Texas Business Litigation
Sofia adrogué, EditorCarolinE BakEr, Co-Editor
2015
TX_Business_Litigation_Cover.indd 1 3/26/14 7:30:09 AM
kim J. askew (Discovery), K&L Gates, LLP
Chip Babcock (Speech-Based Torts: Libel, Slander, Business Disparagement and Invasion of Privacy), Jackson Walker, L.L.P.
david J. Beck (Damages), Beck Redden, LLP
Maria Wyckoff Boyce (Experts), Baker Botts, LLP
david Chaumette (E-Discovery), Chaumette, PLLC
Charles Everingham iV (Intellectual Property and Trade Secrets Litigation), Akin, Gump, Strauss, Hauer & Feld, LLP
david gerger (Criminal Law in Business Tort Cases), Gerger & Clarke
robin gibbs (Breach of Fiduciary Duty Claims in Business Transactions), Gibbs & Bruns
Elizabeth M. guffy (Bankruptcy Ramifications in Business Litigation Cases), Burleson, LLP
lamont a. Jefferson (Contorts), Haynes and Boone, LLP
randy Johnston (Ethics), Johnston Tobey, PC
Mark lanier (The Liability Case), Lanier Law Firm
alice oliver-Parrott (Alternative Dispute Resolution), Alice Oliver-Parrott, P.C.
James J. ormiston (Selected Causes of Action Unique to the Oil and Gas Industry), Gray Reed & McGraw, P.C.
Yvette ostolaza (Fraud and Negligent Misrepresentation), Sidley Austin, LLP
Harry Susman (Evaluating Commercial Cases: Avoiding Icebergs), Susman Godfrey
Patricia J. Villareal (Corporate Governance and Regulatory Proceedings), Jones Day
a. Martin Wickliff, Jr. (Employment Law Litigation), Cozen O’Connor
Marie r. Yeates (Preservation of Error—Appeal Tactics), Vinson & Elkins LLP
r. Paul Yetter (Antitrust), Yetter Coleman, LLP
Contributing authors
tExaS BuSinESS litigation, 2015So f i a ad r o g u é, Ed i t o r, Ca r o l i n E Ba k E r, Co-Ed i t o r
Modern complex business litigation presents a witches’ brew of risks to both sides. Controlling legal standards vary across possible venues. Discovery costs are potentially exorbitant. The challenge of persuasively communicating to courts and juries on issues which are foreign to them requires great imagination and skill. Realistic assessment of settlement values is a critical and difficult art.
The Editors have assembled a galaxy of some of the best trial lawyers in the nation to address the myriad issues raised. This work will be an invaluable resource for both trial lawyers and corporate counsel.—Harry reasoner, Senior Partner, Vinson & Elkins llP
Any attorney who has been licensed for a few years should appreciate the fact, and any seasoned practitioner will agree, that the practice of law in the 21st century bears little resemblance to that of the 1900’s and it is not entirely due to the technology age. To some degree, it requires almost a re-education process. There is no doubt that it requires a new approach.
The advent of new statutes and changing regulations requires constant vigilance and careful attention by those who appreciate the importance of staying current in their representation of clients. That is the beauty of this treatise. Almost no topic of interest, especially to those who have a litigation practice, has been overlooked. Each of the 20 topics has been covered in depth. It can be used as a handy reference as the need arises.
I predict this publication will be the quick “go to” work for those who “enjoy” an active practice, whatever the area.—Hon. ruby kless Sondock
Sofia adrogué, Editor, a native of Argentina and commercial litigator for over 20 years, is a member (partner) of Gray Reed & McGraw, P.C.
Caroline Baker, Co-Editor, a fifth-generation Texan, has served the citizens of Harris County as a judge for over 16 years.
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Texas Business Litigation
Sofia adrogué, EditorCarolinE BakEr, Co-Editor
2015
Suggested citation form: Adrogué & Baker, Texas Business Litigation, § _____, at ____ (2015 ed.)
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This is excerpted, with permission, from Texas Business Litigation, 2015. Copyright ALM Media LLC. Please visit www.lawcatalog.com/txbl for more info or call 800-756-8993.
For further information about the Texas Lawyer books contact:1412 Main St., Suite 1300Dallas, Texas 75202-4432
(214) 744-7740 • (800) 456-5484, ext. 7740
www.TexasLawyerBooks.comwww.alm.com
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This book is not intended to offer advice or counsel. Nor is it intended to serve as a substitute for professional representation. Since the information in this book may not be sufficient in dealing with a client’s particular problem, and because this area of law constantly changes, lawyers and others using this publication should not rely on it as a substitute for independent research.
International Standard Book Number978-1-57625-837-8 (print)
978-1-57625-860-6 (eBook)
Printed in the United States of AmericaDesktop composition by HOV Services.
Copyright ©2014 by ALM Media Properties, LLCAll rights reserved. No part of this book may be reproduced or copied in
any form or by any means—graphic, electronic or mechanical—without prior written permission of the publisher.
Other Titles from Texas Lawyer Books:
Dallas County Bench BookDirectory of Corporate Counsel
Harris County Bench BookHow to Recover Attorneys’ Fees in Texas
Lanier’s Texas Personal Injury FormsLegal Writing for the Rewired Brain: Persuading Readers in Paperless World
Maslanka’s Field Guide to the Family & Medical Leave ActMaslanka’s Field Guide to the Fair Labor Standards Act
Maslanka’s Filed Guide to the Texas Commission on Human Rights Act and Texas Labor Code
Pronske’s Texas BankruptcyTexas Courthouse Guide
Texas Criminal Codes and Rules — AnnotatedTexas Legal Malpractice and Lawyer DisciplineTexas Litigator’s Guide to Departing Employees
Texas Personal Automobile Insurance Policy — AnnotatedWhat Judges Want: A Former Judge’s Guide to Success in Court
Whistleblower and Bounty Law
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Texas Business LiTigaTion 2015 iii
About this Book
“Any attorney who has been licensed for a few years should appreciate the fact, and any seasoned practitioner will agree, that the practice of law in the 21st century bears little resemblance to that of the 1900’s and it is not entirely due to the technology age. To some degree, it requires almost a re-education process. There is no doubt that it requires a new approach.
The advent of new statutes and changing regulations requires constant vigilance and careful attention by those who appreciate the importance of staying current in their representation of clients. That is the beauty of this treatise. Almost no topic of interest, especially to those who have a litigation practice, has been overlooked. Each of the 20 topics has been covered in depth. It can be used as a handy reference as the need arises.
I predict this publication will be the quick ‘go to’ work for those who ‘enjoy’ an active practice, whatever the area.”
—Hon. Ruby Kless Sondock
“Modern complex business litigation presents a witches’ brew of risks to both sides. Controlling legal standards vary across possible venues. Discovery costs are potentially exorbitant. The challenge of persuasively communicating to courts and juries on issues which are foreign to them requires great imagination and skill. Realistic assessment of settlement values is a critical and difficult art.
The Editors have assembled a galaxy of some of the best trial lawyers in the nation to address the myriad issues raised. This work will be an invaluable resource for both trial lawyers and corporate counsel.”
—Harry Reasoner, Senior Partner, Vinson & Elkins LLP
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iv Texas Business LiTigaTion 2015
Litigation in the 21st century has been the subject of vigorous substantive debate and commensurate study. Some commentators have defined a 21st century litigator as “one who uses the court system only as a last resort if a dispute cannot be resolved outside its bounds.” It is undisputed that the jury trial is in jeopardy and, at the very least, the numbers have greatly decreased. In Texas civil district courts, of the cases disposed of in 2013 (excluding family cases), less than half of a percent were tried to a jury. With institutions seeking a “roadmap for reform” in our 21st century civil justice system, issues of costs and length of time for resolution of matters and satisfaction with the overall process are at the forefront of the debate. These are predictable consequences of the “vanishing trial” phenomenon that business litigators face. While we cannot guarantee you a trial, combining nearly 50 cumulative years of practice and over 15 years on a state district court bench, we envisioned a work that would serve as an encyclopedia on business litigation—from A to Z—including some of the unexpected issues that may emerge—a bankruptcy proceeding or a criminal investigation—along with applicable ethical considerations.
We sought to include truly the “Who’s Who of the Bar,” legendary trial lawyers and specialists, to analyze the following: (i) alternative dispute resolution; (ii) antitrust; (iii) bankruptcy ramifications in business litigation; (iv) breach of fiduciary duty claims in business transactions; (v) evaluation of business cases; (vi) contorts; (vii) corporate governance and regulatory proceedings; (viii) criminal law in business torts cases; (ix) damages; (x) discovery; (xi) employment law; (xii) experts; (xiii) fraud and negligent misrepresentation; (xiv) intellectual property and trade secrets litigation; (xv) ethics; (xvi) the liability case; (xvii) oil and gas; (xviii) preservation of error and appeal tactics; (xix) speech based torts: libel, slander, business disparagement and invasion of privacy; and (xx) e-discovery. Given the caliber of the formidable talent, we believe we provide 20 chapters that are thoughtful, thorough and innovative.
A spirited debate about the cause(s) of the “vanishing trial” continues as well as the best manner to handle complex business torts litigation. Success in such matters requires creativity and advocacy skills. Ideally, this treatise will be of benefit. We would like to thank our chapter authors; Lauretta Kelley and Maryann
About this Book
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Texas Business LiTigaTion 2015 v
Zaki, Gray Reed & McGraw, P.C.; and the ALM Team, with a particular thanks to Bridget Bosworth for her editorial talents, Dana Duterroil for her early efforts, as well as Marjorie Grodd Brown, the catalyst for this opportunity.
We hope this treatise will serve as your business litigation template as you move your business litigation cases to trial.
Sofia Adrogué, Editor & Caroline Baker, Co-EditorJune 2014
About this Book
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Texas Business LiTigaTion 2015 vii
About the Editors
Sofia Adrogué (Editor), a commercial litigator for over 20 years, is a member (partner) of Gray Reed & McGraw, P.C. She has obtained favorable judgments and settlements on behalf of both plaintiffs and defendants in a myriad of complex business cases in state and federal courts as well as in ADR proceedings. She represents clients in all industries, ranging from entrepreneurs in rural Texas to multinational conglomerates with diversified worldwide business holdings. She also represents parties in peer review proceedings and/or before state regulatory or licensing agencies in the healthcare arena.
AV Preeminent ®Peer Review Rated by Martindale-Hubbell, she is a frequent CLE speaker and/or chair (over 110 speeches) and publisher (over 100 articles). An alumna of the Harvard Business School OPM, she served as the U.S. Keynote Graduation Speaker for HBS OPM 37, ostensibly the first woman, as well as U.S. Class Representative. She is a graduate of Rice University, magna cum laude, Phi Beta Kappa, and the University of Houston Law Center, magna cum laude, Order of the Coif and Barons, on full academic scholarships. She served as a law clerk to Hon. Jerre S. Williams of the U.S. Court of Appeals for the Fifth Circuit.
She is a “Mujer Empresaria del Año,” (Executive Women of the Year), Sucesos and Solo Mujeres; a “Woman of Influence,” National Council of Jewish Women Greater Houston Section; a “Texas Super Lawyer”; a Texas Lawyer’s “Top 40 Under 40”; a National Diversity Council “Most Powerful and Influential Woman of Texas”; a “TBOY Blazing Star,” Texas Women’s Chamber of Commerce; a Greater Houston Women’s Chamber Hall of Fame Inductee; a Texas Executive Women “Woman on the Move”; a Houston Chronicle Channel 11 “Texas Legend”; a “Houston’s Top Lawyer”; a Houston Jaycees “Outstanding Houstonian”; a Texas
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viii Texas Business LiTigaTion 2015
Jaycees “Outstanding Texan” and a U.S. Jaycees “Outstanding Young American.”
Sofia serves and/or has served on The Advocate Editorial Board; the Texas Supreme Court Advisory Committee; the CLE, Mentor and Professionalism Committees of the State Bar of Texas as well as the CLE, Houston Lawyer and the Professionalism Committees of the Houston Bar Association. She also serves and/or has served on the Board of Directors of the American Leadership Forum Houston; Girls Incorporated of Greater Houston (former President and Board Chair); the Houston Law Review Alumni Association (former President); Memorial Hermann Foundation; RICE-TMS; Museum of Fine Arts, Houston; Theatre Under The Stars; and the United Way of the Texas Gulf Coast, among others.
A native of Argentina, Sofia is a co-host & co-producer of “Latina Voices: Smart Talk.” The mother of Sloane (18), Schuyler (14), and Stefan (11), married to fellow Rice graduate, Sten Gustafson, Sofia has been recognized for her public service by the City of Houston with a proclamation of July 10, 2004 as “Sofia Adrogué Day.”
Caroline Baker (Co-Editor),1 a fifth-generation Texan, has served the citizens of Harris County as a judge for over 16 years. Prior to the bench, she was a partner in the litigation firm of McFall, Sherwood & Sheehy. A graduate of Princeton University and the University of Texas School of Law, she is Board Certified in Personal Injury Trial Law and has been elected to membership in the American Board of Trial Advocates. ABOTA is an honorary organization of plaintiff and defense lawyers (as well as judges) dedicated to the preservation of the right to trial by jury and excellence in the legal profession. Candidates are nominated and elected by the members of the organization and must have a proven record as a trial lawyer. Caroline also is a mediator with a certificate from the AA White Dispute Resolution Center and serves as an adjunct professor in Trial Advocacy at the University of Houston Law Center.
1. Caroline Baker will receive no compensation for her work on this book. Her portion of royalties will be donated to the trial advocacy programs at University of Houston Law Center, South Texas College of Law and Thurgood Marshall School of Law.
About the Editors
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Texas Business LiTigaTion 2015 ix
Strongly committed to professional service, Caroline currently serves on three committees of the State Bar of Texas, including the Committee on Judicial Ethics, Judicial Section. She has served as Chair of the Ethics Committee for the Board of Civil Judges and Chair of the Administration of Justice Committee for the Board of District Judges. She also has served as a member of the Ethics Committee for the National Association of Women Judges and is a Past President of the ADR Section of the Houston Bar Association. She has been a member and Chair of a State Bar Grievance Committee. Caroline also spends time mentoring aspiring lawyers through internships in the court and judging mock trials and mock hearings for students from the Houston law schools.
