General Litigation News and Updates

It has become an almost perfunctory practice. You catch wind of another business using a confusingly similar name. You then call a lawyer to immediately send out a cease and desist letter. More often than not, this would be the right play. But there are pitfalls to this strategy if you are not careful. In order to understand how a cease and desist letter can backfire in certain situations, it is important to understand how trademark rights are acquired in the United States. Unlike most countries where trademark rights are granted to the first to register a mark, the U.S. grants such rights to the first to register OR the first to use the mark. When a business obtains a federal trademark registration, it confers nationwide rights to use the mark except for geographic areas where a prior user has established common law trademark rights. A prior user’s common law rights are cemented regardless of whether they registered their mark. If you send a cease and desist letter to such a prior user, you may get a response letter demanding that you cease and desist using your mark in their neck of the woods. In that situation, your federal trademark registration is of no effect, and you risk having the tables turned on you by this prior user (assuming that this prior use was uninterrupted). This is because the prior user established their rights to use that name in their area before you obtained your registration. To add insult to injury, if your trademark registration is less than five years old, the prior user can petition the Trademark Office to cancel your registration! Oftentimes, these prior users are not even aware of your trademark registration. But by sending out that cease and desist letter, you put yourself in their radar and opened up your business to more trouble than the initial demand was worth.

Before you start questioning the utility of a trademark registration given this seemingly unfair situation, keep in mind that when a trademark is registered, it “freezes” all prior users in place so they can no longer expand the use of their current business name. If a prior user in State A later decides to expand into your State B, then you as a trademark registrant can prevent such an expansion. Therefore, before sending out a cease and desist letter you need to be reasonably certain that you are not dealing with a prior user. With larger businesses, you can possibly determine this with an internet search. But for smaller “mom and pop” shops, you may not be able to determine when they first used the business name in question. There are companies that can provide you with a report on the earliest use of a name by another business. The cost of such a report is relatively modest given what is at stake, and obtaining a report before sending out a cease and desist letter is money well spent. At the very least, a prudent trademark registrant should consider the risks and rewards of pursuing a business using a similar name, and conduct an internet and public records search to get an idea of the pecking order of trademark users in certain geographic areas.

It seems that a lot is going on in DC these days. In what may have been lost in all the other activity, yesterday the Department of Labor issued a Request for Information seeking notice and comment before issuing revised proposed regulations regarding the minimum salary level required to  meet the three most common exemptions under the overtime provisions of the Fair Labor Standards Act.  Who cares, right?  Mind-numbing administrative procedures, right?  Maybe.

A little background is probably necessary.  Back before Russia, fake news, alternative facts, and leaks, the DOL under President Obama issued new regulations that raised the minimum salary level for the executive, professional, and administrative exemption to the FLSA’s overtime requirements from $455 per week to $913 per week.  The rule was supposed to go into effect on December 1, 2016, and would have resulted in millions of more workers becoming eligible for overtime.  Employers spent a lot of time in 2016 getting ready for the new rule by making changes to the workforce to make sure that workers were properly classified under the new rules.

Then there was a lawsuit.  And from that lawsuit came an injunction against the new rule going into effect.  And that injunction resulted in an appeal.  And that appeal is still pending.  But here is where things get interesting.  Candidate Trump became President Trump, and Trump’s DOL took another look the new salary limit.  Trump’s DOL told the United States Court of Appeals for the Fifth Circuit that the DOL was no longer pursuing the $913 salary level that was set by Obama’s DOL.  To be sure, Trump’s DOL still wanted the authority to set a salary level, but it just was not interested in the salary level set by the previous administration.

Yesterday’s notice by DOL is the first step in the process to decide if there should be an increase in the salary limits for the overtime exemptions under the FLSA.

What does all of this mean?  First, the DOL is not going to pursue the new rule that was to have gone into effect on December 1, 2016.  With no one left to fight the appeal, any confusion regarding how the injunction would impact the workforce and the potential retroactive application of the Obama DOL rule if the appeals court overturned the injunction no longer seems in play.  Second, it will be several months (or years) before the DOL decides whether to issue a new rule regarding the salary level for the executive, professional and administrative exemptions under the FLSA.

 

From Tressie McKeon, in Fox Rothschild’s Dallas office:

Texas has long been one of the best locations to start a business, and a big reason for this is the liability protection afforded by the business-friendly Texas courts. Most business owners seek to limit their personal liability if something goes wrong with the business. This leads to one of the questions I get most often: Which business structure provides more liability protection to the business owner? The short answer is it depends on what happened.

