion amount is increasing from $12.06 million in 2022 to $12.92 million in 2023, the largest adjustment the exclusion has ever received. People with a small estate, a million-dollar estate, or multi-million-dollar estate all benefit from the exclusion amount, so keep reading! The exclusion can be applied to offset tax on gifts you make during your lifetime, or on transfers you make at the time of death. When you make a gift larger than the annual exemption amount (in 2022 it is $16,000 and it will be $17,000 in 2023) the excess is subject to gift tax. To eliminate the gift tax, you can tell the IRS to apply the basic exclusion amount to the gift. Doing so consumes some of your basic exclusion amount leaving less available for use at the time of your death.

Historically, the basic exclusion amount started to increase during the GW Bush administration, was expanded under the Obama administration, and was again expanded under the Trump administration. The Trump expansion was, however, saddled with a built-in rollback set to hit in 2026. The rollback will cut the $12.92 exclusion back to about $6 million unless the law is changed before 2026. I say “about $6 million” because there is a set $5 million exclusion which is increased for inflation, so the adjusted exclusion should be about $6 million in 2026.

The Unlimited Marital Deduction

A married couple can pass an unlimited value between spouses without estate tax. It is important to understand that the Unlimited Marital deduction delays paying estate tax, it does not eliminate estate tax. Values you leave to your spouse are not taxed when you die, but they are included in your spouse’s estate and are taxed at the second death if the values exceed the basic exclusion amount.

Historically, this gave rise to a planning technique wherein the first to die would not leave all assets to the surviving spouse. This was done by creating a Bypass Trust in the Will of the first to die and leaving a value equal to the exclusion amount to that trust upon the first spouse’s death. The transfer to the trust was taxable, but the tax was zeroed by the decedent’s exclusion amount.

All value higher than the exclusion amount passed to the surviving spouse tax-free under the Unlimited Marital deduction. Then, when the second spouse eventually died the exclusion amount of the second spouse was also applied. Only the value in excess of both exclusion amounts was subject to estate tax. Both exclusions were thus used to eliminate estate tax. By contrast, if a Bypass Trust was not used then the exclusion amount of the first to die was wasted (because the value passed directly to the surviving spouse) so when the second spouse eventually died, only that second spouse’s exclusion amount was available to reduce the estate tax. Any taxable estate that used only the Unlimited Martial Deduction was wasting the first spouse’s exemption amount.

Portability Replaces Bypass Trusts

Since 2010, however, a Bypass Trust is not necessary to take advantage of both exclusion amounts. The law was changed to allow “portability” of the first exclusion. When one spouse dies, the survivor can ask the IRS to put that first exclusion on hold, then to apply both exclusions when the second spouse dies. Even without a trust, the only portion left taxable is any value that exceeds both exclusion amounts.

How has the value of your estate changed since 2010? When did you last update your legal estate planning documents? If your estate is no larger than about $6 million yet your Wills contain Bypass Trusts, then you should speak with your estate planning attorney about eliminating the burdens imposed by that now unnecessary and restrictive trust. Are you my estate planning client? Does your Will contain what we called a “federal credit trust” or a “shelter trust”? Make your appointment for a planning review asap because we can likely eliminate the burdens and costs of that restrictive trust, which was needed when the exclusion was smaller but is no longer needed now that the exclusion is larger. (Visit www.Premack.com and use the yellow button to book an appointment.)

Next Week: The 2026 Trump Rollback

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Paul Premack is a Certified Elder Law Attorney for Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. To contact us, click here.

Column published on November 14, 2022

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Student Loan Assistance in Texas: How Do I Know if PAYE Is the Right Option for Me?

Are you struggling to pay back your student loans? You’re not alone. Forty-eight million Americans have federal student loan debt totaling $1.6 trillion.

The good news is that student loan assistance options make paying back your loan more affordable. The PAYE repayment plan can drastically reduce monthly payments for eligible borrowers, and some participants can qualify for loan forgiveness after 20 years.

In this article, the second in our multi-part Student Loan Repayment blog series, debt resolution attorney and owner of Ciment Law Firm, PLLC, THE Debt Defenders, Daniel Ciment, explains how PAYE works. Call us at (833) 779-9993 to schedule a free consultation to explore your options and determine if PAYE is right for you.

What is PAYE?

