July 2016 Headnotes: Bankruptcy & Commercial Law by Jessica Smith

Dallas Bar Association

HEADNOTES Focus Bankruptcy & Commercial Law

July 2016 Volume 41 Number 7

DBA and AT&T Dedicate Habitat Home On Saturday June 11, a large group of DBA members, AT&T staff, and Habitat volunteers helped to celebrate 25 years of DBA service to the Dallas Area Habitat for Humanity. The DBA dedicated the first of two Habitat for Humanity homes.

This home was the DBA/AT&T home, which was fully funded by a generous donation from AT&T, through its Senior Executive Vice President and General Counsel David McAtee and the AT&T Legal Department. DBA Presi-

DBA President Jerry Alexander (left) and AT&T General Counsel David McAtee (right) presented the home to the Campos family.

Focus

dent Jerry Alexander and Mr. McAtee welcomed the homeowners—the Campos family of Jose and Fancisa and their children Danilo, Darwin, and Angelique to their new home. Thank you to all who donated, par-

ticipated, and volunteered to build! We appreciate all your hard work. The date for the second dedication is still to be determined. To participate in the project for next year, contact Ethan at ethan.minshull@wickphillips.com. HN

Thank you to Mr. McAtee and the AT&T Legal Department for their support and generous donation that fully funded the DBA/AT&T Habitat home.

Bankruptcy & Commercial Law

Ipso Facto Clauses in Executory Contracts BY JACOB SPARKS

An ipso facto clause—sometimes called a termination-on-bankruptcy provision—is a contractual or other provision conditioned on a debtor’s bankruptcy, insolvency, or financial condition, or the appointment of a custodian, that results in a loss of property rights or the elimination or limitation of obligations that existed prior to the triggering event or condition. More simply and narrowly stated for the scope of this article, an ipso facto clause is a contract or lease provision specifying that insolvency, a bankruptcy filing, or a similar event will terminate or modify the contract or lease. For example, a contract or lease might say, “this Agreement shall terminate, without notice upon the institution by or against either party of insolvency, receivership, or bankruptcy proceedings or any other proceedings for the settlement of either party’s debts.” Although many contracts contain ipso facto clauses, as a general rule, the Bankruptcy Code bars the enforcement of such clauses in executory contracts. Attorneys who do not practice bankruptcy law may be wondering what it means for a contract to be “executory.” An executory contract is one on which performance

remains due to some extent on both sides. Although the Bankruptcy Code does not define the term “executory contract,” the majority of courts have adopted the “Countryman definition” first articulated by Professor Vern Countryman in 1963. This definition provides that a contract is executory “if at the time of the bankruptcy filing, the failure of either party to complete performance would constitute a material breach of the contract, thereby excusing the performance of the other party.” Bankruptcy Code section 541(a) provides that “all legal or equitable interests of the debtor in property as of the commencement of the case” become property of a debtor’s bankruptcy estate, and section 365(e) invalidates ipso facto and other provisions that would otherwise prevent the estate from receiving the benefit of a lease or executory contract. Specifically, section 365(e) (1) provides that an executory contract or unexpired lease may not be terminated or modified after the commencement of a case because ofa provision in an executory contract, an unexpired lease, or in applicable law, conditioned on (1) the financial condition of the debtor, (2) the commencement of a case under the Code, or (3) the appointment of or taking possession of the debtor’s

property by a trustee under the Code or by a prebankruptcy custodian. Furthermore, Bankruptcy Code section 541(c)(1) provides that a debtor’s interest in property becomes bankruptcy estate property regardless of, any provision in an agreement, transfer instrument, or applicable nonbankruptcy law restricting the debtor’s transfer of the interest or conditioned on (1) the financial condition of the debtor, (2) the commencement of a case under the Code, or (3) the appointment of or taking possession of the debtor’s property by a trustee under the Code or by a prebankruptcy custodian. Section 541(c)(1) thus ensures that whatever property interests a debtor has at case commencement becomes bankruptcy estate property Additionally, Bankruptcy Code section 363(l) provides that a trustee (or a debtor proposing a plan of reorganization) may use, sell, or lease bankruptcy estate property, notwithstanding any provision in a contract, lease, or applicable law that forfeits, modifies, or terminates the debtor’s interest in such property that is conditioned on (1) the financial condition of the debtor, (2) the commencement of a case under the Code, or (3) the appointment of or taking possession of the debtor’s property by

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a trustee under the Code or by a prebankruptcy custodian. Section 363(l) thus protects the use of bankruptcy estate property once it is in the hands of the bankruptcy estate by invalidating any contractual or other provision that limits the use, sale, or lease of bankruptcy estate property based on the bankruptcy filing. Of course, there are exceptions to the general rule. Bankruptcy Code sections 365(e) (2)(A) and (B) provide two exceptions to Code section 365(e)(1)’s general invalidation of ipso facto clauses. The first exception in Code section 365(e)(2)(A) applies in situations when applicable nonbankruptcy law excuses a party from accepting performance from or rendering performance to the trustee or assignee, and the nondebtor party does not consent to the assumption or assignment. The second exception in section 365(e)(2) (B) applies to executory contracts to make a loan or extend other credit or financial accommodation, and to issue a security of the debtor. Case law on these exceptions is complex and outside the scope of this article, so interested parties should consult a bankruptcy attorney. HN Jacob Sparks is an attorney in the Dallas ofﬁce of Spencer Fane LLP. He can be reached at jsparks@spencerfane.com.

The 2016 DBA Membership Directory is now available in print & online. Check out the directory and legal resource guide used by Dallas attorneys! To view the Online Directory and Legal Resource & Expert Witness Guide, go to www.dallasbar.org/pictorial and login. To request a copy of the new directory, contact pictorial@dallasbar.org.

2 He a d n o t e s l D a l l a s B a r A s s o ciation

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Calendar July Events

Visit www.dallasbar.org for updates on Friday Clinics and other CLEs.

Publications Committee

JULY 8-NORTH DALLAS** Noon

Christian Lawyers Fellowship

“Nuts and Bolts of Patent Applications and Prosecution,” Bobby Braxton and Zach Hilton. (MCLE 1.00)* At Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Ste. 240, Dallas, TX 75240. Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building. Food is allowed inside the Conference Center. Thank you to our sponsor Fox Rothschild LLP. RSVP to kzack@dallasbar.org.

JULY 15-BELO Noon

FRIDAY, JULY 1

Trial Skills Section “Insurance 201: Liability Insurance Overview for Trial Lawyers,” Amy Stewart. (MCLE 1.00)*

No DBA events scheduled

MONDAY, JULY 4

TUESDAY, JULY 5

DAYL Freedom Run Committee

Noon

Real Property Law Section “Business Partnerships and Negotiation of Partnership Terms,” R. Shawn McBride. (MCLE 1.00)*

WEDNESDAY, JULY 6 Solo & Small Firm Section “Ten Tips on Forming a Business Partnership,” R. Shawn McBride. (MCLE 1.00)* Public Forum Committee DAYL Judiciary Committee

Judiciary Committee “Mom and Dad I Don’t Have A Problem… But,” Hon. Robert Burns, Hon. Julia Hayes, and Hon. Cheryl Shannon. (MCLE 1.00)*

TUESDAY, JULY 26

Friday Clinic—Belo “Legal Ethics to Help Clients (and Law Firms) Deal with Cyber Attacks,” Peter Vogel. (Ethics 1.00)* RSVP to kzack@dallasbar.org.

FRIDAY, JULY 8 Minority Clerkship Luncheon Learn about the broad range of opportunities in Dallas. Speakers: Rocio Garcia, Stephanie Gause, Emmanuel Obi, Monika Sanford, and Justice Ada Brown, moderator. RSVP to bavina@dallasbar.org.

Noon

Labor & Employment Law Section “Pretext,” Amy Gibson. (MCLE 1.00)*

TUESDAY, JULY 19 Noon

Antitrust & Trade Regulation Section “The Changing Landscape: The Supreme Court, Class Actions, and the Federal Arbitration Act,” William Frank Carroll. (MCLE 1.00)*

Pro Bono Activities Committee

Bench Bar Conference Committee

5:15 p.m. Legalline. Volunteers welcome. Second floor Belo.

THURSDAY, JULY 21 Noon

Media Relations Committee Minority Participation Committee Christian Legal Society

THURSDAY, JULY 14 Noon

CLE Committee

DAY OF CIVILITY & PROFESSIONALISM A Special Program Promoting Civility Friday, September 9, 2016 at Belo The DBA, Inns of Court, and ABOTA will be jointly presenting a free half-day seminar on September 9, Noon-4:00 p.m. Ethics 4.00 Speakers includes: DBA President Jerry Alexander Hon. Jim Jordan Rod Phelan Lewis Sifford State Court Panel Federal Judges Panel discussing Dondi

DAYL Equal Access to Justice Committee DAYL Get Involved Luncheon

Municipal Justice Bar Association

Health Law Section “Process of Board Certification in Health Law,” Larry Maxwell. (MCLE 1.00)*

Family Law Section “Evidentiary Issues in Family Law,” Judge Brown. (MCLE 1.00)*

Sports & Entertainment Law Section “A Fair Playing Field: How Can Employment and Anti-Discrimination Laws Reduce Gender Bias in Sports and Entertainment?” Patricia Davis, Allan G. King and Melissa G. Thrailkill. (MCLE 1.00)*

DAYL Elder Law Committee

Energy Law Section “Two Years in…A Look Back, Distress Today, and a View Toward the Future,” John Mitchell, David Parham, and Jason Wilcox. (MCLE 1.00)*

11:30 a.m. House Committee Walk Through

DAYL Lunch & Learn CLE

Noon

Entertainment Committee

WEDNESDAY, JULY 20

DAYL Assisting Lawyers in Transition Committee

8:00 a.m. Federal Bar Association Criminal Practice Seminar

DVAP New Lawyers Luncheon. For more information, contact reed-brownc@lanwt.org.

DWLA Board of Directors

WEDNESDAY, JULY 13 Noon

WEDNESDAY, JULY 27

Community Involvement Committee

Noon

Legal Ethics Committee “Keeping Your Sanity and Your Law License: Avoiding and Dealing Effectively with Difficult Clients,” Nathan Johnson and Bill Pedersen. (Ethics 1.00)*

DAYL Lawyers Promoting Diversity Committee

International/Labor & Employment Law Sections “So Now You Have (Or Are About to Have) Overseas Employees: What You Need to Know,” Dianne Carlson. (MCLE 1.00)*

DAYL Business & Career Development Committee

6:00 p.m. DAYL Board of Directors

DAYL Solo & Small Firm Committee

Courthouse Committee

Immigration Law Study Group “Citizenship: Advanced Issues,” Robert Dunikoski, David Judson and Jiroko Lopez. (MCLE 1.00)*

6:00 p.m. Dallas Hispanic Bar Association

Dallas Asian American Bar Association Friday Clinic—North Dallas** “Nuts and Bolts of Patent Applications and Prosecution,” Bobby Braxton and Zach Hilton. (MCLE 1.00)* At Two Lincoln Centre, 5420 Lyndon B. Johnson Frwy., Ste. 240, Dallas, TX 75240. Parking is available in the Visitor’s Lot located in front of the entrance to Two and Three Lincoln Centre. There are several delis within the building. Food is allowed inside the Conference Center. Thank you to our sponsor Fox Rothschild LLP. RSVP to kzack@dallasbar.org.

