Alternative Fee Arrangements in Commercial Litigation Protecting Privilege in Internal Investigations Is The “Good Cause” Standard Inadequate to Protect Trade Secrets in Discovery Disputes? Recent Evolutions in Texas Law on Spoliation of Evidence Executive Actions on Immigration
Volume 52 – Number 5
Corporate Law and In-House Counsel
Jimmy Erwin Justin Kaplan
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contents Volume 52 Number 5
FEATURES Fee Arrangements 10 Alternative in Commercial Litigation By Tom Fulkerson and Ethan Gibson
Privilege in 16 Protecting Internal Investigations By Stephen M. Ryan
The “Good Cause” Standard 20 IsInadequate to Protect Trade
Secrets in Discovery Disputes? By S. Shawn Stephens
Evolutions in Texas Law 24 Recent on Spoliation of Evidence By Shelley J. White
Historic Importance of 28 The President Barack Obama’s
Executive Actions on Immigration By Charles C. Foster
Things Every Lawyer 32 Ten Should Know About ‘HERO’— Houston’s Equal Rights Ordinance By David Barron
Bar Foundation 34 Houston Recognizes Outstanding Pro Bono,
The Houston Lawyer
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, 2015. All rights reserved.
Pro Bono in Houston…
Rebuilds Families…Helps Veterans . . .Provides Peace of Mind for Seniors
Equal Access Champions
The firms and corporations listed below have agreed to assume a leadership role in providing equal access to justice for all Harris County citizens. Each has agreed to handle one pro bono case through the HBA’s Houston Volunteer Lawyers for every five attorneys in the firm, for a commitment period of five years. For more information contact Kay Sim at (713) 759-1133.
LargeChampions Firm Champions Large Firm Andrews KurthAndrews LLP Kurth LLP Baker Botts L.L.P. Baker Botts L.L.P. & Giuliani LLP Bracewell &Bracewell Giuliani LLP Locke Lord LLPLocke Lord LLP Rose Norton RoseNorton Fulbright USFulbright LLP Vinson Vinson & Elkins LLP & Elkins LLP
CorporateCorporate Champions Champions
BakerIncorporated Hughes Incorporated Baker Hughes BP America Inc.BP America Inc. CenterPointCenterPoint Energy, Inc.Energy, Inc. ConocoPhillips ConocoPhillips, Inc. Mobil Corporation ExxonMobilExxon Corporation Halliburton Halliburton LyondellBasell LyondellBasell Marathon OilMarathon CompanyOil Company Shell Oil Company Shell Oil Company
Mid-Size Firm Champions Mid-Size Firm Champions
Baker &Hauer Hostetler LLPLLP Akin Gump Strauss & Feld Haynes BakerHostetler LLPand Boone, L.L.P. King Beck | Redden LLP& Spalding LLP Porter Hedges L.L.P. LLP Beirne, Maynard & Parsons, Susman Godfrey LLP Burleson LLP Chamberlain, Hrdlicka, White, WilliamsSmall & Aughtry Firm Champions Gardere Sewell LLP AkinWynne Gump Strauss Hauer & Feld LLP Gibbs & BrunsBeck LLP | Redden LLP Beirne, Maynard P.C. & Parsons, L.L.P. Gray Reed & McGraw, Burleson Greenberg Traurig, LLP LLP Chamberlain, Hrdlicka, Haynes and Boone, L.L.P. White, Williams & Aughtry Jackson Walker L.L.P. Jones DayGardere Wynne Sewell LLP Gibbs King & Spalding LLP& Bruns LLP Gray Reed & McGraw, Morgan, Lewis & Bockius LLP P.C. Greenberg Traurig, LLP Porter Hedges LLP Jackson Walker L.L.P. Sidley Austin LLP Jones Day Strasburger & Price, L.L.P. Susman Godfrey LLP
Morgan, Lewis & Bockius Sutherland Asbill & Brennan LLPLLP Sidley Austin LLP Winstead PC & Price, L.L.P. WinstonStrasburger & Strawn LLP
Sutherland Asbill & Brennan LLP
Winstead PC Boutique Firm Champions
Abraham, Watkins, Nichols, Sorrels, Agosto & Friend Boutique Firm Champions Blank Rome LLP Nichols, Sorrels, Agosto Abraham, Watkins, Edison, McDowell&&Friend Hetherington LLP Fullenweider Blank WilhiteRome PC LLP • Baker • Wotring LLP Hicks Connelly Thomas LLP Edison, McDowell & Hetherington LLP Hogan Lovells US LLP Fullenweider Wilhite Hughes Watters Askanase LLPPC Hicks L.L.P. Thomas LLP Jenkins & Kamin, Hogan Lovells LLP P.C. Johnson DeLuca KuriskyUS & Gould, Hughes Watters Askanase LLP LeClairRyan Jenkins & Kamin, L.L.P. McGuireWoods LLP Johnson DeLuca KuriskyLongoria & Gould, P.C. Ogden, Gibson, Broocks, McGuireWoods LLP & Hall, L.L.P. Ogden, Gibson, Broocks, Longoria Ogletree, Deakins, Nash, Smoak, & Hall, & Stewart P.C. L.L.P. Ogletree, Deakins, Nash, Smoak & Stewart P.C. ReedSmith LLP ReedSmith LLP Sutton McAughan Deaver LLP Schwartz, Junell, Greenberg & Oathout, L.L.P Vorys,Sutton Sater, McAughan Seymour and Pease LLP Deaver LLP Weil, Gotshal & Manges LLP Weil, Gotshal & Manges LLP Weycer, Kaplan, Pulaski & Zuber, P.C. Weycer, Kaplan, Pulaski & Zuber, P.C. Wilson,Wilson, Cribbs Cribbs & Goren, P.C. P.C. & Goren, Yetter Coleman YetterLLP Coleman LLP
Small Firm Champions Individual Champions
Coane & Associates Brian Albrecht Coane & Associates Peter J. Bennett Flowers & Frankfort Law Office of J. Thomas Black, P.C. Frye,Law Steidley, & Benavidez, PLLC Office Oaks of Robbie Gail Charette Funderburk Funderburk & Courtois, PLLC Chaumette, PLLC Fuqua & Associates, P.C. Coane & Associates Hunton & Williams DamaniLLP Law Firm Katine & Nechman L.L.P. Helene Dang Katten Law Muchin Rosenman Office of Papa LLP M. Dieye KimLy Law Firm PLLC
The Ericksen KoonsFuller, P.C. Law Firm Flowers Kroger | Burrus & Frankfort Frye, Oaks &and Benavidez, PLLC Law Steidley, Office of James Stagg, PLLC Funderburk Funderburk Patel Ervin Dinn PLLC & Courtois LLP Fuqua & Associates, The Law Office of Scardino P.C. & Fazel David Hsu Shortt & Nguyen, P.C. HuntonBissell & Williams LLP L.L.P. Strong Pipkin & Ledyard, Law Office of James and Stagg, PLLC Tindall & England, P.C.
The Jurek Law Group, PLLC Katine & Nechman L.L.P. Solo Champions Katten Muchin Rosenman LLP Alejandro Macias KimLy Law Firm PLLC Angela Solice KoonsFuller, P.C. Brian Albrecht Kroger | Burrus Chaumette, PLLC Gregory S. Lindley Clinton Yu Law Office of Maria S. Lowry Damani Law Firm Macias Alejandro Danielle H. Maya Martin R.G. Marasigan Law Offices Davis Hsu Danielle H. Maya C. Treich TheDiane Law Office of Evangeline Mitchell, PLLC Helene Dang Bertrand C. Moser Karla J. Patel LaFitteErvin Dinn PLLC Law Office of of Bertrand C.Perry, MoserP.C. Law Office Brent C. Law OfficePilgrim of Brent C. Office Perry, P.C. Law Law Office of CindiE. L. Price Robison Robert Law Office Cindi of Gregory S. Lindley L. Robison & Fazel Law OfficeScardino of J. Thomas Black, P.C. Shortt & Nguyen, Law Office of Jeff Skarda P.C. Skarda Law Office of Jeff Maria S. Lowry Strong Pipkin Bissell Ledyard, L.L.P. Law Office of Papa M.& Dieye Thompson, Coe, Cousins & Irons, L.L.P. Law Office of Peter J. Bennett Tindall & England, P.C. Law Office of Robbie Gail Charette Torrence Martin R.G.Travis Marasigan Law Offices Pilgrim LawDiane OfficeC. Treich Robert E.Norma Price Levine Trusch Clinton The Ericksen Law FirmYu
The Jurek Law Group, PLLC The Law Office of Evangeline Mitchell, PLLC The Law Office of Norma Levine Trusch Travis Torrence
contents Volume 52 Number 5
departments Message 6 Presidentâ€™s Corporate Neighbors By M. carter crow the Editor 8 From Balancing Act By Robert Painter
Managing Internet Risks & Benefits
Internet Risks & Benefits 36 Managing Social media can impact
minors and their future By Taunya Painter
Lawyers Who 37 Houston Made a Difference
By The Hon. Mark Davidson the Bar 38 AtHBAA Chili & Pie Cookoff Raises
Money for Scholarships
Profile in Professionalism 41 ADevon Anderson District Attorney of Harris County
the record 42 off Cynthia Moulton: Courtroom Ninja
Warrior and Beyond
By Raymond L. Panneton
SPOTLIGHT 43 COMMITTEE Communities In Schools Legal
Internship Program Empowering Students to Succeed By Preston Hutson
Trends 44 Legal Supreme Court Clarifies Statute on
Termination of Parental Rights By Kelly L. Fritsch
Court of Criminal Appeals Reforms Juvenile Certification Procedure By Jack Carnegie Reviews 46 Media Gray Mountain
Reviewed by The HON. Jeff Work
When Money Speaks: Reviewed by Jason D. Goff The Houston Lawyer
Corruption In America Reviewed by Steve Wisch
47 Litigation MarketPlace 4
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Mobil Corporation, is serving as the chair of our Houston Bar ne of the privileges of being president of the HousFoundation this year. Bill is a prime example of how corporate ton Bar Association is working with the editorial leadership can emphasize the importance of giving back to the board of The Houston Lawyer on focus issues, like community through pro bono service. The legal department of this one with a corporate/in-house focus. Our Exxon Mobil is consistently recognized for excellence in pro membership data shows that 10 percent of our bono contributions to the Houston Volunteer members are corporate or in-house attorneys. Lawyers and other organizations that serve Our Corporate Counsel Section is one of the those who need help in our communities. Jeff largest sections, with nearly 500 members, Attorneys Kaplan, executive vice president and chief leand one of the most active, holding meetings gal officer at LyondellBasell Industries, is vice and CLE programs nine months out of each who work for chair of our Foundation, and his corporabar year. Only the Litigation Section and the tion has also been recognized for outstanding Oil, Gas & Mineral Law Section are larger, and Houston’s contributions to Houston Volunteer Lawyers. there are many corporate attorneys in those Tom Godbold of Twin Eagle Resource Mantwo sections as well. corporations agement is serving as treasurer of the FounAttorneys who work for Houston’s corporadation, while Veronica Foley of Precision tions have a big impact on our association and have a big Drilling and Michael Donaldson of EOG Reour community service programs. Corporate sources have recently joined our Foundation attorneys are active on many of our commitimpact on our as directors. When we need to raise funds for tees, including Campaign for the Homeless, pro bono, or build a Habitat home, or staff the Fun Run, Gender Fairness, IDEA, Lawyers association and a legal clinic for veterans, corporate and inAgainst Waste, Lawyers for Literacy, Special house attorneys in Houston have stepped up. Olympics, and the list goes on. Corporate atour community “LyondellBasell’s pro bono program has torneys hold a number of leadership roles on allowed our lawyers to become engaged in service committees and HBA/HBF boards. community activities on a scale beyond our Nationally, the Association of Corporate programs company’s local area programs,” Kaplan told Counsel (ACC) has 35,000 members, with us. “Working on pro bono cases also provides 1,200 in the Houston chapter alone. ACC enan opportunity for our lawyers with different courages its members to volunteer pro bono expertise to work together, to learn new aspects of law outside hours through our Houston Volunteer Lawyers. They often staff their normal areas and to receive the personal reward of making legal advice clinics for HVL, as well as take individual pro bono a difference for someone in need.” cases. The general counsel of some of Houston’s largest corporaHouston is fortunate to have a healthy, vibrant corporate sections set an example for their legal departments with their own tor that provides hundreds of thousands of jobs for people from active participation in pro bono efforts. This “top down” policy all walks of life. The Houston Bar Association is fortunate that has made pro bono a part of the corporate culture in many comthe legal representatives of those corporations value the opporpanies in Houston and around the state. tunities we offer to help improve lives. Bill Buck, general counsel–upstream companies for Exxon
The Houston Lawyer
Defending Texans Since 1994 Former Assistant United States Attorney Former Assistant District Attorney Founding Member of the National College of DUI Defense of Counsel Williams Kherkher LLP Law Office of Ned Barnett
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from the editor
By Robert Painter Painter Law Firm PLLC
Angela L. Dixon Attorney at Law
Farrah Martinez Attorney at Law
Jill Yaziji Yaziji Law Firm
recently represented a personal injury plaintiff in an out-of-state mediation. I ended the day with great respect for the in-house counsel of the large corporate defendant. That seasoned attorney demonstrated a skillful balance of the many hats a corporate attorney must wear—including one that can easily get thrown to the back of the closet, the conscience of the business. It was nice to see a corporation step up and do the right thing, and to see the corporate counsel genuinely express compassion toward a plaintiff who was catastrophically injured. It meant a lot to my client to hear what the corporate leaders had learned from this event, and what measures that they had implemented to avoid repeating this tragedy. It would be easy to become jaded as an in-house attorney. We have all met some people who have fallen into that trap. In-house counsel certainly have a lot to juggle. Corporate counsel must balance business interests with legal responsibilities. This can be particularly challenging because cor-
porate environments often view in-house legal departments as expenses rather than assets. They also have to take into consideration public opinion and relations when making legal decisions. And, of course, in-house counsel must keep abreast of emerging legal trends, in order to develop and implement corporate policies that will protect their employers. This issue of The Houston Lawyer gives some insight into a day in the life of in-house counsel. Tom Fulkerson and Ethan Gibson discuss alternative fee arrangements in commercial litigation. Shelley White writes about Texas case law concerning spoliation of evidence. Shawn Stephens covers the adequacy of trade secret protections in discovery disputes. Stephen Ryan analyzes how in-house counsel can protect privileges in internal investigations. Charles Foster outlines the White House’s recent executive actions on immigration. And David Barron informs us about 10 things every lawyer should know about the controversial Houston Equal Rights Ordinance.
In-house counsel certainly have
a lot to juggle.
