One Year Later: A Review of the Defend Trade Secrets Act Uninsured/Underinsured Motorist Coverage: Intake to Trial and Beyond A Primer on the FERC Investigative and Enforcement Process Don’t Feed the Troll: Curbing Patent Litigation in the Eastern District of Texas Making Secondments a “Win-Win” Scenario Meet New President Alistair Dawson
Volume 55 – Number 1
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contents Volume 55 Number 1
FEATURES Year Later: A Review of the 10 One Defend Trade Secrets Act By Zach Wolfe
14 Uninsured/Underinsured Motorist Coverage:
Intake to Trial and Beyond By Chance McMillan
on the FERC Investigative 18 AandPrimer Enforcement Process By Samuel Doran and Joel Androphy
Feed the Troll: Curbing 24 Don’t Patent Litigation in the Eastern District of Texas
By Raymond L. Panneton
Secondments a 28 Making “Win-Win” Scenario By JesÚs Castillón and Sarah Tobin
New HBA President 30 Meet Alistair B. Dawson
Dawson Takes Office as 32 Alistair HBA President
The Houston Lawyer
32 50-Year Lawyers 34 President’s Awards
The Houston Lawyer (ISSN 0439-660X, U.S.P.S 008-175) is published bimonthly by The Houston Bar Association, 1111 Bagby Street, FLB 200, Houston, TX 77002. Periodical postage paid at Houston, Texas. Subscription rate: $12 for members. $25.00 non-members. POSTMASTER: Send address changes to: The Houston Lawyer, 1111 Bagby Street, FLB 200, Houston, TX 77002. Telephone: 713-759-1133. All editorial inquiries should be addressed to The Houston Lawyer at the above address. All advertising inquiries should be addressed to: Quantum/ SUR, 12818 Willow Centre Dr., Ste. B, Houston, TX 77066, 281-955-2449 ext 16, www.thehoustonlawyer.com, e-mail: firstname.lastname@example.org Views expressed in The Houston Lawyer are those of the authors and do not necessarily reflect the views of the editors or the Houston Bar Association. Publishing of an advertisement does not imply endorsement of any product or service offered. ©The Houston Bar Association/QuantumSUR, Inc., 2017. All rights reserved.
contents Volume 55 Number 1
departments Message 6 President’s Much Is Required of Us – It Is
Time to Give Back
By Alistair B. Dawson the Editor 8 From It’s a New Season By Farrah Martinez Lawyers Who 36 Houston Made a Difference
Lieutenant Calvin B. Garwood By The Hon. Mark Davidson
the record 37 off Marty Lundstrom: MannersPro By Veronica Cruz Spotlight 38 Committee HBA Elder Law Committee:
Giving Dignity, Peace of Mind to Low-income Seniors, Disabled By Alice Adam
in professionalism 39 ATheProfile Hon. Caroline E. Baker Judge, 295th District Court Trends 40 Legal The U.S. Supreme Court (Un-)Clarifies
the Travel Ban
By Jill Yaziji
Texas Supreme Court Raises the Bar for Trade Secrets Damages–Again By Zach Wolfe
ExxonMobil Corp. v. Rincones: Texas Supreme Court Rejects Cause of Action for Compelled Self-Defamation By Karan Ciotti ReviewS 43 Media Federal Tax Procedures
for Attorneys (2d Ed.)
Reviewed by Finis Cowan
The Houston Lawyer
44 Litigation MarketPlace
By Alistair B. Dawson Beck Redden LLP
Much Is Required of Us – It Is Time to Give Back
s I mentioned at the HBA Annual Dinner, much has been given to all of us. We are all very fortunate to be members of this honorable and wonderful profession. Consequently, as the famous biblical verse states: “To whom much is given, much is required.” As Mother Teresa so eloquently put it: “At the end of life, we will not be judged by how many diplomas we have received, how much money we have made, how many great things we have done. We will be judged by ‘I was hungry and you gave me food to eat, I was naked and you clothed me, I was homeless and you took me in.’ Hungry not only for bread — but hungry for love. Naked not only for clothing — but naked for human dignity and respect. Homeless not only for want of a room of bricks — but homeless because of rejection.”
The Houston Lawyer
I respectfully submit that it is time for all of us to give back to our community and to our profession. Fortunately, our HBA affords all of us ample opportunities to give back. Here are just a few examples: Pro Bono Legal Representation: Through the Houston Volunteer Lawyers, you can literally make an enormous difference in the lives of someone who cannot afford to hire a lawyer. In Texas, there are over 5 million individuals each year who qualify for legal aid. Sadly, over 4 million of these individuals never find a lawyer to represent them. Ninety percent of individuals who need legal aid are not able to find a lawyer to help them with their legal problem. They are literally denied access to justice. You can give these individuals access to justice. You can represent them and help them solve their legal problems. Among those who need our legal help are those veterans who have faithfully served our country. Every Friday, the HBA and the HVL hosts a legal clinic at the DeBakey VA Hospital where lawyers help veterans with their legal needs. I, along with my colleague Jackie Furlow, recently had the opportunity to help the wife of a US veteran that I met at one of these clinics. After her husband died, she received an eviction notice seeking to force her out of the property she and her husband had lived 6
in for many years. We filed suit for adverse possession and ultimately, through Jackie’s splendid work, reached a settlement whereby our client can remain on the property for the next 15 years. I am pleased by the fact that we made a profound difference in the lives of our client and her family. There are countless other ways that you can help those who need your guidance. If you are interested in ensuring access to justice in our community, I invite you to go to www.makejusticehappen.org and sign up to volunteer. Community Service: The HBA can help you give back to our community in many different ways. You can help build a house for a family that has never owned a home. You can help feed the hungry. You can volunteer at the Houston Food Bank. You can help provide clothing to the homeless. You can help educate children about the effects of drugs and alcohol. You can volunteer for the Special Olympics. You can help create jobs for individuals with special needs. You can read to kids in school and educate them about our Constitution, Texas history or the rule of law. I believe that educating students about our wonderful profession is extremely important these days. Our profession is under attack and the number of students interested in attending law school continues to fall. Lawyers have played an incredibly important role in the development of our country. We need to educate students about the wonders of our profession. This is just one of the many opportunities to give back to our community that are available to you through the HBA. Professional Service: There are a number of opportunities to help those in our profession. You can help mentor a young lawyer. You can participate in CLE presentations. You can help promote gender fairness or help minorities get jobs for the summer with law firms or with a judge. These are just a few of the ways that you can improve our profession. The HBA has 34 committees and 27 sections. There is something for everyone. Come help us give back to our community and to our profession. It is required of us. You can find out more about opportunities to serve our community and our profession at www.hba.org.
from the editor
By Farrah Martinez Farrah Martinez, PLLC
Polly Graham Fohn Haynes and Boone, LLP
Preston Hutson MehaffyWeber PC
Jeff Oldham Bracewell LLP
It’s a New Season
because lawyers face these controversies and it is vital elcome to the first issue of the 2017to provide a venue to discuss and review all legal sides 2018 bar year. Congratulations to of relevant and newsworthy topics. These contribuAlistair Dawson, the new HBA presitions to the magazine help to make us better advodent. Each bar year is a new season of cates for the clients we represent. change, growth, and The articles featured in this issue fresh perspective. I look forward to This bar year include Ray Panneton’s piece, Don’t working with our newly appointed Feed the Trolls: Curbing Patent Litigaboard, an amazing cast that works to my goal is to tion in the Eastern District of Texas. bring each issue together. Polly Fohn is Articles Editor. She is a partner in meet each deadline, It reviews a recent United States Supreme Court decision aimed to block the appellate group at Haynes and patent owners from filing suit in Boone, LLP. Taunya Painter is editor and to publish the Eastern District of Texas, which of our Committee Spotlight column; articles you is also known as a hotbed for patshe primarily focuses on business ent trolls. Next, Jesús Castillón and litigation with the Painter Law Firm. desperately Sarah Tobin’s article, Making SecondThe Legal Trends editor is the Honorments a “Win, Win,” explores the poable Jeff Work, who is a former diswant to read tential that develops once an arrangetrict judge and currently handles civil ment is made between a law firm litigation matters for Nationwide. Our about topics and a company client to supplement newest associate editor is Jeff Oldham, corporate legal department with who is responsible for Media Reviews. that are necessary their an associate when a temporary need Jeff is an appellate partner at Bracearises. Samuel Doran and Joel Androwell LLP. Last but not least, Preston and applicable phy’s article, A Primer on the FERC Hutson is the board’s Off the Record Investigative and Enforcement Process, Editor; he primarily focuses on civil to your area provides an extensive overview of the litigation and is of counsel at Mehaffyfederal agency’s responsibilities and Weber. of practice. insightful guidance for practitioners Each year this committee is tasked while highlighting the latest enforcement trends. with recruiting authors, cultivating ideas, editing Zach Wolfe’s article, One Year Later: A Review of the articles, reviewing new media, reporting on the latDefend Trade Secrets Act, examines the Act’s impact to est legal trends and searching for lawyers who partrade secret litigation and whether it was as influenticipate in unique and exciting pursuits outside of tial as practitioners and legal commentators once anthe legal profession. It is no small feat. This bar year ticipated. Chance McMillan’s Uninsured/Underinsured my goal is to meet each deadline, and to publish arMotorist Coverage: Intake to Trial and Beyond examticles you desperately want to read about topics that ines the challenges and often complexities involved are necessary and applicable to your area of practice. when an uninsured or underinsured at-fault driver This editorial board strives to publish quality articles causes injury and forces the victim to file a claim or that provide relevant information on trending toplawsuit against his or her own insurance company to ics that help lawyers in their day-to-day practice of seek recovery for those losses. law. As a matter of policy, the editorial board does The General Issue is complete with something for not publish partisan perspectives. However, controeveryone. versial happenings in the law are confronted head-on
The Houston Lawyer
Taunya Painter Painter Law Firm PLLC
Hon. Jeff Work Work Law Firm
BOARD OF DIRECTORS President
Alistair B. Dawson
Warren W. Harris
Benny Agosto, Jr.
First Vice President
Neil D. Kelly
Second Vice President
Jennifer A. Hasley
Richard Burleson David Harrell
Diana Gomez Greg Ulmer
Collin Cox Hon. Erin Lunceford
DIRECTORS (2017-2019) Daniella Landers Lionel M. Schooler
editorial staff Editor in Chief
Farrah Martinez Associate Editors
Polly Fohn Jeff Oldham Hon. Jeff Work
Preston Hutson Taunya Painter
Anietie Akpan Kimberly A. Chojnacki Al Harrison Annalynn V. Hoffland Hon. Scott R. Link David T. Lopez Marni Otjen Hon. Josefina M. Rendón
Anna Archer Veronica Cruz Matthew J. Heberlein Kristen Lee Dana Lizik Avi Moshenberg Raymond L. Panneton
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By Zach Wolfe
One Year Later:
A Review of the Defend Trade Secrets Act
nactment of the Defend Trade Secrets Act (DTSA) attracted a lot of attention in May 2016. For the first time, there would be a federal civil cause of action for trade secret misappropriation. This led to headlines with terms like “Biggest IP Development...” and “Watershed Event...”. But the hype surrounding the DTSA was probably overstated. So far, the impact on trade secret litigation has been important, but not groundbreaking. The chief practical effect of the DTSA has been to give plaintiffs the option to file trade secrets lawsuits in federal court rather than state court. The nature of the lawsuits filed has not changed much. Based on an informal survey of published commentary and one year of opinions reported on Westlaw, here are tentative answers to some of the questions that were raised by passage of the DTSA. 1. Would the new ex parte seizure remedy be abused? No. In most cases judges consider an “ordinary” TRO sufficient. Of course, a Temporary Restraining Order is an extraordinary remedy, so “ordinary TRO” is something of an oxymoron. But the point is that use of the ex parte seizure remedy has been rare, in large part because an ordinary TRO is usually sufficient. Under “extraordinary circumstances,” the ex parte seizure provisions of the DTSA allow a judge to issue an order for a federal marshal to seize a defendant’s property—usually a computer or smartphone—to prevent imminent use or disclosure of trade secrets. Some commentators worried about the potential for abuse of this new ex parte remedy, but the statutory requirements for obtaining an ex parte seizure order are stringent. A key hurdle is that the plaintiff must show that another form of equitable relief—such as a TRO—is inadequate.1
The first year of case law suggests this will be rare. Federal district courts have favored TROs over the more extreme remedy of ex parte seizure. Balearia Caribbean v. Calvo was one of the first reported cases to address an application for an ex parte seizure order under the DTSA.2 A ferry company called BCL sued its former CEO, Calvo, claiming that he hijacked the company’s negotiations to provide ferry service to a Bahamas casino. Before leaving, Calvo allegedly bought a Mac laptop, had it reconfigured to access the company’s electronic information systems, and forwarded confidential emails to his private Gmail account. BCL sought ex parte seizure of Calvo’s Mac laptop so that a forensic expert retained by BCL could image the hard drive. However, the court found that the risk of Calvo improperly using or destroying the confidential information was not the kind of “extraordinary circumstance” required for ex parte seizure. Instead, the court granted a TRO requiring Calvo to preserve evidence and to appear at a hearing where the court would appoint a special master to take temporary custody of the Mac to have a forensic expert make an image of the hard drive. Another case where the judge declined to grant an ex parte seizure order was Magnesita Refractories v. Mishra.3 It was also a case of a rogue employee with confidential information on his personal laptop (allegedly). Magnesita, the employer, presented emails suggesting that the employee, Mishra, was in talks with a competitor about pursuing potential business ventures in competition with Magnesita. At an initial ex parte hearing, the judge found that Magnesita met the requirements for an ex parte TRO under Rule 65 but declined to order seizure under the DTSA. Rather than involve a federal marshal and risk reputational damage to Mishra, the judge ordered Mishra to turn over his laptop to Magnesita’s counsel, who would then im-
mediately deliver it to the court clerk without reviewing any contents first. The order also required Mishra to appear at a hearing two days later. This would at least allow Mishra the opportunity to respond before appointment of a special master to image the laptop. Mishra appeared and testified at the hearing two days later, but the judge found his testimony “far from persuasive” and denied his motion to dissolve the injunction. Mishra would suffer no damages if it was found that his laptop was improperly seized or imaged, the judge found, because the laptop would be returned to him as soon as it was imaged. The middle ground approach in Magnesita—rather than the more extreme remedy of ex parte seizure—seems likely to become the norm when a rogue employee transfers alleged trade secrets to a personal device. The only available opinion granting an ex parte seizure order is Mission Capital Advisors v. Romaka.4 The court first issued a show cause order requiring the defendant to appear at the hearing to address a preliminary injunction restraining him from accessing, disclosing, or copying the employer’s client and contacts lists. When the plaintiff failed to appear, the court found that a Rule 65 order would be inadequate and issued an order directing the U.S. Marshal to seize the plaintiff’s contacts list from the defendant’s computer (by copying them to a storage medium and deleting them from defendant’s computer). So, it was only after an initial TRO proved ineffective that the judge issued a seizure order.
