Page 38

COVID-19’s Impact on Drafting and Negotiating Real Estate Contracts

An Overview of Engineering, Procurement, and Construction Contracts

Spotlight on Secondments

How Will an Increased Focus on ESG by the SEC and Investors Impact Transactions?

The Spirit of Community: Houston’s Bid for the 2026 FIFA World Cup

Transactional Law

BUench lawyer Volume 61 – Number 6 May/June 2023 in

COVID-19’s Impact on Drafting and Negotiating Real Estate Contracts

Price Increase Considerations in Government Contracts

An Overview of Engineering, Procurement, and Construction Contracts

By aMy k. Wolfshohl and Cornelius M. sWeers

Spotlight on Secondments introduction by Maggie lu

• Kyle Doherty

• Christian Siboldi

• Emily Tomlinson

• Li Y. Moneypenny

How Will an Increased Focus on ESG by the SEC and Investors Impact Transactions?

By MaDison guerinot

A Litigator’s Guide to Drafting Oil and Gas Contracts: Indemnity, Insurance, and Limitation of Damages Provisions

By Courtney ervin, Colin Watterson, and D. ryan CorDell, Jr.

The Spirit of Community: Houston’s Bid for the 2026 FIFA World Cup

By JaClyn i. BarBosa

The Art of Investigation: Trends and Best Practices in M&A Due Diligence

By Dasha k hoDge

Benefits of Lady Bird Deeds and Transfer on Death Deeds

By Mark P. yaBlon

2023 HBA Law Day Contest Winners Cornerstones of Democracy: Civics, Civility, and Collaboration

First Place: Houston Bar Association Law Day Essay Contest Discourse Drives Democracy

By niCholas nguyen DeBakey high school, houston isD

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, 10306 Olympia Dr., Houston, TX 77042, 281-955-2449 ext 1,, e-mail: leo@quantumsur. com. Views expressed in The Houston Lawyer are those of the authors and do not necessarily reflect the views of the editors or the Houston Bar Association. Publishing of an advertisement does not imply endorsement of any product or service offered. ©The Houston Bar Association/QuantumSUR, Inc., 2023. All rights reserved.

t he h ouston l awyer conTenTs May/June 2023 volume 61 number 6 FeATURes 22 26 30 10 26 30 10 12 18 22 35 16 32 34 12 18 11 2 May/June 2023

Committed to Service

Vinson & Elkins thanks Partner Chris Popov for serving as the 2022-23 President of the Houston Bar Association.

We proudly support our distinguished colleague for his dedication to advancing HBA’s mission to serve the needs of Houston-area lawyers to enhance the legal profession. Thank you for your leadership and unwavering commitment to making a positive impact on your community.

Vinson & Elkins LLP Attorneys at Law Austin Dallas Dubai Houston London Los Angeles New York Richmond San Francisco Tokyo Washington

PresiDent’s Message

Celebrating a Year of Good Work

By ChristoPher v. PoPov

froM the eDitor

The End of the Bar Year

By Brooksie Bonvillain Boutet

off the reCorD

Michael McCormick: A Tale of 21 Cocktails

By nikki Morris

a Profile in ProfessionalisM

Hon. Lee H. Rosenthal

united states District Court for the southern District of texas

Reagan W. Simpson yetter Coleman llP

seCtion sPotlight

Corporate Counsel Section: A New Year of Advancing the Field of Corporate Practice

By ChristoPher CentriCh, leana gariPova, and anthony hilBert

legal trenDs

An Analysis of Helix Energy Solutions Group, Inc. v. Hewitt and the Salary Basis Test—a Test that Provides Benefits to Employers and Employees

By Don J. foty

MeDia revieWs

The Great Dissenter: The Story of John Marshall Harlan, America’s Judicial Hero reviewed by BraDen riley

litigation MarketPlaCe

conTenTs May/June 2023 depARTmenTs
volume 61 number 6
42 t he h ouston l awyer 44 36 8 37 38
42 4 May/June 2023
6 8
36 37 38 40
hon. lee h rosenthal reagan W.

Celebrating a Year of Good Work

Last month, before a capacity crowd of lawyers, judges, and other dignitaries, I passed the HBA president’s gavel to Diana Gomez, who has now begun her term as our 153rd President. It was a wonderful evening. In addition to celebrating Diana becoming our first Latina President, we honored several members who exemplify our mission, including Judge Lee Rosenthal and Reagan Simpson, who received the Justice Eugene A. Cook Professionalism Award for their remarkable careers and consistent dedication to the values of our profession. Locke Lord’s Ann Ryan received the Justice Ruby Kless Sondock Award in recognition of her work as a trailblazing woman in international arbitration. We cannot possibly take inventory of all the good we did last year in 700 words. Every day, our organization, through its 33 committees, 26 sections, and dedicated staff, touches so many corners of the Houston area. After 12 years of board service, it took me serving as president to fully appreciate the impact our organization makes on our community. So in highlighting a few of the year’s achievements, in this column, I do so with a nod to the mountain of good that our members did, and with a focus on just a few of the new initiatives that made an impact his year.

First, we set out to offer a platform for elevating civil discourse over the biggest legal issues of the day. We did that through our President’s Speaker Series, which brought panels of experts together to discuss sensitive legal issues in an objective, substantive way that respects all viewpoints. We hosted panels on amateurism in collegiate sports, voting rights, gun rights, abortion, and free speech over tech platforms. We did it professionally and with reverence for the rule of law. No shouting. No leveling of accusations. No attacking the motives of people with opposing viewpoints. Instead, we offered thoughtful, informative discussions on the current state of the law around these headline-grabbing topics. Our members should be proud of the contrast between how those discussions were presented through the HBA and how they are presented in mainstream media. It is, unfortunately, rare to find such platforms for informative, civil discourse on controversial topics. The State Bar of Texas recognized this exceptional program with a Stars of Texas Bars Award

for Star of Achievement.

Second, we set out to shine a light on our ancillary organizations and to enhance their effectiveness in providing access to justice. Those organizations answered the call. The Houston Volunteer Lawyers placed over 800 cases for extended representation with pro bono attorneys and provided nearly 4,500 cases of pro se assistance and short turnaround advice. There are many ways to measure the value of that service, but when quantified in terms of billable hours, our members donated $12.6 million in legal services to the people who cannot afford a lawyer. That’s almost a 50% increase over the prior year, about three times the average contribution over the prior five years. Additionally, members of the Houston Lawyer Referral Service consulted with over 2,000 Houstonians facing legal problems and took on over 1,000 cases. That organization did so well financially that it was able to make a sizable donation of its referral fees back to support pro bono legal services. And through the Dispute Resolution Center, volunteers offered up over 5,100 hours of volunteer service, which equated to approximately 2,000 mediations—helping thousands of Houstonians resolve their dispute outside of the courthouse.

Finally, we set out to move the needle on wellness issues affecting our profession, and I am proud of the changes we made on that front. We offered wellness-focused CLE programming and revamped the HBA’s webpage on wellness resources. We hosted a managing partners forum on wellness issues and benefits at our law firms. We hosted, as we have for many years, a fun run, golf tournament, and several new physical wellness events. The winter issue of this magazine and The Houston Lawyer podcast were dedicated to wellness issues and to the promotion of wellness resources like TLAP. And we tried, through some incremental behavior changes, to make HBA events healthier environments, including offering nonalcoholic cocktails at all HBA events.

I am proud of these accomplishments, and you should be, too. This is difference-making volunteerism. It is the product of your time and treasure at work, it enhances the quality of life in this city, and it is delivering on the promise of the organization. Cheers to you all on a job well done.

t he h ouston l awyer president’s message
6 May/June 2023


President Christopher V. Popov


Diana Gomez

first vice President

Greg Ulmer

second vice President

Greg Moore

secretary Daniella Landers


David Harrell

immediate Past President

Jennifer A. Hasley

DIRECTORS (2021-2023)

Collin Cox Jeff Oldham

Carter Dugan Colin Pogge

DIRECTORS (2022-2024)

Keri Brown Kaylan Dunn Robert Painter Samantha Torres


editor in Chief

Brooksie Bonvillain Boutet associate editors

Anna Archer Ryan Kent

Elizabeth Furlow Malpass Carly Milner

Nikki Morris Andrew Pearce

editorial Board

Anietie Akpan Jaclyn Barbosa

Natasha Breaux Dasha K. Hodge

Sydney Huber Lee LaFleur

Kristen Lee David T. Lopez

Kylie Loya Maggie Lu

Tim McInturf Lane Morrison

Avi Moshenberg Sara Prasatik

Braden Riley Bryce Romero

Jennifer Smith Kyle Steingreaber

Rachael Thompson Lauren Veillon

Mark Yablon

Managing editor Maggie Martin


executive Director Mindy G. Davidson

receptionist and Membership assistant Fabiola Garcia

Controller Sarah Kole

Director, Marketing and Communications Maggie Martin

Communications specialist Briana Ramirez

Director, education and sections liaison Ashley G. Steininger

education assistant Alli Hessel

Director, Projects and events Bonnie Simmons

Projects and events assistant Reagan Crittenden

Director, Membership and technology services Ron Riojas

Membership assistant Rick Castillo


QuantuM/sur 10306 Olympia Dr., Houston, TX 77042

281.955.2449 •

Publisher Leonel E. Mejía

Production Manager advertising

Marta M. Mejía Mary Chavoustie May/June 2023 7

assoCiate eDitors

The End of the Bar Year

This marks the end of the bar year and the conclusion of another volume of The Houston Lawyer. To round out Volume 61, the theme of this issue was initially planned as “transactional law.” However, with an editorial board full of litigators, it quite frankly became more like everything-but-litigation—in a good way! We were eager to learn about topics outside of our practice areas, and I believe that we have accomplished that—for all of our readers—through this issue.

Martin Buzak and David Rusk discuss contractual drafting considerations in a post-COVID world. Amy Wolfshohl and Cornelius Sweers overview engineering, procurement, and construction (EPC) contracts. Four attorneys share their experiences with secondments, both with clients and outside law firms. Madison guerinot offers her opinions on what to expect in environmental, social, and governance (ESG) trends. Courtney Ervin, Colin Watterson, and D. Ryan Cordell, Jr. outline frequently litigated provisions in oil and gas contracts. Jaclyn Barbosa provides an inside look at legal considerations surrounding Houston’s winning bid to host the FIFA world cup. Dasha Hodge discusses best practices in due diligence. And Mark Yablon reviews options to transfer real property outside of probate.

Anna Archer has recorded the final episode of season three for our companion podcast Behind the Lines. “We WON’T See You in Court” features lawyers who charted career paths outside of litigation with interviews on ChatGPT, real estate law trends, and establishing a non-litigation centric law firm. It also includes young lawyer spotlights, a wellness break, and a segment with the Dispute Resolution Center.

Thank you to all members of The Houston Lawyer editorial board for your service this year. This publication is truly a team effort, from brainstorming content through editing submissions. And a special thank you to the guest editors of this issue, Maggie lu and lane Morrison, and the associate editors of Volume 61: Elizabeth Furlow Malpass, Andrew pearce, Carly Milner, nikki Morris, Ryan Kent, and Anna Archer. Each has spent countless hours curating, writing, and editing content for their respective columns (and the podcast), in addition to working on the articles in each issue. I look forward to seeing what future editorial boards accomplish, especially next year’s board, who will be marking the 60th anniversary of the publication under the leadership of Elizabeth Furlow Malpass.

When I first joined the editorial board, Tara Shockley was the managing editor of The Houston Lawyer. With her tenure at the HBA, and specifically with the magazine, she always knew the answer to any question—or exactly where to find it—and carefully molded the publication into what it is today. My dear friend Anietie Akpan asked me to succeed her as editor in chief, and my first question was “who will be succeeding Tara as managing editor after her retirement?” I was nervous to take on this role with anyone else by my side. Then, Maggie Martin joined the HBA as communications and marketing director. As part of her job, Maggie has been the magazine’s managing editor for the past two years, and she has beautifully and seamlessly transitioned into this role, bringing with her a wealth of experience. Without Maggie’s dedication to the editorial board, this publication would not be possible. Thank you to Maggie and Tara for your time spent on The Houston Lawyer

And, thank you all for reading The Houston Lawyer.

t he h ouston l awyer from the editor
Elizabeth Furlow Malpass Baker Botts Nikki Morris BakerHostetler Andrew Pearce BoyarMiller Ryan Kent Harris County District Attorney’s Office Carly Milner Foglar Brar O’Neil & Gray Anna M. Archer U.S. District Court
8 May/June 2023
Members of the 2022-2023 Houston Lawyer editorial board at the final meeting of the bar year in the HBA office.
Marc Whitehead, Esq. We specialize in representing disabled workers and veterans who have been denied their disability benefits. We fight to overturn claim denials for: • Long-Term Disability Insurance • Social Security Disability Insurance • Veterans Disability Call our office today to discuss partnering on any of these claims. Referral fees are paid in appropriate cases. Have Your Client’s Disability Benefits Been Denied? We can help. Board Certified – Personal Injury Trial Law Texas Board of Legal Specialization Board Certified – Social Security Disability Law National Board of Trial Advocacy Board Certified - Social Security Disability Law 888.699.8210 | ALABAMALLM.UA.EDU EARN YOUR LL.M. ONLINE WITH A CONCENTRATION IN TAXATION OR BUSINESS TRANSACTIONS RAISE THE BAR! May/June 2023 9

COVID-19’s Impact on Drafting and Negotiating Real Estate Contracts

The COVID-19 pandemic affected (and continues to affect) the practice of law in numerous ways. While the effects may be more pronounced in certain legal practices (e.g., Zoom hearings are still often used in litigation), the pandemic has forced every lawyer to adapt their practice to some extent. The practice of real estate law is no exception.

As with many other transactional practices, the pandemic forced real estate lawyers to revisit and expand upon their force majeure provisions. A provision that many lawyers previously considered “boilerplate” became a very important factor in determining clients’ rights and remedies. In addition to the usual suspects (storms, fires, labor strikes, etc.), force majeure provisions now routinely excuse performance delays caused by pandemics, epidemics, quarantines, and supply chain issues. These changes are typically uncontroversial, although the party less likely to claim force majeure will often clarify that “quarantines” extends only to government-imposed quarantines. While each of these events may already be covered by the standard “catchall” language (e.g., “any other cause beyond the reasonable control of a party”), it has become common practice to specifically describe those circumstances to avoid ambiguity down the line.

Real estate lawyers negotiating development-related agreements have also seen an increased focus on construction timelines, budget adjustments, and liquidated damages, particularly on buildto-suit projects. These provisions have always been heavily negotiated, even before the pandemic. However, COVID-19 caused delivery delays and cost overruns on a massive scale, thereby heightening the focus on (and scrutiny of) related contractual provisions. Developers, contractors, and their respective counsel now spend even more time negotiating (1) what constitutes a “permissible” or “excused” delay and the requirements to claim such a delay,

(2) allocation of liability for any cost overruns resulting from the delay or related supply chain issues, and

(3) adjustments to any liquidated damages that would otherwise result from the delay (whether as between the developer and contractor or the developer and its tenant).

