Dallas Bar Association
HEADNOTES |
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Focus | Business Litigation/Franchise & Distribution
October 2020 Volume 45 Number 10
Hartline Barger Provides Critical Support to DVAP As the unique challenges of this year continue into the fall season, businesses and nonprofits continue to pivot to adjust to new circumstances. In this time of uncertainty, steadfast DVAP supporter Hartline Barger LLP has stepped up once again with a donation of $30,500—the largest donation of this year’s Equal Access to Justice Campaign to date! The firm has a long history of supporting pro bono in Dallas through the EAJ Campaign. Including this gift, the firm has donated more than $154,000 to legal aid for low-income people since 2007. “We hope our continued support of DVAP will help narrow the justice gap in Dallas County. We are living in unprecedented times of dire need for so many, and the need for quality legal services continues to grow. We are grateful that our business has stayed viable and allowed us to give back to our community. This donation also honors the wishes of our founding partner, C. Vernon Hartline, Jr., who passed away in July. He was selfless and generous with his time, financial resources, and advice,” said partner Melissa Dorman Matthews. Hartline Barger LLP focuses on general civil litigation defense and trials. While the firm’s services are wide-ranging, they focus on product liability litigation, personal injury defense, commercial litigation, construction litigation, and labor & employment litigation, among other areas. Access to justice is a core value of the firm. “While it is a privilege for us to practice law, we do not believe it should be a privilege to have access to quality legal representation,” said Larry Grayson, managing partner in Dal-
Melissa Dorman Matthews
las. “Unfortunately, this is a reality for much of society. The fact that we represent successful businesses makes it all the more important that we give back to those who lack such financial where-
withal.” Access to legal services is increasingly important during the pandemic as more people are isolated and in dire economic straits. Since April, DVAP’s regular legal intake clinics have been replaced by weekly virtual clinics. DVAP is also placing COVID-19-related pro bono matters with volunteer attorneys. Ken Adler, an associate with Vinson & Elkins, LLP, was able to assist “Charlie,” a DVAP client, with a lease termination agreement. Prior to the pandemic, Charlie signed a lengthy lease to open an acupuncture clinic in Frisco. “We had a successful outcome in great part because the landlord was generous and sympathetic. Charlie was very frank with the landlord and made an effective case. I spent time counseling him beforehand to build his confidence in order to do so. I felt that we would have better success if the landlord could hear from Charlie himself. I thought it was a great example of how DVAP can connect clients with attorneys to help empower their own voices,” said Ken. DVAP is also grateful that The DAYL Foundation has provided support by making a $10,000 contribution to the Justice Forever Fund, which is an endowment supporting long-term funding to DVAP in the event that traditional funding sources shrink or cease to exist. The justice gap in Dallas County is daunting. In a country based on justice for all and access to our court system, over 25 percent of Dallas County residents live near the poverty level, and 42 percent have slim hope of being able to afford an attorney. With annual poverty incomes of $32,750 for a family of four, justice is a luxury for low- and moderate-income families. As Jeffrey Patterson, a Hartline
Barger partner in $1 Dallas, stated, Million “We are well acquainted with the impact that $900,000 DVAP has on the underrepre$800,000 sented in North Texas; its efforts $700,000 towards mitigating the staggering justice $600,000 gap are unparalleled. We know $500,000 our contribu tion helps put $400,000 resources into the right hands.” C. Vernon $350,000 Hartline, Jr. will be fondly $300,000 remembered for his unflagging $250,000 support of DVAP, and would $200,000 undoubtedly be very pleased to $150,000 know of this gift supporting the $50,0000 Equal Access to Justice Campaign in his honor. DVAP is a joint pro bono program of the DBA and Legal Aid of NorthWest Texas. The program is the only one of its kind in Texas and brings together the volunteer resources of a major metropolitan bar association with the legal aid expertise of the largest and oldest civil legal aid program in North Texas. For more information, or to donate, visit www.dallasvolunteerattorney program.org. HN
To Give: www.dvapcampaign.org.
BY MICHELLE M. ALDEN
Michelle Alden is the Director of the Dallas Volunteer Attorney Program. She can be reached at aldenm@lanwt.org.
Thank You to Our Major Donors The Dallas Bar Association and Legal Aid of NorthWest Texas kicked off their annual Equal Access to Justice Campaign benefiting the Dallas Volunteer Attorney Program. A number of Dallas firms, corporations, and friends have committed major support. Join us in recognizing and thanking the following for their generous gifts*:
PRESIDENT’S COUNCIL
GOLD PATRON
PLATINUM SPONSORS
Hartline Barger LLP
Margaret & Jaime Spellings Witherite Law Group
CHAIRMAN’S COUNCIL
DIAMOND SPONSORS
Akin Gump Strauss Hauer & Feld LLP Condon Tobin Sladek Thornton PLLC Katten Muchin Rosenman LLP Latham & Watkins LLP Munsch Hardt Kopf & Harr, P.C. Nelson Mullins Riley & Scarborough LLP The Rosewood Foundation Stewart Law Group Robert L. Tobey Toyota
Jerry & Sherri Alexander E. Leon & Debra Carter The Kilgore Law Firm
AT&T Haynes and Boone Foundation
*As of September 8, 2020
Inside 6 Lewis Sifford to Receive Esteemed Professionalism Award 8 Defining Trade Secrets: What Passes the Test in Texas? 18 Meet the Dallas Volunteer Attorney Program Staff 23 Fraud Alert: Issues and Claims in a Complex Divorce
2 He a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
All programs are presented virtually. Check the DBA Online Calendar (www.dallasbar.org) for webinar links and the most up-to-date information.
Calendar October Events FRIDAY CLINICS
OCTOBER 2 Noon
“Equity Challenges in the Transition to a Low-Carbon Energy Economy,” Prof. Felix Mormann. (MCLE 1.00)*
Visit www.dallasbar.org for updates on Friday Clinics and other CLEs.
Peer Assistance Committee
TUESDAY, OCTOBER 13 Noon
Legal Ethics Committee
OCTOBER 9
Home Project Committee
OCTOBER 16
5:30
Labor & Employment Law Section “Annual Update: Recent Case Law and Developments in Employment and Labor Law,” Joseph Gillespie and Christine A. Newkirk. (MCLE 1.50)*
Noon Noon
“Unsheltering at Home: COVID-19, Guns, and Domestic Violence,” Angela Downes. (MCLE 1.00)* “Bostock Opinion,” Mike Maslanka. (MCLE 1.00)*
OCTOBER 30 Noon
“Debt Collection or Bankruptcy-Proofing Your State Court Judgment,” Hershel Chapin. (MCLE 1.00)*
THURSDAY, OCTOBER 1 Noon
Construction Law Section “The Intersection of Construction, Contracts, and Technology in the Industry,” Christian Blomdahl and Grant Hagan. (MCLE 1.00)*
Friday Clinic “Equity Challenges in the Transition to a LowCarbon Energy Economy,” Prof. Felix Mormann. (MCLE 1.00)*
2:00 p.m. Dallas Minority Attorney Program “Guardianship vs. Management Trusts,” Hon. Brenda Thompson and “Probate Tips and Topics,” Ashlei Gradney and Hon. Brenda Thompson. (MCLE 1.00)*
MONDAY, OCTOBER 5 Noon
Legal Ethics Committee “Ethics Jeopardy,” Jonathan Smaby and Robert Tobey. (Ethics 1.00)*
TUESDAY, OCTOBER 6 Noon
Corporate Counsel Section “Drafting to Win: Contract Drafting Strategies Designed to Withstand the Rigors of Litigation,” Megan Donovan, Ladd Hirsch, and Patrick Keating. (MCLE 1.00)* Tort & Insurance Practice Section “Dallas County Courts at Law Judges Panel: Civil Court Considerations during COVID,” Hon. D’Metria Benson, Hon. Melissa Bellan, Hon. Sally Montgomery, Hon. Paula Rosales, and Hon. Mark Greenberg. (MCLE 1.00)*
WEDNESDAY, OCTOBER 7 Noon
Juvenile Justice Committee
Public Forum/Media Relations Committee 4:00 p.m. LegalLine E-Clinic. Volunteers needed. Contact sbush@dallasbar.org.
THURSDAY, OCTOBER 8
FRIDAY, OCTOBER 2 Noon
Solo& Small Firm Section/Legal Ethics Committee “Legal & Ethical Issues Regarding Cybersecurity, Privacy, COVID-19, and the Cloud,” Peter Vogel. (MCLE 1.00, Ethics 0.50)*
WEDNESDAY, OCTOBER 14 Noon
ADR/Family Law Sections “Best Family Law Virtual Mediation Practices,” Sharon Corsentino, Hon. Lena Levario. and Ebony R. Rivon. (MCLE 1.00, Ethics 0.25)*
4:00 p.m. LegalLine E-Clinic. Volunteers needed. Contact sbush@dallasbar.org.
9:00 a.m. 2020 Jeff Coen Family Law Nuts & Bolts Video recording of 2019 CLE. Register at https:// tinyurl.com/familynutsandbolts2020. (MCLE 6.00, ethics 2.00 for both days).
5:00 p.m. DBA ‘Rona Pep Talk “Daddy Day Care,” Chip Brooker, David Coale, Justin Henry, Anthony Lowenberg, Javier Perez, moderated by Amy M. Stewart.
Noon
THURSDAY, OCTOBER 15
Business Litigation Section “Why the Economic Loss Rule is Important in Business Litigation,” John Adams and Sara Hollan Chelette. (MCLE 1.00)* Publications Committee
2:00 p.m. CLE Committee
FRIDAY, OCTOBER 9
9:00 a.m. 2020 Jeff Coen Family Law Nuts & Bolts Video recording of 2019 CLE. Register at https:// tinyurl.com/familynutsandbolts2020. (MCLE 6.00, ethics 2.00 for both days). Noon
Friday Clinic “Unsheltering at Home: COVID-19, Guns, and Domestic Violence,” Angela Downes. (MCLE 1.00)*
2:00 p.m. Dallas Minority Attorney Program “Practicing Law in a COVID19 World,” Vicki Blanton and “Firm Accounts, Payment Apps & IOLTA,” Kristen Brady and Betty Balli Torres. (MCLE 1.00, Ethics 0.50)*
MONDAY, OCTOBER 12 Noon
Diverse Recruiting Solutions “An Overview of Minority Recruiting and Pipeline Programs,” Lacy Durham, Valerie James, Whitney Fogle Lewis, Crystal Mitchel, and Courtney Barksdale Perez. (MCLE 1.00)*
Real Property Law Section “Alternative Real Estate Finance Options for the Middle Market,” Shae Armstrong. (MCLE 1.00)*
Noon
Minority Participation Committee
3:30 p.m. DBA Board of Directors Meeting 5:30 p.m. 5th District Court of Appeals Candidates Forum Register at dallasbar.org. Sponsored by the DBA Public Forum/Media Relations & Judiciary Committees, and League of Women Voters.
WEDNESDAY, OCTOBER 21 Noon
Health Law Section “Please Tell Me You Didn’t…Handling Dual Civil and Criminal Fraud, Waste and Abuse Investigations and Discovery,” Martin Merritt. (Ethics 1.00)*
Law in the Schools & Community Committee
Pro Bono Activities Committee
4:00 p.m. LegalLine E-Clinic. Volunteers needed. Contact sbush@dallasbar.org.