MONDAY, JULY 18

Business Litigation Section “The Lynching: The Epic Courtroom Battle That Brought Down the Klan,” Laurence Leamer interviewed by Talmage Boston. (Ethics 1.00)*

DAYL PAC Event

Noon

DAYL Lawyers Against Domestic Violence Committee

Dallas Bar Foundation Board of Directors

Morris Harrell Professionalism Committee Family Law Section Board Meeting

Noon

TUESDAY, JULY 12

THURSDAY, JULY 7

Noon

Peer Assistance Committee

Noon

Alternative Dispute Resolution Section “Workshop: Finding Cures and Remedies to Avoid Failed Mediations,” Lisbeth Bulmash and Cecilia Morgan. (Ethics 1.00)*

MONDAY, JULY 25

FRIDAY, JULY 15

MONDAY, JULY 11

No DBA events scheduled

Noon

6:00 p.m. J.L. Turner Legal Association

“Ethical Considerations for Helping Clients Deal with Cyber Attacks,” Peter Vogel. (Ethics 1.00)* RSVP to kzack@dallasbar.org.

DBA & Belo offices closed in observance of Independence Day

“Internet of Things,” John Ansbach. (MCLE 1.00)*

Criminal Justice Committee

FRIDAY CLINICS

Dallas Gay & Lesbian Bar Association 3:30 p.m. DBA Board of Directors 5:30 p.m. DAYL Dinner and Dialogue

THURSDAY, JULY 28 8:00 a.m. Federal Bar Association Criminal Practice Seminar Noon

South Dallas Clinic “New Procedural Traps in Business Tort Cases That You May Not Know: Don’t Find Out the Hard Way,” Brian P. Lauten. (MCLE 1.00)* At UNT Dallas, 7400 University Hills Blvd, Building 2, Room #138. Park in lot in front of 7400 University Hills Blvd. RSVP to kzack@ dallasbar.org. Collaborative Law Section “The Texas Collaborative Brand,” Tim Crouch and S. Camille Milner. (MCLE 1.00, Ethics 0.25)* Environmental Law Section “Civil Versus Criminal Enforcement of Environmental Laws,” Russell Murdock. (MCLE 1.00)* DBA Community Service Fund Board of Directors DAYL CLE Committee

FRIDAY, JULY 22 9:00 a.m. Christmas in July Donation Drop Off Noon

Intellectual Property Law Section

FRIDAY, JULY 29 No DBA events scheduled

BENCH BAR CONFERENCE

Just a Few of the CLE topics: x

What We Learned From the O.J. Simpson Trial

State Judges Panel

Status of the Dallas Jury: What Are They Thinking?

Federal Magistrate Judges Panel

Social Media and the Cloud

Thursday, September 29– Saturday, October 1 REGISTER NOW for the discounted EARLY BIRD RATE!

A special letter signed by Dallas federal and state judges supporting the Day of Civility & Professionalism will soon follow.

Civility is the hallmark of a professional.

www.dallasbar.org or 214-220-7403 Events/Activities: Plan to Stay Friday Night! Sporting Clays, Game Plan, Golf, Tennis, Yoga and more! More than 7 hours CLE, including 1.00 hour ethics. | Casual Attire Only!

Jul y 2 0 1 6

Focus

D al l as Bar A ssoci ati on l Headnotes 3

Bankruptcy & Commercial Law

Executory Contracts and Leases in Bankruptcy BY HON. HARLIN DEWAYNE HALE AND ANDREW G. EDSON

The treatment of executory contracts and unexpired leases in bankruptcy is far from a glamorous topic, but it is nonetheless important to know given recent energyrelated bankruptcy filings. This article briefly explores the explanation and treatment of executory contracts and unexpired leases and provides some practice points. A bankruptcy filing imposes the automatic stay, which provides breathing space to debtors to decide how to manage their affairs and either reorganize or liquidate. That benefit extends to executory contracts and unexpired leases. The debtor or trustee is provided the ability of evaluating which agreements are worth keeping and which are too burdensome. Counterparties are generally required to continue performance despite the uncertainty. But first, what exactly are executory contracts and unexpired leases? We are glad you asked. Unexpired leases are fairly easy to explain: they are leases of real or personal property that are still effective and have not expired. For executory contracts, we need to introduce you to the late Professor Vern Countryman, whose definition of executory contracts is cited by most courts, including the U.S. Supreme Court. Under the “Countryman definition,” a contract is executory if both parties have important performance remaining, and if either side stopped performing, the result would be a material breach. An example of an executory contract is a gas gathering contract, where the operator agrees to accept a certain amount of extracted gas for a certain price for a stated period. Section 365 of the Bankruptcy Code provides for the treatment of executory

contracts and unexpired leases. The debtor or trustee has three options: (1) assume, (2) assume and assign, or (3) reject. Assumption of an executory contract or unexpired lease requires that all pre-petition defaults are cured or will be cured and that adequate assurance of future performance is given. If the debtor wishes to assign the executory contract or unexpired lease, the debtor or trustee must first satisfy the assumption requirements. The standard applied to assuming executory contracts is the reasonable exercise of the debtor’s business judgment. Thus, bankruptcy courts will typically permit assumption unless there is a finding of bad faith or gross abuse of discretion and proof of future performance. Generally anti-assignability clauses contained in agreements are unenforceable in bankruptcy cases. Under the third option, the debtor rejects the agreement to avoid future performance. Rejection is not the equivalent of termination. Instead, rejection is treated as a pre-petition breach of the agreement. If an executory contract or unexpired lease is rejected, then the counterparty is entitled to file a proof of claim for rejection damages, but cannot seek to terminate the agreement until the automatic stay is no longer in effect.

Deadlines

Fortunately for counterparties, there are deadlines by which a debtor or trustee must decide to assume or reject. In Chapter 7, the trustee must decide within 60 days of the petition date if the agreement is to be assumed, otherwise it is deemed rejected. In Chapter 9, 11, 12, and 13 cases, the debtor or trustee must assume or reject executory contracts and unexpired leases prior to confirmation of the bankruptcy plan. The real estate industry was able to suc-

cessfully lobby for some further restrictions on the deadlines. With respect to an unexpired lease of nonresidential real property, the lease is deemed rejected within 120 days of the petition. That deadline may be extended for an additional 90 days. Still awake? We are almost there.

Practice Points

• The debtor must disclose its executory contracts and unexpired leases on Schedule G of its bankruptcy filings. So first check to see if the agreement is listed. Failure to list it does not mean that is not an executory contract, but it helps to discern the debtor’s perception of the agreement. • When continued performance by a counterparty is particularly difficult, the counterparty can request an earlier deadline prior to the statutory deadlines

described above. Thus, if continued performance may result in putting a company out of business, it is worth considering a request for an earlier deadline. • Assumption or rejection is generally “all or nothing.” Try to draft the agreement so that it is not severable into parts will may be assumed or rejected. If severable, the debtor can “cherry pick” the good parts. • Remember that rejection of an agreement is not treated as termination. Rejection is treated as a pre-petition breach. In order to terminate, the counterparty must seek relief from the automatic stay or wait until an order is entered that confirms the plan or dismisses the case. HN Hon. Harlin DeWayne Hale is a U.S. Bankruptcy Judge for the Northern District of Texas, Dallas Division. Andrew G. Edson is an associate with Strasburger & Price, LLP, and can be reached at andrew.edson@strasburger.com

BRING YOUR SUMMER CLERKS TO BELO

Learn about the broad range of opportunities in Dallas.

MINORITY CLERKSHIP LUNCHEON Friday, July 8, Noon at Belo

Speakers: Rocio Garcia, DHBA President, Hunton & Williams LLP Stephanie Gause, DAYL President, Frost Brown Todd LLC Emmanuel Obi, JLTLA President, The OBI Law Firm, PLLC Monika Sanford, DAABA President Justice Ada Brown, Moderator RSVP to bavina@dallasbar.org.

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President's Column

Headnotes Published by: DALLAS BAR ASSOCIATION

DBA Dedicates Two Habitat Houses BY JERRY C. ALEXANDER

On the front page of this issue are pictures from the formal dedication of the DBA/AT&T Habitat for Humanity house that took place on Saturday, June 11. The second home (shown below) built through the generosity of the members of the Dallas Bar Association and its friends, will be dedicated at a future time. For the past 24 years the Dallas Bar Association has built a Habitat for Humanity House. The DBA normally raises funds for and builds one house per year. This year, in honor of a quarter of a century of building these houses, the DBA partnered with AT&T to build an additional Habitat Home. This additional home, known as the DBA/AT&T House, came about through the generosity of AT&T as arranged by its Senior Executive Vice President and General Counsel, David McAtee, and the hours of work contributed by the AT&T Legal Department. Michael Hurst, DBA Second Vice President, was instrumental in the initial introduction of General Counsel McAtee and AT&T to the program, the process, and the project.

2101 Ross Avenue Dallas, Texas 75201 Phone: (214) 220-7400 Fax: (214) 220-7465 Website: www.dallasbar.org Established 1873

means through their work to pay the mortgage on the house. This program is truly not a handout, but a hand “up.” The track record of people paying off the mortgages and becoming the owners of DBA Habitat Houses is astoundingly high. This program works—just like the families that move into and start making their mortgage payments and paying the taxes in order to own their own home. Here is what the families say the houses that the DBA and AT&T are providing for them will mean to them: “To buy a house is the American Dream and I am so excited to finally be achieving it.” and “Our hope is that this home will provide our children with stability so they can pursue their education and one day own a home of their own.” (Does a sentiment get any better than that?) These two families are now “on their way,” and it should not be lost on any of us that, since these two houses are being built on the same block, they will be there to support each other, to say nothing of the fact that their children will have plenty of playmates.

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.

The DBA, AT&T, and Nomas Street

Delegates, American Bar Association: Rhonda Hunter, Hon. Liz Lang-Miers

Nomas Street is in West Dallas. It is the street on which the DBA House and the DBA/AT&T House have been completed. They are both on the same block and face across the street to the Habitat House the DBA built last year. The family that lives in that house, headed by a single mom, also has three children about the same age as their new Habitat neighbors across the street. Below is my homemade map of where the DBA/AT&T House and DBA House and last year’s DBA House are located on Nomas Street.

