Dallas Bar Association
HEADNOTES
Focus Bankruptcy/Franchise & Distribution Law
July 2018 Volume 43 Number 7
Dick Sayles: 2018 DBA Trial Lawyer of the Year BY ANDREW M. JONES
Growing up in the Smoky Mountains hamlet of Gatlinburg, Tennessee, Richard “Dick” Sayles knew from a very early age that he wanted to become a lawyer. “My parents ran a motel and gift shop there,” Sayles recalled. “When I was six years old, my dad said, ‘I wish I had been a lawyer. I think you should be one.’” That was all it took. Sayles went on to graduate from Sevier County High School, a few years behind the famed Dolly Parton. But it was football, not music that earned Sayles a scholarship to Vanderbilt University, where he played four years, from 1967 to 1970. “I was fortunate to play college football,” Sayles said of the sport that paid for his college education. “I was the slowest lineman in the Southeastern Conference, and that’s a record that still stands to this day.” At the time, Sayles real- Dick Sayles ized opportunities for young lawyers in East Tennessee were limited. Most lawyers in Gatlinburg who made a good living, Sayles noted, did so outside of the legal profession in businesses catering to the tourist industry. So Sayles set his sights on Texas, anticipating that opportunities would be more plentiful there. Sayles attended law school at the University of Houston, where he graduated magna cum laude. Upon graduation, Sayles clerked for United States District Court Judge Robert M. Hill in Dallas. The next year, Sayles joined Carrington Coleman, Sloman & Blumenthal, where he practiced law for more than 19 years. There, Sayles built a reputation as a highly skilled trial lawyer. Sayles credits much of his success as an attorney to his mentor, the legendary Jim Coleman. “Jim lives what he taught: always take the high road.” Sayles’ first jury trial was in 1975, just months after arriving at Carrington Coleman. In a breach of contract case, Sayles obtained a $7,000 verdict. In his first year, Coleman assigned Sayles seven cases that went to trial. Sayles won all seven. “I thought I had the secret to success and would never lose a case,” he noted to Mark Curriden of the Texas Lawbook. Sayles left Carrington Coleman with a few other attorneys to start his own firm in 1994. Sayles Werbner has since enjoyed tremendous success as a high-profile, high-stakes trial firm. His practice spans commercial disputes, personal injury cases and patent litigation. Sayles is board certified in both Civil Trial Law and Personal Injury Trial Law by the Texas board of Legal Specialization. He has tried more than 150 jury cases, with more than a dozen resulting in verdicts of more than $1 million. A notable success includes a $1.67 billion verdict for Centocor Inc., a division
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of Johnson & Johnson, in a patent infringement case—at the time, the largest patent verdict in United States history. His impressive track record also features numerous significant defense wins. “We stay lean,” Sayles said about his firm. “We generally have about 10 attorneys, and that’s all we need.” Sayles credits his firm’s strong relationships with large national law firms as a key factor in its success, including significant participation in high profile matters. “We are often asked to be involved as local counsel,” he noted. “When we are, we insist on being substantially involved. Our roles in such cases always grow.” The model has worked for almost 25 years. “Each January 1, I look forward to the New Year but am never sure we can keep our momentum going. But somehow, each year, we’ve been able to do it again.” Sayles fondly remembered a case he tried years ago with attorney Ed DeYoung, now deceased, in which his clients, oil and gas promoters, were sued by investors when some deals went sour. His clients, who had used both borrowed money and invested sums to promote the ventures, in turn sued a bank in a third party action on a theory of negligent lending. Against long odds, Sayles and his team obtained a whopping $13 million verdict on the third party claim against the bank. “We celebrated that evening, with plenty of Dom Perignon, and with a member of our team earnestly playing piano from our rented trial penthouse while we toasted our win.” About a year later, however, the verdict against the bank was reversed. While Sayles’ team succeeded in defending the investors’ claims against the promoters, the promoters were unable to pay their legal fees. “The only payment I ended up getting was a case of Acacia wine.” Here, football lessons applied. “When you reach a verdict, your case is not over. You’re really just at halftime.” The Texas Lawbook recently honored Sayles as a member of the highly prestigious Lions of the Texas Bar, a group of 50 prominent Texas attorneys. Sayles has also been honored by Chambers USA among the leaders in Commercial Litigation, by Benchmark Litigation as a top national litigator and by Texas Super Lawyers, named seven times to the list of Top 10 attorneys in Texas. He also received a Lawyer of the Year award for 2018 in Bet-The Company Litigation from the Best Lawyers in America. Congratulations to Dick Sayles, recipient of the Dallas Bar Association’s Trial Lawyer of the Year award. HN Andrew M. Jones is Co-Vice Chair of the DBA Publications Committee and can be contacted at andrewmilamjones@gmail.com.