Caroline is a graduate of Leadership Houston (where she received the Patrice Johnson Alumnus Award for Leadership), the American Leadership Forum, and the Center for Houston’s Future. She has been honored by Aspiring Youth with the “Star for Girls’ Education” award, and was selected by Texas Executive Women as a “Woman on the Move” and by Houston Woman magazine as one of the “50 Most Influential Women in Houston.”
Equally committed to community service, she serves and/or has served on the Board of Directors of many non-profit organizations, including Neighborhood Centers Inc., Girls Incorporated of Greater Houston (Former Chair), The Heritage Society, Hobby Center Foundation, Leadership Houston (Former Chair), the YMCA, and on the Advisory Boards of The Chinquapin School, Career & Recovery Resources, Inc. and City Hall Fellows.
Above all, Caroline is devoted to her family. She and her husband are the proud parents of three children.
About the Editors
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Texas Business LiTigaTion 2015 xi
Kim J. Askew (Discovery) is a partner at K&L Gates, LLP in Dallas where she concentrates on complex commercial litigation and employment litigation. She holds a law degree from Georgetown University Law Center and clerked for former Chief Judge Jerry Buchmeyer of the United States District Court for the Northern District of Texas. She has been recognized by Best Lawyers in America for commercial litigation, by Lawdragon as one of the “500 Leading Lawyers in America” in employment litigation, and as a “Texas Super Lawyer” for over ten years. She is the former Chair of the Section of Litigation of the American Bar Association and serves on the Council of the American Law Institute. She has been named one of the “25 Greatest Texas Lawyers of the Past Quarter Century.” She is a frequent author and speaker on discovery, evidentiary, and business and employment litigation topics.
Chip Babcock (Speech-Based Torts: Libel, Slander, Business Disparagement and Invasion of Privacy) is a partner at Jackson Walker L.L.P., and has a national trial and appellate practice and has handled many significant cases, including his representation of Oprah Winfrey, her company, Harpo, and Dr. Phil in litigation across the United States. In more than 25 years of practice, he has tried over 100 cases to a jury. He is a Fellow of the American College of Trial Lawyers, The International Academy of Trial Lawyers, The American Board of Trial Advocates, and The American Law Institute. In 2013, he was accepted as a Fellow of the Center for American and International Law and the Litigation Counsel of America. He is a graduate of Brown University and The Boston University Law School. For the past 25 years, he has been a member of the Texas Supreme Court Advisory Committee, and has served as its chair for the last 14 years.
About the Contributing Authors
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xii Texas Business LiTigaTion 2015
David J. Beck (Damages) is a founding partner of Beck Redden, LLP in Texas. He is a Fellow of the American College of Trial Lawyers and the International Academy of Trial Lawyers, and currently serves as Chair of the Board of Trustees of the Center for American and International Law. He is a Past President of the State Bar of Texas and the American College of Trial Lawyers. He has been recognized as one of the “Best Lawyers in America” by Woodward & White since the publication’s inception in 1990 and is consistently named by the National Law Journal as one of the top trial lawyers in the country. He was recognized as a “2013 Lawyer of the Year in Texas for Antitrust Law” by Best Lawyers; named Houston Lawyer of the Year in “Bet-the-Company” Litigation, Best Lawyers, 2009; selected as a Thomson Reuters “Top 10 Super Lawyers,” 2003-2013; and named Global Commercial Litigation Lawyer of the Year, Who’s Who Legal, 2014. United States Chief Justice William Rehnquist appointed David to the Judicial Conference Standing Committee on Rules of Practice and Procedure in 2004, and he was re-appointed by Chief Justice Roberts in 2007 for another three-year term.
Maria Wyckoff Boyce (Experts) is a senior partner in the Litigation Department of Baker Botts LLP and serves on the firm’s Executive Committee. She specializes in complex commercial and intellectual property cases. She has tried patent, trade secrets, contract, fraud, and tort cases to verdict in state and federal courts throughout the United States, and her trial results have been recognized in several national publications. She graduated in 1988 from Northwestern University School of Law, where she was the editor-in-chief of the Journal of Criminal Law and Criminology. She has spoken on and written about topics related to intellectual property damages, evidence, and summary judgment motions.
David Chaumette (E-Discovery) is the founding partner of Chaumette, PLLC, and has a national practice involving significant trial work, including appointments as a special master. In addition, he counsels clients on numerous other business related issues. David has been published in the Texas Lawyer and several national legal related publications and featured in news outlets ranging from ESPN.com to the Washington Post and the
About the Contributing Authors
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Texas Business LiTigaTion 2015 xiii
New York Post. He is a Fellow of The American Law Institute and Litigation Counsel of America, and has also served the community through chairing the Board of Directors for the Houston Bar Association (the fifth largest metropolitan bar association in the United States), Neighborhood Centers, Inc., the Houston Young Lawyers Association, the Houston Lawyers Foundation, First Colony Little League, and Leadership Houston. David has also served on the Board of the Chinquapin School, Young Audiences of Houston, and the Holocaust Museum Houston. In 2009, he was recognized as an “Extraordinary Minority in Texas Law” by Texas Lawyer Magazine. The following year, the State Bar recognized David for his extraordinary contributions to continuing legal education programs across the state. In 2004, David was selected as one of the “Five Outstanding Young Texans” by the Texas Junior Chamber of Commerce. He holds aerospace engineering degrees from Princeton (cum laude) and Stanford University and has a law degree from The University of Chicago Law School.
Charles Everingham IV (Intellectual Property and Trade Secrets Litigation) is a partner with Akin, Gump, Strauss, Hauer & Feld, LLP in the Intellectual Property Section. He represents clients on both sides of the docket in intellectual property litigation and complex civil matters. Before he joined Akin Gump, he served as a United States Magistrate Judge for the Eastern District of Texas and presided over a large number of complex intellectual property matters. He also served for several years as a career law clerk to the Hon. T. John Ward, United States District Judge for the Eastern District of Texas. He serves on the Professionalism Committee for the State Bar of Texas. He is also a Fellow in the Texas Bar Foundation and serves on the District 2 Nominating Committee. He is a 1993 graduate of Baylor University School of Law, where he graduated cum laude and was the highest ranking student in his graduating class. He received a Bachelor of Arts, cum laude, in political science from Stephen F. Austin State University in 1989.
David Gerger (Criminal Law in Business Tort Cases) of Gerger & Clarke has a national practice in business crime investigations, trials, and appeals and their related civil matters. He graduated from Yale College and the University of Texas Law School, where
About the Contributing Authors
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xiv Texas Business LiTigaTion 2015
he was Book Editor of the Law Review, and then clerked for U.S. District Judge Harry Lee Hudspeth and U.S. 5th Circuit Judge Jerre S. Williams. Before starting his own firm, David practiced at Vinson & Elkins; as a Federal Public Defender; and for 10 years with Foreman, DeGeurin, Nugent & Gerger. David has long been listed in Best Lawyers in America and is a Fellow in the American College of Trial Lawyers.
Robin Gibbs (Breach of Fiduciary Duty Claims in Business Transactions) is the founding partner of Gibbs & Bruns, a premier litigation boutique renowned for its signature lean trial teams and representation of both plaintiffs and defendants. Robin’s practice, and that of his firm, focuses on all forms of high-stakes business and commercial litigation, including significant securities and institutional investor litigation, director and officer liability, contract disputes, fraud and fiduciary claims, energy litigation, construction litigation, trust and estate litigation, antitrust litigation, legal and professional malpractice, and partnership disputes. Robin is a Fellow of the American College of Trial Lawyers, The International Academy of Trial Lawyers, and The International Society of Barristers. He is Past President of the American Board of Trial Advocates and was TEX-ABOTA’s 2012 Trial Lawyer of the Year. Robin is recognized in Chambers USA, Chambers Global, Legal 500, Benchmark Litigation, Best Lawyers in America, and Texas Super Lawyers. Gibbs & Bruns was named the “Top US Litigation Firm” by The Financial Times’ “US Innovative Lawyers 2012”; and to The National Law Journal’s inaugural “Litigation Boutiques Hot List,” 2012. The American Lawyer named Gibbs & Bruns a top four U.S. litigation boutique; and the National Law Journal twice named the firm to its “Plaintiffs Hot List.”
Elizabeth M. Guffy (Bankruptcy Ramifications in Business Litigation Cases) is a partner at Burleson LLP in Houston, where she concentrates on commercial bankruptcy and insolvency-related finance matters. She has been appointed as Chapter 11 trustee in a number of cases and has also served as a Chapter 7 trustee. Elizabeth graduated from the University of Houston Law Center in 1987 cum laude, where she was an Articles Editor
About the Contributing Authors
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Texas Business LiTigaTion 2015 xv
for the Houston Law Review. Prior to joining her present firm, she practiced with Baker Botts LLP and Dewey Ballentine LLP. She has authored many articles and has spoken on several panels relating to commercial bankruptcy issues.
Lamont A. Jefferson (Contorts) is a partner at Haynes and Boone, LLP in San Antonio, Texas. Among his accomplishments is admission to Fellowship in the American College of Trial Lawyers and his work on the board of TEX-ABOTA (Texas Chapters of American Board of Trial Advocates). Lamont was licensed to practice law in 1984 after graduating from the University of Texas School of Law and Rice University. He practices commercial litigation and has handled cases resulting in over 70 jury verdicts in his career. He is a frequent speaker and author on a variety of legal and trial practice topics and currently sits on the Texas Supreme Court Rules Advisory Committee.
Randy Johnston (Ethics) is a member of the blues band, “Blue Collar Crime.” He is the author of the book Robbed at Pen Point and practices with the firm of Johnston Tobey PC in Dallas, Texas. His practice concentrates on legal malpractice and professional liability. He is a member of the International Academy of Trial Lawyers, the American Board of Trial Advocates, the Texas and Dallas Trial Lawyers Associations, and is a former President of the Dallas Chapter of the American Board of Trial Advocates and a former President of the Dallas Trial Lawyers Association. In 2012, he was one of five to receive the “Texas Trial Legends Award” from the Dallas Bar Association’s Tort & Insurance Practice Section. In 2010, he was one of eight recipients of the “Standing Ovation Award” from the Texas Bar Association recognizing his service as a speaker at Texas Bar CLE programs.
Mark Lanier (The Liability Case) is the owner of the Lanier Law Firm (New York, Houston, Los Angeles). He has tried cases in all areas of civil law except family law. A graduate of Texas Tech University School of Law (1984), he has amassed well over $1 billion in verdicts, including the nation’s largest punitive damage award ($9 billion), and the largest personal injury award ($9.15 billion). He has repeated recognition in
About the Contributing Authors
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xvi Texas Business LiTigaTion 2015
the National Law Journal’s “Nation’s Top Trial Attorneys,” and has been honored as the only plaintiff ’s lawyer among the 40 lawyers selected as the “Decade’s Most Influential Lawyers” (2000–2010). He is a frequent television commentator on all the major networks, has been subject of feature articles in the Wall Street Journal, The New York Times, the Los Angeles Times, and other major printed media. The movie “Puncture” was based on one of his cases (Lanier plays himself in the movie) and Lanier was the principle subject of the book, All The Justice Money Can Buy, by former-NPR reporter Snigdha Prakash. Mark’s trials have been carried on the Court TV website and have been the subject of articles and books emphasizing his communication techniques and legal accomplishments. Cliff Atkinson’s book, Beyond Bullet Points, describes in Chapter 1 the approach used by Lanier in the Ernst trial, which Fortune magazine described as “frighteningly powerful.”
Alice Oliver-Parrott (Alternative Dispute Resolution) has enjoyed a distinguished career as a trial lawyer, trial judge, Chief Justice of the First Court of Appeals, and now, as a mediator and arbitrator. Judge Oliver-Parrott is experienced in resolving virtually all types of commercial and general civil litigation matters. Consistently listed in Best Lawyers in America and as a Texas Monthly “Super Lawyer,” Judge Oliver-Parrott has been recognized as the “Outstanding Civil Trial Judge” by the Texas Civil Trial Specialists Association, the “Texas Trial Lawyer of the Year” by the Texas Chapters of the American Board of Trial Advocates, and the “Outstanding Young Lawyer of Texas” by the State Bar of Texas. Judge Oliver-Parrott was the first woman in the history of Texas to serve as Chief Justice of any appellate court.
James J. Ormiston (Selected Causes of Action Unique to the Oil and Gas Industry) is a shareholder of Gray Reed & McGraw, P.C. in Houston, and leader of the firm’s Commercial Litigation Section. His practice focuses exclusively on complex commercial cases, with a special emphasis in litigation related to the oil and gas industry. He is a 1987 graduate of The University of Texas School of Law, and received a Bachelor of Arts degree, magna cum laude, in 1984 from St. Mary’s University. He is
About the Contributing Authors
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Texas Business LiTigaTion 2015 xvii
a Fellow of the International Society of Barristers, and has been recognized as a “Best Lawyer” by Best Lawyers in America (2013-2014), and as a “Texas Super Lawyer” by Texas Monthly and Law & Politics magazines (2008-2013).
Yvette Ostolaza (Fraud and Negligent Misrepresentation), a partner with Sidley Austin LLP in Dallas, has developed a reputation in Texas and nationally as a versatile counselor who excels at all aspects of complex disputes. Yvette litigates matters in U.S. state and federal trial and appellate courts on behalf of sophisticated, global clients. She also coordinates and tries proceedings in a variety of arbitration venues and serves on the Roster of Neutral Arbitrators for the AAA for commercial litigation matters. She routinely speaks and publishes on business torts, class actions, and arbitration and has been featured in Time magazine and as a speaker on “Internal Investigations Best Practices” in America’s Most Influential Women. Yvette is recognized as a leading practitioner by virtually every ranking organization including Chambers USA and Benchmark Litigation. The Texas Diversity Counsel, in 2012, named Yvette as one of the 20 “Most Powerful & Influential Women.” She was profiled as one of the “Winning Women” by the Texas Lawyer in 2011 and the Dallas Business Journal, and the Association of Corporate Counsel named Yvette as one of the “Defenders” — the top 15 business defense attorneys in the Dallas-Fort Worth metroplex in 2008.