Trade Secrets Act.5 It involved customer information in the sale of medical, dental and veterinary supplies and equipment. This was an early indication that the typical DTSA case would be a fairly ordinary customer list case. Subsequent cases confirmed this. First Western Capital Management v. Malamed, for example, was also a customer list case.6 The employee took a 130-page customer list, printed from the company’s system, containing roughly 5,000 names, including 331 current company clients. The employee also printed out 22 pages of spreadsheets listing names of clients, the total market value of their holdings under management, the management fees being charged by the company, and “similarly sensitive information.” Finding sufficient evidence that the employee was threatening to misuse trade secrets regarding the clients, the court granted a preliminary injunction barring the employee from competing for the business of any of the company’s clients. There was a recent exception to the trend of ordinary customer list cases: Waymo v. Uber Technologies.7 Far from a typical customer list case, Waymo was a fight between two competitors regarding alleged misappropriation of cutting-edge Light Detection and Ranging (LiDAR) technology that helps selfdriving cars “see” their surroundings. The court issued a stringent preliminary injunction against Uber to protect the alleged secret technology. This is probably closer to what members of Congress had in mind when they voted for the DTSA. But Waymo does seem to be the exception, not the rule.
2. Would federal courts see a wave of cases involving theft of secret technology by foreign companies or governments? No. Most cases under the DTSA have been more routine domestic cases involving information like customer lists. Henry Schein, Inc. v. Cook was the first publicized opinion applying the Defend
3. Would the DTSA allow plaintiffs to bring trade secrets cases anywhere in the United States? Not necessarily. The defendant still must be subject to personal jurisdiction in the forum state. Personal jurisdiction cases tend to be fact-intensive, but a good rule of thumb for trade secrets cases is that a defenthehoustonlawyer.com
dant will be subject to personal jurisdiction if he was physically present in the state when he obtained or disclosed the trade secrets. So, when a defendant’s contact with California was that he once lived there and that he received confidential information in his Gmail account, that was not enough. The fact that his Gmail account “lived” on Google’s servers in Silicon Valley? That was a creative argument, but it was not enough to convince the judge in OOO Brunswick Rail Management v. Sultanov.8 Gold Medal Products v. Bell Flavors & Fragrances was a closer case on personal jurisdiction.9 The employee, Sunderhaus, was the company’s chief “food technologist” with access to the company’s secret recipes for its Glaze Pop® popcorn coatings. Gold Medal engaged an Illinois company, Bell Flavors, to help develop new flavors. Bell Flavors signed a confidentiality agreement with Gold Medal and repeatedly visited Gold Medal’s facility in Ohio. Sunderhaus later left Gold Medal and joined Bell Flavors in Illinois as a “savory flavorist.” Bell Flavors then assigned Sunderhaus to work for a Chinese company that developed a new caramel-flavored popcorn glaze to compete with Gold Medal. The question was whether Bell Fla-
vors, located in Illinois, could be sued for trade secret misappropriation in Ohio, where the employee allegedly obtained the trade secrets. The district court said no. The key jurisdictional fact was that Bell Flavors did not travel to Ohio to recruit Sunderhaus or misappropriate the trade secrets in Ohio. Rather, Sunderhaus lawfully obtained the alleged trade secrets in Ohio, left to work for Bell Flavors in Illinois, and then allegedly provided the trade secrets to Bell Flavors in Illinois. So, Gold Medal is consistent with the rule of thumb for personal jurisdiction in trade secrets litigation. There was no question that Sunderhaus was subject to jurisdiction in Ohio; he worked for the company there and obtained the trade secrets there. But Bell Flavors was not subject to jurisdiction in Ohio because it did not obtain or use the trade secrets in Ohio. 4. Would the difference between the Texas definition of “trade secrets” and the federal definition be significant? No. The definitions are functionally the same. One difference is that the Texas trade secrets statute expressly includes a customer list as one type of information subject to trade secret protection, while the federal statute does not. So, does this mean a customer list is a trade secret under state law but not under federal law? No. The definitions of “trade secret” in the Texas and federal statutes are functionally the same. They have different “laundry lists” of the type of information that can be
a trade secret, but both lists are broad enough to include just about any kind of information a lawyer would want to argue is a trade secret. Both statutes have the same key elements in the definition of a “trade secret” so, under both statutes, a customer list is a trade secret if—and only if—it meets these requirements: (1) “independent economic value”; (2) not generally known or readily ascertainable; and (3) reasonable efforts or measures to guard the information’s secrecy.10 5. Would the DTSA’s limit on the “inevitable disclosure” doctrine make federal trade secrets claims unattractive to plaintiffs? Generally, no. It only means some evidence of threatened misappropriation is required. The “inevitable disclosure” doctrine is essentially the idea that a court can enjoin an individual who knows a company’s trade secrets from going to work for a competitor, even if there is no specific evidence that the individual is going to use the trade secrets. The idea is that the individual will inevitably use that knowledge. The DTSA contains a provision that curbs use of the inevitable disclosure argument. First, it says the court cannot “prevent a person from entering into an employment relationship.” Second, it says that any conditions the court places on employment “shall be based on evidence of threatened misappropriation and not merely on the information the person knows.”11 As a practical matter, this means the plaintiff must do more than simply point to the fact that an employee knows a trade secret. To get an injunction under the DTSA, there must be some evidence of threatened use of the trade secret. So far, the case law indicates this is not a difficult hurdle for plaintiffs to clear. For example, in First Western the court considered the impact of the DTSA’s limit on injunctive relief but found
there was sufficient evidence that the employee intended to use the customer list information he had taken. 6. Would the DTSA’s whistleblower provisions have a significant impact on trade secrets litigation? It is too early to tell. The DTSA has “whistleblower” provisions that provide a sort of safe harbor from claims of misappropriation. These provisions can protect an employee who provides trade secrets to the government or his lawyer. The statute also provides an incentive to disclose these rights to employees: Employers who do not disclose these rights in writing cannot recover punitive damages or attorneys’ fees under the DTSA. It seems the chief effect of the whistleblower provisions has been to give lawyers an opportunity to charge their clients for revising employee agreements and handbooks to add the required disclosure. The effect on trade secrets lawsuits, on the other hand,
seems minimal so far. Claiming whistleblower status as a defense to a trade secret claim may become more common, but it has not been a major issue in the first year of case law under the DTSA.12 7. Would the DTSA foster “uniformity” in trade secrets law? Not really. There has been a lot of talk about the DTSA promoting uniformity in US trade secrets law, but this is largely a myth. The DTSA does not preempt state trade secrets law.13 So, before the DTSA, we had 50 states with their own similar—but not identical—versions of trade secrets law. And now, we have 50 states with their own similar—but not identical—versions of trade secrets law, plus a federal version. If anything, the DTSA has created more opportunities for conflict in trade secrets law. Zach Wolfe is a trial lawyer with Fleckman & McGlynn, PLLC. His practice
focuses on non-compete and trade secret litigation. He often writes about trade secrets issues at his weekly blog www. fiveminutelaw.com. Endnotes
1. See 18 U.S.C. § 1836(b)(2)(A)(ii)(I) (requiring finding that “an order issued pursuant to Rule 65 of the Federal Rules of Civil Procedure or another form of equitable relief would be inadequate...”). 2. “Sealed Order,” Dkt. No. 10, in Balearia Caribbean v. Calvo, No. 16-23300 (S.D. Fla. Aug. 5, 2016) 3. Magnesita Refractories Co. v. Mishra, No. 2:16-CV524, 2017 WL 655860 (N.D. Ind. Feb. 17, 2017). 4. Seizure Order, Dkt No. 7, in Mission Capital Advisors LLC v. Ramaka, No. 1:16-cv-05878-LLS (S.D.N.Y. July 29, 2016). 5. Henry Schein, Inc. v. Cook, 191 F.Supp.3d 1072, 1074-75 (N.D. Cal. 2016). 6. First Western Capital Mgmt. Co. v. Malamed, No. 16-cv-1961-WJM-MJW, 2016 WL 8358549 (D. Colo. Sept. 30, 2106). 7. Waymo LLC v. Uber Technologies, Inc., No. C 1700939 WHA, 2017 WL 2123560 (N.D. Cal. May 15, 2017). 8. See Order Denying Plaintiffs’ Application for Preliminary Injunction, Dkt. No. 52, in OOO Brunswick Rail Mgmt. v. Sultanov, No. 5:17-cv-00017EJD (N.D. Cal. Jan. 20, 2017). 9. Gold Medal Prods. Co. v. Bell Flavors & Fragrances, Inc., No. 1:16-CV-00365, 2017 WL 1365798, at *1-3 (S.D. Ohio Apr. 14, 2017). 10. 18 U.S.C. § 1839(3); TEX. CIV. PRAC. & REM. CODE § 134A.002(6). 11. 18 U.S.C. § 1836(b)(3)(A)(i)(I). 12. 18 U.S.C. § 1833. 13. 18 U.S.C. § 1833 note (f).
By Chance McMillan
Uninsured/Underinsured Motorist Coverage:
Intake to Trial and Beyond R
oughly one in seven drivers in the United States does not carry automobile insurance.1 In Texas, 2.6 million people operate our roadways without minimum automobile insurance coverage.2 The lack of automobile insurance coverage is a big problem for Texans and an issue that Texas personal injury attorneys often face when handling automobile collision cases. In practice, people injured by drivers without automobile insurance are left
with few options. Most attorneys sigh upon learning that a potential client was hit by an uninsured driver and decide to reject the case. However, a portion of the Texas Insurance Code requires insurance companies to offer prospective clients uninsured/underinsured motorist coverage intended to safeguard against this unfortunate possibility. Uninsured/Underinsured Motorist Coverage – What is it and Where to Find it? You can determine whether an individual has uninsured motorist (UM) and underinsured motorist (UIM) coverage by looking to the automobile insurance policy or reviewing the policy’s declaration page. UM/UIM coverage is the same type of coverage; if one is listed then both are present. Often, excess policies will only state UM coverage. UM coverage protects drivers when an at-fault driver is uninsured. UIM coverage safeguards the insured against drivers with too little coverage. UIM coverage fills the gap between the insured’s actual damages and the limits of the negligent driver’s policy, allowing the insured to seek all common-law damages available against the negligent driver when litigating against the UM/UIM carrier, except punitive damages.3 Determination of Applicability Automobile insurance companies are required to provide UM/UIM coverage to their insureds unless there is rejection of the coverage in writing. Prudent practitioners will request the insurance company provide them with proof of rejection if a coverage dispute arises. If there is no written rejection, the client is covered under a UM/UIM policy. In Texas, an individual must carry at least $30,000 in automobile insurance coverage per claimant and $60,000 total for two or more claimants. UM/UIM coverage is limited to an amount equal to or less than the amount of liability coverage. Thus, one purchasing a minimum limits policy is necessarily limited to that amount in UM/UIM coverage.