The Families The families that are prequalified to occupy these Habitat Houses must be qualified, generally, in two very important aspects. First of all, they must demonstrate stability as a family. While oftentimes these are single parents, they can demonstrate that they are successfully raising a family and have worked hard for a number of years. This year both families have working fathers with stay-at-home moms necessitated by the fact that both sets of parents are blessed with three lively children each, one with two boys and a baby girl, the other with an older son and two beautiful daughters. In each case, the oldest child is around the age of 10 and the families will be moving from crowded conditions in an apartment to their own home with plenty of room, and even a back yard. The second qualification is job stability and the financial

Directors: A. Shonn Brown, Hon. Rob Cañas, Jonathan Childers, Dawn Estes, Rocio Cristina Garcia (President, Dallas Hispanic Bar Association), Stephanie Gause (President, Dallas Association of Young Lawyers), Hon. Martin Hoffman, Krisi Kastl, Bill Mateja, Karen McCloud, Kate Morris, Cheryl Camin Murray, Emmanuel Obi (President, J.L. Turner Legal Association), Monika Sanford (President, Dallas Asian American Bar Association), Diane M. Sumoski, Robert L. Tobey (Chair), Aaron Tobin (Vice Chair) and Victor D. Vital Advisory Directors: Christopher Kang (President-Elect, Dallas Asian American Bar Association), Angelina LaPenotiere (President-Elect, Dallas Hispanic Bar Association), Tramaine Scott (President-Elect, J.L. Turner Legal Association), and Paul Simon (President-Elect, Dallas Association of Young Lawyers)

Directors, State Bar of Texas: Leon Carter, John Jansonius, Gregory Sampson and Brad Weber

HEADNOTES Executive Director/Executive Editor: Catharine M. Maher Communications/Media Director & Headnotes Editor: Jessica D. Smith In the News: Judi Smalling Art Director: Josh Garza Display Advertising: Annette Planey, Jessica Smith Classified Advertising: Judi Smalling PUBLICATIONS COMMITTEE Co-Chairs: Meghan Hausler and Keith Pillers Vice-Chairs: Alexander Farr and Carl Roberts Members: Timothy Ackermann, Logan Adock, Jerry C. Alexander, Wes Alost, Jason Bloom, Andrew Botts, Charles Coleman, Shannon Conway, Jess Davis, James Deets, Leiza Dolghih, Dawn Fowler, Susan Halpern, Jeremy Hawpe, Mary Louise Hopson, Lindsay Hedrick, Brad Jackson, Andrew Jones, Kristi Kautz, Amanda Kelley, Michelle Koledi, Kevin Koron-ka, Susan Kravick, Lawrence Maxwell, R. Sean McDonald, Tyler Mendez, Terah Moxley, Jessica Nathan, Eugene Ol-shevskyy, Kirk Pittard, Laura Anne Pohli, Charles Price, Kathy Roux, Jared Slade, Thad Spalding, Shana Stein, John Stevenson, Scott Stolley, Amy Stowe, Ashely Swenson, Michael Tristan, Pryce Tucker, Peter Vogel, Suzanne Westerheim, Yuki Whitmire

The Program, the Process, and the Project The DBA began building Habitat homes in 1991 and is the longest running whole-house sponsor in Dallas. The way the program works is that the DBA finds donors, many of them DBA members, including law firms and friends of the association, and raises enough money to pay the Habitat for Humanity organization to provide land and materials to build a house for a qualified family. No DBA funds are used to fund these projects. The lots are acquired oftentimes from the City of Dallas, who has “inherited them” due to non-payment of property taxes, and these lots are usually located in areas of the city which are in need of renewal. Habitat then provides materials, plans, and supervision by professional home builders that work fulltime for Habitat. Next comes the fun part. Members of the DBA, their friends, and colleagues come out to the building site and help build the house. Whatever their skill level, as long as they are willing to provide elbow grease, they can be put to work and watch a house literally rise out of the ground in the matter of a few months. Al Ellis, a former President of the DBA, has worked on every Habitat House the Dallas Bar has ever done and has actually acquired some skills in this regard over the years. (He can be taught! ) Al is there most days of the build, for the entire build, working, encouraging, and teaching. The DBA owes him a tremendous debt for his dedication to these projects over the years.

OFFICERS President: Jerry C. Alexander President-Elect: Rob D. Crain First Vice President: Michael K. Hurst Second Vice President: Laura Benitez Geisler Secretary-Treasurer: Sakina Rasheed Foster Immediate Past President: Bradley C. Weber

The Future As the houses started taking shape, the volunteers are always finding that they need additional nails, hammers, ladders, siding, etc., and the two projects are allowed to borrow from each other during a build day so the work does not slow down. The fulltime Habitat people even out the supplies during the week so things will proceed smoothly on the next build day. When walking back and forth between the houses to do some of this “borrowing” (I think Al Ellis sent me to run these errands since he believes I could not hold down a “real job” onsite), I noticed that there was vacant land between the two houses. I then did some checking and found out that there are two vacant lots as shown above on the map between the DBA/AT&T House and the DBA House. I believe we should strive to build houses on both of those lots next year! In so doing, literally an entire block will have been renewed by the DBA and AT&T and the lives of five families, especially 15 or so impressionable children, will have been positively impacted for their entire lifetimes. That is to say, something the DBA is accomplishing on Nomas Street right now will carry forward through the end of this new century! I do not know how you spent any of the first 16 Saturdays of this year, but if you found time to spend at least one of them on one of these Habitat projects on Nomas Street, you are truly blessed. And that blessing applies with particular emphasis to the Co-Chairs of the DBA Home Project Committee, David Fisk, of Kane Russell Coleman & Logan, P.C., and Ethan Minshull, of Wick Phillips. Let’s finish up Nomas Street! See you at the Belo, Jerry

DBA & DBF STAFF Executive Director: Catharine M. Maher Accounting Assistant: Shawna Bush Communications/Media Director: Jessica D. Smith Controller: Sherri Evans Director of Community Services: Alicia Hernandez Events Director: Rhonda Thornton Executive Assistant: Mary Ellen Johnson Executive Director, DBF: Elizabeth Philipp LRS Program Assistant: Biridiana Avina LRS Interviewers: Viridiana Avina, Marcela Mejia Law-Related Education & Programs Coordinator: Melissa Garcia Membership Director: Kimberly Watson Projects Coordinator: Kathryn Zack Publications Coordinator: Judi Smalling Receptionist/Staff Assistant: Yedenia Hinojos DALLAS VOLUNTEER ATTORNEY PROGRAM Director: Alicia Hernandez Managing Attorney: Michelle Alden Mentor Attorneys: Kristen Salas, Katherine Saldana Volunteer Recruiter: Chris Reed-Brown Paralegals: Whitney Breheny, Miriam Corpal, Tina Douglas, Zaporra Gonzales, Andrew Musquiz, Carmen Perales, Alicia Perkins Program Assistant: Patsy Quinn Secretary: Ellie Pope Copyright Dallas Bar Association 2016. 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 publica-tion. 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 nec-essarily those of the Dallas Bar Association. All advertising shall be placed in Dallas Bar Association Headnotes at the Dallas Bar Association’s sole discretion. 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.

Jul y 2 0 1 6

D al l as Bar A ssoci ati on l Headnotes 5

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6 He a d n o t e s l D a l l a s B a r A s s o ciation

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DBA Athletic Director

HRM’s and Other Fitness Trackers BY KENNETH G. RAGGIO

Chapter 8 of our training manual, Younger Next Year, states that it is an utter necessity to get a heart rate monitor—a monitor so that you can see when exercising (or when not exercising or resting) what your heart rate is. The book states that it is important to monitor the time that one spends in each of the three basic “heart rate zones,” low-rate aerobics (fat burning), high-endurance aerobics (fat burn plus some glucose), and anaerobic exercise (all-out effort for a minute or two). Without monitoring, one may be under exercising, and perhaps gaining weight, or over exercising and becoming more susceptible to injury. The book was copyrighted in 2004, way before fitness trackers. Fitness trackers now combine a heart rate monitor (HRM) with

Gregory Bevel used his FitBit to monitor his heart rate during a recent trial.

all kinds of other nifty reminders of exercise, such as steps, mileage, floors climbed, average heart rate, resting heart rate, sleep time, and other measures of fitness. Or lack thereof. The Fitbit Charge HR is a good example. When you reach a goal for the day— say 10,000 steps—your watch (your Fitbit doubles as a watch) will vibrate. Since your Fitbit is synched with your smart phone, it will chart your efforts over time and award you merit badges when you attain some lofty fitness goal, such as an Italy badge— 736 lifetime miles on the device (the distance to walk Italy), or Hot Air balloon (2,000 lifetime floors). If you get a Fitbit or some other fitness tracker, when you reach 8,000 steps in one day, it encourages you to walk the extra 2,000 steps to get the vibration on your wrist for reaching 10,000 steps in a day. So

not only does it track fitness, but it truly encourages fitness. And they also help monitor stressful activities, such as being a lawyer in a jury trial. Gregory H. Bevel, of Rochelle McCullough LLP, gives an account of how his Fitbit Charge HR proved how stressful a jury trial is to us lawyers. His wife gave him the Fitbit about a year ago, and he used it to monitor his daily walk with his dog. He watched his resting heart rate drop steadily from 82 to 69 bpm just before he started a two week jury trial in district court in Fort Worth in April. His resting heart rate soared back up to 82 on the first day of trial and stayed in that range for the entire trial. Mr. Bevel reports that his sleep efficiency—also measured by the Fitbit—dropped from an average of 98 percent to 84 percent during the trial. It showed he was waking up in the middle of the night and only having one deep sleep session per night. (For those of us 50+, the Fitbit recognizes how often you get up to go to the bathroom in the night and therefore how disturbed your sleep is.) Mr. Bevel also reports that the Fitbit showed that he had long times in the “cardio zone”—between 125 to 150 bpm— the whole way through voir dire and perhaps 1 to 2 hours each day of trial after that. And 10-12 hours each day in the fat burning zone of 100-125 bpm. Every day of trial was like walking 20 miles. “Want to lose 5 or 10 pounds? Just have a jury trial,” he quips. The New York Times magazine in March published a comment/critique on mobile fitness devices such as the Fitbit, pointing out that Fitbit faces a classaction lawsuit on the accuracy of its heart rate monitor, and also that Oral Roberts University requires its freshman to wear a Fitbit and to allow school administrators access to the data to ensure that the student is meeting the minimum 10,000 steps per day mandated by the school’s “whole person education” program. Some would say users intuitively already know what their fitness trackers tell them. But there are advantages that fitness trackers uniquely bring. Fitbit, Garmin (and other) bike computers, Apple watches, and iPhones all have fitness apps built in or are easily available. So access to high level, immediate, and mostly accurate data is readily available. And if you choose to do so, you can share data with your “friends” as you define them. Rick Robertson, of KoonsFuller, uses his Apple watch, iPhone, and Garmin bike computer to document his bike rides—heart rate, speed, cadence, incline, average speed, best effort on the same portion of a route previously ridden, etc. He

Mr. Bevel’s heart rate during his trial.

uses the app Strava to share data with his “friends.” Mr. Robertson points out that he finds the sharing of data with friends—and them sharing with him—to be a real motivator to help him exercise, as he sees what his friends—from afar—are doing. Interested in joining the 13 million who bought fitness trackers in 2015? A Fitbit Charge HR will set you back $110$150. And then you can be ready when

it is time for “Big Data” to have access to millions and millions of trackers to help improve our national health through actual massive individual data. Do you have an athletic activity that you would like to share? If so, please send suggested topics to kenneth@raggiolaw. com. HN Kenneth G. Raggio is a partner at Raggio & Raggio, P.L.L.C. and can be reached at kenneth@raggiolaw.com.