THURSDAY, OCTOBER 22 No events scheduled as of yet
FRIDAY, OCTOBER 23 No events scheduled as of yet
SATURDAY, OCTOBER 24 6:00 p.m. J.L. Turner Legal Association Gala
MONDAY, OCTOBER 26 No events scheduled as of yet
TUESDAY, OCTOBER 27
11:00 a.m. 28th Annual DBA Golf Tournament At Cowboys Golf Club, Grapevine. Register at www.dallasbar.org. Noon
Probate, Trusts & Estates Law Section Topic Not Yet Available
FRIDAY, OCTOBER 16
5:00 p.m. Evening Ethics Program “Ethics in the Time of COVID.” Free for DBA members; Non-members: $110. Late Registration $135; Join DBA (fall special) + Registration: $175. (Ethics 3.00)*
2:00 p.m. Dallas Minority Attorney Program “Practicing in the Higher Courts and Ethics Jeopardy. (MCLE 1.00, Ethics 0.50)*
WEDNESDAY, OCTOBER 28
Noon
Friday Clinic “Bostock Opinion,” Mike Maslanka. (MCLE 1.00)*
MONDAY, OCTOBER 19 Noon
Science & Technology Law Section “10 Commandments of Information Technology (IT) Contracts,” Peter Vogel. (MCLE 1.00)*
TUESDAY, OCTOBER 20 Noon
International Law Section “Mexican Consulate General of Dallas: Programs and Services Offered to the Legal, Business and Local Communities,” Francisco de la Torre, Florentino Ramirez, and Mark Romney. (MCLE 1.00)*
4:00 p.m. LegalLine E-Clinic. Volunteers needed. Contact sbush@dallasbar.org.
THURSDAY, OCTOBER 29 No events scheduled as of yet
FRIDAY, OCTOBER 30 Noon
Friday Clinic “Debt Collection or Bankruptcy-Proofing Your State Court Judgment,” Hershel Chapin. (MCLE 1.00)*
DVAP Pro Bono Awards Celebration. For more information, contact martinm@lanwt.org.
Community Involvement Committee
THANK YOU
upporting s r fo
and raising over
$37,000
Thanks to your support during North Texas Giving Day, DVAP raised more than $37,000!
You can still donate to the Equal Access to Justice Campaign. Visit www.DallasBar.org or contact Michelle Alden, aldenm@lanwt.org.
Make a donation. Make a difference.
If special arrangements are required for a person with disabilities to attend a particular seminar, please contact Alicia Hernandez at (214) 220-7401 as soon as possible and no later than two business days before the seminar. All Continuing Legal Education Programs Co-Sponsored by the DALLAS BAR FOUNDATION. *For confirmation of State Bar of Texas MCLE approval, please call Grecia Alfaro at the DBA office at (214) 220-7447. **For information on the location of this month’s North Dallas Friday Clinic, contact yhinojos@dallasbar.org.
O c t o b e r 2 0 20 â€
D al l as Bar A ssoci ati on l Headnotes 3
4 He a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
President’s Column
Headnotes
After the Pandemic—What Comes Next? BY ROBERT TOBEY
There will be life after the pandemic—I guarantee it! But I do not know when that will be or what it will look like. The pandemic has affected everyone. No other event in my lifetime has changed the basic way that we live our lives on a day-to-day basis like the COVID pandemic. Every time a new routine is established, something happens to upset it. In this column, I will discuss some of what I am seeing and what our “new normal” may look like by making some “fearless predictions sure to go wrong.” 1. Everyone is thinking and talking about getting back to “normal” and referring to life during the pandemic as the “new normal.” In my view, we are in a transition stage and will remain in transition until the pandemic ends. At that time, we will settle into whatever the “new normal” winds up being. One thing I am confident about is that the “new normal” when it arrives will not look like March 12, 2020— the day we closed our DBA headquarters building and much of the country also shut down. 2. Lawyers are finding that they can work effectively from home. While some people (like me) always will prefer the office environment, many members of our profession work just as effectively from home. What that means is that people can work from anywhere meaning home can be in a rural area or in another state. 3. There will be two camps of lawyers—those who can’t wait to get out of the house, and those who have found happiness and are content to remain working from home. A large percentage of lawyers will continue to work remotely once the pandemic ends. That trend will change the way law firms use leased space and manage their lawyers and staff. 4. Video technology has allowed courts to continue functioning during pretrial proceedings, but it has not effectively replaced in-person jury trials. One thing that we have learned is that Zoom technology is a great substitute for a lawyer flying from Dallas to Houston for a 15-minute hearing or a 2-hour deposition or a mediation. With the costs of litigation so high, innovations like the remote handling of hearings, depositions, and mediations is essential to allow litigants to be able to afford to participate in the system. With that said, it does not appear that Zoom technology will be a good substitute for in-person jury trials. Even then, though, it might work for some cases involving very few witnesses and small amounts in controversy. 5. Wellness issues continue to plague the legal community, and it does not seem to matter if lawyers are in their offices or working remotely. I wrote my last column on the inability of lawyers to “unplug,” and until the work life balance is restored in some way, lawyers will continue to have a disproportionate number of alcohol and substance abuse problems and the highest suicide rate of any profession. 6. The battle for social justice has been at the fore-
front of our society since the death of George Floyd. While the battle has risen to prominence at times in the past few years, it always seems to recede with time. I believe this time is different! There is a heightened awareness about social injustice in the white community, and I believe there is a strong feeling among most Americans that change needs to happen before this country can reach its true potential as a democratic society. So, what does all of this mean to the Dallas Bar Association and how we provide services to our more than 11,000 members? 1. We have always been a physical bar association centered in our own fabulous building. When the pandemic ends, we will continue with virtual programming, as well as have our traditional in-person meetings. The large attendance numbers that we have achieved—with more than 200 virtual programs since the pandemic began—confirms that this is a service our members need. We are reaching members not only in the Dallas suburbs, but around Texas and in other states. 2. Despite the increased use of virtual programming, lawyers are social creatures as a rule and want and need to meet in person. The biggest advantage of our building is that it provides a central gathering place that allows lawyers to have a feeling of fellowship. Also, while virtual programming is great, you can’t get to know people and build a referral network from home. That remains the biggest selling point of our traditional bar association model. 3. Once a new normal is reached in the courts with a hybrid of virtual and in-person proceedings, our programming will be geared to help a new generation of trial lawyers be successful with that format. 4. It is up to the DBA to continue to emphasize wellness programs. I have been gratified this year to see the big attendance numbers for presentations by our Peer Assistance Committee and for the State Bar’s TLAP program. The first step to recovery is acknowledging that there is a problem. 5. Lastly, but I think most importantly, the DBA has to be in the vanguard of the fight for social justice. There is no more important issue in this country, and that probably isn’t changing anytime soon. The work of our Allied Dallas Bars’ Equality Taskforce has started, and we look forward to seeing its mission broaden and reach into the community at large. Regardless of our respective political beliefs and affiliations, all of us should be able to agree that everyone deserves an equal chance to share in the American dream. Together we can make a difference! As I say in my videos each week, we will get past the pandemic, so let’s use this time as an opportunity to take care of each other and make things better for the legal profession and in society at large. Robert
Women’s Equality Day 2020
Published by: DALLAS BAR ASSOCIATION
2101 Ross Avenue Dallas, Texas 75201 Phone: (214) 220-7400 Fax: (214) 220-7465 Website: www.dallasbar.org Established 1873 The DBA’s purpose is to serve and support the legal profession in Dallas and to promote good relations among lawyers, the judiciary, and the community. OFFICERS President: Robert L. Tobey President-Elect: Aaron Z. Tobin First Vice President: Krisi Kastl Second Vice President: Cheryl Camin Murray Secretary-Treasurer: Monica Lira Bravo Immediate Past President: Laura Benitez Geisler Directors: Vicki D. Blanton (Vice Chair), Rob Cañas, Jonathan Childers, Hon. Tina Clinton (Judicial At-Large), Stephanie G. Culpepper (President, Dallas Women Lawyers Association), Rocío García Espinoza, Isaac Faz (President, Dallas Hispanic Bar Association), Sakina Rasheed Foster, Justin Gobert (President, Dallas Association of Young Lawyers), Hon. Martin Hoffman, Kate Kilanowski, Bill Mateja (Chair), Hon. Audrey Moorehead, Lindsey Rames, Bill Richmond, Mary Scott, Andrew Spaniol (President, Dallas Asian American Bar Association), KoiEles Spurlock (President, J.L. Turner Legal Association), Amy M. Stewart, and Mary Walters Advisory Directors: Whitney Keltch Green (PresidentElect, Dallas Association of Young Lawyers), Marissa Hatchett (President-Elect, J.L. Turner Legal Association), Stacey Cho Hernandez (President-Elect, Dallas Asian American Bar Association), Jennifer King (President-Elect, Dallas Women Lawyers Association), and Javier Perez (President-Elect, Dallas Hispanic Bar Association) Delegates, American Bar Association: Rhonda Hunter, Mark Sales Directors, State Bar of Texas: Chad Baruch, Rebekah Brooker, Rob Crain, Michael K. Hurst, Mary Scott HEADNOTES Executive Director/Executive Editor: Alicia Hernandez Communications/Media Director & Headnotes Editor: Jessica D. Smith In the News: Judi Smalling Display Advertising: Annette Planey, Jessica Smith PUBLICATIONS COMMITTEE Co-Chairs: Andy Jones and Beth Johnson Vice-Chairs: James Deets and Elisaveta (Leiza) Dolghih Members: Timothy Ackermann, Logan Adcock, Wesley Alost, Stephen Angelette, Michael Barbee, David Black, Jason Bloom, Grant Boston, Andrew Botts, Emily Brannen, Jonathan Bridges, Amanda Brown, Angela Brown, Eric Buether, Casey Burgess, Cory Carlyle, Paul Chappell, Charles Coleman, Wyatt Colony, Shannon Conway, Natalie Cooley, Daniel Correa, G. Edel Cuadra, Jerald Davis, James Dockery, Angela Downes, Sheena Duke, Charles Dunklin, Alex Farr, Dawn Fowler, Juan Garcia, Britaney Garrett, Michael Gonzales, Andrew Gould, Jennifer Green, Kristina Haist, Susan Halpern, Bridget Hamway, Edward Harpole, Meghan Hausler, Jeremy Hawpe, Lindsay Hedrick, Marc Hubbard, Brad Jackson, Kristi Kautz, Thomas Keen, Daniel Klein, Michelle Koledi, Kevin Koronka, Susan Kravik, Jess Krochtengel, Dwayne Lewis, Margaret Lyle, Lawrence Maxwell, Jordan McCarroll, R. Sean McDonald, Kathryn (Kadie) Michaelis, Elise Mitchell, Terah Moxley, Daniel Murray, Jessica Nathan, Madhvi Patel, Keith Pillers, Kirk Pittard, Laura Anne Pohli, Luke Radney, Mark Rasmussen, Pamela Ratliff, David Ritter, F. Colby Roberts, Bryon Romine, Kathy Roux, Stacey Salters, Joshua Sandler, Matthew Sapp, Justin Sauls, Mazin Sbaiti, Mary Scott , Jared Slade, Thad Spalding, Jacob Sparks, John Stevenson, Scott Stolley, Elijah Stone, Amy Stowe, Adam Swartz, Ashley Swenson, Robert Tarleton, Paul Tipton, Michael Tristan, Tri Truong, Pryce Tucker, Adam Tunnell, Kathleen Turton, Peter Vogel, Suzanne Westerheim, Yuki Whitmire, Jason Wietjes, Sarah Wilson, Pei Yu DBA & DBF STAFF Executive Director: Alicia Hernandez Accounting Assistant: Shawna Bush Communications/Media Director: Jessica D. Smith Controller: Sherri Evans Events Director: Rhonda Thornton Executive Assistant: Liz Hayden Executive Director, DBF: Elizabeth Philipp LRS Program Assistant: Biridiana Avina LRS Interviewers: Viridiana Mejia, Marcela Mejia Law-Related Education & Programs Coordinator: Melissa Garcia Marketing Coordinator: Mary Ellen Johnson Membership Director: Kimberly Watson Projects Director: Kathryn Zack Publications Coordinator: Judi Smalling Receptionist: Grecia Alfaro Staff Assistant: Yedenia Hinojos DALLAS VOLUNTEER ATTORNEY PROGRAM Director: Michelle Alden Managing Attorney: Holly Griffin Mentor Attorneys: Kristen Salas, Katherine Saldana Paralegals: Whitney Breheny, Miriam Caporal, Star Cole, Tina Douglas, Carolyn Johnson, Andrew Musquiz, Alicia Perkins Community Engagement Coordinator: Marísela Martin Copyright Dallas Bar Association 2020. All rights reserved. No reproduction of any portion of this publication is allowed without written permission from publisher. Headnotes serves the membership of the DBA and, as such, editorial submissions from members are welcome. The Executive Editor, Editor, and Publications Committee reserve the right to select editorial content to be published. Please submit article text via e-mail to jsmith@dallasbar.org (Communications Director) at least 45 days in advance of publication. Feature articles should be no longer than 750 words. DISCLAIMER: All legal content appearing in Headnotes is for informational and educational purposes and is not intended as legal advice. Opinions expressed in articles are not necessarily those of the Dallas Bar Association. All advertising shall be placed in Dallas Bar Association Headnotes at the Dallas Bar Association’s sole discretion.
