2022 Essentials of Business Law

The Anti-Money Laundering Act of 2020, which is part of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) and includes the Corporate Transparency Act, became law effective with Congress’ override on January 1, 2021 of former President Trump’s veto of the NDAA. The Corporate Transparency Act requires certain business entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”). The information will not be publicly available, but FinCEN is authorized to disclose the information: to U.S. federal law enforcement agencies, with court approval, to certain other enforcement agencies, to non-U.S. law enforcement agencies, prosecutors or judges based upon a request of a U.S. federal law enforcement agency, and with consent of the reporting company, to financial institutions and their regulators

While there are a wide variety of alternative dispute resolution clauses that can be implemented in different types of transactions and contracts, the starting goal for each type of clause is the same –the parties’ goals and the end in mind. When all else fails, and no one can agree, what options do the parties want? Where parties seek to avoid traditional litigation, or at least postpone it, several types of alternative dispute resolution clauses are available, and each can be personalized and detailed to help meet the parties’ wants and needs. However, it always requires anticipation of the worst-case scenario.

Section 323.007 of the Government Code requires the Texas Legislative Council (Legislative Council or Council) to carry out a complete, nonsubstantive revision of the Texas statutes. The process involves reclassifying and rearranging the statutes in a more logical order; employing a numbering system and format that will accommodate future expansion of the law; eliminating repealed, invalid, duplicative, and other ineffective provisions; and improving the draftsmanship of the law if practicable—all toward promoting the stated purpose of making the statutes “more accessible, understandable, and usable” without altering the sense, meaning, or effect of the law. The continuing statutory revision program was created by a 1963 statute. Under the Texas statutory revision program, all Texas statutes will eventually be contained in one of 27 topical codes. The Texas Securities Act, previously contained in Articles 581-1 through 581-45 of the Texas Civil Statutes, was one of the last of the remaining civil statutes to go though the codification process.

Given their structural flexibility and tax advantages, it is little wonder that limited liability companies (“LLCs”) and limited partnerships (“LPs”) have eclipsed the corporation as the primary entities of choice for new businesses in Texas. LLCs and LPs offer a myriad of almost limitless options on ownership structure, company governance and almost all other aspects related to the operation of the entity. However, as it is often said, with much freedom comes much responsibility. A practitioner who puts together a limited liability company (“LLC agreement”) or an agreement of limited partnership (“LP agreement”) for a client should be well versed in the overall structure of these entities and the variables that should be considered in drafting the operative agreement. Both LLCs and LPs are so-called “creatures of contract” in that the Texas Business Organizations Code (“TBOC”) chapters on LLCs and LPs give great deference to the LLC agreement or LP agreement to define the rights and obligations of the members and partners, respectively, of these entities. This paper analyzes select provisions of the LLC agreements and LP agreements that practitioners are likely to have to address in drafting an agreement for a client.

Two of your law school classmates decide to form a company, and it sounds great. Bill and Paul have the same business idea – making custom pet bandanas and selling them at the farmers market every Saturday. They both put the same amount of money into the business, and launched their little pet accessory business as an LLC. You hear bits and pieces through the school newsletter, but it seems they are doing really well selling at the Redmond farmer’s market. Next thing you know, Bill wants to start selling at the Seattle Sunday farmers market, just a little way away. However, you hear that Paul doesn’t want to drive that far and has blocked Bill’s decision. It is a 50/50 company, and Bill and Paul agreed to make decisions about the business together even though they never wrote out a formal agreement. Without Paul’s consent, the business can’t expand to Seattle, and stylish pets in the urban oasis may need to go without the latest in Kraken accessories.For Bill and Paul, foregoing an LLC Operating Agreement sounded like a good idea at formation – they couldn’t imagine ever disagreeing about how to run the business! - but now that Paul vetoed Bill’s business decision, bandanas have piled up because Bill can’t sell at the Sunday market. Bill could make a lot more money from selling at the other market, and the workers he hired to make the extra bandanas and collars (he expanded production to collars without Paul’s consent) need to be paid. This is a problem.It's a good thing you also went to law school with Bill and Paul, and even better that you did pretty well in your Business Entities class and went to work in Delaware after graduation.

In this paper we focus on digital curb cuts created during the pandemic: improvements designed to increase accessibility that benefit people beyond the population that they are intended to help. As much as 86% of civil legal needs are unmet, according to a 2017 study by the Legal Services Corporation. Courts and third parties designed many innovations to meet the emergency needs of the pandemic: we argue that these innovations should be extended and enhanced to address this ongoing access to justice crisis. Specifically, we use the Suffolk University Law School's Document Assembly Line as a case study. The Document Assembly Line rapidly automated more than two dozen court processes, providing pro se litigants remote, user-friendly, step-by-step guidance in areas such as domestic violence protection orders and emergency housing needs and made them available at courtformsonline.org. The successes of this project can extend beyond the pandemic with the adoption of an open-source, open-standards ecosystem centered on document and form automation. We give special attention to the value of integrated electronic filing in serving the needs of litigants, a tool that has been underutilized in the non-profit form automation space because of complexities and the difficulty in obtaining court cooperation.