Polly Graham Haynes and Boone, LLP
The Houston Lawyer
Taunya Painter Painter Law Firm PLLC
BOARD OF DIRECTORS President
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Alistair B. Dawson
Neil D. Kelly
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DIRECTORS (2014-2016) Diana Perez Gomez Greg Ulmer
editorial staff Editor in Chief
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By Tom Fulkerson and Ethan Gibson
Alternative Fee Arrangements in Commercial Litigation A lternative fee arrangements (AFAs), long a staple of personal injury litigation, are now becoming more common in commercial litigation. This article explains when and why AFAs make sense, how to draft them, and what to avoid when working with them. The key to any successful alternative fee arrangement is a strong alignment of interests between the attorney and the client. Given AFAs’ demonstrated value in fostering access to the judicial system, both attorneys and courts should consider AFAs a viable alternative to traditional hourly billing. When Alternative Fee Arrangements Make Sense AFAs usually serve as a form of financing for litigants who would not otherwise be able to afford legal assistance. They have historically been useful for personal inju-
ry plaintiffs, who typically lack the capital to pay counsel’s hourly fees. But increases in hourly rates have made litigation too expensive even for commercial litigants. Although it is often unstated, the traditional hourly fee structure puts the client and the attorney at odds in terms of billing practices. While the attorney has the incentive to work more, the client has the incentive to pay less. Yet, a shift from an hourly to a contingent fee structure relieves a client from possible overbilling, and general counsel from spending hours calculating monthly fees and reviewing invoices. Hence, a properly drafted AFA harmonizes the incentive structure of the case and makes the attorney and the client partners in seeking a favorable outcome. Commercial litigants prefer AFAs for several reasons, including the client’s: • inability to pay for proper counsel; • need to allocate scarce capital for other pressing business needs; • reduced costs in supervising the attorney’s monthly billings, or; • preference to provide incentives for counsel to produce the best result. How to Draft an AFA The most basic requirement of any AFA is that it must be in writing and clearly delineate the client’s and attorney’s respective responsibilities and distribution of proceeds. The agreement must comply with the disciplinary rule requirements concerning the reasonableness of the contingency percentage; clearly disclose how costs will be charged; discuss whether costs will be fronted by the client or attorney; and define whether those costs will be repaid from all proceeds or from the client’s or attorney’s share of proceeds alone. This article presumes that all “basic” requirements of retention have been met and focuses on the relationship between attorney and client. As the following hypotheticals will demonstrate, AFAs offer great flexibility for the commercial litigant with unique problems: Hypothetical 1—The Start-up The client is a start-up firm that has in-
vested millions in a new product design, but has discovered that one of its development engineers has copied a critical hard drive and has gone to work for a much larger and well-capitalized competitor. The client needs an immediate injunction and the return of all proprietary information. This will cost $100,000, but the client needs every bit of cash to continue its business. AFA 1: Counsel is retained on an “injunction obtained” basis with fee payment of $150,000 (incorporating a risk-associated premium) upon the acquisition of a temporary injunction pending trial. The fee is guaranteed by the client’s financial backers, who are good for it. Reasoning—the client does not part with cash unless it gets the relief it needs and the attorney is compensated for the risk. AFA 2: Counsel is retained by the immediate transfer of a five-percent equity interest in the client, which the client may repurchase within six months at $150,000. Reasoning—the attorney participates in the value of the client that is helped to preserve and the client has the right to recapture equity when times are better.1 Hypothetical 2—The Exhausted Plaintiff The client has a typical hourly rate arrangement and has spent $500,000 so far. Now the client has exhausted its ability to continue and needs relief. The defendant’s “last and best” offer is $1,000,000, but the client and attorney believe the case may be worth $10,000,000. AFA 3: The agreement assigns onethird of all sums obtained through trial in excess of $1,000,000. Reasoning— the client has already spent $500,000 to obtain the $1,000,000 offer and the new attorney benefits only by improving the client’s position and adding value to the case. AFA 4: The attorney takes the case for 27 percent of all results obtained from the defendant. Reasoning—the attorney’s “normal” contingency rate is reduced because the attorney gets the
benefit of the pre-existing legal work, and the client is compensated for the $500,000 it has already spent through a larger part of the final outcome.
es of recovery in lower recovery ranges avoid the risk of severe loss while even a lower percentage of greater recoveries may yield significant upside.
Hypothetical 3—The Graduated Hypothetical 4—Half and Half Contingency “Half and half” arrangements with cliGraduated AFAs do not apply a single ents, in which part of the compensation percentage of recovery in every situation, is paid on an hourly basis and part is paid but instead slide the through contingency, scale of compensation are common. The most basic 2 to meet client needs. AFA 7: They agree that requirement of any the firm will charge The most common of one-half of its ordinary these are graduated AFA is that it hourly rates and receive over two metrics: time a one-half contingency or dollars. must be in writing interest in proceeds colAFA 5 (time): The atlected, say 20 percent. torney is paid oneand clearly delineate the AFA 8: The same arninth of all recoveries client’s and attorney’s rangement as in AFA 7, if the matter is settled but the client is entitled within the first three respective responsibilities to use some or all of months after filing the fees it has paid durthe plaintiff’s claim, and distribution of ing the life of the case two-ninths if resolved proceeds. as a credit against the in months three thru contingency. Usually, six, and one-third in this circumstance the contingency thereafter. Reasoning—client believes percentage will be adjusted for this rethat its case will settle quickly and fears coupment right. that if it agrees to an AFA containing a one-third or 40 percent contingency, The reasoning for this sort of relationthe attorney will be overpaid. In these ship is also self-evident. The client can arrangements, an attorney’s good faith afford some regular billing, but not a full and strict adherence to fiduciary duty measure of it. It is willing to assign part is critical. The attorney cannot delay or of its claim, but not all of it. The attorbe seen as delaying the case in order to ney is willing to share some of the risk augment the fee. of litigation, but not all of it and wants to AFA 6 (dollars): The attorney and client make sure the client becomes committed agree that the case in question is large, to the effort and will support it through with up to $50,000,000 of recovery, completion. but will require significant effort and expertise to complete—say, $2.5 milHypothetical 5—The Negative lion in invested time and $500,000 in Contingency costs. The client agrees that the attorNegative contingency AFAs, one in which ney will be paid one-third of the first attorneys are compensated for avoiding $10,000,000 recovery, 30 percent from an outcome, are like the Yeti, in that their the next $10,000,000 and 15 percent existence is vigorously debated and they thereafter. Reasoning—the client has are virtually never seen. For instance, suffered the large loss, not the attorney. ABC Corp. is hit with a large securities The client is willing to reward counsel fraud suit with potential exposure in a for taking such a large risk, but not to range of zero to $100,000,000. coronate him. The agreement works for AFA 8: Attorney and client agree that the attorney because higher percentag-
the true settlement value of the case is $20,000,000. They agree that the attorney will receive 15 percent of the first $10,000,000 loss avoided—a settlement or judgment of between $10,000,000 and $20,000,000; and 30 percent of the next $10,000,000 loss avoided—a settlement or judgment between zero and $10,000,000. Reasoning—the client wants an attorney just as highly incentivized to defeat the case as the plaintiff’s counsel is to prevail. Negative contingencies are rare for many reasons. First, the client must assess what it believes the “true” exposure is for the case, an assessment that is usually made by the client’s general counsel and management for accounting accrual purposes. Perversely, once that negative value is set, quick success by the attorney may cause the client to criticize inhouse counsel for overstating the threat. Second, the negative contingency involves extreme risk for the attorney. It is rare that an attorney taking on any en-
gagement, with or without an AFA, will know all of the facts that will impact the outcome of a case. Unfortunately, a demonstrable economic benefit exists for the client to withhold negative facts, hence magnifying the risk to such a degree that the contingency interest might become worthless. Even clients acting in complete good faith may not know what damaging emails or other documents might float to the surface during discovery. If negative facts materialize after retention, the trust relationship between attorney and client may be so damaged as to be unworkable, and little way exists to unwind the relationship fairly. Finally, the attorney must be certain of both the client’s solvency and willingness to pay the contingent outcome rather than re-negotiate or litigate it. In general, negative contingencies are most viable when liability has been fixed by a prior existing judgment or a clear “take it or leave it” settlement demand that is beyond the client’s ability or willingness to pay.
What to Avoid AFAs are hard to use when the client has both monetary and non-monetary goals. Dual or multiple goals may compete with one another and the value of attaining them may be hard to calculate. Consider an executive who was fired by her employer “for cause” and who lost valuable incentive compensation. Reinstatement of the client to her former post or a public retraction of the “for cause” claim might be far more important to her than recovery of the incentive compensation. But the attorney working under an AFA will be paid solely from recovery of the lost incentive compensation. Thus, an inconsistency in the incentive structure between attorney and client exists, and, unless it is addressed up front, it can produce serious downstream conflicts. When the client seeks to pursue both monetary and non-monetary goals, but wishes to employ an AFA, the attorney should answer three questions before retention: (1) can the non-monetary goal be given an agreed value; (2) is that value
high enough to support the cost of handling the litigation and provide some premium for the attorney’s assumption of risk; and (3) can the client pay the attorney if only the non-monetary goal is accomplished? In Defense of AFAs While the benefit of AFAs to the judicial system as a whole is a broader topic than the purview of this article, it is important to note that AFAs have recently been treated poorly by our higher courts. The Texas Supreme Court has refused to allow juries to consider awards of fees on a percentage basis alone, though no language in the enabling statute requires this result.3 In a second opinion, the Court has intimated that attorney’s fees awarded under fee-shifting statutes may be limited to their equivalent lodestar fee calculation unless truly exceptional (but unidentified) circumstances exist—an approach that fails to credit a premium for the risk presented by the contingency.4 Moreover, the United States Supreme
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Court has held that, with rare exception, all proceeds received from litigation under a contingency arrangement, including the portion paid to the attorney for services, are taxable as the plaintiff’s gross income.5 This tax treatment results in double taxation of the lawyer’s portion of the fee. At current tax rates, such governmental double-dipping can strip significant value from the client’s final recovery, and should be discussed with the client at the beginning. These decisions affect how attorneys go about recovering fees when fee shifting is in place, and how they interact with their clients. To recover under an AFA when fee shifting statutes are present, the attorney must maintain proper billing records and be ready to explain the reasoning for any AFA that awards more than the billable sum. Furthermore, the attorney should clearly articulate to the client at the beginning that the “reasonable and necessary” test that might be applied in court does not alter the AFA itself, and additionally, the attorney should describe
for the client the difference between a reasonable fee under a contract and a reasonable fee recovery under a fee-shifting provision in order to avoid an awkward conversation later on when the client demands to know why he is paying more than what a fact-finder found to be a “reasonable fee.”6 If necessary, the client should obtain independent tax advice before entering into the agreement. AFAs are probably more viable in the commercial litigation sector than in any other setting. Clients often well understand the concept of risk and reward associated with these undertakings. When carefully crafted, they can routinely result in win-win outcomes in a host of settings. Tom Fulkerson is the founding partner of Fulkerson Lotz LLP and practices in litigation involving the oil and gas, securities and technology businesses. Ethan Gibson is an associate at Fulkerson Lotz LLP’s Houston office and his practice centers on complex commercial litigation, including
business disputes, trade secrets, joint ventures and partnership disputes. The authors would like to thank Byron Keeling for his assistance in preparing this article. Endnotes
1. As this type of transaction could be considered entering into a “business transaction” with a client, all aspects of Texas Disciplinary Rule of Professional Conduct 1.08(a) must be met. 2. All graduated payment changes must be clearly set out in writing. See TEX. DISCIPLINARY R. PROF’L CONDUCT § 1.04(d). 3. Arthur Anderson & Co. v. Perry Equip Corp., 945 S.W.2d 812, 818 (Tex. 1997) (citing TEX. DISCIPLINARY R. PROF’L CONDUCT § 1.04). 4. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 765 (Tex. 2012). Thankfully, more recent decisions have held that El Apple does not apply to fee-shifting provisions that do not utilize the lodestar, such as the fee shifting provision in Texas Civil Practice & Remedies Code Chapter 38 for breach of contract claims. Metroplex Mailing Servs. v. RR Donnelley & Sons Co., 410 S.W.3d 889, 900 (Tex. App.—Dallas 2013, no pet.); Concert Health Plan, Inc. v. Houston Northwest Partners, Ltd., No. 14–12–00457–CV, 2013 WL 2382960, *9 n. 17 (Tex. App.—Houston [14th Dist.] 2013, no pet.). 5. Comm’r v. Banks, 543 U.S. 426 (2005). 6. Arthur Anderson & Co., 945 S.W.2d at 818 (“A contingent fee may indeed be a reasonable fee from the standpoint of the parties to the contract. But, we cannot agree that the mere fact that a party and a lawyer have agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes of shifting that fee to the defendant.”)