On August 26, the DBA presented a special Women’s Equality Day 2020 webinar with NPR Correspondent of Legal Affairs Nina Totenberg. The event was moderated by Judge Tonya Parker and drew a crowd of more than 300 participants.
Headnotes (ISSN 1057-0144) is published monthly by the Dallas Bar Association, 2101 Ross Ave., Dallas, TX 75201. Non-member subscription rate is $30 per year. Single copy price is $2.50, including handling. Periodicals postage paid at Dallas, Texas 75260. POSTMASTER: Send address changes to Headnotes, 2101 Ross Ave., Dallas, TX 75201.
October 2020â€
D al l as Bar A ssoci ati on l Headnotes 5
6 H e a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
Lewis Sifford to Receive Esteemed Professionalism Award BY ANDREW M. JONES
Dallas attorney Lewis R. Sifford has been named recipient of the 2020 Morris Harrell Professionalism Award. The award is presented annually by the Dallas Bar Association and the Texas Center for Legal Ethics and Professionalism to exceptional attorneys who, through their conduct and character, best exemplify professional traits that other attorneys admire and should strive to emulate. Sifford has practiced law in Dallas since 1973. He is the founding member of Sifford, Anderson and Company, P.C. He is an accomplished trial lawyer, having tried more than 150 cases before civil juries, with matters ranging from commercial litigation to catastrophic personal injury and death. He has also maintained a successful dispute resolution practice, in which he has arbitrated disputes regarding pharmaceuticals and medical devices, securities matters, and many more. Further, making use of his authoritative knowledge of professional ethics, Sifford has served as an expert witness in many diverse legal matters. While balancing the rigors of his practice, Sifford has also been a prolific educator, serving as an adjunct instructor to both SMU and Baylor law schools, where he has focused on trial advocacy and legal ethics. He has delivered more than 300 continuing legal education presentations, and he is especially known for his ethics courses, the subject being among his favorites. Among his numerous professional achievements, Sifford is a member of the American Board of Trial Advocates (ABOTA), a prestigious organization comprised of experienced, accomplished trial lawyers and judges. Among its purposes is the promotion and preservation of civil jury trials, which the organization advocates through numerous educational platforms. He has been honored with two prestigious
Lewis Sifford
ABOTA awards: the Mark P. Robinson Lifetime Achievement Award given by the ABOTA Foundation, and the National ABOTA Lifetime Achievement Award given by National ABOTA. Sifford is a Fellow of the American College of Trial Lawyers, which seeks to promote standards and ethics for trial practitioners. He is also a Fellow of the International Academy of Trial Lawyers. He received the DBA’s Texas Trial Legend Award in 2018 and has been named to Texas Super Lawyers and Best Lawyers in Dallas many years over. Sifford was most recently honored as the 2019 Baylor Lawyer of the Year in recognition of his legal ability, achievements as a lawyer and contributions to the legal profession. One of Sifford’s most memorable cases was a long-running matter in Pampa, Texas about 40 years ago, where as a young lawyer he defended a hospital that was in the process of closing its doors after serving the Pampa community for some 50 years. The hospital was facing a malpractice case, Sifford recalled, and he worked very closely with the hospital administrator in her early 80s who had also worked as a nurse for the hospital for decades.
“She was very emotionally engaged with the suit and felt strongly that the hospital had done nothing wrong,” he remembered. The nurse worked tirelessly with Sifford in preparing the case, and she became a motherly figure to him. Sadly, she died unexpectedly on the eve of trial. “It was one of the most emotional cases I have ever worked on,” Sifford said, and he was very saddened that the nurse was unable to see the trial to its conclusion, which resulted in a defense verdict. “Hundreds of people in the community came to the courthouse to hear the verdict and to provide an outpouring of support” in memory of the hospital administrator and to the hospital that had served the town for decades. Sifford completed both his bachelor and law degrees at Baylor University in five years. Sifford completed his studies on an expedited schedule to honor his father, who was facing a terminal illness. Sometime after he had graduated, his mother was asked how long her son had been a lawyer. “Since he was two years old,” she told the friend, no doubt commenting upon his advocacy abilities demonstrated at that tender age. “He is one of the kindest, most gracious and thoughtful people I’ve ever known,” said longtime colleague Jennifer “Jenny” Stephens, who has worked with Sifford as a partner and in other professional capacities for some 20 years. “He was my number one mentor among the many lawyers I’ve worked with or against,” Stephens noted. “I
have never met a lawyer better able to boil down complex facts in such a simple, understandable way,” she said, adding that “he is funny and always able to lighten things up with a good joke.” Most importantly, Stephens said, Sifford treats everyone with respect, including the shoeshine man at the ground floor of his office, whom she noted Sifford has befriended and treats like family. “Lewis personifies the ideals of the Morris Harrell Professionalism Award,” said DBA President Robert Tobey. “So many people talk the talk, but Lewis Sifford walks the walk. Lewis is a shining example to all of us to be better lawyers who value ethics and professionalism above all else.” Asked what sort of advice he would give other lawyers, especially younger ones, Sifford said: “of all the things a lawyer can strive for, having integrity is best. If you have no integrity, nothing else matters. When lawyers represent their clients with integrity, success will follow.” Sifford also encourages lawyers to reach out to others facing difficult times. “It’s not enough for us to simply let someone know that we are there for them; we must proactively find ways to actually help others who are facing difficult times, whether that means sharing a meal with them, helping with their workload or simply providing an empathetic ear.” Congratulations to Lewis Sifford, recipient of the 2020 Morris Harrell Professionalism Award. HN Andrew M. Jones is Co-Vice Chair of the DBA Publications Committee and can be contacted at andrew.jones@lionresources.com.
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October 2020â€
D al l as Bar A ssoci ati on l Headnotes 7
8 He a d n o t e s l D a l l a s B a r A s s o ciation
Focus
October 2020
Business Litigation/Franchise & Distribution Law
Defining Trade Secrets: What Passes the Test in Texas? BY CHRISTOPHER W. PATTON
More wide-ranging than patent or trademark protection, trade secrets can be both highly valuable and highly vulnerable—particularly during tough economic times like these. Employee turnover often creates new opportunities for confidential information to be disclosed. And with the COVID crisis in full swing, employee turnover is higher now than at any time in recent history. This current environment also creates a special security risk for companies, many already fighting to stay afloat. In the now-familiar “virtual office,” businesses are often forced to entrust trade secrets to employees working remotely. This can create even more problems when those same companies lay off or furlough their newly homebound staff. And former employees may bring
insider knowledge with them, as they go in search of new jobs. In this context, it is increasingly essential for companies to redouble their efforts to ensure their trade secrets remain confidential. Adopted by Texas in 2013, the Texas Uniform Trade Secrets Act (TUTSA) defines trade secrets as (a) business practices or information; which (b) derive commercial value from the fact that they are not generally known or not readily ascertainable by proper means; and (c) are subject to reasonable efforts under the circumstances to protect their secrecy. In 2016, the Defend Trade Secrets Act (DTSA) created a new federal cause of action which mostly tracks TUTSA’s trade secret definition (18 U.S.C. § 1836, et seq.) To establish a protected trade secret, a plaintiff must ensure that it undertook
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“reasonable efforts” to keep the information at issue confidential. Decisions over the last few years in Texas have addressed what qualifies as “reasonable,” holding, for example, that keeping confidential information in a password-protected database, requiring a keycard or security clearance to access information, checking material going in and out of a location where trade secrets are kept, or regularly training employees regarding their confidentiality obligations can pass the “reasonable” test under Texas law. Beyond this, an actionable trade secret must “derive independent economic value” from the fact that it is either not “generally known” or not “readily ascertainable through proper means.” Information has “independent economic value” if its hypothetical use by a competitor would somehow disadvantage the trade secret owner. So, while passwords alone would not typically qualify, courts have found that compilations or databases— even complications of exclusively public information—could meet this standard. A trade secret’s “independent economic value” can be established in several ways. Some plaintiffs offer expert testimony to demonstrate the trade secret’s value, but others have simply used employee testimony to detail how the information took substantial time and effort to develop. Indeed, one recent decision even found that the plaintiff had set forth sufficient evidence of the trade secret’s value by establishing that other companies partnered with the plaintiff to obtain access to the trade secret. Of course, information that can be easily reverse engineered—i.e., “readily ascertainable by proper means”—does
not qualify as a trade secret under either TUTSA or DTSA. But just because a competitor can potentially reverse engineer a trade secret does not, by itself, end the analysis. For example, if it would be theoretically possible, but costly, for a competitor to independently develop a specific trade secret, that information can still qualify. Recent Texas cases have identified specific types of information—most of them fairly mundane—which may qualify as trade secrets. Some examples include distributor and network lists created by a multi-level marketing company; a consumer product’s national account information, including the volume of product in stores, revenue, and sales trends; records showing the type of contracts which the plaintiff typically underwrites with a client; a DNA test developed by a skincare company to inform customers about personalized products; and a database containing 1.7 million job applicant resumes. Most trade-secrets claims tend to spring from common commercial business relationships, such as an employee who leaves one company to join a competitor, or a vendor who obtains a company’s trade secret information as part of an ongoing relationship. Although maintaining “reasonable” protections for trade secrets typically depends on each company’s unique situation, the current COVID crisis should, at the very least, spur a reassessment of best practices to ensure this valuable type of intellectual property does not fall by the wayside. HN Christopher W. Patton is a partner at Lynn Pinker Hurst & Schwegmann and can be reached at cpatton@lynnllp.com
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S I G N AT U R E R E S O LU T I O N .C O M
October 2020â€
D al l as Bar A ssoci ati on l Headnotes 9
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10 H e a d n o t e s l D a l l a s B a r A s s ociation
October 2020
Entrepreneurs in Community Lawyering Class of 2020 STAFF REPORT
The Dallas Bar Association welcomed the second cohort of the Entrepreneurs in Community Lawyering (ECL) group in September. ECL launched last year as the first local attorney incubator program in Dallas. Like other incubators across the country, the ECL attorneys are dedicated to providing affordable legal services to help “everyday people” who cannot afford to pay steep legal fees. By providing mentoring, office space, and many other start-up benefits, the ECL program “incubates” these solo practices for the first year to give them a solid foundation. Started by Laura Benitez Geisler during her year as president of the DBA, the program has flourished. “For the past year I have observed with pride the professional growth of the inaugural class,” Ms. Geisler said. “This special group of lawyers have worked diligently the past year to lay the foundation for a sustainable practice that caters to the needs of a lower income clientele, while collectively providing more than 2,800 hours of pro bono and low bono legal service. But what really warms my heart is the positive impact their efforts have had in the lives of others and ripple effect it will carry going forward—and for that I thank them.” Family law attorney and director of the program, Saedra Pinkerton, said she is excited to welcome nine attorneys with diverse backgrounds to the new cohort. Sanford Holmes, who graduated from George Washington School of Law, has practiced in Dallas for several years and is now ready to start his own firm serving under-represented citizens in the southern half of Dallas. His primary goal
is to promote services that help stabilize families and new businesses. Licensed in 2014, attorney Veronica Montemayor was inspired by her own family’s struggles to create a practice that serves the community by providing
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affordable access to justice through flat fee structures and payment plans. Markeyta Mitchell, who has always dreamed of opening a woman-owned and operated law firm, will focus her practice on estate planning, business law, and criminal misdemeanors. Tu Nguyen will focus her practice on family law, immigration law, and bankruptcy law. She plans to serve vulnerable and underrepresented members of the community through her willingness to listen to people from different segments of society with an open mind. Newly-licensed attorney Sussana Ampem believes that the tangible rewards earned from working in underserved communities far exceeds the challenges of running a small firm. To close the justice gap, Sussana plans a “best fit” fee structure that incorporates free and useful community resources already available to middle to low-income clients.