Finally, the proliferation of “work from home” policies has raised a number of drafting issues for real estate attorneys. Office leases often include covenants requiring tenants to occupy and operate their businesses within the leased premises. Office landlords and tenants must now consider and define what constitutes “occupancy” for purposes of the lease. If half of the tenant’s employees work from home on a regular basis, is the tenant in violation of the lease? What about three-quarters? In a similar vein, office landlords and tenants now spend more time negotiating subletting clauses. Tenants want more flexibility to sublet otherwise unused portions of their leased premises. Landlords tend to disfavor vacancy (even if the tenant is paying rent), but they also want to ensure they have some level of approval over the occupants of their buildings.

More than three years after the initial shutdown, COVID-19 continues to impact the practice of law in many ways. Like other specialists, real estate lawyers have encountered both short-term effects (e.g., contractual disputes relating to supply chain issues have subsided for the most part) and long-term effects (e.g., occupancy and subletting covenants will likely continue to be relevant in the coming years). The pandemic’s ongoing impacts will require real estate lawyers to employ lessons learned and remain adaptable in order to effectively manage contract risks arising from the COVID era.

Rusk is a partner at Holland & Knight LLP focusing on real estate and banking matters.


Price Increase Considerations in Government Contracts

Above-average material price inflation and supply chain constraints have hit Texas cities hard. Market volatility has limited the availability of certain materials or caused their lead time to increase significantly, impacting municipalities’ abilities to complete critical infrastructure improvements, or otherwise effectively administer their contracts. While dynamic world events are beyond cities’ control, workable strategies can mitigate such issues to keep projects moving forward.

Occasionally, project managers may agree to a delayed notice to proceed in order to give contractors time to procure long lead items. Extensions of contract time may also be an option. If specific material is unavailable, project managers can substitute other products of comparable quality that serve the needed purpose. Managers can also buy project materials in advance and then arrange for the materials to be stored at city facilities until ready to be incorporated.

While commodity contracts typically include automatic price increase clauses, services contracts may not. In such cases, appropriately authorized city individuals may, in extraordinary circumstances and in their discretion, approve an increase to unit prices. The contractor must be able to demonstrate verifiable cost increases or other issues, such as suppliers or subcontractors being unable to provide the needed materials. Any price increases are, of course, subject to statutory or contractual limitations. If a city must amend a contract to authorize a discretionary price increase framework, the governing body may have to approve the amendment. Project managers are advised to follow their chains of command to avoid misunderstandings and further delays.

A municipal attorney might draft a contract to keep costs static for the first con-

tract year but allow a contractor to request an adjusted price beginning in the second year. The contractor should submit the request to the designated city individual and include current written documentation from a relevant, nationally recognized index detailing the rationale for the adjustment. If price volatility provides an opportunity for reduced costs in the short term, an attorney could draft the contract to mandate pricing to revert to the previous level if the index level falls.

Material or labor price increases alone are not the sole cause for project delays. Sometimes contractors or developers fail to meet project milestones for unrelated reasons. But without transparent communication between contractors and proj-

ect managers, it may be difficult to know what those reasons are. Managers should be transparent with contractors about when price increases are feasible and appropriate. Cities might consider a contractor’s compliance with prompt payment and prevailing wage requirements or other critical contract terms and conditions when determining price increases, so managers should also thoroughly monitor all relevant aspects of a contractor’s performance throughout the contract lifecycle. Managers should always follow their internal procedures and consult with their counsel, if necessary, to ensure any price increases are done in accordance with relevant laws and city policies.

Martin Buzak is a senior assistant city attorney in the City of Houston Legal Department, where he serves as the chief of the department’s Contracts Section. May/June 2023 11

An Overview of Engineering, Procurement, and Construction Contracts

What Is an EPC Contract?

Engineering, procurement, and construction (EPC) contracts are commonly used in the construction of large infrastructure and energy projects, such as ports, airports, power plants, refineries, petrochemical plants, and renewable energy facilities. Unlike the typical design-bid-build construction arrangement where the owner contracts with separate firms to design and construct a project, an EPC agreement bundles all or some of the project design, engineering, and procurement of materials and equipment, and construction of the facility, with a single EPC contractor.

Large energy and infrastructure projects are particularly suited to EPC contracts. First, such facilities typically have objective performance criteria, such as generation capacity for a power plant or storage capacity for a crude oil terminal, that can be translated into the contractual design basis. Instead of providing a set of plans and specifications generated by an architect, in an EPC arrangement, the owner typically provides the performance requirements that the facility has

to meet, and the EPC contractor in turn designs the facility to meet those performance requirements. Second, aesthetics are low on the priority list when developing industrial projects, so owners generally are willing to cede this design role to the contractor in return for other benefits. By contrast, in commercial or residential projects, aesthetics are an important consideration, and the owner/developer usually wants input and the final say on what the finished product looks like. Consequently, owners and developers play a greater role in the design stage of such projects and tend to engage architecture firms to prepare plans and specifications that can be put out to bid. Third, coordinating the various moving parts of the design and construction of such large projects is a challenge, and owners often prefer to hire a single “one-stop shop” EPC contractor with experience in delivering such complex projects.

EPC contracts typically are structured with a lump sum contract price, and the discussion in this article assumes a lump sum structure. From the owner’s perspective, a key purpose of EPC contracts is to shift the risk of integrating project design, engineering, procurement, and construction from the owner to the EPC contractor. An EPC contractor tends to have little room to complain to the owner about design or engineering changes in project drawings or late-delivered equipment,1 because the EPC contractor is the one responsible for preparing the drawings, procuring the equipment, and constructing a finished project. EPC contractors, of course, do not assume these risks for free. Thus, the disadvantage of EPC contracts from the owner’s perspective and potential advantage from the contractor’s perspective is that they tend to include a higher risk premium built into the contract price than one would find in a typical design-bid-build contracting arrangement.2 This contract price is typically, though not always, structured on a lump sum basis. In return for the higher risk premium, the owner (at least in theory) tends to gain greater certainty regarding the project’s schedule and cost, as well as additional options for project financing.3

aMy k. Wolfshohl and Cornelius M. sWeers

Understanding the Core “E,” “P,” and “C” Components of the EPC Contract

Though EPC contracts share many commonalities with other types of designbid-build construction contracts, there are significant differences that drafters and negotiators need to keep in mind.


Unlike a traditional construction contract, a true EPC contract explicitly places some or all of the design/engineering responsibility on the EPC contractor. With some limits, this is expressly permitted under Texas law by Chapter 59 of the Texas Business and Commerce Code enacted in the 2021 legislative session. Chapter 59 provides that the contractor “is not responsible for the consequences of design defects in and may not warranty the accuracy, adequacy, sufficiency, or suitability of plans, specifications, or other design documents provided to the contractor by a person other than the contractor’s agents, contractors, fabricators, or suppliers, or its consultants, of any tier.”4 However, many, if not most, EPC contracts will likely fall outside the scope of Chapter 59, as it exempts contracts for construction or repair of a “critical infrastructure facility” as defined by a laundry list that “includes” 24 items, such as refineries, chemical plants, power plants, gas processing plants, liquefied natural gas facilities, oil or gas pipelines, and more.5 Chapter 59 further exempts contracts where “the construction, repair, alteration, or remodeling is performed under an engineering, procurement, and construction contract and the part of the plans, specifications, or other design documents for which the contractor is responsible under the contract is the part alleged to be defective.”6 As a result, Chapter 59 overrules the Lonergan case and its progeny (requiring the contractor to expressly disclaim responsibility for design, otherwise the contractor may bear the risk of design defects and errors)7 in many, but not all, instances. Key instances where Chapter 59 would probably not apply by its own terms include certain typical EPC contractual structures, described

further below, including (1) “full wrap” EPC contracts, (2) “partial wrap” EPC contracts with respect to the portion of the design for which the contractor is expressly responsible, and (3) construction contracts for pipelines and petrochemical facilities (whether or not EPC contracts, if such facilities meet the fairly broad definition of a “critical infrastructure facility” articulated in Chapter 59).

To achieve the intended result of transferring design/engineering responsibility to the contractor, an EPC contract should expressly address key design and engineering issues. Two of these key issues are the extent to which the owner or contractor is responsible for the facility’s design basis and warranties on design/ engineering services.

The “design basis” is typically found in larger EPC agreements where the engineer has full design responsibility or the project is more complex. In essence, it is a broad scope of work that shapes the detailed design, engineering, procurement, and construction required for a complete project. The design basis usu-

ally lists the applicable codes, statutes, regulations, and overall project requirements. Project requirements include the essential purposes of the facility (i.e., how many barrels per day of product a facility is designed to process, what type of petrochemicals will be processed as feedstock, etc.). In some instances, the design basis is not contractual. The design basis may be created before the EPC agreement or during the project. In litigation, frequently the original assumptions in the design basis form the largest claims. For example, the dispute may rest on one project participant’s failure to identify the relevant technical code that applies under given project conditions. If the design basis is not contractual, a possible ambiguity may exist regarding whether the requirement was intended to be incorporated into the agreement.

Another key issue is the applicability of warranties to engineering services. While design professionals often refuse to give warranties on their services in standalone design or engineering agreements due to the lack of professional li- May/June 2023 13

ability coverage, EPC contracts differ in that their typical purpose is to produce a project that meets certain performance guarantees. For this reason, from the owner’s perspective, it is important to make sure that the warranty provisions of the EPC contract are broad enough to include engineering services. One way to do this is to make sure that the contractual definition of the “Work” to be performed under the EPC contract— which is typically defined in such an agreement—includes engineering services. Otherwise, warranties may not extend as far as intended. Including a warranty for the EPC contractor’s engineering services has the further benefit of reducing disputes over whether a particular issue is a matter of construction or engineering services. From any owner’s perspective, regardless of whether coverage exists, it is more reasonable for the engineer to take this responsibility than the owner given the purpose of the agreement. From the contractor perspective, EPC contractors should be aware that professional liability coverage may not exist for accepting such responsibilities and often limits warranties to those that are consistent with coverage.


Another important issue the EPC contract must address is the extent to which the EPC contractor is responsible for procuring materials and equipment for the project. With respect to procurement, EPC contracts tend to come in two varieties: (1) “turnkey” or “full wrap” and (2) “partial wrap.”8 In “turnkey” or “full wrap” EPC contracts, the EPC contractor is responsible for procuring all equipment and materials, as well as the risks of equipment and material delivery delays and defective materials/ equipment. Lenders and equity investors tend to prefer this approach because it reduces the owner’s risk with respect to major equipment defects or delays.9 The downside from the owner’s perspective, and benefit from the EPC contractor’s prospective, is an increased risk premium built into the contract price to account for the EPC contractor taking the

material and equipment risk.10

By contrast, in a “partial wrap” EPC contract, the owner often procures the major equipment and certain materials with the EPC contractor responsible for installing and incorporating the equipment and owner-supplied materials into the work.11 This approach is in tension with the overarching purpose of an EPC contract to shift risk to the EPC contractor, including the risk of equipment/material delays. By procuring materials and equipment, the owner gives up some of the benefits of shifting procurement risk to the contractor and runs the risk of disputes with the EPC contractor in the event of late-delivered or defective equipment. However, owners may choose a “partial wrap” approach for several reasons. Sometimes, the owner may be able to procure equipment and materials at a much lower cost than an EPC contractor would charge. Other times, the owner will be positioned to procure materials at an earlier point in the project than the EPC contractor, allowing the project to be completed more quickly. If an owner wishes to supply materials, it is important for the owner to understand and carefully track when material and equipment must be delivered. The best tool for this purpose is a well-written scheduling clause that requires the EPC contractor to regularly update a critical path schedule. Additionally, the owner’s negotiation of the change order clause and owner-caused-delay provision takes on more significance for a project where the owner will be supplying key materials or equipment.


In addition to addressing engineering and procurement, the EPC contract must address the issues found in an ordinary construction contract. Depending on whether a “turnkey” or “partial wrap” EPC approach is desired, there are several big picture issues to keep in mind. If the goal is to achieve a “turnkey” EPC arrangement, it is important to define the scope of work as broadly as possible to accomplish the parties’ goal of entering into a single contract for a

complete facility. This can be done using a broad definition of the scope of work in the agreement itself, along with a more specific scope of work attachment, if desired. An accurate description of the “Project” is also necessary given that in EPC agreements, the multilayered, complex nature of the concept of a project is usually broader than in the typical building project, and in many instances, few or no drawings are developed before the contract is signed.

Additionally, in a “partial wrap” arrangement, care should be taken at the outset to expressly define which portions of the facility are the responsibility of the contractor and what materials or equipment the owner will provide or supply. For example, in some “partial wrap” scenarios, the contractor is simply responsible for assembling or integrating owner-supplied equipment (as well as the engineering and procurement of material to connect all the equipment). If that is the case, the EPC contract needs to specify where the owner responsibility stops and contractor responsibility begins. In other scenarios, the owner may only want the EPC contractor to construct a portion of the overall facility, while reserving other portions of the facility to be built by other specialized contractors. In any of these “partial wrap” situations, carefully defining the scope of work for construction is important at the outset to avoid unpleasant surprises and change order disputes during the project.


EPC contracts provide a means for parties to develop large infrastructure and energy projects and allocate the correspondingly large risks that come with developing such projects. By vesting responsibility for the project in a single EPC contractor, EPC contracts shift most cost and performance risks to the EPC contractor in exchange for a risk premium. This allows owners to more easily quantify project risks and results in a contract that helps the owner obtain project financing from lenders and investors. Because of the many ways EPC contracts differ in their scope and risk

14 May/June 2023

allocation provisions from ordinary construction contracts, attorneys drafting or negotiating EPC contracts need to be aware of those differences to avoid pitfalls and unexpected outcomes.

Amy K. Wolfshohl is certified by the Texas Board of Legal Specialization in construction law and is a construction partner in Porter Hedges LLP’s Houston office. She represents clients in analyzing risk and resolving problems in connection with highly complex construction transactions, with an emphasis on industrial construction, energy construction, commercial construction, and EPC contracts, as well as all areas of construction litigation. Ms. Wolfshohl graduated magna cum laude from the University of Houston Law Center. Before practicing law, Ms. Wolfshohl was a project engineer for general contractors in Texas and California.

Cornelius M. Sweers is a construction associate in Porter Hedges LLP’s Houston office. He advises clients on both construction transactions and disputes on industrial, energy, commercial, and multifamily projects. Mr. Sweers graduated with highest honors from the University of Texas School of Law in 2016.


1. This assumes the Contractor has fully assumed such responsibilities, but in some EPC arrangements the owner retains certain responsibilities for engineering, procurement, or construction.

2. Dr. Patricia D. Galloway, The Art of Allocating Risk in an EPC Contract to Minimize Disputes, 38 Constr. L. 26, 27 (Fall 2018).