UM/UIM covers both “insureds” under the policy and those inside the motor vehicle at the time of the crash. In addition, it protects the insured and his or her family whether they are in a motor vehicle or outside of a motor vehicle at the time of a crash. For example, an injured pedestrian is protected under their UM/UIM policy if struck by a motor vehicle. Similarly, an insured passenger in a motor vehicle without any insurance coverage is also potentially covered under their own personal UM/UIM policy.4 Victims of a hit-and-run driver are covered under the UM/UIM policy. It is important to establish whether the identity of the UM is known or not. If the identity is known, actual physical contact with the UM’s motor vehicle is not required. If the identity is not known, there must be contact between the UM vehicle and the motor vehicle operated by the client. What constitutes “contact” under the UM/UIM often comes into dispute between the insured and the first party insurance carrier. An accident resulting from debris or parts falling off the unknown motor vehicle will not qualify as physical “contact” necessary to activate the UM/UIM provision.5 Most UM/UIM policies require the insured to contact the police following a hit-and-run incident. UM/UIM Claim In reviewing an automobile accident, one should consider the applicability of UM/UIM coverage. Immediately upon accepting a file, an attorney should send a notice of representation to all insurance companies that could potentially provide coverage to the injured, including the first party insurance carrier. If it turns out that the negligent party has insurance, then a letter to the first party insurance company will provide notice that the driver may look to utilize UIM coverage. If there is a UM situation, counsel should focus on that claim and submit any settlement demands to the first party insurance company upon
completion of their client’s medical treatment. Usually, the UM/UIM policy will require the claimant to sign off on third party settlements. Most carriers will compare underlying limits and the offer of settlement before giving consent to settle. In the event consent is not obtained, the carrier must show it is actually prejudiced by the insured’s settlement with the negligent driver.6 If there is no prejudice, then the UM/UIM carrier cannot deny coverage for the failure to obtain consent. With a UIM claim, the first party carrier will receive a credit up to the limits of the negligent driver’s policy regardless of the amount of settlement. For example, if the negligent driver has a minimum limits policy of $30,000 but the third-party settlement is $20,000, then the first party carrier is entitled to a $30,000 credit. Conversely, the thirdparty carrier does not get a credit if the UM/UIM carrier reaches a settlement with the plaintiff.7 In fact, plaintiffs are not required to inform the third-party carrier of any settlement with a UM/ UIM carrier. In practice, it is rare to settle with the UM/UIM carrier first. Hospital Liens Hospitals can file a lien to protect their bills in automobile collision cases and regularly do. However, hospital liens only attach to third party claims, not UM/UIM claims. To illustrate, assume your client suffers a severe injury resulting in $300,000 in medical care to which the liability insurer and UIM carriers both tender their respective limits of $30,000 and $100,000. The hospital lien attaches only to the liability policy not the UIM policy. Therefore, $100,000 is not relevant when negotiating a reduction in the hospital lien and should not be discussed with the hospital’s representative. Stowers In automobile litigation, the Stowers doctrine is often a good tool towards set-
tlement. A plaintiff can make a Stowers demand for the negligent party’s policy limits, and if the negligent party’s insurance company refuses to pay the policy limits, any recovery above the policy limits is potentially collectable against the third-party insurance company. The Stowers duty is activated by a settlement demand when three prerequisites are met: (1) the claim against the insured is within the scope of coverage, (2) the demand is within the policy limits, and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured’s potential exposure to an excess judgment.8 Unfortunately, the Stowers doctrine is not applicable in an UM/UIM claim. UM/UIM Lawsuit Plaintiffs can bring a UM/UIM suit in either the county where the crash occurred or the plaintiff’s county of residence at the time of the crash. The statute of limitations to bring a UM/UIM case is four years from the date of the incident. Many practitioners file the lawsuit with bad faith claims, like deceptive trade practices violations and insurance code violations, included. A new trend by plaintiffs is to file UM/UIM cases as declaratory judgment actions. A common misconception when litigating a UM/UIM case is that the UM/ UIM carrier should not have to put forth a corporate witness for the insurance company. UM/UIM carriers often try to conceal their involvement from the jury and some act as though their attorneys are representing the negligent tortfeasor who is rarely at trial. There is no case law that allows for a UM/UIM carrier to shield its involvement from the jury. After all, the insurance company is a party to the lawsuit that will have raised affirmative defenses that it wishes to argue at trial. Under Texas Rules of Civil Procedure 181, “either party to a suit may examine the opposing party as a witness, and shall have the same process to compel thehoustonlawyer.com
his attendance as in the case of any other witness.”9 Rule 181 allows a plaintiff to depose and cross examine the first party carrier’s corporate representative in a UM/UIM case. In fact, at least one Texas Court of Appeals has characterized an insurance company’s attempt to conceal its identity from the jury as a “fraud.”10 Trial In 2006, the Texas Supreme Court issued probably the most significant case in UM/UIM litigation in Brainard v. Trinity Universal Ins. Co.11 Prior to Brainard, there were questions as to how UM/UIM cases were to be tried, whether they are breach of contract cases and whether the plaintiff could recover attorney fees. The Brainard court decided every issue in favor of the insurance industry. Per Brainard, before a first party insurance company can breach the contract with its own insured, there must be a determination, in the form of a final judgment, as to the UM/UIM’s negligence and the plaintiff’s damages must be es-
tablished. Thus, the jury charge submitted to the jury will likely be identical to the submission of a charge in a standard motor vehicle accident containing two questions: one on negligence and one on damages. Post-Trial Considerations After a verdict is rendered, typical posttrial rules come into play. It is essential for the plaintiff to move quickly to get a judgment entered on the verdict because a signed final judgment is necessary to pursue a breach of contract and bad faith claim against the first party carrier. Under UM/UIM case law, before a carrier owes a contractual “duty” to its insured there must be a final judgment entered establishing the tortfeasor’s negligence and damages. Thus, thirty days after the judge signs the final judgment, the plaintiff can begin to recover reasonable attorney fees. Conclusion UM/UIM cases are not as straight for-
ward as litigating standard automobile cases. Frankly, the laws favor the insurance company over the consumer. Practitioners taking on these claims need to be aware of the special attention required from the moment the case is signed up until the judge signs a final judgment. The current state of the law undoubtedly will discourage a great deal of plaintiff’s attorneys from undertaking these cases. But, there is a real need for competent attorneys to assist individuals placed in terrible situations usually through no fault of their own. Every year, Texans are impacted by UM/UIMs operating on the roadways illegally. People are injured or killed and receive either no or inadequate compensation for their injuries or their loved one’s death. By knowing the basic rules and case law relating to UM/ UIM law, attorneys are the only chance consumers have at getting a decent recovery when hit by an uninsured or underinsured motorist. Chance A. McMillan is a partner at Garcia McMillan, PLLC located in Houston. His practice is dedicated and limited to plaintiff’s personal injury law and business litigation. Endnotes 1. Uninsured Motorists, INSURANCE INFORMATION INSTITUTE, http://www.iii.org/fact-statistic/uninsured-motorists (last visited May 29, 2017). 2. Number of Uninsured Drivers on Texas Roads Drops, INSURANCE JOURNAL, July 5, 2012, available at, http://www.insurancejournal.com/ news/southcentral/2012/07/05/254593.htm. 3. UM/UIM Coverage is governed by Texas Insurance Code §§ 1952.101-110. 4. McDonald v. S. Cnty Mutual Ins. Co., 176 S.W.3d 464 (Tex. App.—Houston [1st Dist.] 2004, no pet.); Greene v. Great Am. Ins. Co., 516 S.W.2d 739, 744 (Tex. App.—Beaumont 1974, writ ref’d n.r.e.) 5. Nationwide Ins. Co. v. Elchehimi, 249 S.W.3d 430 (Tex. 2008). 6. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994). 7. Bartley v. Guillot, 990 S.W.2d 481 (Tex. App.— Houston [1st Dist.] 1999, pet. denied). 8. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 547–48 (Tex. Comm’n App. 1929, holding approved); Am. Physicians Ins. Exch. v. Garcia, M.D., 876 S.W.2d 842, 849 (Tex. 1994). 9. Progressive v. Delgado, 335 S.W.3d 689 (Tex. App.—Amarillo 2011, pet. denied). 10. Perez v. Kleinert, 211 S.W.3d 468 (Tex. App.— Corpus Christi 2006, no pet.). 11. Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 819 (Tex. 2006).
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A Primer on the FERC Investigative and Enforcement Process
he Federal Energy Regulatory Commission (FERC) is the federal agency responsible for regulating the interstate transmission of electricity, natural gas, and oil. FERC’s current enforcement model has been shaped by the crises and enforcement failures of the past two decades. The Enron fraud, the Western Energy Crisis of 2000-2001, and the Northeast Blackout of 2003 demonstrated to Congress and FERC enforcement staff that a new paradigm was needed for enforcement.1 Following these failures, Congress empowered FERC to be more aggressive in its regulation of the energy market. A Walkthrough of the FERC Investigative and Enforcement Process The FERC enforcement process has several aspects that differentiate it from those of other agencies. Accordingly, it is valuable to have a sense of how the FERC process works. FERC staff begin investigations based on a “reason to suspect violations” of statutes, regulations, and orders governing interstate energy transmission, which can be information obtained from an Independent System Operator or Regional Transmission Organization, a hotline tip by a market participant, information passed along by another FERC office or other government agency, or any other source of information.2 When FERC staff formally open an investigation, they notify the subject of the investigation, and proceed to collect information through document requests, interrogatories, and interviews. During this time, the subject of the investigation may submit any information they believe will be helpful for consideration, and may communicate in writing with the Commission3 as well as enforcement staff. This is a key period for the subject of the investigation, during which they can help shape FERC’s understanding Charles Irvine of the facts andProfessor implications of a given situation. Following the initial investigation,
FERC enforcement staff make a preliminary conclusion to determine whether to proceed. A review of enforcement investigations from 2006 onwards shows that about half of investigations were closed based on either a finding of no violation or that the violation did not warrant sanctions.4 If the enforcement staff’s preliminary conclusion is that a violation that warrants sanctions did occur, they will usually send a letter to the subject of the investigation detailing their understanding of the facts and their legal theories regarding the alleged violation. The subject of the investigation may respond to this letter, and doing so can help create a useful record as the investigation moves forward. The majority of remaining FERC investigations, nearly half of the total, are then resolved through settlement negotiations with enforcement staff. Following the preliminary conclusion that a violation warranting sanctions occurred, enforcement staff request authority to settle the matter from the Commission and seek authority to negotiate within a range of penalties. Enforcement staff supply the Commission with their theory and evidence, as well as any material submitted by the subject of the investigation. Clearly, then, the ability of the subject of an investigation to communicate directly with the Commission and frame facts and legal argument at earlier stages can be helpful in ensuring that the Commission properly understands the issues and scope, especially as they decide on a penalty range to guide the enforcement staff’s negotiations. If the subject of the investigation and enforcement staff can reach an agreement, the Commission will review the proposed settlement, and if they approve it, issue a Stipulation and Consent Agreement, which ends the investigation. As noted above, almost half of investigations since 2006 have ended in this manner. If the subject and enforcement staff are not able to reach an agreement, enforcement staff refer the matter to the
Committee for action, giving the subject 30 days’ notice pursuant to 18 C.F.R. § 1b.19. At this point, the subject should submit an additional statement to the Commission, pursuant to Rule 1b.19, consisting of facts, law, argument, and supporting documents. Based on this, and the final report of the enforcement staff, the Commission decides whether to issue an Order to Show Cause. If the Commission decides to issue an Order to Show Cause, they will then identify potential violations and penalty amounts. At this point, the matter then proceeds as an administrative proceeding or civil action, depending on the alleged violations and their governing statutes. It is worth noting that, when and if the Commission decides to issue an Order to Show Cause, the relationship between the Commission and enforcement staff changes. Before that point, enforcement staff are permitted to communicate extensively with the Commission. Following the Order to Show Cause, enforcement staff are prohibited from communicating with the Commission except through publicly filed briefs.5 This is only fair for the subject of an investigation, because when the Commission is asked to issue an Order to Show Cause, it shifts from its regulatory function to a quasi-judicial function, but still raises some concerns for potential subjects. Although due process concerns in regulatory proceedings are beyond the scope of this article, there is an inherent and latent conflict in the Commission treating enforcement staff as fact-finders and investigators in the pre-Show Cause period. Then, later turning to see them as advocates representing one side in a dispute as soon as enforcement staff ask for the issuance of an Order to Show Cause. Surely this costume change, as it were, would produce some cognitive dissonance in even the best intentioned and most impartial arbiter. It is also important to recall that the FERC enforcement process is not a judicial one—while enforcement staff may be trying to ascertain the truth of what