Tips in Navigating the Retail Tenant Apocalypse BY KATHARINE BATTAIA CLARK AND CASSANDRA SEPANIK SHOEMAKER
Expert opinions are mixed on the precise reason retailers have been hit hard by the latest bankruptcy cycle. Many point to a significant increase in consumer online purchasing, which has certainly decreased demand for commercial real-estate space and has left vacancy rates skyrocketing. These troubles, and more, have left landlords scrambling to keep up with the deluge of retail lease workouts and bankruptcy filings. Below are key considerations for landlords navigating the retail tenant apocalypse. First: Just as its name implies, the automatic stay arises automatically when a debtor files for bankruptcy protection. The automatic stay prohibits a landlord (or its agent) from taking any act to collect a pre-bankruptcy debt. The stay halts the obvious, like eviction or foreclosure proceedings, but also the less obvious such as phone calls, default letters, and application of funds on account to amounts owed. Accordingly, landlords should carefully consider their actions vis-à-vis a bankrupt tenant. However, the automatic stay has limits. It generally does not protect non-debtor parties or their property, and a landlord may pursue non-debtors (including guarantors) outside of the debtor’s bankruptcy proceeding. Second: Going-out-of-business sales are a common part of a debtor’s initial request to a bankruptcy court, and most bankruptcy courts give liquidators broad authority to conduct them, irrespective of lease terms (or even city ordinances) applicable outside of bankruptcy. For example, in the recent Toys “R” Us bankruptcy, the bankruptcy court permitted, over the landlords’ objection, the debtor-tenant to conduct GOB sales that violated lease terms regarding signage and hours-of-operation. Third: Landlords and leases receive special attention in the Bankruptcy Code, and aligning with an experienced bankruptcy professional early in a case is key. On the one hand, debtortenants must pay rent if they remain in the space post-bankruptcy (although when rent payments start is not always a straightforward issue). Also, the Code sets out deadlines by which a debtortenant must assume or reject a lease, so the landlord is not captive indefinitely. On the other hand, a debtor’s ability to assume or reject unexpired leases can create complications for landlords, and we offer a few points of caution: A debtor’s decision to reject a lease is difficult to challenge, so the general
focus should be on preserving a landlord’s claim (including reviewing landlord records carefully to determine how much was due to the landlord as of the bankruptcy filing not just for base rent, but any other component of rent, such as legal fees, taxes, late fees, etc.). Landlords and their counsel should read over lease-rejection motions carefully. The effective rejection date and the timeline for filing claims against the debtor as a result of the rejection are both critical. If a debtor remains in the space post-bankruptcy, the landlord has a right to collect rent as an administrative (meaning, priority over others) creditor. Debtors work to reduce administrative claims as much as possible to preserve post-bankruptcy cash, making lease rejection a target for creative lawyering. Also, while many savvy landlords are aware of the concept of a claims-bar date, many have not experienced separate deadlines being set for filing administrative-rent or lease-rejection claims. These varying deadlines can get particularly tricky when multiple leases are being rejected by a staggered sale or a plan of reorganization. The Bankruptcy Code expressly limits a landlord’s damages in lease-rejection scenarios. However, courts vary in how the limits are applied, depending on not only the underlying lease, but also the law in a particular circuit. While lease assumption (as opposed to rejection) may seem initially attractive because a tenant will remain in the space, landlords should carefully consider what a debtor is offering. For instance, landlords should review whether both payment and non-payment defaults will be cured, whether the debtor or the debtor’s assignee will be able to perform for the remainder of the lease, and any other additional matters the debtor may try to shoehorn into an assumption motion (such as resolution of tenant improvement disputes). Inherent in the retail industry is the risk that a commercial tenant may become financially troubled. In today’s increasingly online retail environment, this risk is increasing and retail bankruptcies are making headlines and impacting parties’ respective rights and obligations. By having familiarity with the common issues that may arise when confronted with a bankrupt tenant, commercial landlords can better protect themselves to minimize the impact of a tenant’s financial woes. HN Katharine Battaia Clark is a partner at Thompson & Knight LLP. She can be reached at katie.clark@tklaw.com. Cassandra Sepanik Shoemaker is an associate at the firm. She can be reached at cassandra.shoemaker@tklaw.com.
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