Harry Susman (Evaluating Commercial Cases: Avoiding Icebergs) is a partner with Susman Godfrey in Houston, Texas. He tries complex cases for plaintiffs and defendants throughout the country and has recovered hundreds of millions of dollars for his clients. He has been recognized consistently as one of “The Best Lawyers in America” by Best Lawyers, Chambers Global and USA as a leader in the field of antitrust and commercial litigation, “Super Lawyers in Texas” by Texas Monthly magazine, and one of the best lawyers under 40 in Houston by H Magazine. He is a graduate of Yale College and the University of Texas School of Law, where he was editor-in-chief of the Texas Law Review. He clerked for the Honorable Anthony Kennedy on the United States Supreme Court
About the Contributing Authors
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xviii Texas Business LiTigaTion 2015
and the Honorable Alex Kozinski on the United States Court of Appeals for the Ninth Circuit.
Patricia J. Villareal (Corporate Governance and Regulatory Proceedings) is the partner-in-charge of the Dallas Office of Jones Day and leads that office’s Securities Litigation & SEC Enforcement Practice. She represents public companies and their directors and officers, as well as private equity clients, in securities and corporate governance litigation and internal investigations. She also advises boards of directors, board committees, and other entities and individuals regarding a broad range of topics, including corporate governance, director and officer indemnification and insurance, and mergers and acquisitions. She lectures frequently on securities litigation and corporate governance matters and has been recognized for several years as a leading lawyer by Chambers, Best Lawyers in America, Texas Monthly, D Magazine, and Lawdragon. She has also been rated AV Preeminent in Securities Law and listed in the Benchmark Top 250 Women in Litigation. She received her J.D. from Harvard Law School and clerked for the Hon. H. Barefoot Sanders of the United States District Court for the Northern District of Texas.
A. Martin Wickliff, Jr. (Employment Law Litigation) is chair of the Houston Labor and Employment Group of Cozen O’Connor, which is based in Philadelphia. His practice focuses on the representation of employers in all phases of Labor and Employment law, litigation, trials and appeals in state and federal courts, as well as the EEOC, NLRB, OFCCP and other administrative agencies. He holds a law degree from Thurgood Marshall School of Law (Houston) and a LLM (Labor) from NYU. He is recognized as one of the “Top 100 attorneys in Texas and the Houston Region,” Texas Lawyer; Named one of the “25 Greatest Lawyers for the Past Quarter Century,” Texas Lawyer (2010); Texas Super Lawyers, 2003-2014; Who’s Who Legal (Texas); Chambers (2007-2014) Best Lawyers in America (2010-2014); College of Labor and Employment Lawyers (ABA); and the American Board of Trial Advocates, Houston Chapter.
About the Contributing Authors
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About the Contributing Authors
Marie R. Yeates (Preservation of Error—Appeal Tactics) has led Vinson & Elkins LLP’s appellate practice since 1991. She serves on the firm’s management committee. She has presented over 100 appellate oral arguments. In Chambers USA 2009 and 2012, Marie “is noted for her impressive advocacy and rapid grasp of the most complex issues” and is lauded as a “rare talent” who is “known in particular for being meticulous.” In 2014, Benchmark named Marie as one of the top 250 women litigators in the country. The Texas Lawyer (August 2011) named Marie as one of the top 20 “Winning Women” lawyers in Texas. Since the beginning of Chambers rankings in 2004, she has consistently been recognized, each year, in the top “Band 1” category of appellate litigators in Texas. Due to the national breadth of her practice, Marie is also ranked nationally by Chambers. Marie graduated from Louisiana State University summa cum laude in 1977 and LSU School of Law in 1980, first in her class, and editor-in-chief of the Louisiana Law Review. She clerked for Judge Alvin Rubin, U.S. Fifth Circuit Court of Appeals in 1980-81. A member of the American Academy of Appellate Lawyers since 1997, Marie is also Board Certified in Civil Appellate Law by the Texas Board of Legal Specialization.
R. Paul Yetter (Antitrust) is founder and managing partner of Yetter Coleman LLP in Houston. With litigation as his core practice, he represents plaintiffs and defendants in a range of industries—energy, technology, transportation, construction, mining, utility, telecommunications and financial services—in all manner of disputes including antitrust, IP, securities, business torts, and contract. For 30 years, he has been lead counsel in defending and prosecuting lawsuits and arbitrations around the country, as well as appeals in many federal and state appellate courts. Paul graduated from Columbia Law School, before clerking for Hon. John R. Brown of the U.S. Fifth Circuit Court of Appeals. He is a Fellow of the International Society of Barristers and a member of the American Board of Trial Advocates. He was named one of the nation’s top litigators by National Law Journal (2004). He also was honored as a Distinguished Alumnus (2008) by his college alma mater, the University of Texas at El Paso, and is a member
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xx Texas Business LiTigaTion 2015
of the Dean’s Council of Columbia Law School. His law firm has been recognized as one of the nation’s top litigation boutiques by the American Lawyer (2005 and 2009) and National Law Journal (2012), and was recently named the top midsize litigation firm in Texas by Texas Lawyer (2013).
About the Contributing Authors
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Summary of Contents
Chapter 1: Alternative Dispute Resolution—Issues in Business Litigation ............................................................................................1
Chapter 2: Antitrust..............................................................................73
Chapter 3: Bankruptcy Ramifications in Business Litigation Cases ..............................................................................157
Chapter 4: Breach of Fiduciary Duty Claims in Business Transactions ...................................................................................249
Chapter 5: Evaluating Commercial Cases: Avoiding Icebergs ...............291
Chapter 6: Contorts ............................................................................321
Chapter 7: Corporate Governance and Regulatory Proceedings ...........353
Chapter 8: Criminal Law in Business Torts Cases ................................405
Chapter 9: Damages ...........................................................................441
Chapter 10: Discovery.........................................................................503
Chapter 11: Employment Law Litigation ............................................561
Chapter 12: Experts............................................................................625
Chapter 13: Fraud and Negligent Misrepresentation ............................677
Chapter 14: Intellectual Property and Trade Secrets Litigation ...........721
Chapter 15: Ethics ..............................................................................793
Chapter 16: The Liability Case ...........................................................909
Chapter 17: Selected Causes of Action Unique to the Oil and Gas Industry ............................................................................933
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Chapter 18: Preservation of Error – Appeal Tactics ............................971
Chapter 19: Speech Based Torts: Libel, Slander, Business Disparagement and Invasion of Privacy ......................................... 1089
Chapter 20: E-Discovery ................................................................... 1157
Table of Cases ................................................................................. 1247
Index ............................................................................................... 1339
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Table of Contents
Chapter 1: Alternative Dispute Resolution—Issues in Business Litigation ..........................................................................1
1-1 INTRODUCTION .....................................................................11-2 LAW GOVERNING MEDIATION IN TEXAS .......................1
1-2:1 The Process in Texas .....................................................11-2:2 The Facilitator ..............................................................31-2:3 Texas Courts Ethical Guidelines for Mediators ............31-2:4 Legal Issues in Mediation .............................................9
1-2:4.1 Enforceability of a Mediated Settlement Agreement ..................................9
1-2:4.2 The Mediation Privilege .............................111-3 LAW GOVERNING ARBITRATION IN TEXAS ..................13
1-3:1 The Federal Arbitration Act .......................................151-3:1.1 Ambit of the Federal
Arbitration Act ..........................................191-3:1.2 Preemption of State Law ...........................191-3:1.3 Remedies Under the Federal
Arbitration Act ..........................................201-3:2 The Texas Arbitration Act ..........................................21
1-3:2.1 Ambit of the Texas Arbitration Act ...........231-3:2.2 Remedies Under the Texas
Arbitration Act ..........................................231-3:3 Ascertaining Which Law Applies ................................24
1-3:3.1 When Agreement Specifies .........................251-3:3.2 When Agreement Does Not Specify...........251-3:3.3 Common Law ............................................261-3:3.4 Preemption of State Law ...........................26
1-4 ENFORCEMENT OF ARBITRATION AGREEMENT .......311-4:1 Parties Subject to Agreement ......................................31
1-4:1.1 State Contract Law ....................................331-4:1.2 Signature Requirements .............................33
1-4:2 Within Scope of Valid Agreement ..............................34
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1-5 DEFENSES TO ENFORCEMENT OF ARBITRATION AGREEMENT ........................................................................351-5:1 No Agreement ............................................................351-5:2 Invalid Agreement ......................................................35
1-5:2.1 Fraud .........................................................361-5:2.2 Unconscionability ......................................36
1-5:2.2a Substantive Unconscionability ..................36
1-5:2.2b Procedural Unconscionability ..................37
1-5:2.3 Illusory Agreement ....................................381-5:3 Claim Outside Agreement’s Scope ..............................381-5:4 Waiver ........................................................................39
1-5:4.1 Substantial Invocation of Judicial Process ... 391-5:4.2 Prejudice ....................................................40
1-6 PRE-ARBITRATION LITIGATION IN TRIAL AND APPELLATE COURTS .................................................411-6:1 Where to File ..............................................................411-6:2 Interlocutory Appeal Available for Denial
of Motion to Compel Arbitration ...............................411-6:3 Standard of Review of Trial Court’s Denial
of Motion to Compel Arbitration ...............................411-6:4 Review by Mandamus .................................................42
1-7 THE ARBITRATION .............................................................431-7:1 The Arbitrator ............................................................44
1-7:1.1 Number of Arbitrators ..............................441-7:1.2 Selection of Arbitrators .............................441-7:1.3 Judicial Involvement in Selection Process ....451-7:1.4 Disqualification of Arbitrator ....................46
1-7:2 Discovery ....................................................................481-7:2.1 Permissible Discovery ................................481-7:2.2 Judicial Involvement in Arbitral Discovery ...49
1-7:3 Decision to Request a Transcript of Proceedings ........491-7:4 Award, Costs and Sanctions .......................................50
1-8 CONFIRMING AN ARBITRATION AWARD .....................511-8:1 How to Confirm Award ..............................................51
1-8:1.1 Must Show Agreement Contemplated Judgment ...................................................52
1-8:1.2 Arbitral Award Must be Final ...................521-8:1.3 Attachments ..............................................521-8:1.4 Ruling on Motion When No
Response Filed ...........................................53
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1-8:2 Where to File Motion .................................................531-8:3 Procedural Deadlines ..................................................55
1-8:3.1 State Courts ...............................................551-8:3.2 Federal Courts ...........................................56
1-8:4 Scope of Review .........................................................571-8:4.1 Standard of Judicial Review ......................571-8:4.2 Review Defined by Contract ......................58
1-9 CHALLENGING AN ARBITRATION AWARD ..................591-9:1 Procedural Hurdles to Challenging Award ..................61
1-9:1.1 Determining Finality of Award .................611-9:1.2 Where to File Challenge.............................611-9:1.3 Procedural Deadlines .................................63
1-9:1.3a State Courts ...........................631-9:1.3b Federal Courts .......................63
1-9:2 Scope of Review .........................................................641-9:2.1 Standard Judicial Review ...........................651-9:2.2 Review Defined by Contract ......................65
1-9:3 Remedies ....................................................................661-9:3.1 Modification of Award ..............................66
1-9:3.1a FAA .......................................661-9:3.1b TAA .......................................67
1-9:3.2 Vacatur of Award ......................................681-9:3.2a FAA Statutory Grounds .........681-9:3.2b Judicially Created Exceptions
to the Enforcement of Arbitration Awards Under the FAA ......................69
1-9:3.2c TAA Statutory Grounds ........701-9:3.2d Common Law Grounds
Under Texas law .....................71
Chapter 2: Antitrust..............................................................................732-1 INTRODUCTION ...................................................................732-2 STATUTORY OVERVIEW .....................................................74
2-2:1 Texas Free Enterprise and Antitrust Act of 1983 .................................................................742-2:1.1 History ......................................................742-2:1.2 Purpose ......................................................752-2:1.3 Defined Terms ...........................................75
2-2:2 Overlap With Federal Law ..........................................762-2:2.1 Sherman Act ..............................................762-2:2.2 Clayton Act ...............................................77
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2-2:2.3 Robinson-Patman Act ...............................772-2:2.4 Federal Trade Commission Act .................78
2-2:3 Exemptions .................................................................782-3 UNLAWFUL PRACTICES .....................................................80
2-3:1 Monopolies .................................................................802-3:1.1 Monopolization .........................................81
2-3:1.1a Monopoly Power in Relevant Market .................81
2-3:1.1b Willful Acquisition, Maintenance, Or Use of Power .................................85
2-3:1.2 Attempts to Monopolize ............................862-3:1.2a Predatory Or Anticompetitive
Conduct .................................872-3:1.2b Specific Intent
to Monopolize ........................902-3:1.2c Dangerous Probability of
Achieving Monopoly Power ...912-3:1.3 Conspiracy to Monopolize ........................91
2-3:1.3a Specific Intent to Monopolize ........................92
2-3:1.3b Combination Or Conspiracy to Achieve Monopoly .............92
2-3:1.3c Overt Acts in Furtherance of Combination Or Conspiracy ...93
2-3:2 Combinations in Restraint of Trade ...........................932-3:2.1 Horizontal and Vertical Combinations ......952-3:2.2 Illegality Per Se Versus the Rule
of Reason ..................................................962-3:2.2a Per Se Violations ....................962-3:2.2b Rule of Reason Analysis ........98
2-3:2.3 Practices Found To Be Illegal .....................992-3:2.3a Price-Fixing ............................992-3:2.3b Market Allocation
Agreements ............................992-3:2.3c Resale Price Maintenance
Agreements ..........................1002-3:2.3d Tying Arrangements .............1012-3:2.3e Price Discrimination ............1022-3:2.3f Exclusive Dealerships ...........1032-3:2.3g Group Boycotts ....................105
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2-3:3 Covenants Not to Compete ......................................1052-3:3.1 Ancillary to Or Part of Otherwise
Enforceable Agreement ............................1072-3:3.1a Non-Solicitation Covenants ....1092-3:3.1b Non-Disclosure Covenants ... 111
2-3:3.2 Shifting Burden of Establishing Compliance With the Act ........................112
2-3:3.3 Reasonableness ........................................1132-3:3.3a Time .....................................1152-3:3.3b Territory ...............................1152-3:3.3c Scope of Activity ..................1162-3:3.3d Protection of Goodwill
Or Business Interest .............1172-3:3.4 Enforcement ............................................1172-3:3.5 Reformation.............................................1182-3:3.6 Availability of Costs
and Attorney’s Fees .................................1192-4 ANTITRUST REMEDIES AND DEFENSES .....................119
2-4:1 Scope ........................................................................1192-4:2 Monetary Damages ..................................................121
2-4:2.1 “Before and After” and “Yardstick” Measures of Lost Profits ..........................121