happened and why, they are not an impartial judiciary, and they are reporting, until the request for an Order to Show Cause, to a Commission that is primarily regulatory in its function. Thus, there is no truly impartial authority to whom the subject of an investigation can appeal until the commencement of litigation or an administrative proceeding. This underlines, once again, the importance of presenting a clear, compelling, and credible narrative and supporting record at each stage of the investigative process, both to enforcement staff and to the Commission, as they are essentially both the investigators and arbiters of fact until the initiation of a civil or administrative action. Throughout the FERC investigative process, unlike those of certain other agencies which draw upon information from multiple sources, the great majority of the data, documents, and witness testimony usually come from the subject of the investigation. Company emails, instant message logs, spreadsheets, trading data, along with employee testimony, are crucial sources of information for enforcement staff. Thus, the subject of the investigation needs to carefully balance its obligations under the data requests and administrative subpoenas that FERC can bring to bear with its goal of framing the facts to bring enforcement staff and the Commission to their way of thinking. Because the vast majority of information and relevant documents are under the control of the subject, responding to an investigation will likely entail shouldering the burden of producing potentially voluminous records and making key employees available to FERC staff. The opportunity, however, to highlight the materials that best support the subject’s view of a situation, with limited influence from competitors and outside sources on the enforcement staff, is a powerful one, and one that entities under investigation by other agencies, such as the Federal Trade Commission and Department of Justice, who often receive a substantial portion thehoustonlawyer.com
of their investigative material from a subject’s competitors, would likely appreciate. An additional practical wrinkle regarding employee testimony is raised by the fact that, unlike civil litigation, enforcement staff can withhold transcripts of witness testimony from the subject of the investigation “for good cause.”6 Although enforcement staff rarely invoke this protection, the subject of an investigation needs to be aware that it can occur, and that it is not entitled to all witness transcripts in all cases. FERC Enforcement Trends Generally, FERC enforcement continues to grow more aggressive, both in scope and in volume. The five-member Commission saw two new members join in 2014, as well as a sitting member take over as Chairman, and the Commissioners have made it clear that enforcement is a top priority. The number of FERC investigations has trended
upward since 2006, as demonstrated by the fact that there were only six civil penalty actions brought in 2010, as compared with 23 by 2013.7 Additionally, the scope and impact of these actions has increased, netting nearly $140 million in civil penalties and profit disgorgements in 2013, up from under $10 million in 2010.8 One of the most important trends in FERC enforcement in the past several years has been the targeting of large financial institutions for investigation. Banks, such as JPMorgan Chase, Deutsche Bank, and Barclays, have all come under scrutiny by FERC enforcement staff. These institutions, while large and sophisticated, do not have the expertise and familiarity with FERC proceedings that many smaller energy companies have had for years, and are grappling with how to deal with a new regulator overseeing their actions. Last year Norman Bay, then Director of Office of Enforcement, and former FERC
Chairman, testified before Congress about the increased focus on financial institutions, and noted that while “banks and financial institutions as a whole may have a relatively lower percentage of sales and generation ownership interest compared to more traditional energy companies, ...as we have seen in our investigations, they may retain the ability to move prices in a manipulative manner.”9 He also noted that the focus on financial institutions may “be as much a product of [FERC’s] enhanced detection and enforcement abilities ...rather than any uptick in manipulative conduct.”10 Thus, as FERC’s expertise in investigating financial institutions grows, banks can likely expect FERC enforcement in this sector to continue to increase. FERC is also litigating a record number of cases. This year, FERC has had four cases before an administrative law judge or a United States district court. FERC also has a number of other cases at the Order to Show Cause stage that
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may end up in litigation. While FERC’s preference is to resolve actions through settlement negotiations, an increasing percentage of enforcement staff resources have become tied up in litigating cases that were not settled. As such, FERC has been able to open fewer investigations recently, and those that it has opened have been moving slower than before. As FERC adapts to its new and increased role, it is likely that the sum of resources given to investigations and litigation will continue to grow. The increase in scope and depth of FERC enforcement actions, along with their focus on new targets such as financial institutions, demonstrates that, like other agencies now flexing their regulatory muscle such as the Commodity Futures Trading Commission, FERC enforcement actions are likely to continue growing in importance for market participants. The unique nature of the FERC investigatory and enforcement process provides both challenges and
opportunities for those entities that may have cause to deal with FERC enforcement staff. Joel M. Androphy has a nationwide and diverse trial practice representing individuals and corporations in white collar criminal proceedings and qui tam civil actions for which he has recovered hundreds of millions of dollars in settlements for his clients and the government. He is a partner in Berg & Androphy with its principal office in Houston and other offices in N.Y., D.C., Philadelphia and Denver. Samuel Doran is an associate at Berg & Androphy. His practice focuses on civil litigation, including plaintiff’s qui tam cases, and white collar criminal defense. Endnotes 1. Examining Enron: Developments Regarding Electricity Price Manipulation in California: Hearing Before the Subcomm. on Consumer Affairs, Foreign Commerce & Tourism of the S. Comm. on Commerce, Science, and Transportation, 107th Cong.
140 (2002). 2. FERC also encourages voluntary reporting of possible violations and, unlike certain other agencies, most voluntarily reported violations are dismissed without penalty. 3. The Commission is composed of up to five commissioners who are appointed by the President with the advice and consent of the Senate. Commissioners serve five-year terms, and have an equal vote on regulatory matters. 4. Staff of the Office of Enforcement, Fed. Energy Regulatory Comm’n, 2014 Report on Enforcement, Docket No. AD07-13-008 (2014), available at http://www.ferc.gov/legal/staffreports/2014/11-20-14-enforcement.pdf. 5. 18. C.F.R. §§ 385.2201-.2202; Order No. 718, Ex Parte Contacts and Separation of Functions, 125 F.E.R.C. ¶ 61,063 (2008). 6. 18 C.F.R. § 1b.12 (2012). 7. See 2014 Report. 8. See FERC – All Civil Penalty Actions, available at https://www.ferc.gov/enforcement/civil-penalties/civil-penalty-action.asp. 9. Testimony of Norman C. Bay Director, Office of Enforcement Federal Energy Regulatory Commission Before the Committee on Banking Financial Institutions and Consumer Protection Subcommittee United States Senate January 15, 2014, available at http://www.banking. senate.gov/public/index.cfm?FuseAction=Files. View&FileStore_id=d3d5a9a5-fbc8-4ef7-96e15314d849156d. 10. Id.
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Don’t Feed the Troll:
Patent Troll / ’patnt, trol/ noun 1. a person who sues companies for patent infringement, often using patents of dubious value or questionable relevance; 2. thugs.1
Curbing Patent O Litigation in the Eastern District of Texas
n March 27, 2017, the United States Supreme Court heard oral arguments in TC Heartland, LLC v. Kraft Foods Group Brans, LLC, an appeal filed by an Indiana company that argues it was improperly sued for patent infringement in Delaware. At first blush, this simple jurisdictional question hardly seems able to turn the patent litigation world on its ear; however, the Court’s holding in TC Heartland serves to bar most patent owners from filing suit in the Eastern District of Texas, a hotbed for patent trolls. Per federal statute, a patent suit “may be brought in the judicial district where the defendant resides.”2 In 1957, the Supreme Court in Fourco Glass v. Transmirra Products interpreted this statutory language to mean that suits can be only filed in the defendant’s place of incorporation.3 Then, in 1988, Congress amended the federal general venue statute to provide that venue generally exists “in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”4 This general statutory venue provision makes most corporations subject to personal jurisdiction throughout the country. In 1990, the United States Court of Appeals for the Federal Circuit, the appellate court that specializes and decides patent infringement cases, confronted whether the 1988 amendment to the general venue statute altered the Su-
preme Court’s restrictive interpretation of the patent venue provision. It found that it did, holding that the test for venue under the patent statute with respect to a defendant corporation is “whether the defendant was subject to personal jurisdiction in the district of suit at the time the action was commenced.”5 This holding essentially applied the broader federal general venue provisions to patent cases, despite the Supreme Court’s holding in Fourco Glass. In reaching this decision, the Court of Appeals for the Federal Circuit essentially opened up any federal district court where the defendant corporation does business— including the Eastern District of Texas. Over the years, the small towns of Marshall and Tyler, Texas, which are located within the boundaries of the Eastern District of Texas, became the nation’s epicenter of patent troll litigation. The Eastern District of Texas’s fast docket and plaintiff-friendly juries make it the ideal venue for patent trolls. While only roughly five percent of the patent cases filed in the Eastern District actually make it to trial, in the cases that actually do go to trial, patent holders win 78 percent of the time, higher than the 59 percent national average.6 Given the incredibly high cost of defending against patent infringement claims, as well as the large number of verdicts for plaintiffs, and exposure to large jury awards, most corporations being sued opt for an out-of-court settlement, often the most cost-effective option. Settlement is not an acknowledgement of infringement, but rather a pay-off to end the financial bleeding associated with defending against arguably frivolous litigation—also known as feeding the troll. Another factor luring litigation to the Eastern District is Judge Rodney Gilstrap. Judge Gilstrap, a Federal District Judge based in Marshall, Texas, widely known for his no-nonsense handling of patent cases, presides over more patent cases than all federal judges in California, Florida, and New York combined.7
and the witnesses needed. Patent trolls often have even a greater handle on their case, as they frequently file their suits in volume, with each case building upon the last. Defendants, however, are often caught unaware of the pending litigation; therefore, defendants have a greater learning curve to overcome with respect to the litigation filed against them. Having rapidly approaching deadlines favors the plaintiff, who is able to prepare much of their case prior
Judge Gilstrap has a reputation for taking immediate control of the litigation in his Court and holds the parties to strict deadlines governing the case— oftentimes scheduling up to five trials each month to ensure there is always a trial taking place in his court.8 The combination of favorable juries and the Eastern District’s rocket-docket is a plaintiff’s utopia. Before filing suit, the plaintiff is often aware of the key issues, the documents governing the case,
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to filing suit. These favorable conditions have led the Eastern District to patent litigation supremacy. In 2016, a total of 4,520 patent cases were filed in the United States—a majority of which were filed in the Eastern District of Texas.9 With 36.4% of all patent cases being filed in the Eastern District of Texas, the second most popular court for patent litigation was the District of Delaware, with just over 10% of patent cases being filed there.10 As noted by several Justices during oral arguments, the TC Heartland case has the potential of taking patent litigation venue away from the Eastern District of Texas. Aptly put, Justice Kagan noted that the case can be simply summed as “when 30 years of practice goes against you, what happens?”11 That is, since the Federal Circuit’s holding in 1990, the federal general venue provisions have been applied to patent cases, despite the Supreme Court’s 1957 ruling
in Fourco Glass. In an attempt to marry the Court’s 1957 holding with Congress’ 1988 amendment to the general venue provision, Justice Kagan again noted that the broader rule was the “practical backdrop” against which Congress was legislating.12 Despite the potential of the Court’s decision to affect patent litigation in the Eastern District of Texas, Justice Breyer was not convinced such matters were relevant. Specifically, Justice Breyer noted that many amicus briefs filed discussed the large number of patent cases filed in the Eastern District of Texas as a negative side-effect of the broader venue provisions, stating that many briefs were “filled with this thing about a Texas district which they think has too many cases.”13 Justice Breyer then begged the ultimate question: “What’s this got to do with this [case]?”14 When asked this very question by Justice Kagan, counsel for Kraft noted that issues with the Eastern District impact “how
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the cases are managed, how discovery takes place, how motions practice is handled, and so on.”15 Justice Roberts felt reluctant to address such issues via the case at bar. On May 22, 2017, in an opinion written by Justice Thomas, the Supreme Court unanimously ruled in favor of TC Heartland, LLC. In reaching this decision, the Court held that with respect to patent litigation, when applying the patent venue provisions of 28 U.S.C. 1400(b) to domestic corporations, residence refers only to the state of incorporation. In reaching this decision, the Court found that the 1988 amendments to the general venue statute did not modify the meaning of Section 1400(b) previously adopted in Fourco Glass. While the TC Heartland case will likely curb patent troll litigation in the Eastern District of Texas, its prohibitive effect will not be similarly felt throughout the country. Specifically, the District Court of Delaware, also a favorable venue for patent troll litigation, will likely see a large boom in cases filed there due to the large number of corporations incorporated there. In sum, venue provisions will not stop patent trolls from filing suit against unsuspecting corporations. Trolls get fed, not due to a specific venue, but rather due to the great expense of defending against patent litigation. Should the Court, or Congress, wish to truly curb the patent troll problem, legal mechanisms should be put in place that allows defendants to challenge the validity of the plaintiff’s claims early in the litigation. Without such mechanisms in place, corporations still must remain vigilant for the troll under the bridge. Raymond L. Panneton is a member of The Houston Lawyer Editorial Board and a litigation associate at Hendershot, Cannon, Martin & Hisey, PC. He can be reached at firstname.lastname@example.org..