DBA Christmas in July

Drop Off Donations Friday, July 22, 9:00 a.m.- Noon At Belo (2101 Ross Ave., Dallas) Benefiting: Austin Street Center, Big Brothers Big Sisters, The North Texas Food Bank, and The Family Place For more information: mbellan@jhflegal.com or keltzlaw@yahoo.com Sponsored by the DBA Community Involvement Committee

COMMUNITY VOLUNTEER OPPORTUNITIES FOR LAWYERS Q

A multi-office national law firm is seeking Attorneys for its Dallas Office. Litigation department is looking for Attorneys in the following areas: Professional Liability Defense, General Liability, Workers Compensation Defense, Construction, and Employment Liability Defense. Corporate Law, Commercial Litigation and Financial Services departments are looking for Attorneys with experience handling securities and broker dealer matters, international and domestic taxation, bankruptcy, real estate, intellectual property, international law, corporate structure, asset protection, land use, and mergers and acquisitions. Portable book of business is a plus. Also seeking 1-4 year Associates. Email resume to RESUME@QPWBLAW.com

Volunteer to help at a Dallas Volunteer Attorney Program free legal clinic, contact reed-brownc@lanwt.org. Participate in mentor2.0, contact whall@bbbstx.org. Tutor a Child Confined to the Henry Wade Juvenile Justice Center, contact ahernandez@dallasbar.org. Mentor a Child Impacted by Incarceration, contact Wendell Hall at whall@bbbstx.org. Speak to a Community or Civic Group on a Law-Related Topic, contact mjohnson@dallasbar.org. Volunteer to build a Habitat House, contact dfisk@krcl.com or eminshull@wickphillips.com.

Jul y 2 0 1 6

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

Jul y 2016

Lawsuit?...But I Was A Volunteer! BY JOHN L. THOMPSON

Opportunities to volunteer abound in our community. But no volunteer wants to be subjected to civil liability as a reward for their altruistic efforts. With this in mind, the Legislature enacted the Texas Charitable Immunity and Liability Act of 1987, TEX. CIV. PRAC. & REM. CODE, § 84.001, et seq. (TCILA). The TCILA provides volunteers broad protection from liability for negligence. Specifically, a “volunteer” of a “charitable organization” is immune from civil liability for any act or omission resulting in death, damage, or injury, if he was acting in the course and scope of his duties. This immunity does not extend to any act or omission that is intentional, willfully negligent, or done with conscious indifference or reckless disregard for the safety of others. Also, there is no immunity for acts or omissions arising from the operation of motor-driven equipment, to the extent insurance coverage is required by state law and to the extent there is any other applicable insurance coverage. A “volunteer” means a person rendering services for a charitable organi-

zation, who does not receive compensation beyond expense reimbursements. Generally, a “charitable organization” includes any organization—whether a tax-exempt § 501(c)(3) or (c)(4) organization or not—organized and operated exclusively for permissible purposes, such as charitable, religious, educational, prevention of cruelty to children or animals, and youth sports, or organized and operated exclusively for the promotion of social welfare by being primarily engaged in promoting the common good and general welfare of the people in a community. A non§501(c)(3) or (c)(4) organization must also satisfy six factors ensuring the organization is focused on social welfare, not politics or profit. Additionally, if certain criteria are met, homeowners associations, volunteer centers (as defined by statute), local chambers of commerce, and wildfire mitigation organizations may also qualify. The TCILA does not modify the duties and liabilities owed by officers and directors to the organization; nor does it limit the organization’s potential liability for acts or omissions of its employees and volunteers. Non-hospital chari-

South Dallas Clinic Presents: New Procedural Traps in Business Tort Cases That You May Not Know: Don’t Find Out the Hard Way

table organizations can, however, limit their exposure to $500,000/person and $1 million/occurrence for bodily injury or death and $100,000/occurrence for property damage, by maintaining insurance in these amounts (or a $1 million bodily injury and property damage combined single limit policy) covering the organization and its employees. Volunteers also benefit from the Volunteer Protection Act of 1997, 42 U.S.C. § 14501, et seq. (VPA), which Congress enacted to establish a nationwide baseline for protecting volunteers. The VPA preempts inconsistent state laws, except to the extent a state law affords broader protections, which the TCILA generally does. The VPA provides that a “volunteer” of a “nonprofit organization” shall not be liable for “harm” caused by a volunteer’s act or omission on behalf of the organization, if the volunteer: (1) was acting within the scope of his responsibilities; (2) was properly licensed, if applicable; (3) did not cause the harm by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed; and (4) did not cause the harm while operating a vehicle requiring an operator’s license or insurance. There is no protection afforded volunteers for misconduct involving certain criminal activity or occurring while under the influence of drugs or alcohol. Generally, “nonprofit organization” means any tax-exempt 501(c)(3) organization and any nonprofit organization organized for public benefit and operated primarily for charitable, civic, educational, religious, welfare, or health pur-

poses. “Volunteer” means an individual performing services for a nonprofit organization who does not receive compensation exceeding $500 per year, excluding expense reimbursements. “Harm” includes any economic and non-economic losses. Beyond precluding liability for negligence, the VPA limits liability for non-economic losses in circumstances of heightened culpability. First, in multi-defendant cases, there is no joint and several liability for non-economic losses. Rather, a jury determines each defendant’s percentage responsibility for the plaintiff ’s harm, then liability for non-economic losses are allocated pro-rata. Second, punitive damages are available only for willful or criminal misconduct or a conscious, flagrant indifference to the rights or safety of the individual harmed. The VPA, however, neither creates a cause of action for punitive damages nor expands any state or federal law that further limits punitive damage availability. These statutes cannot prevent a lawsuit. Likewise, a good faith allegation that misconduct involved heightened culpability means the culpability determination and, thus, the volunteer’s entitlement to any protection at all, may require a jury verdict. Nevertheless, these statutes essentially eliminate a volunteer’s personal liability for damages arising from mere negligent conduct. HN John L. Thompson is a shareholder at Munsch Hardt Kopf & Harr, PC. He can be reached at jthompson@munsch.com.

MCLE 1.00 | Thursday, July 28, Noon

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UNT Dallas (7400 University Hills Blvd., Building 2, Room #212) Park in lot in front of 7400 University Hills Blvd RSVP to kzack@dallasbar.org.

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Jul y 2 0 1 6

Focus

D al l as Bar A ssoci ati on l Headnotes 9

Bankruptcy & Commercial Law

The New-Value Exception to the (Almost) Absolute Priority Rule BY JARED T.S. PACE AND J. SETH MOORE

In the absence of consent, a business that wants to reorganize under Chapter 11 must generally come up with a plan to pay all of its creditors in full before the owners are allowed to keep their ownership. This so-called â&#x20AC;&#x153;absolute priority ruleâ&#x20AC;? is intended to achieve fairness by not allowing owners of a struggling business to cut in front of creditors when it comes to the benefit of the businessâ&#x20AC;&#x2122;s assets. The rule can create tough choices, especially for small single-owner companies, or those owned by just a few individuals, who want to reorganize and keep their business, but cannot afford to pay all debt in full. The sole exception to the absolute priority rule requires an owner to contribute â&#x20AC;&#x153;new valueâ&#x20AC;? to the reorganized business. Courts are generally skeptical of â&#x20AC;&#x153;new valueâ&#x20AC;? plans because of a perceived unfairness in allowing business owners to buy back their interests at potentially bargain prices while at the same time requiring creditors to accept less than what they are owed. The new value standard is therefore exacting, obligating owners to first show that a capital infusion is necessary, and then to make a substantial monetary contribution in an amount that is reasonably equivalent to the ownership interests they receive in exchange. These requirements naturally beget factually intensive determinations, including valuation of the reorganized business. Nonetheless, any confirmable new value plan must have certain standard components. Cash is perhaps the most straightforward component necessary to meet the new value exception. Other forms of con-

tribution will not suffice. For instance, an ownerâ&#x20AC;&#x2122;s forgiveness of debt she is owed from the business, or an ownerâ&#x20AC;&#x2122;s personal guaranty of new loans to the business, fall short of the â&#x20AC;&#x153;monetary contributionâ&#x20AC;? requirement of the new value exception. If an owner wants to keep her business without paying creditors in full, then she must come out of pocket. While the cash requirement is fairly direct, disputes understandably develop over the amount of cash needed to achieve new value. Courts uniformly require a â&#x20AC;&#x153;substantialâ&#x20AC;? contribution and reject â&#x20AC;&#x153;de minimisâ&#x20AC;? offerings, but there is no bright-line test for what is sufficient. The best approach is to avoid a seemingly arbitrary amount, and instead, tie the amount of the contribution to the value of the business. Once an owner determines the amount of cash she is willing to contribute to the reorganized business, she must give others an opportunity to pay more. In other words, a confirmable new value plan must assure the court that it is fetching top dollar for the ownership interests in the business by exposing those interests to the market. A plan that denies everyone other than the business owner a meaningful opportunity to buy the business does not meet the new value exception. There is no mandated process for allowing others a meaningful opportunity to buy the business, but it generally involves some form of auction, wherein the ownerâ&#x20AC;&#x2122;s stated contribution serves as the opening bid. Even in that context, an owner must convince the court the auction was adequately marketed

so that those who would be most likely to bid, including investors and competitors, were given sufficient notice of the auction itself and were acceptably informed of what was being sold. In deciding whether the appropriate level of market exposure was obtained, courts have reached varying conclusions. Some courts confirmed plans where only the businessâ&#x20AC;&#x2122;s creditors were notified of the opportunity to buy the business, and other courts required more. On the whole, merely mailing a copy of the plan to all creditors is less likely to satisfy the requisite amount of market exposure than, for instance, advertising the auction through trade publications, websites, and the like. This is especially true where the plan itself buries details of the sale in numerous other unrelated provisions. But regardless of the market-

ing approach, the owner of a bankrupt business should assume a direct correlation between the efforts she invests in marketing the business and the chances of obtaining confirmation of a plan based on the new value exception. The high threshold necessary to meet the new value exception reveals the level of importance courts place on protecting the principles of fairness embodied in the absolute priority rule. The idea is that because of its onerous requirements, only the most earnest owners will endeavor to meet the exception, thereby increasing the odds that a reorganized business will achieve its best use to everyoneâ&#x20AC;&#x2122;s benefitâ&#x20AC;&#x201D;creditors included. HN Jared Pace is an attorney at Anderson Tobin, PLLC and can be reached at jpace@andersontobin.com. Seth Moore is a partner at the ďŹ rm and can be reached at smoore@andersontobin.com.

33rd Annual Philbin Awards Luncheon Tickets Now Available! KEYNOTE SPEAKER Jackson Walker

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Friday, September 23 | Noon | Belo For tickets, log on to www.dallasbar.org

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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

Focus

Jul y 2016

Bankruptcy & Commercial Law

Five Issues to be Aware of in Oil & Gas Bankruptcies BY JASON KATHMAN

The dramatic fall in oil prices has caused a precipitous rise in oil and gas related bankruptcy cases. Over the last 16 months, at least 70 oil and gas companies with aggregate debts of approximately $38.2 Billion have filed for protection under the United States Bankruptcy Code. Although the price of oil has recently rebounded, the threat of future bankruptcies continues to exist. Below are five issues you should be aware of when dealing with an oil and gas bankruptcy.