2-4:2.2 No Double Recoveries Under Federal and State Laws ............................122
2-4:3 Injunctive Relief .......................................................1232-4:4 Declaratory Judgment ..............................................124
2-4:4.1 Requirements for Declaratory Judgment Complaint ...............................125
2-4:4.2 Specifications of Declaratory Judgments ................................................126
2-4:5 Attorney’s Fees and Costs .........................................1262-4:5.1 Recovery of Plaintiff ’s Fees .....................1262-4:5.2 Recovery of Defendant’s Fees ..................127
2-4:6 Prejudgment Interest.................................................1282-4:7 Treble Damages ........................................................1282-4:8 Defenses ...................................................................129
2-4:8.1 Affirmative Defenses ................................1292-4:8.2 Defenses Under Antitrust Law ................130
2-5 PRIVATE CAUSES OF ACTION .........................................1302-5:1 Jurisdiction ...............................................................1302-5:2 Venues ......................................................................132
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2-5:3 Statute of Limitations ...............................................1322-5:4 Discovery .................................................................1332-5:5 Standing ...................................................................134
2-5:5.1 Injury in Fact ...........................................1342-5:5.2 Antitrust Injury .......................................1352-5:5.3 Proper Plaintiff Status .............................136
2-5:6 Summary Judgment Practice ....................................1372-5:7 Class Actions and Multi-District Proceedings ..........138
2-5:7.1 State Court Class Actions ........................1382-5:7.2 Federal Court Class Actions ....................1392-5:7.3 Multi-District Proceedings .......................140
2-5:8 Final Judgments Rendered in Actions Brought by State of Texas .........................................141
2-5:9 Practical Considerations ...........................................1412-6 ENFORCEMENT ACTIONS ...............................................143
2-6:1 Civil Investigative Demands ......................................1432-6:1.1 Purpose ....................................................1432-6:1.2 Format and Requirements of Demand ....144
2-6:1.2a Protections to Person Receiving Demand ...............144
2-6:1.2b Required Content of Demand ...........................145
2-6:1.2c Product of Discovery ...........1462-6:1.3 Responses Available .................................146
2-6:1.3a Petition for Relief .................1462-6:1.3b Means of Compliance
With Demand .......................1472-6:1.3c Petition to Compel
Compliance by Attorney General ................................149
2-6:1.4 Disclosure of Information Obtained by Demand Process ..................................1492-6:1.4a Statutory Exceptions to Rule
Against Non-Disclosure .......1502-6:1.4b Disclosure for Good Cause ...1502-6:1.4c Other Obligations Owed
by Attorney General ............1512-6:2 Governmental Civil Suits ..........................................152
2-6:2.1 Suit to Collect Civil Fine .........................1522-6:2.2 Suit for Injunctive Relief ..........................1522-6:2.3 Federal and State Actions
by Attorney General ................................153
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2-6:3 Criminal Actions ......................................................1532-6:4 Immunity from Criminal Prosecution .......................154
2-7 CONCLUSION ......................................................................155
Chapter 3: Bankruptcy Ramifications in Business Litigation Cases .....1573-1 INTRODUCTION .................................................................157
3-1:1 Types of Bankruptcy Relief Available .......................1583-1:1.1 Chapter 7 .................................................1583-1:1.2 Chapter 11 ...............................................1593-1:1.3 Other Available Chapters .........................160
3-1:1.3a Chapter 13 ............................1603-1:1.3b Chapter 12 ............................1613-1:1.3c Chapter 9 .............................1613-1:1.3d Chapter 15 ............................161
3-1:1.4 Conversion Between Chapters .................1623-1:1.4a By the Debtor .......................1623-1:1.4b By a Party in Interest ............1623-1:1.4c Effect on Creditors ...............1633-1:1.4d Conversion to Chapter 7 ......1633-1:1.4e Other Conversions................164
3-1:2 The Parties ................................................................1643-1:2.1 The Debtor ..............................................164
3-1:2.1a Role in Chapter 7 Cases .......1653-1:2.1b Role in Chapter 11 Cases ......1653-1:2.1c Role in Other Chapters .........166
3-1:2.2 The Debtor in Possession .........................1663-1:2.2a Duties and Responsibilities ... 1663-1:2.2b Right to Operate Business ....167
3-1:2.3 The Trustee ..............................................1673-1:2.3a Chapter 7 Trustee .................1683-1:2.3b Chapter 11 Trustee ...............1693-1:2.3c Chapter 13 Trustee ...............169
3-1:2.4 Official Committees .................................1693-1:2.4a Unsecured Creditors
Committee ...........................1703-1:2.4b Equity Security Holders
Committee ...........................1713-1:2.4c Other Committees ................171
3-1:2.5 Estate Professionals .................................1723-1:2.5a Debtor’s Counsel ..................1723-1:2.5b Special Counsel ....................1733-1:2.5c Chief Restructuring Officer ...173
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3-1:2.5d Examiner ..............................1743-1:2.5e Other Professionals ..............174
3-1:2.6 The Office of the United States Trustee ...1743-1:2.6a Role in Chapter 7 Cases .......1733-1:2.6b Role in Chapter 11 Cases ......173
3-1:3 The Bankruptcy Estate .............................................1753-1:3.1 Property of the Estate ..............................1763-1:3.2 Exempt Property ......................................1763-1:3.3 Excluded Property ...................................1773-1:3.4 Property Acquired After Filing ................177
3-1:4 Contested Matters and Adversary Proceedings .........1783-1:4.1 Relief Available Only by Adversary
Proceeding ...............................................1783-1:4.2 Contested Matters ...................................1783-1:4.3 Applicable Rules of Procedure .................1793-1:4.4 Arbitration and Mediation ......................180
3-2 THE AUTOMATIC STAY ....................................................1813-2:1 Scope ........................................................................181
3-2:1.1 Commencement of the Bankruptcy Case ...1813-2:1.2 Property Covered .....................................1813-2:1.3 Parties Covered ........................................1813-2:1.4 Actions Prohibited ...................................182
3-2:2 Effect on Pending Litigation .....................................1833-2:2.1 When the Debtor Is the Sole
Defendant ................................................1833-2:2.2 When the Debtor Is One
of Several Defendants ..............................1833-2:2.3 When the Debtor Is a Plaintiff .................1843-2:2.4 Non-Bankruptcy Appeals ........................185
3-2:3 Relief From the Stay .................................................1853-2:3.1 By Motion ...............................................185
3-2:3.1a Grounds ...............................1853-2:3.1b Procedural Issues ..................186
3-2:3.2 By Operation of Law ...............................1873-2:3.3 Consequences of Violation of the Stay ....187
3-2:3.3a Actions Made Void ..............1873-2:3.3b Damages and
Attorney’s Fees .....................1883-2:3.4 Issues Specific to Litigation ......................188
3-2:3.4a Insurance .............................1883-2:3.4b Status of Existing Litigation ...1893-2.3.4c Jury Trial ..............................189
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3-3 JURISDICTION ....................................................................1893-3:1 Scope of Bankruptcy Court Jurisdiction...................189
3-3:1.1 Core Matters ............................................1903-3:1.2 Non-Core Matters ...................................1903-3:1.3 Personal Jurisdiction ................................191
3-3:1.3a Scope ....................................1913-3:1.4 Service of Process ....................................1913-3:1.5 Postconfirmation Jurisdiction
in Chapter 11 Cases .................................1923-3:2 Constitutional Issues ................................................192
3-3:2.1 Article III v. Article I Judges ....................1923-3:2.2 Standing Order of Reference ...................193
3-3:2.2a Scope of Order .....................1933-3:2.2b Withdrawal of Reference ......1943-3:2.2c Effect of Withdrawal ............1943-3:2.2d Procedure .............................1943-3:2.2e Strategic Considerations .......195
3-3:3 Recent Developments ...............................................1963-3:3.1 Questions Raised by Supreme
Court Decision ........................................1963-3:3.2 Response by Courts .................................1973-3:3.3 Strategic Considerations ..........................198
3-4 REMOVAL AND REMAND ................................................1983-4:1 Statutory Basis for Removal .....................................1983-4:2 Procedure for Removal .............................................199
3-4:2.1 Pleadings .................................................1993-4:2.2 Local Rules ..............................................1993-4:2.3 Timing .....................................................200
3-4:3 Abstention ................................................................2003-4:3.1 Mandatory Abstention ............................2013-4:3.2 Abstention on Other Grounds .................2013-4:3.3 Procedural Issues .....................................201
3-4:4 Remand ....................................................................2023-4:4.1 Distinguished From Abstention ...............2023-4:4.2 Grounds for Remand ...............................202
3-5 APPEALS ..............................................................................2033-5:1 Right to Appeal ........................................................203
3-5:1.1 Final Orders ............................................2033-5:1.2 Interlocutory Appeals ..............................203
3-5:2 Appellate Court ........................................................2043-5:2.1 District Court ..........................................204
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3-5:2.1a Timeline ...............................2053-5:2.1b Standard of Review ..............206
3-5:2.2 Circuit Court of Appeal...........................2063-5:2.2a Appeal From District
Court....................................2063-5:2.2b Direct Appeal .......................206
3-5:3 Preserving Rights on Appeal.....................................2073-5:3.1 Equitable Mootness .................................2073-5:3.2 Stay Pending Appeal ................................208
3-5:3.2a Procedure .............................2083-5:3.2b Bonding Considerations .......208
3-6 INVOLUNTARY BANKRUPTCY .......................................2093-6:1 Procedural Requirements ..........................................209
3-6:1.1 Number of Petitioning Creditors .............2093-6:1.2 Aggregate Amount of Claims ..................2103-6:1.3 Bona Fide Disputes .................................210
3-6:2 Debtor’s Response ....................................................2113-6:2.1 Consent to Entry of Order for Relief .......2113-6:2.2 Contested Petition ...................................211
3-6:3 Gap Period ...............................................................2123-6:3.1 Automatic Stay in Effect ..........................2123-6:3.2 Continuation of Business .........................2123-6:3.3 Treatment of Gap Period Claims .............212
3-6:4 Hearing on Petition ..................................................2133-6:4.1 Elements to Be Proven .............................2133-6:4.2 Burden of Proof ......................................213
3-6:5 Considerations for Petitioning Creditors...................2143-6:5.1 Practical Effect of Involuntary Filing ......2143-6:5.2 Availability of Damages for Bad
Faith Filing ..............................................2143-7 PRESERVING CLAIMS AGAINST A DEBTOR
IN BANKRUPTCY ...............................................................2143-7:1 Proof of Claim .........................................................215
3-7:1.1 Bar Date ..................................................2153-7:1.2 Preparing and Filing the Proof
of Claim ..................................................2153-7:1.2a Official Form ........................2153-7:1.2b Specific Types of Claims.......2163-7:1.2c Unsecured Claims ................2163-7:1.2d Secured Claims .....................2163-7:1.2e Priority Claims .....................2173-7:1.2f Administrative Claims ..........217
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3-7:1.2g Where and How to File ........2173-7:1.2h Service ..................................218
3-7:1.3 Consequences of Not Filing a Claim .......2183-7:1.3a Chapter 11 ............................2183-7:1.3b Chapter 7 .............................2183-7:1.3c Strategic Reasons for Not
Filing a Claim ......................2193-7:1.4 Untimely Claims ......................................219
3-7:1.4a Lack of Notice .....................2203-7:1.4b Excusable Neglect ................2203-7:1.4c Other Circumstances ............220
3-7:2 Claims Objection Process ..........................................2213-7:2.1 Objection to a Claim ................................221
3-7:2.1a Standing ...............................2213-7:2.1b Timing..................................222
3-7:2.2 Defending a Claim ...................................2223-7:2.2a Responding to the Objection ...2223-7:2.2b Burden of Proof ...................2233-7:2.2c Discovery .............................2233-7:2.2d Hearing ................................224
3-7:3 Objection to Discharge .............................................2243-7:3.1 Only Applicable to Individuals ................2243-7:3.2 General Objection to Discharge ...............2243-7:3.3 Objection to Discharge of Specific
Claims......................................................2253-7:3.4 Practical Considerations ..........................226
3-7:4 Claims Covered by Insurance ...................................2263-8 PRESERVING CLAIMS BELONGING
TO THE DEBTOR ................................................................2273-8:1 Necessity of Disclosure of Claims in Schedules
of Assets ...................................................................2273-8:1.1 Effect of Non-Disclosure .........................2273-8:1.2 Remedies .................................................228
3-8:2 Preservation Under Chapter 11 Plan and Disclosure Statement .........................................228
3-9 AVOIDANCE ACTIONS .......................................................2293-9:1 Preferences ................................................................229
3-9:1.1 Statutory Elements ..................................2303-9:1.1a Look-Back Period
for Insiders ...........................2303-9:1.1b Presumption of Insolvency ...230
3-9:1.2 Defenses ..................................................231
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3-9:2 Fraudulent Transfer ..................................................2313-9:2.1 Under Bankruptcy Code ..........................2313-9:2.2 Under State Law ......................................232
3-9:3 Strong-Arm Powers ..................................................2323-9:3.1 Status as Judgment Creditor ....................2323-9:3.2 Status as Bona Fide Purchaser
for Value ..................................................2323-9:4 Avoidable Liens ........................................................232
3-10 EXECUTORY CONTRACTS AND UNEXPIRED LEASES .................................................................................2333-10:1 Definition of Executory Contract .............................2333-10:2 Debtor’s Right to Assume Or Reject .........................234
3-10:2.1 Assumption .............................................2343-10:2.1a Effect of Assumption ...........2353-10:2.1b Requirements for
Assumption ..........................2353-10:2.1c Right to Assign
to a Third Party ....................2363-10:2.2 Rejection ..................................................237
3-10:2.2a Effect of Rejection ...............2373-10:2.2b Claim for Damages ..............237
3-10:3 Actions Available to Counterparties and Lessors ......2383-10:3.1 Motion to Compel Assumption
Or Rejection ............................................2383-10:3.1a Procedure .............................2393-10:3.1b Factors to Consider ..............239
3-10:3.2 Rights in Connection With Assumption ............................................... 240
3-10:3.3 Rights in Connection With Rejection ......2403-11 DISMISSAL...........................................................................240
3-11:1 Dismissal for Cause ..................................................2403-11:1.1 Unauthorized Filing ................................2403-11:1.2 Bad Faith .................................................2413-11:1.3 Serial Filings ............................................241
3-11:2 Voluntary Dismissal ..................................................2423-11:3 Effect of Dismissal....................................................242
3-12 POST-BANKRUPTCY ISSUES ............................................2423-12:1 Effect of the Permanent Injunction ..........................2433-12:2 Failure of a Chapter 11 Plan .....................................2433-12:3 Re-Opening a Bankruptcy Case ................................243
3-13 PRACTICAL CONSIDERATIONS FOR ATTORNEYS ....2433-13:1 Consequences of a Client’s Bankruptcy Filing ..........243
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3-13:1.1 Authority to Represent the Client Postpetition ..............................................244
3-13:1.2 Attorney-Client Privilege .........................2443-13:1.3 Automatic Stay ........................................244