3. Id.; see also Damian McNair, EPC Contracts in the Power Sector, DLA Piper Asia Pacific Projects Update, 3–4 (2012).

4. Tex. Bus. & Com. Code § 59.051(a).

5. Tex. Bus. & Com. Code § 59.001, 59.002(b).

6. Tex. Bus. & Com. Code § 59.002(c)(2).

7. Lonergan v. San Antonio Loan & Trust, Co., 104 S.W. 1061, 1065–66 (Tex. 1907); Interstate Contracting Corp. v. City of Dallas, 407 F.3d 708, 720–21, 726 (5th Cir. 2005); El Paso Field Servs., LP v. MasTec N. Am., Inc., 389 S.W.3d 802, 811 (Tex. 2012); Amy K. Wolfshohl, Never Can Say Goodbye: Lonergan Reaffirmed by Texas Supreme Court 100 Years Later, 7–8, 28th Construction Law Conference, San Antonio, Texas (2015).

8. Jill Van Dalen & Laura C. Fraher, Not all Contract Models Have the Same Risk: Tips for Managing Power and Energy Projects, 38 No. 9 ACC Docket 50, 52 (Nov. 2020).

9. Id. 10. Id.

Personalinjury Wrongfultermination Intellectualproperty Commercialdamages/lostprofits Businessvaluations Whenyouneedanumber callournumber 281.846.6132 DAMAGES WWW.THOMASRONEYLLC.COM May/June 2023 15
11. Id.

Coming out of law school, most of us are aware of two main career paths: working at a law firm or working inhouse. A lesser-known opportunity is a secondment— an arrangement between a law firm and a client or a prospective client in which an attorney works in-house for the organization for a set period of time. Occasionally, an in-house lawyer may be seconded to a law firm. Secondments generally range from three months to two years and provide attorneys with not just a unique experience to develop their skills, but also a chance to develop client relationships. Secondees have the opportunity to learn

Kyle Doherty

Iwas in my first year at Baker Botts when I was seconded to Shell for about five months (with a brief interruption due to Hurricane Harvey). I had never worked for a huge company like Shell before, so I thought it would be fun to see what it was like for my workplace to be a campus, complete with an onsite cafeteria and gym.

Aside from the amenities, something I came to appreciate was the massive scale of the legal department. My group—which focused on North American shale assets—was part of a constellation of teams organized by practice type, geography, and asset classifications. It seemed like it would be easy to get lost in such a complicated organization, but all my coworkers seemed to have friends across the length and breadth of the department. I realized this was because the company made a concerted effort to encourage folks to take on tours of duty as parts of different teams and familiarize themselves with various aspects of the business. This sort of cross-pollination was apparent when talking to my colleagues, some of whom had come from completely different

Christian Siboldi

In the fall of 2021, I had already been working for our client, a global online retailer, for about six months when I was approached by the relationship partner with the opportunity to be seconded to the client while the client tried to fill a recently vacant position. I was working very closely with the in-house attorney who left, so everyone thought it would make the most sense to bring me on to run with those deals and handle new ones as they came in.

I had only ever worked for law firms up until that point, so I was very interested to see what it was like to work directly with the business side. It was eye-opening in the sense that I never realized how complicated the internal processes can be just to get approval for a specific provision in a lease, for example. One of my main takeaways from the experience is that now I am always looking for ways to make my client’s job easier for their own

the ins and outs of the organization’s internal processes, as well as develop an understanding of how to quickly and effectively solve the organization’s problems. In this issue, The Houston Lawyer spotlights four attorneys who have recently completed secondments.

Maggie Lu is an attorney in the Real Estate practice of Jackson Walker’s Houston office and a member of The Houston Lawyer editorial board, as well as a guest editor for this issue.

practice groups in law firms before joining Shell. One of my cubicle mates had started out as a tax attorney at a large law firm, came to Shell as counsel to the gas and derivative trading group, and, as of my secondment, was working on upstream shale asset development. A LinkedIn search indicates he is now with Chemicals & Products, Americas. Aside from the great people, interesting work, and onsite sushi bar, I also enjoyed getting to know the history of Shell. My favorite fact: the name comes from a company that sold seashells in London. While the move from crustaceans to energy seems to have worked out for Shell, I appreciated the reminder that even supermajors have humble beginnings.

Kyle Doherty is a senior associate in the global projects group at Baker Botts, where his practice focuses on project development, joint ventures, commercial agreements, and M&A transactions in the energy transition space.

internal clients—whether that be teeing up correspondences to the correct point of contact or simplifying agreements to ensure they can obtain approvals from the appropriate stakeholder.

I will be forever grateful for the experience, as it has solidified internal contacts with people who have since moved on from the company, as well as helping me understand my other clients’ particular business needs so that I can help serve them better.

Christian Siboldi, a 2015 graduate of South Texas College of Law Houston, has an active practice that consists of retail and industrial leasing, helping clients buy and sell raw and developed land, joint venture deals, and a bit of financing (mainly lender side).

SPotlIgHt on SECondMEntS
16 May/June 2023

Emily Tomlinson

In August 2021, I received a cryptically worded email from my practice group head requesting a call that afternoon. After spending my day trying to figure out what I had done wrong, we finally connected, and he presented me with an unexpected opportunity—a six-month secondment with a client, Vitol Inc. I had always been interested in a secondment, and a potential move in-house, but was surprised by his offer. I had never worked for Vitol and did not have a background in commodity trading. Nonetheless, I was excited to learn more, and a few days later interviewed with Vitol’s general counsel, Ernie Kohnke.

After meeting Ernie and the other attorneys in the legal group, they extended me an offer to join their team. On the one hand, I would be returning to the office five days a week after over a year working from home, and I was not sure what to make of sitting on a trade floor. On the other, Vitol is quite possibly the most interesting and dynamic company you have never heard of that deals with complex legal issues and sophisticated clients.

Ultimately, it was an easy “yes,” and I started two weeks later. During my secondment, I felt fully integrated into the team. I enjoyed the fast pace and the variety of work. While I did not have a substantive background in much of what I reviewed and

Li Y. Moneypenny

In 2020, Shell afforded me a three-month reverse secondment opportunity at Reed Smith’s Houston office, where I expanded my legal skills by supporting a range of major construction projects in the firm’s Energy & Natural Resources group. I spent much of my time working with Antoine Smiley, supporting pre-litigation claims and disputes under construction agreements. This work included exposure to arbitrations, where I prepared analysis on potential defenses for contractor claims regarding topics on which I have regularly negotiated the counterargument for Shell. Having to stand in the shoes of a potential counterparty helped me understand their drivers (for example, why the variation provisions are so important to contractors). As a transactional attorney, this first-hand claims experience has enabled me to better advise my business partners on risk management and the areas of the contract to focus on. This experience also provided a deeper understanding of key jurisdictional differences and taught me to look at issues

negotiated, I found the other attorneys and my clients always welcomed questions and were often excited to talk about what they were working on.

From a business development perspective, it was incredibly helpful to understand a client’s needs from the client perspective. Surprisingly, it was often those junior associate skills that made all the difference—double- and triple-checking for typos, promptly responding to emails, even if just to acknowledge receipt, and delivering work product when promised.

A few months after my secondment concluded, I received a call from Ernie asking if I would come in for a meeting. He was looking for a lawyer to join full time, and my six-month secondment now looked, in many respects, like a six-month interview. It was another enthusiastic “yes!”

Emily Tomlinson is corporate counsel with Vitol Inc. Prior to joining Vitol, Emily was an associate at Vinson & Elkins LLP in Houston.

through a different lens.

All in all, this experience not only broadened my expertise in construction law, but also provided insight into the relationship and expertise of one of Shell’s panel firms. I was also able to observe how the firm responded to COVID-19 and approached virtual working. Having completed this reverse secondment, I see myself as a more well-rounded lawyer, especially since I started my legal career at Shell and have not witnessed how things are done elsewhere. I am grateful to both Shell and Reed Smith for providing me with this unique opportunity.

Li Y. Moneypenny is legal counsel for Projects & Technology – Projects at Shell USA, Inc. May/June 2023 17

How Will an Increased Focus on ESG by the SEC and Investors Impact Transactions?

ESg overview and Use in Investments

Environmental, social, and governance (ESG) has become a hot topic for investors in recent years. For those not familiar, ESG proposes a set of nontraditional factors to identify risks and opportunities related to a given business. Each of the three main categories includes numerous subcategories, so any given company must tailor its focus to the ESG factors most relevant to its business. Environmental considerations range from physical risks from rising sea levels to carbon emissions. Social factors can mean anything from diversity and inclusion to the ethical sourcing of materials. The governance factors look to how ethically a company operates and how it incorporates environmental and social considerations into the business. ESG advocates argue that boards incorporating ESG into business decisions and investors using ESG to evaluate potential investments increase financial returns and reduce liabilities.1 For example, a company with robust anti-harassment practices is less likely to encounter costly litigation. On the environmental side, an investment fund considering the physical risks of its assets is likely to suffer fewer costly damages from hurricanes or flooding.

Consequently, ESG-related funds and a focus on ESG have proliferated in the M&A world.2 According to one study, 65% of M&A executives say their companies’ focus on ESG will increase over the next three years.3 Incorporating ESG into due diligence involves broadening traditional diligence considerations that are already geared toward evaluating potential litigation risks or future financial performance. In fact, many ESG factors, like safety and diversity, are already accounted for in EEOC and OSHA reporting requirements. Buyers are asking more ESG questions in the due diligence process, and sellers need to be prepared.

As investors seek ESG investments, companies are reviewing their internal ESG metrics and seeking to provide reports to their shareholders and potential investors. However, the U.S. currently lacks an overarching ESG reporting standard. Companies attempting to incorporate ESG have wide latitude to choose a reporting standard (or not) in compiling any investor reports or public relations materials. The most used reporting standards include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-Related Financial Disclosures (TCFD).

Even after selecting a given framework, companies have further discretion on how to use the framework. For example, SASB includes 77 identified industries, each with different standards for evaluation.4 Thus, a company must select the most applicable industry (or combination) prior to evaluating its ESG metrics. Similarly, the TCFD includes 11 different categories of disclosure. For the fiscal year 2021, only 4% of companies using TCFD disclosed according to all 11 recommended disclosures and only 40% included at least five of 11 disclosures.5 While ESG reporting may provide investors and shareholders with more information, the lack of standardization makes it difficult to draw comparisons between companies, or even develop a full understanding of any individual company or

fund. ESG reports may even be misleading given the lack of scrutiny of climaterelated methodologies.

SEC takes an Interest in ESg Companies are increasing their ESG reporting, and regulators are taking note. To rectify some of the issues associated with this new plethora of ESG reports, the Securities and Exchange Commission (SEC) launched a Climate and ESG Task Force in March of 2021.6 The Task Force is working to identify material gaps or misleading statements in issuers’ reports.7 As summarized below, the SEC is stepping up enforcement related to ESG reporting and is proposing new rules related to that reporting.

Investment Company Act “Names Rule”

In 2022, the SEC proposed changes to

the Names Rule, including changes designed to reduce greenwashing in investment funds. Greenwashing refers to exaggerated claims made regarding ESG, especially for sustainability.8 The current rule requires investments with names suggesting a focus on a particular type of investment to have 80% of the assets invested in accordance with the suggestion of the name. The proposed rule extends this 80% requirement to funds with names suggesting a focus on investments with “particular characteristics.” The SEC did not define the term “particular characteristics,” but used ESG as an example of a term that would trigger the new requirement. Funds with names such as “ESG” or “sustainable” need to consistently invest in appropriate assets or risk being

found materially deceptive or misleading under the new requirements.

Climate-Related Risk Rule

In March 2022, the SEC published a proposed rule requiring that publicly traded companies report on climate-related risks.9 While many people agree that a broad need for standardization exists, there has been considerable discussion and commentary surrounding the proposed rule. It has been hotly contested and drew more than 15,000 comments. The rule would require registrants to include climate-related disclosures in their registration statements and periodic reports. In particular, companies would be required to disclose climate-related risks that are reasonably likely to have a material impact on the company’s business, operations results, or financial condition. The proposed rule requires companies to analyze the climate-related costs and risks for each item of their financial statements and report costs that are 1% or higher of a given line item. It was ex-

‘‘ May/June 2023 19
To rectify some of the issues associated with this new plethora of ESG reports, the Securities and Exchange Commission (SEC) launched a Climate and ESG Task Force in March of 2021.”

pected that the rule would be finalized in April 2023, but as of the writing of this article, the rule has not been finalized. Given the broad reach of the proposed rule, legal challenges are sure to follow.

SEC Enforcement

While the SEC continues to increase regulations around ESG, current regulations give the SEC power to prosecute issuers who make misleading statements in their reports. In the past few years, the SEC has been cracking down on issuers’ and investors’ statements regarding ESG.10 In 2022, the SEC charged BNY Mellon Investment Advisor, Inc. (BNY) for misstatements and omissions about ESG considerations in making investment decisions for certain mutual funds that it managed.11 The SEC’s order found that for three years, BNY had failed to use the ESG criteria as promised in evaluating investments and that numerous investments held by BNY did not have ESG quality review scores at the time of the investment. BNY agreed to settle the charges with a $1.5 million penalty. Adam S. Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Climate and ESG Task Force, stated, “[a]s this action illustrates, the Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process.” While this is just one example of SEC enforcement, as ESG reporting and related regulations increase, we expect similar enforcement actions to increase in tandem.

going Forward

As investors become increasingly focused on ESG, they will demand more accurate and reliable information from companies. The SEC’s proposed rules point to a significant shift toward standardization and accountability in ESG reporting. SEC enforcement poses a serious potential liability, so buyers of public companies will need to closely review

past reporting for potential greenwashing. There has been, and will likely continue to be, some ESG pushback, as well. Still, it seems fair to say that the overall emphasis on ESG will continue, with a corresponding increase in ESG due diligence in connection with investment decisions and acquisitions.

Madison Guerinot is an environmental associate in Phelps Dunbar’s Houston office. She combines her experience in engineering and law to help companies in heavily regulated industries stay current on evolving regulations and other macroenvironmental factors that may impact their bottom lines. Complimenting her environmental practice, Madison is a frequent author on topics related to ESG policies, trends, best practices, and regulations.


1. Tim Koller, Robin Nuttall, and Witold Henisz, Five Ways that ESG Creates Value, Nov. 14, 2019, com/business-functions/strategy-and-corporate-finance/ our-insights/five-ways-that-esg-creates-value.

2. ESG-focused Institutional Investment seen Soaring 84% to US $33.9 trillion in 2026, making up 21.5% of Assets under Management: PwC Report, Oct. 10, 2022, gx/en/news-room/press-releases/2022/awm-revolution2022-report.html.

3. Jean-Charles van den Branden, Axel Seemann, and Marc Lino, The ESG Imperative in M&A, Feb. 8, 2022, https://www., and Martin Vezér and Doug Morrow, ESG Compatibility: A Hidden Success Factor in M&A Transactions, Jun. 29, 2017,

4. SASB Standards, Sustainability Accounting Standards Board,

5. Task Force on Climate-Related Financial Disclosures, Final Report: Recommendations of the Task Force on Climate-Related Disclosures (2017) and Task Force on Climate-Related Financial Disclosures, 2022 Status Report, Oct. 2022.