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By Stephen M. Ryan
Protecting Privilege in Internal Investigations F
or more than 30 years, the United States Supreme Court’s 1981 opinion in Upjohn Co. v. United States1 allowed companies to be reasonably confident that their attorney-client communications and their attorney’s work product–created as part of an internal investigation–were protected from mandatory disclosure to government investigators, regulators or private litigants. Upjohn made it clear that the attorney-client privilege “exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice.”2 This was particularly important for corporate compliance programs because it established that the attorney-client privilege protects confidential employee communications made during a business’ internal investigation
conducted by company lawyers. This long-established framework was recently put in jeopardy by a March 2014 district court opinion in United States ex rel. Barko v. Halliburton Co.,3 a qui tam case under the False Claims Act. In that case the relator, Barko, alleged that Kellogg Brown & Root (“KBR”), along with certain related entities and subcontractors, defrauded the U.S. government by inflating costs and accepting kickbacks while administering military contracts in wartime Iraq. During discovery, Barko moved to compel KBR to produce documents related to KBR’s internal investigation of the alleged fraud, which had been overseen by the company’s in-house legal department. Citing Upjohn, KBR argued that the internal investigation had been conducted for the purpose of obtaining legal advice and, therefore, the internal investigation documents were protected by the attorney-client privilege. Barko argued that the internal investigation documents were unprivileged business records that KBR was required to produce under Rule 26 of the Federal Rules of Civil Procedure. Following an in camera review of the documents, the trial court ordered KBR to produce the documents.4 The district court held that the reasons for recognizing and applying the privilege in Upjohn were distinguishable and inapplicable to the communications KBR sought to protect for several reasons. First, in Upjohn the internal investigation began after inhouse counsel conferred with outside counsel, but KBR had conducted its investigation in-house without consulting outside counsel.5 Second, in Upjohn the employees who were interviewed were informed that the purpose of the interview was to assist the company in obtaining legal advice. Although KBR required its employees to sign confidentiality agreements about the investigation, they were not expressly informed of the purpose of the investigation.6 Third, the Upjohn employee interviews were conducted by attorneys, while many of KBR’s interviews were not.7 Those distinguishing facts aside, the
overarching reason for the trial court’s ruling was its finding that KBR’s investigation was “undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”8 The trial court reasoned that because federal regulations require contractors like KBR to “maintain compliance programs and conduct internal investigations into allegations of wrongdoing,” KBR’s investigation was “a routine corporate, and apparently ongoing, compliance investigation required by regulatory law and corporate policy,” and thus its primary purpose was not to obtain legal advice.9 Accordingly, the trial court found that KBR’s files were merely unprivileged business records and not confidential attorney-client communications. The district court denied KBR’s motions to certify the issue for interlocutory appeal and stay its ruling pending appeal, and ordered KBR to produce the disputed documents within a few days.10 KBR immediately filed a petition for mandamus, and, fortunately for KBR, the appellate court stayed the trial court’s order pending its review. On June 27, 2014, the D.C. Circuit Court of Appeals granted mandamus and reversed the district court’s order compelling production.11 The court of appeals found that none of the trial court’s bases for distinguishing Upjohn “holds water as a basis for denying KBR’s privilege claim.”12 With respect to the trial court’s attempt to distinguish between the use of in-house and outside counsel, the appellate court pointed out that “Upjohn does not hold or imply that the involvement of outside counsel is a necessary predicate for the privilege to apply” and that “a lawyer’s status as in-house counsel ‘does not dilute the privilege.’”13 The appellate court also refuted the trial court’s distinction that non-attorneys had conducted the interviews instead of attorneys, reasoning that KBR’s investigation was conducted at the direction of KBR’s attorneys, and “communications made by and to nonattorneys serving as agents of attorneys in
internal investigations are routinely procovered by the attorney-client privilege. tected by the attorney-client privilege.”14 And the District Court’s novel approach would eradicate the attorney-client And regarding the trial court’s distinction privilege for internal investigations that KBR employees were not informed conducted by businesses that are rethat the purpose of the investigation was quired by law to maintain compliance to obtain legal advice, the appellate court programs, which is now the case in a noted that “nothing in Upjohn requires a significant swath of American induscompany to use magic words to its emtry. In turn, businesses would be less ployees in order to gain the benefit of the likely to disclose facts privilege for an internal to their attorneys and to investigation.”15 For more than seek legal advice, which However, the most 30 year›s, the United States would “limit the valusignificant basis for able efforts of corporate reversal was the trial Supreme Court’s 1981 counsel to ensure their court’s application of opinion in Upjohn Co. v. client’s compliance with the incorrect standard the law.”18 to determine whether United States allowed the communications at The appellate court issue were privileged. thus rejected the trial companies to be reasonably Many courts, including court’s “but for” test confident that their the D.C. Circuit Court as being “inconsistent of Appeals, use the “priattorney-client communica- with the principle of mary purpose” test to Upjohn and longstandtions...were protected determine whether a ing attorney-client privilege exists where privilege law.” The apfrom mandatory disclosure pellate court then arcommunications have both legal and business to government investigators, ticulated what it called purposes. Here, the trial a “more precise” version regulators or private court purportedly used of the primary purpose the “primary purpose” test, expressly adopting litigants. analysis, but actually Section 72 of the Reapplied a much stricter standard, asking statement (Third) of the Law Governing whether the communications at issue Lawyers (2000), which states, “In genwould have been made “but for” the fact eral, American decisions agree that the that legal advice was sought.16 Prior to the privilege applies if one of the significant purposes of a client in communicating trial court’s decision in the Barko case, with a lawyer is that of obtaining legal asonly three federal district courts had held sistance.”19 Under this test, the key questhat federal common law requires a party to meet a “but for” test to prove a claim of tion is whether obtaining or providing 17 privilege. legal advice was “one of the significant purposes” of the communication, not the The D.C. Circuit Court of Appeals notprimary purpose. Thus, if one significant ed that the result of using the trial court’s purpose of a company’s internal inves“but for” approach would effectively limit tigation was to obtain or provide legal the attorney-client privilege to instances advice, the privilege applies–even if the where the sole purpose of the communicainvestigation was also required by statute tion was to obtain or provide legal advice: or regulation, or conducted pursuant to The District Court’s novel approach company policy. to the attorney-client privilege would Whether other circuits will adopt the eliminate the attorney-client privilege D.C. Circuit’s reasoning or its “more prefor numerous communications that are cise” formulation of the primary purpose made for both legal and business purtest remains to be seen. However, Kellogg, poses and that heretofore have been
Brown & Root was recently cited with approval by Judge Jesse Furman of the U.S. District Court for the Southern District of New York in a January 2015 opinion in In re GM LLC Ignition Switch Litigation.20 The issue addressed in Judge Furman’s opinion was the discoverability of witness interviews conducted as part of an internal investigation into allegedly faulty ignition switches conducted by GM’s outside counsel, Jenner & Block. Although noting that the D.C. Circuit’s opinion in Kellogg, Brown & Root was not binding on the Second Circuit, Judge Furman found the D.C. Circuit’s analysis of the “primary purpose” test in that case to be consistent with Second Circuit precedent, as well as “consistent with—if not compelled by— the Supreme Court’s logic in Upjohn.”21 Judge Furman held that the Jenner & Block interviews were protected by attorney-client privilege and work-product doctrine. Most circuits use some version of the “primary purpose” test having originated with the oft-cited privilege analysis in United States v. United Shoe Machinery Corp.,22 which used the word “primarily” in defining the purpose of a privileged communication.23 However, while many courts have cited and applied the “primary purpose” test to determine whether communications are privileged, few have
applied the test as restrictively as the trial court applied it in the Barko case. And as noted by the appellate court’s opinion in the appeal of that case (the Kellogg, Brown & Root case cited herein), no U.S. Supreme Court or circuit court of appeals has ever applied the restrictive “but for” test used by the D.C. District Court. The question remains, then, for any inhouse counsel of what the best course of action is regarding protecting company communications and documents. Because any district court’s application of Upjohn may vary significantly from court to court, the most prudent approach for in-house counsel to take is to have the company’s internal investigation policies and procedures adhere as closely as possible to the Supreme Court’s guidance in Upjohn. Although Upjohn does not set out a bright-line test to determine when an internal investigation is protected by privilege, it does provide helpful guidelines. The key factors in determining that communications were privileged per Upjohn decision were: 1. the communications were made by employees; 2. the communications were made to corporate counsel; 3. the employees made the communications at the direction of corporate superiors; 4. the communications concerned matters within the employees’ corporate duties; 5. the communications were to allow counsel to obtain information that was not available from upper echelon management; 6. the communications were made in order to secure legal advice; and 7. the employees were sufficiently
aware that the purpose of the investigation was so that the corporation could obtain legal advice.24 Most of these seven factors are easily established in the context of an internal investigation. The communications at issue are almost always made by employees at the direction of their corporate superiors about matters within the scope of their duties, regarding information not available from upper-echelon management, and for the purpose of obtaining legal advice for the company. That satisfies at least five of the seven Upjohn factors. The remaining two are the same factors that the district court in Barko determined to be against KBR’s assertion of privilege, namely (a) the use of non-attorneys to conduct the investigation, and (b) failing to expressly inform employees of the purpose of the investigation. To avoid the dilemma that KBR faced in the Barko case, in-house counsel should insure that attorneys conduct the investigation and interviews whenever possible. While the use of non-attorneys to conduct interviews or other significant portions of internal investigations is sometimes unavoidable, it would be prudent, in those instances, to ensure that non-attorneys conducting internal investigations are instructed to report to one or more assigned in-house counsel so that it is clear that the investigator’s activities are being conducted under the direct guidance and oversight of the legal department. Further, even though using “magic words” to inform employees about the purpose—specifically to procure legal advice for the corporation—is not expressly required by Upjohn or any other authority, it certainly does not hurt to use them. Note that the confidentiality agreement signed by the KBR employees in the investigation at issue was very comprehensive, and arguably implies that the purpose of the investigation was for legal advice. It was, nevertheless, found lacking by the D.C. District Court: Due to the sensitive nature of this review, I understand that the information discussed during this interview is
confidential. I further understand that the information that I provide will be protected and remain within the confines of this review and only authorized personnel will have access to the information contained in this report. I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the specific advance authorization of KBR General Counsel. I acknowledge and agree that I understand the unauthorized disclosure of this information could cause irreparable harm to the review and reflect adversely on KBR as a company and/ or KBR performance in the Middle East Region and therefore, I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.25
legal advice was the only purpose of a communication with counsel. This would lead to the seemingly inevitable result of limiting such investigations and thereby reducing the effectiveness of internal risk and compliance programs since it would become all but impossible to satisfy that “but for” standard in the context of internal compliance investigations. As the Supreme Court noted in Upjohn, making the scope of attorney-client privilege too narrow “not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law.”26 Stephen M. Ryan is of counsel with DLA Piper LLP (US), where he practices commercial litigation. Endnotes 1. Upjohn Co. v. United States, 449 U.S. 383 (1981). 2. Id. at 390. 3. United States ex rel. Barko v. Halliburton Co., No. 1:05-
CV-1276, 2014 WL 1016784 (D.D.C. Mar. 6, 2014) vacated sub nom. In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) cert. denied sub nom. U.S. ex rel. Barko v. Kellogg Brown & Root, Inc., No. 14-637, 2015 WL 231997 (U.S. Jan. 20, 2015). 4. Id. at *1. 5. Id. at *3. 6. Id. 7. Id. 8. Id. 9. Id. 10. United States ex rel. Barko v. Halliburton Co., 4 F. Supp. 3d 162 (D.D.C. 2014). 11. In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) cert. denied, U.S. ex rel. Barko v. Kellogg Brown & Root, Inc., No. 14-637, 2015 WL 231997 (U.S. Jan. 20, 2015). 12. Id. at 758. 13. Id. at 758-59. 14. Id. at 759. 15. Id. 16. Barko, 2015 WL 231997 at *3. 17. See In re CV Therapeutics, Inc. Securities Litig., 2006 WL 1699536, at *3-4 (N.D. Cal. June 16, 2006) (applying “because of” standard); First Chi. Int’l v. United Exch. Co., 125 F.R.D. 55, 57 (S.D.N.Y. 1989); United States v. ISS Marine Servs., Inc., 905 F. Supp. 2d 121 (D.D.C. 2012). 18. Kellogg, Brown & Root, 756 F.3d at 759. 19. Id. at 760. 20. In re GM LLC Ignition Switch Litig., No. 14-MD-2543 (JMF), 2015 BL 9476 (S.D.N.Y. Jan. 15, 2015), Court Opinion. 21. Id. 22. United States v. United Shoe Machinery Corp., 89 F.Supp. 357, 358-59 (D.Mass. 1950) 23. Id. 24. Upjohn, 449 U.S. at 394-95. 25. Barko at *3, n.33. 26. Upjohn at 393.
Although the inclusion of a statement of purpose in the comprehensive agreement above would probably not have changed the trial court’s opinion in Barko, it would have at least been one factor weighing in KBR’s favor. Therefore, the lesson is, if you are going to go to the trouble to have employees sign a confidentiality agreement as part of an internal investigation, you should include the “magic words” stating that the purpose of the investigation is for the company to obtain legal advice. The trial court’s order in Barko represented a true threat to corporate compliance programs. Because in-house counsel perform many different functions, it is rare that a communication with in-house counsel is ever made solely for the purpose of obtaining legal advice. As the D.C. Circuit Court of Appeals recognized, most communications to in-house counsel are motivated by overlapping purposes. The “but for” test applied by the trial court in Barko would have set the bar unrealistically high for a party to prove that thehoustonlawyer.com
By S. Shawn Stephens
Is The “Good Cause” Standard Inadequate to
Protect Trade Secrets in Discovery Disputes?
s the law on trade secrets continues to evolve, one thing stays the same: secrecy is everything. Once a trade secret is disclosed, especially to a competitor, the value of this property right is destroyed and the competitive advantage it affords the owner is lost. One issue that therefore arises regarding trade secrets law is that typical standards (such as “good cause”) used to assess run-of-the-mill discovery disputes may not be adequate when trade secrets are at issue. Courts must take great care when ordering the disclosure of trade secrets because, unlike ordering the disclosure of most discovery products, ordering the disclosure of trade secrets is akin to transferring property from one party to another. Thus, in trade secret discovery disputes, courts should balance the constitutional rights of the parties, including the trade secret owner’s Fifth Amendment right to be free from governmental taking of property, in addition to assessing whether “good cause” exists for protecting trade secrets.1
Presuming Disclosure Despite the fact that compelled disclosure of trade secrets implicates the Fifth Amendment, some courts and legislatures presume that trade secrets must be disclosed, even to non-parties (such as in product defect litigation), making it more difficult for trade secret owners to protect their trade secrets.2 This presumption is based on arguments that the discovery process is open to the public and that ready disclosure of trade secrets helps lawyers and potential litigants learn about alleged product defects in a cost effective way.3 However, this presumption falters when applied to trade secret situations because, as is shown below, it ignores the fact that the United States Supreme Court has held: (1) trade secrets constitute property for Fifth Amendment
