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Whether a Judgment Creditor Can Execute on Shares and Assets of the Corporation to Satisfy Debts of Shareholder
In Yamin v Carroll Wayne Conn, L.P. 574 S.w. 3rd 50 (Tex. App. - Houston 14th Dist, 2018, pet. denied) the debtor-appellees took considerable trouble to ensure that assets in the corporation and the shares of that corporation were separate property of the wife. A jury determined that they were in fact community property. The Court allowed an outside creditor to reverse veil-pierce the protections of the corporate veil.
Whether a Claim of Implied Warranty to Repair is Actionable in Common Law as well as the DTPA
In Nghiem v Sajib, 567 S.W. 3rd 718 (Tex. 2019), two passengers on an airplane were injured in a crash and sued the entity that had recently repaired it. One of the passengers sued after the DTPA's 2 year statute of limitations, claiming to sue under the common law for implied warranty to repair. The Texas Supreme Court determined that there was a common law action for implied warranty t repair, overrulling the lower courts in this case.
CONSUMER COLLECTIONS
According the Federal Reserve, there are 59.5 Billion debit or credit card swipes a year in the United States. That boils down to 165 million swipes/day; approximately 15% of which occur in Texas (25 million/day; 1.8 million/hour; 30,000/minute; 500/second). That’s a lot of plastic, and much of this article will be geared to the type of consumer debt that is created in the retail debt arena. However, “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes” is likely a consumer debt. This paper has traditionally focused on basic regulatory compliance, causes of action, limitations and proof. While all are important to consumer collections, changes in the industry have necessitated a greater emphasis on issues surrounding regulatory compliance. Consumer lawsuits are like any other lawsuit and, as such, the core legal challenges and approaches are not unique to consumer collections. What has been unique and what continues to drive the evolution within the consumer space are the regulatory requirements and transitions which are actively occurring in this area of practice. The purpose of this paper is to address the common areas of law which impact collection work in this arena and to provide a context in which to understand the rapidly changing framework in which consumer debt collection now operates.
THE HIDDEN COST OF M&A
The shareholder wealth maximization norm exerts tremendous influence on both business practice and corporate legal scholarship. Widespread acceptance of the norm has produced substantial focus among corporate executives, analysts, and scholars on one key metric: share price. The norm and the related focus on equity prices rest on two key assumptions: (1) that the pursuit of shareholder wealth maximization, as measured by share price, effectively maximizes the wealth of actual shareholders and (2) that the pursuit of shareholder wealth maximization, as measured by share price, is socially beneficial. If the shareholder wealth maximization norm does not truly maximize shareholder wealth, it fails by its own terms. If pursuing shareholder wealth maximization does not produce a net social benefit but instead generates a net social harm, the pursuit of shareholder wealth maximization no longer constitutes a “win-win” for businesses and consumers but instead elevates business interests in a zero-sum competition between the two groups. This Article addresses one context where the pursuit of share price gains both fails to maximize the wealth of all shareholders and fails to benefit society: corporate mergers and acquisitions activity.
DRAFTING PRELIMINARY AGREEMENTS, INCLUDING CONFIDENTIALITY AGREEMENTS AND LETTERS OF INTENT
A confidentiality agreement (“Confidentiality Agreement”), also sometimes called a nondisclosure agreement (“NDA”), is typically the first stage in the due diligence process for an acquisition transaction as parties generally are reluctant to provide confidential information to the other side without having the protection of a confidentiality agreement. After a Confidentiality Agreement is in place, the parties exchange information and proceed to negotiate the terms of a transaction. If the negotiations are successfully completed, the parties may enter into a letter of intent. While the parties initially intend that a letter of intent does not bind the parties to proceed with a transaction, disputes often arise as to whether and to what extent the parties are contractually bound.
TECHNOLOGY AND CORPORATE GOVERNANCE: Blockchain, Crypto and Artificial Intelligence
Over recent decades, the on-going “digital revolution” has transformed many aspects of everyday life. Think of the increased power and shrinking size of personal computers and smartphones; the global expansion of the Internet and the new forms of social interaction that have been created; and, the ready availability of massive amounts of cloud-based information (“Big Data”), which is processed by automated algorithms for use in multiple settings. But, how has the digital transformation affected the organization and operation of business, and what does this mean for current regulatory frameworks, particularly those related to corporate governance? And, how are current and near-future technological developments - think distributed ledger technologies, “smarter” forms of automation and artificial intelligence - likely to disrupt the current corporate governance discussion? This paper explores these questions and concludes that current corporate governance approaches need to adapt to these technological and business developments in order to remain relevant.