6. SEC Announces Enforcement Task Force Focused on Climate and ESG Issues, RELEASE 2021-42 (Mar. 4, 2021).

7. Spotlight on Enforcement Task Force Focused on Climate and ESG Issues, U.S. SECURITIES AND EXCHANGE COMMISSION (Apr. 10, 2023), enforcement-task-force-focused-climate-esg-issues.

8. SEC Proposes Rule Changes to Prevent Misleading or Deceptive Fund Names, RELEASE 2022-91, May 25, 2022,

9. SEC Proposes Rules to Enhance and Standardize ClimateRelated Disclosures for Investors. RELEASE 2022-46, Mar. 21, 2022,

10. See Enforcement Task Force Focused on Climate and ESG Issues,

11. SEC Charges BNY Mellon Investment Advisor for Misstatements and Omissions Concerning ESG Considerations, Release 2022-86, May 23, 2022, press-release/2022-86.

20 May/June 2023

Hallettsville Rare Find! Running Springs!! Cattle Dream Place!!!

1007± Acres Lavaca County - Just 7 miles to downtown Hallettsville, in the same family for many years, no pesticides/chemicals ever used, great all-around cattle/horse recreational ranch, small cabin, two old barns, cattle pens, dove hunting, spring-fed pond, running springs, great location!

Texas Best Water! Medina River, Creek, 2 Lakes, Minutes to Bandera!

374± Acres Bandera County - Minutes to Medina/ Camp Verde. 4BR/4BA ranch home w/pool, guest house, cabin, nice barn, equipment shed, airstrip, hangar, paved roads, electric gate, large & small lake, both sides of cypress-lined creek & Medina River!

Rare Opportunity – Bandera Texas Giant Lake!

60± Acres Bandera County - Minutes to historic Bandera, 3BR/3BA lake-side home, wrap-around porches, 1BR/1BA guest cabin, barn w/workshop, paddocks, boat ramp, floating dock, 3 pastures, water well, paved access, gated entry, more!

Texas Best Deal! Motivated Seller!!

1 Hour to Horseshoe Bay!!!

2,556± Acres San Saba County! - 5,500± s.f. 3BR/3.5.5BA hilltop home, gourmet kitchen, magnificent porches, giant patio w/pool, outdoor cook area, 10 ponds, community water, 4,000± s.f. pole barn, 3,000± s.f. shop, 20± years game managed, great wildlife, gated entry.

Jeff Soele • 210-705-4013 •

Indemnity, Insurance, and Limitation of Damages Provisions

When oil and gas executives negotiate a contract, their focus is understandably on the commercial terms: what is being sold, how long is the deal, and, of course, price. The parties are aligned toward a common goal of planning and executing on a successful project and rarely carefully consider the practical implications of “boiler plate” provisions that are the stuff of lawyers. But market conditions shift, accidents occur, supply chains are disrupted, and even a global pandemic can strike. While no one can predict the future or contract against every possible “what if,” parties would be well-served to think carefully about the potential risks and how the risk-shifting provisions in the agreement allocate that risk. These riskshifting provisions include indemnification, insurance, and limitation of damages. Instead of falling back on standard provisions used in prior agreements, parties should think critically about the potential risks and how these provisions will impact both sides if a dispute arises.

This article will explain the purpose of these provisions and recommend considerations for negotiating their terms. Entire articles and treatises are devoted to each of these topics. This article is merely a starting point for things to consider. The wise negotiator will include a litigator on their deal team to provide guidance on drafting these provisions in

light of the specific contract, including its value, place of performance, and anticipated risks.


Indemnity provisions are intended to allocate risk in advance of a loss for the purpose of managing that risk, often including through the purchase of insurance. When drafting indemnity provisions, parties should thoroughly evaluate the potential losses that may arise out of the agreement and which party can adequately cover those losses. Indemnities are intended to provide more certainty as to which party bears what loss because they shift liability from one party to another. However, efforts to provide certainty are not always successful. For example, if the indemnitor cannot afford the indemnity, if there is any room for contrary interpretation, or if the clause may be unenforceable, litigation often ensues.

An important preliminary consideration in drafting an indemnification clause is its breadth. Will the indemnification be narrow and limited to instances where the indemnitor is at fault or broad enough to cover situations where the accident or property damage is solely the fault of the indemnitee? Indemnity clauses are typically sorted into three buckets: narrow: The indemnitor indemnifies losses caused by its own fault and the indemnitee’s negligence bars indemnification.

Intermediate: The indemnitor owes indemnity for losses caused in part by the indemnitee, but the indemnitee’s sole negligence bars indemnification. Broad: The indemnitor owes indemnity without regard to the fault of the indemnitee, including losses caused by the sole or concurrent negligence of the indemnitee.

Parties should take note that the broader the indemnity, the more likely it is governed and limited by specific laws. Indemnification provisions can also be mutual or unilateral. In a mutual ar-

A lItIgAtor’S gUIdE to drAFtIng oIl And gAS ContrACtS:
By Courtney ervin, Colin Watterson, and D. ryan CorDell, Jr.

rangement, the parties agree to indemnify each other. In a unilateral scheme, one party agrees to indemnify the other without receiving reciprocal indemnification. “Knock-for-knock” indemnity provisions are a common form of mutual indemnity in the oil and gas industry pursuant to which each party is responsible for the death or injury of its own employees and/ or for loss or damage to its own property. Where subcontractors may be involved, the parties also need to consider how the indemnity provisions in the master contract and subcontracts are intended to, and actually do, interact.

While the above examples are types of standard indemnities, absent statutory requirements, the scope of an indemnity provision is in the control of the contracting parties. A single clause can cover all types of losses, cover only specific types of losses, or the parties can draft separate indemnity provisions applicable to distinct types of loss (e.g., environmental, property, or personal injury). The parties can also include defense of any claim within the scope of the indemnity. If defense is included, parties should expressly contract for the right to control the defense, including selection of counsel and settlement. Parties can also limit the amount of indemnity provided and whether it must be backed by collectable insurance. Parties should also expressly provide for the notice to be provided, including timing and scope (i.e., promptly provide all notices, demands, and claims).

The previous paragraphs discuss the many factors parties should consider when tailoring indemnification provisions to their specific commercial objectives. But parties must also understand and comply with laws that limit or outright bar certain types of indemnity arrangements. Because indemnity provisions contractually shield a party from liability it would otherwise have under the law, there are numerous laws governing their enforceability. Moreover, many of these laws are considered a matter of public policy and, thus, a choice of law provision selecting contrary law may be May/June 2023 23

unenforceable. For this reason, it is not enough to include a choice of law provision and assume the indemnity will be enforced, provided it complies with the chosen law. The parties must also consider whether another state’s law may apply and draft the indemnity provisions with that state’s law in mind (or at least include a severability provision and be mindful of the risk the indemnity may be invalidated).

In Texas, as in many states, there are anti-indemnity statutes that restrict the use of indemnity provisions in certain circumstances. For example, the Texas Oilfield Anti-Indemnity Act (TOAIA) imposes limitations on indemnification arrangements involving oilfield operations. There are also common law requirements that must be considered. An indemnity provision that purports to indemnify a party for its own negligence must meet the Express Negligence Doctrine and the conspicuousness requirement to be enforceable.1 The Express Negligence Doctrine holds that “[a] party seeking indemnity from the consequences of [its] own negligence must express that intent in [clear and] specific terms within the four corners of the contract.”2 The Conspicuousness Requirement requires the indemnity to be written such that “a reasonable person against whom it is to operate ought to have noticed it,”3 (i.e., must be visually flagged, e.g., with Bold, CAPS, italics). Texas law is unclear as to whether a party may be indemnified for its own gross negligence, intentional torts, or punitive damages.4


As with indemnity, insurance is another way to allocate risk. As briefly mentioned above, it would be wise for parties to include insurance requirements to support the parties’ indemnity obligations. Under TOAIA, certain safe harbors apply to salvage indemnity obligations if those obligations are supported by insurance. In addition to specifying the type and limits for required insurance, parties may also wish for the non-procuring party to be

listed as an additional insured. An additional insured can obtain insurance rights under the policy directly for a covered loss, including defense. This gives the party an additional source of funds to cover a loss. The parties may also want the insurer to waive any right of subrogation against the non-procuring party. A waiver of subrogation prevents an insurance company from suing to recover amounts paid for an insured loss. Absent an agreement to the contrary, an insurance company typically has the right to “stand in the shoes” of its insured to recover insurance funds paid for a covered loss. Insuring a loss may save a company from responding to a lawsuit from its counterparty, but without a waiver of subrogation, the policy may serve only to change the name on the other side of the “v” to that of the insurer.

Parties should be mindful that the scope and validity of additional insured provisions and anti-subrogation clauses depend not only on the language of the contract, but also on the language of the policy. While it is common for parties only to obtain a certificate of insurance, that document is not enforceable and does not describe the policy’s terms, including exclusions. The best practice is to obtain and review the insurance policies in connection with drafting any insurance requirements and confirming they have been followed.

limitation of damages

Limitation of damages provisions are useful to cut off the scope of the parties’ risk under a contract. Damages can be limited by amount or type of damages, or both. They can also be narrow in scope, applying only to claims under the agreement, or be broad in scope, applying to claims relating to the subject matter of the contract. In drafting limitation of damages provisions, it is important to understand the type of damages being limited and the risk that such damages will occur. Parties also need to consider whether the limitation of damages applies to any indemnity obligation. For example, parties

often exclude consequential damages. But what constitutes consequential damages is not easily understood and is heavily litigated. By law, consequential damages “result naturally, but not necessarily, from the defendant’s wrongful acts” and must be foreseeable.5 On the other hand, direct damages are “the necessary and usual result of the defendant’s wrongful act; they flow naturally and necessarily from the wrong.”6 A party seeking to avoid liability will argue that the damages sought are consequential, not direct, relying on the limitation of damages provision. Instead of using the oft-litigated term “consequential damages,” consider using a damages cap or more specific terms, such as lost profits, lost use, or business interruption.


In closing, parties must remember that a court or tribunal will interpret the contract based on the words the parties chose and not based on what the parties actually intended, unless the agreement is ambiguous. It is therefore critical for parties to write what they mean and mean what they write. While this seems obvious, after days, weeks, and even months of negotiations, it can be easy for the parties to read the contract to say what they intended instead of what is actually stated. One of the best ways to guard against litigation is to have a relative stranger to the negotiation do a cover-to-cover review of the contract prior to execution to look for ambiguities and inconsistencies. In a dispute, the parties interpreting the agreement—successor parties, litigation counsel, arbitrator, judge, and jury—will almost assuredly not have been its drafters.

A careful drafter will consider the “what if” scenarios and how the allocation of risk under the contract may apply under those scenarios. To mitigate risk as much as possible, a drafter should pay close attention to the language of any indemnity, insurance, or damages limitation provisions. Keeping these drafting tips in mind will help ensure that a contract has the intended outcomes—no matter what disputes arise.

24 May/June 2023

Courtney Ervin is a partner with the litigation boutique Hicks Thomas LLP, where she serves as lead counsel for numerous clients in the energy industry, including major E&P companies, independent producers, and service providers in business disputes. Courtney also serves as national counsel to a leading property and casualty insurer.

Colin Watterson is also a partner at Hicks Thomas LLP, where he focuses his practice on complex commercial litigation in state and federal courts and in arbitration. Colin has represented oil and gas companies in numerous disputes involving master service agreements, joint operating agreements, and other oilfield service contracts.

D. Ryan Cordell, Jr. is an associate at Hicks Thomas LLP, where he has experience handling a variety of complex commercial litigation matters, including contract disputes, tortious business conduct, trade secret misappropriation, and infringement of various other types of intellectual property. Ryan also has experience in mass torts and personal injury litigation.


1. See Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex. 2004).

2. See Dresser Indus., Inc. v. Page Petroleum,853 S.W.2d 505, 508 (Tex. 1993) (citing Enserch Corp. v. Parker, 794 S.W. 2d 2, 8 (Tex. 1990)).

3. See id. (citations omitted).

4. Compare Webb v. Lawson-Avila Constr., Inc., 911 S.W.2d 457, 461–62 (Tex. App.—San Antonio 1995, writ dism’d) (such indemnification provisions do not violate public policy and are enforceable when the parties are sophisticated entities bargaining from positions of substantially equal strength) with Smith v. Golden Triangle Raceway, 708 S.W.2d 574, 576 (Tex. App.—Beaumont 1986, no writ) (pre-injury releases of gross negligence violate public policy and are not enforceable).

5. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997).

6. Id

Visit for more information about Crowe LLP, its subsidiaries, and Crowe Global. © 2023 Crowe LLP. MBV2301-001F Texas values. Global reach. Crowe is a public accounting, consulting, and technology firm with five offices in Texas. Our experienced teams – locally and around the world – provide a variety of services and solutions for legal departments and law firms. • Forensic accounting and litigation support • Business valuation
Family law forensic accounting
Digital forensics and incident response services
Legal management consulting Explore more on May/June 2023 25

Houston’s Bid for the 2026 FIFA World Cup

Our beloved Houston is a multicultural city with a thriving, diverse community.

The Harris County-Houston Sports Authority (HCHSA) curates the city’s robust sports culture by bringing world-renowned sporting events to Houston, including the highly anticipated 2026 FIFA World Cup.

This World Cup will be the biggest in the tournament’s history after the 67th Fédération Internationale de Football Association (FIFA) Congress unanimously voted to expand the tournament to 48 teams.1 And, 2026 will be the first time in the history of the World Cup that three countries—the U.S., Canada, and Mexico—will host the tournament. Once FIFA selected the United 2026 bid submitted by the three countries,2 further host city evaluations were necessary to select 17 host cities and stadiums from the 41 options across North America.

On June 16, 2022, FIFA announced that Houston won its bid to host the 2026 FIFA World Cup. Houston expects to host five or six games over three to four weeks and daily ancillary events for visitors and the local community throughout the tournament. Projections estimate that the tournament will have a regional economic impact worth upward of $1 billion and an economic impact of $14.3 billion across the three host countries.3

HCHSA was instrumental in navigating the matrix of legal, procurement, and

organizational mechanics responsible for bringing the FIFA World Cup to Houston. The legal and policy landscape that HCHSA navigated during the bid process was incredibly complex, touching on issues related to facility contracts, marketing and sponsorship agreements, copyright and trademark law, immigration law, labor and employment law, federal aviation regulations, criminal law, and nonprofit tax law. This article describes the HCHSA’s role in that bid process.

the History of the HCHSA

Every major Texas city has a sports authority to develop and manage the local sports stadiums and arenas within the locale. The Harris County Commissioners Court and Houston’s City Council created the “sports and community venue district” in 1997 when the Astros built their new ballpark in downtown Houston. The voters then approved of the HCHSA’s creation. Its history is primarily rooted in building and managing sports venues funded by bonds.