1. Property of the Estate

Upon the filing a bankruptcy case, the Bankruptcy Code establishes a separate and distinct legal entity called the bankruptcy estate. With some exceptions, the majority of a debtor’s assets become property of the bankruptcy estate upon the filing for bankruptcy. The determination of what oil and gas interests a

debtor owns (and the characterization of those interests), and thus what interests become property of the estate, is an important issue in any oil and gas bankruptcy. Moreover, the Bankruptcy Code limits a debtor’s ability to use, sell, and/ or lease any estate property other than in the ordinary course of business. To the extent that the interests generate cash that is a [creditor’s?][bank’s] collateral, the Bankruptcy Code also limits the use of such “cash collateral” unless certain requirements are met.

2. Valuation and Adequate Protection

Valuation issues arise in many contexts. For example, in order to obtain approval for use of cash collateral, a debtor must prove that the lender’s collateral is “adequately protected.” While other factors and elements will affect the ultimate determination of adequate protection, a central issue will be the value

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of the [creditor’s][bank’s] collateral. Similarly, one of the ways in which a creditor may seek to have the automatic stay lifted is to argue that a debtor lacks equity in a particular oil and gas asset and that the asset is not necessary for an effective reorganization. In both cases, evidence of the value of the assets will be necessary to address creditors’ objections. The complicated nature of oil and gas valuation (reserve reports, discounted cash flows, etc.) combined with the volatile manner in which oil and gas futures are traded, makes valuation of these types of assets anything but an exact science and makes the determination of whether a lender is adequately protected or oversecured challenging.

3. Executory Contracts

Section 365 of the Bankruptcy Code allows a debtor to assume “executory contracts” or unexpired leases it deems beneficial, and reject those that it deems burdensome. An “executory contract” is commonly understood to be one where material performance is still due by both parties to the contract. Whether an agreement constitutes an unexpired lease is a question of state law. A common oil and gas contract that may be classified as an executory contract is the Joint Operating Agreement (JOA). While many JOAs expressly provide for what happens in the event of an operator’s bankruptcy, the enforceability of those provisions and their intersection with bankruptcy law is a state by state determination. Similarly, other “executory contracts” may include vendor contracts with supply and service companies. As such, companies in the oil and gas industry should be aware of how their contractual rights may be modified when

the counter-party to a contract files for bankruptcy.

4. Characterization of O&G Leases

State law determines whether an oil and gas lease can be rejected. In states like Texas, where mineral rights are treated as vested property rights that may be bought and sold, an oil and gas lease will not be treated as an unexpired lease subject to rejection under Section 365. Conversely, in states where a property owner merely owns the exclusive right to drill and develop the minerals, the oil and gas lease may be treated as an unexpired lease subject to assumption or rejection under Section 365 of the Bankruptcy Code.

5. Avoidance Powers

The Bankruptcy Code also provides a number of so-called “avoidance powers” that provide a debtor with authority to avoid certain preferential and fraudulent transfers. Thus, a vendor who received payments in the 90 days immediately prior to the bankruptcy may have to pay money back to the debtor. Similarly, dividends or distributions made to partners and members of the debtor while it was insolvent may also be voidable and returned to the debtor. Additionally, a debtor (or trustee) is provided with so-called “strong-arm” powers that enable it to avoid unperfected interests in the debtor’s property. These powers can be especially problematic for working interest owners who have unrecorded interests. HN

Jason Kathman is a shareholder at Pronske Goolsby & Kathman, P.C. and can be reached at jkathman@pgkpc.com.

DAYL Lawyers Promoting Diversity Committee invites you to the 11th Annual Dinner & Dialogue Implicit Bias - Strategies for Breaking the Cycle

Thursday, July 21,

Powerful

Personal

6:00 - 8:30

With opening remarks by Chief District Judge Barbara M.G. Lynn, United States District Court for the Northern District of Texas, and closing remarks by A. Shonn Brown, Partner at Lynn Pinker Cox & Hurst LLP Register at www.dayl.com. 1.50 hours of ethics credit pending.

DVAP’s Finest Ellen Williamson

Ron Massingill & Maryann Brousseau

Powerful results delivered with a personal touch. That’s what you get when you partner with Brousseau Naftis & Massingill. When your ﬁrm requires co-counsel, has a conﬂict or needs a referral, we are there for you and your clients. We can achieve results on a broad range of matters, from business litigation, real estate transactions and corporate law to family law and bankruptcy. Learn more at bnmdallas.com

Ellen Williamson has proudly served as a DVAP volunteer since opening her solo practice in summer 2013. She has taken on many probate, guardianship, and family law pro bono cases, including a complicated probate matter. She has also helped to create and deliver CLEs co-sponsored by DVAP and the DAYL Elder Law Committee, including the Introduction to Heirship Prove-Ups and the 2015 Probate and Guardianship Symposium, and looks forward to working together with DVAP to help meet the need for quality legal service for clients of limited means. Thank you for all you do, Ellen!

Pro Bono: It’s Like Billable Hours for Your Soul. To volunteer or make a donation, call 214/748-1234, x2243.

Personal approach. Proven results.

Jul y 2 0 1 6

D al l as Bar A ssoci ati on l Headnotes 11

2016 DBA 100 CLUB - WE WANT YOU! What is the DBA 100 Club? The DBA 100 Club is a distinguished membership recognition category that consists of Firms, Law Schools, Organizations and Government agencies with two or more attorneys as well as corporate legal departments that have 100% membership in the DBA. Recognition is FREE and given to the 2016 DBA 100 Club members in our June, July and August Headnotes and at our Annual meeting in November. Please note that the DBA 100 Club is FREE recognition and open for renewal annually. We do not automatically renew an organization’s membership due to changes in attorney rosters each year. Do you see your name on the list? If not, you need to GET ON THE LIST! To become a 2016 DBA 100 Club member, please submit your request via email and include a list of all lawyers in your Dallas office to Kim Watson, kwatson@dallasbar.org. We will verify your list with our membership records and if you qualify, your firm will be added to the 2016 DBA 100 Club! If we receive your list by July 8th, your firm will be included on the August DBA 100 Club recognition list in Headnotes.

Send in your list TODAY! DBA 100 Club Members as of June 10, 2016 2 to 5 Attorneys A. William Arnold III & Associates, P.C. Ackerman & Ramos, L.L.P. Adair, Morris & Osborn, P.C. Aldous \ Walker Alexander Dubose Jefferson & Townsend LLP Altaffer & Chen PLLC Anderson & Brocious P.C. Anderson Beakley, PLLC Andrews & Barth, PC Ashcraft Law Firm Ashley & Laird Atwood Gameros LLP Bisignano Harrison Neuhoff LLP Blackwell & Duncan, PLLC Blankenship, Wiland & O’Connor, P.C. Brousseau Naftis & Massingill ByrdAdatto Calabrese Huff, P.C. Chen Dotson, PLLC Clark, Malouf & White, LLC Coffin & Bailey, PLLC Connatser Family Law Crain Lewis Brogdon, LLP Darrell W. Cook & Associates PC Darrow Mustafa PLLC Davenport & Epstein, P.C. Davis Stephenson, PLLC Dedman Law, PLLC Dunn Sheehan LLP Edison, McDowell & Hetherington LLP Edwards & de la Cerda, L.L.C. Fisher & Welch, P.C. Franklin Hayward LLP Fuller Mediations Gauntt, Koen, Binney, Woodall & Kidd, LLP Gillespie Sanford LLP Goggin Law Firm Grau Law Group, PLLC

Grogan & Brawner P.C. Gunnstaks Law Office Hamilton & Squibb, LLP Hance Law Group Hollingsworth Walker Horton & Archibald, P.C. Hunt | Ham, PLLC Hunter & Kalinke Hyden + Hyden Iola Galerston, LLP JEE Law, PLLC Jenkins & Watkins Johnston Tobey Baruch, P.C. Juneau, Boll, Stacy & Ucherek, PLLC Kabani & Kabani, PLLC Kellett & Bartholow PLLC Kendall Law Group, LLP Kevin Buchanan & Associates, P.L.L.C. Kinser & Bates, L.L.P. Kizzia Johnson PLLC Koning Rubarts LLP Langley LLP Law Office of Andrew & Mark Cohn Law Offices of Carmen S. Mitchell, LLP Law Offices of Richard A. Gump, Jr., P.C. Law Offices of Terrence G. Turzinski, P.C. Lee & Braziel, LLP Lemons & Hallbauer, LLC Lidji Dorey & Hooper Lira Bravo Law, PLLC Lisa E. McKnight, P.C. Little Pedersen Fankhauser LLP Malouf & Nockels LLP Marshall & Kellow, LLP McElree | Smith McTaggart & Beasley, PLLC Miller Mentzer Walker, P.C. Mincey-Carter, PC Nesbitt, Vassar, & McCown, L.L.P. Orenstein Law Group, PC Pace & Pace, L.L.P.

Peckar & Abramson, P.C. Quaid Farish, LLC RegitzMauck PLLC Rosenberg Paschall Johnson LLP Sawicki Law Schuerenberg & Grimes, P.C. Sheils Winnubst, PC Skierski Jain PLLC Smith Kendall P.C. Smith, Stern, Friedman & Nelms, P.C. Spencer Scott pllc Talcott Franklin PC The Courtney Firm Travis Law Group, P.C. Van Every Creedon PLLC Ward & Turton, PLLC Webb Family Law Firm, P.C. Winn, Beaudry & Winn, L.L.P. Withers & Withers, P.C. Wolfish & Newman, P.C. Woodward & Shaw Woolley <> Wilson, LLP. Wormington & Bollinger Law Firms with 6 or More Attorneys Ackels & Ackels, L.L.P. Anderson Tobin, PLLC Baker Botts, L.L.P. Bragalone Conroy PC Brown Fox PLLC Buether Joe & Carpenter, LLC Burdette & Rice, PLLC Calloway, Norris, Burdette & Weber, PLLC Canterbury, Gooch, Surratt, Shapiro, Stein & Gaswirth, P.C. Carrington, Coleman, Sloman & Blumenthal, L.L.P. Carstens & Cahoon, LLP Cavazos, Hendricks, Poirot & Smitham, P.C. Coats Rose Cobb Martinez Woodward PLLC Cooper & Scully, P.C. Cowles & Thompson, P.C.

Cozen O’Connor Cunningham Swaim Cutler Smith, PC Duffee + Eitzen LLP Estes Okon Thorne & Carr PLLC Farrow-Gillespie & Heath LLP Fee, Smith, Sharp & Vitullo, L.L.P. Fletcher, Farley, Shipman & Salinas, LLP Fox Rothschild LLP Godwin PC Goranson Bain, PLLC Gordon Rees Scully Mansukhani, LLP Gruber Elrod Johansen Hail Shank LLP Hankinson LLP Hiersche, Hayward, Drakeley & Urbach, P.C. Higier Allen Lautin, P.C. Hoge & Gameros, L.L.P. Jordan Cresswell Monk Reber, PC Kessler Collins, P.C. Lynn Pinker Cox & Hurst, LLP Macdonald Devin, P.C. Malouf Nakos Jackson & Swinson, P.C. McCathern, LLP McGuire, Craddock & Strother, P.C. Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P. Mullin Law, PC Orsinger, Nelson, Downing & Anderson L.L.P. Passman & Jones, P.C. Sayles Werbner, P.C. SettlePou Shannon, Gracey, Ratliff & Miller, L.L.P. Sorrels, Udashen & Anton Stacy & Conder, L.L.P. Stanton Law Firm PC Staubus & Randall, L.L.P.