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1. David Segal, Has Patent, Will Sue: An Alert to Cor-
porate America, The New York Times, http://www. nytimes.com/2013/07/14/business/has-patentwill-sue-an-alert-to-corporate-america.html 2. 28 U.S.C. § 1400(b) 3. Fourco Glass v. Transmirra Products, 353 U.S. 222 (1957). 4. 28 U.S.C. § 1391(c) 5. VE Holding Corporation v. Johnson Gas Appliance Company, 917 F.2d 1574 (Fed. Cir. 1990). 6. Matt Levin, How east Texas became the epicenter for ‘patent trolls’ lawsuits, The Houston Chronicle, http://www.chron.com/news/houston-texas/article/How-east-Texas-became-the-epicenter-forpatent-6211845.php 7. Adam Liptak, Supreme Court Considers Why Patent Trolls Love Texas, The New York Times, https://www.nytimes.com/2017/03/27/business/ supreme-court-patent-trolls-tc-heartland-kraft. html 8. Jeff Bounds, New patent infringement lawsuits in East Texas shatter records, The Dallas Morning News, https://www.dallasnews.com/business/ business/2015/08/18/new-patent-infringementlawsuits-in-east-texas-shatter-records 9. Brian Howard, 2016 Fourth Quarter Litigation Update, Lex Machina, https://lexmachina.com/q4litigation-update/ 10. Id. 11. Ryan E. Hatch, Supreme Court hears Oral Arguments in TC Heartland v. Kraft Foods, IP Watchdog, http:// w w w.ipwatchdog.com /2017/04/04/supreme -court-hears-oral-arguments-tc-heartland-vkraft-foods/id=81527/ 12. Id. 13. Id. 14. Id. 15. Id.
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By JesÚs CastillÓn and Sarah Tobin
Making Secondments a “Win-Win” Scenario
corporate legal department may “borrow” a lawyer from a law firm to provide in-house legal support on a temporary basis, typically on-site. This type of arrangement is referred to as “secondment” and can be a win for both a law firm and the company.1 The need for a secondee in a corporate legal department can arise from various scenarios. For instance, an in-house lawyer may go on medical or parental leave or temporarily or permanently relocate. Other personnel issues such as a planned or unplanned termination, vacancy or even a hiring freeze in the legal department may also give rise to the need for a creative solution for legal coverage. Special, short-term projects that the company is working on may also lend themselves an ideal situation for a secondee. Such projects could range from an unusually high volume of contracts with tight deadlines, heavy due diligence workloads, or an unexpected increase in litigation claims that need managing. Whatever the cause for the increased demand, many companies use secondees as a solution to fill a shortterm need. The Terms of the Secondment The fee arrangements for a secondee can vary.2 If the company needs full-time help for a determinable amount of time, the firm and company may negotiate a lump sum fee that represents a discount off the firm’s standard rate card for work for the company. For secondee arrangements that might not amount to a full-time workload, the secondee may not need to be physically on-site at the company’s office five days a week and may instead continue to bill at a previously agreed hourly rate as the work flows. Regardless, the company
and the firm should negotiate the terms of the secondee arrangement up front and, if necessary, leave room for flexibility to make changes to the arrangement. From the company’s perspective, engaging a secondee can result in personnel and costsaving efficiencies because a secondee will not add to the legal department’s overall headcount and the company does not expend any financial resources on the secondee’s benefits. The parties should consider all the necessary terms when planning the assignment. For example, if the firm’s engagement for other work with the company contemplates a volume discount based on certain thresholds, will the secondee’s work (especially if it is subject to a further discount off the firm’s typical rates) count towards any such thresholds? It is also a good idea for the company and firm to have a backup support plan in place if the secondee becomes ill or has previously scheduled time off during the secondment period. Another attorney at the firm should be readily available and looped in enough on company matters to step in if needed. As with all outside counsel relationships, it is advisable for the key relationship contacts at the firm and company to communicate regularly to ensure that each parties’ expectations and needs are met and to provide an opportunity to give candid feedback along the way. Selecting the Right Secondee Selecting the right associate to use as the secondee is also key to a successful secondment arrangement. It could be tempting for a firm to second an associate who is behind on billable hour requirements and for whom the firm cannot otherwise figure out a suitable purpose. However, that
associate might not be the best candidate for the job. A good secondee will already have plenty of background on the company and substantial previous experience working on company matters. In addition to ensuring that the associate selected for the secondment has enough background on the company and matters involved, it is important to consider whether that associate will be a good fit in an in-house environment in general and the specific in-house environment in question. Private practice attorneys with no prior day-to-day experience in an in-house environment may have a steep learning curve adjusting to their new temporary corporate environment. The company may be able to help reduce the learning curve by providing useful on-boarding materials such as company policies, department procedures, organizational charts and any other material that is normally provided to any new attorney hire joining the company’s legal department. The firm’s commitment in allowing an associate to focus solely or at least mainly on the company’s work is a sacrifice. Other firm attorneys may need to help off-load and cover other work from the secondee’s plate to allow that person to give the attention to the secondment that it demands. The Benefits of Secondment The firm can capitalize on the opportunity to embed someone in the organization (either physically or virtually) for the secondment period by enriching its relationship with the company in a way that enhances its service offerings to the company on a long-term basis. Being at least temporarily on the inside of a company may allow the secondee to pick up some ideas on ways that the firm can further serve its client’s needs both during and after the secondment. Similarly, the new perspective that the secondee brings to the company’s environment may help the company with respect to re-evaluating any day-to-day practices, policies and routines that could use an update or refresh. That may both reduce risk for the company and create additional longer-term billable work for the firm. The secondee will also likely get a better feel for the in-house legal department’s
role within the larger company organization, which can further strengthen the relationship between the company and the firm as well as provide more insight into what the client is dealing with on a regular basis. An important part of providing assistance as outside counsel is to make the life of the client better and easier and the more a secondee can get to know about how to make that happen, the more effective and productive the relationship can be. Hopefully, the outcome is more practical continued legal support from the secondee when he or she returns to the firm. These are just some of the practical ways that secondment arrangements can enrich the attorney-client relationship with a corporate legal department and enhance the service level offerings by the firm while increasing the revenue generated by the firm. If the arrangement is successful, it can be a lasting win-win scenario for everyone involved. Practical Tips for the Secondee Lastly, here is some practical advice for an
associate tasked with a second assignment: • Understand the company’s primary business. • Recognize that legal is there to help generate revenue, not impede it. • Draft internal communications concisely. • Include an executive summary in all memoranda. • “No” is never a good answer. Give the business an option. • Be decisive. • Use Microsoft Outlook to calendar meetings or teleconferences; promptly accept or decline invitations sent to you. • Outline objectives at the outset of a meeting and end on time. • Do not let perfect be the enemy of good. • Be responsive. • Seek insight on the client’s values and culture to help gain a better understanding of the client’s needs and priorities. • Remember that this is both an opportunity to build a trusting relationship
with the client and to obtain on-thejob training that you might not otherwise get at a firm. Jesús Castillón is a senior associate at BakerHostetler and has been seconded to Schlumberger Technology Corporation for temporary periods to cover special projects as in-house counsel. Sarah Tobin is Managing Counsel, Corporate Services at Direct Energy, a role that includes helping manage the company’s outside counsel relationships. Endnotes 1. Pronounced s -kond-m nt. Garner’s Dictionary of Legal Usage defines secondment as “a person’s reassignment from his or her regular employment to some temporary assignment elsewhere.” Secondment, Garner’s Dictionary of Legal Usage (3d ed. 2011). 2. Law firms and corporate legal departments may enter into an agreement to outline the terms of the secondment arrangement such as clarifying the employment status of the seconded employee and who bears ultimate responsibility for any liabilities that may arise during the secondment.
Meet New HBA President Alistair B. Dawson
The Houston Lawyer asked 2017-2018 HBA president Alistair B. Dawson about his family, legal careers and goals for the new bar year. THL: Where were you born and where did you grow up? Dawson: I was born in the town of Sedgefield, England. My parents were both from Great Britain. My Mom was from the north of England and my Dad from a small town outside Edinburgh, Scotland. We moved to Houston for Dad’s work when I was six years old. When I was thirteen, I went back to Scotland and attended a boarding school called Fettes College (where Sean Connery had his first job as a milk delivery man and Prime Minister Tony Blair graduated). I stayed in Scotland until I graduated from Fettes. I then returned to the United States for college at Vanderbilt. THL: Tell us about your family. Dawson: My parents have passed, but were amazingly strong characters to whom I owe much appreciation for the person I am today. My father was a Chartered Accountant who worked for Zapata (which was founded by President George H. W. Bush). My
Wendy and Alis
tair were m
mother was a nurse at Methodist Hospital and later imported fine antique furniture from Great Britain for her antique shop. My brother Fraser works as a civilian screener at the courthouse. I am married to the wonderful and beloved Wendy Dawson who runs a charity called Social Motion, Inc. which teaches social and life skills to kids and young adults with special needs. I have four incredibly talented and loving children. Kaitlyn is a lawyer with Ware Jackson. Cameron is a junior at Texas Tech University where he is studying Communications. Collin is a rising 8th grader and Connor is a rising 7th grader, both at Kinkaid. THL: Where did you go to college and law school? Dawson: I graduated from Vanderbilt University and the University of Texas School of Law.
THL: How did you become interested in law as a career? Dawson: When I was a kid, I used to watch Perry Mason almost every day. I loved how Mr. Mason would (1) win every trial and (2) always get the guilty party to confess to the crime, usually while on the witness stand. I decided then that I wanted to attend law school and become a trial lawyer. I have won my fair share of trials, but certainly not all of them. In all of my trials, I have had two “Perry Mason” moments during cross-examination. I guess most people would conclude BA on at the H er m a that I am no Perry Mason. C d n itlyn a Alistair, Ka y, d en W r, o n Collin, Con ner Meeting THL: What are your areas of specialty and Annual Din 30
arried in Sco
with what firms have you worked in your legal career? Dawson: I am a trial lawyer at Beck Redden. My practice is largely commercial and business litigation, mostly on the defense side. I defend companies in business and commercial disputes. I have been at Beck Redden for twenty-four years. Prior to joining Beck Redden, I worked at Vinson & Elkins and Bracewell & Patterson in their litigation sections. THL: Who were your mentors? Dawson: I have been fortunate to work with many amazing lawyers and I have learned from many of them. David Beck and Judge Royal Furgeson have probably had the biggest impact in my development as a lawyer. David is one of the greatest trial lawyers in the country. Not only have I learned from watching him how to prepare for and try a lawsuit, but I have also learned how to conduct myself as a professional. David’s moral compass always points true north. Despite the many challenges of our profession, David always maintains his integrity. David taught me to always take the “high road” and never to get on the “low road” even if the opposing lawyer is racing down that “low road.” David always does what is right and never does what is wrong, and he won’t allow himself to try and justify a decision by claiming it is a “grey” area. I have tried hard to emulate the manner in which David approaches the practice of law in how I conduct myself. Judge Royal Furgeson is one of the nicest individuals I have ever met. I was fortunate to work with him on the Litigation Council of the State Bar of Texas for many years. In the years that I worked with him, I noticed that he only
had the nicest things to say about every person. He would often comment that someone was “a great American.” I never heard him make a negative comment about anyone. I once asked his law clerk if she had ever heard Judge Furgeson say anything negative about anyone. She quickly reported that she had not. I decided that this was a good way to approach life, and I have tried to follow the lead that I learned from Judge Furgeson. THL: How did you get interested in volunteering with the bar? Dawson: I first got involved in Bar activities when I was fortunate enough to join the Litigation Council of the State Bar of Texas. I served on that Council for a number of years and had the privilege of serving as the Chair of the Litigation Section in 2007. I wanted to give back to my local Bar, so I joined the Board of the HBA in 2008 and have served on the Board for the last nine years. THL: What do you think is the role of the organized bar in society today? Dawson: I believe that organized bar associations should promote and protect our profession. We must protect against attacks on the independence of our judiciary. We should uphold the 7th Amendment to our Constitution. We must ensure that all Houstonians have access to justice by promoting pro bono legal representation. Our Bar should promote and uphold professionalism among our members. And finally, we should give our members a number of opportunities to give back to our community. THL: What do you see as the role of the president in the Houston Bar Association? Dawson: The primary role of the President of the HBA is to be a strong and vocal leader of our organization. The President should encourage members to uphold the values that are central to the HBA. We at the HBA will encourage all of our volunteers to continue the great work of giving back to the profession and to our community—qualities and attributes that have been hallmarks of the HBA for many years. THL: What areas will you focus on during your administration? Dawson: I will focus on making sure that we continue the various programs and initiatives that have been introduced by the wonderful HBA Presidents who have preceded me. In addition, I am introducing programs to help children and young adults with special needs. We will have pro bono legal representation for these individuals to ensure that they are getting what they are legally entitled to at their schools. We will
help them establish supported decision-making arrangements or guardianships when these special individuals turn 18 so that their caregivers can continue providing guidance. Finally, we will provide employers with training materials that will assist them in preparing for and hiring employees with special needs as well as manage issues that might arise. Hopefully, these employers will be better suited and prepared to welcome an increased number of differently-abled individuals in their work force.
s are golfing tside interest ou ’s ir ta lis Among A colleagues.