About 15 years ago, the HCHSA decided to expand its mission to include bringing one-of-a-kind sporting events to Houston. Janis Burke, the organization’s first female CEO, has been integral to ushering in a new era of robust sporting events in Houston since she joined the HCHSA around the same time. Ms. Burke has spearheaded efforts to create Houston’s first major league rugby team, the Houston SaberCats, and establish partnerships with the Houston Texans to coordinate major sporting events, such as Super Bowl LI, the Gold Cup (regional soccer championship between the U.S., the Caribbean, and Central America), and matches between the Premier League and major Latin American teams in NRG and PNC Stadiums.

A dream of the World Cup

Hosting the World Cup, however, was not a new dream for Houston. The 1994 FIFA World Cup was hosted exclusively in the U.S., with host cities including Orlando, Washington, D.C., Chicago,

tHE SPIrIt oF CoMMUnIty:

and Dallas. This historic opportunity transformed the North American soccer landscape, notably resulting in the birth of Major League Soccer, which has grown into one of the most exciting and well-established soccer leagues in the world, including our own Houston Dynamo. After the 1994 World Cup, the City and future committee members felt the generational impact that the tournament had on the youth and the host communities. Not having an established sports authority at the time, unfortunately, Houston was never an option. However, FIFA officials did (prophetically) consider us as a viable host for a future tournament.

the Houston 2026 Bid Committee

Houston’s journey to the successful 2026 FIFA World Cup bid began when the HCHSA established the Houston 2026 Bid Committee, led by Chris Canetti and John Arnold.4 The Committee’s primary goals were to fundraise and identify numerous community considerations for hosting such a large-scale event, including selecting stadiums to be used as practice facilities for players, coordinating law enforcement and security, and addressing transportation and hotel needs. The United 2026 Committee and FIFA looked at each candidate city’s (a) experience hosting major sporting and cultural events, (b) potential venues, (c) transportation infrastructure, (d) available accommodations, (e) environmental protection initiatives, (f) costs and revenue forecasts, and (g) commitment to human and labor rights.5

Houston’s Experience Hosting Major Sporting and Cultural Events

Houston has hosted Super Bowl LI, the 2004 MLB All-Star Game, the 2013 NBA All-Star Game, multiple NCAA Final Four tournaments, CONCACAF Gold Cup matches, the 2021 World Table Tennis Championship, and the 2016 Copa Centenario.6 With this resume, Houston has hosted more major sporting events than any other city since 2004.

Houston’s Potential Venue for FIFA World Cup NRG Stadium was the tournament site included in Houston’s bid proposal. The suggested practice facilities were PNC Stadium, Houston Sports Park, AVEVA stadium (home to the Houston SaberCats), and facilities at the University of Houston and Rice University. The HCHSA and Houston 2026 World Cup Bid Committee—once the facilities were selected—collaborated with the owners and major tenants of these facilities, their subtenants, and contracted service providers to work through potential contract disputes that may arise as it relates to the use of the facilities during the tournament, as well as any tenant or sponsorship that conflicts with FIFA and any FIFA sponsor.

Houston’s transportation Infrastructure

Houston scored a 4.3 for its transportation infrastructure, which is well above the United 2026 bid average score of 3.6.7 While the bid and the evaluation noted

the lack of rail-based transportation at IAH, the Metropolitan Transit Authority of Harris County (METRO) proposed a METRORapid line that begins at IAH.8 If this METRO line goes live before the 2026 FIFA World Cup, it will provide a much-needed, efficient mass transportation option between IAH and downtown.

Available Accommodations

Houston scored a perfect 5.0 for General Accommodations proposed in the bid.9 Houston offers 800 qualified hotels and more than 75,000 rooms throughout the city.10 The Committee noted that it already has contracts in place. FIFA said that there is so much available space, however, that the City may not be able to secure an area properly. This is another issue that the Committee must consider when selecting accommodations for the teams. One of FIFA’s main priorities is player safety. HCHSA acts as a bridge between the private commercial space and local government when they bring private hoteliers with the Mayor’s office, the May/June 2023 27

Houston Police Department, METRO, and other providers to help ensure players’ safety.

Environmental Protection Initiatives

FIFA also considered Houston’s commitment to reducing transportation-related emissions. The high occupancy vehicle and high occupancy tolling lane programs increase the transportation system’s efficiency, reducing the average emissions rate per trip. The City and METRO also invest in cleaner vehicles: the fully electric LRT system, the downtown circulator bus, which gets its power from compressed natural gas (CNG), and METRO will replace its entire bus fleet with clean vehicles with either CNG-powered engines or diesel-powered engines fitted to save fuel and reduce emissions.11 HCHSA is also working with METRO to provide free public transportation to every ticket holder.

Commitment to Human and l abor rights

FIFA’s new human and labor rights requirements include safeguarding children from sexual or other abuses and protecting freedom of expression, supply chain transparency, and media freedom. In response to these requirements, the City formed a Human Rights Subcommittee with 11 members, including representatives from the Mayor’s Office of Human Trafficking and Domestic Violence, the Mayor’s Office of New Americans and Immigrant Communities, Houston Dynamo F.C., and local

businesses. Together, committee members and stakeholders came up with 50 planned measures that the City can take to advance FIFA’s commitment to human and labor rights. Examples of these measures are:12

a. hosting law enforcement community listening circles to foster collaboration, highlight existing positive efforts, and create collaborative service learning between police and minority groups;

b. expanding the current prevailing wage regulations or enforcing a $15 minimum wage on public projects;

c. using citations instead of arrests for minor crimes to prevent migrants from being taken into ICE custody;

d. bolstering the supply of accessible rideshare options, including equipping drivers with technology for communicating with the hard of hearing and the blind, in compliance with the Americans with Disabilities Act; and

e. establishing a legal clinic for workers to express grievances, help documented visitors at the airport, and handle human rights violations.

Houston 2026 also commits to a $15 an hour minimum wage on all contracts for game delivery. The workers’ rights group suggests working closely with employers providing services related to the World Cup and with labor and community organizations concerned about employment issues pertaining to proper wages and workers’ rights to establish mechanisms to be proactive in mitigating issues, such as implementing prescreening and ensuring that any issues are promptly handled. Additional measures include implementing and enforcing financial penalties for businesses that violate the wage requirements and entering into a labor peace agreement to ensure that workers receive the minimum wage and provide conditions to express grievances. In an effort to help local workers get hired on these proj-

ects, the Committee recommends targeted hiring provisions in contracts.

After the Bid Process: Preparing for the 2026 FIFA World Cup

The Committee responsible for retaining the bid transitioned to the Houston 2026 Hosting Committee effective January 1, 2023 and, under this name, is moving forward with the immense preparations to be completed. The 2026 FIFA World Cup is an exciting opportunity to host the largest sporting event in the world, and it will continue to elevate Houston’s international profile within the sporting world. The World Cup bid process is complex, and involves collaboration with several companies, groups, and philanthropists. Lucky for us, we have the HCHSA and Houston 2026. This is a well-deserved win for Houston.

Jaclyn I. Barbosa is a Labor & Employment associate at Hunton Andrews Kurth. Her experience includes involvement in federal and state court actions for harassment, discrimination, breach of contract, fraud, tortious interference, negligence, and deceptive trade practices. She also advises employers on tort claims, wage and hour issues, employment policies and handbooks, fair credit reporting, restrictive covenants, and transactional aspects of labor and employment law. Jaclyn is a member of The Houston Lawyer editorial board.


1. FIFA, Bid Evaluation Report 2026 FIFA World Cup (2017), 1d154bdd6324/original/ir3g14juxglqbbteevvfpdf.pdf, at 3, 11. Of the 41 North American cities that submitted bids, 11 U.S. cities, two Canadian cities, and three Mexican cities were chosen as hosts.

2. United 2026 is the name of the joint bid for the 2026 FIFA World Cup entered by the United States, Canada, and Mexico, collectively.

3. Mario Diaz, FIFA World Cup economic impact will be felt from now to 2026, according to officials, CLICK2HOUSTON (Jun. 22, 2022, 10:39 PM),

28 May/June 2023
FIFA’s new human and labor rights requirements include safeguarding children from sexual or other abuses and protecting freedom of expression, supply chain transparency, and media freedom.”


4. Mr. Canetti, a 19-year Major League Soccer executive, served as president of the Houston Dynamo before joining Houston 2026. Mr. Arnold, an experienced oil and gas trader and one of the City’s most prominent philanthropists, has a deep passion for soccer.

5. For a graphic representation of the evaluation process, see Bid Evaluation Report at 8

6. Interview with Chris Canetti, President, Houston 2026 Bid Committee (Aug. 10, 2022) (notes on file, Jaclyn Bar-bosa).

7. See Bid Evaluation Report at 201.

8. “The METRORapid Bus Rapid Transit (BRT) network is designed to provide station-to-station service similar to METRORail but has the flexibility to accommodate multiple routes. A METRORapid line will provide a direct con-nection between Downtown and George Bush Intercontinental Airport.” See METRO, METRONext Moving Forward Plan Summary, MetroPDFs/METRONEXT/METRONext-Moving-Forward-Plan-Summary.pdf.

9. See Bid Evaluation Report at 200.

10. United 2026 Bid Book at 268, available at https://

11. Id. at 348.

12. For the list of 50 Areas of Opportunities, see FIFA, FIFA World Cup 2026 candidate host city human rights stakeholder engagement report, at 86–96, available at chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.houstonsports. org/wp-content/uploads/2021/12/HOUSTONFIFA-WC-Human-Rights-Submission-w-template-FINAL-FOR-6-30-2021-SUBMISSIONCLEAN.pdf.



Personal Injury Claim*

• Lawyer sued for allowing a default judgment taken against client

• Damages of up to $4,000,000 sought ($200,000 policy limit)

• TLIE settled case for $300,000


Deductible = $1,000

Amount over policy limit = $109,000

Total out-of-pocket = $110,000


Defense costs $10,000

Settlement + $300,000

Total out-of-pocket = $310,000

* Based on actual claim handled by TLIE.

FIND OUT MORE: TLIE.ORG or (512) 480-9074

FUN... May/June 2023 29

Trends and Best Practices in M&A Due Diligence

Due diligence may not be an M&A practitioner’s favorite part of a transaction, but it can be the most important. Findings during the due diligence process can guide the price, structure, and terms of a transaction, and, in extreme cases, ultimately determine whether there will be a deal at all. This is why it is important to have a robust and thorough diligence process at the onset of a deal. The following discussion includes some baseline best practices for practitioners and highlights recent trends and areas of focus.

Establish Scope of Investigation

The first and foremost task in any due diligence undertaking is to establish the scope of the investigation. Work closely with your client and internal legal team to determine the areas of concern. While a due diligence process should be comprehensive, there may be special areas of concern for the client that should receive additional consideration.

d etermine d eal team Composition

It is increasingly important to include team members with the right subject matter expertise on your due diligence team. This includes both internal and external team members. The client may have its internal team conducting certain investigations, and care should be taken that appropriate firm subject matter experts are coordinating with the corresponding client personnel. In addition, the client may also be working with (1) an investment bank, which conducts financial diligence and analysis, (2) an audit firm, which conducts diligence on financial statements, (3) tax advisors, who conduct diligence on tax and financial matters and taxefficient structuring, and (4) other consultants who conduct diligence on a specific part of the business (for example, reserve engineers may audit a company’s oil and gas reserves, an environmental consultant may audit a company’s environmental compliance, and a risk management consultant may review insurance).

Use of technology

In addition to having the right personnel, understand what tools you have at your disposal. Most legal due diligence is conducted virtually, using virtual data rooms, with only an occasional need for a site visit. In addition, data analytics tools are increasingly used to conduct diligence, including analyzing and synthesizing large data sets.

representation and Warranty Insurance ( r WI)

RWI has become a common and central component of M&A transactions. Knowing at the onset of a transaction that parties will be looking to insurance for post-closing liability related to breaches of representations and warranties may impact due diligence. An insurer will want comfort that the buyer has completed comprehensive diligence before binding a policy. To this end, the lawyers will prepare a

tHE Art oF InVEStIgAtIon:

due diligence memorandum and hold a “management call” with the target’s management, counsel, and the insurer to review the memorandum and answer any specific questions. A common exclusion from RWI coverage are liabilities resulting from facts the buyer knew about prior to binding the policy. However, this should not be viewed as an incentive to conduct anything less than a thorough due diligence review. If there are liabilities uncovered prior to signing, the appropriate remedy may be to negotiate a purchase price adjustment or a special indemnity from the seller for the uncovered liability.

Environmental, Social, and g overnance (ES g ) d iligence

As in other areas of corporate governance, there is a growing trend in diligence toward assessing a target’s ESG performance. Acquirers and their stakeholders recognize the potential financial and reputational risks associated with ESG issues and are allocating more time and resources to assessing the risks and benefits of a potential transaction through an ESG lens.


With the inescapable reliance on technology and the increasing threat of cyberattacks, acquirers are increasingly focused on assessing the existence and effectiveness of a target company’s cybersecurity policies and incident response plans and identifying any po -

tential vulnerabilities.

data Privacy

Given the increasing complexity of data privacy regulations, such as the General Data Protection Regulation (GDPR) and California’s Consumer Protection Act (CCPA),1 acquirers are focused on ensuring that the target is in compliance with applicable regulations. An acquirer will want to evaluate the target’s data protection measures, including data encryption, access controls, and data backup and recovery systems.

C oVId -19 Effects

The COVID-19 pandemic changed the practice of law in many respects, and due diligence was no exception. For example, COVID-19 has increased the need for supply chain diligence, as the COVID-19 pandemic highlighted the vulnerabilities of global supply chains. As a result, acquirers are more focused on understanding the full scope of the supply chain of the business being acquired, including understanding supplier risks, contingency planning, and ESG matters. Another effect of COVID-19 and the related governmental response was to add a layer of financial diligence, in the form of diligence relating to COVID-19 relief and status of any loans received by the target company.

Dasha K. Hodge is a corporate and M&A counsel in the Houston office of Akin Gump Strauss Hauer & Feld LLP. She is also a member of The Houston Lawyer editorial board.


1. At the time of writing, Texas has not adopted a similar data privacy law. However, on April 5, 2023, the Texas House of Representatives voted in favor of House Bill 4 for the Texas Data Privacy and Security Act. The Texas Senate subsequently approved the bill, and as of this writing, the legislation is currently awaiting signature by Governor Abbott.

‘‘ May/June 2023 31
It is increasingly important to include team members with the right subject matter expertise on your due diligence team. This includes both internal and external team members.”