I believe most owners are concerned with what is known as piercing the corporate veil.   “Piercing the corporate veil” is a legal term that means that the owners/members of a corporation or LLC lose the limited liability protection the business entity provided, thus the piercing of the veil of protection. When this happens, personal assets can be used to satisfy business debts and liabilities, not just corporate assets.  The result is that individuals start getting named in lawsuits, in addition to the LLC or corporation they own.

When we look at the Texas Business Organizations Code (TBOC) we see that the two most popular business structures, corporations and limited liability companies, have similar protections for owners. Both organization structures limit liability on contract issues, and absent actual fraud or unless some extraordinary circumstances exist, the veil will not be pierced on a contract action.

But it is a little easier to pierce the corporate veil when it comes to tort liability. Businesses get sued for all kinds of torts, like slip and falls, job site accidents, etc… The two prevailing theories used to pierce the veil in a tort action are the alter ego theory and the single business enterprise theory.

The alter ego theory boils down to looking at how the owners managed internal matters, how the financial interests were kept separated from personal interests and the degree of control the individual had over the company. Basically, was the LLC put in place as a shield to liability or were business formalities observed? The courts will look at everything from the existence of a corporate book to the payment of taxes in order to determine the degree the alter ego was employed.

The other theory used to pierce the veil is the single business enterprise theory. This is used to impute liability to companies that share resources and operate as if they were one entity. This is rarely used, but when it is it can considerably open up the pool of damages available to the plaintiff.

There are a number of other things to consider when analyzing business and personal liability when starting a business. For example, when starting a new business, an owner may need to personally guarantee a business loan. No piercing of the veil is necessary to hold the owner personally liability for the guaranteed debt. Oh, and it goes without saying, no business entity will insulate an owner from criminal liability or protect them if their personal actions cause an injury to someone.

 

 

The Texas Supreme Court in 2015 issued an opinion that should make it easier for defendants to win summary judgment in premises liability cases. In Austin v. Kroger Texas, L.P. (2015), the Court clarified that an invitee’s awareness of a dangerous premises condition does not bear on the issue of contributory negligence, but instead relieves the landowner of a legal duty to warn the invitee of the condition. This holding effectively reinstates the “no duty” doctrine in Texas, which the Court had abolished nearly forty years ago in Parker v. Highland Park, Inc. (1978).

Under the rule announced in Austin v. Kroger, a landowner generally does not have a duty to warn or protect an invitee against unreasonably dangerous premises conditions that are open and obvious or known to the invitee. Establishing that a condition is open and obvious can be difficult. Some judges may find that a condition is open and obvious as a matter of law, while others may submit the issue to a jury. Establishing that the invitee knew about the condition, however, is more straightforward. For example, a plaintiff’s deposition testimony that the plaintiff saw the dangerous condition before the plaintiff got hurt can be enough to defeat the claim entirely.

The new no-duty rule has two exceptions. The first is the criminal-activity exception, which applies when a dangerous condition results from the foreseeable criminal activity of a third party. The second is the necessary-use exception, which applies when the invitee necessarily must use the dangerous premises, and despite the invitee’s awareness of the danger, the invitee is incapable of taking precautions that will adequately reduce the risk. If a plaintiff raises one of the exceptions, defense counsel should argue that it is the plaintiff’s burden to prove the exception applies. After all, a plaintiff is required to prove the defendant owed him a duty, and if a duty would exist only if an exception applies, then a plaintiff should be required to prove the exception.

Although the Supreme Court issued its ruling two years ago, litigants and courts have been slow to catch up. The contributory negligence doctrine is well ingrained and has been instrumental to the analysis of whether a fact issue exists on a premises liability claim. And it appears that many judges are still reluctant to dismiss a plaintiff’s case when confronted with an open and obvious dangerous condition, opting instead to declare a fact issue despite the new legal standard. But in situations where it is proven that a plaintiff was aware of the condition, judges will be hard pressed to ignore Austin. Eventually, the body of law will develop as to what constitutes an open and obvious condition, and courts will then become more comfortable in granting summary judgment in those situations.

Thank you Fox Rothschild LLP’s Steven Ludwig for forwarding this to me.

Yes, there are other developments going on with the Trump Administration that have nothing to do with Russia, Twitter, and fake news.