Claudia Brice and Kara Rafferty, both of whom graduated from law school in the 90’s, are returning to the law after years devoted to other pursuits. Ms. Brice will focus her practice on the areas of consumer and family law, while Ms. Rafferty will apply her years of business experience to helping clients with housing and financial issues. Michael Butz, who graduated from UNT Dallas College of Law in 2018, plans a general practice solo firm focused on representing working-class people. After more than 20 years in the corporate world, Mr. Butz will use his business acumen to provide legal access to everyday people. Lisa Woodard will focus her areas of practice in family law, ADR, and immigration law. She plans to reach clients who cannot afford to miss work or do not have childcare by providing weekend and evening hours and virtual meetings. HN
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October 2020
D al l as Bar A ssoci ati on l Headnotes 11
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12 He a d n o t e s l D a l l a s B a r A s s ociation
Column
October 2020
Ethics
Division of Contingency Fees in Withdrawals BY STEPHEN ANDREW KENNEDY
Professional Ethics Opinion No. 688, issued in May 2020, addresses the issue of division of fees in the context of a contingency fee agreement where an attorney is withdrawing from the representation due to a nonconsentable conflict of interest. The Opinion also addresses whether the withdrawing lawyer can negotiate an agreement with the client to recover fees incurred before the lawyer realized a nonconsentable conflict existed. Rule 1.04(f) of the Texas Disciplinary Rules of Professional Conduct addresses the division of fees between lawyers who are not in the same firm. Rule 1.04(f)(1) provides that a division or arrangement for division of a fee between lawyers who are not in the same firm may be made only if the division is in proportion to the professional services performed by each law-
yer or made between lawyers who assume joint responsibility for the representation. Thus, “fee divisions between lawyers not in the same firm must be made either in proportion to the professional services performed by each lawyer or based on the lawyers’ assumption of joint responsibility for the representation.” Professional Ethics Opinion 568 (April 2006). Rule 1.04(f)(1)(i) allows for a division of fees “in proportion to the professional services performed by each lawyer.” It also provides that “a division of a fee based on the proportion of services rendered by two or more lawyers contemplates that each lawyer is performing substantial legal services on behalf of the client with respect to the matter” and requires that “each lawyer who participates in the fee have performed services beyond those involved in initially seeking to acquire and being engaged by the client.” Com-
Evening Ethics: Ethics in the
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ment 12 of Rule 1.04. In Opinion 688, the facts presented to the Committee involved an attorney who worked approximately ten hours on the matter before discovering the conflict. The Committee concluded that a proposed fee division whereby the referring lawyer was to receive 75 percent of the fees earned on the first $1 million of recovery and 50 percent thereafter was not consistent with Rule 1.04(f)(1)(i) because there was no “reasonable correlation between the amount or value of service rendered and responsibility assumed, and the share of the fee to be received” where the referring attorney performed ten hours of work. Tex. Ethics Comm’n Op. No. 688 (2020). “In the opinion of the Committee, there is no ‘reasonable correlation’ between the amount or value of services rendered in merely filing a petition and a predetermined 75 percent or 50 percent share of all fees earned from future recovery in a serious personal injury case.” Id. The Committee did not reach the question of whether a lawyer may ever enter into a fee division “in proportion to the professional services performed” if the lawyer will not be representing the client at all after entering into a fee division agreement. The Committee also addressed the issue of whether the Rules allow for a division of fees between lawyers under Rule 1.04(f)(1)(ii) after a conflict of interest arises. The Committee concluded that “[i]t is impossible for a lawyer who withdraws from an ongoing representation due to a conflict of interest to exercise joint responsibility for the representation after the withdrawal. The very conflict
that prevents the lawyer from continuing the initial representation of the plaintiff also prevents the lawyer from meeting the joint responsibility requirements outlined in Comment 13 to Rule 1.04.” Accordingly, a lawyer who withdraws from an ongoing representation due to a conflict of interest may not enter into an agreement to divide fees based on the acceptance of joint responsibility for the representation with client’s new lawyer. On the issue of a negotiated payment for actual work performed, the Committee concluded that a lawyer may attempt to reach an agreement with the client pertaining to such compensation. The Committee cautioned, however, that “a lawyer should be mindful that courts ‘scrutinize with jealousy’ all modifications to a client fee agreement during the representation” citing Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964) (“There is a presumption of unfairness or invalidity attaching to the contract, and the burden of showing its fairness and reasonableness is on the attorney.”). Opinion 688 therefore teaches that an attorney operating under a contingency fee agreement who must withdraw due to a conflict must comply with all aspects of Rule 1.04(f) addressing division of fees. Furthermore, negotiating compensation directly with the client carries the presumption of unfairness or invalidity. To avoid any question of impropriety, the referring attorney may determine that the prudent course is to write-off the time and expenses. HN Stephen Andrew Kennedy is the founder of Kennedy Law, P.C. and is a member of the DBA Legal Ethics Committee. He can be reached at skennedy@saklaw.net.
October 2020
D al l as Bar A ssoci ati on l Headnotes 13
TWO WORDS:
PROVE IT. I N T R O D U C I N G C H R I S L E W I S & A S S O C I AT E S Those who know Chris Lewis know that his record as a criminal defense lawyer speaks for itself. In more than 250 state and federal jury trials across the country, Chris has not only dominated — he has achieved one of the highest acquittal rates in the state of Texas. Chris has been described as “a master in the courtroom.” Attorneys and clients call his approach to trials “strategic, creative and brilliant,” saying his examinations are “…unpredictable and tremendously effective.” There’s no doubt that Chris Lewis & Associates can handle any type of criminal charge — everything from white-collar crimes and drug conspiracies to violent felonies. They’ve handled them all. They’ve got your back, and they are ready to prove it.
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14 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
October 2020
Business Litigation/Franchise & Distribution Law
Business Insurance Coverage Basics For COVID-19 BY JODY RODENBERG AND ANDREW B. SOMMERMAN
Many businesses are looking to their insurance company for coverage following business interruptions in the wake of COVID-19. Lawsuits have been filed and rulings are starting to trickle out of courts across the county. Business owners and executives will likely continue looking to lawyers for assistance. While this issue is evolving on a week-to-week basis, it is helpful to understand some types of coverage that may apply to your client’s business. The law regarding business insurance coverage is becoming increasingly complex. Every insurance policy, including the definitions of key words and types of coverage provided, is different. A lawyer should closely examine a client’s policy and declarations page when advising clients. Certain provisions are likely to be
of special concern in regard to COVID19 claims.
Business Income and Extra Expense Insurance
Some insurance policies provide coverage for loss of income to a business in certain situations. It is common for loss of business income to be covered when there is loss or damage to the business property. It is possible that this coverage could be triggered by either a complete cessation of your client’s business, or even a partial slow down. It all depends on the terms of the policy.
Business Income from Dependent Properties
Some insurance policies provide coverage for lost business income when a dependent property sustains loss or damage.
Dependent property is generally thought of as property owned by others but provides some type of resource or material on which your client’s business relies. Whether this coverage applies depends on the definition of a dependent property, the reason the dependent property sustained loss or damage, and the extent to which a business may have been able to obtain resources of a different source.
Actions of Civil Authority
Some insurance policies cover loss of business income when an order of civil authority prohibits physical access to your property. This coverage is important to consider for those clients whose businesses have been subject to lockdowns, whether applicable to geographic regions or for particular types of businesses. Further, this type of coverage may be limited to a shorter time period than other types
of coverage within the same policy.
Pandemic Coverage
It is possible your client may have obtained coverage that expressly covers loss due to a pandemic. This possibility is less common, but it certainly worth evaluating and is one example of why you should read the entire insurance policy, cover to cover.
Virus Exclusion or Limitation?
You will need to determine whether your client’s policy contains any exclusions or limitations for viruses and the extent to which those exclusions apply to any type of coverage. HN
Jody Rodenberg is as Attorney at Sommerman, McCaffity, Quesada & Geisler, LLP and can be reached at jrodenberg@ textrial.com. Andrew B. Sommerman is a Senior Partner at the firm and can be reached at andrew@textrial.com.
Ethics Jeopardy
Mark Your Calendar! DBA Annual Meeting Friday, November 6, 4:00 p.m.
Test your knowledge of the disciplinary rules against our experts and stay up to date on these important rules.
DBA Awards Luncheon Thursday, November 12, Noon
Monday, October 5, Noon Ethics 1.00
More information to come. Stay up-to-date at www.dallasbar.org.
Sponsored by the Legal Ethics Committee
2020 Sustaining Members of the Dallas Bar Association
The DBA sincerely appreciates the support of its Sustaining Members whose financial contributions enhance the preservation of the historic Belo Mansion.
Ben Abbott
Hon. Bonnie L. Goldstein 44th District Court
Mike McKool McKool Smith P.C.
Randolph D. Addison Addison Law Firm P.C.
Cecily S. Gooch
Nancy A. Nasher NorthPark Development Company
Micah Adkins The Adkins Firm, P.C.