Benefits of Lady Bird Deeds and Transfer on Death Deeds

There are several significant reasons that estate planning attorneys may advise a property owner to use one of two types of special deeds, a Lady Bird Deed or a Transfer on Death Deed (TODD) (collectively, Special Deeds) to transfer real property to third parties instead of by will, trust, inter vivos gift, outright sale, or intestacy law. Either type of deed is attractive for the right client because each allows:

1. Instant transfer of real property to intended third party(ies) on the date of the property owner’s death;

2. Flexibility and control to revoke deeds at any time while the property owner is competent;

3. Avoidance of costs and delays associated with probate (legal, timing, court procedures, etc.);

4. Avoidance of Medicaid recovery of a Medicaid recipient’s real property after the property owner dies;

5. Exemptions and creditor protections; and

6. Avoidance of costs and ongoing tax and legal implications of trusts.

Both deeds have similarities and some differences. Regardless of which deed is used to transfer a property, the property owner files the deed with the county property records department. But unlike a deed of transfer upon the sale of real property, the transfer is not completed upon the filing. Rather, the transfer takes place automatically upon the property owner’s death.

Additionally, unlike with a trust or inter vivos gift, the property owner can decide to revoke the Special Deeds by filing a formal revocation with the county or filing

a subsequent Special Deed. The property owner can also automatically revoke the Special Deeds simply by transferring the real property by sale or gift.

These Special Deeds bypass probate. They also override wills and intestacy laws that otherwise name certain beneficiaries to receive the real property. The process is akin to naming specific beneficiaries in a life insurance policy, which also bypasses probate. Avoiding probate may save the beneficiaries some legal costs and certainly saves time as probate may take months or years to complete, depending upon challenges to the will or finding heirs and getting them to agree on the disposition of the property.

Medicaid pays for the healthcare of millions of Texans. Of particular concern to property owners is that Medicaid makes one spend down a significant portion of one’s assets—excluding the real property—before Medicaid begins paying for long-term care services. But after the owner dies, the government may recover its costs against the estate, which would be principally the real property. Because these Special Deeds immediately transfer the real property upon the property owner’s death, the asset is not subject to probate. Because it is not subject to probate and no longer an estate asset, the government generally has not made a claim. With a TODD, the government cannot make a Medicaid recovery claim.1 Although, estate creditors may make a claim against the real property if the estate has insufficient assets to pay creditors.2 Because these special deeds are not inter vivos gifts or sales of property, the property owner maintains the existing property tax exemption and real property

creditor protections.

Trusts can be an excellent way of transferring assets, but they come with additional upfront and ongoing costs and complexities that are not suited for everyone. If the primary concern is how to smartly transfer a real property, the Special Deeds provide a low-cost, hassle-free way to do so.

Another perk is that because these special deeds are not inter vivos gifts or sales of property, the property owner maintains the existing property tax exemption and real property creditor protections.

The concept of Special Deeds began decades before the practice was codified.3 The Lady Bird Deed is a construct of common law based on property law. While case law validates the use of Lady Bird Deeds, one must piecemeal multiple cases together to defend or attack a Lady Bird Deed, depending on what issues are presented.4 Whereas TODDs are statutorily authorized. The TODD was created in 2015 by the Texas Legislature to specifically address giving a future right to real property with the right to revoke that gift while competent.5

Regardless of which option best fits a client’s particular needs, Special Deeds present opportunities to better meet a client’s wishes as to whom should receive a significant asset in a simple, cost-effective manner—while alive and beyond.

Mark P. Yablon founded Yablon Law PLLC to be a clientcentered law practice, helping business and individuals with estate planning, probate, real estate, bankruptcy, and commercial litigation. He is on the editorial board of The Houston Lawyer


1. “Notwithstanding Subsection (a), real property transferred at the transferor’s death by a transfer on death deed is not considered property of the probate estate for any purpose, including for purposes of Section 531.077, Government Code.” TEX. EST. CODE § 114.106.

2. TEX. EST. CODE § 114.106(a).

3. “A person may make an inter vivos conveyance of an estate of freehold or inheritance that commences in the future, in the same manner as by a will.” TEX. PROP. CODE § 5.041.

4. In re Estate of Turner, No. 06-17-00071-CV, at *2 (Tex. App.—Texarkana Dec. 8, 2017).

5. TEX. EST. CODE § 114.101, et al.

By Mark P. yaBlon
32 May/June 2023
Steno is revolutionizing court reporting, with a full suite of services that actually meet the needs of legal firms. Take, for example, our signature deferred payment option, DelayPay. It lets you take all the depositions you need, while paying nothing upfront. Plus, you’ll get access to our all-in-one firm dashboard, in-house technical support, and concierge customer support unlike anything else in the industry. Our service is reliable. Our response times are unprecedented. And our network of court reporters can handle depositions anywhere in the country. GET THE DEPOSITIONS YOU NEED DONE 1.800.604.4694 OR CONCIERGE@STENO.COM

Cornerstones of Democracy: Civics, Civility, and Collaboration

Law Day (May 1) is a national holiday established by President Dwight Eisenhower in 1958 as an annual celebration of America’s heritage, liberty, justice, and equality under the law. The HBA and American Bar Association have sponsored and promoted Law Day since its inception 65 years ago.

Each year, the HBA holds an essay contest, poster contests, and photography contests where students interpret the ABA’s theme of Law Day and submit their work to the Law Week Committee. The theme this year was “Cornerstones of Democracy: Civics, Civility, and Collaboration.” The first place winners were honored at the HBA/HYLF/HYLA Annual Law Day Luncheon in downtown Houston on May 3. The Houston Bar Foundation

funds the prizes. The HBA is also proud to share that four of the Houston area students who took first place in the HBA’s Law Day Contest also placed in the State Bar of Texas’ 2023 Statewide Law Day Contest.

The HBA has eight categories for its Law Day Contest, including Essay, Photography, Poster (K-2nd grade; 3rd-5th; and 6th8th grades), Special Needs Photography, Special Needs Individual Poster Contest, and Special Needs Team Poster Contest. This year’s HBA winners were selected by volunteer HBA members.

Thank you to our volunteers, participants, and partners who helped make our programming possible. Learn more about this year’s HBA’s Law Day activities at

2023 HBa Law Day Contest wInners
In tHE HBA lAW dAy ContEStS :
luis Angel gomez of Carver High School (Aldine ISd ) won the Photography Contest. His entry is titled Poor Hands. luis also took first place in the statewide contest. His teacher was Matt Kirkpatrick. Wren Schumacher of Hayes Elementary School (Katy ISd ) won the K-2nd grade Poster Contest with her entry, Being Good and Talking About Safety. Wren also took third place in the statewide contest. Her teacher was Emily Winter. Emree Blackwell of Hayes Elementary School (Katy ISd ) won the 3rd-5th grade Poster Contest. Her poster was titled Town Hall. Claire Montizaan, a student at Willow Wood Junior High School ( tomball ISd ), won the 6th-8th grade Poster Contest with her entry, Assembling Democracy. Claire also took first place in the statewide contest. Her teacher was Cerethia Fontana. Virece Berry, a student at Carl Wunsche High School (Spring ISd ), took first place in the Special needs team Photography Contest for their photo, titled Civil Rights. the winning teacher was lucas lytle. gabriel Fara of Carl Wunsche High School (Spring ISd ) won the Special needs Individual Poster Contest for their poster, Food Law. the winning teacher was Bridgett dotson.
34 May/June 2023
rahma Alhita, drew Johnson, lucas Ajapacja, Freddy Predomo, and Alyssa Carpentier of Kempner High School (Fort Bend ISd ) took first place in the Special needs team Poster Contest with their poster titled Better Together the winning teacher was robyn Crowson-Wagner.

FIrst PLaCe:

Houston Bar Association Law Day Essay Contest Discourse Drives Democracy

(1st place winner in the HBA and statewide contests)

The foundation of America is built with bricks of collaboration and civics. In the diversity of thought and speech that encouraged discourse, America’s partisan democracy flourished as it broke glass ceilings in every century. However, in recent years of unconditional political polarization, societal progress has become paralyzed with parties intent on fighting each other more than the issues at hand. Through the pursuit of collaboration between parties, American democracy returns to its roots of civility embedded in the Constitution and fosters an environment for healthy discourse.

America is founded on partisanship. Although modern politics suggests recency in the polarity between parties, partisanship has existed since the creation of the nation. James Madison, dubbed as the “Father of the Constitution,” wrote in his “Speech on the Right to Suffrage” that “no free Country has ever been without parties, which are a natural offspring of Freedom.” Understanding that parties were an inevitable and integral part of politics that should be embraced instead of discouraged, Madison wrote the Constitution as a platform to explore the complexities that arise through partisanship discourse. Parts of the Constitution, such as the First Amendment, ensure that individuals from any party can express their opinions to contribute to the public discourse surrounding any subject. However, this contribution is only constructive to society if its ideas are respected by the parties opposing it.

Every topic in contemporary United States society is a source of division. While this diversity in thought presumably enables inclusive policymaking, the aggressive polarization between parties has

stripped discourse of its substance, turning every conversation into “Democrats V.S. Republicans” instead of an analysis of strengths and weaknesses. Through respectful collaboration instead of unconditional opposition, the differences between parties will become a tool for progress instead of a hindrance to it. By pursuing civility and the courtesies of organized debate, American politics will return to the Founding Father’s vision of a society grown through forums of discussion.

While some argue that partisan collaboration is an idealistic dream, history has proven the success of the collaboration between parties in several distinct eras. In the 1900s, numerous Republican senators surpassed their political alignment by voting alongside the Democratic Senators and passing the Civil Rights Act to prohibit discrimination based on race, color, religion, sex, and nationality. In the 1800s, President Lincoln, a Republican, filled his cabinet with both Democrats and Republicans, gathering talented individuals of diverse backgrounds; through collaboration with his multi-party cabinet, Lincoln left one of the biggest marks on American history by winning the Civil War. Finally, the Great Compromise in the 1700s supported both small and large state parties, laying the foundation for the bipartisanship ideals of collaboration that were embedded in the Constitution written shortly after.

The American people are rapidly drifting apart. However, by pursuing collaboration between parties and civil discourse, the wound laid upon American politics will have an opportunity to heal; returning to the roots of America’s Constitution, our society will flourish in a sea of diverse ideas and inclusive policymaking. May/June 2023 35

MICHAEl McCorMICK : A Tale of 21 Cocktails

Like many others, Michael McCormick suddenly found himself with extra time during the pandemic. Michael put his free time to good use, and what began as a recipe and short write-up for a Manhattan that he submitted for a morale-boosting firm cookbook led to Michael self-publishing Lawyerly Libations, Concoctions for the Counselor, Apéritifs for the Attorney, Elixirs for the Esquire, and Additional Alcoholic Anecdotes: A Cocktail Compilation for the Burgeoning Barrister’s Bar

In addition to an admirable use of alliteration in the title, the book contains 21 chapters that pair a recipe and history of a cocktail with interesting legal and law-related stories, complete with citations to case law, including Bluebook-worthy footnotes! As you would expect for a book about the history of cocktails, Michael’s writing style is witty, entertaining, and fun. Every chapter stands alone and is easy to pick up and peruse at your leisure.

Michael didn’t initially set out to write a book. A history lover who keeps a file of funny cases, Michael realized he could make interesting connections to some of his favorite cocktails. He took the Manhattan recipe and paired it with a few cases on judicial notice and showed the results to a friend, who immediately asked for the next chapter. “Eventually, 21 cocktails later, I found myself with a book,” he reflected.

Michael explained that a cocktail’s origins is often “imprecise at best,” and he knew he would need to cite sources “as any good researcher would.” Relying on The Bluebook was a natural extension for the former chief articles editor (editorial board No. 55) of the Houston Law Review. However, he did take some liberties and created his own signal—see for no apparent reason—which I’m sure more than a few of us have considered when reading opposing counsel’s briefs.

Michael’s favorite cocktail—as you may have guessed by now— is the Manhattan, but he said his favorite chapter is probably § 10 – Eggnog, The Clerk, and the Archive War, which describes some events that are so over the top that they are almost unbelievable.

Section 13 – Blood and Sand and Getting Away with Murder comes in at a close second and discusses an attorney/congressman/major general who murders his wife’s lover in the streets of D.C. but was later acquitted based on temporary insanity. Michael noted that this chapter was especially fun to write because it is a favorite among Civil War historians and essentially involves the “OJ Simpson of the 19th Century.”

This endeavor took more than two years to complete, including waiting for the National Archives to reopen so that he could confirm what the history books got wrong about the disposition of a patent claim made against the U.S. government (see § 12). “It took some time to learn,” but Michael did all of the typesetting himself, relying on his law review experience, and used photoshop to clean up a few images scattered throughout the book. Michael was able to self-publish through Amazon’s Kindle Direct Publishing and has sold over 1,100 copies to date! The process also allowed him to make unexpected connections in a time when we were all in isolation. As part of his research, Michael would send a cold email, with a “Howdy from Texas,” to practitioners who are experts in their fields, hoping to get a response. He said that it was “amazing how people would call you out of the blue and would take your questions.” He still keeps in touch with some of these contacts today.

Michael still has a file of funny cases that didn’t make it into the book, but a sequel probably isn’t in the cards for him just yet. Life with his wife, Carolyn, who is also an attorney, and his two girls under the age of four, keeps him plenty busy.

Recognizing the subject of alcohol can be a sensitive topic for those in our profession, Michael explained that “while it may not be for everyone, page for page, it’s a history book that just happens to have alcohol.” The book—and any concoctions created therefrom—should always be enjoyed responsibly.

The Houston Lawyer off the reCord
Nikki Morris is a litigation attorney and the Off-the-Record column editor for The Houston Lawyer.
36 May/June 2023

A Profile in pRoFessionALism

For this final issue of the 2022-2023 bar year, we invited Judge Lee H. Rosenthal of the United States District Court for the Southern District of Texas and Reagan W. Simpson of Yetter Coleman LLP—this year’s recipients of the Justice Eugene A. Cook Professionalism Award—to share their perspectives on professionalism with The Houston Lawyer

It’s hard to believe that I have been a federal district judge for 30 years. I’m not worried about being bored. Even after 30 years, every day brings some new and different issue or twist. Our city produces a fascinating case load. Add to that an extraordinarily talented and energetic bar on both sides of the v., in both civil and criminal cases, and you have a guaranteed supply of interesting cases. What’s an interesting case? Any case I have to decide, correctly and fairly. By that measure, all my cases are interesting.

Although we judges operate on the basis of what we need-to-know to get it right, even after 30 years, I’m clearly not going to run out of new things I need to know. Fortunately, there are able lawyers ready and eager to explain the issues and problems to me. And although many thoughtful people rightly decry the discord in our discourse, I find that most lawyers remember the importance of civility—at least when I’m in the room and they’re on the record, by Zoom or otherwise.

I recently celebrated my bench anniversary with past, present, and former law clerks. The T-shirt I created for the occasion says it as well as I can:

How do you measure 30 years as a judge?

In opinions, in orders, In hearings and trials.

In motions unending, In draft after draft.

In lunches and muffins, In striving for right. But it’s 70 law clerks, The measure I treasure, of 30 years in this life.

Every year has been a good year, and there is good work ongoing. Thanks to good lawyers and law clerks, I’ll try to get it right.