Today the Department of Labor withdrew its 2015 and 2016 informal guidance on joint employment and independent contractors.  Why is this important, you ask?  Because during President Obama’s eight years in office, the DOL and its state counterparts upped the efforts to investigate and identify companies that were improperly classifying individuals as independent contractors.  The increased enforcement efforts led to the DOL taking a more expansive view of joint employment, and a higher standard for employers to meet to establish independent contractors.  These enforcement efforts culminated in the DOL’s 2015 and 2016 informal guidance on joint employment and independent contractors.  Under the Obama Administration’s independent contractor test, the key inquiry was whether the independent contractor was economically independent.  For joint employment, the Obama Administration’s DOL investigators looked at whether one employer exercised indirect control over the individual.  Today’s rescission of the Obama Administration’s tests returns the DOL to pre-Obama standards.  Thus, the DOL is reinstating the direct control test for joint employment (as opposed to the more expansive indirect control standard) and  right of control test for independent contractors (instead of the more liberal economic independence test).

Bottom Line:  The DOL still will investigate the classification of workers as independent contractors, and whether one employer can be held liable for another employer’s violations.   However, with today’s rollback to pre-Obama tests for joint employment and independent contractors, it may be easier to classify individuals as independent contractors, and it will be more difficult to hold one employer liable for the employment law violations of another employer.

 

 

The Texas Supreme Court has rejected the theory of defamation by compelled self-publication.  Say what? you ask?  Compelled self-publication occurs most often in the employment context, where a terminated employee is compelled to inform subsequent potential employers why the employee was terminated from the employee’s last job.  As the theory goes, if an employer gives untrue defamatory reasons for terminating an employee, it should recognize that such conduct creates an unreasonable risk that the defamatory matter will be communicated to prospective employers.  By rejecting the theory, the Texas Supreme Court was concerned about creating an actionable tort any time an employee disagrees with the employer’s reason for firing the employee.   By refusing to recognize a tort based on compelled self-publication, the Texas Supreme Court reemphasized Texas’s long-standing tradition of employment at-will.

Good news middle aged drivers!  Today the Texas Legislature has passed HB 60, making it illegal to text and drive in Texas.  The new legislation is headed to Governor Abbot’s desk, who is expected to sign the bill.  Based on the language of the final bill that passed both houses, it is an affirmative defense to prosecution under the new law if the person is using the wireless device in conjunction with a hands-free device, to navigate using GPS, to report illegal activity, or (and this is really in the law) to activate a function that plays music.

So you cannot text while driving, but you can use Google Maps and Waze, and listen to Spotify.  And no more honking at the car in front of you two milliseconds after the light turns green…

 

 

 

Those who know me know that I am into hunting and shooting sports.  I have been an avid handgun shooter since 1997.  I have been into shotgun sports and shotgun hunting since approximately 2005-2006.  Within the last couple of years, I have become an avid rifle shooter and have gone on two big game hunts, with a third scheduled.

Some time ago, while shooting at the Bullet Trap in Plano, Texas, I noticed a sign on the wall that said “Silencers Are Not Illegal.”  I did not think much of it at the time, since most people do not have silencers on their handguns.

Copyright: nexusby / 123RF Stock Photoisolated on white, illustration
Copyright: nexusby / 123RF Stock Photo

However, over the last two years, I have spent a lot of time at the Elm Fork 100 yard rifle range in Dallas, and I noticed that many people have silencers or suppressors on their rifles.  David Crooks and I often will discuss gun and shooting topics during breaks from legal work, and recently, we looked up the necessary steps for obtaining a firearm suppressor in Texas.  This prompted me to look up the actual statute, and this blog post is the result.

Firearm suppressors commonly are called “silencers;” indeed, even the Texas legislature calls these devices silencers.  However, this moniker is somewhat inaccurate.  It is a topic for another post, but suppressors do not “silence” firearms; rather, depending on the caliber of the gun (larger calibers are harder to keep quiet) and ammunition (regular vs. subsonic), suppressors have varying levels of effectiveness in quieting the perceived sound after firing a round.

But in 2015, during the 84th Texas Legislature, Texas Governor Greg Abbott signed into law SB 473, which amended Section 46.05 of the Texas Penal Code to make firearm silencers legal in Texas.  Prior to this bill, silencers had been illegal in Texas.