Short for “pay as you earn,” PAYE is a student loan repayment plan designed to reduce the amount of your monthly payments. Instead of paying a fixed loan amount based on your loan principal and interest, PAYE limits your monthly payments to 10% of your discretionary income.

Referred to as income-driven repayment (IDR), PAYE keeps loan payments affordable, allowing borrowers to climb out from crippling student loan debt.

What You Need to Know about PAYE

Because there are several different programs available offering assistance for educational loans, the options for student loan borrowers can get overwhelming.

To avoid some of the confusion from similar programs, here’s what you need to know about PAYE:

1. PAYE can make student loan payments more affordable. Your loan payments are capped at 10% of your discretionary income, so you don’t have to decide between eating dinner or paying your student loan.

2. PAYE is a long-term plan. While other income-driven repayment plans provide temporary relief, such as deference or a pause on payments (referred to as forbearance), PAYE offers long-term assistance for as long as you are eligible for the program.

Further, because PAYE carries a 20-year term, you will accrue more interest than a standard plan, which has a ten to twelve-year term. As a result, your total amount paid over the life of the loan could be higher.

3. PAYE is not a loan rehabilitation program. If you’ve defaulted on your loan and are trying to get it back on track, there are other options besides PAYE.
4. You have to reapply each year. Because eligibility is based on your income, you must reapply each year to confirm that you are still qualified. As your income goes up or down, your payment will also be adjusted.
5. Your spouse’s income may be included in your income calculation. If you are married and file taxes jointly, your spouse’s income could affect the amount of your discretionary income, which could spike your payment obligation.

PAYE Loan Forgiveness

Many borrowers turn to PAYE to reduce their monthly student loan payments, but another benefit can be even more compelling.

If you have made continuous payments and kept your loan in good standing, you can have any remaining balance erased at the end of 20 years. The federal government forgives the loan, and you are free from making future payments.

The debt is gone for good, whether you have remaining loan balances totaling $10k or $100k.

There is one caveat to loan forgiveness to keep in mind: the amount of the loan that’s forgiven gets added to your taxable income, so you could end up with a tax bill from Uncle Sam to offset the windfall.

For example, if the amount of student loan forgiven is $10,000 and you pay 18% in taxes, you would have to pay $1,800 back to the government when you file your taxes. Still, that’s better than being on the hook for the entire $10,000 balance!

How Discretionary Income is Calculated

Borrowers under the PAYE program can reduce their monthly payments to a mere 10% of their discretionary income, but how is “discretionary income” calculated?

Discretionary income is based on your adjusted gross income, which is essentially your taxable income after adjusting for 401k contributions, pre-tax healthcare costs, and other pre-tax expenses.

From there, you will subtract 150% of the federal poverty line for Texas from your adjusted gross income. This number changes yearly and is also based on the size of your household.

PAYE Eligibility Requirements

To be eligible for PAYE, you must meet the following requirements:

1. Your loan must be federally backed (private loans are not eligible)
2. You cannot be in default on your loan
3. You have to demonstrate financial hardship (your payments exceed 10% of your discretionary income)
4. Your loan must have been taken out after October 1, 2007
5. You must have received a loan disbursement after October 1, 2011

The Bottom Line

If your income is limited and you’re struggling to meet your payment obligations, having your loan recalculated based on your income could give you some financial breathing room.

For further information about PAYE and other programs in Texas, contact a student loan assistance lawyer at Ciment Law Firm, PLLC, THE Debt Defenders, at (833) 779-9993 today or fill out our online form.

Copyright © 2022. Ciment Law Firm PLLC, THE Debt Defenders. All rights reserved.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.

Ciment Law Firm, PLLC, THE Debt Defenders
221 Bella Katy Dr
Katy, TX 77494
(833) 779-9993
https://www.cimentlawfirm.com/

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4 Steps Every Business Should Take to Protect Confidential Information

If 2023 is THE year that your business is going to maximize protections for confidential information, make sure you have the following four areas addressed:

1. Non-disclosure agreements (and non-compete and non-solicitation agreements) protect confidential information because they impose contractual restrictions on what employees can disclose to third parties. These are the first documents that courts look at when a company attempts to obtain an injunction preventing a former employee from disclosing their confidential information.
2. Mobile device management (MDM) software protects confidential information because it prevents employees from forwarding, downloading, or taking screen shots of confidential information from their devices.
3. Network behavior analysis (NBA) software protects confidential information because it alerts your company if an employee is attempting to engage in a prohibited action, such as plugging in an unauthorized USB drive or downloading large amounts of data.
4. Employee training helps to protect confidential information because it educates employees on what the company considers confidential, company confidentiality policies, and the consequences of violating those policies.