Steed Dunnill Reynolds Bailey Stephenson LLP Stuber Cooper Voge, PLLC The Bassett Firm, P.C. The Hartnett Law Firm Thiebaud Remington Thornton Bailey LLP Thompson & Knight LLP Touchstone Bernays Verner Brumley McCurley Mueller & Parker, PC Winstead PC Zelle LLP Corporate Legal Departments Alon USA Energy Inc. Austin Industries, Inc. Borden Dairy Company Buckner International Capital Senior Living, Inc. Compatriot Capitol Inc. Dunhill Partners, Inc. Fair Texas Title, LLC Front Burner Restaurants, LP Gaedeke Group HighGround Advisors Morgan Management Corporation Neuberger Berman Oak Highlands Brewery PrimeLending, a PlainsCapital Company Tenaska, Inc. Government Agencies, Law Schools & Organizations City of Irving Dallas Children’s Advocacy Center Dallas County Probate Court DII Industries, LLC Asbestos PI Trust UNT Dallas College of Law Special Recognition Students of the UNT Dallas College of Law

12 H e a d n o t e s l D a l l a s B a r A s s ociation

Jul y 2016

BAR NONE XXXI Once again, Bar Noneâ&#x20AC;&#x2122;s cast revealed that their abilities extend beyond the practice of law. Celebrating their 31st year, Bar None XXXI: Straight Outta Uptown provided an uproarious performance! Led by show director Martha Hardwick Hofmeister, choreographer Rhonda Hunter, and producer Tom Mighell, the show played for four nights in June, and thanks to the Dallas Bar Foundation and these hard-working singers, dancers and actors, more than $1.5 million has been contributed to the Sarah T. Hughes Diversity Scholarships, benefitting nearly 50 law students since 1986. For more information, visit www. barnoneshow.com. Photo credits: Scott Alden.

Jul y 2 0 1 6

D al l as Bar A ssoci ati on l Headnotes 13

Straight Outta Uptown

Thank You, Bar None Sponsors! On behalf of the Sarah T. Hughes Diversity Scholarship, the Dallas Bar Foundation salutes and thanks the following sponsors of Bar None XXXI. Their generous contributions not only benefit the scholarships, but they made this year’s show possible.

Producers: Attorney at Law Magazine • Sarah T. Hughes Alumni Scholars • Texas Lawyer

Directors: Burdin Mediations • DBA Business Litigation Section • DBA Corporate Counsel Section • DTI Global • ExxonMobil • Farrow-Gillespie & Heath, LLP • Haynes and Boone, LLP • Jackson Walker L.L.P. • Ben Abbott & Associates • Shackelford, Bowen, McKinley & Norton, LLP • Waters Kraus & Paul

Stars: Altrusa International of Downtown Dallas, Inc. • Brown & Hofmeister, LLP • Leon Carter • Cooper & Scully, P.C. • Cowles & Thompson • DBA Bankruptcy & Commercial Law Section • DBA Mergers & Acquisitions Section • Federal Bar Association • Goranson Bain, PLLC • Hunton & Williams LLP • Jones Day • Kastl Law, P.C. • Linebarger Goggan Blair & Sampson, LLP • John McDowell • Millennium Settlements • Passman & Jones, P.C. • Siemens PLM Software • William “Mac” Taylor American Inn of Court

14 H e a d n o t e s l D a l l a s B a r A s s ociation

Focus

Jul y 2016

Bankruptcy & Commercial Law

SCOTX Resolves TUFTA’s “Reasonably Equivalent Value” Standard BY JEREMY C. MARTIN

The Texas Uniform Fraudulent Transfer Act (TUFTA) allows a bankruptcy trustee to avoid a debtor’s transfers that defraud the estate’s creditors. On a certified question from the Fifth Circuit, the Supreme Court of Texas held that TUFTA’s “reasonably equivalent value” is determined by an objective, market-place standard. In doing so, the Supreme Court rejected the interpretation of TUFTA as turning on the value from the subjective standpoint of the debtor’s creditors. For almost 20 years, Allen Stanford operated a multi-billion dollar Ponzi scheme. Beginning in 2005, Stanford targeted sports audiences because of the group’s large proportion of high-net-worth individuals. As part of that effort, Stanford entered into an agreement with Golf Channel for a range of marketing services. By the time the Ponzi scheme was exposed, Stanford had paid at least $5.9 million to Golf Channel. The SEC uncovered Stanford’s Ponzi scheme and filed a lawsuit in the Northern District of Texas, and the court appointed

a receiver. In the process of investigating Stanford’s accounts, the receiver discovered the payments to Golf Channel and filed suit under TUFTA to recover the full $5.9 million. The district court held that although Stanford’s payments to Golf Channel were fraudulent transfers under TUFTA, Golf Channel established its affirmative defense that it received the payments in good faith and in exchange for reasonably equivalent value, i.e., the market value of advertising on The Golf Channel. The Fifth Circuit initially reversed the district court’s judgment on the ground that “reasonably equivalent value” should be gauged from the creditors’ perspective: “Golf Channel’s services did not, as a matter of law, provide any value to Stanford’s creditors.” Janvey v. Golf Channel, 780 F.3d 641, 646 (5th Cir.), opinion vacated and superseded on reh’g sub nom. The court reasoned that Golf Channel’s services actually attracted new investors to the Ponzi scheme, which decreased the estate’s value by increasing its liabilities. On rehearing, the Fifth Circuit with-

drew its opinion and certified to the Supreme Court of Texas the question of what showing of “value” under TUFTA is sufficient for a transferee to prove the elements of the “reasonably equivalent value” affirmative defense. Janvey v. Golf Channel, Inc., 792 F.3d 539, 547 (5th Cir. 2015), certified question accepted (July 17, 2015), certified question answered sub nom. Janvey v. Golf Channel, Inc., No. 15-0489, 2016 WL 1268188 (Tex. Apr. 1, 2016). The Supreme Court of Texas noted as a threshold matter that “TUFTA operates to ‘prevent debtors from defrauding creditors by placing assets beyond their reach,’ but it also protects transferees ‘who took in good faith and for a reasonably equivalent value.’” Janvey v. Golf Channel, Inc., No. 15-0489, 2016 WL 1268188, at *9 (Tex. Apr. 1, 2016). The court then reasoned that under TUFTA, “value exists when the debtor took consideration that had objective value at the time of the transfer, even if the consideration neither preserved the debtor’s estate nor generated an asset or benefit that could be levied to satisfy unsecured creditors.” Id. at *12 (emphasis added).

The Supreme Court further held that nothing in TUFTA indicated that a different standard should be applied in the context of a Ponzi scheme. Id. at *16. The court ultimately concluded that TUFTA’s reasonably equivalent value affirmative defense is established when the transferee “fully performed in an arm’s-length transaction in the ordinary course of its business at market rates.” Id. at 17. Thus, any bankruptcy trustee seeking to set aside a conveyance under TUFTA should consider that the value of the transaction will be determined: (1) from a reasonable creditor’s perspective at the time of the exchange, and (2) in relation to the individual exchange at hand. The value of the transaction will not be determined based on: (1) the subjective needs or perspectives of the debtor or transferee, (2) the context of the debtor’s entire enterprise, or (3) hindsight. HN Jeremy C. Martin is a partner at Malouf & Nockels LLP. He can be reached at jmartin@smalouf.com.

LOOKING FOR A JOB? NEED TO POST A JOB OPENING? VISIT THE DBA’S ONLINE CAREER CENTER

Sign up to Volunteer at the DBA Community Day of Service Saturday, October 22, 2016 A day of community service hosted by the DBA’s Community Involvement Committee. For more information, visit www.dallasbar.org/dbacommunitydayofservice. If your ﬁrm or group has an idea for a project that you would like to organize, please contact acavazos@velaw.com.com, belwood@dykema.com, or kzack@dallasbar.org.

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Jul y 2 0 1 6

Focus

D al l as Bar A ssoci ati on l Headnotes 15

Bankruptcy & Commercial Law

Unencumbered Assets Lead to Unique Issues in E&P Bankruptcies BY AUTUMN HIGHSMITH AND SAKINA RASHEED FOSTER

In a typical chapter 11 bankruptcy case, a secured lender will have a lien on significantly all of the assets of the debtor. When the amount of the first lien debt exceeds the debtor’s enterprise value, there is not much left for any unsecured creditors. While a creditors’ committee or other parties may attempt to challenge the validity or priority of the first lienholder’s liens, successful challenges are the exception, not the rule. However, this typical scenario may not play out in bankruptcies for exploration and production (E&P) companies (a sector of the oil and gas industry) where reserve-based lending is the norm. Reserve-based loans (RBLs) are a category of asset-based loans where the loan amount is determined by the value the E&P company’s oil and gas reserves from time to time. These oil and gas reserves also secure the loan. Most E&P companies will have thousands of individual assets, often spanning multiple jurisdictions. Given this fact, experience tells us that, in many RBLs, a lender will not require (or at least not perfect) a lien on all of the debtor’s assets. Instead, the loan documents typically require a pledge of at least 80-90 percent of the debtor’s “proven” oil and gas reserves, which are the reserves that can be estimated with reasonable certainty to be economically producible. This potentially leaves the remaining proven

reserves unencumbered, along with a potentially significant portion of the debtor’s undeveloped acreage, mineral rights, real estate, and personal property. Even in cases where the E&P companies carry second lien debt, an intercreditor agreement between the first and second lienholders often provides that the second lienholders have no greater collateral rights than the first lienholders. As a result, unencumbered assets may be available for the benefit of administrative, priority, and general unsecured creditors. The existence of unencumbered assets in E&P cases creates an environment ripe for significant litigation. For example, in the Quicksilver bankruptcy case, the debtors’ declaration filed on the first day of the bankruptcy case stated that a portion of the debtors’ assets were unencumbered, including (among other assets) a percentage of the debtors’ hydrocarbon interests in Texas’ Barnett Shale and $167.5 million of cash and cash equivalents. The unsecured creditors committee and the second lienholders in the bankruptcy later reached a stipulation agreeing that certain of those assets were unencumbered, including certain real property interests in West Texas, but disagreeing on the unencumbered classification of other assets of the estate, including hydrocarbon assets located in other counties in Texas. The unsecured creditors committee filed an adversary complaint seeking a declaratory judgment that those disputed hydrocarbon interests were not subject to the liens or security interests of the

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second lienholders, or alternatively, that any liens or security interests were unperfected or avoidable because they were not specifically identified in the second lienholders’ mortgage. The committee also sought to recover the costs and expenses of preserving the second lienholders’ collateral, arguing that the debtors used more than $15 million of unencumbered cash to fund post-petition operations and preserve the collateral. The court disagreed with the creditors’ committee and found that the second lienholders had a valid, perfected lien on those assets because of a general grant in the applicable mortgages of all of the debtors’ real property interests in the State of Texas and the fact that the mortgages were properly filed in the applicable counties. Litigation over certain remaining disputed collateral continues in both the adversary proceeding and the bankruptcy case.