Adam Hamilton Fox Rothschild LLP Krista Hanvey
W. Mike Baggett Carmen Blankenship Law Office of Carmen Blankenship Hilary Beth Bonial Bonial & Associates, P.C. Mary B. Campbell
James J. Hartnett, Jr. The Hartnett Law Firm Christina Heddesheimer Dentons US LLP Eric Hinton Southern Methodist University Gregory Hudson Comerica Bank
J. Scott Chase Farrow-Gillespie Heath Witter, LLP Wm. Kevin Cherry Cherry Petersen Landry Albert LLP William Cox Cox Nawaz & Levine L.L.P. David A. Eldridge Al Ellis Sommerman, McCaffity & Quesada & Geisler L.L.P. William A. Galerston Iola Galerston, LLP David L. Godsey Godsey - Martin, P.C.
Kathleen E. Irvin Attorney at Law Justice Tom James Attorney at Law Kristina N. Kastl Kastl Law, P.C. Laura Kupish Baker & McKenzie, LLP
Robert H. Osburn Law Office of Bob Osburn Ellen S. Pryor UNT Dallas College of Law Glynis W. Redwine The Redwine Law Firm Angel L. Reyes, III Reyes Browne Reilley S. Theis Rice Trinity Industries, Inc. Michael L. Riddle David Rost The Beneficient Company Group, L.P. Douglas Salisbury Mitzner LLP Charles W. Shewmake Thompson & Knight LLP Darryl J. Silvera The Silvera Firm
Sang Eun Lee Bell Nunnally & Martin LLP
Peter S. Vogel Foley & Lardner LLP
Ron MacFarlane The MacFarlane Firm, P.C.
Natalie Washington Lynn Pinker Hurst & Schwegmann
Justin Martin Godsey - Martin, P.C. Bradley Marx Marx Law Firm Sawnie A. McEntire Parsons McEntire McCleary PLLC
Noah Webster Zix Corporation
37 36 18 3.8 2.8
October 2020
D al l as Bar A ssoci ati on l Headnotes 15
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16 H e a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
To Honor Hispanic Heritage Month, Let Us Continue to Push Forward BY ISAAC FAZ
During Hispanic Heritage Month, we celebrate the culture and independence of various Spanish-speaking countries, including the land from which my parents, and many others, emigrated—Mexico. As we celebrate our heritage, I encourage you to pause to recognize the challenges that many within the Latinx community are facing today. In this most unusual of years, many Hispanics have been directly affected by both the COVID-19 pandemic, as well as current developments related to longstanding civil rights concerns. First, Hispanics have been disproportionately impacted by COVID-19. Both cases and deaths among Hispanics exceed Hispanics’ share of the population. We are essential workers. Hispanics, Blacks, and Asians account for over 60 percent of essential workers in Texas. As of mid-August, Hispanics accounted for approximately 40 percent of the state’s population, however, the community has sustained upwards of 52 percent
of COVID-19 deaths—including in my own family. Many of these workers—documented or otherwise—are health care workers, caretakers, and literally keep the food on the table via agricultural, service or production, yet they continue to work without adequate protection or rights. Our essential workers are powering this state forward. In Dallas, data shows the 75211 zip code, which is overwhelmingly Hispanic, has one of the highest rates of COVID19. Compounding the problem, per a 2019 report by the City of Dallas, the Latinx community is four times more likely not to have health insurance. This should not surprise us, since Texas has the highest rate of uninsured individuals in the nation. How can we recover as a city and state if we do not help the recovery of the Latinx community? Second, in regard to civil rights, mem-
DBA's First Criminal Law Bench Bar Conference Friday, November 13 11:00 a.m. - 4:00 p.m. Held Virtually
bers of the Hispanic community are directly impacted by current immigration policies and recent court decisions. This summer the U.S. Supreme Court ruled in Department of Homeland Security v. Regents of the University of California that DHS did not follow proper procedure in moving to end the Deferred Action for Childhood Arrivals (DACA). Texas has the second highest number of DACA recipients of any state and the DFW area has the most in the state. “Dreamers,” as impacted individuals have been called, are our neighbors, friends, first responders, troops, educators, and family. They are students and workers who, according to the Center for American Progress, pay over $3 billion in state and local taxes. Yet there is still not a permanent resolution to this complex issue. Separately, the issue of the separation of children and adults at border facilities raises assorted legal concerns, including the right to representation for affected individuals. Where do we go from here? We must work towards better representation. The Texas Demographic Center at UT San Antonio states that half of the total population growth over the last decade has been led by Latinos. In Dallas County at least 40
percent of our residents are Hispanic, yet a closer look at our elected officials indicates otherwise. From the court room to city hall, from school boards to Capitol Hill, a candid conversation about diversity must include increasing representation of Hispanics and other groups to ensure we are equally represented among those elected to serve us. We must work towards more voting engagement. For the first time in our history Hispanics will be the largest minority voting group. The Pew Research Center states an estimated 32 million Hispanics will be eligible to cast a ballot on November 3. In Texas, Latinos account for 30 percent of the eligible voter population. This is THE opportunity. We have numbers. We are inspired. We have an extra week to vote early. I know voting is not a panacea, but during Hispanic Heritage Month it feels like the natural first step. I firmly believe that we cannot just talk about change, we need to be that change. We can see that change manifest if we start by voting. Voting leads to power and elected seats, those seats lead to policy discussions, and inclusive policies will lead to a better life for all of us. This Hispanic Heritage Month we invite you to partner, support, and join us at DallasHispanicBar. com to help make that change a reality. Juntos Podemos (“together we can”). HN Isaac Faz is President of the Dallas Hispanic Bar Association and the Chief Legislative Counsel at Dallas College. He can be reached at isaac@isaacfaz.com.
Let’s Keep it Social. Follow Us! Find out what’s going on at the #DallasBarAssoc | www.dallasbar.org.
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DVAP’s Finest DAVID TAUBENFELD
David Taubenfeld is a Partner at Haynes and Boone, LLP. 1. How you first get involved in pro bono? When I first graduated from Law School in 1985, I took a post-appeal death row inmate case and I volunteered as a mediator for a juvenile offender mediation program here in Dallas County. Also, I participated in veterans’ clinics and other pro bono activities. It was just something I always knew I was going to do. 2. What types of cases have you accepted? All types. Death row habeas cases. Landlord-tenant disputes. Consumer disputes. Juvenile mediations. Asylum cases. 3. Describe your most compelling pro bono case. Most compelling case was the case for the Widow Bell. Her husband died suddenly, and had bought a new truck for his business shortly before he died. He bought credit life insurance on the truck. When he died, the Widow Bell could not pay for the truck, and the insurance company (wrongfully) denied coverage, essentially calling the Widow’s suddenly departed husband a liar. We represented her through one day of trial, after which the insurance company paid all benefits and then some. 4. What impact has pro bono service had on your career? It’s made it more enjoyable and satisfying. There is nothing more satisfying than a pro bono success.
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Pro Bono: It’s Like Billable Hours for Your Soul. To volunteer or make a donation, call 214/748-1234, x2243.
October 2020â€
D al l as Bar A ssoci ati on l Headnotes 17
18 H e a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
Meet the Dallas Volunteer Attorney Program Staff The Dallas Volunteer Attorney Program is a joint program of the Dallas Bar Association and Legal Aid of NorthWest Texas. Providing free civil legal services to low-income residents of Dallas County, the DVAP staff recruits, trains and supports hundreds of volunteer attorneys who donated more than 13,000 hours in the last calendar year. We invite you to meet the DVAP staff here.
Michelle Alden, Director (214) 243- 2234 aldenm@lanwt.org Michelle joined DVAP in 2007 and was appointed to her current position in 2017. She oversees all operations of DVAP.
Holly Griffin, Managing Attorney (214) 243-2263 griffinh@lanwt.org
Holly joined DVAP in 2017. She is responsible for the day-today management of DVAP and works closely with the management teams of both Legal Aid and the Dallas Bar Association. Carolyn Johnson, Paralegal (214) 243-2260 johnsonct@lanwt.org
Star Cole, Paralegal (214) 243-2240 coles@lanwt.org
Whitney Breheny, Paralegal (214) 243-2238 brehenyw@lanwt.org
Star joined DVAP in 2018. She is responsible for coordinating the Veterans Clinic and handles DVAP’s expunction and non-disclosure clients.
Whitney joined DVAP in 1999 and handles all referrals of client cases to volunteer attorneys.
Miriam Caporal, Paralegal (214) 243-2245 caporalm@lanwt.org
Miriam joined DVAP in 2016. She is responsible for coordinating the Pro Se Divorce Clinic for cases without children and the East Dallas Legal Clinic.
Tina Weaver Douglas, Paralegal (214) 243-2241 weavert@lanwt.org
Tina joined DVAP in 2000. She is responsible for coordinating the Pro Se Divorce Clinic for cases with children involved and DVAP’s monthly prove up clinic.
Stolley Law
P.C.
Scott Stolley Appellate Attorney Respected Advocate Gifted Writer Trusted Bar Leader
“Scott is my go-to appellate lawyer.” Laura Benitez Geisler Sommerman, McCaffity, Quesada & Geisler, L.L.P
scott@appellatehub.com • (469) 235-4588
Carolyn joined DVAP in 2019. She coordinates the Wills Clinic and assists at the Veterans Clinic. Marisela Martin, Community Engagement Coordinator (214) 243-2243 martinm@lanwt.org
Marisela joined DVAP in 2019. She is responsible for DVAP’s social media and recruitment of volunteer attorneys and firms. Andrew Musquiz, Paralegal (214) 243-2239 musquiza@lanwt.org
Andrew joined DVAP in 2001. He coordinates the West Dallas Clinic and the Pro Se Divorce Clinic for Spanish-speaking clients.
Alicia Perkins, Paralegal (214) 243-2245 perkinsa@lanwt.org
Alicia joined DVAP in 2009. She monitors and closes all client cases assigned to pro bono attorneys. Alicia also assists with the Friendship West Clinic. Kristen Salas, Mentor Attorney (214) 243-2237 salask@lanwt.org
Kristen joined the DVAP staff in 2008. She mentors volunteer attorneys on their pro bono cases by providing advice, help with pleadings, and assistance in court as needed. Kristen also assists with the Wills Clinic. Katherine Saldana, Mentor Attorney (214) 243-2235 saldanak@lanwt.org
Katherine joined the DVAP staff in 2007. She mentors volunteer attorneys on their pro bono cases by providing advice, help with pleadings, and assistance in court as needed.