Leiza Dolghih is the founder of Dolghih Law Group PLLC.  She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.

The post 4 Steps Every Business Should Take to Protect Confidential Information appeared first on North Texas Legal News .

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Free CLE Opportunity: What Every Lawyer Should Know About the Attorney Grievance System

Laura Gibson

Editor’s Note: State Bar of Texas President Laura Gibson sent the following message to members on Wednesday.

It is the duty of the State Bar of Texas to improve and advance the quality of legal services to the public, and foster integrity and ethical conduct in the legal profession. The attorney grievance system is vital to these efforts; however, the workings of the system aren’t always well understood.

In an effort to provide our members more information, I recently moderated a CLE webinar titled “What Every Lawyer Should Know About the Attorney Grievance System.” It is now available to all members to watch on demand, for free, at texasbarcle.com for 1.25 hours of MCLE ethics credit.

The structure of the State Bar enables Texas lawyers to have an independent, confidential, and fair system for handling attorney grievances. The Texas attorney discipline system is governed by the Texas Disciplinary Rules of Professional Conduct and the Texas Rules of Disciplinary Procedure. The ethics rules define proper conduct for purposes of professional discipline. The procedural rules provide the mechanism by which grievances are processed, investigated, and prosecuted.

From the presentation you will learn about the Commission for Lawyer Discipline, which oversees the grievance system; the Office of Chief Disciplinary Counsel’s role in administering the system; the role of the District Grievance Committees; and the additional processes of checks and balances that ensure all parties are treated fairly. You will also hear from Seana Willing, the chief disciplinary counsel, and Scott Rothenberg, a Bellaire attorney who currently serves as panel chair of the District 4 Grievance Committee, who so graciously joined me as panelists.

I hope you take the time to view the presentation. It is very informative and insightful and could save you some time navigating the grievance process.

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Major Life Activities as Essential Functions and What That Means for Test Takers Trying to get into Those Jobs

Today’s blog entry deals with two decisions from the U.S. Court of Appeals for the Second Circuit dealing with essentially the same fact pattern. One decision, Williams v. MTA Bus Company, here, is a published decision decided August 12, 2022, while the other decision, Frilando v. New York City Transit Authority is a summary order decided on August 19, 2022, here. Both decisions have the potential to set back the ability of Deaf, deaf, and HOH individuals to be employed. I don’t see why the decision don’t have the ability to set back people with other kinds of disabilities from being employed as well. The facts are substantially similar. Both cases involve culturally deaf individuals seeking employment. Both cases involve exams needing to be taken in order to see if they were qualified for that job. Both cases involve a refusal to have an interpreter to interpret the examination and its instructions. The panel for Williams was Cabranes, Raggi, and Carney. The panel for Frilando was Cabranes, Lynch, and Chin. As usual the blog entry is divided into categories and they are: court’s reasoning in Williams; court’s reasoning in Frilando; and thoughts/takeaways. Of course, the reader is free to focus on any or all of the categories.

 

I

Court’s Reasoning in Williams

 