Because of the potential for litigation like that in Quicksilver, we can anticipate that unsecured creditors will have a more prominent role in negotiations in E&P cases than in many other Chapter 11 cases. In the absence of negotiated deals, litigation may be very costly and cause significant delay. It will also be interesting to see if the lessons learned from today’s E&P bankruptcies will lead lenders to ask for more expansive collateral coverage in the future. Considering these issues when representing an E&P company or secured lender in connection with an RBL can help counsel advise their clients on issues to consider and potential risks when dealing with unencumbered assets in an E&P bankruptcy. HN Autumn Highsmith is a partner at Haynes and Boone, LLP and can be reached at autumn.highsmith@haynesboone.com. Sakina Rasheed Foster is counsel at the ﬁrm and can be reached at sakina.foster@haynesboone.com.

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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 ociation

Column

Jul y 2016

Ethics

Attorney Immunity and Lawyers’ Responsibilities to Non-Clients BY CLINT L. TAYLOR

Recently, in Troice v. Proskauer Rose, LLP, the Fifth Circuit, interpreting the Texas Supreme Court’s 2014 opinion in Cantey Hanger v. Byrd, further clarified the nature and extent of the attorney immunity doctrine under Texas law. The attorney immunity doctrine provides that an attorney is immune from civil liability to nonclients for actions taken in connection with representing a client, even if such actions are wrongful, so long as those actions are part of the discharge of the lawyer’s duties in representing his or her client and are not entirely foreign to the duties of an attorney. The reasoning underlying the doctrine is that attorneys are authorized to practice their profession, to advise their clients and

interpose any defense or supposed defense without making themselves liable for damages. Providing immunity is meant to ensure loyal, faithful, and aggressive representation by attorneys employed as advocates. The Court in Troice restated the Texas Supreme Court’s holding in Cantey Hanger that there is no fraud exception to this immunity. Thus, even if an attorney makes an express misrepresentation to a third-party during the course of his or her representation of a client, the attorney is immune from civil liability. The Fifth Circuit further held that attorney immunity is a complete immunity to suit rather than merely a defense to liability. How this expanded application of the attorney immunity doctrine affects negligent misrepresentation claims against attor-

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neys under the Texas Supreme Court’s 1999 holding in McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests is unclear. In McCamish, the Texas Supreme Court held that an attorney can be held liable to a non-client when he or she supplies false information for the guidance of others in a business transaction if the attorney fails to exercise reasonable care or competence in obtaining or communicating the information and invites third parties to rely on that information. McCamish has not been expressly abrogated, and negligent misrepresentation claims may still be viable, particularly in situations involving opinion letters where attorneys know that non-clients will be relying on their work product. The Texas Supreme Court has not yet addressed whether the attorney immunity doctrine applies to conduct outside of litigation; however, it did note in its opinion in Cantey Hanger that many appellate courts have applied the doctrine outside of the litigation context. Nevertheless, both the Texas Supreme Court and the Fifth Circuit expressly pointed out that, notwithstanding immunity to civil liability, attorneys remain subject to public remedies for misconduct involving non-clients, including sanctions, contempt and disciplinary proceedings. Consequently, attorneys representing clients in transactions and other business matters must remain mindful of their responsibilities to non-clients. Texas Disciplinary Rule of Professional Conduct 4.01 provides that, in the course of representing a client, a lawyer shall not knowingly (a) make a false statement of material fact or law to a third person or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid

making the lawyer a party to a criminal act or knowingly assisting a fraudulent act perpetrated by a client. This rule applies only to statements of material fact, and it does not include statements ordinarily viewed as matters of opinion or conjecture or matters within the context of negotiations that are typically construed as “puffery.” The line between misrepresentation of material fact and puffing, however, is not always well delineated, and a lawyer proceeds at risk in relying on a defense that a misrepresentation was mere immaterial puffery. Furthermore, while a lawyer generally has no duty to inform a third person of relevant or material facts in the course of representing a client, a lawyer is generally required to disclose a material fact to a third party if the lawyer knows that the client is perpetrating a fraud and the lawyer knows that disclosure is necessary to prevent the lawyer from becoming a party to that fraud. However, an attorney must remain mindful of his or her obligations to the client to maintain confidentiality as required under Rule 1.05, which prohibits attorneys from revealing confidential information of a client or a former client without client consent or otherwise using confidential information to the disadvantage of the client. If a lawyer discovers that a client is committing a criminal or fraudulent act, the lawyer should attempt to persuade the client to take appropriate remedial actions first. Disclosure is generally necessary only if those attempts fail. HN Clint L. Taylor is a member at Cobb Martinez Woodward, PLLC. He can be reached at ctaylor@cobbmartinez.com.

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Jul y 2 0 1 6

Focus

D al l as Bar A ssoci ati on l Headnotes 17

Bankruptcy & Commercial Law

Maneuvering Through the Automatic Stay BY HOWARD RUBIN

The automatic stay provides a bankruptcy debtor with breathing room while it reorganizes or slowly liquidates. However, even to the experienced attorney, this core provision of bankruptcy law can be confusing, contradictory, and vexing. Consider that Section 362(a) of the Bankruptcy Code bars eight broad actions by creditors against a debtor and its property including foreclosures, litigation, and any attempt to collect a debt. Then the very next subsection -362(b)- contains more than 28 enumerated acts that are excepted from the automatic stay under Section 362(a). Section 362(c) lists several discreet instances in which the stay continues, terminates or does not go into effect and other provisions of Section 362 excuse, do not apply or limit the application of the stay. It can be quite a maze, but the “prime directive” is that if a party files bankruptcy and you represent a creditor, do not proceed until you get permission from the court. Acting first and then asking for forgiveness later is not a solid strategy as it may subject your client to a motion for contempt or sanctions for violating the automatic stay. Let us take a look at a few issues that the general practitioner may encounter involving the automatic stay:

Expiration/Termination of the Stay The general rule is the stay is in effect until the property in question is no lon-

ger “property of the estate” or when a discharge is adjudicated. As to property, the stay applies to just about any interest that you can conceive—including all legal and equitable interests and contract rights. When a discharge in a chapter 7 case is granted or debts are discharged in a chapter 11 plan, the automatic stay is replaced by what is usually a broad injunction that serves the same purpose as the stay, but is more permanent. If, for some reason, a discharge is denied, the stay goes away and whatever property that remains may be subject to creditor claims. The stay may be terminated by a motion filed in the bankruptcy court. The statutes and procedures for having the stay lifted are found in Section 362 of the Bankruptcy Code and Bankruptcy Rule 4001. Most bankruptcy courts have promulgated very important local 4001 rules dealing with reply deadlines, agreements and notice—read them!

Grounds for Obtaining Relief from the Stay

The automatic stay may be lifted or terminated upon motion for “cause,” a term which itself is case specific. As to property in which the movant has a secured interest, this could mean that property is not being maintained or insured; lack of equity or adequate protection in collateral (the debt exceeds the value of collateral and payments are not being made to account for depreciation); or reorganization is not realistic. One may also show that the property in question is not necessary for an effective reorganization. As for

litigation, the need to proceed with that litigation must greatly outweigh the benefit of the stay to the debtor and the estate must not be depleted by the continuation of the litigation.

Considerations Involving State Court Litigation

The stay applies to all participants in a case with respect to the continuation of lawsuit—even the debtor defendant. A debtor defendant must have the stay lifted if it needs to move a state suit forward—for instance, an appeal. Remember, actions taken in violation of the stay are void in this jurisdiction. Again permission trumps forgiveness.

Waiver of the Stay

It is very difficult to get an obligor’s prepetition waiver of the automatic stay past a bankruptcy court. The courts will consider sophistication of debtor; context of the waiver (was it part of a prior

settlement in a bankruptcy case, for instance); consideration for the waiver; risk of the transaction for which the waiver was given to the creditor; and the rights of other creditors in the bankruptcy. Still, it is a tough burden for a creditor.

Surrender of Collateral If you represent a secured creditor, your debtor may indicate an intention to surrender collateral during the bankruptcy. Intent to surrender does not mean the property can change hands. There needs to be an order lifting the stay in order to complete the turnover. So, the moral here is permission prevails over forgiveness; national and local bankruptcy rules involving automatic stay litigation are important; and the stay should not be treated cavalierly. HN Howard Rubin is a shareholder at Kessler & Collins. He may be reached at hrubin@kesslercollins.com.

Professionalism Tip I will not serve motions or pleadings in any manner that unfairly limits another party’s opportunity to respond. Excerpt from the Texas Lawyers Creed Find the complete Creed online at http://txbf.org/texas-lawyers-creed/.

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Communities Foundation of Texas, and the first grant they made was to Parkland Foundation. Through this grant, they started the Scott and Cathy Sweet Endowment to benefit Parkland’s Burn Center to support, enhance and improve the recovery of burn patients. And while Scott and Cathy would love to see the rooms on that floor

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18 H e a d n o t e s l D a l l a s B a r A s s ociation

Jul y 2016

The LawPay Security Series: Security Step 1 BY TRACY GAVIN

Your path to a more secure law firm starts today! Our mission with LawPay’s Security Series is to promote better data protection in law firms through simple, manageable steps. With the increase of cyber-crime and the associated risk to your firm, securing your assets is more important than ever. As a leading payment provider for the legal industry, we are in a unique position to share our knowledge and expertise in data security with our partners and colleagues.

Security Step 1: Identify Your Cyber Assets

The path to a more secure office starts with creating a simple document detailing your firm’s IT assets. Using a standard excel sheet, list all the technology you use at your firm, to the best of your knowledge. If you

In the News

have an IT service or office manager, have them fill in any missing areas they know about. This inventory should include: Networking infrastructure: Do you have wired (LAN) and WiFi networks? What is connected to each? Is there a guest network? What people have the WiFi passphrase(s)? Systems and other hardware: What PCs, laptops, mobile devices, printers, file servers or network attached storage are present in the practice? The sample office network map below may help prompt you with the hardware present. Applications and data: What business software are you using, and what are those applications responsible for? Common software for law firms include QuickBooks or other financial applications, practice

management suites, and search and discovery tools. What information do they manage, and where does that data reside (both cloud-based and on premises)? Do not forget about any backups and archives that you may have residing in different locations. Users: Who are the users with accounts on your systems, and what privileges or capabilities do those users have? For example, you might have administrative rights on your PC, but you may have created an account for your bookkeeper with access restricted to certain folders or files. Ask all members of your staff to help ensure this information is as complete as possible. Once you have this information recorded in your IT asset inventory, you

have officially taken the first steps towards becoming a more secure law firm. To view the rest of The LawPay Security Series visit lawpay.com/blog/?securityseries/.