October 2020
D al l as Bar A ssoci ati on l Headnotes 19
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20 H e a d n o t e s l D a l l a s B a r A s s o ciation
Focus
October 2020
Business Litigation/Franchise & Distribution Law
Buying a Franchise: Identifying the Red Flags BY KLINT RYBICKI AND CHERYL MULLIN
Buying a franchise is a good way to get a jump start on a new business, with the franchise providing instant brand name recognition and a plug-and-play operating system. Along with the benefits, however, come contractual obligations and reliance that the franchisor will exercise its discretionary powers in the best interest of its franchisees. For these reasons, it is important to guide clients through the due-diligence process and help them to understand their franchise commitments. In conducting due diligence, there are two primary sources of information: the franchise disclosure document (or FDD) and speaking with other franchisees. The FDD contains information about the franchisor’s management team, information about fees and other contract provisions, an estimate of initial investment costs, and data and con-
tact information concerning operating and former franchisees. Most FDDs also contain historical- or projected-earnings information for the franchised business. When we are hired to do an “FDD Review,” we approach the project as follows: How Much Can I Make? We look at the income potential. Federal franchise rules declare it an unfair trade or practice for a franchisor to convey any earnings information to a potential franchisee unless the information is contained in Item 19 of the FDD. Most franchisors choose to include this information. We analyze the information and point out any inconsistencies. Keep in mind that it is human nature for your client to believe that they will outperform all the other franchisees. How healthy is the franchise network? How is the franchise system doing? The FDD contains information about franchisees and franchised locations over the past
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three years. A disparity between the number of franchise agreements signed and stores open may indicate that the franchisor lacks the resources to get stores open in a timely manner. A significant proportion of unit transfers or closures may indicate performance issues or that franchisees are wanting to leave the system. What does the Franchisor give? What does the Franchisor take away? We look at the business deal. Specifically, what rights are being granted and what rights does the franchisor reserve for itself? Can the franchisor establish competing units in the franchisee’s area? Can the franchisor compete with the franchisee through alternate channels of distribution, such as online sales? What control does the Franchisor have over Franchise operations? We look at the franchisor’s control over the franchisee’s operation. Does the franchisee have the right to set their own retail prices? Are there any marketing or customer restrictions? Must the franchisee source all products and services from designated or approved suppliers? The buck stops with you. We remind our client that, even if they form a separate business entity to operate the franchise, the franchisor will want the business owners to personally guarantee the franchisee’s obligations. You can’t quit. We remind our client that they are signing up to operate a business for the full franchise term. If the client decides to terminate or close the business early, they can be on-the-hook for damages in the nature of lost future royalties or profits through the end of the franchise term. You are renting an apartment, not buying a house. The franchise is for a fixed term, subject to any renewal options. If
the client decides to exercise their renewal rights, they must sign the form of franchise agreement that is being offered to new franchisees at the time of renewal. This may include higher fees and/or loss of territorial protection. You can only sell what you own. We tell our client that, if they want to sell the business, they can sell the assets of the franchised business (including going concern value), but absent franchisor’s prior approval, they cannot sell the franchise agreement that they have. As with renewal, the buyer must sign the franchise agreement form then being offered to new franchisees. Again, this may include higher fees and/or loss of territorial protection. And in the end…When the franchise term ends, the client must stop using the franchisor’s trademarks and operating system. The franchisor most likely will have an option to assume the franchisee’s lease and to purchase the assets of the franchised business at either fair market or book value but without compensation for goodwill. The franchisee and its owners will likely be restricted, most likely for a two-year period, from engaging in a similar business either at the former franchised location or within proximity of any other franchised business. Franchising can be a very good way to open a profitable business as it provides instant name recognition and a proven business plan. But franchising is a business relationship. And as with any other business relationship, it is our job as franchise counsel to help the client make an informed decision. HN Cheryl Mullin and Klint Rybicki are shareholders at Mullin Rybicki, P.C. Klint can be reached at klint.rybicki@mrkpc.com and Cheryl can be reached at cheryl.mullin@mrkpc.com.
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October 2020
Focus
D al l as Bar A ssoci ati on l Headnotes 21
Business Litigation/Franchise & Distribution Law
Three Key Ethics Rules for Your Remote Practice BY JEANNE M. HUEY
Lawyers are increasingly choosing to work remotely—and to let their staff do so as well. This trend began prior to the advent of COVID-19 as many firms reduced their office space and implemented a paperless practice, and there is no reason to think that this trend will not continue after the pandemic has passed. Regardless of whether you are working outside the office due to the kind of law you practice, the location of your clients, or the pandemic, there are three key ethics rules to keep in mind when working remotely; (1) Rule 1.01, competence; (2) Rule 5.03, supervision of non-lawyer staff and (3) Rule 5.5, the prohibition against the unauthorized practice of law. In applying each of these rules to a remote work scenario, it is important to remember a lawyer’s overarching duty of confidentiality to clients under Rule 1.05. Rule 1.05 applies to every lawyer’s practice no matter where they are working or who their clients are. And it is not hard to imagine confidentiality breaches occurring when lawyers and staff share work computers with family members, log onto the internet using free Wi-Fi, or take client calls in the presence of others. Most Texas lawyers know that Rule 1.01 includes a mandate that lawyers be competent in the “benefits and risks” associated with the technology they use. (Comment 8 to Rule 1.01). Here again, remote work is rife with peril. Take the most basic requirement for remote working—the internet. Most people do not really know if their inter-
net connection or network is secure or not. Texas Ethics Opinion 680, which emphasizes the duty of competence in technology and focuses on how lawyers should evaluate the security of their cloud-based storage, provides some help. However, for those lawyers who simply want to be sure that their client data is secure while they and their staff are working away from the office—the practical solution to Rule 1.01’s mandate is to seek advice from a qualified consultant on internet, cloud, and personal device security issues. For law firms who have non-lawyer staff, working outside of the office adds an additional complication—how do you properly supervise these employees to ensure their compliance with the Rules? Rule 5.03 requires that lawyers who directly supervise nonlawyer employees make a “reasonable effort” to ensure that the nonlawyer’s conduct is compatible with the lawyer’s own professional obligations. The best way to do that, pandemic or not, is to maintain a policies and procedures handbook that all lawyers and staff (no matter how temporary, parttime, or remote) are required to read and acknowledge with their signature. It should be updated as circumstances, the Rules, or the practice changes. If you do not currently have such a handbook, take the opportunity to adopt one now. The State Bar of Texas Law Practice Management Program has online resources to get you started. Do not forget to add policies and procedures vital to a remote law practice. Address not only the risks and Rules mentioned in this article but every
other issue that has come up in the months since your practice has gone remote, including procedures for video conferencing and the use of personal and home electronic devices and networks. Finally, whether you are practicing law when traveling, at a vacation home, or at an out of state office, careful analysis and consideration of each applicable rule regarding the unauthorized practice of law (UPL) is required. The Texas Rule is straightforward— it prohibits practicing law or assisting another in practicing in another jurisdiction if doing so would violate the regulation of the legal profession in that jurisdiction. (Rule 5.05). Most other states’ rules and ethics opinions provide more detailed guidance for a multijurisdictional practice along the lines of ABA Model Rule 5.5. Lawyers who are working outside of their state of licensure would be wise to know the UPL rules that apply where
they are living or staying temporarily, where they are actually doing the work, and where their clients are located. You cannot know if you are violating Rule 5.05 if you do not know the rules in the jurisdiction where you may be determined to be practicing law. There are very few bright lines, but most jurisdictions consider whether the lawyer is actually “practicing law” and, if so, whether they are relocated on a “temporary” basis. In every case, claiming to be a local lawyer or have a local office is likely to cause trouble. In the era of COVID-19, staying safe means more than protecting your health. For lawyers, it also means protecting your license and reputation by knowing and following the rules that will allow you to work wherever you want. HN Jeanne M. Huey, of Hunt Huey PLLC, is Chair of the DBA Legal Ethics Committee. She can be reached at jhuey@ hunthuey.com.
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22 H e a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
Email Messages at Trial BY T. RAY GUY
Every litigator knows that email messages cause discovery headaches. And as a trial lawyer friend of mine once wrote, “They are the cockroaches of litigation— impossible to eradicate and outliving all other forms of evidence.” But email messages also provide a realtime written history of a business dispute— an as-it-happened record of the events making up the controversy. An event or communication that would never have been documented in a memorandum to the file or a letter is now memorialized in 30 seconds by an email message. And at trial, email messages have credibility arguably exceeding that of oral testimony because of my favorite litigation truism: witnesses change their stories, but documents do not. Prose committed contemporaneously to paper or to electronic memory can carry persuasive power exceeding that of unsupported, memory-based oral testimony. The two primary obstacles to the admissibility of email messages are authentication and overcoming hearsay objections. In practice, the authenticity of email messages is seldom contested, especially if the sender or a recipient—a “witness with knowledge” under Federal Rule of Evidence 901(b) (1)—is available to testify. Absent a witness concerning the specific message, authenticity can be proven under Rule 901(b)(9) (“Evidence About a Process or System”)
by testimony about the email system from an expert, under Rule 702, or a lay-witness opinion, under Rule 701. Authentication is only half the battle. Even if the author or a recipient is on the stand identifying an email message, it remains hearsay—a statement not made while testifying at the trial—if it is offered to prove the truth of the assertion in the statement. There are several ways to overcome a hearsay objection. Not Offered for the Truth. The message is not inadmissible hearsay if you do not care whether it is true—if, for example, you just need it to establish chronology, or the fact that it was said. Expect a limiting instruction that the message cannot be considered for its ostensible truth. Business Record. The business records (or “shop book”) exception to the hearsay rule, codified in Rule 803(6) (“Records of a Regularly Conducted Activity”) can prove up an email message. Present Sense Impression. An exception especially appropriate for the prevalence of unfiltered, immediate email is found in Rule 803(1), under which a “statement describing or explaining an event or condition, made while or immediately after the declarant observes it,” is admissible. Statement Against Interest. If the author is not available at trial, an email message that was “so contrary to [his] proprietary or pecuniary interest or had so great a tendency to invalidate [his] claim” that he
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must have believed it to be true, is admissible under rule 804(b)(3). Used to undercut testimony of opposing party or adverse witness. Obviously an email communication that contradicts the opposing party’s position or is inconsistent with an adverse witness’s trial testimony is extraordinarily useful in cross-examination. The Rules address the use of such messages in two ways: 1. As an Opposing Party’s Statement. Under Rule 801(d)(2), the former “admission of a party opponent” is now “an Opposing Party’s Statement,” and is not hearsay if it is properly attributed to the opposing party. Like the foregoing bases for admission, it does not require that the declarant be available to testify, but like the following grounds which do, the statement is most commonly woven into the examination of the adverse party or its representative. 2. As a Witness’s Inconsistent Statement. An email message from a witness who is not the adverse party, or someone authorized to speak on its behalf, which is inconsistent with his trial testimony is admissible under Rule 613. Again, expect a limiting instruction. Used to support testimony of your own witness. Email communications can also support your witness’s testimony in direct examination. Rebutting Fabrication Claim. A message authored or adopted by a testifying
witness that is consistent with his trial testimony does not constitute hearsay and is admissible under Rule 801(d)(1)(B) if offered to rebut a claim of recent fabrication or of testimony shaped by improper influence or motive. Refreshed Recollection and Recollection Recorded. The message can be used either to refresh the witness’s recollection, under Rule 612, or as memorialization of an event when it was fresh in the witness’s memory, under Rule 803(5). Usually the message itself will not be admitted unless offered by the opposing party. And such use of an email implicitly admits that the witness’s memory is not complete and needs refreshing or is dependent on the past record. But it is usually better than nothing; a contemporaneous piece of paper, even if it is not actually seen by the jury, undoubtedly helps dispel any notion that the witness’s version of the facts could have been concocted the week before trial.
Conclusion
Properly used, email messages can undercut adverse trial testimony or buttress favorable testimony. Collections of such messages can frame the chronology of a dispute and take the jury back to the time when the controversy arose. Good trial lawyers see past the discovery headaches and spend appropriate time in trial preparation planning for their admissibility and effective use. HN
Ray Guy is a member of Frost Brown Todd LLC and can be reached at rguy@fbtlaw.com.