purposes; and, (2) there is no absolute First Amendment right of public access to pretrial discovery materials. Moreover, courts should not cavalierly order the disclosure of trade secrets because those secrets are particularly vulnerable during litigation.4 A failure to protect trade secrets adequately may, therefore, be more than an abuse of discretion—it may result in an unconstitutional taking of private property without just compensation.5 In Seattle Times Co. v. Rhinehart, the U.S. Supreme Court rejected the argument that the First Amendment mandates complete access by all people to discovery materials, noting that discovery is a statutory right, not a constitutional one, and that, because courts enable litigants to gather information in the first place, they can also restrict the use of that information.6 Importantly, the Seattle Times court rejected the idea that discovery is a presumptively public process, relying on the facts that: (1) trials are traditionally public, but discovery proceedings are “conducted in private;” and (2) much of the information uncovered during pretrial discovery is unrelated, or only tangentially related, to the underlying cause of action.7 The U.S. Supreme Court also recognized that protective orders are important tools in protecting parties’ privacy rights from the breadth of most pretrial discovery procedures, which allow parties to obtain information that, if publicly released, could be damaging to both reputation and privacy. The Court therefore concluded that the government has a “substantial interest” in preventing “abuse” of discovery processes, a concern that is especially significant when trade secret property rights are involved.8 Additionally, in Ruckelshaus v. Monsanto Co., the U.S. Supreme Court held that trade secrets constitute property for purposes of the Fifth Amendment’s takings clause, which, of course, prohibits state actors from taking private property for public use without just compensation.9 The Supreme Court has also recog-
crets as a strategy to force, or increase nized that the takings clause applies to the value of, a settlement. In both of the courts as well as to other branches of these instances, the alleged need for the government, because governments exerinformation is unlikely to outweigh the cise coercive power when courts enforce owner’s legitimate property interest in discovery requests.10 As a result, a court’s keeping the information secret and predecision to allow access to private propserving the integrity of its property right. erty can constitute a taking even though private actors subsequently control the Balancing the Interests property.11 While it is conceivable In analyzing wheththat a court may be able er there has been an Once a trade to craft an individualunconstitutional taksecret is disclosed, ized protective order to ing under the Fifth preserve a significant Amendment, a court especially to a portion of the owner’s must decide whether rights (and thereby pre“property” was “taken” competitor, the value vent disclosure of the and whether the taking of this property right secret from rising to the served a private purlevel of a taking), if the pose (which is entirely is destroyed order requires continuprohibited) or whether and the competitive ous monitoring to enthe taking served a sure compliance, it may public purpose (which advantage it affords still constitute a taking requires just compenbecause monitoring sation to the owner).12 the owner is lost. usually falls outside a The first part of the court’s ability. analysis is easily met in trade secret casOn the other hand, it is possible that es because, as noted above, the Supreme orders that give access to trade secret Court held in Monsanto that trade secrets information to “attorneys and experts are property for purposes of the Fifth 13 only” may effectively protect owners’ Amendment. constitutional rights, especially where As to the second part of the analythe litigation involves direct competitors. sis, whether property has been “taken,” Such orders allow the seeking parties accourts must determine whether the cess to, but prevent disclosure of, trade owner’s deprivation rises to the level of a secrets to competitors—and in certain taking. In Monsanto, the Supreme Court circumstances, competitors’ corporate recognized that compelled involuntary representatives—thereby avoiding dedisclosure of trade secrets to third parstruction of the secret and the owner’s ties constitutes a taking because it decompetitive advantage. This type of “atprives the owner of all or most of his torneys and experts only” protective orproperty interest.14 der was specifically authorized by the reUnder that analysis, a court’s order cent Texas Uniform Trade Secrets Act.16 requiring a litigant to disclose its trade secrets to a competitor should also conMoreover, in United States Government stitute a taking because it eliminates the v. Marks, the Texas Supreme Court apowner’s competitive advantage and abproved of a process similar to the “attorrogates the law’s protection of the trade neys and experts only” process described 15 secret from unauthorized use. This reabove, despite a due process objection to it.17 Using the U.S. Supreme Court’s fasult is also logically compelled in cases where: (1) courts’ orders give people acmiliar three-part “Matthews test,”18 the cess to trade secrets discovered in prior Texas Supreme Court held that a civil cases to which they were not parties; and litigant’s due process rights were not vio(2) a party seeks its opponent’s trade selated when a district court heard a gov-
ernment attorney’s oral statements about a related, secret, federal grand jury investigation in camera and ex parte.19 Similarly, applying Marks, using “attorneys and experts only” orders for most trade secret discovery cases will not violate the seeking party’s due process rights because seeking parties will still be able to cross examine witnesses and to participate in hearings where trade secret evidence is presented through their lawyers and experts. This “attorneys and experts only” form of participation may be the only method that will adequately protect trade secrets and still allow the court to hear the full panoply of evidence. Such a hearing can be recorded and sealed for in camera appeal, as it was in Marks, so there is no concern over the ability to obtain review of the order. Based on the foregoing, a court may be able to preserve a trade secret owner’s Fifth Amendment right through a carefully-crafted protective order, but it will require considerable judicial resources and attention. However, where an order
is ineffective to protect the owner’s property rights, there is a taking for purposes of the Fifth Amendment. Where a taking occurs, the final two steps of the analysis become relevant. As mentioned, the taking of a trade secret for a private purpose is unconstitutional; by contrast, where the taking serves a public purpose, it may pass constitutional scrutiny if the owner is justly compensated.20 The complication in discovery “takings” situations is the fact that courts do not have designated funds to compensate parties for takings, so most courts and legal writers believe that judicial takings must be invalidated because there is no mechanism for providing just compensation to the owners for the taking of their property.21 At the least once a court determined that an order compelling pretrial disclosure of trade secrets would constitute a taking of property for a public purpose, the court should refrain from requiring the disclosure if it cannot provide the owner with just compensation for the taking.22
At present, Texas cases focus only on the First Amendment aspect of the trade secret discovery issue and do not fully recognize that the forced public disclosure of trade secrets has the potential to effectuate a taking in violation of the Fifth Amendment. In part, this is because Texas Rule of Procedure 76a contains a presumption of openness and simply does not address situations in which disclosure would constitute a taking.23 The extensive incursion into private matters that pretrial discovery rules permit should not be allowed to destroy valuable trade secret property rights.24 As one commentator has wryly observed, “a foreigner watching the discovery proceedings in a[n] [American] civil suit would never suspect that this country has a highly-prized tradition of privacy enshrined in the Fourth Amendment.”25 While protective orders can raise prior restraint concerns and warrant scrutiny of their impact on First Amendment expression, that First Amendment concern
is not the only constitutional inquiry that must be made in trade secret discovery disputes. Both the U.S. Supreme Court’s ruling that trade secrets constitute property and its refusal to recognize an unfettered First Amendment right to access discovery materials show a willingness to engage in a balancing of constitutional rights in trade secret cases.26 Thus, after Seattle Times and Monsanto, courts should engage in a balancing analysis as well as a good cause analysis when trade secrets are sought in discovery, to ensure that an unconstitutional taking of trade secrets does not occur. S. Shawn Stephens is a partner at King & Spalding LLP. She is certified by the Texas Board of Legal Specialization in Civil Appellate Law, and is nationally certified in appellate law by the AIAP. Endnotes 1. See Jordana Cooper, Beyond Judicial Discretion: Toward a Rights-Based Theory of Civil Discovery and Protective Orders, 36 RUTGERS L.J. 775, (2005); James R. McKown, Taking Property: Constitutional Ramifications of Litigation Involving
Trade Secrets, 13 REV. LITIG. 253, 254 (1994); Note, Trade Secrets in Discovery: From First Amendment Disclosure to Fifth Amendment Protection, 104 HARV. L. REV. 1330, 1331 (1991). 2. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1011 (1984); Oryon Techs., Inc. v. Marcus, 429 S.W.2d 762, 764 (Tex. App.— Dallas 2014, no pet.); see also Note, Constitutional Limitations on Government Disclosure of Private Trade Secret Information, 56 IND. L.J. 347, 347, 367-68 (1981); see generally John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 COLUM. L. REV. 669 (1986). 3. Trade Secrets in Discovery, 104 Harv. L. Rev. at 1331. 4. Oryon Techs., 429 S.W.3d at 764; Timothy S. Durst & Cheryl L. Mann, Behind Closed Doors: Closing the Courtroom in Trade Secrets Cases, 8 INTEL. PROP. L.J. 355, 356 (2000). 5. U.S. CONST. amend. V (“[N]or shall private property be taken for public use without just compensation...”). The Fifth Amendment applies to the states through the Fourteenth Amendment. Chicago B. & O.R.R. v. City of Chicago, 166 U.S. 226, 239 (1897); Seattle Times Co. v. Rhinehart, 467 U.S. 20, 32 (1984); Ruckelshaus, 467 U.S. at 1003-04; cf. Carpenter v. United States, 484 U.S. 19, 26 (1987) (finding a “property” interest in a newspaper’s confidential information); accord Leonard v. State, 767 S.W.2d 171, 175 (Tex. App.—Dallas 1988), aff’d sub nom., Schalk v. State, 823 S.W.2d 633 (Tex. Crim. App. 1991); Trade Secrets in Discovery, 104 HARV. L. REV. at 1337-1344; see generally Pamela Samuelson, Information as Property: Do Ruckelshaus and Carpenter Signal a Changing Direction in Intellectual Property Law?, 38 CATH. U. L. REV. 365 (1989). 6. See Seattle Times 467 at 20. 7. See id. at 22-37. 8. Id. 9. See Ruckelshaus, 467 U.S. at 1004. 10. U.S. CONST., amend. V; Ruckelshaus, 467 U.S. at 1003-04; see, e.g., Shelley v. Kraemer, 334 U.S. 1, 18-23 (1948); Note,
Barton H. Thompson, Jr., Judicial Takings, 76 VA. L. REV. 1449, 1457 (1990). 11. See Gregory Gelfand, “Taking” Informational Property Through Discovery, 66 WASH. U. L. Q. 703, 705 n.9 (1988); United States v. General Motors Corp., 323 U.S. 373 (1945). 12. See Ruckelshaus, 467 U.S. at 1000-01. 13. Id. at 1001-04. 14. Id. at 1011-12 & n. 15. 15. Trade Secrets in Discovery, 104 HARV. L. REV. at 1342; Constitutional Limitations on Government Disclosure of Private Trade Secret Information, 56 IND. L. J. at 367-68. 16. TEX. CIV. PRAC. & REM. CODE §§ 134A.001 et seq. 17. U.S. Government v. Marks, 949 S.W.2d 320 (Tex. 1997). 18. Under the Matthews test, the U.S. Supreme Court recognized that procedural due process must be balanced against other rights, such as a trade secret owner’s Fifth Amendment and property rights. Courts must consider three factors: the private interests that will be affected by the official action; the risk of erroneous deprivation of such interest through procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and the government’s interest. Marks, 949 S.W.2d at 326; Matthews v. Eldridge, 424 U.S. 319, 334-35 (1976). 19. Marks, 949 S.W.2d at 326; Matthews, 424 U.S. at 334-35; see also Air Products & Chem., Inc., v. Johnson, 442 A.2d 114, 11617 (Pa. Super. 1982). 20. Trade Secrets in Discovery, 104 HARV. L. REV. at 1343. 21. Id.; Judicial Takings, 76 VA. L. REV. at 1454. 22. Trade Secrets in Discovery, 104 HARV. L. REV. at 1343. 23. See TEX. R. CIV. P. ANN. R. 76a, 166b (5)(c) (Vernon Supp. 1990); Herring, Sealing Court Records: Unanswered Questions and Unsolved Problems, TEX. LAWYER, May 21, 1990, at 24. 24. Trade Secrets in Discovery, 104 HARV. L. REV. at 1348; Richard L. Marcus, Myth and Reality in Protective Order Litigation, 69 CORNELL L. REV. 1, 23, 54-55 (1983). 25. Rifkind, Are We Asking Too Much of Our Courts?, 70 F.R.D. 96, 107 (1976). 26. See generally Trade Secrets in Discovery, 104 HARV. L. REV. at 1330.
By Shelley J. White
Recent Evolutions in Texas Law on Spoliation of Evidence T
echnology has profoundly changed the way Texas companies do business. No matter the industry, today’s companies generate and store increasingly greater volumes of electronic information. Document-retention policies prescribing the routine deletion of data from computer systems are now the norm in managing electronically stored information (“ESI”). These policies have created unique problems for companies engaged in civil litigation. As the number of requests for discovery of ESI increases, so too does the number of requests for sanctions based on spoliation—the loss, alteration, or destruction of relevant evidence.1 The courts
expect parties to prevent spoliation—often even before a lawsuit is filed—and protect newly created ESI for production in litigation. The need to strike a “balance between the significant interest in preserving relevant evidence and the burdens associated with doing so,” mainly costs, prompted the Texas Supreme Court to clarify the law on spoliation in Brookshire Brothers, Ltd. v. Aldridge.2 Before the Brookshire Brothers opinion issued last summer, this state’s highest court had not written on spoliation in a decade;3 since Brookshire Brothers, however, the Court has written on the subject twice more.4 To navigate the current evolution of spoliation law, in house counsel should consider
the following three questions: When is a litigation hold necessary? The purpose of a litigation hold is to stop the purging—routine or otherwise—of electronic data. The question of when to order a litigation hold is answered by another question: Does the company have a duty to preserve evidence?5 A duty of preservation exists “when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material and relevant to that claim.”6 A “substantial chance of litigation” does not refer to any statistical probability that litigation will commence, but rather that “litigation is more than merely an abstract possibility or unwarranted fear.”7 Ultimately, the test for when litigation reasonably may be anticipated is an objective one, involving consideration of whether “a reasonable person would conclude from the severity of the accident [or event] and the other circumstances surrounding it that there was a substantial chance” for litigation.8 Brookshire Brothers, a slip-and-fall case, did not announce a new test for determining the existence of a duty to preserve evidence or even apply the already existing test. In this case, the grocery-store defendant retained a copy of eight minutes of surveillance video capturing the plaintiff’s fall and the few minutes before and after the fall, but allowed its surveillance system to automatically record over the remainder of the video, which, according to the plaintiff, might have shown whether the grocery store knew a dangerous condition existed. Instead of deciding whether the grocery store was obligated to retain the video footage, the Court passed on the duty issue and decided the case on another ground.9 Specifically, the Court reversed the $1 million judgment for the plaintiff because the trial court imposed an unduly harsh remedy—an instruction to the jury that it could infer the portions of the video not preserved were unfavorable to the grocery store.10 Counsel seeking guidance as to the
circumstances that trigger the duty to preserve evidence should look to the spoliation cases that predate Brookshire Brothers. Those cases indicate that a party’s knowledge of an accident’s occurrence alone does not give rise to a duty to preserve evidence when a reasonable person would conclude the accident was not severe.11 Neither should a routine investigation pursuant to company policy obligate a party to preserve evidence if the injuries caused by the accident are not reported or would be considered only minor by a reasonable person.12 As for circumstances that do trigger a duty to preserve evidence, the most obvious is the filing of a lawsuit or receipt of actual notice of potential litigation.13 But neither is required. “Common sense dictates that a party may reasonably anticipate suit being filed... before the plaintiff manifests an intention to sue.”14 Signs that litigation is imminent may include communications with adverse parties or their counsel before suit is filed, such as letters specifically requesting preservation of evidence; the existence of other litigation based on the subject matter referenced in the destroyed documents; and the filing of a complaint with a government agency.15
ery; (3) is reasonably likely to lead to the discovery of admissible evidence; or (4) is already the subject of a pending discovery action.18 This begs the related question of how long a company must hold data. Should data be preserved until a company reaches its storage capacity or cannot afford to keep it any longer? Should data be preserved in accordance with an industry standard? Or should data be preserved until the statute of limitations expires? Regrettably, the Texas Supreme Court offers no guidance. As stated above, the Court expressly refused in Brookshire Brothers to address the reasonableness of the grocery store’s surveillance system, which recorded over existing footage every 30 days.19 In another spoliation case decided six months after Brookshire Brothers, the Court again remained silent as to the reasonableness of cameras installed on a bus that automatically looped over and erased previously recorded data every seven days.20 In the absence of further instruction from the Court as to what constitutes a reasonable retention policy, in-house counsel should be prepared to articulate the specific reasons for the duration and scope of company’s policy.