TRADE SECRETS 101: What Texas Businesses and Their Lawyers Need to Know
Trade secrets law touches many areas of law practice. This updated article covers the basics of federal and Texas trade secrets law, focusing on the key questions that come up in trade secrets litigation: 1. Is the information at issue a “trade secret”? 2. Did the defendant “misappropriate” the information? 3. Did the plaintiff take “reasonable measures” to keep the information secret? 4. Can the plaintiff prove causation and damages? 5. Is the plaintiff entitled to an injunction? 6. Can the defendant move to dismiss under the TCPA? 7. Is the plaintiff entitled to recover punitive damages and/or attorneys’ fees? We also include practical tips on protection of trade secrets for Texas businesses and the lawyers who represent them.
CONTRACT AMBIGUITY YIELDS SUMMARY JUDGMENT DENIAL
On December 4, 2018, the Texas Court of Appeals for the Fifth Circuit reversed the decision of the Dallas County Court at Law No. 2., holding that ambiguity within a contract constitutes a fact issue for which summary judgment is improper. Although the facts within this case were particularly complicated and intricate, this case stands to show the fundamental principle that ambiguity and fact issues will typically not allow a summary judgment to survive. It is important to remember when drafting a contract that if it contains provisions that are susceptible to more than one interpretation, a court may deem this an ambiguity and thus a fact issue that cannot be properly resolved through summary judgment.
DOES A PRIOR PERFECTED SECURED CREDITOR WAIVE ITS PRIORITY BY FAILING TO TAKE ACTION BEFORE A JUDGMENT LIEN CREDITOR GARNISHES THE COLLATERAL?
On December 31, 2018, the Court of Appeals of Texas for Eastland considered an issue of first impression for Texas. The issue was whether the holder of a prior perfected security interest waives its right to collateral by failing to take affirmative action prior to a junior creditor exercising rights on the same collateral. The Court held that a prior perfected security interest holder does not waive its senior security interest by failing to exercise elective remedies prior to a junior judgment creditor exercising foreclosure rights. Read the case note below.
TO REPORT OR NOT TO REPORT?—SUPREME COURT DETERMINES DODD-FRANK’S WHISTLEBLOWER PROTECTION ONLY EXTENDS TO INDIVIDUALS WHO REPORT DIRECTLY TO THE SEC
On February 21, 2018, the United States Supreme Court clarified whether Dodd-Frank’s anti-retaliation provision for “whistleblowers” extends to individuals who have not reported a securities law violation to the Securities and Exchange Commission (“Commission” or “SEC”). The Court unanimously held that protection extends only to those who report a securities law violation to the Commission.
NO CONSPIRACY OR COMPLICITY LIABILITY WHEN A STATUTE DRAWS SPECIFIC LINES AS TO ITS EXTRATERRITORIAL APPLICATION
The United States Court of Appeals for the Second Circuit addressed whether a nonresident foreign national may be liable based on conspiracy or complicity under the Foreign Corrupt Practices Act (“FCPA”). The court held that the FCPA should be interpreted as it facially states, which contains no express provision assigning liability to nonresident foreign nationals “who lack an agency relationship with a U.S. person.” Additionally, the court reasoned that, from the process that the Senate and House went through while drafting the bill, Congress demonstrated an affirmative legislative policy in the FCPA in order to restrict criminal liability to certain types of defendants. Read the case note below.
WHO SUFFERS THE FINANCIAL CONSEQUENCES OF IDENTITY THEFT: THE BANK V. BANKING CUSTOMER?
On September 12, 2018, the Supreme Court of Texas considered whether Francisco Calleja-Ahedo (“Calleja”) or his bank must suffer the financial consequences of identity theft. Calleja sued Compass Bank (the “Bank”) to recover stolen funds after his bank account was drained due to a series of fraudulent transactions. Calleja alleged that the Bank was liable for the financial consequences of the identity theft that took place over a two-year time span. Affirming the decision of the district court, the Supreme Court of Texas overruled a decision by the court of appeals and concluded that Texas law shields the Bank from liability for the losses Calleja’s account sustained due to fraudulent activity.
WHOSE LIEN IS IT ANYWAY: APPELLATE COURT ADDRESSES PRIORITY AS IT RELATES TO FORECLOSED REAL PROPERTY
In the recent appellate decision Woodhaven Dr. 1401 Land Trust v. Citibank, the Dallas Court of Appeals addressed the issue of priority in regard to competing liens on foreclosed real property. Focusing on the facts, the express language of the HOA’s declaration of covenants, conditions and restrictions (“the Declaration”), case law precedent, and the straightforward definition of “mortgage,” found in Black’s Law Dictionary, the court affirmed the holding below. The HOA’s assessment lien was clearly subordinate to Citibank’s first lien and as a result, Woodhaven purchased the property subject to the first lien. Read the case note below.