THL: What do you think has changed most about the practice of law since you became licensed? Dawson: There are two fundamental changes that have occurred during my tenure as a lawyer. First, there are significantly less opportunities for trial lawyers to actually go to trial. Due to legislative changes, tort reform, and the increased cost of litigation, there has been a significant drop in the number of jury trials. Trial lawyers suffer because they have less opportunities for trial experience. Litigants also suffer as they are denied their “day in court.” It is unlikely that we can change legislation or tort reform (at least in the near term). So I think we have to figure out ways to reduce the cost of litigation so that more cases can go to trial. The second change I have seen is a shift in focus of the legal profession. When I started the practice of law, most lawyers focused on providing legal representation to their clients and helping them solve their legal issues. It was truly a profession and treated as such by almost all of the lawyers with whom I practiced. In recent years, the focus has shifted and now there is more emphasis on the business side of being an attorney. Lawyers move from one firm to the other and there is increasing pressure to raise hourly rates. I understand we have to run our businesses, but I wish that we could all focus on the fact that we are all part of the legal profession and being professionals in the practice of law is the most important aspect of our work.
and with friends
of the Texas Bar Foundation, the Board of the Houston Volunteers Lawyers, the Board of Lone Star Legal Aid, the Executive Committee of the UT Law School Alumni Association, Adjunct Professor at the University of Houston, Professor at Notre Dame Law School Intensive Trial Advocacy Program, the Board of HEART, Board of TUTS, Board of the Texas Lyceum, and the Board of the Parish School. THL: Is there anything else you would like to bring out in this interview that is important to you? Dawson: I want to do my best as your President this year. My office, phone or email is always available. If any of our members have suggestions, issues, or things that they want to discuss, I invite them to contact me. I look forward to serving you this year and will endeavor to uphold the highest standards of this esteemed office. Thank you for giving me this opportunity.
THL: What do you like to do outside of the practice of law? Dawson: I love spending time with my family and I enjoy travelling. I also enjoy playing golf and drinking nice wine. THL: Are you involved with other professional or community organizations? Dawson: I have been involved in ABOTA, the Supreme Court Advisory Committee, the Board
Alistair was b spent many orn in Sedgefield, En g of his schoo l years in Sco land, but tland. thehoustonlawyer.com
Alistair Dawson A Takes Office as HBA President
listair B. Dawson of Beck Redden LLP took office as the 2017-2018 president of the Houston Bar Association at the organizationâ€™s Annual Dinner Meeting on May 18 at River Oaks Country Club. He succeeded Neil D. Kelly of Andrews Kurth Kenyon LLP. The gala evening was dedicated to the accomplishments of the HBA and its members during the past year. Kelly presented the Presidentâ€™s Awards to outstanding committee and program chairs for 2016-2017, and the HBA honored its emeritus members who reached their 50th year of practice during the last bar year. Photos by Deborah Wallace/Barfield Photography
Alistair Dawson accepts the gavel as new HBA president from Neil Kelly.
Alistair and Wendy Dawson, right, with Neil and Dana Levy Kelly.
50-Year Lawyers 50-year lawyer Jim S. Adler and his wife, Deborah Adler
50-year lawyer Joe B. Allen and his wife, Helen Allen
50-year lawyer Charles L. Aycock and his wife, Claudia Aycock
50-year lawyer Robert L. Blackwood
50-year lawyer Charles J. Brink and his guest, Brenda Lera
50-year lawyer Robert L. Clark and his wife, Kathleen Clark
50-year lawyer Michael A. Culling and his wife, Jan Culling
50-year lawyer Sharon Steele Doyle
50-year lawyer Victor A. Driscoll, Jr. and his wife, Dottie Burge
50-year lawyer Woodrow Epperson, Jr.
50-year lawyer Charles C. Foster and his son, Anthony Foster
50-year lawyer Edward William Goldstein and his wife, Betsy Goldstein
50-year lawyer J. Clifford Gunter III and his wife, Katie Gunter
50-year lawyer Lee Hamel, right, and his guest, Bill Bowers
50-year lawyer Alfred John Harper II and his wife, Cynthia Harper
50-year lawyer, the Hon. David Hittner and his son, George Hittner
50-year lawyer John L. Hopwood and his wife, Linda Hopwood
50-year lawyer Donald M. Hudgins and his wife, Toni Hudgins
50-year lawyer Clay Moore and his guest, Sue Whittington
50-year lawyer Michael Moriarty and his wife, Melna Moriarty
50-year lawyer John F. Nichols, Sr. and his sons John F. Nichols, Jr., (l), Travis Nichols
50-year lawyer Patrick C. Oxford
50-year lawyer, the Hon. John Wesley Peavy, Jr. and his wife, Diane Peavy
50-year lawyer Marvin B. Peterson Jr. and his wife, Audrey Peterson
50-year lawyer Ned Price, Jr. and his wife, Sue Price
50-year lawyer Jack Morris Rains and his guest, Carolyn St. Clair
50-year lawyer James W. Robertson and his wife, Laura Robertson
50-year lawyer J. Lindsey Short Jr. and his wife, Agnes Short
50-year lawyer G. Byron Sims and his daughter, Lisa Thomas
50-year lawyer William J. Stradley and his wife, Emmalee Stradley
50-year lawyer Michael Kyle Swan and his wife, Carey Swan
50-year lawyer Ben Harold Welmaker, Jr.
50-year lawyer H. Erwin Wilbanks and his wife, Ann Wilbanks
50-year lawyer Gary L. Wood and his wife, Dianne Wood
50-year lawyer Kenneth R. Wynne and his wife, Gay Wynne
50-year lawyer, the Hon. Alvin Zimmerman and his wife, Susie Zimmerman
The HBA would like to recognize the following 50 Year Members who were unable to join us for the Annual Dinner:
Mr. Everett L. Anschutz Mr. David Howard Berg Mr. Charles Alvin Brown Mr. Charles H. Carmouche Mr. Roland E. Dahlin II Mr. Alfred L. Deaton III Mr. Pleas B. Dover Jr. Hon. Joe L. Draughn Mr. David Walter Eckman Mr. Otto B. Gerlach III
Mr. H. Martin Gibson Hon. Michael Tabor Hay Mr. Michael J. Hinton Mr. John L. Hopwood Mr. J.W.-Don- Johnson Mr. Ned W. Johnson Mr. Fred M. Knapp Jr. Mr. Arno W. Krebs Jr. Mr. William G. Lawhon Mr. Arthur Marshell Lincoln
Mr. Donald Lee Linker Mr. Neil Martin Mr. H.L. Hensel Murchison Mr. John B. Murphrey Mr. Dan A. Naranjo Mr. Jerry W. Neagle Mr. Stephen C. Paine Mr. Jon C. Pfennig Mr. P. Allan Port Mr. Hugh M. Ray
Hon. Neel Richardson Mr. B.J. Russo Mr. Thomas P. Sartwelle Mr. James R. Shelton Mr. Frank Hamilton Simonton Jr. Mr. James Patrick Smith Mr. Richard S. Snell Mr. Milton Henry Steffen Mr. Walter Arnold Theis Jr. Mr. John A. Townsend
Neil Kelly presented the 2016-2017 President’s Awards to outstanding committee chairs during the HBA’s Annual Meeting.
Jill Yaziji was honored for outstanding work as editor in chief of The Houston Lawyer magazine.
Courtney Scobie was honored for outstanding work as chair of the AIDS Outreach Committee.
Chevazz Brown, Cassandra McGarvey and Zach Wolfe were honored for their outstanding work on the Eikenburg Law Week Fun Run.
Committee chair, Geoff Gannaway, along with subcommittee chairs Rick Anderson, Courtney Ervin, Sammy Ford IV, Brian Quintero, Ryan Van Steenis and Justin Strother were honored for their outstanding contributions to CLE programming. 34
Sherra Gilbert, Travis Torrence and Elizabeth Campbell were honored for outstanding work with the Gender Fairness Committee.
Alistair Dawson, Peter Kelly and the Hon. Sylvia Matthews were honored for their outstanding work as co-chairs of the Administration of Justice Committee
Large Firm Champions
Andrews Kurth Kenyon LLP Baker Botts L.L.P. Bracewell LLP Locke Lord LLP Norton Rose Fulbright US LLP Vinson & Elkins LLP
Porter Hedges LLP ReedSmith LLP Sidley Austin LLP Strasburger & Price, LLP Susman Godfrey LLP Winstead PC Winston & Strawn LLP
Boutique Firm Champions
BP America Inc. CenterPoint Energy, Inc. ConocoPhillips, Inc. Exxon Mobil Corporation Halliburton LyondellBasell Marathon Oil Company Shell Oil Company
Mid-Size Firm Champions Akin Gump Strauss Hauer & Feld LLP BakerHostetler LLP Beck Redden LLP Chamberlain, Hrdlicka, White, Williams & Aughtry Eversheds Sutherland LLP Gardere Wynne Sewell LLP Gibbs & Bruns LLP Gray Reed & McGraw, LLP Greenberg Traurig, LLP Haynes and Boone, LLP Jackson Walker L.L.P. Jones Day King & Spalding LLP Morgan, Lewis & Bockius LLP
Abraham, Watkins, Nichols, Sorrels, Agosto & Aziz Blank Rome LLP Edison, McDowell & Hetherington, LLP Fullenweider Wilhite PC Jenkins & Kamin LLP LeClairRyan Ogden, Broocks & Hall, L.L.P. Ogletree, Deakins, Nash, Smoak & Stewart P.C. Sutton McAughan Deaver PLLC Vorys, Sater, Seymour and Pease LLP Weycer, Kaplan, Pulaski & Zuber, P.C. Wilson, Cribbs & Goren, P.C. Yetter Coleman LLP
Small Firm Champions
Coane and Associates, PLLC Flowers Law Firm Frye, Oaks, Benavidez & Oâ€™Neil, PLLC Fuqua & Associates, P.C. Givens & Johnston Hunton & Williams LLP Katine & Nechman L.L.P. Katten Muchin Rosenman LLP
Law Firm of Min G. Kim, PLLC KoonsFuller, P.C. Kroger | Burrus MehaffyWeber, P.C. Quinn Emanuel Urquhart & Sullivan, LLP The Law Office of Scardino & Fazel Shortt & Nguyen, P.C. Trahan Kornegay Payne, LLP
Amalfi Law, PLLC Law Office of Peter J. Bennett Law Office of J. Thomas Black, P.C. Burford Perry, LLP The Dieye Firm The Ericksen Law Firm Law Office of Todd M. Frankfort Hasley Scarano, L.L.P. David Hsu and Associates The Jurek Law Group, PLLC The LaFitte Law Group, PLLC C.Y. Lee Legal Group, PLLC Lindley Law Firm, PLLC Law Office of Maria S. Lowry Martin R.G. Marasigan Law Offices Law Office of Evangeline Mitchell, PLLC Law Office of Bertrand C. Moser Law Office of Rita Pattni Pilgrim Law Office Robert E. Price Reece Law Firm, PLLC Law Office of Cindi L. Robinson Law Office of Jeff Skarda Diane C. Treich, Attorney at Law The Law Office of Norma Levine Trusch thehoustonlawyer.com
Houston Lawyers AND The Great War
his year marks the centennial of America’s declaration of war against Germany and the Central Powers and our involvement in World War I. Recognizing the role played by our community and profession in the war, this year’s column of Houston Lawyers Who Made a Difference will honor six who were active in that war and put their contributions in context. The veterans of the Great War are dead now, and this column is based on the memories passed to grandchildren and on contemporary newspaper accounts that portrayed of the lives of the doughboys. The war in Europe raged for three years before the United States entered the war. In 1914, the science and technology of killing had advanced farther than medicine and sanitation. War fatalities were in the millions. Military tactics added to the carnage. Infantrymen who lived in trenches were ordered “over the top” to run across a no man’s land in the face of withering machine-gun fire, with the hope that at least a few would get through. Parts of France absorbed so much lead that the fields of battle remain poisoned even now, a century later. The United States entered the war with a noble purpose. President Woodrow Wilson hoped his “Fourteen Points” plan, which he believed would make the world “safe for Democracy,” would be adopted
as part of the peace. For a variety of reasons which historians and biographers disagree about today, Wilson’s dream did not happen. The failure of the War to End All Wars to end any wars—not to mention ending imperialism or to bring lasting peace—should in no way diminish the valor and heroism of those who honored the call of duty. Houston lawyers from every practice served. Young lawyers whose parents were at the center of high society volunteered, as did men who were working their way through law school. Some were wounded and, sadly, some did not come home. American soldiers were active on the military front for no more than six months of the four-year war. Notwithstanding this brief time frame, the U.S. participation in WWI was significant. American soldiers were fresh to the fight, well supplied, and available in increasing numbers. The fighting skill of Americans, who had been civilians the year before, surprised Allies and enemies alike. That realization ended the war by forcing Germany and its allies to either surrender or to declare an armistice. This series is dedicated to the young men, and especially the Houston lawyers, whose efforts shortened the war and reduced the extent of the human carnage. In that way, if in no other, each of them made a difference.