What data should be held? The duty to preserve evidence is not so broad as to require a company to hold every bit of data in its possession when litigation can be reasonably anticipated.16 But a company is obligated to preserve relevant evidence, and must exercise reasonable care in doing so.17 Although technology has imposed upon companies the task of managing everincreasing amounts of ESI, technology may also assist companies in complying with the duty to preserve ESI for disclosure in litigation. An effective documentmanagement system should allow a company to determine what information it actually has. Once that determination has been made, a company should hold what it: (1) knows or reasonably should know is relevant to the litigation; (2) is reasonably likely to be requested during discov-
What happens if data is lost or deleted? The failure to prevent the loss or destruction of relevant ESI can be costly. Because spoliation is a form of “particularized discovery abuse,” courts have a wide array of sanctions at their disposal.21 A trial judge may find a party in contempt of court, award attorney’s fees and costs, exclude relevant evidence, instruct the jury on spoliation, or even strike a company’s claims or defenses.22 Recognizing that the management of ESI has become increasingly difficult and that potential remedies “can affect the fundamental fairness of the trial in ways as troubling as the spoliating conduct itself,”23 the Texas Supreme Court in Brookshire Brothers adopted a framework to guard against the imposition of excessive remedies. This new analysis involves two steps. First, the trial judge must determine
whether spoliation occurred. This determination turns on whether the alleged spoliator (1) had a duty to reasonably preserve evidence and (2) intentionally or negligently breached that duty by failing to do so.24 The classification of this initial inquiry as a legal question represents a significant departure from prior practice, which left the spoliation decisions largely to the jury. For a company facing spoliation allegations, this should be a welcome change. A litigant can no longer present evidence to the jury bearing directly upon whether an opposing party has lost or destroyed evidence “except insofar as it relates to the substance of the lawsuit.”25 If the trial judge finds that spoliation occurred, the second step regards the assessment of an appropriate remedy. The key considerations here are the level of the spoliating party’s culpability and the degree of prejudice suffered by the nonspoliating party.26 The harshest of remedies—a spoliation instruction like the one given in Brookshire Brothers or an order striking a party’s claims or defenses—may be imposed only when (1) a spoliating party acted with specific intent to conceal discoverable evidence or (2) “in the rare circumstance” its negligence “irreparably prevents the nonspoliating party from having any meaningful opportunity to present a claim or defense.”27 Applying this framework in Brookshire Brothers, the court concluded there was no evidence the grocery store intentionally destroyed evidence by failing to prevent the routine deletion of the surveillance video after 30 days.28 The store preserved the most relevant portions of the video— those portions beginning with the plaintiff entering the store, capturing his fall, and ending shortly thereafter. The portions of the video not preserved likely made no difference due to the obstructed viewpoint of the camera. The court further concluded that the grocery store’s conduct “did not rise to the rare level required to justify an instruction in the absence of intentional spoliation” because other evidence was available to prove the elements of the plaintiff’s slip-and-fall claim.29 thehoustonlawyer.com
A word of caution regarding over-reliance on retention policies is warranted. Brookshire Brothers cannot be read to allow the destruction of relevant ESI in the name of a stated retention policy. Indeed, Brookshire Brothers preserved some evidence of the incident and the court believed that Brookshire Brothers’ deletion of the surveillance video was not intended to thwart the judicial process. Therefore, any inference that Brookshire Brothers intentionally deleted unfavorable evidence
was necessarily unwarranted under the circumstances. But the court strongly cautioned others that a company should not knowingly allow relevant information to be erased by an automatic electronic deletion system. “Willful blindness” will not be considered mere negligence and will be subject to harsher penalties associated with intentional destruction of evidence.30 Conclusion The Court’s recent opinions on spoliation
of evidence have not changed a company’s legal obligation to preserve relevant evidence when confronted with imminent litigation. Corporate efforts to preserve ESI through reasonable document-retention policies will assist in successfully arguing that the most severe sanctions for evidence spoliation are unwarranted. To be sure, a number of questions remain. The court has not yet defined reasonableness as that term may be applied to the duration of retention policies, and it is yet to be seen how the Brookshire Brothers framework will be applied where the actual merits of a case involve the alleged loss or destruction of evidence. But generally, companies using retention policies to manage electronic information should welcome the recent evolutions in spoliation law. And for companies that have not yet developed a well-reasoned retention policy, abundant online resources exist to aid the practitioner in the development of that policy.31 When litigation arises, any time spent developing and articulating such policies will have been time well spent. Shelley J. White is an associate with the law firm of Wright & Close, L.L.P., where she specializes in civil appeals in a variety of matters. Endnotes
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1. See Dan H. Willoughby, Jr., et al., Sanctions for E-Discovery Violations: By the Numbers, 60 DUKE L. J. 789, 790 (2010). 2. Brookshire Brothers, LTD v. Aldridge, 438 S.W.3d 9, 14 (Tex. 2014). 3. See Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718 (Tex. 2003); see also Cire v. Cummings, 134 S.W.3d 835 (Tex. 2004). 4. Wackenhut Corp. v. Gutierrez, No. 12-0136, 2015 WL 496301, at *4–5 (Tex. Feb. 6, 2015) (per curiam); Petroleum Solutions, Inc. v. Head, No. 11-0425, 2014 WL 7204399, at *5–6 (Tex. Dec. 19, 2014). 5. This article does not address potential criminal liability for destruction of evidence or a company’s obligations to maintain records for regulatory, tax or other business purposes. 6. Brookshire Bros., 438 S.W.3d at 20 (citing Johnson, 106 S.W.3d at 722). 7. Id. (citing Nat’l Tank Co. v. Brotherton, 851 S.W.2d 193, 204 (Tex. 1993)). 8. Nat’l Tank, 851 S.W.2d at 204. 9. Brookshire Bros., 438 S.W.3d at 27. 10. Id. at 27–29. 11. See, e.g., Mangham v. YMCA of Austin, Texas-Hays Cmtys., 408 S.W.3d 923, 931 (Tex. App.—Austin 2013, no pet.) (no pre-suit duty in case arising from fall in YMCA aerobics class where plaintiff confirmed to instructor that she was okay after fall; continued with class; and, when she later notified YMCA of injury, stated she “did not want anything to come of it”); Hopper v. Swan, No. 12-02-00269-CV, 2004 WL 948526, at *5 (Tex. App.—Tyler Apr. 30, 2004, no pet.) (mem. op.) (no pre-suit duty when plaintiff in trucking accident refused medical treatment, drove away from the accident under his own power, and truck involved remained in service).
12. See, e.g., Johnson, 106 S.W.3d at 722 (internal investigation did not give retailer notice of substantial chance of litigation because plaintiff did not sustain serious injury and never indicated he might seek legal relief); see also Albertson’s, Inc. v. Arriaga, No. 04-03-00697-CV, 2004 WL 2045389, at *2–3 (Tex. App.—San Antonio Sept. 15, 2004, no pet.) (mem. op.) (policy to retain surveillance video of shoplifters did not obligate store to preserve video absent evidence store reasonably should have anticipated falseimprisonment claim). 13. See, e.g., H.E. Butt Grocery Co., L.P. v. Advance Stores Co., Inc., No. 10-10-00004-CV, 2010 WL 3036654, at *3–4 (Tex. App.—Waco Aug. 4, 2010, no pet.) (mem. op.) (duty to preserve evidence triggered by receipt of notice plaintiff intended to pursue property-damage claim). 14. Nat’l Tank, 851 S.W.2d at 204. 15. See Nicole D. Wright, Federal Rule of Civil Procedure 37(e): Spoiling the Spoliation Doctrine, 38 HOFSTRA L. REV. 793, 797–98 (2009). 16. Trevino v. Ortega, 969 S.W.2d 950, 957 (Tex. 1998) (Baker, J., concurring). 17. Brookshire Bros., 438 S.W.3d at 20. 18. Trevino, 969 S.W.2d at 957 (Baker, J., concurring). 19. Brookshire Bros., 438 S.W.3d at 27 n.19. 20. Wackenhut, 2015 WL 496301, at *3–5. 21. Brookshire Bros., 438 S.W.3d at 20. 22. Id. at 14, 21. 23. Id. at 17. 24. Id. at 14. 25. Id. 26. Id. 27. Id. at 25; see Petroleum Solutions, 2014 WL 7204399, at *5–6. 28. Brookshire, 438 S.W.3d at 27. 29. Id. at 28. 30. Id. at 24 n.17. 31. See, e.g., THE SEDONA GUIDELINES: BEST PRACTICE GUIDELINES & COMMENTARY FOR MANAGING INFORMATION & RECORDS IN THE ELECTRONIC AGE (The Sedona Conference Working Group Series Nov. 2007), available at, https://thesedonaconference.org/publication/ Managing%20Information%20%2526%20Records.
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The Historic Importance of President Barack Obamaâ€™s Executive Actions on Immigration
By Charles C. Foster
he sweeping and historic executive actions announced in a television address by President Barack Obama on November 20, 2014, stirred controversy and even anger. But the executive actions also, for the first time in more than a quarter of a century, gave hope to millions of undocumented long-term residents of the United States. This article addresses these important new legal options that will be more fully developed by regulation and policy guidelines in order to implement the executive actions by May 19, 2015, if not sooner. While all the details will not be known until then, based upon the president’s announcement of executive actions and the follow-up briefings by the Obama Administration, there is sufficient basis to outline: (1) the meaningful, albeit temporary, legal status through Deferred Action for Parental Accountability (DAPA) to an estimated 4.5 million long-term undocumented residents of the United States, (2) the expansion of the Deferred Action for Children Arrivals (DACA) program initially implemented in 2012, and (3) the new opportunities for graduates from U.S. universities under the H-1B visa program. Deferred Action for Parental Accountability (DAPA) Clearly, the most controversial part of the executive actions is the granting of DAPA status to an estimated 4.5 million individuals who have resided in the United States since January 1, 2010, and who are the parents of one or more U.S. citizens or lawful permanent residents (so-called “green card” holders). The requirements for DAPA status are relatively straightforward. Such individuals must have been physically present in the United States on November 20, 2014 (the date of the announcement); they must have maintained residence (but
not necessarily a continuous presence) versial, it was less so since many of these in the United States since before Januindividuals were brought as minor chilary 1, 2010; and they must not have been dren and in some cases, as infants, and convicted of any felony or any serious had lived here virtually all of their lives. misdemeanor, which would most likely It was conditioned upon their being eninclude a conviction for DWI or DUI. rolled in high school, completing high Qualified applicants are granted school or in college or serving in the U.S. deferred action for three years, meanArmed Forces. ing that the government would not Under the president’s 2014 execuduring this time initive action, the DACA tiate any removal/ program will expand Clearly, the most deportation proceednow to cover those controversial part of ings. If, for whatever who were brought here reason, undocumented under the age of 16 irthe executive actions aliens not on the list respective of their curof those prioritized rent age (rather than is the granting of for detention and rethe 2012 requirement DAPA status to an moval, like convicted that they be under 31 felons, come to the atyears old), provided estimated 4.5 million tention of Immigrathat they arrived priindividuals who have tion and Customs Enor to January 1, 2010 forcement (ICE) after (rather than the 2012 resided in the United States January 5, 2015, such requirement that they individual would not arrive prior to 2007). since January 1, 2010, be detained. Most imFurthermore, they will and who are the portantly, DAPA applibe eligible for a threecants can concurrently year deferred action parents of one or more file for an Employment (rather than the 2012 Authorization Docugrant of two years). As U.S. citizens or ment (EAD), which of July 20, 2014, the lawful permanent would also be valid for two-year watermark three years. Issuance for DACA, the U.S. Citresidents... of the EAD imparts izenship and Immigrathe most important benefit. For the first tion Services (CIS) had accepted 681,189 time, DAPA beneficiaries will be lawinitial DACA applications for processing fully authorized to work in the United and granted approval to 587,366 indiStates. DAPA and DACA beneficiaries viduals. Those who were approved near with EADs are also then eligible to apthe beginning of DACA implementation ply for and obtain a Social Security Card in August 2012 are now able to renew it and based upon current law, a valid for two years. Texas driver’s license, both for a similar period of time. Implementation Hurdles to DAPA and DACA Expanded DACA Program for Childhood Although there may be an estimated Arrivals 4.5 million individuals nationally and In 2012, President Obama first created 200,000 in the Houston region who are deferred action to a large number of inpotentially eligible for such a significant dividuals who were brought as children benefit, based upon past history, a sigunder the age of 16 to the United States nificant portion of such population will prior to January 1, 2007, who as of the miss the opportunity of obtaining these effective date were in the United States benefits. This is because of a lack of eduunder the age of 31. While also controcational outreach or fear that through
their participation, they are effectively providing the Immigration Service with information that could lead to their future arrest and deportation. Houston Mayor Annise Parker, the Greater Houston Partnership, educational and religious leaders, and other institutions within our community have urged broad based-participation, given the enormous benefits to DAPA and DACA beneficiaries and minimal legal risks. Under government guidelines, information collected in connection with applications for both DAPA and DACA programs will not be used in any enforcement proceedings. State Litigation over DAPA and DACA At the time this article is written, litigation was pending in the U.S. District Court for the Southern District of Texas, commenced by then-Attorney General Greg Abbott. The suit challenges the constitutionality of President Obama’s executive actions for DAPA implementation and DACA expansion. The State of Texas and the other 17 states joining in the U.S. District Court litigation may face difficulty in proving standing by demonstrating that such executive actions will have any significant harm on the aforesaid states. Even if state litigants are found to have standing, it is likely that both DAPA and the DACA expansion may be upheld based upon a number of prior federal court decisions giving the president broad prosecutorial discretion in the enforcement of U.S. immigration laws. Houston and Texas Impact This article is more than an academic exercise given the fact that there are an estimated 400,000 undocumented longterm residents in the greater Houston area, of which almost 200,000 might benefit from the DAPA program and the expanded DACA program. These undocumented workers are deeply intertwined in our economy providing the basic workforce for home and office building construction, highway expansion and 30
maintenance and the hospitality industry, including a large percentage of hotel and restaurant workers. Texas Executive Action Possibly Affecting DAPA and DACA On December 3, 2014, then-Governor Rick Perry issued an executive order mandating any company doing business with governmental agencies under the supervision of the governor’s office to use the voluntary E-Verify federal program. Such companies are required to verify that all of their existing and prospective employees as well as contract employees are authorized to work in the United States by verifying that they have a valid Social Security number. It is widely recognized that there are large numbers of undocumented employees or subcontractors working for the State of Texas contractors, particularly with construction companies, state universities and medical facilities. While these workers are predominantly in semi-skilled positions, they would also include higher and even professional positions. Ironically, DAPA and the expanded DACA programs will allow many contractors with State agencies to save both their current and future employees. Executive Actions Benefiting the Highly Skilled and Entrepreneurs While the DAPA and DACA provisions of the executive actions were center stage, there is another provision that is significant, although not as sweeping or historic. It is often said that the United States benefits from the best and the brightest. Statistically, a large percentage of Nobel Prize winners, patent holders, individuals starting new businesses and professors at our most distinguished institutions of higher education are immigrants. The United States continues to excel in higher education. Thus, foreign nationals from all over the world come to the U.S. not only for their college education, but also to do graduate work. For-
eign students continue to make up a very high portion of the graduates receiving masters and Ph.D. degrees from our institutions of higher education, particularly from the most distinguished, in the science, technology, engineering and math (STEM) fields. Yet, when these foreign students graduate, their options to remain in the United States are very limited. Upon graduating, they can obtain upwards of 12 months of work authorization known as Optional Practical Training (OPT) and if graduating in a STEM field, up to 29 months. In order to be employed in the United States, such individuals must be sponsored by a U.S. employer. Since 1965, the only viable legal option has been the H-1B non-immigrant visa classification. This program allows individuals to apply for a work visa as specialty workers for a position requiring at a minimum a four-year bachelor’s degree or the equivalent and a job offer at the prevailing wage (the higher of the actual wage or the prevailing wage as determined by the state employment agency for that particular profession in that particular location). Congress has set an annual cap of 65,000 for the H-1B classification. With a growing economy, not only are there more petitions filed than there are visa numbers available, those numbers will be exhausted on the first date it is possible to file a petition. This past year, while there was an annual cap of 65,000 under the H-1B classification, plus an additional 20,000 visas available for students graduating with a master’s degree or above from a U.S. university, more than 170,000 petitions were filed on the earliest date possible. This resulted in closing of the petition period within one week. Thus, we have a system in America by which, in practical application, we can only hire foreign graduates to work in the United States on October 1, the first day of the federal fiscal year. Furthermore, the prospective employer must sponsor that individual at least seven months before the anticipated start date
and must tell highly skilled applicants that they may have no more than a 30 to 40 percent chance of success of having their petitions randomly selected for adjudication by CIS. President Obama, through his executive actions, took a number of steps to improve the chances of highly skilled foreign nationals being able to remain in the United States long enough in order to qualify for appropriate temporary work visa status under the H-1B classification and for Lawful Permanent Residency. Conclusion President Obama’s executive actions of November 20, 2014, provide an opportunity for millions of long-term residents of the United States and for many foreign graduates of U.S. universities that want a future in America. The implementation of the DAPA and expanded DACA programs will be a real challenge for the Houston region because the vast majority of the DAPA and DACA potential beneficiaries will not be able to afford private experienced immigration legal counsel. They will reach out to a variety of accredited agencies, the immigration law clinics of our three law schools and ultimately, to the Houston Bar Association (HBA) for assistance. This is not only a historic moment in U.S. immigration policy, but it will be a unique opportunity for HBA members to participate in this extraordinary program as pro bono attorneys. These attorneys will be given plenty of opportunities to be trained and to work through one of the existing accredited non-profit agencies to provide these important services. Please do your part. Charles C. Foster is chairman of Foster LLP, and the Immigration Task Force of the Greater Houston Partnership. He is policy advisor on immigration to both Presidents George W. Bush and Barack Obama, and he is the past national president of American Immigration Lawyers Association.