3-13:2 Representing the Debtor Postpetition .......................2443-13:2.1 Retention by the Estate ............................245
3-13:2.1a Special Counsel ....................2453-13:2.1b Ordinary Course
Professional ..........................2453-13:2.2 Fee Arrangements ....................................2463-13:2.3 Getting Paid by the Estate .......................246
3-13:3 Protecting Your Fees .................................................2473-13:3.1 Retainers ..................................................2473-13:3.2 Avoidance Actions ...................................2473-13:3.3 Additional Considerations .......................248
Chapter 4: Breach of Fiduciary Duty Claims in Business Transactions ...................................................................................249
4-1 INTRODUCTION .................................................................2494-2 ELEMENTS OF CLAIM ......................................................251
4-2:1 Existence of a Fiduciary Relationship ......................2514-2:2 Breach of the Fiduciary Duty ..................................2524-2:3 Defendant’s Breach Resulted in Injury .....................252
4-3 SCOPE OF FIDUCIARY DUTIES ......................................2534-3:1 Specific Duties Arising Out of Fiduciary
Relationships ............................................................2544-3:1.1 Duty of Loyalty .......................................254
4-3:1.1a Entire Fairness .....................2554-3:1.1b Application of the Entire
Fairness Test.........................2564-3:1.2 Duty of Candor .......................................256
4-3:1.2a Fraud by Non-Disclosure .....2574-3:1.3 Duty to Account for Benefits ..................2574-3:1.4 Duties of Good Faith and Fair
Dealing ....................................................2584-3:1.5 Duties of Care and Competence .............258
4-4 SOURCES OF FIDUCIARY RELATIONSHIPS .................2584-4:1 Formal Fiduciary Relationships................................259
4-4:1.1 Attorney-Client Relationship ...................2594-4:1.1a Rule Against
“Claim Splitting” ..................2594-4:1.1b Associate Attorneys ............260
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4-4:1.2 Principal-Agent .......................................2604-4:1.3 Trustee-Beneficiary .................................2614-4:1.4 Partners in a General Partnership ............261
4-4:1.4a Partner Duties of Loyalty ....2624-4:1.4b Partner Duties of Care .........2634-4:1.4c Limits of Partnership
Duties ...................................2634-4:1.5 General Partner in a Limited
Partnership ..............................................2644-4:1.5a General Partner Duties ........264
4-4:1.6 Corporate Directors and Officers ............2644-4:1.6a Duties to Shareholders .........2654-4:1.6b Exculpation of Governing
Persons .................................2664-4:1.6c Limited Liability Companies ...2674-4:1.6d Interested Party
Transactions .........................2674-4:1.7 Family Relationships ...............................2684-4:1.8 Redemption of Minority Interests
of an LLC ................................................2684-4:1.9 Employer/Employee .................................269
4-4:2 Informal Fiduciary Relationships .............................2704-4:2.1 Acquisition of Influence ..........................2714-4:2.2 Factors Supporting a Confidential
Relationship .............................................2724-4:2.3 Confidential Relationships Must
Precede the Challenged Transaction ........2734-4:2.4 Questions of Law and Fact in
Connection with Confidential Relationships ...........................................273
4-5 COMMON CLAIMS ARISING OUT OF BREACHES OF FIDUCIARY DUTIES ....................................................2744-5:1 Self Dealing .............................................................274
4-5:1.1 Entire Fairness Rule ................................2744-5:1.1a Interested Transactions
Involving Officers and Directors ..............................275
4-5:2 Misrepresentation/Breach of Duty of Candor .........2764-5:3 Shareholder Oppression ...........................................276
4-5:3.1 Questions of Law and Fact in Connection with Shareholder Oppression ....................................................277
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4-5:3.1a Conduct That Defeats Shareholders’ Reasonable Expectations .........................278
4-5.3.1b Burdensome, Harsh Or Wrongful Conduct .........278
4-5:3.2 Specific Acts Constituting Oppression ...............................................2784-5:3.2a Termination of Employment ...2794-5:3.2b Suppression of Dividends ....2794-5:3.2c Denial of Access to Books
and Records ........................2804-5:3.2d Excessive Or Unearned
Compensation .....................2804-5:4 Aiding and Abetting .................................................280
4-6 DEFENSES ...........................................................................2814-6:1 Affirmative Defenses ................................................281
4-6:1.1 Limitations .............................................2814-6:1.2 Statute of Frauds ....................................2824-6:1.3 Release/Waiver ........................................2824-6:1.4 Ratification .............................................282
4-6:2 Statutory Protections for Officers and Governing Persons ............................................283
4-7 REMEDIES ...........................................................................2844-7:1 Actual Damages .......................................................2854-7:2 Constructive Or Resulting Trust ...............................2854-7:3 Equitable Forfeitures ................................................285
4-7:3.1 Factors Governing Disgorgement of Fees .....................................................286
4-7:4 Rescission .................................................................2874-7:5 Receivership ..............................................................2874-7:6 Exemplary Damages ................................................287
4-7:6.1 Standard of Proof for Exemplary Damages ..................................................288
4-7:7 Liquidation ...............................................................2884-8 PATTERN JURY CHARGES ...............................................289
Chapter 5: Evaluating Commercial Cases: Avoiding Icebergs ...............2915-1 INTRODUCTION .................................................................2915-2 GENERAL RULES OF EVALUATING
BUSINESS CASES ................................................................2935-2:1 A System Approach to Case Evaluation ...................2935-2:2 Basic Rules for Case Evaluation................................295
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5-3 COMMON LEGAL ISSUES THAT ARISE IN THE EVALUATION OF COMMERCIAL CASES FOR FILING IN TEXAS .........................................3005-3:1 Texas Rules on Arbitration .......................................3005-3:2 Motion to Dismiss Practice in Texas .........................3025-3:3 Shareholder Oppression ............................................3035-3:4 Negligent Misrepresentation in Texas .......................3045-3:5 Claims Against Attorneys .........................................3045-3:6 Claims Against Auditors ...........................................3055-3:7 Holder Claims ..........................................................3075-3:8 Setting Aside Releases...............................................3085-3:9 Breach of Fiduciary Duty .........................................3105-3:10 Tortious Interference with Prospective
Business Relations ....................................................3115-4 CONCLUSION ......................................................................312CHAPTER 5—APPENDIX A: Sample Case Acceptance Memo .....314
Chapter 6: Contorts ............................................................................3216-1 INTRODUCTION .................................................................3216-2 CONTRACT OR TORT—WHAT DIFFERENCE
DOES IT MAKE? ..................................................................3226-2:1 Recoverable Damages ...............................................322
6-2:1.1 Attorney’s Fees ........................................3226-2:1.2 Pure Economic Loss vs. Personal Injury
Or Loss to Tangible Personal Property ....3236-2:1.3 Punitive and Mental Anguish Damages ...3236-2:1.4 Consequential Damages ..........................323
6-2:2 Venue ........................................................................3246-2:2.1 All Or Substantial Part of Cause of Action ...324
6-2:3 Statutes of Limitations .............................................3256-2:4 Personal Jurisdiction .................................................3266-2:5 Can a Party Pursue Both Remedies? .........................326
6-3 OVERVIEW ...........................................................................3266-3:1 History of the Concept .............................................3266-3:2 Source of Duty Test .................................................3276-3:3 Contract Requirement Can Create Tort Remedy ......3286-3:4 Economic Loss Rule .................................................3306-3:5 Independent Injury Test ............................................3336-3:6 Impact of Risk Allocation ........................................334
6-4 CONTRACTS ........................................................................3366-4:1 Sanctity of the Contract ...........................................3366-4:2 Formation Issues ......................................................337
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6-4:3 Implied .....................................................................3386-4:4 Strangers and Contractual Privity ............................3396-4:5 Role of Privity of Contract .......................................3406-4:6 Risk Allocation Between Contracting
Parties .......................................................................3406-4:7 Good Faith and Fair Dealing ...................................341
6-5 APPLICABLE CAUSES OF ACTION .................................3416-5:1 Negligence Action.....................................................3426-5:2 Products Liability and Component Parts ..................3426-5:3 Strict Liability Claims for Product Defect .................3436-5:4 Warranties ................................................................344
6-5:4.1 Application of UCC ................................3446-5:4.2 Express Warranties ..................................3446-5:4.3 Implied Warranties—Created by Law,
Tort Or Contract remedies? .....................3456-5:5 Tortious Interference ................................................3466-5:6 Fraudulent Inducement ............................................3466-5:7 Promissory Estoppel .................................................3486-5:8 DTPA .......................................................................3496-5:9 Negligent Misrepresentation .....................................349
6-6 TRUST RELATIONSHIPS ...................................................3506-6:1 Insurance Contracts and Duty
of Good Faith ..........................................................351
Chapter 7: Corporate Governance and Regulatory Proceedings ...........3537-1 INTRODUCTION .................................................................3537-2 FIDUCIARY DUTIES ..........................................................354
7-2:1 Fiduciary Duties of Directors ...................................3547-2:1.1 Duty of Care ...........................................354
7-2:1.1a Business Judgment Rule ......3557-2:1.1b Contractual Limitations
on Liability ...........................3567-2:1.2 Duty of Loyalty .......................................358
7-2:1.2a Safe Harbor From Duty of Loyalty ............................358
7-2:1.3 Duty of Obedience ..................................3597-2:1.4 Permissible Reliance on Others ................3597-2:1.5 Texas vs. Delaware Fiduciary
Duties .....................................................3607-2:2 Fiduciary Duties of Shareholders .............................3617-2:3 Fiduciary Duties in LLCs ........................................361
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7-2:4 Fiduciary Duties in LLPs .........................................3637-2:5 Fiduciary Duties of Officers .....................................363
7-3 TYPES OF CLAIMS AGAINST DIRECTORS AND OFFICERS ..................................................................3647-3:1 Usurpation of Corporate Opportunities—
The “Corporate Opportunity Doctrine” and Self-Interested Transactions ...............................3647-3:1.1 Ratification ..............................................3657-3:1.2 Estoppel ..................................................366
7-3:2 Waste of Corporate Assets .......................................3667-3:3 Use of Inside Information ........................................3667-3:4 Section 10(b) of the Securities Exchange
Act and Rule 10b-5 ...................................................3677-3:4.1 Standing ..................................................3687-3:4.2 Material Misrepresentation ......................3687-3:4.3 Scienter ....................................................3687-3:4.4 “In Connection With” the Purchase
Or Sale .....................................................3697-3:4.5 Reliance and Causation ...........................369
7-3:5 Individual Liability to Shareholders .........................3707-3:5.1 Shareholder Derivative Suits ....................3707-3:5.2 Derivative vs. Direct Actions ...................3717-3:5.3 Available Remedies ..................................3717-3:5.4 Rules and Statutes Regulating
Derivative Suits ........................................3727-3:5.5 Shareholder Status and Contemporaneous
Ownership .....................................................3727-3:5.6 Effect of Merger ......................................3737-3:5.7 Pre-Suit Demand .....................................3737-3:5.8 Special Litigation Committees .................3747-3:5.9 Demand Refused .....................................3747-3:5.10 Discovery Limitations ..............................3757-3:5.11 Judicial Review of Settlements .................3757-3:5.12 Texas vs. Delaware Derivative Suit ...........375
7-3:5.12a Fiduciary Duties ..................3767-3:5.12b Applying the Business
Judgment Rule .....................3767-3:5.12c Demand Requirements .........377
7-4 MINORITY SHAREHOLDER OPPRESSION CLAIM..........................................................3777-4:1 Definition and History ..............................................3777-4:2 Standing ...................................................................378
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7-4:3 Basis for Claim .........................................................3787-4:3.1 Burdensome, Harsh, Or Wrongful
Conduct That Departs From the Standards of Fair Dealing ..................379
7-4:3.2 Conduct That Substantially Defeats the Minority’s Reasonable Expectations ...3807-4:3.2a General Expectations ...........3817-4:3.2b Specific Expectations ............381
7-4:4 Avoiding and Limiting Liability ................................3817-4:5 Available Remedies ...................................................382
7-4:5.1 Receivership and Liquidation ..................3837-4:5.2 Other Remedies .......................................383
7-4:6 Texas vs. Delaware Oppression Claims .....................3837-5 INSPECTION OF BOOKS AND RECORDS ......................384
7-5:1 By Governing Persons ..............................................3847-5:2 By Shareholders ........................................................385
7-6 LIABILITY TO THIRD PARTIES .......................................3877-6:1 Contractual Liability ................................................3877-6:2 Tortious Liability ......................................................3887-6:3 Creditor Liability ......................................................389
7-7 REGULATORY INVESTIGATIONS AND PROCEEDINGS .........................................................389
7-8 INDEMNIFICATION ..........................................................3917-8:1 Mandatory Indemnification ......................................3927-8:2 Permissive Indemnification .......................................3937-8:3 Court-Ordered Indemnification ................................3947-8:4 Advancement of Expenses ........................................394
7-9 INSURANCE ........................................................................3957-9:1 Insurance Types ........................................................3957-9:2 Excess Insurance .......................................................3967-9:3 Retention and Co-Insurance ....................................3967-9:4 Insurance Application Issues ....................................3977-9:5 Notice Issues .............................................................3977-9:6 Defense Issues and Duty of Cooperation .................3987-9:7 Policy Language........................................................3997-9:8 Exclusions .................................................................400
7-9:8.1 Dishonesty Or Conduct Exclusion ...........4017-9:8.2 Prior Act Exclusion .................................4017-9:8.3 Prior and Pending Litigation
Exclusion .................................................4017-9:8.4 Particular Acts Exclusion .........................4027-9:8.5 Other Policy Exclusions ...........................402
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7-9:8.6 Catastrophic Hazards Exclusion ..............4027-9:8.7 Bump-Up Exclusion ................................4027-9:8.8 Insured vs. Insured Exclusion ..................402
7-9:9 Insurance in Bankruptcy ...........................................403
Chapter 8: Criminal Law in Business Torts Cases ................................4058-1 INTRODUCTION .................................................................4058-2 WHY COMPANIES SELF REPORT ....................................407
8-2:1 DOJ’s Principles of Corporate Prosecution ..............4108-2:2 Deferred Prosecution Agreements ............................411
8-3 THE SCOPE AND IMPACT OF THE FIFTH AMENDMENT .....................................................................4138-3:1 How Will You Know You Have