1. Only qualified individuals can establish a disability discrimination claim.
2. The term “qualified individual,” appears in the statutory section, 42 U.S.C. §12112(a), talking about how a person cannot be discriminated against on the basis of disability with respect to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment. Through the use of the term “qualified individual,” means that a person has to be able to perform the essential functions of the employment position.
3. 42 U.S.C. §12112(b) references 42 U.S.C. §12112(a). Therefore, the term “qualified,” is equally applicable in that section as well.
4. Doesn’t make sense that Congress would intend to permit individuals who are not qualified for their desired employment positions to maintain action for some types of employment related discrimination but not for others. Therefore, Congress intended the “qualified individual,” requirement to apply to all forms of employment discrimination under 42 U.S.C. §12112.
5. Reading 42 U.S.C. §12112 to maintain the “qualified individual,” requirement is consistent with both the ADA and the Rehabilitation Act taken as a whole.
6. 42 U.S.C. §§12111, 12112 work together. So, considering the interactive relationship between those two provisions, it would be nonsensical to disregard the term “qualified individual,” when reading 42 U.S.C. §12112(b)’s subparts rather than reading it all together so that only “qualified individuals,” may bring claims based upon discriminatory acts enumerated in 42 U.S.C. §12112.
7. 504 of the Rehabilitation Act, 29 U.S.C. §794, echoes that only an “otherwise qualified individual,” can sustain a discrimination claim under that section.
8. Since the statutory sections are clear, the EEOC guidance does not come into play. However, even if it were to come into play you still get to the same endpoint. The EEOC guidance said that an employer must provide a reasonable accommodation to a qualified applicant with a disability that will enable the individual to have an equal opportunity to participate in the application process and to be considered for the job. Accordingly, it is fair to read the guidance to say that before an employee can prevail on its failure to provide accommodations during the application process, the plaintiff must show that he was qualified for the employment position at issue.
9. The portion of the EEOC guidance does not address the employer’s obligation regarding an applicant who cannot perform the essential functions of the position regardless of any on-the-job accommodations, and therefore is another reason why the EEOC guidance is of little assistance.
10. Taking a test to see if they are qualified for certain jobs is not an employment position and therefore the test-taker is not entitled to accommodations in the test taking process if they are not qualified for the employment position they are seeking.
11. An employer is perfectly within its rights to mandate that the applicant evaluate his qualifications for the job before seeking accommodation for exams. An employer does not have to allow a person to take exams for job that they are not qualified for. In other words, an applicant cannot sue successfully a potential employer under 42 U.S.C. §12112 when the individual is facially not qualified for the position sought at the time of the preemployment test.
12. Williams simply did not have the education or experience requirements necessary for the jobs that he wanted to take the exams for.
13. In the Second Circuit, an employer’s failure to comply with the interactive process requirement is not an independent cause of action under the ADA.

 

II

 

Court’s Reasoning in Frilando

 

1. Plaintiff applied for the jobs of train operator, track worker and bus operator.
2. Defendants offered to provide ASL interpretation for the exam instructions but refused to provide interpretation for the exam questions and answers.
3. The term “qualified,” applies not just to current employees but to job applicants as well.
4. When assessing whether a person is otherwise qualified for a job, a court must give considerable deference to an employer’s judgment regarding what functions are essential for a particular position.
5. In a four day bench trial, the District Court found that the ability to communicate in English and the ability to hear sounds were essential functions of all three positions. Plaintiff was not qualified for any of the positions because he could not be understood in spoken English and also did not understand spoken English. He also did not have the minimum hearing standard for any position.
6. Test taking is not an employment position. Therefore, plaintiff is out of luck for a failure to accommodate claim with respect to taking the test necessary to qualify for the various jobs.

 

III

Thoughts/Takeaways

 

1. I often say in my trainings that an employer makes a big mistake by focusing on major life activities as an essential function of the job. These two cases say that the employer may get away with taking that considerable risk if it chooses to use a major life activity as an essential function of the job. That said, taking this approach is lousy preventive law. An employer will go much further in preventing litigation and successfully defending lawsuits when there is litigation, if the essential functions of the job do not include a major life activity.
2. On the plaintiff side, the argument to make is that hearing is not the essential function of the job but being able to communicate is. That is an argument the plaintiff successfully made in the case we discussed in the blog entry involving Johns Hopkins, here. The Johns Hopkins case is also a cautionary tale for an employer insisting on a major life activity being an essential function of the job.
3. Neither of the decisions are published (one is not published and the other is a summary order).
4. In footnote 16 of the Williams decision, the court says that the employer by not evaluating the plaintiff’s qualifications before refusing to provide him with an ASL interpreter for the exam, ran the risk of denying a reasonable accommodation to a qualified individual that would have rendered the company liable for disability discrimination. Also, courts should not bless off blanket denials of accommodation by accepting specious explanations why applicants with disabilities may ultimately not be qualified for a position.
5. Both of these cases give employers a tool now to prevent Deaf individuals in particular from even getting considered for a particular job because accommodations do not have to be offered for any testing for those jobs unless they can do the essential functions of the job first.
6. The Second Circuit decisions play down considerably the obligation of the employer to provide reasonable accommodations. Remember, reasonable accommodations can either be in the title I context a logistical or financial undue hardship. Per 42 U.S.C. §12111(10)(B), financial undue hardship looks to the entire operations of the entity, while logistical undue hardship looks to whether essentially the nature of the business is fundamentally altered.
7. A sign language interpreter does not do the job for a Deaf individual, rather they are just enabling communication. That said, I could see logistical undue hardship questions and possibly financial undue hardship questions as well arising depending upon the situation.
8. Before employers just start adopting including major life activities as essential functions, mandatory reading is this blog entry. Plaintiff lawyers need to make that blog entry mandatory reading as well after these two cases.
9. Deaf individuals frequently do not read above a fourth grade reading level because ASL is a completely different kind of language than English. It is of course a visual language and its structure is entirely different, based on French. Therefore, a Deaf person is equally unlikely to understand the exam questions as they are the instructions themselves. As such, granting ASL for instructions but not for exam questions means it is still the disability being evaluated rather than the person’s abilities.
10. A qualified interpreter for the Deaf is strictly a communication vehicle and is not offering their own view on anything.
11. Remember whether a person is qualified for a particular position depends upon whether they can do the essential functions of the job WITH or without reasonable accommodations.
12. Undue hardship is an affirmative defense, though the burden of proof can get complicated with respect to whether a person is qualified or not per the ADA.
13. Depending upon the circuit, failure to engage in the interactive process may or may not be a separate cause of action. That said, the trend is certainly in favor of a failure to accommodate being a separate cause of action.
14. I don’t see why these decisions necessarily get limited to hearing. Why not walking or seeing, smelling, etc.?
15. It will be interesting to see both how other circuits deal with this issue as well as how the EEOC reacts to these decisions going forward.