Houston Lawyers Who Made a Difference
Lieutenant Calvin B. Garwood
By The Hon. Mark Davidson
hen the United out, last combat duty was in Houston Bar Association in 1935. He reStates declared the Meuse-Argonne Offenenlisted in the Army at the beginning of war on the Gersive. The 141st Regiment in World War II and became a brevet brigadier man Empire in April which he served was ordered general. He was military governor of Alge1917, our army was smaller to attack at Blanc Mont Ridge, ria after it was recaptured from the Nazis. than Portugal’s. The soldiers in the Champagne area of He also trained numerous other Americans we sent into battle were alFrance, on the morning of Ocon how to administer governments during most all civilians with no pretober 7, 1918. The French army occupation. Throughout his life, he dedivious military experience. It had launched several atwas an army of citizens who tacks on the ridge, all unreported for duty and, with successful. A large numlittle preparation, took on an Calvin B. Garwood, 1922 ber of casualties led the armed force that had been at war for three French to withdraw, and their replaceyears. They acquitted themselves well. ment was the untried 36th Division. The performance of 2nd Lieutenant The French artillery was supposed Calvin B. Garwood was both extraordito have cleared the German machine nary and commonplace. His leadership guns on the ridge. They failed to do so. on the front lines earned him the Croix Lieutenant Garwood led his men into de Guerre from the French government. intense machine-gun fire while running Other Americans who have received it up the mountain. They captured the include Col. George S. Patton, Brigadier German line, at a cost of almost oneGeneral Douglas McArthur, and Sergeant third of the regiment, including most Croix de Guerre presented to Calvin B. Garwood Alvin York. of the officers. That evening, the Germans cated himself to serving his country and his Garwood volunteered in the Texas Nacounterattacked. Most of his superiors profession. For all of us who live in a freer tional Guard after graduating from college were either wounded or dead, and it was and more peaceful world as the result of and was active in the Mexican Border camup to the young officer and the troops unhis service, Calvin Garwood made a differpaign of 1916 against Pancho Villa. When der his command to stop the attack. They ence. America entered The Great War, his military prevailed, and the Germans pulled out of experience placed him in the officer corps, the Champagne area two weeks later. The Hon. Mark Davidson is an MDL judge even though he was only 23 years old. For the rest of his life, doctors would find and judge (retired) of the 11th District Garwood served in the 36th Infantry Dimustard gas residue in Lieutenant GarCourt. His column for The Houston Lawvision, made up almost entirely of recruits wood’s body, a reminder of the battle. yer focuses on Houston attorneys who have from Texas and Oklahoma. After arriving After the war, he became a lawyer—a had significant impact on the law, the legal in France, their first, and, as it would turn good one. Garwood was president of the profession and those served by the law.
OFF THE RECORD
By Veronica Cruz
ife as an assistant general counsel is never dull, but Houston native, Marty Lundstrom, certainly brings a new level of “polish” to the job. Marty is an experienced attorney with a unique expertise in navigating manners and etiquette in the modern world. When she is not acting as the assistant general counsel for Spark Energy, Marty finds the time to run a successful manners and etiquette business with her mom—MannersPro. For Marty, proper etiquette has always been a way of life. Her mother, certified in the art of etiquette, passed on her knowledge and love of teaching to her daughter. Marty, who is also certified in etiquette consulting, has been helping others master the art of proper Marty Lundstrom etiquette and manners since college. As a leader in the student government at the University of St. Thomas, many of Marty’s friends and fellow students often asked her for advice about proper etiquette while dining and interviewing. Because so many of her colleagues sought Marty’s advice, Marty asked her mom to help her teach her friends and other students how to navigate the world of proper etiquette. This experience helped inspire the idea for MannersPro. Marty and her mom realized that so many college students and young professionals could benefit from some etiquette training to help them conquer the professional world, but that there were not many formal programs offering etiquette training. Students can easily take courses at college or law school to help them learn their trade or profession, but where do they go when they want to know which water glass to use at a crowded dinner table? Marty and her mom decided to use their training and experience to help others gain the confidence they need while dining, interviewing, and networking. MannersPro offers unique etiquette and manners seminars for professionals, college students, and anyone who could use a refresher on proper etiquette. MannersPro not only offers advice
on which utensils to use at dinner, but also how to effectively communicate and create the best impression in interviews and networking events. Because the world of manners has grown, Marty and her mom also help their students create good, lasting impressions over email and other electronic communications. When asked why she believes manners and etiquette matter, Marty said that proper etiquette gives students and young professionals confidence; it is just one less thing someone has to think about. In addition to her legal career and running MannersPro, Marty also finds the time to run a life and style blog. “Polished Professionals” is just another way Marty helps other professionals gain confidence in the corporate world. Marty’s blog provides helpful advice for the young professional on a range of topics—everything from how to craft the perfect elevator speech to practical fashion and beauty advice to travel etiquette. Marty uses her own experiences in the workplace to help others figure out the “dos” and “don’ts” of being a polished professional. If you visit Marty’s blog at www.polished-professionals. com, you will see that Marty has a passion for helping others navigate the professional world with style and poise. For many professionals, balancing work with passion seems like a daunting, if not impossible, task. But, as Marty said, “you cannot ignore passion.” Marty’s many endeavors outside of her legal career show that it is possible to have a successful career and other passions. For those looking to pursue their careers and passions outside of their career, Marty recommends finding a good mentor who will help you build the expertise you need to excel in your career and become more efficient. As you progress in your career, she said, you will learn how to efficiently manage your time and pursue your passions. Veronica Cruz is an associate in the Labor and Employment Practice Group at Haynes and Boone, LLP. thehoustonlawyer.com
HBA Elder Law Committee:
Giving Dignity, Peace of Mind to Low-income Seniors, Disabled
By Alice Adam
The Houston Lawyer
s our population ages, elder law issues become annual event. ever more prevalent. Not that these issues did not Every one of us has a right to dispose of what we own always exist, it’s just that life expectancy has inwhether next to nothing or a large estate – according to our creased and it is not unusual for people to live well wishes. The HBA Elder Law Committee and its pro bono atinto their 80’s and 90’s. As most seniors live on a torneys provide these pro bono services and more—they put fixed income and a a smile on the clisignificant portion ent’s face. That of that population smile and heartfelt is below the federal thank you is worth poverty level, payevery second spent ing legal fees for a on providing these Last Will and Testaservices. ment, Directive to Additionally, the Physician, Guardcommittee is reianship, etc. is simsponsible for creply out of reach. ating and updatThis is where ing the Elder Law the HBA Elder Law Handbook, which Committee steps in is utilized durand provides much ing HBA’s Legalneeded services to Line and other pro the seniors and disbono events for abled in our comthe seniors, dismunity. The Elder Alice Adam, far left, and other volunteers help clients at the 2017 Will-A-Thon. abled and veterans Law Committee harnesses the pro bono spirit of the Housin our community. These handbooks are being updated for ton area attorneys practicing in corporations, law firms or as 2017-2018 and will be available free of charge to the commusolo practitioners to participate in an annual Will-A-Thon in nity. The handbook also is available online at www.hba.org/ a local community center. Over the last two years alone, the legal-handbooks. committee served well over 400 seniors and disabled persons. Recently, the Committee has also taken on the task of Alice Adam retired from CenterPoint Energy’s legal department creating additional, facility-specific, mini Will-A-Thons and now has a solo practice. She is a former co-chair of the HBA for eligible seniors who have significant mobility issues Elder Law Committee and has been recognized in the commuor other disabilities that prevent them from attending the nity for her work on behalf of seniors and the disabled. 38
in pro f e s s io n ali s m
The Hon. Caroline E. Baker Judge, 295th District Court
o me, “professionalism,” first and foremost means treating everyone with dignity and respect. After all, the legal profession is one of service—we should never lose sight of the fact that we are serving others, not ourselves. When I think about professionalism in action, two quotes come to mind. The first, by Maya Angelou is, “I have learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” The second is sometimes called the Cowboy Code: “If it’s not yours, don’t take it. If it’s not true, don’t say it. If it’s not right, don’t do it.” It is exciting to see a great trial lawyer zealously advocating on behalf of his or her client. What is disheartening, however, is when that zealous advocacy devolves into arrogance, bullying, or worse, unethical behavior. It is dangerous if we ask ourselves only can we do it? We also must ask ourselves should we do it? Being professional means answering “yes” to both of these questions. When we disregard the second question, we not only compromise our professionalism, but also put our humanity at risk. We all often are asked to give advice to young lawyers about best practices. In addition to the above, we should tell them the following:
• Use good manners. • Communicate regularly with your client and opposing counsel. Call them on the phone—texts don’t count. • Never miss an opportunity to extend a professional courtesy to another lawyer. It will come back to you tenfold. What goes around really does come back around. • Trust your gut. If it feels wrong, it probably is. Don’t do it. • Mentors are essential. Find a mentor you trust. And later pay it forward by being a mentor for someone else. Civility in our profession does matter, especially in the courtroom. Jurors routinely comment on lawyers who exhibit bad manners. They have a clear expectation that all of us will act courteously and professionally. This may be the only time the 12 people of the jury, from all walks of life, will touch the court system. They form definite opinions about the process based on how we conduct ourselves in the courtroom. It is up to us to make sure that, win or lose, litigants and jurors leave the courthouse with faith in the court system, and the belief that we all have performed our jobs honorably.
The U.S. Supreme Court (Un-)Clarifies the Travel Ban By Jill Yaziji
The Houston Lawyer
n June 25, 2017, the U.S. Supreme Court issued a decision in Trump v. International Refugee Assistance Project, 583 U.S.__(2017) in which it sustained some, but not all, of the limitations imposed on nationals of six nations by Trump’s revised Executive Order (EO2), or Travel Ban. Those nations are Iran, Libya, Somalia, Sudan, Syria and Yemen. Iraq was initially included in the original Executive Order, but it was removed from EO-2 due to the alliance between that country and the U.S. in fighting ISIS and other important considerations. In a unanimous decision, the Supreme Court ruled that certain provisions of EO-2 may proceed. The Court elaborated that the President’s powers to limit immigration “are undoubtedly at their peak when there is no tie between the foreign national and the United States.” The Court applied the same logic to refugees’ admission stating that “when it comes to these refugees who lack any connection to the United States, … the balance tips in favor of the Government to provide for the Nation’s security.” However, the Supreme Court did not uphold the ban in its entirety. The ban cannot be “enforced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States.” The Court wrote, “For individuals, a close familial relationship is
required. A foreign national who wishes to enter the United States to live with or visit a family member ...clearly has such a relationship.” “As for entities, the relationship must be formal, documented, and formed in the ordinary course, rather than for the purpose of evading EO-2.” Justice Thomas wrote a partial dissent joined by Justices Alito and Gorsuch, in part anticipating that the temporary decision would create a “flood of litigation” as U.S. consulates abroad try to interpret the Court’s opinion on who has a bona fide relation and should be excluded from EO-2. The dissent’s concern has proven legitimate. What constitutes a “close familial relationship” is already at issue in federal courts. The U.S. State Department had said the list includes spouses, parents, parents-in-law, children, sons- and daughters-in-law, fiancés, and siblings of those already in the United States. On Thursday, July 13, a Hawaii federal judge issued a ruling to expand the list to include grandparents, grandchildren, cousins, aunts, uncles, nieces, and nephews. Based on the Hawaii Court’s order, the U.S. State Department sent a cable from Secretary of State Rex Tillerson to all U.S. diplomatic posts stating that close family includes all of those listed in the Hawaii judge’s ruling. The cable stated further, though, that cousin was limited to first cousin. Meanwhile, the Justice Department, on that same day, filed a motion with the Supreme Court to seek clarification to the Court’s opinion. The Court’s June ruling is a temporary decision pending full argument on the merits this October. In that decision, the Court will consider the President’s power to limit entry of foreign nationals to the United States. In 1952, Congress passed the Immigration and Nationality Act (INA), in which it gave the President practically unfettered discretion in excluding aliens deemed “detrimental to the interest of the United States.” 8 U.S.C. § 1182 The challenges leveled by different groups
against EO-2 primarily allege that it implicates the Establishment Clause of the First Amendment because it is motivated by animus toward Islam, rather than national security. The October decision will likely have to explain how presidential authority interacts with federal laws that prohibit discrimination on the basis of one’s nationality or religion. Jill Yaziji is the principal of Yaziji Law Firm, where she practices civil litigation and asylum law. She is the past Editor in Chief of The Houston Lawyer.
Texas Supreme Court Raises the Bar for Trade Secrets Damages–Again By Zach Wolfe
amas, don’t let your babies grow up to be damages experts in Texas. That’s the refrain CPAs may feel like singing after the Texas Supreme Court recently raised the bar for proving lost profits damages in trade secrets lawsuits again, after it reversed a lost profits verdict, in Horizon Healthcare v. Acadia Healthcare, because expert’s assumptions were too speculative. See, 2017 WL 2323106, (Tex. May 26, 2017). It started in 2016, with Southwest Energy v. Berry-Helfand, where the damages expert calculated lost profits for misap-
propriation of oilfield trade secrets by assuming a flat reasonable royalty rate of 3%. The Texas Supreme Court said this opinion was faulty because the information available to the expert would have allowed for a more precise calculation. Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 720 (Tex. 2016). More recently, the Texas Supreme Court addressed trade secrets damages again in Horizon v. Acadia. The court rejected the expert’s calculation of lost profits damages because it was based on assumptions about causation and profitability that were not supported by the evidence. Horizon involved a management group leaving a company to work for a competitor: 1. Horizon provided contract management services to healthcare providers. 2. Four Horizon executives, the “Saul group,” signed non-competes with Horizon. 3. The Saul group began negotiating to join Acadia, a Horizon competitor. 4. The Saul group solicited Piechocki, a successful Horizon salesman, to join them. 5. Shortly before leaving, Saul secretly copied a “massive amount” of Horizon documents to an external hard drive. 6. The documents Saul copied included contracts, financial models, and lists of Horizon’s sales leads. 7. After leaving Horizon to join Acadia, the Saul group and Piechocki began competing with Acadia and soliciting Acadia’s clients. Obviously, these facts did not look good for the defendants. But bad facts do not necessarily make a good damage model. Consider these facts concerning damages: 1. Piechocki used Horizon’s financial models to win a contract from Westlake. 2. Westlake was on Horizon’s “lead list” but was not a Horizon client. 3. Horizon did not lose any existing clients to Acadia.