As a young associate, I heard a partner in my law firm questioning the ethics of an opposing lawyer. The partner concluded that the other lawyer was not “practicing law in the grand manner.” That phrase has stuck with me. What a noble calling to “practice law in the grand manner.” But what does that entail?

One guide is the Texas Lawyers Creed, the result of efforts by Justice Eugene A. Cook and the members of the Supreme Court Advisory Committee on Professionalism that he chaired while on the court. The Texas Lawyers Creed provides principles and rules that all lawyers should follow. We should reread the Creed from time to time to remind ourselves of its obligations.

Following the Creed is a start. Practicing law in the grand manner requires more. Two virtues come to mind. Honesty and respect.

Honesty means more than avoiding misrepresentations; it means forthrightness, in all circumstances and in dealing with all people. Respect is the esteem we should show for clients, judges, court personnel, witnesses, our colleagues, and for the system of justice we are sworn to uphold. Yes, we should respect even ourselves. There is today not enough honesty, and too little respect—especially for views different from our own and for outcomes we dislike, both in the law and other arenas.

Yet honesty and respect may not be enough. Benjamin Cardozo famously remarked in an opinion that honesty alone is insufficient when fiduciary duties are owed, as in our profession. He required “a punctilio of an honor the most sensitive.” Such a high degree of honor calls for an attitude and aspiration of conscience and heart.

Let us continually ponder what it means to practice law in the grand manner, and let us always strive to do so.

hon. lee h. rosenthal reagan May/June 2023 37

SEC tIon: A New Year of Advancing the Field of Corporate Practice

Over the past 45 years, the HBA’s Corporate Counsel Section has played a vital role in the legal community, bringing together in-house counsel and law firm practitioners to promote professionalism, collaboration, and excellence amongst Houston’s corporate attorneys. As the section’s latest directors and officers prepare for its 2023-2024 year, the section is poised to address the latest challenges in a rapidly evolving environment for corporate lawyers through sponsored events, while continuing its history of community outreach.

As part of its commitment to continuous growth and development, the section sponsors a number of lunch programs each year, offering Houston lawyers invaluable time to meet and network—particularly as the community reengages with one another in-person—while addressing contemporary and emergent ethical and practical business and legal issues. The section regularly hosts events addressing practical issues in corporate practice.

In February, the section’s “Proxy Season Update,” hosted at the offices of Akin Gump Strauss Hauer and Feld LLP (recently rebranded to Akin) and presented by Kevin Schott, counsel at Akin, and Kimia Jalalipour, associate at Akin, provided attendees with a comprehensive update on the latest developments and best practices ahead of proxy season. The event provided a window into the shifting landscape of shareholder activism, regulatory developments, and evolving expectations for corporate governance, offering crucial updates ahead of the year’s annual shareholder meetings.

The HBA Corporate Counsel Section also held joint events with other organizations. In March, the section, in collaboration with the Georgetown Club of Houston, offered the event “Deal or No Deal? Ethical Considerations for Dealmakers,” bringing together two prominent groups of attorneys in Houston. Rebekah Bennett, general counsel at ExxonMobil Pipeline Company, and Leana Garipova, counsel at Akin—both Georgetown alums—presented to a packed house at the offices of Akin and delved into the ethical challenges that corporate attorneys face in M&A and related

transactions. Featuring seasoned dealmakers, attendees gained invaluable insights into the importance of adhering to ethical standards while working towards successful outcomes for their clients from both the in-house and outside counsel perspectives.

Beyond educational events for practice, the section provides opportunities for members to discuss career development, a crucial topic as the field continues to see rapid shifts in where and how corporate work is done. In its recent “Pathway to General Counsel” event, a panel of influential general counsels provided an exclusive look into the journey of becoming a general counsel for aspiring legal professionals, sharing their experiences, challenges, and insights on making the transition from private practice to in-house counsel.

In addition to its sponsored events, the section continues to help advance the careers of others throughout Houston, including through its scholarship program offering $2,000 to one student from each local law school interested in corporate law.

The HBA’s Corporate Counsel Section continues to serve as a beacon of professionalism and excellence in the field of corporate law in Houston and beyond. As we enter a new bar year, section leaders will continue to develop and expand its programming and outreach while remaining committed to its core mission of promoting the objectives and standards of professionalism within the Houston legal community.

Christopher Centrich is a partner at Akin in the Corporate group. His practice focuses on mergers and acquisitions, corporate and securities matters. He serves as outside counsel for clients in the upstream, midstream, and oilfield services sectors.

Leana Garipova is a counsel at Akin in the Corporate group. Her practice focuses on public and private mergers and acquisitions and other complex corporate transactions, and she counsels boards and management of public companies on corporate governance matters.

Anthony Hilbert is an associate at Akin in the Corporate group. His practice focuses on mergers and acquisitions, corporate and securities matters.

seCtion spotlight
The Houston Lawyer 38 May/June 2023
rebekah Bennett of ExxonMobil Pipeline Company and l eana garipova of Akin presented in a joint event between HBA’s Corporate Counsel Section and the g eorgetown Club of Houston on March 30, 2023.

Benefiting Houston Volunteer Lawyers

Monday, November 13, 2023 · 7:00 – 10:00 p.m. • River Oaks Country Club

100% of net proceeds raised for the Harvest Celebration directly benefit pro bono efforts in our community through Houston Volunteer Lawyers

Thank you to the early underwriters of the 74th Annual Harvest Celebration (as of May 16, 2023).

To learn more about sponsoring the Harvest Celebration, visit

Diamond Sponsors

Baker Botts L.L.P.

Bracewell LLP

Hunton Andrews Kurth LLP

Norton Rose Fulbright US LLP

Vinson & Elkins LLP

Ruby Sponsors

Benny Agosto, Jr. & Nikki Agosto


Chamberlain Hrdlicka

Chevron Corporation

Sapphire Sponsors

BakerHostetler LLP

CenterPoint Energy, Inc.

LyondellBasell Industries

Gold Sponsors

Arnold & Porter LLP

Beck Redden LLP

Blank Rome LLP

Hewlett Packard Enterprise

Hicks Thomas LLP

Johnson DeLuca Kurisky & Gould, P.C.

King & Spalding LLP

Latham & Watkins LLP

Silver Sponsors

Abraham, Watkins, Nichols, Agosto, Aziz & Stogner

Jane & Doug Bland

Hon. Harvey Brown

Conoco Phillips

Foley & Lardner LLP

Gibbs & Bruns LLP

Gibson, Dunn & Crutcher LLP

Tom & Debbie Godbold


HBA Energy Law Section

Hicks Davis Wynn, P.C.


Monica Karuturi & Kumaran



Pillsbury Winthrop Shaw Pittman LLP

Weil, Gotshal & Manges LLP

Yetter Coleman LLP

Bronze Sponsors

Barry & Sue Abrams

Akerman LLP

Christian Attar

Bissinger, Oshman, Williams & Strasburger LLP

Bush Seyferth PLLC

Cokinos | Young


Jacquelyn & Collin Cox

Mindy & Joshua Davidson

Dentons US LLP

Digital Insurance, LLC dba One Digital

Diggs & Sadler

Dobrowski Stafford LLP

Energy Transfer

Fayez Sarofim

Frost Bank

Hon. Michael Gomez & Diana Gomez

Gray Reed

Hagans Montgomery Hagans

Linda & Tracy Hester

Houston Lawyer Referral Service, Inc.

Jackson Walker

Jenkins and Kamin, LLP

Kean Miller

McDowell Hetherington LLP

Munsch Hardt Kopf & Harr, P.C.

Jeff Paine and Brandon Holcomb –Goldman Sachs

Reed Smith LLP

Reynolds Frizzell LLP

Service Corp International

South Texas College of Law Houston

Westlake Chemical Corp.

Wright Close & Barger, LLP

Crystal Sponsors

Sharon M. Beausoleil

The Buck Family Fund

BWA Video, Inc.

Cozen O’Connor

David Toy Law Firm

Wendy & Alistair Dawson

DLA Piper LLP (US)

Eric & Kami D’Olive

Kaylan & John Dunn

Fullenweider Wilhite, P.C.

Jackie & John Furlow

Lynn & Stewart W. Gagnon

Roland Garcia

Craig & Penny Glidden

Hon. Joseph “Tad” Halbach

Lauren & Warren Harris

Gregory & Jennifer A. Hasley

HBA Construction Law Section

HBA Juvenile Law Section

HBAA Charitable Fund, Inc.

Hedrick Kring Bailey PLLC

Sara & Jason Keith

Neil & Dana Kelly

Kilpatrick Townsend & Stockton LLP

The Law Office of Daniel D. Horowitz, III, PC

Elizabeth & Russell Lewis

Peter Lowy & Gabriela Boersner

Hon. Erin Lunceford & Mike Lunceford

Diana & Dwaine Massey

Tim & Ginnie McConn

Hon. Darryl L. Moore

Nathan Sommers Jacobs

Jeff & Melissa Oldham

Aaron M. Reimer & Amanda Heidemann Reimer

Rusty Hardin & Associates, LLP

Travis & Sandy Sales

Kay Sim

Smyser Kaplan & Veselka

The Springer Law Firm PLLC

Steven C. Howard P.C.

Roy & Dominique Varner

Ware, Jackson, Lee, O’Neill, Smith & Barrow, LLP

Winstead PC

Friend Sponsors

B. Riley Advisory Services

Hon. Julie Countiss

Amy Catherine Dinn

Polly & Stephen Fohn

Hon. Angela Graves-Harrington

David T. Harvin

Jane Langdell Robinson

S. Mayer Law

Hon. Charles Spain & John Adcock

Travis Torrence

Other Sponsors

Hon. Tanya Garrison

Hon. Beau A. Miller

Brooks & Jacquelyn Tobin

Hon. Fran Watson

In-Kind Sponsors

Innovative Legal Solutions

An Analysis of Helix Energy Solutions Group, Inc. v. Hewitt and the Salary Basis Test—a Test that Provides Benefits to Employers and Employees

The Fair Labor Standards Act (FLSA) is the federal law that requires employers to pay employees an hourly wage rate of no less than the federal minimum wage and to pay overtime wages when employees exceed 40 hours of work in one week.1 However, Congress has identified that there are certain workers in the U.S. who are exempt from these requirements. Specifically, any employee who is “employed in a bona fide executive, administrative, or professional capacity” is exempt from the overtime and minimum wage requirements.2 However, the FLSA does not define these phrases. Instead, Congress expressly delegated the responsibility to the Secretary of Labor to define “employed in a bona fide executive, administrative, or professional capacity.”3 In early 1940, the Department of Labor did so and enacted a standard that has three distinct parts.

To qualify for these exemptions, three elements must be met. The first element is the “salary basis test,” which requires an employer to pay a “predetermined and fixed salary” to the employee. The second is the “salary level” test, which requires an employer to pay a salary that exceeds a specified amount. The third is the “duties test,” which requires the employee to

perform certain job duties. In Helix Energy Solutions Group, Inc. v. Hewitt, the Supreme Court finally resolved an issue that had confused the lower courts: whether a highly paid worker whose paycheck is based solely on a daily rate meets the “salary basis” test.4 In a 6-3 decision, the Supreme Court said “no.”

Background of Helix Energy Solutions Group, Inc. v. Hewitt

The plaintiff was an offshore oil rig worker who was paid on a day rate basis as low as $963 per day and as high as $1,341 per day.5 Annually, his compensation exceeded $200,000.6 His weekly compensation was determined by multiplying his daily rate times the number of days he worked in the week.7 Under this pay system, the plaintiff’s compensation each week varied depending upon the number of days he worked.8

Before the Supreme Court, Helix made two primary arguments. First, Helix argued that the payment of a day rate constitutes a salary because the employee is guaranteed a payment if the employee works at least one day in a week and that payment always meets the salary level test.9 The Supreme Court rejected this argument. The Supreme Court relied upon the plain text of the regulation and held that a “salary” is a fixed amount of pay for a week no matter how many days the employee worked in the week.10 “Put it all together and a dailyrate worker does not qualify... as a salaried employee.”11

Next, Helix argued that because the plaintiff was highly paid and earned more than $200,000 per year, the salary basis test did not apply to him. The Supreme Court rejected this argument, as well. The Supreme Court reaffirmed the premise that employees “are not ‘deprived of the benefits of [overtime compensation] simply because they are well paid.’”12 Instead, the Supreme Court held that the plain text of the regulation requires the payment of a salary even for a highly compensated employee.13

the Supreme Court reaffirmed the “reasonable relationship” test

Finally, the majority’s decision reaffirmed the validity of the “reasonable relationship” test.14 The reasonable relationship test provides that an employer can pay an employee on a day rate basis and still satisfy the salary basis test so long as the employer also pays the employee a guaranteed weekly amount that bears a “reasonable relationship” to the amount the employee “actually earned” in a typical week. The Supreme Court stated that an employee who is paid on a daily rate basis can be classified by the employer as exempt from overtime if, and only if, the employer satisfies the reasonable relationship test.

The reasonable relationship test requires the employer to pay the employee a weekly guaranteed amount that meets the salary level test and the guaranteed amount is high enough that it is roughly equal to the amount the employee earns in a typical week.15 In other words, the employer must guarantee a weekly amount of pay to the employee (who is paid on a day rate basis) in an amount that is the equivalent of what the employee normally earns each week from working for the employer.16 The reason for this requirement is because “[t]hose conditions create a compensation system functioning much like a true salary—a steady stream of pay, which the employer cannot much vary and the employee may thus rely on week after week.”17

Justice Kavanaugh’s dissent

Justice Kavanaugh, with Justice Alito joining him, issued a dissent which suggests that the regulations issued by the Department of Labor are inconsistent with the text of the FLSA.18 According to Justice Kavanaugh, section 213(a)(1) of the FLSA focuses on whether the employe performs exempt duties.19 However, the regulations inexplicably add two additional requirements that look to “how much an employee is paid and how an employee is paid.”20

At first blush, some employers may view Justice Kavanaugh’s dissent as a way of ar-

legal trends
The Houston Lawyer
40 May/June 2023

guing against the requirement to meet the salary basis test. Yet, when analyzing this argument further, it is apparent that instituting the salary basis test was a proper exercise of the authority delegated to the Department of Labor by Congress.

First, the text of the FLSA, and section 213(a)(1) in particular, does not focus solely on the duties a worker performs. Instead, the plain language of the text written by Congress states that the employee must be “employed in a bona fide executive, administrative, or professional capacity.”21 The statute does not say that an employee must be “employed in a position that performs bona fide executive, administrative, or professional duties.” Instead, Congress used the word “capacity,” and the use of this word is significant. According to, “capacity” means a “specified position.” Employed in a “specified position” requires an employee to perform certain duties in exchange for certain pay. The Department of Labor’s test requires the worker to perform certain duties in exchange for certain pay.