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By David Barron
Ten Things Every Lawyer Should Know About ‘HERO’ —Houston’s Equal Rights Ordinance
ast year, the City of Houston passed a controversial city ordinance that brings the City, for the first time, into the business of regulating employment discrimination in the private sector.1 The ordinance was passed with the goal of adding sexual orientation and gender identity (or transgender status) to the list of protected classifications; but, as noted herein, federal discrimination laws have largely already addressed those areas, making the city ordinance not all that groundbreaking. Nonetheless, the ordinance adds a significant new legal avenue for employment claims. It will expand coverage to employers with at least 25 employees in May 2015, and will cover all employers with more than 15 employees in May 2016. The following article answers the common questions about the ordinance, and how it might impact employers in Houston. 1. What types of discrimination are covered under the Houston Equal Rights Ordinance (HERO)? Although the ordinance received attention because it added new classes not already explicitly protected under federal or 32
state discrimination laws, it actually prohibits a long list of discriminatory conduct. Specifically, the new ordinance prohibits intentional discrimination based on sex, race, color, ethnicity, national origin, age, familial status, marital status, military status, religion, disability, sexual orientation, genetic information, gender identity or pregnancy. All of these classes are already explicitly protected under federal law (Title VII of the Civil Rights Act of 1964) or state law (Texas Labor Code Chapter 21), with the exception of sexual orientation and gender identity. 2. Are there other cities in Texas that already have passed similar local ordinances? Yes. Austin, Dallas, El Paso and Fort Worth are a few examples. Houston was not the first city in Texas to pass an ordinance that included sexual orientation or gender identity as classes protected from discrimination. 3. Does this ordinance create new legal protections for sexual orientation and transgender discrimination? “Technically” yes, because sexual orienta-
tion and gender identity are now specifically defined and covered under the new ordinance. The federal government, however, has long taken an expansive view of discrimination based on “sex.” For example, the Equal Employment Opportunity Commission (EEOC) issued an opinion, in April 2012, holding that “intentional discrimination against a transgender individual because that person is transgender is, by definition, discrimination based on sex.”2 The Justice Department similarly issued a memorandum on December 15, 2014, making clear its enforcement policy that federal discrimination laws should be interpreted as prohibiting discrimination based on gender identity.3 Many courts have also held that discrimination against transgendered employees is covered under federal and state law as discrimination “based on sex.”4 Further, federal courts have also recognized that discrimination based on sexual stereotypes is unlawful, which is often used as a proxy for sexual orientation.5 As early as 1989, the Supreme Court held that a female accountant denied partnership because she was “not feminine enough” stated a claim for sex discrimination.6 Federal courts in Houston have reached similar conclusions. For example, Judge Nancy Atlas of the United States District Court for the Southern District of Texas held that a biological male living as a female was protected from discrimination under existing federal law.7 The plaintiff claimed to have been denied a job because the employer believed the applicant was deceptive about being transgender. The employer moved for summary judgment arguing that transgender status was not protected under Title VII; but the court found sexual discrimination to include discrimination based on nonconformance with gender stereotypes by stating: “Lopez’s transsexuality is not a bar to her sex stereotyping claim. Title VII is violated when an employer discriminates against any employee, transsexual or not, because he or she has failed to act or appear sufficiently masculine or feminine enough for an employer.”8
4. Does the ordinance apply to private employers, or only those companies who do business with the city? Both. The ordinance applies to employees of the city and/or in city services, as well as employers with city contracts, housing contracts, public accommodations and private employment including restaurants, bars, entertainment venues and places of public amusement, hotels and motels, and public conveyances. Notably the ordinance expands the definition of “employer” over time so that more businesses are covered by the ordinance as time passes. An “employer” is currently defined as a “person who has 50 or more employees.” However, on the first anniversary of the effective date of the ordinance, May 28, 2015, an employer will be defined as “a person who has 25 or more employees.” It will further expand, effective on the second anniversary of the effective date, to include persons “with 15 or more employees.” This will eventually make the ordinance’s coverage threshold the same as state and federal discrimination laws (which also cover employers with 15 or more employees). 5. Are there any exclusions? Yes. The ordinance does not apply to bona fide private clubs (clubs that require membership) or to employers that are religious organizations. 6. What are the penalties for a violation by an employer? Violation by employee or official of the city. An employee or official of the City of Houston found in violation shall be subject to disciplinary action up to and including indefinite suspension/termination or removal from office. Violation by employer in performance of a city contract. If a contractor is found to have violated the ordinance in connection with any city contract, the Inspector General shall refer the matter to the City Attorney for appropriate action to serve the best interest of the city, including the use of remedies provided by the city’s contract with the contractor. These rem-
edies would include possible termination of the city contract. Public Accommodations and Private Employment. If the Inspector General finds that a violation has occurred, the Inspector General shall refer the matter to the City Attorney for appropriate action. A violator is entitled to a trial by jury in municipal court. A person who violates the ordinance commits a criminal offense, classified as a Class C misdemeanor, which is punishable in municipal court by a fine of $250 to $500. A person is guilty of a separate criminal offense for each day or part of a day during which a violation is committed, continued or permitted. In no event shall the aggregate of all fines relating to the same complaint filed by a complainant exceed $5,000. It is also notable that the city can hold liable the employer’s “agent.” Thus, managers arguably risk prosecution in their individual capacities for violation of the city ordinance. 7. What if an employee files a complaint that is frivolous? The ordinance makes it unlawful for a person to file a complaint in bad faith. Such an action would be a “violation” and subject the charging party to the same criminal penalties noted above. Importantly however, bad faith is hard to prove and most complaints, even baseless ones, will likely not be found to meet this standard. The ordinance, like federal and state law, also contains protection for an employee who files a good faith claim (even if ultimately found to be without merit), and retaliation against a complaining party is prohibited. 8. How is the law enforced? Persons who wish to make a complaint under the ordinance must file a charge with the City of Houston within 180 days of the alleged wrongful action. This is consistent with state law, but shorter than the statute of limitations under federal discrimination law (which is 300 days). If the complaint states a claim under existing state or federal law, the ordinance
provides that the Inspector General “shall refer the complaint to the appropriate agency for further action and discontinue the investigation of the complaint.” As a practical matter, with the possible exception of claims based on sexual orientation or gender identity, one would expect virtually all complaints to be referred to the EEOC or Civil Rights Division of the Texas Workforce Commission. As noted above, even complaints for sexual orientation and gender identity would likely be accepted by the EEOC, making it unlikely that many complaints will actually be retained by the Inspector General. In the unlikely event the complaint is not referred, the complaints will be investigated by the City of Houston’s Inspector General. The Inspector General may take statements and inspect relevant records. If an employer refuses to voluntarily comply with the investigation, the City Attorney (in consultation with the Inspector General) may request the City Council to issue a subpoena or subpoena duces tecum to compel the attendance of witnesses or production of relevant documents. If the Inspector General finds a violation of the ordinance upon completion of an investigation, criminal penalties can be issued, in the form of fines, for each violation as outlined above. 9. Can the employee of a private employer file a private damages claim under this ordinance? No, but other federal and state law claims may be available. 10. Does this law allow an employee to use the restroom of his or her choice? The original version of this ordinance included specific rights to choose a restroom based on gender identity. The provision was removed from the final draft of the ordinance after much debate and controversy. Although not specifically addressed, a transgendered person barred from a restroom can still file a disContinued on page 49 thehoustonlawyer.com
Houston Bar Foundation Recognizes Outstanding Pro Bono, Volunteer Efforts William Buck Takes office as 2015 Foundation Chair
he Houston Bar Foundation marked its 32nd year of service with an Annual Meeting and Luncheon held February 26 at the Four Seasons Downtown. The luncheon not only commemorated the installation of new 2014 Foundation Chair, John Eddie Williams, and new Foundation officers, but also recognized the contributions of volunteers who Chair, William R. Buck. provide pro bono legal representation and other services to the community. William R. Buck of Exxon Mobil Corporation took office as 2015 chair of the Houston Bar Foundation. He succeeded John Eddie Williams, Jr. of Williams Kherkher Hart Boundas LLP. The program featured a conversation with legendary Houston attorney Joe Jamail, interviewed by Williams and Janet Hansen Jeffrey Kaplan of LyondellBasell Industries will serve as vice chair of the Foundation and Tom Godbold of Twin Eagle Resource Management, LLC will serve as treasurer. Newly-appointed directors are Michael Donaldson of EOG Resources, Inc.; Veronica John Eddie Williams and Janet Hansen interviewed legendary H. Foley of Precision Drilling Corporation; and Travis J. Sales Houston attorney Joe Jamail about his long legal career. of Baker Botts L.L.P. Completing two-year terms as directors are Timothy McConn of Andrews Kurth LLP and Denise Scofield of Morgan, Lewis & Bockius LLP, who also is chair-elect. Williams will serve on the board as immediate past chair. Williams presented the Foundationâ€™s annual awards for pro bono service through the Houston Volunteer Lawyers Program (HVL), volunteer mediation services through the Dispute Resolution Center William R. Buck, Jack Balagia and Susan Sanchez were among the pro bono team that (DRC), and legal writing in The Houston accepted the award for Exxon Mobil Corporation for Outstanding Contribution to HVL by a Lawyer, the HBAâ€™s professional journal. corporate legal department. 34
M. Carter Crow accepted the award for Norton Rose Fulbright US LLP for Outstanding Contribution to HVL by a Large Firm.
John Spiller accepted the award for Strasburger & Price for Outstanding Contribution to HVL by a Mid-size Firm.
Richard Kaplan accepted the award for Weycer, Kaplan, Pulaski & Zuber, P.C. for Outstanding Contribution to the HVL by a Boutique Firm.
Will Denham accepted the award for Shortt & Nguyen, P.C. for Outstanding Contribution to the HVL by a Small Firm.
Peter J. Bennett was honored for Outstanding Contribution to the HVL by a Solo Practitioner.
Frederick J. Wagner earned the award for Outstanding Contribution to the Dispute Resolution Center.
Hertzel Aron was honored for Longevity of Exemplary Service to the Dispute Resolution Center.
Patrick Upton of KoonsFuller PC (left) and the Hon. Randy Wilson of the 157th District Court were both honored as authors of Outstanding Legal Articles in The Houston Lawyer for 2013-14 thehoustonlawyer.com
By Taunya Painter
Managing Internet Risks & Benefits
Social media can impact minors and their future
t was social media saturation: Facebook, Twitter, and Instagram. Innumerable pictures—surging surfing in Hawaii, dancing the tango in Buenos Aires, flying through the air at the Patagonia glaciers, jet setting on chartered planes, skydiving in Argentina, snapping pictures with world leaders, flashing couture brands and swanky digs, taking selfies with stars and pumping iron and posing shirtless in about every possible position. While narcissism is not a crime, it sure seemed to fuel a globe-trotting social media mania for a U.S. Congressman from Peoria, Illinois. And it was the tip of the iceberg. Effective March 31, 2015, Representative Aaron Schock, the only member of Congress born in the 1980s, resigned. All of his social media saturation led to closer scrutiny of his financial records, which led to an FBI investigation. This article looks at some things to consider as we help our tweens and teens navigate their use of social media, and particularly as it may negatively affect their reputation and future opportunities for education and employment.1 Selfie obsession: While we love seeing pictures and video of our kids, we would not hold a dinner party and force our friends to look at them. Help your kids manage how they portray themselves. The “look at me, my body and how amazing I am” behavior played out on Instagram by a teen may seem adorable in small doses, but it becomes especially distasteful over time and certainly by the time someone is a young professional. One photo particularly disconcerting in the Rep. Schock Instagram fest is the one of when he met Pope Francis. In the picture, Schock is using his time with the Pope to show the Pope a picture of himself. Take 36
notice when your kid posts mostly pictures of himself and focuses on how many people “follow” or “like” his selfies. He may view this as an indicator of popularity, but it can easily turn into disdain by others, including potential employers. We should encourage our teens to experience fun and challenging activities and to be amazing, but as they mature, their social media posts should reflect their growing appreciation for others and issues important to them. Self-loathing whiner: At the opposite end of super-teen is complainer-teen. It’s the “look how pathetic I am” posts or pictures that say: “I’m so depressed. I just_______ (got dumped / failed a test / got rejected from a college).” The teacher or parent rant is equally damaging. One tech-savvy teacher outed a student for his anti-teacher Twitter rage, and the student’s “friends” sided with the teacher. Those tweets and retweets will always be around; the U.S. Library of Congress has been archiving all public tweets since 2006. Future professional employers will not likely be sympathetic. It is estimated that one in 10 young people are denied a job because of their presence on social media. Spring Break and reputation photos: Every March, there is an increasing number of students that get expelled from school when they return from Spring Break. The reason is that live feeds, videos and pictures are being streamed for every waking and sleeping moment. A lot of these cases relate to activities with under-aged kids, girls passed out and racist comments or gestures. Also, a Kaplan Test Prep survey found that 35 percent of college admissions officers discovered negative information in
applicants’ social media profiles. They are finding vulgarities, as well as illegal or questionable activities. Furthermore, they are comparing the admissions application with the kids’ social profiles to see if they are consistent. Universities do not want students who could harm their institutional reputation. Nude or semi-nude photos: Consider all texts, photos and videos to be permanent and public, even with tight privacy settings and apps like Snap Chat where the photos allegedly disappear. Child pornographers are now populating their porn sites and services by scouring the web, apps and networking sites. They pick up every nude and semi-nude photo of kids that they can get their hands on. Many kids are ending up on porn sites that originally only intended to send their picture to a few friends. Criminal or civil proceedings: In a well-reported case in 2006, a 20-year old drunk driver had a head on collision with a victim. While the victim was still in the hospital, the 20-year old was out on bail and went to a Halloween party, dressed in an orange jumpsuit with “jail bird” on it. He thought he was so clever, and posted his picture to Facebook. The picture was shown to the jury, who decided that he was not remorseful and sent him to prison. Also, in civil proceedings, subpoenas are increasingly being issued for all texts messages sent and received for a span of time. When other kids harm yours: Bullies commonly use social media sites. An enemy of your child could set up a fake profile for your child and post crazy stuff, pretending to be your child. It should be addressed immediately, but often, damage is done before the profile can be removed. Also, bullies set up anonymous blogs and post gossip, lies, and photos that your child thought were sent only to friends. This happened recently where a high school kid set up an anonymous “gossip girl” blog. Ultimately, it took police intervention and child pornography charges to get the blog taken down, but not before it damaged people’s reputations. It is important to remind our kids that while most of what they post is targeted to-
ward friends, it is increasingly being evaluated by school boards, college admission boards, future employers and even criminal prosecutors and juries. The upside is that social media profiles can work both ways. Kids have a need to be online; otherwise, they will be marginalized with their peers and in their future opportunities. We can suggest options that will bolster their reputation in the long-run. If our kids are being responsible and thoughtful in life and they are authentic in their social profiles, then future employers and admissions boards may be more impressed with that than even the resume or application itself. Consider suggesting that your child do a blog in their own name, if they like writing. This may help them highlight the positive things they are doing, develop discussion groups around their hobbies and interests, and engage a thoughtful group of likeminded friends. Also, there are sites for tweens and teens to develop digital skills, make movies and enter contests. There are also social networking sites for kids under 13, such as Kidzworld. Your teen
should also set up Google alerts and other automated searches that notify them when her name or profile name is mentioned. You may discuss with your college-bound child the option of hiring an online reputation expert before the application process. These experts can assess any real exposure created by the kid or someone else, and any faked exposure created by an enemy. They can also try to eliminate or minimize the damage, or counsel you and your kid on how to address it. As you invest together to create a positive digital footprint, your children will likely become more conscientious about their online reputation even in those social networking sites not visible to you. Taunya Painter is a member of Painter Law Firm PLLC, where she specializes in business, contract and international law. She is an associate editor for The Houston Lawyer. Endnotes
1. While Childrenâ€™s Online Privacy Protection Act of 1998 (COPPA), 15 U.S.C. 6501, made it illegal for those under 13 to be on social networking sites, the majority of tweens are using the sites, and most with their parentsâ€™ knowledge.