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October 2020
Focus
D al l as Bar A ssoci ati on l Headnotes 23
Business Litigation/Franchise & Distribution Law
Fraud Alert: Issues and Claims in a Complex Divorce BY CARSON EPES STEINBAUER
Sometimes better turns to worse, and what once was true may no longer be so. High-net-worth couples dealing with divorce face many complex challenges, including but not limited to the preservation, valuation, and division of ownership interests in privately held companies, and the fraudulent dissipation of assets. There is no worse fraud than that committed by one spouse upon the other. In 1977, the Texas Supreme Court abolished the doctrine of interspousal immunity to the extent that it barred all claims between spouses for willful and intentional torts. Later, in 1998, the Supreme Court ruled that the fraudulent dissipation of community assets by a spouse during marriage is not an independent tort or cause of action from which damages can be recovered. Rather, a fraudulent transfer of marital assets may be presented to the factfinder by the injured spouse for consideration when seeking a disproportionate division of the community estate. The disproportionate division in favor of one spouse over the other compensates for the community property wrongfully expended or wasted by the spouse who committed the fraud. While fraud in the civil arena allows for economic and exemplary damages as set forth in the Texas Civil Practice and Remedies Code, fraud on the community in a marriage is an entirely separate animal, the legal remedies of which are specifically outlined in Section 7.009 of the Texas Family Code. If the factfinder finds that a spouse committed actual or constructive fraud on the community, then the Court shall reconstitute the total community estate by determining the value of that portion of the estate that was depleted and recalculating the entire estate.
Once the community estate has been reconstituted, the court is tasked with making a just and right division of the estate. In making a just and right division, the court has several legal and equitable remedies that it may consider. These remedies include awarding the wronged spouse a disproportionate division of the community estate or appropriate share of the community estate remaining after the actual or constructive fraud on the community; awarding a money judgment in favor of the wronged spouse against the spouse who committed the actual or constructive fraud on the community; or awarding to the wronged spouse both a money judgment and an appropriate share of the community estate. Unlike civil fraud, fraud on the community does not allow for recovery of damages and the remedies in the Family Code are exclusive to a spouse in a divorce. Many times, a third party is in part responsible for fraud on a spouse during marriage. For example, a spouse may have secretly transferred real or personal community property out of the marital estate to a relative or a paramour to the detriment of the innocent spouse. In these circumstances, it may be appropriate to join the third party in the case for fraud, conspiracy, and conversion. Once again, independent tort damages are not recoverable against the third party in this instance; rather, the relief sought in the third-party action is the recovery of the community property fraudulently transferred out of the estate. In lieu of damages calculated for purposes of reconstituting the marital estate, a court may impose a constructive trust to recover the specific property wrongfully transferred out of the community. Notably, fraud on the community is not subject to the traditional statute of limitations that applies to civil fraud claims.
Because a claim for fraud on the community must be litigated as part of a just and right division in a divorce, it follows that a fraud claim in the context of a divorce is not ripe until the divorce is filed. Similarly, when fraud is alleged defensively in a divorce, such as when a spouse claims that he or she was fraudulently induced to sign a postnuptial agreement, Texas courts have held that the statute of limitations does not apply to defeat liability on an obligation induced by fraud. Other times, a deceiving spouse may waste assets or intentionally run up debt, with the intent to deplete the value of the community estate prior to division in a divorce. This is sometimes true when a spouse has exclusive control of small business interests. The fraudulent spouse may transfer stock to a third party or take on extraordinary business debt to devalue the business with the intent to harm the other spouse and reduce that other spouse’s share of the estate. In this instance, the innocent spouse may again
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turn to the Texas Family Code and seek the appointment of a receiver for the preservation and protection of the parties’ property. The appointment of a receiver in a divorce is not subject to the stringent requirements otherwise set out in the Texas Civil Practice and Remedies Code, which requires a showing that property is in danger of being lost, removed, or materially injured. Rather, a spouse must only show that a receiver is necessary to preserve and protect property owned by the parties in the divorce. Identifying and dealing with these and other complex issues in a contentious divorce is not for the faint of heart. When fraud is suspected and valuable assets are at stake, hire an experienced family lawyer to best protect a spouse’s financial interests in a divorce. HN Carson Epes Steinbauer is a Partner with Shackelford, Bowen, McKinley & Norton, LLP and is Board Certified in Family Law. She can be reached at csteinbauer@shackelford.law.
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24 H e a d n o t e s l D a l l a s B a r A s s o ciation
October 2020
Legal Implications Associated with Livestreamed Proceedings BY LISA GREENWOOD DUFFEE AND LARISA MARTIROSOVA
After the COVID-19 pandemic reached Texas, courts were among the first agencies to limit public interaction by postponing non-critical hearings and handling critical matters remotely. More recently, courts expanded beyond just hearing “essential” matters, with many courts now handling a variety of proceedings remotely, including final trials. Proceedings are now being held on the videoconferencing application Zoom and then streamed to the public on YouTube to maintain the transparency and allow access to the remote court proceedings. The individual courts’ web pages now have a tab called “Join Livestream” which links to live YouTube feeds of the growing number of Zoom proceedings. Many courts’ online COVID-19 policies and procedures warn litigants that, due to Texas law’s “Open Courts Provision,” anyone may gain access to view the
proceeding. However, any video or audio recording of the livestreams is prohibited. The right of the public to attend civil trials is grounded in the First Amendment as well as the common law. However, although constitutional in nature and origin, the right to public and open hearings is not without limitations, and may be outweighed by other competing rights or interests, such as interests in security, preventing disclosure of non-public information, ensuring a fair trial, or protecting a child from emotional harm. So what safeguards are available to litigants who may be concerned and wish to limit public access to their remote proceedings? Under both the United States and Texas Constitutions, an individual has a privacy interest in avoiding the disclosure of certain personal matters. For family courts in particular, marital relationships, procreation, contraception, family relationships, child rearing, education, and medi-
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cal records fall within the constitutionally protected zone of privacy. If children are involved, broadcasting the child’s private, confidential, and privileged information on YouTube is not in their best interest and should be protected. The Texas Family Code expressly permits the limiting of public access by agreement in contested hearings involving Suits Affecting Parent Child Relationship (SAPCR) claims and rights. If supported by appropriate findings made on the record, the court may limit attendance at the hearing to only those persons who have a direct interest in the suit or in the work of the court. Another safeguard is grounded in Rule 18c of the Texas Rules of Civil Procedure. Rule 18c allows a trial court to broadcast, televise, record, or photograph the proceedings in the courtroom only in the following circumstances: (a) in accordance with guidelines promulgated by the Supreme Court for civil cases, or (b) when the broadcasting, televising, recording, or photographing will not unduly distract participants or impair the dignity of the proceedings and the parties have consented, and consent to being depicted or recorded is obtained from each witness whose testimony will be broadcast, televised, or photographed, or (c) the broadcasting, televising, recording, or photographing of investiture or ceremonial proceedings. Tex. R. Civ. P. 18c. The Texas Supreme Court has not promulgated statewide guidelines under Rule 18c(a). Instead, the Supreme Court allows Texas district courts, county courts, county courts at law, and probate courts to propose local rules setting forth guidelines for recording and broadcasting court proceedings. Only a handful of Texas courts have done
that. In the absence of Texas Supreme Court guidelines, Rule 18c(b) contemplates that no broadcasting will be permitted without the consent of all parties and witnesses. Health Insurance Portability and Accountability Act (HIPAA) provides significant safeguards against disclosing health information at a proceeding that will be made public via YouTube. When disclosure of health information is authorized under narrow exceptions, a covered entity must make reasonable efforts to limit protected health information to the minimum necessary to accomplish the intended purpose of the use, disclosure, or request. Allowing worldwide disclosure of the party’s information via YouTube arguably renders HIPAA meaningless. If a case involves businesses or companies, concerns associated with disclosure of business dealings or trade secrets may come into play. The Texas Uniform Trade Secret Act (“TUTSA”) provides that a court shall preserve the secrecy of an alleged trade secret by reasonable means. If a company’s financial information, business plans, customer lists, and other proprietary and sensitive information can be broadcasted to the world via YouTube, and falls into the hands of a competitor, for example, the company and its employees may suffer considerable harm. For the duration of this pandemic and while the emergency orders are in effect, courts must find a practical and effective way to enable public access to remote court proceedings while balancing privacy and other competing interests. HN Lisa Greenwood Duffee is a Partner at Duffee+Eitzen LLP. She can be reached at lisa@d-elaw.com. Larisa Martirosova is an Associate at the firm and can be reached at larisa@d-elaw.com.
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October 2020
Focus
D al l as Bar A ssoci ati on l Headnotes 25
Business Litigation/Franchise & Distribution Law
Limited Partner’s Standing: New Texas Supreme Court Ruling BY MICHAEL C. LEE
In June 2020, the Texas Supreme Court clarified whether a limited partner has constitutional standing to sue and seek damages individually for injuries to the value of the partnership. Pike v. Tex. EMC Mgmt., LLC, 17-0557, 2020 WL 3405812 (Tex. June 19, 2020). The case signals a shift from Texas precedent and is destined to impact partnership disputes in the future. In Pike, EMC Cement BV (EMC), a limited partner, obtained a $7 million damage award for the other partners’ (collectively, Walker) breach of the partnership agreement. On appeal, Walker challenged the award, claiming EMC lacked standing to recover damages because Walker’s breach caused harm to the partnership and not to EMC. According to Walker, the partnership was the only party that could maintain a cause of action for breach. For years, defendants relied on the Texas Supreme Court’s decision in Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990) to halt individual partners from asserting claims for injuries suffered by the partnership. In Wingate, the court explained that stockholders lack standing to maintain suit or recover for wrongs done solely to the corporation. Courts have applied the same logic in partnership disputes. Several Texas appellate courts, relying on the so-called “Wingate prohibition,” held that limited partners did not have an individual right to sue for the diminished value of their ownership interests in the partnership. Wingate and its progeny allowed courts to block at the outset of the lawsuit a lim-
ited partner’s attempt to recover damages for harm suffered by the partnership. Defendants typically argued that limited partners had no standing to recover for the diminished value of his or her interest in the partnership because the partnership suffered the harm. Further, defendants claimed that, even though partners may have been injured by the diminished value to his or her interest, they would be made whole if the partnership recovered compensation for the wrong. Looking to federal case law and the Texas partnership statutes, the Pike court addressed whether the “Wingate prohibition” implicates a constitutional standing issue and requires courts to find a limited partner lacks standing for harm suffered by the partnership. The court held it did not, finding that “a partner or other stakeholder in a business organization has constitutional standing to sue for an alleged loss in the value of its interest in the organization.” In the majority’s view, Wingate does not implicate a court’s subject matter jurisdiction, and partners’ or stakeholders’ claims should be decided on the merits. This holding departs from decades of Texas jurisprudence interpreting the “Wingate prohibition.” Justice Bland vehemently disagreed with the majority. She remarked that the court’s holding allows a limited partner to circumvent the partnership, and despite lacking personal injury, recover directly for the partnership’s injury. In her mind, the court blurred the basic principal that entities are separate from their individual partners. The court also ignored the derivative standing rights the Texas Business Organizations Code affords limited partners by allowing them to bring a claim
on behalf of the partnership. Further, she cited Texas precedent finding that the “standing inquiry begins with determining whether the plaintiff has personally been injured” and a reduction in value to the partnership constitutes an injury to the partnership, not its limited partners. According to Justice Bland, EMC had no standing to bring a claim for a reduction in the value of the partnership and the court should have dismissed its claim for lack of jurisdiction. Pike may trigger a potential flood of litigation by limited partners seeking individual redress for the lost value
of interests in a partnership. Trial courts may no longer dismiss a limited partner’s claim on standing grounds. The “Wingate prohibition” appears to have lost its teeth because limited partners can individually assert claims without fear of swift dismissal. Limited partners now have the ability to engage in motion practice and attempt to establish the merits of the case. At a minimum, defendants will likely incur more costs in fending off such claims. HN Michael Lee is an Associate at Hunton Andrews Kurth LLP. He can be reached at mlee@huntonak.com.
