Dallas Bar Association
HEADNOTES
Focus Bankruptcy & Commercial Law
July 2012 Volume 37 Number 7
Road to Executive Leadership
Mike McKool, Jr. Named DBA Trial Lawyer of the Year by Timothy G. Ackermann
The Minority Participation Committee hosted the Road to Executive Leadership Program, an enlightening discussion on how to obtain a general counsel or executive leadership position. Participants included: Hyatte Simmons, former General Counsel DART; Shauna Martin, Wick Phillips Gould & Martin; Maricela Moore, Committee Co-Chair; David Huntley, General Counsel AT&T; and Richard Cheng, General Counsel Senior Care Centers.
Focus
Bankruptcy/Commercial Law
A Primer on Preferences Creditor Defenses
by Judge Harlin DeWayne Hale and Andrew Edson
Your client receives a demand from a bankruptcy trustee that certain otherwise valid payments made for goods or services have to be returned. Affectionately known as “preferences,” such claims are troublesome to creditors, for a good faith and innocent recipient may have to refund payments received from a bankrupt debtor before the bankruptcy filing. Understanding basic preference law should aid you in your conversation with your client.
The Basics
Preference law is strict. A trustee must prove six elements to recover under 11 U.S.C. Section 547(b): (1) a transfer of an interest of the debtor in property; (2) to or for the benefit of a creditor; (3) for or on account of antecedent debt; (4) made while the debtor was insolvent; (5) made on or within 90 days before the date of the filing of the bankruptcy petition; and (6) that enabled the creditor to receive more than it would otherwise have received if the transfer had not been made and the case had proceeded under Chapter 7. A preferential transfer may include money, property, or lien rights.
Thankfully, for the creditor in the goods and services situation, some defenses exist. If the trustee is able to prove all the preference elements, the Bankruptcy Code provides three primary defenses under 11 U.S.C. Section 547(c): the contemporaneous exchange, the subsequent new value, and the ordinary course of business defenses. The contemporaneous exchange defense protects from avoidance the simultaneous payment by the debtor for goods or services provided at the same time. A cash on delivery transaction, where payment was received about the same time as goods were delivered, is an example. The subsequent new value defense reduces the creditor’s potential preference liability by the amount of goods or services provided to the debtor after the preferential transfer. Thus, if the debtor made a preferential payment, and the creditor subsequently provided additional goods or services, the creditor can reduce the overall preference liability by the amount of those additional goods or services provided. This defense encourages creditors to continue doing business with the debtor prior to bankruptcy. continued on page 10
Inside 5
Beware of Hidden Liens
9
Bankruptcy is Watchdog Friendly
11 Debt Collection Communication Regulations 13 An Introduction to Chapter 15 of the Bankruptcy Code
There are many routes to becoming a great trial lawyer—Mike McKool, Jr., got there by learning, starting in childhood, how to be the kind of lawyer that businesses call on when the stakes are truly high. The kind of lawyer that has some of his best friends on the other side of the aisle. And the kind of lawyer that recognizes the importance of legal services to his clients and to our community. “Mike McKool is an excellent trial lawyer,” said Paul K. Stafford, President of the Dallas Bar Association, “and is an example of all that is good in our profession—inquisitive by nature, committed to excellence, effective and ethical in and out of the courtroom.” Acknowledging these qualities, the Dallas Bar Association has named Mr. McKool its 2012 Trial Lawyer of the Year. His successes are well-known. After becoming the youngest partner at the firm he joined after law school, he left that firm (then Johnson & Gibbs) in 1991, along with nine other lawyers. With his co-founder, Phil Smith, a Baker & Botts partner, they formed McKool Smith. McKool Smith now has about 175 lawyers in eight offices. And the firm, of which McKool is the President and Chairman, has opened Washington, DC, New York City, Los Angeles and Silicon Valley offices in the last five years. Commenting on the award, Mr. Smith said, “Needless to say, the firm is proud of Mike for his accomplishments as a trial lawyer and firm leader. We believe this honor is well-deserved.” The firm originally gained recognition in commercial litigation. Tom Hicks, for example, was accused, with his partners, of mismanaging a company that later went bankrupt. McKool said he saw the suit as a sham—he felt strongly there simply were not two sides to the case—but it was going to be hard to win. Representing the lead defendant, after a nearly two-month trial, and with about a half-billion dollars at stake, McKool Smith got the jury to find for their client on every question. Having earned a reputation in commercial litigation, the firm entered the contingency fee IP litigation arena and has seen great success. Indeed, two of its cases last year were listed among the “10 Biggest IP Litigation Wins of 2011.” Other recent recognition includes winning 11 National Law Journal and VerdictSearch “Top 100 Verdicts” since 2007—more than any
other law firm in that period. Just some of the honors already awarded to McKool personally include membership as a Fellow of the American College of Trial Lawyers; membership as an Associate of the American Board of Trial Attorneys; being named as: one of only five “Go-To Attorneys” for civil litigation (Texas Lawyer); appearing in Best Lawyer in Dallas five different Mike McKool times (D Magazine); and being chosen as one of the five Top Business Trial Lawyers in the DFW Metroplex (Dallas Business Journal). He has also been featured in The Best Lawyers in America in Commercial Litigation for almost 20 years and in Bet-the-Company Litigation since 2006. Recognition of his skill, tenacity and integrity also extends to his opposing counsel. Terry Murphy, who opposed McKool in more than one case, remarked, “You need to anticipate that Mike will pick out … themes that will win his case,” and that “Mike is a very fair, reasonable guy to deal with. He’s got a lot of integrity and honesty.” Mr. Murphy also noted: “Mike will dig to the bottom and get every fact he needs. You know you’re in a battle royal when you go up against him.” Mr. McKool came by those characteristics honestly— starting with his family. Mike McKool, Sr., who passed away in 2003, also a Dallas trial lawyer, and state Senator, came to this country as a child with his Lebanese parents. Mr. McKool remembers him as “hardworking and ambitious, like so many immigrants.” No surprise, then, that instead of playing during the summer, Mike went to work with his father. Although he may have hated it then, he watched his father try more than 20 cases. And he credited that experience with giving him a sense of ease and comfort in the courtroom. Mr. Smith remarked that Mike is “just as comfortable in a jury trial in an East Texas courtroom as in an appellate court in Washington, D.C.” His mother’s family was from Dallas, but Betty McKool’s father was a carnival photographer when she was a child. So the family followed around the carnival and she performed a comedy boxing routine with her sister. Mike notes that he still hears from continued on page 7