Houston Lawyers Who Made a Difference
By The Hon. Mark Davidson
arris County has had many contributions made to it by licensed attorneys who never practiced law in a traditional sense. There is almost certainly none who contributed more to the development of our community than Bob Lanier. Lanier was born in Baytown and grew up in a very poor family during the Depression. He worked his way through law school as a sports writer and started his legal career at the firm of Baker, Botts Andrews and Parish. While he was thought to be a promising lawyer, he quickly got bored with the practice of law and decided to become a real estate developer. Houston in the 1950s turned out to be the perfect place and time for Lanier to build homes and apartments and, in doing so, to prosper. Many subdivisions throughout the county owe their existence to him. Fifty years later, those subdivisions still
provide quality housing for thousands of people. Having made millions of dollars, Lanier turned to public service, with even greater success. He served as Chairman of the Texas Highway Commission and helped develop highway projects and mass transportation systems all over the state. He would serve as Chair of the Houston Metropolitan Transit Authority and in that role and as Mayor of Houston would change, with some controversy, the transportation system for the city. He also expanded public spending on parks, law
enforcement and libraries. Lanier fought hard for his vision of a better city, and won almost every time. He is remembered as one of the greatest Mayors in Houston and American history. By any measure, he made a difference for our city that will last forever.
The Hon. Mark Davidson is an MDL judge and judge (retired) of the 11th District Court. His column for The Houston Lawyer focuses on Houston attorneys who have had significant impact on the law, the legal profession and those served by the law. thehoustonlawyer.com
At the Bar
HBAA Chili & Pie Cookoff Raises Money for Scholarships
he Houston Bar Association Auxiliary held its first Chili & Pie Cookoff on January 31 at the Karbach Brewery. The event was a fundraiser for the HBAA Charitable Fund, which provides scholarships for students at Houston’s three law schools. Nearly 200 people attended the event, with 13 chili teams and 15 entries in the pie contest. The cookoff raised over $8,000 for the Charitable Fund. Cookoff Winners 1st Place Chili – The law firm of Donato, Minx, Brown & Pool 2nd Place Chili – Houston Bar Association Auxiliary Charitable Fund 3rd Place Chili – South Texas College of Law Alumni Team
An alumni team from South Texas College of Law took Gina Rebman, center, took first place in the Pie 3rd place in the Chili Cookoff, as well as The People’s Contest. She is shown with Dominique Varner, Choice Award. left, and HBAA president, Hazel Donato.
1st Place Pie – Gina Rebman 2nd Place Pie – Marcella Burke 3rd Place Pie – Phyllis Dent
Best Decorated Table – Burleson Law Firm People’s Choice Award – South Texas College of Law Alumni Team
The Houston Lawyer
The HBAA would like to thank the judges: Chili Cookoff The Hon. Ken Wise, 14th Court of Appeals The Hon. Lynn Bradshaw Hull, 280th District Court The Hon. Jerel Twyman, Bellaire Municipal Court Judge Pie Contest Prof. Doug Moll, University of Houston Law Center Sharron Sanborn, cooking blog author, One Clever Mom
Employees of Burleson Law Firm took first place in the Best Decorated Table.
Cookoff Judges, from left: Justice Ken Wise, 14th District Court of Appeals; Judge Lynn Bradshaw-Hull, 280th Family District Court; Judge Jerel Twyman, Bellaire Municipal Court; Professor Doug Moll, University of Houston Law Center; and Sharron Sanborn, cook- The law firm of Donato, Minx, Brown & Pool took ing blog author of One Clever Mom. first place in the Chili Cookoff.
The Best Decorated Table of Burleson Law Firm.
The HBA Auxiliary Charitable Fund took second place in the Chili Cookoff.
Autism To Work
nonPareil Institute, a nonprofit 501 (C)(3) corporation not only provides career training for autistic young adults, It gives them and their families hope for their future. With your support, nonPareil Institute can become a reality in Houston, and begin offering services that will enable adults with autism to have fulfilled and meaningful lives. To make a donation or learn more about nonPareil Institute-Houston, please visit www.npitx.org/city/houston.htm or see our Facebook page at facebook.com/nonPareilhouston Email: email@example.com
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Zach Wolfe presented on “Ethical Use of Social MediaWolfe by Lawyers.” Zach presented on
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in pro f e s s io n ali s m
e are in an adversarial profession. We fight for the people and entities that we represent, we argue against our opponents in open court, and we vigorously challenge the evidence presented against our positions. This is as it should be. In adversarial trial proceedings, we are ethically obliged to be zealous advocates. In the American justice system, everyone is entitled to be heard, and no one is entitled to evade scrutiny. And from the rough-and-tumble competition of lawyers in court, the truth emerges. But what distinguishes the practice of law from other kinds of conflict resolution is that our adversarial process is defined by principles of civility and professionalism. In our office, for example, the prosecutors fight hard to see that justice is done, but they also understand and respect the role of the criminal
defense attorneys to vigorously advocate for their clients. Similarly, although we may disagree with a judgeâ€™s ruling on a difficult question of law, we also understand and respect that the role of a judge is to make tough decisions. We must always remember that attorneys and judges are good people, all doing their part to see that justice is done. I am proud to be the District Attorney of Harris County. The men and women who work for the citizens of Harris County in our office do their part in an often thankless job to help victims of crime, to rehabilitate people who need help finding the path back to productive and law-abiding lives, and to protect the community from dangerous offenders. As it is for all lawyers, it is our responsibility as prosecutors to fight for justice within the bounds of the law and with respect for each other and for the great American justice system.
The Houston Lawyer
Devon Anderson District Attorney of Harris County
OFF THE RECORD
Cynthia Moulton: Courtroom Ninja Warrior and Beyond By Raymond L. Panneton
The Houston Lawyer
physical fitness has been a priority in Moulton’s daily routine. ndurance, perseverance, and dedication are characDespite being in shape, Moulton knew she needed to take her teristics shared by all attorneys; however, Cynthia training to the next level. She quickly found out that the training Moulton, of Moulton, Wilson & Arney, LLP, has apnecessary to be an American Ninja Warrior was a whole differplied these characteristics to achieve another goal— ent caliber than what she was used becoming an American to. Ninja Warrior. Moulton found a local Houston Moulton maintains a national ninja, Sam Sann, and began training trial and arbitration practice based at his ninja gym. She has been trainin Houston. Practicing in the area ing for her American Ninja Warrior of complex litigation, Moulton’s debut since July, 2014. Having her clients include multi-national corown firm has allowed Moulton the porations, closely-held businesses, freedom necessary to train hard physicians, brokers, and individual while still tending to her clients. entrepreneurs. Moulton dedicates Moulton generally trains daily (exherself to learning the fundamental cept Sundays) between 6:00 a.m. and principles of her clients’ businesses 9:00 a.m., arrives at the office around and uses that knowledge in her liti10:00 a.m., and gets her legal work gation strategy in order to achieve done after she trains, often at odd her clients’ goals. The complexity hours. of her cases and diversity of her Training to be an American Ninja clients help Moulton stay sharp Warrior has given Moulton a new and adaptable—two key skills in perspective on perseverance. “My the fierce competition involved in training has given me a true apprebecoming an American Ninja Warciation for the mental and physical rior. commitment and perseverance reAmerican Ninja Warrior, entering quired to take on a new challenge, its seventh season, is a television overcome fears and never quit,” series in which competitors comMoulton reflects. When asked if plete a series of grueling obstacles training to be an American Ninja for the chance to compete on the ultimate Mount Midoriyama course Cynthia says her training for American Ninja Warrior has helped her in her Warrior has helped her law pracin Las Vegas, Nevada. The competi- law practice: “It has helped me better learn to take things as they come.” tice, Moulton responded that “it has helped me better learn to take things as they come.” tion seeks to push the competitors to their physical and mental Moulton’s application was accepted to compete in the Amerilimits. Moulton, a long-time fan of the show and fitness enthusican Ninja Warrior regional competition, scheduled to be held in ast, accepted the challenge. Houston on March 28 and 29, 2015. Although 50 when she started training, Moulton has never been afraid of a physical challenge. Moulton met her bodybuilder husband at a gym over twenty years ago. He challenged her Raymond L. Panneton practices medical device and pharmaceutical to do a workout with him; Moulton accepted and completed the litigation with the Talaska Law Firm, PLLC. He is a member of the workout without hesitation, and the rest is history. Since then, editorial board of The Houston Lawyer.
Communities In Schools Legal Internship Program
Empowering Students to Succeed
By Amy Hargis
ship between CIS and the HBA would ifty-one percent of Houstonwith an eight-week paid internship at allow us to increase participation and area students fail to graduate local law firms, paid for by the firms. strengthen the program. When we apwithin four years of entering The program sometimes receives grants high school. Communithat pay for internships in governties In Schools of Houston ment offices as well. Students attend (CIS), named one of the top nonweekly enrichment programs durprofit organizations in the country, ing lunch at the civil courthouse. is dedicated to decreasing that numDeveloped and implemented by atber by empowering at-risk teenagers torneys serving on the Committee, to stay in school and achieve success. enrichment programs include guest CIS places full-time staff in schools speakers, moot court, mock trials, situated in the most economicallyand tours. The Committee also redisadvantaged areas of Houston to cruits and encourages law firms provide students with critical reto participate in the program by sources for success, whether it be CIS students participate in a mock trial. employing one of the outstanding tutoring, eyeglasses, counseling, or teenagers. An organization which basic necessities. depends largely on local partnerThe mission of CIS extends beships, law firms’ participation in the yond the classroom as well. One of program is a critical component to the key ways in which CIS empowthe success of CIS and its students. ers students is by connecting them Reasoner explains, “Our hope was to the professional community in that by making the program a partHouston. For over 20 years, CIS has nership with the HBA, we could placed outstanding high school stureach more students and make the dents in summer internships with program stronger than ever. HappiHouston law firms through its Sumly, that partnership has thrived over mer Legal Internship Program. But The Hon. Jennifer Walker Elrod, U.S. Court of Appeals for the Fifth the last six years, and it is well posiCircuit, has participated in enrichment programs for CIS students for it wasn’t until 2009, when Barrett many years. tioned to continue into the future.” proached CIS, they were delighted with Reasoner took office as HBA President, Every year, CIS produces excellent the idea, and things took off almost imthat the program began to thrive. Forgstudents craving exposure to the legal mediately.” ing a partnership between the HBA and community. Law firms of all sizes and As a result, the HBA’s Communities the organization aimed at equipping atpractices are encouraged to participate in in Schools Committee was born. This risk teenagers with tools for personal and the program’s summer 2015 session. For year the Committee is co-chaired by Izzy professional success was one of his main more information, contact Bonnie SimAnderson with HISD, Colin Pogge with focuses. mons at the HBA at firstname.lastname@example.org or Gibbs & Bruns LLP, and Nicole Soussan “My firm had been a part of the Com713-759-1133. with Baker Botts LLP. munities In Schools Legal Internship In conjunction with the Committee, Program for many years,” explains ReaAmy Hargis is an attorney at Doyle the CIS Program provides selected stusoner. “As my year as HBA president apRaizner LLP and a member of The Houston dents who have demonstrated success proached, I thought forming a partnerLawyer editorial board. thehoustonlawyer.com
Supreme Court Clarifies Statute on Termination of Parental Rights
been adjudicated the father of J.K.B. and J.D.B in the 2002 divorce proceeding; (2) genetic testing had not occurred in the divorce proceeding; (3) Roy had not contested paternity in the divorce proceeding because of the mistaken belief at that time that he was the father; and (4) his mistaken belief was based upon misrepresentations that had been made to him. In support of his petition, Roy also presented the trial court with a copy of the genetic test results evidencing he was not By Kelly L. Fritsch the biological father of J.K.B. and J.D.B. Mona did not oppose Roy’s motion to tern June 26, 2014, the First minate. Court of Appeals delivered After hearing, the trial court denied its opinion in In the Interest of Roy’s request for termination. Instead, J.K.B and J.D.B., Minor Chilthe trial court found that Roy was a predren.1 The opinion analyzes sumed father and Texas Family Code therefore excluded §161.005. Under cerRoy had not from asserting tertain circumstances, mination under the statute allows a facontested paternity in 161.005(c). On apther to terminate his peal, the appellate parental rights. The the divorce proceeding court held Roy was Court’s opinion claribecause of the mistaken an adjudicated father fies who is entitled because (1) he was, to seek relief, what belief at that time in the Final Decree evidence is required of Divorce, found to in order to meet that he was the father; be a parent of J.K.B the statutory requireand J.D.B.; and (2) ments, and, whether and his mistaken belief courts have consisor not the trial court tently held that a man can consider the best was based upon has been adjudicated interests of the child. to be the father of a Roy and Mona, the misrepresentations that child when a court parents of J.K.B. and finds the final decree J.D.B., married in had been made to him. resolves all issues af1987. In 2002, they fecting the parent-child relationship. divorced and according to their Agreed What evidence is necessary to proFinal Decree of Divorce, were appointed ceed under Texas Family Code section joint managing conservators of the chil161.005? Subsection (f) requires a trial dren. In that judgment, the trial court court to hold a pretrial hearing to deterfound that Roy and Mona were the parmine whether the father has established ents of J.K.B. and J.D.B. On December 28, a “meritorious prima facie case for termi2011, Roy filed a verified petition to ternation of the parent-child relationship.” minate the parent child relationship beIf a trial court finds that a man has estween him and J.K.B. and J.D.B pursuant tablished a prima facie case for terminato Texas Family Code §161.005(c). Roy’s tion, the trial court shall order the petipetition alleged the following: (1) he had
The Houston Lawyer
tion and child to submit to genetic testing. On appeal, the appellate court found that Roy did establish a prima facie case because (1) his petition tracked the statutory grounds verbatim; (2) his petition was supported by a sworn statement; (3) Mona did not answer the petition; and (4) Mona did not contest the termination request. Can a trial court consider the best interest of the child in making a finding pursuant to Texas Family Code §161.005? As part of the 2011 amendments to section 161.005, the Legislature added the following italicized language to subsection 161.005(a): “Except as provided by Subsection (h), the court may order termination if termination is in the best interest of the child.” Subsection (h) provides: “If the results of genetic testing ordered under Subsection (f) exclude the petitioner as the child’s genetic father, the court shall render an order terminating the parent-child relationship.” Although a parent may still seek termination of the parent-child relationship based on the best interest of the child under subsection 161.005(a), termination sought under subsection (c) does not include a best-interest determination. If a petitioner makes a prima facie showing under subsection (f), entitling him to genetic testing, and the genetic testing excludes him as the father, then he is entitled to termination under subsection (h), irrespective of the child’s best interest. Accordingly, the appellate court reversed and remanded the proceeding back to the trial court. Kelly L. Fritsch is the owner of Kelly L. Fritsch, P.C. located in Houston. She is Board Certified in Family Law by the Texas Board of Legal Specialization and a member of The Houston Lawyer editorial board. Endnote 1. In the Interest of J.K.B. and J.D.B., Minor Children, 439 S.W.3d 442, Tex.App.–Houston [1 Dist.], 2014.ordinance.pdf.