26 H e a d n o t e s l D a l l a s B a r A s s o ciation
In the News KUDOS
Rhonda Hunter, of the Law Office of Rhonda Hunter, has been elected Secretary of the ABA House of Delegates Minority Caucus for a two-year term. Hon. Audrey Moorehead, of Dallas County Criminal Court No. 3, accepted an appointment to serve as Judicial Liaison to the American Bar Association Criminal Justice Section. Jana Simons, of Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P., has been accepted to Leadership ISD in Dallas County. Kathryn Murphy, of GoransonBain Ausley, has been named a Diplomate of the American College of Family Trial Lawyers (ACFTL). Stephen Angelette, of Polsinelli PC, has been accepted into Dallas Regional Chamber’s 46th class of Leadership Dallas. Regina Montoya was awarded the Margaret Brent Women Lawyers of Achievement Award from the American Bar Association’s Commission on Women in the Profession. Hilda Galvan, of Jones Day, has been named chair elect for the Texas Women’s Foundation. New TWF Board members include: Sakina Foster, of Haynes and Boone, LLP; Julia Simon, of Mary Kay Inc. TWF Executive Committee members include: A. Shonn Brown, of Kimberly-Clark; Stacey Doré, of Sharyland Utilities, L.L.C., and Debra Hunter Johnson, of Reciprocity Consulting.
Former Texas Supreme Court Justice Deborah Hankinson, of Hankinson PLLC, has been appointed board chair of the Texas Access to Justice Foundation.
ON THE MOVE
Carol A. Wilson and The Law Office of Carol A. Wilson PLLC, have become Of Counsel to Siebman Forrest. Samantha Anderson has joined Law Office of Jodi McShan, PLLC. Donald Littlefield has joined the newly expanded office of Bressler, Amery & Ross PC. in Dallas. Claire Piepenburg joined Gray Reed & McGraw LLP as Associate. Bart Biggers joined Sidley Austin L.L.P. as Partner. Hon. John G. Browning has been appointed by Governor Abbott to serve as Justice of the Fifth District Court of Appeals, Place 6. Shelby Wilson joined Spencer Fane LLP as Associate in the Plano office. Kerry E. Braxton joined Acme Brick Company as Associate General Counsel. Soren Lindstrom joined FisherBroyles, LLP as Partner. News items regarding current members of the Dallas Bar Association are included in Headnotes as space permits. Please send your announcements to Judi Smalling at jsmalling@dallasbar.org.
October 2020
Guns N Orders: Firearms and Family Law BY FRED ADAMS
There are a number of both state and federal laws about which the family law practitioner should be knowledgeable, so that they will be in a position to properly advise their clients. The most significant portion of federal law, from a family law perspective, is contained within 18 USC Section 922(g) (8), which makes possession of a firearm or ammunition unlawful when a person is subject to a court order that restrains such person from harassing, stalking or threatening an intimate partner of such person or child of such intimate partner, or engaging in other conduct that would place an intimate partner in reasonable fear of bodily injury; or has been convicted in any court of a misdemeanor crime of domestic violence. Except that this paragraph shall only apply to a court order that (a)was issued after a hearing of which such person received actual notice, and at which such person had the opportunity to participate; and (b)(i) includes the finding that such person represents a credible threat to the physical safety of such intimate partner or child or (ii) by its terms explicitly prohibits the use, attempted use or threatened use of physical force against such intimate partner or child that would reasonably be expected to cause bodily injury.” In other words, if the temporary orders prohibit the use, attempted use or threatened use of physical force against an intimate partner or child, the party who is subject to that order, may not purchase or possess a firearm or ammunition. Of equal importance, 18 USC Section 922(g)(8), as stated above, permanently precludes the possession of firearms or ammunition by one who has been convicted of a misdemeanor crime of domestic violence. Thus, it is imperative to warn clients that if they receive a citation (class C misdemeanor) that they not simply go down and pay it, as they will lose their gun rights forever.
Case Law
In the United States of America vs. Timothy Joe Emerson in the United States Court of Appeals, Fifth Circuit, 270 F.3d 203 (2001) just such a set of facts existed. Mr. Emerson was in the midst of a divorce from his wife and on September
4, 1998, a temporary hearing was had wherein the standard form temporary orders were entered. No evidence was adduced concerning any act of violence or threatened violence by Mr. Emerson against any member of his family and no findings were made to that effect. Furthermore, the Court did not admonish Mr. Emerson that if he granted the temporary injunction, Mr. Emerson would be subject to federal criminal prosecution merely for possessing a firearm while being subject to the Order. Mr. Emerson was convicted and served time.
Exceptions Under 18 USC Section 925
Section 925 provides an exception for a person in the military that receives the weapon as part of his military training or service and in furtherance thereof. Likewise, the same exception is applicable to peace officers. It should be noted that neither of those exceptions apply to a person convicted of the misdemeanor crime of domestic violence. I have spoken with several BATF lawyers (Bureau of Alcohol Tobacco and Firearms) and discussed the applicability of 18 USC 922 to courts that use standing orders. It is their position that the law is applicable and failing to request a hearing to exclude the portions of the Temporary Orders that make it applicable is a waiver. On my client intake form, I have a question where I ask whether or not they own or possess firearms or ammunition and I make them initial it. Likewise, I have a statement that indicates that in the event of their conviction of the misdemeanor crime of domestic violence, they will lose the gun rights forever. This too is initialed. I find this a good method of ensuring that I have asked the question and having the answer in my file. Thus, it is imperative that as Family Law practitioners we determine if our clients possess ammunition or firearms, explain the law to them and ensure that the weapons and ammunition are safely placed with a third party during the pendency of the divorce when required.
Fred Adams is a Shareholder at KoonsFuller, P.C. He can be reached at fred@koonsfuller.com.
TURLEY LAW CENTER
Want to help your favorite charity from home? The Dallas Bar Association Community Involvement Committee is pleased to announce its Charity Madness 2020 initiative. In lieu of our annual in-person Project Community initiative, formerly known as the Day of Service, we are hosting an online March Madness style charity bracket. Please continue casting your vote to narrow down our top 2 winners! Consider donating to the Affinipay Donation Pool after you vote for your favorite charity. There is no minimum amount required and every donation is valuable in helping this Charity Madness be a success! Thank you to our DBA members for supporting local charitable organizations. Questions? Contact Grecia Alfaro at galfaro@dallasbar.org To vote visit: tinyurl.com/ VoteCIC2020 and to donate visit: tinyurl.com/DonateCIC2020
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October 2020
Focus
D al l as Bar A ssoci ati on l Headnotes 27
Business Litigation/Franchise & Distribution Law
The Impacts of Crisis on Disclosure BY MO ALTURK AND LAURA KUPISH
The United States and several foreign jurisdictions require franchisors to provide pre-sale disclosures to prospective franchisees, and some jurisdictions also require franchise offerings to be registered. While disclosure requirements vary by jurisdiction, franchisors are generally required to disclose information about the franchisor and the franchise system. Franchisors must also typically update their franchise disclosure documents (FDDs) and/or registrations either annually or even throughout the year to reflect material changes. Many franchisors tend to overlook this latter requirement. Crisis events or significant system changes can occur to any franchise system at any time. Private equity might acquire a franchisor, or a senior leader may retire. Or something unprecedented—like a global pandemic—may result in significant system closures and disruptions to distribution channels and supply chains. Domestically and abroad, franchisors should carefully monitor their business for all types of material changes and amend their disclosure documents and/or registrations as required.
United States
In the United States, franchise offerings must comply with the Federal Trade Commission (FTC) Franchise Rule (the Rule) and applicable state laws. In franchise registration states, franchisors must also register franchise offerings unless otherwise exempt. Under the Rule and state disclosure laws, a franchisor must annually update its FDD. Throughout the year, franchisors also have an affirmative obligation to amend their FDDs to reflect the occurrence of material changes. The Rule requires franchisors to
amend within a reasonable time after the close of each fiscal quarter in which the material change occurred. State registration laws vary regarding the time frame for filing amendments. For example, in some states, the occurrence of a material change triggers an immediate requirement to amend, while others require amending within 30 days of the material change. The Rule does not define “material change,” but generally, a fact, circumstance, or set of conditions is considered material if it is likely to affect a prospect’s decision to purchase a franchise. Some examples of “material” changes include filing for bankruptcy protection, a negative change in financial statements, negative changes to financial performance representations (FPRs), reorganization, a change in control or management, or significant unit attrition. The COVID-19 pandemic is illustrative of crisis events triggering the amendment requirement. In response to COVID-19, many state and local governments issued stay-at-home orders or other regulations impacting the operations of many businesses and, in some cases, completely prohibiting their operation. Pandemic-related limitations on group gatherings and hours of operations, supply chain disruptions, and employee availability significantly impacted the franchise unit economics for some systems. In some cases, these limitations and disruptions led to material changes, prompting some franchisors to amend their FDDs. To this same end, in June 2020, the North America Securities Administrators Association (NASAA), which is comprised, in part, of state franchise examiners, authored commentary on the impacts of COVID-19 on FPRs. NASAA reminded franchisors of
their obligation to amend FDDs to reflect material changes. NASAA also indicated that, for some systems, the negative economic impact of COVID-19 in 2020 may be grounds to amend an FPR that only included historic figures predating COVID19, to reflect the impact of COVID-19. Beyond COVID-19, franchisors may experience other crisis events from time to time. Crisis events may or may not trigger the requirement that a franchisor amend its domestic FDD. However, upon the occurrence of such an event and as the response evolves, franchisors and their advisors should consider whether any material changes result that trigger the requirement to amend.
International Impacts
Like the United States, several countries that require pre-sale disclosures also require franchisors to amend their FDDs to reflect material changes. Canada and Mexico provide two examples close to home for US franchisors. In certain Canadian provinces, franchisors must supplement their FDDs with a Statement of Material
Change if material adverse changes occur during the disclosure period. In Mexico, FDDs must not lack veracity, so franchisors must amend and re-disclose to account for any material changes. Similar to franchise registration states, some foreign jurisdictions, including South Korea and Vietnam, require franchisors to update their registrations at least annually, but also throughout the year, to reflect material changes. Depending on the change, the update may be required within 30 days.
Conclusion
Franchise systems are accustomed to the cadence of annually updating their FDDs. However, franchisors should also carefully monitor system changes and events throughout the year and regularly evaluate whether FDDs should be amended to comply with applicable requirements, particularly in seasons of change or crisis. HN
Mo Alturk is a Partner, and Laura Kupish is an Associate, at Baker & McKenzie LLP. They can be reached at mohammad.alturk@ bakermckenzie.com and laura.kupish@bakermckenzie.com, respectively.
Need Help? You’re Not Alone. Texas Lawyers’ Assistance Program…………...(800) 343-8527 Alcoholics Anonymous…………………………...(214) 887-6699 Narcotics Anonymous…………………………….(972) 699-9306 Al Anon…………………………………………..…..(214) 363-0461 Mental Health Assoc…………………………….…(214) 828-4192 Crisis Hotline………………………………………..1-800-SUICIDE Suicide Crisis Ctr SMU.…………………………...(214) 828-1000 Metrocare Services………………………………...(214) 743-1200 More resources available online at www.dallasbar.org/content/peer-assistance-committee
28 H e a d n o t e s l D a l l a s B a r A s s o ciationâ€
October 2020