Supply chain disruptions have taken center stage in the news cycle in the wake of the COVID-19 pandemic, bringing commercial agreements into the international spotlight. In this volatile commercial environment, attorneys have a unique opportunity to bring order to chaos by providing valuable legal insight into their clients’ procurement and supply chain relationships. This article identifies several key considerations for drafting and negotiating complex commercial agreements specifically through the lens of potential supply chain issues. For simplicity’s sake, this article focuses primarily on customers and suppliers, but attorneys should also pay close attention to the various other parties in the overall supply chain network, such as raw materials providers, distributors, resellers, and logistics and warehousing providers. Generally, the party purchasing goods or services is referred to as the “customer” and the party providing goods or services is referred to as the “supplier” throughout this article, but other defined terms may be a better fit for different types of agreements (e.g., “Client” or “Purchaser” may be used for the party purchasing goods or services, and “Service Provider” or “Seller” may be used for the party providing goods or services). This article does not contain an exhaustive list of provisions that should be included in a commercial agreement. Complex commercial agreements are just that – complex! – and should be specifically tailored to the business arrangement between the parties. However, the standard elements addressed in this article should generally apply across a variety of types of agreements.

This is the PowerPoint slide deck regarding the Texas Lawyers' Assistance Program.

In the three years since the California Supreme Court started to apply the infamous “ABC” employment test to California, the franchise business model has been disrupted by the threat that courts may now identify franchise relationships as employment relationships. Adoption of the ABC test in California has influenced potential federalization of the test, under the Protect the Right to Organize Act (“PRO Act”). The PRO Act is legislation passed by the House of Representatives, but not the Senate, in March 2021 that seeks to reclassify independent contractors as employees under the ABC test, and to expand the standard for determining the existence of a co-employment relationship. If the PRO Act becomes law, each of these components could have a substantial and negative effect on franchising. The PRO Act passed the House with bipartisan support; however, it is unlikely the Act will pass through the Senate without Democrats first eliminating the filibuster, which requires 60 votes to invoke cloture on legislative matters and prevents parties with a small majority from voting partisan bills into action. The PRO Act has two principal components, adoption of a federal ABC test to determine if workers are employees rather than independent contractors and adoption of a federal joint employer standard that could render franchisors the joint employers of their franchisees and their franchisees’ employees. The ABC test assumes every worker is an employee rather than an independent contractor, unless the hiring company can prove: (A) the worker will be free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact; (B) the worker will perform work that is outside the usual course of the hiring entity’s business; and (C) the worker will be customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. A franchise relationship might not satisfy the “A” test and a franchisee could be deemed an employee of a franchisor rather than an independent contractor if the franchisor exercised a type or degree of actual control over the franchisee or the franchisee’s employees not customarily exercised by a franchisor to protect the franchisor’s trademarks, service marks and/or trade dress. The current joint employer standard provides that a business will be deemed a joint employer only if it possesses and exercises substantial, direct and immediate control that meaningfully affects matters relating to the employment relationship. The PRO Act conversely provides that joint employment can exist if the purported joint employer has direct or indirect control over the essential terms and conditions of employment, or reserved authority to control those terms and conditions. Some franchisors’ systems policies and procedures indirectly control franchisees’ employees’ activities and as a result, franchisors could once again be sued for the employment practices and policies of their franchisees notwithstanding the fact that the franchisees control the hiring, firing, discipline, wages and when and where work will be performed. This paper addresses the manner in which courts had previously conceptualized the franchise relationship; recent cases that have considered the application of the ABC test to franchise relationships, and whether the analysis of franchise vicarious liability cases is relevant to franchise misclassification claims, before addressing potential avenues for the practitioner to consider should the ABC test become law on a national level.

Simply put, everything that ensues from the human mind is intellectual property (“IP”) and can be among the most valuable assets of a business if properly protected. As described later in this article, if IP is not protected, its value will be impacted negatively. The way to protect IP is to make sure intellectual property rights (“IPRs”) are timely secured. IPRs are government-provided rights granted when the owner of the IP takes the IP protection measures required under federal and state statutes and/or the common law. The laws exist for owners of IP to protect their investment in research and development, to be enabled to pursue legal remedies when their IPRs are violated by others, and thus to promote the continued progress of science and art for the benefit of the whole of society. This article will focus primarily on the fundamentals of IP and IPRs to impart a basic understanding to business lawyers. In addition to providing an overview of IP, IPRs, and the related statutes and case law, under the “Strategy Tip” headings, the article the business lawyer will find practical strategies and techniques that can be used to benefit clients.