Court of Criminal Appeals Reforms Juvenile Certification Procedure By Jack Carnegie
ix years ago, I got a call from a former colleague, Christene Wood, asking me to take on a pro bono matter that would end up changing the juvenile certification system. Christene knew Cameron Moon, a 16-year-old boy who had gotten in “some trouble” (an alleged murder). A few days earlier, the juvenile court certified Cameron for trial as an adult. Like other children deemed “adults,” Cameron was now in an adult facility in solitary confinement 23 hours a day to “protect” him from adult prisoners. By statute, juveniles have no right to an immediate appeal of the certification order. Cameron was later convicted and sentenced to 30 years in prison. Adult certification is supposed to be reserved for “exceptional cases.” Public policy is to rehabilitate children where possible through one of the proven effective programs available in the juvenile system. The certification statute therefore prohibits juvenile courts from certifying children as adults based on the category of the crime alone. It permits certification only when “the welfare of the community requires criminal proceedings,”1 and requires juvenile courts to consider other factors including the child’s sophistication and maturity, record and previous history, and likeli-
hood of rehabilitation.2 That is the theory. The reality was different. Between 1997 and 2008, juvenile courts in Harris County certified 1,524 children as adults and denied the State’s certification requests only 83 times. Typically, after abbreviated proceedings, the courts entered form orders that made the same findings in every case—some with no apparent relation to whether the welfare of the community required criminal proceedings. Children with IQ’s in the 70s were found sufficiently “sophisticated and mature” based on nothing more than “some evidence” they were capable of assisting their lawyer. Despite this, appellate courts almost never reversed certification. In Cameron’s case, the juvenile court’s form order made no finding that Cameron’s record and previous history supported certification. It recited that Cameron was “of sufficient sophistication and maturity to have … waived all constitutional rights heretofore waived[,]” never mind that, by statute, juveniles have no capacity to waive their rights. It also found he could “aid in the preparation of HIS defense.” The State, however, introduced no such evidence; nor was it evident why community welfare requires adult criminal proceedings because a child can help his lawyer. The juvenile court also said Cameron should be certified because it was more “convenient.” On December 10, 2014, the Court of Criminal Appeals reversed Cameron’s certification, and consequently his conviction, as an adult.3 It agreed the State introduced no evidence to support the juvenile court’s sophistication and maturity finding. More importantly, it held that a juvenile’s “capacity to waive his constitutional rights and help a lawyer to effectively represent him” is not a basis for certification and characterized this finding as “misguided.” It also agreed that the State introduced insufficient evidence to support the finding re-
garding Cameron’s amenability to rehabilitation; there was in fact substantial uncontroverted evidence that he was an excellent candidate. The Court of Criminal Appeals’ decision is critically important. It reminds lower courts that adult certification is reserved for exceptional cases and that the statutory standards for certification must be more thoughtfully applied and reviewed in the future. It clarifies the statutory “sophistication and maturity” element. It ends the use of form orders that make substantially the same findings in every case. It requires juvenile courts to “show their work” and reveal the real reasons each individual child is being certified so the rationale for certification can be meaningfully reviewed. Appellate courts must then base their review on the reasons expressly stated in the order—not other things the juvenile court “might” have found but did not. It further recognizes the difference between the “seriousness” of a crime and the category of a crime; not all crimes that fall into a particular category are the same. Despite the significance of the Moon decision, more remains to be done. Perhaps most importantly, the legislature should restore the right to immediately appeal certification decisions so that other children who are wrongly certified do not spend a third of their life in adult facilities before the error can be corrected. Jack Carnegie, a partner in the Houston office of Strasburger & Price, LLP, focuses on business litigation and arbitration involving the oil and gas and chemical industries. He has an active appellate practice and is Board Certified in Civil Appellate Law. Endnotes
1. Tex. Fam. Code. §54.02(a)(3). 2. Tex. Fam. Code. §54.02(f) 3. Moon v. State, 2014 Tex. Crim. App. LEXIS 1918 (Tex. Crim. App. Dec. 10, 2014)
Gray Mountain By John Grisham 2014, Doubleday
The Houston Lawyer
Reviewed The HON. Jeff Work he best description of Gray Mountain is that it combines the inspiration of To Kill a Mockingbird with the backwoods justice of the tale in the 1972 movie, Deliverance. The newest Grisham book’s scenery backdrop moves swiftly from a large New York City law firm, to Washington D.C., to a small town in the Appalachians and back again several times. The main character, and our heroine, is a bright, young, three-year real estate lawyer, who is the only child of two highly successful lawyers. It can be difficult to be married to a lawyer; it can be excruciating being the only child of an attorney marriage. Initially, this book may be met with much skepticism. Although Grisham has written some enormously successful thrillers over the years, occasionally he leaps into a pulpit to address a topic politically and socially important to him. Legal service to the poor is a hot topic in today’s legal circles, and the source of pride, guilt, pessimism, or indifference to lawyers depending on their involvement. So, when Grisham quickly moves to a Virginia legal services clinic as one of the main environments, the reader may be mentally preparing for a moral tongue lashing. Instead, Grisham rapidly brings the main character, Samantha Kofer, into several humorous situations and more than a few moral dilemmas. In true Grisham style, he creates a drama that appears to have only one solution but suddenly sends the reader into a free-fall of alternative crises. Although the book provides suspense, it is also easy to relax with on a 46
rainy day. As with many of his other writings, if you are critical of Grisham, you may not like this book; but, if you are a fan of Grisham, you will thoroughly enjoy it. Frankly, it would not hurt most of us to gain a deeper understanding of legal services to the poor, and be entertained in the process. The Hon. Jeff Work is a former judge of Harris County State District courts. He practices with the Law Offices of Susan Cartwright/Zurich Insurance Group Staff Counsel, litigating for the Major Claims Unit.
When Money Speaks: The McCutcheon Decision, Campaign Finance Laws and the First Amendment By Ronald Collins & David Skover 2014, Top Five Books
Reviewed by Jason D. Goff haun McCutcheon is an electrical engineer. He is rich but no Rockefeller. McCutcheon believed that he could make a difference by donating money to his political party and its candidates. His greatest obstacle, however, was the threat of being charged and convicted of a felony for overcontribution, bearing a five-year penalty. The law in question, known as the Bipartisan Campaign Reform Act (BCRA), sets limits on the amount any individual can donate to any specific candidate ($48,600 per
candidate) or political party ($74,600 per political party), and additionally sets an aggregate limit ($123,200). During the 20132014 election cycle, McCutcheon wanted to donate more than $135,000 among several candidates and the Republican Party, which would have exceeded the contribution limit under the BCRA. McCutcheon believed that his individual donations were his voice as to what he believed to be the correct direction for the country. He believed that the BCRA obstructed his rights of free speech under the First Amendment and decided that this was the battle he would fight. And so began the case of McCutcheon v. Fed. Election Comm’n, 134 S. Ct. 1434 (2014). When Money Speaks was written by Ronald Collins and David Skover. Collins is a professor of law at the University of Washington Law School. Skover is a professor of law at the neighboring Seattle University School of Law. Collins and Skover have been writing articles and books together for nearly three decades. When Money Speaks addresses the United States Supreme Court’s decision in the McCutcheon case, in which the Court analyzed the constitutionality of restraining an individual’s right to make political contributions. The case was limited to the issue of aggregate contributions, and did not address the limits on contributions to specific candidates or political parties. The debate surrounding the McCutcheon case centers on the weight and balance of two concerns: (1) whether removing political contribution limits puts the government up for sale to the highest bidder, and (2) whether restrictions on individual political contributions serves as an inhibition to the individual’s right to free speech. When Money Speaks does a good job of presenting both sides and includes a detailed history of campaign finance laws, ample character development of the key players, equal explanation of the supporting data from the opposing viewpoints, and a thorough pre-
sentation of the Justices’ legal reasoning for their decision and dissent. As an example of providing both sides of the argument, the authors point out that while the McCutcheon decision directly benefitted the Republican Party (since McCutcheon was a Republican donor), the Democratic Party has also benefitted from large contributions from wealthy individuals (such as George Soros). Campaign finance is an important issue for the United States going forward. Whether you lean towards supporting an individual’s right to freely express themselves through political contribution, or putting restrictions on political contribution to guard against the government being purchased by the nation’s elite, When Money Speaks will help you to strengthen your arguments while deepening your understanding of the rationale of both sides of the cause. Jason D. Goff is an attorney with Sheehy, Ware and Pappas. His practice is dedicated to trial work, where he defends clients in civil litigation claims.
Corruption In America – From Benjamin Franklin’s Snuff Box to Citizens United By Zephyr Teachout 2014, Harvard University Press Reviewed by Steve Wisch
n 1785, King Louis XVI of France, a critical ally during the American Revolution, rewarded Benjamin Franklin’s diplomatic service between the two countries by giving him a gold encrusted snuffbox festooned by 408 pristine diamonds adorning a portrait of the King. While the gift was in line with the extravagance the French King, who as history shows paid for such extravagance with his life, it certainly was not in line with the principles of democratic service in America. Franklin’s devotion to the Republic was beyond question. But, he was mortal. He and his fellow Founders recognized that the Old World custom of rewarding diplomats with expensive presents bordered on bribery for political influence, so they placed limitations in both the Articles of Confederation and the Constitution, requiring the consent of Congress for such gifts. Professor Zephyr Teachout, at Fordham University’s Law School, writes a history of American political contributions, with a particular critique of Citizens United v. FEC, 130 S. Ct. 876 (2014), the 5 to 4 Supreme Court decision in favor of the Plaintiff. Citizens emanated from the plan of Citizens United, a conservative non-profit lobbying group, to fund a massive airing of “Hillary,” a critical film about then Senator Hillary Clinton, during the 2008 Presidential Campaign. Part of the group’s strategy was to advertise the film on television, an apparent violation of the Bipartisan Campaign Reform Act of 2002 (BCRA) that prohibited corporatefunded campaign commercials within 30 days of a primary election. The Federal Election Commission moved to block Citizens United’s advertising programs and Citizens United countered that the 90-minute film was a documentary entitled to First Amendment protection. The Supreme Court agreed,
holding that corporate political speech is Free Speech protected under the First Amendment, and therefore Congress may not restrict corporations from spending to support or denounce candidates in political campaigns. Teachout argues that Citizens United is anchored on two intertwined flaws. “First, the Court found that the First Amendment protects political speech regardless of the identity of the speaker. Second, the Court found no significantly important countervailing government or constitutional goal was served by limiting corporate political advertising.” Therefore, she believes the decision uprooted 200 years of Constitutional precedent by now limiting corruption to “quid pro quo corruption,” which only exists when there are “direct examples of votes being exchanged for expenditures.” Teachout argues that while access does not equal corruption, it easily leads to corruption. Democracy is premised on responsiveness, but responsiveness to the wealthy can overshadow responsiveness to constituents. Donor favoritism is unavoidable. Teachout draws from what she saw while she was in politics, when she discusses some of the realities of campaign contributions and how they can influence decision-making: today’s congressman is often tomorrow’s high-paid lobbyist. This extends to Congressional staff as well. The same corporations that fund elections later employ former members of Congress and former staff with far higher salaries and perks. Teachout is not alone in her opposition to Citizens United. Retired-Justice John Paul Stevens and Justice Ginsburg have characterized Citizens United as the worst Supreme Court decision during their tenure on the Court. Furthermore, both President Obama and Justice Stevens have called for a Constitutional Amendment to overturn Citizens. Steve Wisch is a Houston lawyer whose law practice focuses on representing individuals in health, life and disability insurance disputes. He is a former newspaper reporter, and he remains active in Democratic Party politics. thehoustonlawyer.com
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Ten Things Every LawyER... from page 33 crimination complaint with the Inspector General because the ordinance broadly protects against discrimination in both public accommodation and employment, which would logically include access to restrooms. The publicity surrounding the passage of the City of Houston’s HERO ordinance has educated the public on the availability of a new legal avenue against employers for sexual orientation and gender identity discrimination. For this reason, one would expect to see increased litigation in this area of the law. Although federal law had long been interpreted as allowing such claims before the City took action, the law did not explicitly protect these classifications, and many were unaware of the precedent. That has changed. Ironically, because the HERO ordinance requires the City to refer complaints that are actionable under federal or state law, it is doubtful we will see much actual litigation under the ordinance. Instead, the ordinance will instead spur the further development of sexual orientation and gender identity claims under Title VII (federal law). David Barron is a member in Cozen O’Connor P.C.’s Houston office. He is board certified in Labor and Employment Law by the Texas Board of Legal Specialization, and represents management exclusively in all aspects of labor and employment law. Endnotes 1. City of Houston, Texas Ordinance No. 2014-530; available at http://www.houstontx.gov/equal_rights_ ordinance.pdf. 2. Macy v. Holder, Appeal No. 0120120821 (EEOC April 20, 2012). 3. http://www.justice.gov/sites/default/files/opa/pressreleases/attachments/2014/12/18/title_vii_memo. pdf 4. See, e.g., Schroer v. Billington, 577 F. Supp. 2d 293 (D.D.C. 2008). 5. See, e.g., Smith v. City of Salem, 378 F.3d 566 (6th Cir. 2004); Rosa v. Park West Bank & Trust Co., 214 F.3d 213 (1st Cir. 2000); see also Glenn v. Bromby, 663 F.3d 1312 (11th Cir. 2011). 6. Price Waterhouse v. Hopkins, 490 U.S. 228 (1989). 7. Lopez v. River Oaks Imaging & Diagnostic Group, Inc., 542 F. Supp. 2d 653 (S.D. Tex. 2008). 8. Id. at 660.
10 Ways the HBA serves you.
• Earn all of your CLE and Ethics Hours for free through online CLE videos on the HBA website, and live seminars. • Attend live institutes and special CLE programs, and watch programs through CLEOnline.com, at substantial discounts to members. • Enjoy many opportunities for professional networking with your colleagues. • Find mentors through both one-on-one and group opportunities. • Get to know the local judiciary. • Stay current on legal issues, educational programs and events through HBA publications. • Learn to lead through Committee participation. • Get the right tools for practice through Section membership. • Take advantage of pro bono opportunities that allow you to help veterans, families, the elderly and others who do not have access to legal services, while receiving mentoring and other benefits. • Participate in more than 35 community programs that range from educating children about the law, cleaning up Houston parks and green spaces, building a Habitat home, collecting clothing and books for the needy, and many other activities that make our communities better.
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The Houston Lawyer magazine_March/April 2015