a “Criminal Problem?” ..............................................4138-3:2 Dealing With Employees ..........................................414
8-3:2.1 The Tension Between the Company and Its Employees ....................................414
8-3:2.2 Upjohn, Separate Counsel & Joint Defenses ..................................................416
8-3:3 The Fifth Amendment ..............................................4188-3:4 Invoking the Fifth Amendment ................................419
8-3:4.1 By the Witness, Not His Lawyer ..............4198-3:4.2 Question by Question ..............................4198-3:4.3 Proceeding by Proceeding ........................4208-3.4.4 Waived if Not Invoked .............................421
8-3:5 The Scope of the Fifth Amendment: “Any Link in the Chain” ...........................................422
8-3:6 Applies to “Act of Production” .................................4238-3:7 Salinas v. Texas: Must “Invoke” ................................4268-3:8 Effect of Fifth Amendment on Criminal Case ..........4278-3:9 Effect of Fifth Amendment on Civil Case.................428
8-3:9.1 Adverse Inferences (Including Against Employers)...............................................428
8-3:9.2 Staying a Civil Proceeding .......................4298-3:9.2a Overlapping Facts Is
the Main Criterion ...............4308-3:9.2b A Stay Avoids Improper
Sharing of Discovery Between the Civil Plaintiffs and the Government’s Criminal Prosecution ...........431
8-3:9.2c Balancing of Interests ..........431
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8-4 OBSTRUCTION OF JUSTICE .............................................4328-4:1 Common Obstruction Statutes .................................433
8-4:1.1 18 U.S.C. § 1512c .....................................4338-4:1.2 18 U.S.C. § 1513 ......................................4338-4:1.3 Witness Tampering .................................433
8-4:2 Don’t Lawyers Obstruct Justice? ..............................4358-4:3 Crime-Fraud Exception ............................................436
8-4:3.1 The “In Furtherance” Test .......................4378-5 CONCLUSION ......................................................................440
Chapter 9: Damages ...........................................................................4419-1 INTRODUCTION .................................................................441
9-1:1 Classifying the Action by Theory of Recovery ..........4429-2 PLEADING DAMAGES.......................................................443
9-2:1 Fair Notice ...............................................................4439-2:2 Measure and Amount ...............................................4439-2:3 General Damages .....................................................4449-2:4 Special Damages .......................................................444
9-3 DAMAGES AND DISCOVERY ...........................................4459-3:1 Discoverable Materials..............................................4469-3:2 Disclosure .................................................................447
9-4 GENERAL STRATEGIES FOR PROVING DAMAGES ............................................................................4479-4:1 Using Lay Witnesses .................................................4499-4:2 Using Expert Witnesses ............................................449
9-4:2a Expert Testimony .....................................4509-4:2b Challenging the Other Side’s
Damages Expert ......................................4509-5 CONTRACT DAMAGES .....................................................452
9-5:1 Expectancy Or “Benefit of the Bargain” Damages ....4529-5:2 Special Or Consequential Damages ..........................453
9-5:2.1 Lost Profits ..............................................4539-5:2.1a Reasonable Certainty ...........4549-5:2.1b Proving Lost Profits..............455
9-5:2.2 Cost of Delay ..........................................4569-5:2.3 Cost of Substitute Performance ...............4569-5:2.4 Loss of Credit Reputation .......................4569-5:2.5 Loss of Financing ....................................4579-5:2.6 Loss of Goodwill .....................................457
9-5:3 Reliance Or “Out-of-Pocket” Damages .....................4589-5:3.1 Calculating Out-of-Pocket
Expenses ..................................................458
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9-5:4 Restitution Damages ................................................4589-5:5 Contract Damages Under the Uniform
Commercial Code .....................................................4609-5:6 Liquidated Damages .................................................460
9-5:6.1 Validity ....................................................4619-5:6.2 Liquidated Damages and the UCC ..........462
9-5:7 Damages for Breach of Warranty .............................4629-5:8 Mitigation .................................................................462
9-5:8.1 Duty to Mitigate ......................................4629-5:8.2 Exceptions to Duty to Mitigate ................463
9-5:9 Right of Offset ..........................................................4639-5:10 Attorney’s Fees .........................................................464
9-6 TORT DAMAGES .................................................................4659-6:1 Compensatory Damages ...........................................4659-6:2 Damages-Related Considerations in Frequently
Litigated Business Torts ............................................4669-6:2.1 Negligent Misrepresentation ....................466
9-6:2.1a Reliance Damages ...............4669-6:2.2 Fraud .......................................................466
9-6:2.2a Reliance Damages ................4669-6:2.2b Benefit of the Bargain
Damages ..............................4679-6:2.2c Other Recoverable
Amounts ..............................4679-6:2.3 Tortious Interference With Contract ........4689-6:2.4 Breach of Fiduciary Duty ........................468
9-6:2.4a Actual Damages ...................4699-6:2.4b Equitable Relief ...................469
9-6:2.5 Misappropriation of Trade Secrets ..........4709-6:2.5a Injunctive Relief ...................4709-6:2.5b Value to the Plaintiff ............4719-6:2.5c Benefit to the Defendant/Value
of the Secret .........................4719-6:2.5d Reasonable Royalty ..............472
9-6:2.6 Violation of Covenants Not to Compete ... 4729-6:2.6a Monetary Damages ..............4739-6:2.6b Injunctive Relief ...................473
9-6:2.7 Business Disparagement and Defamation .......................................4749-6:2.7a General Damages ................4749-6:2.7b Special Damages ..................4759-6:2.7c Presumed Damages ..............475
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9-6:2.8 Patent Infringement .................................4769-6:2.8a Reasonable Royalty ..............4769-6:2.8b Lost Profits ...........................4779-6:2.8c The Entire Market
Value Rule ............................4779-6:2.9 Trademark Infringement ..........................478
9-6:2.9a Statutory Damages ...............4789-6:2.9b Lost Profits ...........................478
9-6:2.10 DTPA Violations .....................................4799-6:2.10a Economic Damages ..............4799-6:2.10b Mental Anguish ...................4809-6:2.10c Additional Damages ............4809-6:2.10d Tie-In Statutes ......................481
9-7 ONE SATISFACTION RULE ...............................................4819-8 COLLATERAL SOURCE RULE .........................................4829-9 ATTORNEY’S FEES ............................................................482
9-9:1 Avenues for Recovery ................................................4839-9:1a The Civil Practice and Remedies Code ....4839-9:1b Contract ..................................................4839-9:1c Equity ......................................................484
9-9:2 Prerequisites for Recovery .........................................4859-9:2a Claimant Has Stated a Claim for Fees ....4859-9:2b Claimant Is Entitled to Recover
Attorney’s Fees ........................................4859-9:2c Claimant Is Represented by Counsel .......4879-9:2d Claimant Incurred Attorney’s Fees ..........487
9-9:3 Reasonableness .........................................................4879-9:4 Proving Attorney’s Fees ............................................488
9-10 PUNITIVE DAMAGES ........................................................4919-10:1 Awarded to Penalize the Defendant ..........................4919-10:2 Chapter 41 of the Civil Practice
and Remedies Code ..................................................4919-10:3 Conditions for Recovery ...........................................491
9-10:3.1 Pleading Requirement ..............................4919-10:3.2 Actual Damages Required .......................4929-10:3.3 Aggravated Conduct Required .................492
9-10:3.3a Fraud ...................................4929-10:3.3b Malice ..................................4939-10:3.3c Gross Negligence ..................493
9-10:4 Vicarious Liability for Punitive Damages ..................4939-10:5 No Joint and Several Liability
for Punitive Damages ................................................494
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9-10:6 Trying Exemplary Damages ......................................4949-10:6.1 Bifurcating the Trial .................................4949-10:6.2 Proving Aggravated Conduct ...................4959-10:6.3 Calculating Punitive Damages .................4959-10:6.4 Unanimous Jury Verdict ..........................496
9-11 NOMINAL DAMAGES ........................................................4969-12 THE JURY CHARGE ...........................................................4969-13 EXCESSIVE OR INADEQUATE DAMAGES AWARDS ....4989-14 PREJUDGMENT INTEREST .............................................498
9-14:1 When Recoverable ....................................................4999-14:2 Application ...............................................................5009-14:3 Calculating Prejudgment Interest ..............................500
9-15 POST JUDGMENT INTEREST...........................................5019-15:1 When Recoverable ....................................................5019-15:2 Application ...............................................................5019-15:3 Calculating Post Judgment Interest ...........................501
9-16 COURT COSTS .....................................................................501
Chapter 10: Discovery.........................................................................50310-1 INTRODUCTION .................................................................50310-2 SCOPE OF DISCOVERY ......................................................503
10-2:1 Reasonably Tailored Discovery .................................50410-2:2 Agreements and Court Limitations on Discovery .....505
10-3 FORMS AND SEQUENCE OF DISCOVERY .....................50510-3:1 Seven Forms ............................................................50510-3:2 Any Sequence of Discovery Permissible....................505
10-4 DISCOVERABLE ITEMS ....................................................50610-4:1 Documents and Tangible Things .............................50610-4:2 Persons with Knowledge of Relevant Facts ..............50610-4:3 Trial Witnesses ..........................................................50710-4:4 Testifying & Consulting Experts ...............................50710-4:5 Witness Statements ...................................................50810-4:6 Indemnity and Insurance Agreements ......................50810-4:7 Settlement Agreements .............................................50910-4:8 Contentions ..............................................................509
10-5 SIGNING DISCLOSURES, DISCOVERY REQUESTS, RESPONSES AND OBJECTIONS .......................................51010-5:1 Signing Disclosures ...................................................51010-5:2 Signing Discovery Requests, Notices, Responses
Or Objections ...........................................................51010-6 FILING DISCOVERY MATERIALS ...................................511
10-6:1 Discovery Materials Not Filed ..................................511
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10-6:2 Discovery Materials Filed .........................................51110-6:3 Service of Discovery Materials .................................511
10-7 RESPONDING TO WRITTEN DISCOVERY .....................51210-7:1 The Mechanics ..........................................................512
10-7:1.1 Restate the Request ..................................51210-7:1.2 Respond ...................................................51210-7:1.3 Object ......................................................51210-7:1.4 No Objection for Privilege .......................513
10-7:2 Waiver & Good Cause ..............................................51310-7:3 Time Periods for Responses ......................................514
10-8 PROTECTIVE ORDERS ......................................................51410-8:1 Motion .....................................................................51410-8:2 Court Order ..............................................................515
10-9 AMENDING OR SUPPLEMENTING WRITTEN DISCOVERY .........................................................................51510-9:1 The Basic Duty .........................................................51510-9:2 Form and Verification ...............................................51510-9:3 Timing ......................................................................51610-9:4 Mandatory Additional Discovery .............................51610-9:5 Sanctions for Failure to Supplement Or Amend .......51710-9:6 Certain Responses Not Admissible ...........................518
10-10 ASSERTING PRIVILEGES ..................................................51810-10:1 The Basics .................................................................51810-10:2 Withholding Statements............................................51810-10:3 Privilege Logs ...........................................................51910-10:4 In Camera Inspections ..............................................51910-10:5 Burden of Proof and Hearings ................................52010-10:6 Inadvertent Disclosure of Privileged
Information Snap-Back Provision .............................52110-11 PRIVILEGES ........................................................................522
10-11:1 Work Product ..........................................................52210-11:1.1 General Rule ............................................52210-11:1.2 In Anticipation of Litigation ...................52310-11:1.3 Core and Non-Core Work Product ..........52310-11:1.4 Certain Materials Are Not Work Product ... 524
10-11:2 Attorney-Client Privilege ..........................................52410-11:2.1 The Privilege ............................................52410-11:2.2 Subject Matter Test for Corporations ......524
10-11:3 Clergy Privilege .........................................................52510-11:4 Physician-Patient Privilege .......................................525
10-11:4.1 The Rule ..................................................52510-11:4.2 Limitations .............................................526
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10-11:5 Trade Secret Privilege ...............................................52610-11:6 Mental Health Privilege ...........................................526
10-12 DISCOVERY PLANS ............................................................52710-12:1 The Proper Discovery Control Plan ..........................52810-12:2 Level 1 Discovery .....................................................52810-12:3 Level 2 Discovery ......................................................52910-12:4 Level 3 Discovery .....................................................529
10-13 REQUESTS FOR DISCLOSURE ........................................53010-14 REQUESTS FOR PRODUCTION OF DOCUMENTS .......531
10-14:1 Documents and Tangible Things from Parties ..........53110-14:2 Documents and Tangible Things from Non-Parties ...53110-14:3 Hearing on Objections ..............................................53210-14:4 Self-authentication of Documents ............................532
10-15 DISCOVERY OF ELECTRONIC INFORMATION ............53310-15:1 Procedure ..................................................................53310-15:2 Litigation Hold Or Preservation Letters ...................534
10-15:2.1 When the Duty to Preserve Arises............53410-15:2.2 Contents of Litigation Holds ...................53410-15:2.3 Handling Litigation Holds .......................535
10-15:3 Discovery of Social Media ........................................53610-15:4 Objections to Social Media Discovery ......................537
10-16 ENTRY ON LAND ...............................................................53810-16:1 Specification of Request and Order ..........................53810-16:2 Response ...................................................................538
10-17 INTERROGATORIES ..........................................................53910-17:1 General Use ..............................................................53910-17:2 No Expert Discovery ................................................53910-17:3 Responses and Business Record Option ....................54010-17:4 Verification ...............................................................540
10-18 REQUESTS FOR ADMISSIONS .........................................54010-18:1 General Use ..............................................................54010-18:2 Responding to Requests ............................................54110-18:3 Effect of Deemed Admissions ...................................54110-18:4 Use at Trial Or in Motions ........................................543
10-19 DEPOSITIONS .....................................................................54310-19:1 Oral Depositions ......................................................54310-19:2 Conduct During Oral Depositions ............................54410-19:3 Waiver and Hearing ..................................................54510-19:4 Time Limitations ......................................................54510-19:5 Deposition of Organization .....................................54510-19:6 Deposition on Written Questions ..............................54510-19:7 Depositions in Foreign Jurisdictions .........................546