This article provides a high-level review of a lawyer’s representation of a Texas nonprofit corporation as well as ethical resposnibilities of the lawyer who serves as an officer or director of a nonprofit organization. The presentation associated with this article is slotted for 30 minutes, with appropriate allocation of time to ensure participants’ receipt of continuing legal education credit in ethics. This article is proportionately limited to select and key areas of consideration on these two broad and important topics.

The Texas Legislature passed the Texas Securities Act recodification in the 2019 regular session with an effective date of January 1, 2022.1 The Legislature amended the recodified Texas Securities Act’s private cause of action provisions through SB 1280 during the 2021 regular session by deleting cross-references imposing liability for violations as to six Texas Securities Act provisions that imposed no duties on private actors and thus had no potential for violations by private actors.2 Business attorneys should have some familiarity with the recodified Texas Securities Act’s private causes of action and remedies in order to properly advise clients of potential pitfalls in securities transactions. Business attorneys should also relearn the Texas Securities Act statutory structure, which has significantly changed. The previous Texas Securities Act had had 64 sections. The recodified Texas Securities Act (“Recodified TSA”) has 248 sections - almost 400% more.

This is the PowerPoint slide deck for the presentation by Mr. Charlie Guidry of the SEC.

A famous cyber security expert once quipped: “Computer security is hard.” He’s right. Unfortunately, while you have to be right every time, the criminal only needs to be right once. Ransomware is but one of a long line of hacking techniques that have been used to infect millions of systems and cost billions of dollars in damage. Essentially, ransomware is malware that encrypts all of the files on a computer system – rendering your computer system useless. Normally, the files affected are on laptops, desktops, servers, and (in many cases) network-connected backup machines. The perpetrator will then notify you that s/he holds the private key necessary to decrypt your files, but will only provide that key if you pay a ransom, typically in Bitcoin. I won’t mince words. Ransomware is one of the ugliest infections you’re ever likely to encounter as a practicing attorney. The first purpose of this article is (to attempt) to help you avoid a ransomware attack in the first place. The second purpose of this article is to help you decide what to do if you suffer a ransomware attack. The third purpose of this article is to help you deal with the aftermath of such an attack. In each section of this article, there will be links to online resources. Keep in mind that most court opinions which have addressed ransomware attacks have centered around evidentiary issues, and those arguing that “ransomware-ate-my-brief” have garnered a few success and far more denials of relief. Now I know that you’ve heard about ransomware attacks, and think they only hit hospitals and larger companies. Unfortunately, that is no longer the case as roughly 41% of current ransomware cases are not related to the healthcare industry. As with any malware that is bought and sold openly on the Dark Web, the cost of ransomware software goes down the longer that it is in circulation. That means, from a cost-of-entry standpoint, that smaller companies (like law firms) become economically feasible targets. One expert put it this way: “It’s often assumed that ransomware mainly affects governments and major corporations because it’s those incidents that make the news,” said Brett Callow, a ransomware analyst at Emsisoft. “The reality, however, is that more than half of all ransomware victims are small businesses and individuals. And, unfortunately, they are usually not as well prepared to deal with the problem as larger organizations and probably feel more pain as a result.”

Buying or selling a closely held business (“M&A), including the purchase of a division or a subsidiary, can be structured as (i) a statutory combination such as a statutory merger or share exchange, (ii) a negotiated purchase of outstanding stock from existing shareholders or (iii) a purchase of assets from the business.1 An M&A transaction typically revolves around an agreement between the buyer and the selling entity, and sometimes its owners, setting forth the terms of the deal, which is herein referred to as the “Agreement” whether it takes the form of a merger agreement, stock purchase agreement or asset purchase agreement. An M&A Agreement typically includes contractual representations and warranties as to the assets and liabilities of the business to be acquired, conditions to the buyer’s obligations to close the transaction contemplated thereby, the obligations of the seller and its owners to indemnify the buyer for breaches of its representations and covenants therein (and any contractual limitations on the amount that buyer can recover for such breaches), and that the Agreement represents the entire agreement of the parties with respect to the transaction. After the transaction is closed, the buyer may determine that there were breaches of seller’s representations and covenants, and that buyer’s losses could exceed the amount that buyer could recover under the express indemnification provisions in the Agreement. Under these circumstances, the buyer might claim that is was defrauded by the seller, that its damages for its fraud claim were not capped by the Agreement, and that it is entitled to rescind the transactions and recover the amount that it paid for the business. Whether the buyer is entitled to recover the amount it seeks depends on the wording of the Agreement and the law governing its rights under the Agreement.