What can a damages expert assume about causation? To calculate lost profits based on the Westlake contract, Horizon’s expert assumed that Westlake would have signed a similar contract with Horizon. Based on that assumption, the expert calculated lost profits of $898,000 on the Westlake contract, and the jury’s verdict included that amount. But the Texas Supreme Court said it was “pure speculation” to assume Horizon would have won the Westlake contract if Acadia had not. This was especially true given the fact that there was no evidence that Horizon would have included the same $150,000 incentive that Acadia included in its bid. Thus, “Horizon failed to establish the fact of damages relating to the Westlake contract with reasonable certainty.”
Based on ten years of Horizon’s retention data for employees in Piechocki’s position, the expert assumed Piechocki would have stayed either two or four years. Although Piechocki’s employment was at-will, the court found there was some evidence to support this assumption, including testimony by Piechocki that suggested he would have stayed at Horizon if not solicited to work for Acadia. There was also some evidence to support the assumption that the loss of Piechocki caused Horizon to lose future sales. This included an email from one of the defendants saying “I cannot think of a bigger body blow relative to impacting future new sales for Horizon than to get Piechocki out of there.” But the Texas Supreme Court said there was no evidence to support the third assumption: the profitability of contracts Piechocki would have sold had he remained at Horizon. In the court’s view, the expert’s calculation of lost profits was flawed because it was based on the historical profitability of Horizon contracts generally, rather than the historical profitability of Piechocki’s Horizon contracts. The court held that the absence of evidence showing the profit associated with Piechocki’s sales was “fatal” to Horizon’s lost profits claim.
What can a damages expert assume about contract profitability? Horizon also argued that the wrongful solicitation of Piechocki, its top salesperson, caused the loss of future contracts Piechocki would have obtained if he had stayed at Horizon. To quantify the lost profits for these hypothetical contracts, Horizon’s expert had to make assumptions about three issues: 1. How long Piechocki would have stayed at Horizon. 2. How many contracts Piechocki would have generated at Horizon. 3. The amount of profits Horizon would have made on those contracts.
What practice tips can litigators take from Southwestern Energy and Horizon? Litigators can draw several lessons from this pair of cases. First, if you hire a damages expert to support a lost profits theory, you need to work closely with the expert to identify the key assumptions underlying the expert’s calculations, and to evaluate whether the evidence will support those assumptions. Second, the at-will status of departing employees is not necessarily fatal to proving causation. While the Texas Supreme Court ultimately found there was insufficient evidence to support Horizon’s damage theory, its opinion makes clear that
4. Piechocki was an at-will employee without a non-compete. 5. Piechocki was Horizon’s best salesperson. The challenge for Horizon was to prove that the defendants’ wrongful conduct caused the loss of the Westlake contract as well as future contracts Piechocki would have obtained.
an expert can make a reasonable assumption about how long an at-will employee would have stayed at the company, provided there is evidence to support the assumption. That brings us to tip number three: Whatever assumptions the damages expert is going to make, the plaintiff’s lawyer must be prepared to offer evidence to support those assumptions. Easy, right? Zach Wolfe is a trial lawyer with Fleckman & McGlynn, PLLC. His practice focuses on non-compete and trade secret litigation. He often writes about trade secrets issues at his weekly blog, fiveminutelaw.com.
ExxonMobil Corp. v. Rincones: Texas Supreme Court Rejects Cause of Action for Compelled Self-Defamation The Houston Lawyer
By Karan Ciotti
eversing the Thirteenth Court of Appeals, the Texas Supreme Court has held that Texas law does not recognize a cause of action for compelled self-defa-
mation. ExxonMobil Corp. v. Rincones, No. 15-0240, 2017 WL 2324710 (Tex. May 26, 2017). The Court stated that defamation requires “publication of a false statement of fact to a third party.” Courts that have recognized a cause of action for compelled self-defamation allow this publication element to be satisfied by a theory of compelled self-disclosure. It is typically alleged in cases similar to Rincones, in which the plaintiff contends he was fired for untrue, defamatory reasons, and was required to “publish” the untrue, defamatory reasons to prospective employers when asked why he left his former employer. Mr. Rincones was employed as a catalyst technician by WHM Custom Services, a contractor at ExxonMobil’s Baytown refinery. ExxonMobil requires its contractors to have a written substance abuse policy, and in meeting that requirement, WHM engaged DISA to administer its drug testing program. In April 2008, DISA selected Rincones for random drug testing; he tested positive for marijuana. Rincones disputed the results but was nonetheless prohibited from returning to work until he completed a rehabilitation program. He declined to do so. In April 2009, Rincones filed suit in Cameron County against WHM, DISA and ExxonMobil. Rincones alleged defamation and compelled self-defamation as separate causes of action, and he pleaded both causes against WHM, DISA, and ExxonMobil. The trial court granted summary judgment on all these claims. Rincones appealed. After granting Rincones’ motion for rehearing, the appellate court affirmed summary judgment against Rincones on his defamation and compelled selfdefamation claims against ExxonMobil based on his failure to preserve error. The court also affirmed summary judgment against Rincones on his defamation and compelled self-defamation claims against DISA based on limitations. The appellate
court treated Rincones’ defamation claim and compelled self-defamation claim against WHM as two separate causes of action. While the court affirmed summary judgment against Rincones on the defamation claim, the court reinstated Rincones’ claim of compelled self-defamation against WHM. Rincones v. WHM Custom Servs., Inc., 457 S.W.3d 221 (Tex. App. – Corpus Christi 2015). In reversing the appellate court, the Texas Supreme Court, in Rincones, noted that compelled self-defamation is “probably better understood as an exception to the publication requirement of a standard defamation claim,” rather than an independent cause of action. But regardless of whether compelled self-defamation is presented as an independent cause of action or as a special form of a standard defamation claim, it is not actionable under Texas law. In so holding, the Supreme Court aligns Texas with the majority of states whose courts have addressed the issue, and rejects lower court decisions that ruled to the contrary. The Supreme Court outlined four reasons for its rejection of compelled selfdefamation. First, the Court cited to its own precedent in Lyle v. Waddle, wherein the Court held that a plaintiff may not recover damages based on a publication that the plaintiff himself authorized, invited or procured. Second, the court noted its concern that recognition of a tort for compelled selfdefamation would discourage plaintiffs from mitigating damages to their own reputations. A fired employee could “unilaterally create an actionable tort” against his former employer by repeating a defamatory statement. Citing the decision of an Illinois intermediate court of appeal, the Supreme Court further reasoned that “the availability of increased damages” might even encourage fired employees to harm their own reputations. Third, and most importantly, the Court recognized that the doctrine of compelled
self-defamation is incompatible with the at-will employment doctrine—a central tenet of Texas employment law (and the employment laws of every state other than Montana). The at-will employment doctrine generally allows both employers and employees to terminate their relationship with or without cause, absent an agreement to the contrary. An employer is not required “to be reasonable, or even careful, in making its termination decisions.” The doctrine of compelled self-defamation would require employers to extensively investigate suspected misconduct to ensure the accuracy of any stated reason for terminating employment. Alternatively, it would discourage employers from communicating any reason for terminating employment. The Court’s final reason is that it could even stifle workplace communication regarding employee job performance. Employers would engage in self-censorship to avoid the burdens of litigating claims of compelled self-defamation. By rejecting the doctrine, the court implicitly recognizes the value of open and honest evaluation of an employee’s job performance to both employee and employer. Karan Ciotti practices employment law at Cokinos |Young. She has been board certified in Labor and Employment Law by the Texas Board of Legal Specialization since 2005.
Federal Tax Procedures for Attorneys (2d Ed.) By W. Patrick Cantrell American Bar Association, 2016 Reviewed by Finis Cowan
ederal Tax Procedures for Attorneys, Second Edition by board certified Houston tax lawyer, Pat Cantrell, is a wonderfully useful resource for tax advocates. The author is a former IRS Appeals Officer and has been battling the IRS for over 40 years. A true “code head,” he reads old tax cases and proposed IRS regulations for recreation, but he writes in a clear, concise, easily accessible style. The book’s detailed practical advice, including on how to prevent (1) the IRS from asking improper questions of taxpayers, (2) the broadening of the scope of an IRS inquiry and (3) numerous examples of tax malpractice, makes this an indispensable tool for all tax lawyers whether they handle estates, TFRP, partnership audits or tax litigation. It has sections every tax practitioner regularly encounters including statutes of limitations, penalties and ethical considerations. The book is well organized, footnoted and full of highlighted practice points based on extensive experience. A few of the many examples show that this book is well worth tax practitioners’ investment: • “Consider filing two separate [appeal] protests ...the first one ...that ...contains the minimum require-
ments ...[and] a few days before the ...conference, submit a supplemental protest containing the substance ...of your defense. This prevents the examiner from shoring up his or her case...” • “Do not submit a large amount of new evidence ...This can be very dangerous; the revenue agent will have yet another opportunity to develop new issues...” • “[I]f your case has some soft spots not initially recognized by the agent ....go ahead and get your case docketed in tax court, where it is more difficult for the government to raise new issues.” • “To avoid the result in the Himelwright case ...insert a provision in a closing agreement that any subsequent, and at present unknown, net operating loss or similar event giving rise to a carryback may be carried back for purposes of claiming a refund of all or part of any tax agreed to in the closing agreement for the taxable year.” My only wish for future editions is for an additional appendix with RIA-style checklists, such as for appeal protests, allowable deductions not specified on Form 433 (attorneys’ fees), and tax court petition contents. Tax controversy practitioners should order this book today to avoid making ruinous mistakes. I consider it the “O’Connors” of IRS Controversy, and keep it close at hand. Finis Cowan is a Certified Public Accountant and a lawyer who is board certified in Civil Trial Law by the Texas Board of Legal Specialization. Mr. Cowan has extensive experience in tax disputes, commercial litigation, and tax malpractice. thehoustonlawyer.com
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Executive office suite in a Class “A” River Oaks location. Luxurious Attorney office with hardwood floors and spectacular view as well as two paralegal/associate offices available. Office share withPatricia Peterson, Claims Attorney three well established Fam| ily Law practices. TurnkeyTLIE delivers exceptional service. We provide insureds with outstanding defense counsel including well-appointed re-our when they need it most. ception area and boardroom,• Voted www.law.uh.edu best professional liability insurance commercial grade high speed company in Texas five years in a row by readers of Texas Lawyer magazine internet, legal research portal,• Over 37 years in the business automated telephone system,• Preferred Provider of the State Bar of Texas qualified, experienced and trusted copier/printer/fax as well as• Only highly512.480.9074 lawyers are hired to defend TLIE’s insureds common area lunchroom. In1.800.252.9332 house bookkeeping available512.480.9074 / 1.800.252.9332 INFO@TLIE.ORG / WWW.TLIE.ORG info@TLIE.ORG for an additional fee. @TLIE_ 713-208-2222 facebook.com/TLIE01 www.tlie.org
UNIVERSITYof HOUSTON LAW CENTER
WOODWAY/VOSS AREA OFFICE SPACE 15’ X 15’ furnished space on 8th floor available for sublease. Great view of Tanglewood /Galleria/Downtown. Includes access to conference room; wifi; phone; free garage parking; bank, courtesy officer and deli in building. Call Michael 713-333-6822 HOUSTON DOWNTOWN AREA Two Window Offices in a Class “B” office building available – term or monthly. Tunnel access from building. Parking options. Also includes use of conference room and kitchen. Arrangements can be made for use of ad-
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full color business cards
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Up to 100% Financing for Attorneys Cadence recognizes the needs of customers just beginning their law careers by offering this Early Professionals mortgage loan program: • Must be in professional career (5 years or less post-certification) • 5/1 ARM and Fixed Rate programs available • Loan Amounts up to $1,000,000 • Up to 100% LTV • Owner Occupied Purchases • No Mortgage Insurance Requirement Maybe you are already established in your law career and looking to purchase a new home or refinance your current home. Cadence has great loan products for you as well with up to 80% LTV: • Fixed Rate Jumbo Loans • One-Time Close Construction & Renovation Loans • Lot Loans • Refinances For more information contact:
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M O RTGAGE All loans are subject to credit approval. Loan terms and availability subject to change. Restrictions apply. Consult a Cadence Bank Mortgage Lender for complete details. Cadence Mortgage is a Division of Cadence Bank, N.A. NMLS#525022
The Houston Lawyer magazine_July/August, 2017 issue