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10-19:8 Apex Depositions .....................................................54610-19:9 Use of Depositions in Trials Or Hearings .................54610-19:10 Reviewing Deposition Transcripts ............................54710-19:11 Depositions Before Suit ............................................548
10-19:11.1 Purpose ....................................................54810-19:11.2 The Petition .............................................54810-19:11.3 When Allowed .........................................549
10-20 PHYSICAL AND MENTAL EXAMINATIONS .................54910-20:1 Timing and Service ...................................................55010-20:2 Good Cause ..............................................................55010-20:3 Order of Examination ..............................................55010-20:4 Report of Examination ............................................551
10-21 DISCOVERY FROM NON-PARTIES ..................................55110-22 MANDAMUS ON DISCOVERY ISSUES ............................552
10-22:1 Standard for Mandamus Relief ................................55210-22:2 Preserving Mandamus-Party Seeking Discovery .......55310-22:3 Preserving Mandamus-Non-Discovering Party ........55310-22:4 Mandamus Granted .................................................554
10-22:4.1 Apex Depositions ....................................55410-22:4.2 Depositions Before Suit ..........................55410-22:4.3 Failure to Conduct In Camera Review
In Assessing Privilege ...............................55410-22:4.4 Discovery of Computer Hard Drives .......55410-22:4.5 Ordering the Discovery of Privileged
Information ............................................55510-23 DISCOVERY SANCTIONS ..................................................555
10-23:1 Conduct Giving Rise to Sanctions ............................55510-23:2 Purpose .....................................................................55610-23:3 Limitations on Death Penalty Sanctions ...................55710-23:4 Procedure and Timing ..............................................55710-23:5 Non-exclusive Sanctions Under Rule 215 .................558
Chapter 11: Employment Law Litigation ............................................56111-1 INTRODUCTION ................................................................56111-2 TEXAS COMMISSION ON HUMAN RIGHTS ACT ........562
11-2:1 Overview ...................................................................56211-2:2 Forms of Discrimination ..........................................563
11-2:2.1 Disparate Treatment ................................56311-2:2.2 Disparate Impact .....................................56511-2:2.3 Discriminatory Harassment ....................566
11-2:2.3a Quid Pro Quo Harassment ..........................566
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11-2:2.3b Hostile Work Environment Harassment ..........................566
11-2:2.4 Disability Discrimination ........................56811-2:2.4a Disability ..............................56911-2:2.4b Failure to Accommodate .....570
11-2:2.5 Retaliation ...............................................57111-2:3 Enforcement ............................................................572
11-2:3.1 Procedure ................................................57211-2:3.2 Statute of Limitations .............................574
11-2:4 Remedies ..................................................................57511-2:4.1 Compensatory and Exemplary Damages ....57711-2:4.2 Mitigation of Damages ...........................57711-2:4.3 After-Acquired Evidence .........................577
11-2:5 Related Federal Laws ................................................57911-2:5.1 Title VII of the Civil Rights Act of 1964 ....57911-2:5.2 Age Discrimination in Employment Act ... 58111-2:5.3 Americans with Disabilities Act ...............58311-2:5.4 Family Medical Leave Act .......................58411-2:5.5 Equal Pay Act .........................................585
11-3 WHISTLEBLOWER PROTECTION ....................................58711-3:1 Sabine Pilot ...............................................................58711-3:2 Texas Whistleblower Act ...........................................588
11-4 WORKERS COMPENSATION RETALIATION ................58911-4:1 Non-Subscribers .......................................................59011-4:2 Absence Control Policies ..........................................59111-4:3 Causation ................................................................59211-4:4 Circumstantial Evidence ...........................................59311-4:5 Statute of Limitations ...............................................59411-4:6 Damages ..................................................................594
11-5 EMPLOYMENT AT-WILL ...................................................59511-5:1 Judicially Created Exceptions ..................................59611-5:2 Common Law Exceptions .........................................596
11-5:2.1 Employment Contracts ............................59611-5:2.2 Tort Claims ..............................................597
11-5:3 Good Faith and Fair Dealing ...................................59711-5:4 Federal and State Statutory Exemptions ...................597
11-6 EMPLOYMENT TORTS ......................................................59811-6:1 Breach of Fiduciary Relationship .............................59811-6:2 Tortious Interference With an Employment
Contract ...................................................................60011-6:3 Tortious Interference With a Prospective Contract ...60111-6:4 Intentional Inflection of Emotional Distress ............603
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11-6:5 Defamation ..............................................................60411-6:5.1 First Amendment Consideration ............60511-6:5.2 Defenses ..................................................60611-6:5.3 Damages .................................................608
11-6:6 Conspiracy ................................................................60811-6:7 Negligence ...............................................................609
11-6:7.1 Negligent Misrepresentation ...................61011-6:7.2 Negligent Hiring, Retention,
Supervision, and Training ........................61111-6:7.2a Hiring ...................................61211-6:7.2b Supervision ..........................613
11-6:8 Covenants Not-to-Compete .....................................61311-6:8.1 Evolution of Texas Non-Compete
Agreements .............................................61411-6:8.2 Consideration .........................................61611-6:8.3 What are Reasonable Time, Scope
and Geographic Restraints? .....................61711-6:8.4 Remedies .................................................618
11-6:9 Non-Solicitation/Anti-Raiding Agreements .............61811-6:10 Non-Disclosure/Confidentiality Agreements ............619
11-7 CONTRACTS ........................................................................62011-7:1 Overview ...................................................................62011-7:2 Express Contracts .....................................................62111-7:3 Implied Contract ......................................................62111-7:4 Employee Handbooks...............................................62211-7:5 Implied Covenant of Good Faith and Fair Dealing ....62311-7:6 Remedies ..................................................................623
Chapter 12: Experts............................................................................62512-1 INTRODUCTION .................................................................62512-2 ADMISSION OF EXPERT TESTIMONY ...........................626
12-2:1 Core Admissibility Requirements .............................62612-2:2 Burden of Proof .......................................................62712-2:3 Role of the Trial Court ............................................62712-2:4 Standard of Review on Appeal ................................628
12-3 RELEVANCE .......................................................................62812-3:1 General Rule .............................................................62812-3:2 Balancing Test: Relevant Evidence May
Still Be Excluded .......................................................62912-3:3 Irrelevant Testimony ................................................630
12-4 QUALIFICATION OF EXPERTS ........................................63112-4:1 Qualifications ............................................................631
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12-4:2 Special Knowledge ....................................................63212-4:3 Related to Facts at Issue ...........................................633
12-5 RELIABILITY ......................................................................63412-5:1 General Rule .............................................................63412-5:2 Foundational Reliability ...........................................63412-5:3 Reliability of Methodology .......................................63512-5:4 Applicability to All Expert Testimony ......................63612-5:5 The “Analytical Gap” Test .......................................63712-5:6 Reliability of Application of Methodology ..............63712-5:7 Role of the Trial Court ............................................638
12-6 APPROPRIATE SUBJECTS FOR EXPERT TESTIMONY ........................................................................63912-6:1 Expert Testimony Required ......................................63912-6:2 Expert Testimony Permitted .....................................639
12-6:2.1 Ultimate Issues ........................................63912-6:2.2 Mixed Questions of Law and Fact ...........639
12-6:3 Expert Testimony Not Permitted ..............................64012-6:3.1 Questions of Law .....................................64012-6:3.2 Issues of General Knowledge
and Experience ........................................64012-7 EXPERT TESTIMONY IN BUSINESS LITIGATION ........641
12-7:1 Introduction .............................................................64112-7:2 Liability ....................................................................641
12-7:2.1 Contracts .................................................64112-7:2.1a Custom and Usage ...............64112-7:2.1b Unambiguous Contracts ......642
12-7:2.2 Fiduciary Duty: Standard of Care ...........64212-7:2.2a Generally ..............................64212-7:2.2b Professional Standard
of Care .................................64312-7:3 Remedies ..................................................................644
12-7:3.1 Damages Calculations .............................64412-7:3.2 Lost Profits ..............................................64512-7:3.3 Other Valuation Issues .............................64712-7:3.4 Attorney’s Fees ........................................647
12-8 OBJECTING TO EXPERT TESTIMONY ...........................64812-8:1 Before Trial ...............................................................64812-8:2 During Trial ..............................................................64912-8:3 After Trial .................................................................64912-8:4 Issues on Appeal .......................................................650
12-9 FACTS OR DATA RELIED ON BY EXPERTS ...................65012-9:1 Expert Need Not Have Personal Knowledge ............650
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12-9:2 Disclosure of Facts Or Data Underlying Expert Opinion .........................................................65212-9:2.1 Underlying Facts Need Not Be Disclosed ...65212-9:2.2 Voir Dire ..................................................65312-9:2.3 Admissibility of Underlying Facts Or Data
Used to Support Or Explain Opinion ......65312-9:2.4 Limiting Instructions ...............................655
12-9:3 Testimony May Be Excluded If Underlying Facts are Insufficient Basis for Expert’s Opinion ................655
12-10 EXAMINATION OF EXPERTS ...........................................65512-10:1 Direct Examination of Experts .................................65512-10:2 Cross-Examination of Experts ..................................657
12-11 TYPES OF EXPERTS ...........................................................65712-11:1 Testifying Experts .....................................................65812-11:2 Consulting Expert .....................................................658
12-11:2.1 Generally ................................................65812-11:2.2 Consulting-Only Expert ..........................65912-11:2.3 Consulting Expert Whose Work
Has Been Reviewed ..................................66012-11:2.4 Consulting Expert With First-Hand
Knowledge of Facts in the Case ...............66012-11:3 Court-Appointed Expert...........................................660
12-12 DISCOVERY OF EXPERTS ................................................66112-12:1 Information Discoverable .........................................661
12-12:1.1 Testifying Experts ....................................66112-12:1.2 Consulting Experts Whose Mental
Impressions Have Been Reviewed by a Testifying Expert ..............................663
12-12:1.3 Consulting-Only Expert ...........................66412-12:1.4 Consulting-Only Experts Who Have
Obtained First-Hand Knowledge of Facts Related to the Case ....................664
12-12:2 Tools for Obtaining Discovery From Retained Testifying Experts .....................................................66512-12:2.1 Requests for Disclosure and Required
Disclosures ..............................................66512-12:2.2 Oral Deposition ......................................66612-12:2.3 Reports ...................................................667
12-12:2.3a Expert Reports in Texas Courts ..................................667
12-12:2.3b Expert Reports in Federal Court....................................668
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12-12:3 Obtaining Discovery From Other Experts ................66812-12:3.1 Nonretained Testifying Experts ...............66812-12:3.2 Consulting Experts Whose Mental
Impressions Have Been Reviewed ............66912-12:4 Limits on Discovery of Experts ................................67012-12:5 Designation of Experts .............................................671
12-12:5.1 Generally .................................................67112-12:5.2 Changing Designation .............................671
12-12:6 Amending Or Supplementing Responses to Written Discovery .................................................67212-12:6.1 Generally .................................................67212-12:6.2 Retained Experts .....................................67312-12:6.3 Nonretained Experts ...............................673
12-12:7 Failure to Comply With Discovery Rules ..................67412-12:7.1 Sanctions Under Texas Rules ...................67512-12:7.2 Sanctions Under Federal Rules ................676
Chapter 13: Fraud and Negligent Misrepresentation ............................67713-1 INTRODUCTION .................................................................677
13-1:1 Generally ..................................................................67713-1:2 Potential Defendants ................................................678
13-1:2.1 Employer (Vicarious Liability) .................67813-1:2.2 Principal, If Agent Acted With Actual
Or Apparent Authority ............................67813-1:2.3 Principal, If Conduct of Agent Ratified...67913-1:2.4 Agent .......................................................67913-1:2.5 Beneficiary of the Fraud ..........................680
13-1:3 False Statements .......................................................68013-1:3.1 False Statements of Opinion
Are False Representations in Limited Circumstances ........................68113-1:3.1a Defendant Knows Opinion
Is False .................................68213-1:3.1b Opinion Is Based On
Defendant’s Superior Knowledge ...........................682
13-1:3.1c Opinion Is Based On False Facts ......................683
13-1:3.2 False Promises of Future Performance Actionable ...............................................683
13-1:3.3 False Representations by Conduct Equivalent to False Statement of Fact .....684
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13-2 CAUSES OF ACTION ..........................................................68413-2:1 Simple Fraud ............................................................684
13-2:1.1 Generally .................................................68413-2:1.2 False, Material Representation .................68513-2:1.3 Defendant’s State of Mind .......................685
13-2:1.3a Knowledge ...........................68613-2:1.3b Recklessness .........................686
13-2:1.4 Reliance ...................................................68713-2:1.4a Defendant Intends Plaintiff
Will Rely Upon Falsity of Representation .................687
13-2:1.4b Actual Reliance ....................68713-2:1.4c Justifiable Reliance ...............68813-2:1.4d Plaintiff’s Personal
Characteristics and Abilities.....68813-2:1.4e Plaintiff ’s Knowledge
of Facts ................................68813-2:2 Fraudulent Inducement ............................................689
13-2:2.1 Generally .................................................68913-2:2.2 False, Material Representation .................69013-2:2.3 Defendant’s State of Mind .......................690
13-2:2.3a Knowledge ...........................69113-2:2.3b Recklessness .........................691
13-2:2.4 Reliance ...................................................69113-2:2.4a Defendant Intends Plaintiff ’s
Reliance Or Had Reason to So Expect .........................692
13-2:2.4b Justifiable Reliance ...............69213-2:2.4c Plaintiff’s Personal
Characteristics and Abilities....69213-2:2.4d Plaintiff ’s Knowledge
of Facts ................................69313-2:3 Fraud by Non-Disclosure, Omission,
Or Concealment........................................................69313-2:3.1 Generally .................................................69413-2:3.2 Concealed Facts .......................................694
13-2:3.2a No Liability Where Plaintiff Executes Contract Without Reading Same ........694
13-2:3.3 Duty to Disclose ......................................69513-2:3.4 Material Knowledge ................................69513-2:3.5 Defendant’s Knowledge ...........................695
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13-2:3.6 Defendant’s State of Mind .......................69613-2:3.7 Reliance On Non-Disclosure, Omission,