State Bar of Texas Board of Directors and will represent District 6 from Dallas.

ation Tax Section Partnerships and LLCs Committee.

J. Dean Hinderliter has joined Thompson & Knight LLP as Partner.

Don Glendenning, of Locke Lord LLP, has been named Partner in Charge of Corporate Responsibility and Charitable Giving.

Jill A. Kotvis, a solo attorney, participated in the 1st World Environmental Law Congress in Rio de Janeiro in April 2016. Of the 10 participants from the United States, Ms. Kotvis was the only private practicing environmental attorney invited to participate in the World Congress.

Sean Whyte has joined Gardere Wynne Sewell as Partner.

About LawPay

More than just a “merchant account,” LawPay offers legal professionals an effortless way to separate earned and unearned fees to avoid trust account violations when accepting credit card payments. LawPay contractually protects client funds by restricting the ability of any third-party from debiting monies from a Trust or IOLTA account, and is the only payment provider approved and endorsed by over 90 bar associations. For more information, visit our website at https://lawpay.com/dallasbar or give us a call at (866) 376-0950. HN

Tracy Gavin is the Marketing Director for LawPay. She can be reached at tgavin@afﬁnipay.com.

July

KUDOS

Jennifer Larson Ryback, of McGuire, Craddock & Strother, P.C., has been elected to membership in the Fellows of the Texas Bar Association. Curtis W Harrison II, of GoransonBain, PLLC, has been promoted to Managing Partner. Suzanne M. Duvall, of Burdin Mediations, and Christopher Nolland, of Law Offices of Christopher Nolland, received the Association of Attorney Mediator’s Steve Brutsche Award at the annual National Conference held in Nashville, Tennessee.

Colin Cahoon, of Carstens & Cahoon, LLP, received the Ingeniero Eminente award for Spring 2016 at the College of Engineering at New Mexico State University and was inducted into the Order of the Engineer society. Following his induction he delivered the commencement address for the College of Engineering Graduation Ceremony.

Bradley C. Weber, of Locke Lord LLP, and Greg W. Sampson, of Gray Reed & McGraw, P.C. have been elected to the

Brent Clifton, of Winstead PC, received the Larry M. Katz Distinguished Service Award, given by the American Bar Associ-

Randy Johnston, managing shareholder of Johnston Tobey Baruch, is being awarded the 2016 Champion of Justice Award from Legal Aid of NorthWest Texas. This award is given to an outstanding local attorney for services to women and children in the area of Texas served by LANWT.

ON THE MOVE

Jason Hoggan and D. Rockwell Bower have joined Polsinelli as Associates.

Ann Massey Badmus, Andrea Bouressa, and Celsa Rodriguez-Story have joined the Frisco office of Scheef & Stone, L.L.P. as Partner and Associates, respectively. Joseph Hummel has joined the Dallas office of the firm. Veronica Bonhamgregory and Amanda Pennington have joined Weil, Gotshal & Manges LLP as Associates. Brian Benitez has joined Cutler-Smith, PC, as an Associate. 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

2nd Annual L.A. Bedford, Jr. Awards Luncheon Friday, August 5, Noon at Belo • • • •

Honorees include: L.A. Bedford, Jr. Distinguished Jurist Award: Hon. L. Clifford Davis Hon. Sam A. Lindsay Professionalism and Ethics Award: Kim J. Askew C.B. Bunkley Community Service Award: Dallas Habitat for Humanity Hon. Cleo R. Steele Committed Mentor Award: Hon. Martin Hoffman

Tickets: $35/Table: $350/Title Sponsorship: $1,500 For more information, contact tatiana.waits@citi.com or ebony@rivonlawﬁrm.com.

Jul y 2 0 1 6

Classiﬁeds

D al l as Bar A ssoci ati on l Headnotes 19

July

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FOR LEASE Full size Xerox printer/copier/scanner. Our law firm is moving and looking to get out from under a lease on a Xerox printer/ copier/scanner. Truly a great machine, never any problems. 3 years old. 2 years remain on lease term. We pay $625 per month. We will pay any transfer or assumption fees and moving expenses. Email me at susan@wesholmes.com.

OFFICE SPACE Dallas High-Rise: All-Inclusive independent attorney ecosystem. Furnished window offices, dedicated workspaces, coworking space, virtual offices. Mail/reception, conference rooms, coffee bar, media lounge. CLE/MGMT training, social events, instant referral network. 6-month minimum, 1st month free with 1-year

agreement. Tour/info: (214) 865-7770. www.attorneyvenue.com. Walnut Glen Tower (Walnut Hill/ Central). Great Deal! Terrific offices in Class A building near Northpark with views of downtown over lake with fountains. Convenient access to DART station. Prized, central location wherever you need to go in the Metroplex. Do business in a relaxed yet professional environment which includes administrative stations, conference room, kitchen, copier, phones, reserved garage parking, on-site restaurant and other amenities. A larger executive office and/or smaller offices/flex space for as little as $500/month. Why not have a professional location for your business and quality of life at work? Please call (214) 373-0404 for details. Turtle Creek - Uptown. Gorgeous Brand New Class A Fully Furnished Office Available In Prestigious Turtle Creek/Uptown Dallas Building. Parking, Gym, 24/7 Security, Internet, Phone, Club Lounge, and More $1425p/month. For more information email mn7054a@ american.edu. Pictures/tour available. Belt Line and Dallas North Tollway Addison. Addison A/V Rated law firm with great location at Belt Line and Dallas North Tollway has two, adjacent offices and secretary bay for lease. One office is partner-size, and one is partner/associate size. Offices come with telephone service and receptionist, use of conference rooms and kitchen area, work/copy room, some additional storage, covered parking and Wi-Fi. Kelly@crb-law.com Historic Home in Uptown. Two office spaces for rent in historic home in Uptown, Dallas. Office one is 15X15 available for 1K a month. Office two is 15X17 available for 1.2K month. Lease individually or combined. Access to all common areas, e.g., conference room. Call (214) 720-9552. McKinney Avenue. Office with secretarial area available at 4054 McKinney Avenue. Shared conference room, break room, copier, fax, DSL & phone equipment are available if needed. No long term commitment and a monthly rate of $850.00 for the furnished or unfurnished large office and $300.00 for the furnished secretarial office. Call (214) 520-0600 Uptown Dallas – Near the Crescent. Elegant 1200 square foot four office suite with reception area and extensive file room storage room with built-ins. Available August in small office building near Crescent with tall ceilings, large windows and other amenities. Contact jackcirwin@earthlink.net or (214) 855-0127. Uptown - Executive Office space available for lease in a professional Legal environment, in uptown. Share office space with experienced and established

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lawyers. Case referrals and other case arrangements are possible. Amenities include: Bi-lingual receptionist, fax and copy machines, two conference rooms, two kitchen areas, and plenty of free parking. Location is convenient to all Dallas Courts and traffic arteries. Please call Rosa (214) 696-9253 for a tour. Turtle Creek Blvd. – executive office space available for lease in a professional, legal environment. Two large offices available to share with experienced and established lawyers. Separate areas available for assistants or para-professionals. Three bench seat spaces available for daily or short-term use if desired. Referrals and other case arrangements are possible. Amenities include reception area, telephone, fax and copy machines, conference room, kitchen area, covered visitor parking, and free office parking. Location convenient to Dallas courts, downtown and all traffic arteries. Please contact Judy at (214) 7405033 for a tour and information. Uptown Law Firm - Office Sharing. Uptown law firm looking for attorney to office share. Will provide furniture, overflow work, which should cover office expense, access to conference room, kitchen and break area. If interested, email resume and brief cover letter to snh@charleskaplanlaw. com or call (214) 522-4900.

POSITIONS AVAILABLE Fifth District Court of Appeals. PartTime Staff Attorney. Salary: $33,750 – up to $35,000. Closing Date: Open Until Filled. Responsible to work with one Justice doing legal research, analysis of legal issues, preparation of legal memoranda, and assisting with the preparation of complex civil and criminal opinions. Superior academic credentials and writing ability. Excellent analytical and research skills. A disciplined work ethic. Licensed Texas Attorney with minimum of six years of legal experience preferably appellate. Flexible work schedule. Excellent benefits. Please submit a State of Texas job application, resume, academic transcript, and writing sample to Gayle Humpa, 600 Commerce Street, STE 200, Dallas, TX 75202. Military Occupational Specialty Codes 27A & 250X. Please call for reasonable work place accommodations. (214) 712-3434 EOE/AA. Deputy Field Director. ACT (Advocates for Community Transformation) is a rapidly growing non-profit justice organization using the legal system to empower inner-city residents to fight crime on their streets. Its vision is to see safe neighborhoods, where crime is no longer tolerated and dignity and hope are restored. ACT has an immediate opening for an Attorney to serve as the Deputy Field Director in their West Dallas office. This leadership position requires previous management, litigation, cross cultural

and collaborative teamwork experience. For additional information, please visit ACT’s website at https://actforjustice.org/ join-our-team/attorney-and-deputy-fielddirector/. To apply, please forward your cover letter, resume, and references by email to recruitment@actdallas.org. Associate Needed For Growing Construction Boutique Firm. Slates Harwell LLP has an immediate need for an associate with 2-4 years of experience. As a growing boutique construction law firm, Slates Harwell serves both the transactional and litigation needs of the construction industry. Litigation experience necessary. Construction experience is preferred but not required. Interested candidates should email their resume and cover letter to Gene Blanton at gblanton@slatesharwell.com. An Established 15 Attorney Civil Firm. Palmer & Manuel, LLP, seeks to add one or two experienced attorneys with portable business. Our formula based compensation system allows attorneys to keep a substantial portion of their earned fees. For a confidential discussion about your practice and our firm, please contact Steve Palmer at (214) 265-1951 or email spalmer@pamlaw.com. www.pamlaw.com.

SERVICES Credentialed Forensic Genealogist & Attorney – hire an experienced attorney and credentialed forensic genealogist to ethically find next of kin and missing heirs for intestacy, probate, guardianship, property issues, and more. Reasonable hourly rate. See www.ProfessionalAncestryResearch. com. Wanda Smith, (972) 836-9091. Energy Acquisition(s): I buy any size royalty(ies), mineral(s) , working interest(s) and try to reach (and pay) the sellers asking price. I am a licensed attorney and have been making oil and gas purchases for 35 +/- years. E-mail to bleitch@prodigy.net or call Brenda at 1-800-760-9890 or (214) 720-9890 for a friendly and quick analysis and response. Immediate Cash Paid For Diamonds and Estate Jewelry. Buying all types of jewelry and high end watches. Consignment terms available @ 10-20 % over cash. For consultation and offers please call J. Patrick (214) 739-0089. Trial Preparation Stress Relief: Licensed litigation attorney (20 years) available for hourly projects: court appearances, trial preparation, drafting pleadings/discovery/ motions, attending depositions, mediations. Large firm and complex litigation experience, first and second chair trials and arbitrations, law review. (972) 665-9834. To place an affordable classified ad here, contact Judi Smalling at (214) 220-7452 or email jsmalling@dallasbar.org.

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

20 H e a d n o t e s l D a l l a s B a r A s s ociation

Jul y 2016