Under current Texas law, as long as one meets the requirements to be able to own a firearm (i.e., not a convicted felon, not under investigation for family violence, not diagnosed with a mental illness, etc.), he or she also can own a firearm suppressor.  The silencer must be registered in the National Firearms Registration, and a transfer (purchase) record must be maintained with the ATF.

If you meet these requirements, are willing to plop down the $400-$1,500 necessary to purchase a silencer, and pay a gunsmith to thread your firearm barrel to attach the silencer, you too can take advantage of another perk of living in Texas.  Happy (quieter) shooting.

Copyright: gsagi / 123RF Stock Photo
Copyright: gsagi / 123RF Stock Photo

 

 

 

In October, I wrote about How the Practice of Law is Like the NHL.  This article was about how rule changes in the practice of law, and changing skill sets in the NHL have made finesse and skill more important than brawling.  Recent experience has shown that this trend continues in law, and that Judges hate “gotcha games.”

Brett Myers and I recently sat through a trial docket call in County Court at Law No. 1 in Dallas County.  While waiting for our turn, we watched Judge Benson make two interesting rulings during a pre-trial hearing for the case ahead of us.

First, Judge Benson ruled that at trial, Defendant could not call as witnesses any of the twenty-three doctors it had recently disclosed.  Interestingly, Defendant’s attorney had added the doctors to Defendant’s disclosure responses forty-five days before trial, which is timely under the Texas Rules of Civil Procedure.  It did not come out during the hearing whether Defendant’s tardiness was a mistake or was intended as a “gotcha,” so as to not allow Plaintiff to conduct discovery on these witnesses.

Either way, the Judge sustained the Plaintiff’s objection to the witnesses, and held that this late disclosure caused unfair prejudice to Plaintiff.  In her commentary from the bench, Judge Benson said if there had been a timely supplementation of one or two witnesses, it would have been okay, but such a late disclosure of this amount of witnesses simply was not fair.

Second, in a turn of the tables, Judge Benson ruled against Plaintiff for similar reasons.  Defendant’s attorney had produced a video made by Defendant’s expert late according to the rules.  Although the video was produced late according to the technical letter of the law, it was produced eight months before trial.

Rather than taking any action to remedy the tardiness issue, Plaintiff’s attorney waited until a week before trial to object to the video – a clear attempt at a “gotcha.”  The Judge denied Plaintiff’s motion to exclude the video, and allowed Defendant’s expert to use the video.  Judge Benson stated that Plaintiff’s attorney had been in the possession of the video for so long that Plaintiff could not have been prejudiced, and that if Plaintiff felt it was prejudiced, it should have taken action during the intervening time period.

I think there are two lessons to be learned from this experience: 1) Supplement your discovery responses early and often; and 2) If you have a problem, take it up with the Court as soon as possible and do not sit back to try to wait on a “gotcha” ruling from the Court, because you may not get it.

One of the ironies in the business world is that the foresight and planning that goes into a creative work is often left behind when it comes to the subsequent protection of these efforts. Copyright protection is a concept that many are familiar with on a superficial level. But a lot of confusion exists as to what copyright protects and how you go about obtaining that protection. Copyright protects original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and websites. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed. In other words, if there is only one way to express an idea then it is not eligible for copyright protection. Although the bar for creativity is not set particularly high, there must be at least some modicum of original thought in the final work product.

So what is the proper way of obtaining copyright protection? It may surprise many people that copyright protection exists the moment a work is created. In fact, as soon as your work is complete, you have the right to include the © symbol on it. Aside from the cachet associated with any “legal” declaration of rights, the © symbol also serves as a deterrent to would-be infringers. But despite the ease with which an author can obtain instant copyright protection, enforcing these rights is another story. In order to be able to sue someone for copyright infringement, you have to first obtain a copyright registration. This entails submitting your work specimen along with an application to the U.S. Copyright Office. The cost of filing such an application is modest, and it pales in comparison to what it will cost if this crucial step is not undertaken. Without the ability to sue in federal court, you can never be compensated or receive money damages when someone copies your work. More important, you cannot stop someone from continuing to use your work. Further, if you register your copyright within three months of publication you may be entitled to attorney’s fees and statutory damages. Statutory damages are a powerful remedy in that you do not have to prove lost profits in order to receive them. Plaintiffs who can show willful infringement may be entitled to statutory damages up to $150,000 per work. So what is the moral of the story? If something is worth your time to create, it is worth your time to protect.