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Welcome to the Era of Salary Transparency

Have you heard it’s “taboo” to talk about your salary? Us too. Well, that is out the window now. Welcome to the era of salary transparency. Yes, we know it can be awkward to talk about salary, but with new laws on the horizon, it may be a little easier to figure out how much your co-workers are getting paid. 

 Recently, the New York City Council passed a law requiring employers in New York City with four or more employees to list the minimum and maximum salary on all job posting including ads, promotions, and transfer opportunities. This law applies to any position that can or will be performed, in whole or in part, in New York City. This affects remote listings, meaning any job that could conceivably be done in New York City must follow this. 

 So why did the New York City Council deem this necessary? They passed this law to try and fight against big pay gaps, specifically between genders as well as between majority and minority racial groups. Let’s be honest, pay matters. It affects where you work and how long you decide to stay there.  

Continue reading ›

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Disputes Related to Pasture Leases

Landowners commonly lease their properties to ranchers and farmers for agricultural purposes. To avoid leasing disputes, some details should be ironed out before any agreements are made. These involve the expectations of both parties. Understanding the facts before entering into a contract can avoid disappointment, money, and future litigation. Considerations Before Entering a Lease Agreement…

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Extra, Extra: IRS Division of Tax Exempt and Government Entities Releases FY2023 Program Letter

On November 4, 2022, the Tax Exempt and Government Entities division of the IRS (TE/GE) released its Fiscal Year 2023 Program Letter (2023 Program).

The 2023 Program is intended to dovetail with the IRS Strategic Plan FY2022-2026. Under that Strategic Plan, the IRS’s Mission is: “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” The Plan includes key performance indicators in areas of Service, Enforcement, Transformation, and People. For Enforcement, the IRS’s objectives are to:

• Enforce the tax law fairly and efficiently to increase voluntary compliance and narrow the tax gap;
• Improve operations to effectively and efficiently identify and address non-compliance;
• Enhance enforcement efforts to collect unpaid taxes in a fair and impartial manner; and
• Proactively identify current and emerging fraud schemes and other threats using real-time intelligence and analytics.

A key pillar of the 2023 Program is to “Strengthen Compliance Activities (Enforcement)”. TE/GE will focus on collaboration with IRS divisions of Criminal Investigations; Large Business & International; Small Business/Self-Employed; and Research, Applied Analytics & Statistics. A TE/GE priority includes selecting and examining returns for compliance action. TE/GE’s collaboration is aimed at creating a unified compliance plan to enable effective tax administration.

As for People, the 2023 Program indicates that TE/GE hired 187 new employees in FY2022, and TE/GE anticipates a greater number in FY2023. In the Service arena, TE/GE expects to continue with appropriate compliance workstreams – education letters, compliance checks, or exams – in order to balance TE/GE and taxpayer burdens for effective enforcement of tax laws.

As calendar year 2022 enters its end-of-life phase, the TE/GE Fiscal Year 2023 Program Letter gives tax practitioners of an idea of what we might see in the near future and into 2023, at least from a tax-exempt and governmental entities perspective.