Filling in the Gaps: Shareholder Oppression After Ritchie v Rupe, Part 2
The purpose of this Part Two article is to explore the common-law protection of minority shareholder rights in closely-held corporations in light of the monumental change in Texas law resulting from the Ritchie v. Rupe decision. In Part One, we explored the development of the shareholder oppression doctrine in Texas as a judicial remedy to the inherent problem in closely-held corporations of oppressive conduct directed toward minority shareholders. The Texas Supreme Court’s decision in Ritchie v. Rupe rejected the creation of such duties on individual shareholders and made clear that majority shareholders owe no legal duties to minority shareholders arising solely by virtue of shareholder status and corporate control. Part One analyzed existing property rights of shareholders that arise from share ownership and existing duties that corporations owe to all shareholders by virtue of the legal relationship between corporation and shareholder—a relationship analogized by our courts as a kind of rust. Drawing on these rights and duties and on the holdings and analysis of cases such as Cates v. Sparkman, Yeaman v. Galveston City Co., and Patton v. Nicholas, we argued for the rediscovery and development of a breach of trust cause of action that individual shareholders could assert against the corporation when majority shareholders abuse their power over the corporation to harm the interests of minority shareholders. In this Part Two, we continue that analysis, looking at a different cause of action, the common law tort of conversion as applied to stock. Conversion is a tort claim that protects property rights in personal property, such as stock ownership. However, our courts have adapted this tort in very special ways when the personal property rights in a shareholder’s stock in a corporation are impaired by that same corporation. The development of this judicial doctrine, in light of the specific duties that corporations owe to shareholders, may provide another potent judicial remedy to minority shareholders against corporate abuse of power.
Nuisance Cases Against Energy Companies in Texas, Pennsylvania and Other Areas with Significant or Developing Oil and Gas Exploration
Energy companies increasingly have been the target of nuisance suits alleging that drilling operations were a nuisance to nearby residents. But saying something is a nuisance case, as the Texas Supreme Court recently noted, “does not tell you much.” A variety of things have generated nuisance allegations against energy companies, such as bright lights on drilling rigs, vibrations from drilling, odor from condensate tanks, exhaust fumes from trucks, dust from construction, and noise from compressor stations. Some cases allege personal injury; others allege only property damage. Some claim intentional behavior; some claim negligent behavior; others only claim that the condition was out-of-place with its surroundings. Given the muddled state of nuisance law, this article first outlines the history of nuisance law to give context to the present confusion. With that historical context in mind, it then discusses modern private nuisance in Texas and Pennsylvania, with reference to other jurisdictions having significant oil and gas development—what it is, what it is not, and a host of issues surrounding recent nuisance cases.
Series LLCs - Part One: Current Status, Multi-State Issues, and Potential Uniform Limited Liability Company Protected Series Act
The Series Limited Liability Company (“Series LLC”), a variation of the traditional limited liability company (LLC), is the newest entity enterprise on the business scene today. Within this legal entity, separate “series” or “cells” can be created and established under the umbrella of a single LLC.
Does Halliburton II Allow Defendants to Prove a Lack of "Correctiveness" to Defeat Class Certification?
In Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”), the U.S. Supreme Court held that defendants in federal securities fraud cases may defeat class certification by proving a lack of “price impact” at the class certification stage. This holding gave defendants in such cases a significant new opportunity to defeat class certification. But lower courts so far have not given Halliburton II the robust application that Halliburton and other corporate defendants may have hoped for.
The Texas Margin Tax: Is It Time For The Curtain Call?
On January 1, 2008, the business landscape changed dramatically for tens of thousands of Texas-based businesses. This change was the result of legislation that made significant revisions to the Texas franchise tax (now commonly called the “margin” tax) by expanding its scope to include entities that never before had been subject to the tax and significantly altering how the tax is calculated. To put it mildly, the margin tax has not been well received, and it is doubtful that it will reach its tenth anniversary.