Second, the argument that the salary basis test is inconsistent with the text of the FLSA is not a new argument. To date, every circuit court to have addressed whether the salary basis test is valid has held that it constitutes a “reasonable exercise” of the authority of the Department of Labor.22 Nothing new has changed.

the Salary requirement Is necessary and Provides Benefits to Both Employers and Employees

Nevertheless, the question remains as to whether a salary requirement provides benefits to employers and employees alike. Having a salary requirement provides clarity to both employers and employees. The Department of Labor “has long recognized that the salary paid to an employee is the ‘best single test’ of exempt status, which has... provid[ed] a ready method of screening out the obviously nonexempt employees’ and furnished a ‘completely objective and precise measure which is not subject to

difference of opinion or variations in judgment.”23 That is because the salary basis test is objective in nature.24 When employers are making decisions to classify certain job positions as exempt or not, having an objective test provides a level of transparency that is welcome in the workplace. Similarly, the salary basis test benefits employees because it enables employees to know the amount of their compensation each week before they perform the work. This provides assurances to employees and enables them to make better financial planning decisions. Ultimately, the salary basis test has been in existence for approximately 80 years, and it is unlikely to be going away any time soon.

Don J. Foty is a partner with the law firm of Hodges & Foty, LLP. Mr. Foty routinely represents workers in wage and hour disputes across the country and has served as class counsel in nearly 100 class and/or collective actions.


1. 29 U.S.C. §§ 206, 207.

2. 29 U.S.C. § 213(a)(1).

3. Id

4. 143 S. Ct. 677 (2023).

5. Id. at 684.

6. Id

7. Id

8. See id

9. Id. at 685.

10. Id. at 686–87.

11. Id. at 688.

12. Id. at 682.

13. Id. at 689–90.

14. The reasonable relationship test states: “[a]n exempt employee’s earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” 29 C.F.R. 541. § 604(b).

15. 143 S. Ct. 677 at 684.

16. Id

17. Id

18. Id. at 695.

19. Id

20. Id

21. 29 U.S.C. § 213(a)(1).

22. Usery v. Associated Drugs, 538 F.2d 1191, 1193 (5th Cir. 1976); Craig v. Far W. Eng’g Co., 265 F.2d 251, 259 (9th Cir. 1959).

23. 69 Fed. Reg. at 22,165.

24. Evans v. McClain of Ga., Inc., 131 F.3d 957, 965 (11th Cir. 1997).

legal trends May/June 2023 41

The Great Dissenter: The Story of John Marshall Harlan,

America’s Judicial Hero

Clocking in at roughly 500 pages, Peter Canellos’ The Great Dissenter: The Story of John Marshall Harlan, America’s Judicial Hero is much like the many opinions of its namesake: complex, thorough, and lengthy. But the tale of John Marshall Harlan’s life is a prodigious one and thus requires a great deal of backstory in order to appreciate it fully.

The first of the book’s three parts walks the reader through the historical context in which John Marshall Harlan grew up and, on the nomination of Rutherford Hayes in 1877, eventually ascended to the United States Supreme Court. At the time of his birth in 1833, Harlan’s native Kentucky was embroiled in the slavery debate of the antebellum period. Canellos expertly navigates the reader through the intricate ways in which this debate shaped Harlan’s views, particularly in light of Kentucky’s position as a border state between the North and the South and how this geographical happenstance tore at the Bluegrass State’s social fabric, with friends and neighbors turning on each other as the Civil War drew near.

Canellos focuses on two notable fig-

ures of Harlan’s early life: his father, James, and Robert Harlan, an enslaved person held in bondage by the Harlan family. Canellos describes how the elder Harlan’s intense belief in maintaining the Union was ingrained in his son at an early age and how it would later resurface in John Harlan’s jurisprudence.

As for Robert—long thought to be John Harlan’s brother, albeit DNA testing of the two men’s decedents undermines this theory—Canellos speculates that his life served as a major influence on John and his decisionmaking as a jurist, particularly on issues related to civil rights for Black Americans. True or not, Robert’s story is a fascinating one, even without his connection to John, and it spans James Harlan’s (unsuccessful) efforts to have Robert formally educated at the local school all the way to Robert’s rise in Ohio politics, during which he befriended Frederick Douglass and other famous members of the Black community of that era.

Although those who recognize John Harlan’s name at all doubtlessly think of his dissent in Plessy v. Ferguson, Canellos reveals that Harlan was a more complicated figure and, in his earlier years, not a staunch defender of civil rights. Not only was he at one time a member of the Know Nothing Party—which advocated against Catholics and immigrants— Harlan also encouraged others to stand by the Dred Scott decision and later spoke against the Emancipation Proclamation. Perhaps generously, Canellos portrays these moments as arising out of Harlan’s belief that the United States should be preserved—to John Harlan, nearly any price apparently was worth-

while to maintain the Union.

As the first part draws to a close, the reader learns how Harlan came to join the Republican Party and, not without scrutiny from his contemporaries, made an about-face in many of his previous stances regarding race and civil rights. The Great Dissenter never conclusively resolves the true genesis for this turning point in Harlan’s views, but, as the second part of the book demonstrates, Harlan’s changed views would have a profound effect on the debates concerning civil rights in post-Civil War America.

The book’s second part is a behemoth, taking the reader through 24 years of Harlan’s tenure on the Supreme Court. Harlan’s dissents span some of the most well-known cases in American law—the Civil Rights Cases of 1883, the Sugar Trust Case, the income tax case of Pollock v. Farmers’ Loan & Trust Company, and, of course, Plessy—and Canellos describes each in fine detail. Here, the author’s thorough research and engaging narrative truly shines.

Moreover, Canellos is unsparing in pointing out that, despite the influence of Harlan’s dissents in the Civil Rights Cases and Plessy, modern-day scholars nevertheless have criticized Harlan for his shortsightedness in other cases, particularly those focused on the rights of Asian Americans, who likewise faced intense discrimination.

On balance, The Great Dissenter capably illuminates the life and times of a Supreme Court justice whose work remains worthy of attention.

Braden Riley is an associate at Cozen O’Connor P.C. and member of The Houston Lawyer editorial board.

media reviews
The Houston Lawyer
Canellos focuses on two notable figures of Harlan’s early life: his father, James, and Robert Harlan, an enslaved person held in bondage
42 May/June 2023
by the Harlan family.”

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 made a commitment to provide representation in a certain number of cases through the Houston Volunteers Lawyers.

abraham, watkins, nichols, agosto, aziz & stogner

akin gump strauss hauer & feld llp

Baker Botts l.l.p.

Bakerhostetler llp

Balch & Bingham llp

Beck redden llp

Blank rome llp

Bracewell llp

Law Office of David Hsu Brogden and associates

Centerpoint energy, inc.

Chamberlain hrdlicka

Chevron USA

Dentons US LLP

the ericksen law firm

Eversheds Sutherland US LLP

exxon mobil Corporation

fleurinord law pllC

foley & lardner llp

Frye and Benavidez, PLLC

fuqua & associates, p.C.

gibbs & Bruns llp

gibson, dunn & Crutcher llp

gray reed

greenberg traurig, llp

halliburton energy

hasley scarano, l.l.p.

haynes and Boone, l.l.p.

hunton andrews Kurth llp

Jackson walker l l p

Jenkins & Kamin, l.l.p.

the Jurek law group, pllC

Katine & nechman l l p

Kean miller llp

Law Firm of Min Gyu Kim PLLC

King & spalding llp

Koonsfuller, p.C.

the lafitte law group, pllC

Kirkland & ellis llp

locke lord llp

lyondellBasell industries

Martin R.G. Marasigan Law Offices

marathon oil Company

mcdowell & hetherington llp

McGarvey PLLC

morgan, lewis & Bockius llp

Norton Rose Fulbright US LLP

ogletree, deakins, nash, smoak & stewart p.C.

painter law firm pllC

rita pattni, attorney at law

Law Office of Robert E. Price

rapp & Krock, pC

reed smith llp

royston, rayzor, vickery & williams, llp

sanchez law firm

shell oil Company

shipley snell montgomery llp

shortt & nguyen, p.C.

sidley austin llp

angela solice, attorney at law

sorrels law

squire patton Boggs

diane C. treich, attorney at law

Law Office of Norma Levine Trusch

vinson & elkins llp

weycer, Kaplan, pulaski & Zuber, p.C.

Law Office of Cindi L. Rickman

wilson, Cribbs, & goren, p.C.

winstead pC

winston & strawn llp

Yetter Coleman llp

LITIGATION MARKETPLACE The Houston Lawyer HOuSTOn gAllERIA AREA One 10’ X 15’ and One 15’ X 15’ furnished office near San Felipe inside 610 Loop. Has access to a large conference room, library, telephones, internet, fax machine, copier, kitchen, and more. Staffed with a receptionist/office manager. Suite has 10 lawyers. Contact Jerry at 713-237-0222. Office Space Video Mediations Available Professional Services classified ads: Call today to Mary Chavoustie 281.955.2449 ext. 3 classified ads: Mary Chavoustie 281.955.2449 ext. 3 HBA ClE VIdEoS PROCESS MORE CASES IN LESS TIME How? 3Connect core systems 3Automate tasks 3...then focus on winning Contact us today to get started. (713) 532-9311 DENNIS CLIFFORD Mediating Complex Employment Disputes Board Certified in Labor & employment law – Texas Board of Legal Specialization 713-999-1833 44 May/June 2023

Join the HBA 100 Club!

the Houston Bar association 100 Club is a special category of membership that indicates a commitment to the advancement of the legal profession and the betterment of the community. the following law firms, government agencies, law schools, and corporate legal departments with five or more attorneys have become members of the 100 Club by enrolling 100 percent of their attorneys as members of the HBa.

Firms of 5-24 Attorneys

Abraham, Watkins, Nichols, Agosto,

Aziz & Stogner

Ajamie LLP

Alvarez Stauffer Bremer PLLC

Baker, Donelson, Bearman, Caldwell

& Berkowitz, PC

Berg & Androphy

Bradley Arant Boult Cummings LLP

Buck Keenan LLP

Bush & Ramirez, PLLC

Christian Levine Law Group, LLC

Coats | Rose

Crady, Jewett, McCulley & Houren, LLP

De Lange Hudspeth McConnell

& Tibbets LLP

Dentons US LLP

Devlin, Naylor & Turbyfill, P.L.L.C.

Dobrowski Stafford LLP

Doyle Restrepo Harvin & Robbins LLP

Ewing & Jones, PLLC

Fisher & Phillips LLP

Fizer Beck Webster Bentley & Scroggins

Fogler, Brar, O’Neil & Gray LLP

Frank, Elmore, Lievens, Slaughter

& Turet, L.L.P.

Funderburk Funderburk Courtois, LLP

Germer PLLC

Givens & Johnston PLLC

Gordon Rees Scully & Mansukhani, LLP

Hagans Montgomery Hagans

Henke, Williams & Boll, LLP

Hirsch & Westheimer, P.C.

Holm | Bambace LLP

Horne Rota Moos LLP

Hughes, Watters & Askanase, L.L.P.

Husch Blackwell LLP

Irelan McDaniel, PLLC

Jackson Lewis P.C.

Jenkins & Kamin LLP

Johnson DeLuca Kurisky & Gould, P.C.

Jordan, Lynch & Cancienne PLLC

Kane Russell Coleman & Logan PC

Kean | Miller LLP

Kilpatrick Townsend & Stockton LLP

KoonsFuller, PC

Law Feehan Adams LLP

Linebarger Goggan Blair & Sampson, LLP

Liskow & Lewis

McGinnis Lochridge

McGuireWoods LLP

McKool Smith

MehaffyWeber PC

Morris Lendais Hollrah & Snowden

Murrah & Killough, PLLC

Nathan Sommers Jacobs PC

Ogletree Deakins Nash Smoak

& Stewart, P.C.

Paranjpe Mahadass Ruemke LLP

Peckar & Abramson, P.C.

Phelps Dunbar LLP

Pillsbury Winthrop Shaw Pittman LLP

Pipkin Ferguson PLLC

Ramey, Chandler, Quinn & Zito, P.C.

Rapp & Krock, PC

Reynolds Frizzell LLP

Roach & Newton, L.L.P.

Ross Banks May Cron & Cavin PC

Royston, Rayzor, Vickery & Williams, L.L.P.

Rusty Hardin & Associates, P.C.

Schirrmeister Diaz-Arrastia Brem LLP

Schwartz, Page & Harding, L.L.P.

Scott, Clawater & Houston, L.L.P.

Shannon Martin Finkelstein Alvarado

& Dunne, P.C.

Shearman & Sterling LLP

Shellist | Lazarz | Slobin LLP

Shipley Snell Montgomery LLP

Smith Murdaugh Little & Bonham LLP

Sorrels Law

Spencer Fane LLP

Sponsel Miller Greenberg PLLC

Strong Pipkin Bissell & Ledyard LLP

Stuart PC

Taunton Snyder & Parish

Taylor Book Allen & Morris Law Firm

Thompson & Horton LLP

Tindall England PC

Tracey & Fox Law Firm

Ware, Jackson, Lee, O’Neill, Smith

& Barrow, LLP

West Mermis, PLLC

Weycer, Kaplan, Pulaski & Zuber, PC

Williams Hart & Boundas, LLP

Wilson Cribbs & Goren PC

Wright Abshire, Attorneys, PC

Wright Close & Barger, LLP

Ytterberg Deery Knull LLP

Zukowski, Bresenhan & Piazza L.L.P.

Firms of 25-49 Attorneys

Adams and Reese LLP

Andrews Myers, P.C.

Beck Redden LLP


Cokinos | Young

Gibbs & Bruns LLP

Hogan Lovells US LLP

Littler Mendelson P.C.

Martin, Disiere, Jefferson

& Wisdom LLP

McDowell & Hetherington LLP

Yetter Coleman LLP

Firms of 50-99 Attorneys


BakerHostetler LLP

Brown Sims, P.C.

Chamberlain Hrdlicka

Greenberg Traurig, LLP

Haynes and Boone, LLP

Jackson Walker L.L.P

Morgan, Lewis & Bockius LLP

Susman Godfrey L.L.P.

Winstead PC

Firms of 100+ Attorneys

Baker Botts L.L.P.

Bracewell LLP

Hunton Andrews Kurth LLP

Locke Lord LLP

Norton Rose Fulbright US LLP

Porter Hedges LLP

Vinson & Elkins LLP

Corporate legal departments

CenterPoint Energy, Inc.

EOG Resources, Inc.


Plains All American Pipeline, L.P.

Quantlab Financial, LLC

Rice University

S & B Engineers and Constructors, Ltd.

law School Faculty

South Texas College of Law Houston

Thurgood Marshall School of Law

University of Houston Law Center

government Agencies

Harris County Attorney’s Office

Harris County Domestic Relations Office

Metropolitan Transit Authority of Harris County, Texas

Port of Houston Authority of Harris County, Texas

1st Court of Appeals

14th Court of Appeals

5300 Memorial Drive, Suite 270 Houston, TX 77007 (713) 496-1100 713-582-8005 Over $60 Million Six Months Still Left Sorrels Law 713-582-8005 OVER $60 MILLION SIX MONTHS STILL LEFT
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.