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Please leave me my inheritance in a trust

Trusts are commonly used in estate plans to leave assets to minor children, incapacitated beneficiaries, or spendthrifts.  To avoid the expense of guardianship for a minor, a trust is a necessary part of the estate plan for that beneficiary.  Trusts are used for young adults because although the legal age of majority in Texas […]

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Texas Temporary Injunction and Injunctive Relief

There are times when monetary damages will not be enough to help a plaintiff get what they need in court. In some cases, they simply need the behavior to stop. In those cases, a plaintiff can seek a temporary injunction for injunctive relief. A judge would either order a halt to the behavior in question while they consider a permanent ruling, or they may put an end to the defendant’s actions about which the plaintiff is complaining.

The Main Types of Injunctive Relief in Texas Cases

Here are the five main types of temporary or permanent injunctive relief in Texas:

• Preliminary or temporary injunctions: These can be issued at the outset of a case while the judge is considering the overall situation. If the judge rules in favor of the plaintiff, the injunction may become permanent.
• Temporary restraining orders: These are issued for a set duration of time, usually until the judge can decide whether to grant a temporary injunction.
• Permanent injunctions: A judge will issue this order at the conclusion of a case if the case was resolved in favor of the plaintiff.
• Mandatory injunctions: Instead of ordering a party not to do something, a judge could direct them instead to take a specific action.
• Prohibitory injunctions: The judge may prohibit a party from taking a specific action.

In federal cases, restraining orders and injunctions are governed by Rule 65 of the Federal Rules of Civil Procedure. In Texas cases, Chapter 65 of the Civil Practice and Remedies Code applies to the case. A federal or state court must follow the procedures set forth in the rule or rules applicable to the action before them.

The Factors a Court Considers When Deciding Whether to Grant an Injunction

A judge would likely issue a temporary restraining order while they consider an injunction. There is a high standard a plaintiff must meet to obtain certain types of injunctions. For a preliminary injunction, a judge will consider the following four factors:

• The likelihood of success on the merits. A judge would consider the merits of the larger case in deciding whether to issue an injunction. If the case does not have merit, the judge will not order an injunction. The hearing for a preliminary injunction is often a yardstick by which litigants can measure their ultimate chance of success in the case. The parties can expect the court to give an analysis of the bigger picture.
• The likelihood of irreparable harm. An injunction is an extraordinary measure that is granted to stop imminent harm from occurring before the court can rule on the overall case. To persuade a court to grant an injunction, a plaintiff would need to show that they would suffer greatly in the interim.
• Balance of equities and hardships. An injunction is an equitable measure. A plaintiff must show that the equities of the case are in favor of an injunction. The benefit to a plaintiff must be weighed against the hardship to the defendant, recognizing that an injunction will also impose costs on the defendant.
• Public interest. The plaintiff must show that an injunction is in the public interest. Since this is not specifically defined, it gives a judge a wide degree of latitude in making their decision.

Examples of Injunctions in Texas Cases

Examples of injunctions that a court could issue include:

• Ordering a halt to an alleged infringement upon the intellectual property
• Stopping a former employee from taking a business’ clients
• Preventing a fiduciary from committing further breaches of their duty
• Granting an injunction to stop a nuisance that is impacting the rights of a property owner
• Ordering a party to continue performing its obligations under the terms of a contract
• Stopping a majority shareholder from freezing out a minority shareholder

By the time a litigant files a request for an injunction, they will need to have practically fully developed their case. They cannot get an injunction unless they have a relatively compelling argument in their overall case. If the court grants the request for an injunction, it is often a strong indicator of which direction the judge may be leaning toward in their final ruling. However, just because a plaintiff was granted an injunction does not mean they’ll automatically win the case.

You Must Prepare Early When an Injunction Is Involved

Cases that involve a request for an injunction require a great deal of preparation before you even file a lawsuit in court. Court hearings for an injunction are often held within days after the plaintiff files their initial pleadings in a case. They may file their original petition or complaint along with a request for an injunction. The judge would need to decide immediately whether injunctive relief makes sense based on the strength of the petition or complaint. Therefore, you need an experienced civil litigation attorney on your side to give you the best possible chance of obtaining an injunction. If you are defending yourself or your business against a lawsuit, you should reach out to an attorney immediately if the plaintiff has requested an injunction. The commercial litigation attorneys at Feldman & Feldman will provide you with tough and aggressive legal representation.

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