Filling in the Gaps: Shareholder Oppression After Ritchie v Rupe, Part 1
On June 20, 2014, the Texas Supreme Court’s decision in Ritchie v. Rupe initiated a seismic shift in Texas law governing the protection of minority shareholders in closely-held corporations and limited liability companies. After almost thirty years of steady appellate court development of a judicial remedy for oppressive conduct against minority shareholders, recognizing the trial court’s power to force an oppressive controlling shareholder to purchase the oppressed minority shareholder’s stock for a fair value, the Texas Supreme Court suddenly announced that no common law cause of action for oppression existed and that Texas courts had no power to order a buy-out under the statutory remedy for oppression. This article provides an insight into how effective Texas law governs the relationship between shareholders and corporations in light of the Ritchie v. Rupe decision. The author aims to evaluate the extent that the law has left a “gap” in the protection to individual minority shareholder interest after Ritchie, and explore how the court should interpret existing legal rights, corporate duties and remedies to fill in these gaps.
WHETHER UCC ARTICLE 4 IN TEXAS PREEMPTS COMMON LAW FRAUD AND BREACH OF CONTRACT CLAIMS IN THE RELATIONSHIP BETWEEN A BANK AND ITS CUSTOMER
Under Texas law, the UCC regulates a bank’s handling of deposits and collections for its customers. American Dream Team, Inc. (“ADT”) filed suit against Citizens State Bank (“Bank”) alleging that Bank had improperly charged back $30,000.00 against its account for a provisional credit extended on a counterfeit check. The trial court granted summary judgment to Bank, and ADT appealed. There are two pertinent issues in this review: (1) whether Uniform Commercial Code Article 4 (the “Code”) preempts a claim of common law fraud when looking at communication between a bank and its customer; and (2) whether the Code preempts common law rules concerning breach of contract. The Tyler Court of Appeals (the “Court”) held that: (1) if the Code is silent on an issue, common law may supplement the Code; and (2) the Code preempts common law breach of contract claims.
ARE ARBITRATION CLAUSES IN ENGAGEMENT LETTERS BINDING WHEN THE CLIENT DOESN’T SIGN AND THE PARTY SUING IS DOING SO DERIVATIVELY?
WHETHER AN AGREEMENT TO ARBITRATE DISPUTES IS ILLUSORY AND THUS UNENFORCEABLE WHEN ONE PARTY HAS THE POWER TO TERMINATE ITS OBLIGATION AT ANY TIME, EFFECTIVE IMMEDIATELY WITHOUT ADVANCE NOTICE OF TERMINATION
WHETHER A COURT SHOULD MANDATE ARBITRATION PURSUANT TO AN AGREEMENT WHEN THE MOVANT CHALLENGES THE FORMATION OF THAT AGREEMENT
Advice: Do not walk into a trap, especially one of your own making. The Maxwell Family Partnership walked into a trap when it sought to compel arbitration of a dispute involving an asserted partnership agreement with the Kents, while at the same time vigorously arguing that the asserted partnership agreement containing the arbitration clause was never formed because of lack of consideration.1 Accordingly, the appellate court affirmed the trial court’s decision in denying the attorney’s motion to compel arbitration.
Life Settlement Agreements and the Texas Securities Act: A Summary and Review of Life Partners Inc. V. Arnold
In Life Partners, Inc. v. Arnold, the Texas Supreme Court (the Court) addressed the issue of whether “life settlement agreements” are securities under the Texas Securities Act and thus subject to the Act’s registration and disclosure requirements. Holding that the transactions at issue are in fact “investment contracts,” and thus “securities,” under the Texas Securities Act, the Court solidified important protections for the investing public and rejoined the vast majority of States in interpreting securities regulations broadly so as to maximize the protection provided to investors. After briefly summarizing the law and facts at issue, this article discusses the Court’s reasoning and analysis in Life Partners and attempts to address some potential impacts of the Court’s decision.
Dude, Where's My Car? How the Proposed Uniform Certificate of Title Act Addresses Conflicts Between the Texas Certificate of Title Act and the Uniform Commercial Code
Joe Consumer finds a vehicle at a dealership, makes the deal and fills out paperwork to transfer the ownership of the vehicle while paying the dealer to cover the titling expenses. The dealer promises to send the titling paperwork to the state certificate of title (“CT”) office so that the ownership of record may be transferred to Joe pursuant to the state’s CT law. Then, maybe two weeks after purchasing the car, Joe attempts to leave home for work, but instead finds his vehicle in the process of being repossessed by the dealer's bank. Joe, extremely confused and irritated, may find that, while Joe filled out the appropriate documentation needed for a CT application, the dealer did not file the documentation with the state CT office. Now, Joe must file a declaratory action and argue that a judge should declare Joe to be the proper owner under generally applicable laws including the Uniform Commercial Code (“UCC”), property and contract laws, and perhaps equitable principles, the applicable CT law, and even the Bankruptcy Code. Each of these laws is challenging in this context, and the relations between them add to the complexity. Joe may be facing a very expensive (and uneconomical) lawsuit as his only legal remedy.