Or Concealment .......................................69713-2:3.7a Nonperformance Insufficient to
Show Intent Not to Perform At Time Contract Is Executed .... 697
13-2:4 Statutory Fraud in Real-Estate and Stock Transactions .............................................69713-2:4.1 Generally .................................................69813-2:4.2 Defendant’s Conduct ...............................698
13-2:4.2a False Representation ............69913-2:4.2b False Promise .......................69913-2:4.2c Non-Disclosure of Third
Party’s False Representation Or Promise ...........................700
13-2:4.3 Reliance ...................................................70013-2:4.3a Defendant Intends Plaintiff ’s
Reliance Or Had Reason to So Expect .........................701
13-2:4.3b Actual Reliance ....................70113-2:5 Negligent Misrepresentation .....................................701
13-2:5.1 Generally .................................................70213-2:5.2 Potential Defendants ...............................70213-2:5.3 Plaintiff ’s Prerequisites ............................703
13-2:5.3a Plaintiff Is Person Or Member of Class of Persons Whom Defendant Intended to Benefit Or Whom Defendant Knew Or Should Have Known Would Receive Information ... 703
13-2:5.3b Showing That Defendant’s Pecuniary Interest Was Involved in Misrepresentation.............703
13-2:5.3c Showing That Defendant Supplied False Information for Guidance of Others ........704
13-2:5.4 False Representation ................................70413-2:5.4a Silence and Failure to Disclose
Creates Liability Only When There Is a Duty to Disclose ...704
13-2:5.4b Future Promises Not Actionable ............................705
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13-2:5.5 Failure to Exercise Reasonable Care ........70513-2:5.6 Reliance ...................................................705
13-3 CAUSATION .........................................................................70613-4 BURDENS OF PROOF AND PRESUMPTIONS ................70713-5 DAMAGES AND REMEDIES .............................................707
13-5:1 Plaintiff ’s Injury ........................................................70713-5:2 Remedies ..................................................................707
13-5:2.1 Choice of Legal Or Equitable Remedies ...70813-5:2.2 Legal/Monetary Remedies .......................708
13-5:2.2a Direct Damages ....................70813-5:2.2b Direct Damages—Damages
were Foreseeable ...................70913-5:2.2c Consequential Damages—
Fraud Proximately Caused the Damages .........................709
13-5:2.2d Exemplary Damages ............71013-5:2.3 Equitable Remedies..................................71013-5:2.4 Interest.....................................................71113-5:2.5 Court Costs .............................................71113-5:2.6 Attorney’s Fees ........................................711
13-6 DEFENSES ...........................................................................71113-6:1 Fraud Defenses .........................................................711
13-6:1.1 Limitations ..............................................71213-6:1.2 Contractual Disclaimer ............................71213-6:1.3 Immunity .................................................71413-6:1.4 Plaintiff ’s Fault Or Negligence .................71413-6:1.5 Statute of Frauds .....................................71413-6:1.6 Ratification ..............................................71413-6:1.7 Knowledge of Falsity/Concealed Facts ....71513-6:1.8 Religious Belief ........................................716
13-6:2 Negligent Misrepresentation Defenses ......................71713-6:2.1 Limitations ..............................................71713-6:2.2 Plaintiff ’s Education ................................71813-6:2.3 Immunity .................................................71813-6:2.4 Plaintiff ’s Fault Or Negligence .................71913-6:2.5 Economic-Loss Rule ................................71913-6:2.6 Inferential Rebuttals ................................71913-6:2.7 First Amendment.....................................720
Chapter 14: Intellectual Property and Trade Secrets Litigation ...........72114-1 INTRODUCTION .................................................................72114-2 PATENT LITIGATION ........................................................721
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14-2:1 Constitutional and Statutory Sources .......................72214-2:2 Jurisdiction and Venue Considerations .....................72214-2:3 Claim Construction ..................................................724
14-2:3.1 General Principles ....................................72514-2:3.2 Means Plus Function Claims ...................727
14-2:4 Direct Infringement ..................................................72814-2:4.1 Literal Infringement ................................72914-2:4.2 Infringement Under the Doctrine
of Equivalents..........................................72914-2:5 Indirect Infringement ................................................730
14-2:5.1 Induced Infringement ..............................73014-2:5.2 Contributory Infringement ......................731
14-2:6 Joint Infringement ....................................................73214-2:7 Willful Infringement .................................................73314-2:8 Defenses ...................................................................734
14-2:8.1 Invalidity .................................................73514-2:8.1a Non-Patentable
Subject Matter......................73514-2:8.1b Anticipation .........................73614-2:8.1c Obviousness .........................73714-2:8.1d Other Grounds
for Invalidity ........................73814-2:8.2 Unenforceability ......................................739
14-2:9 Remedies ..................................................................74014-2:9.1 Damages ..................................................740
14-2:9.1a Lost Profits ...........................74014-2:9.1b Reasonable Royalty ..............741
14-2:9.2 Injunctions ...............................................74214-2:9.2a Preliminary Injunctions ........742
14-2:9.3 Permanent Injunctions .............................74314-2:9.4 Exceptional Cases ....................................745
14-3 COPYRIGHT LITIGATION ................................................74614-3:1 What is Protected by the Copyright Laws? ................746
14-3:1.1 Originality ...............................................74714-3:1.2 Fixation ...................................................74814-3:1.3 Idea vs. Expression ..................................74814-3:1.4 Special Categories of Works ....................74914-3:1.5 Derivative Works .....................................74914-3:1.6 Formalities—Notice and Registration
Requirement ............................................75114-3:1.7 Duration and Renewal Rules ...................75214-3:1.8 Exclusive Federal Jurisdiction ..................753
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14-3:2 Infringement Claims ................................................75314-3:2.1 Ownership ...............................................75414-3:2.2 Copying ...................................................75414-3:2.3 Substantial Similarity ..............................75514-3:2.4 Protected Rights ......................................75614-3:2.5 Right to Perform Publicly ........................756
14-3:3 Contributory Infringement .......................................75714-3:4 Defenses ...................................................................757
14-3:4.1 Fair Use ..................................................75714-3:4.2 First Sale .................................................75914-3:4.3 New Technological Uses ..........................76014-3:4.4 Safe Harbors for Online Service
Providers (OSPs) ......................................76014-3:5 Remedies ..................................................................760
14-3:5.1 Injunctions ...............................................76014-3:5.1a Preliminary Injunctions ........76014-3:5.1b Permanent Injunctions .........76114-3:5.1c Compulsory Licensing .........762
14-3:5.2 Statutory Damages ..................................76214-3:5.3 Actual Damages ......................................76314-3:5.4 Infringer’s Profits .....................................76314-3:5.5 Criminal Liability ....................................76314-3:5.6 Statute of Limitations ..............................764
14-4 TRADEMARK LITIGATION .............................................76414-4:1 Sources of Protection................................................76414-4:2 Federal Requirements ...............................................765
14-4:2.1 The Lanham Act Definition of Trademark ...........................................765
14-4:2.2 Distinctiveness Requirement (Classifications of Marks) ........................765
14-4:2.3 Registration .............................................76714-4:3 Texas Trademark Act ................................................76914-4:4 Loss of Rights (Genericism) .....................................77014-4:5 Infringement Claims .................................................771
14-4:5.1 Likelihood of Confusion .........................77214-4:5.2 Dilution ...................................................77414-4:5.3 Contributory Infringement ......................776
14-4:6 Defenses ...................................................................77614-4:6.1 Fair Use/Use in Limited Area ..................77714-4:6.2 Fraudulent Acquisition ............................77814-4:6.3 Abandonment ..........................................779
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14-4:7 Remedies ..................................................................77914-4:7.1 Injunctions ..............................................77914-4:7.2 Actual Damages .....................................78014-4:7.3 Infringer’s Profits .....................................78014-4:7.4 Remedies Under the Texas
Trademark Act.........................................78114-5 TRADE SECRET LITIGATION ..........................................781
14-5:1 Source of Protection .................................................78114-5:2 Definition of a Trade Secret ......................................78214-5:3 Secrecy ......................................................................78414-5:4 Misappropriation .....................................................78514-5:5 Remedies ..................................................................787
14-5:5.1 Injunctions ...............................................78714-5:5.2 Damages ..................................................789
14-5:6 Statute of Limitations ...............................................79014-5:7 Texas Theft Liability Act ..........................................790
Chapter 15: Ethics ..............................................................................79315-1 INTRODUCTION .................................................................79315-2 ETHICAL TRAPS .................................................................794
15-2:1 Texas Rules vs. the ABA Model Rules ......................79415-2:1.1 Texas Disciplinary Rules of Professional
Conduct vs. American Bar Association Model Rules .............................................794
15-2:2 Overview of Texas Grievance Procedures .................79515-2:2.1 Procedures Before the Texas State Bar
Grievance Committees .............................79515-2:2.2 Choosing the Evidentiary Panel
of the Grievance Committee ....................80015-2:2.3 Choosing a Trial in District Court ...........800
15-2:3 Traps and Common Violations .................................80015-2:3.1 Ethical Duties to the Client ......................802
15-2:3.1a Confidential Information .....80215-2:3.1b Turning Over the Client’s
File ......................................80315-2:3.2 Trust Account Issues ................................80515-2:3.3 Conflicts of Interest With Clients
and Former Clients ..................................80515-2:3.4 Representing Multiple Clients ..................80815-2:3.5 Dealing with Non-Clients ........................81015-2:3.6 Fees .........................................................81115-2:3.7 Advertising ..............................................812
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15-2:4 Waiver of Conflicts ...................................................81315-2:5 The Effect of Ethical Rules in Litigation ..................81515-2:6 Resources Available to the Practicing Lawyer ...........816
15-3 PRIVITY AND NON-CLIENT EXPOSURE.......................81715-3:1 Formation of the Attorney-Client Relationship ........81715-3:2 Non-Clients Who May Sue a Lawyer ........................81815-3:3 Assignments of Legal Malpractice Claims ................81915-3:4 The Privity Rule ........................................................825
15-3:4.1 Strict Application of the Rule ..................82515-3:4.2 Negligent Misrepresentation Claim .........82715-3:4.3 Secondary Liability Under
the Securities Laws ...................................82915-3:4.4 Suing Opposing Counsel ..........................83015-3:4.5 Claims Against Criminal Attorneys .........832
15-3:5 Cracks in/Tracks Around the Privity Rule? ...............83315-3:5.1 Slander Claims .........................................83315-3:5.2 Insurance Defense Counsel Issues ............83715-3:5.3 Estate Legal Malpractice Claims .............84415-3:5.4 Conclusion ...............................................847
15-4 MULTIPLE CLIENT REPRESENTATION ISSUES ..........84715-5 LIMITATIONS ......................................................................84915-6 CAUSES OF ACTION AGAINST A LAWYER ...................853
15-6:1 Negligence ................................................................85315-6:2 DTPA .......................................................................85415-6:3 Negligent Misrepresentations ...................................85615-6:4 Breach of Fiduciary Duty .........................................85615-6:5 Negligence vs. Breach of Fiduciary Duty ..................859
15-7 DAMAGES ............................................................................86115-7:1 Mental Anguish Damages ........................................86115-7:2 Fee Forfeiture ...........................................................86215-7:3 Attorney’s Fees As Damages and Collectibility ........865
15-8 CONTINGENT FEE PROBLEM AREAS ...........................86915-8:1 Minimizing the Risk .................................................879
15-9 ADDITIONAL MISCELLANEOUS THOUGHTS AND MUSINGS ...................................................................88015-9:1 The Good Faith Rule ................................................88015-9:2 Insurance Issues ........................................................88115-9:3 Proximate Cause .......................................................88215-9:4 Law Office Issues ......................................................883
15-10 HOT SPOTS, DANGER ZONES, RED FLAGS...................88815-11 PREVENTION AND AVOIDANCE ....................................891
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CHAPTER 15—APPENDIX A: Proposed Multi-Client Representation Letter ....................893
CHAPTER 15—APPENDIX B: Proposed Prospective Client Letter Rejecting Case ...............................897
CHAPTER 15—APPENDIX C: Proposed Hourly Retainer Letter....900CHAPTER 15—APPENDIX D: Top 10 Ways to Avoid Malpractice ...904
Chapter 16: The Liability Case ...........................................................90916-1 INTRODUCTION .................................................................90916-2 SCRUBBING THE CASE .....................................................91116-3 SCULPTING THE PLEADINGS .........................................91316-4 STRUCTURING THE DISCOVERY ...................................91416-5 FOCUS GROUPS AND JURY RESEARCH .......................91816-6 JURY SELECTION ...............................................................91916-7 OPENING .............................................................................921
16-7:1 Tell a Story, Do Not Recite Facts ..............................92216-7:2 Use Names in Opening, Not Titles Or Pronouns ......92216-7:3 Speak in Simple Terms Using Easy Words ................92316-7:4 Use Visuals and Demonstratives ...............................92316-7:5 Use Language of the Charge in Opening ..................92516-7:6 Tell the Whole Story .................................................925
16-8 ORDER OF WITNESSES, TESTIMONY, AND EVIDENCE .................................................................92616-8:1 Lead With Your Trump Card ....................................92616-8:2 Plan on Calling the Opposite Party
as an Adverse Witness ...............................................92616-8:3 Have Your Direct Examinations Prepared
to the Nth Degree .....................................................92716-8:4 Keep Using Demonstratives......................................92816-8:5 Keep Objections to a Minimum ................................92816-8:6 Honor the Playing Field, But Use the Playing Field ...92916-8:7 Be Smart With Exhibits ............................................930
16-9 CLOSING ..............................................................................93116-10 CONCLUSION ......................................................................932
Chapter 17: Selected Causes of Action Unique to the Oil and Gas Industry ............................................................................933
17-1 INTRODUCTION .................................................................93317-2 BREACH OF IMPLIED COVENANTS ...............................934
17-2:1 Nature of Implied Covenants ...................................93417-2:1.1 Classification ...........................................93417-2:1.2 Reasonably Prudent Operator Standard ....935
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17-2:2 Implied Covenant to Develop the Leasehold ............93617-2:2.1 Scope of Duty..........................................93617-2:2.2 Elements of Claim ...................................93717-2:2.3 Damages and Other Relief .......................938
17-2:3 Implied Covenant to Protect the Leasehold Against Drainage ......................................................93917-2:3.1 Scope of Duty..........................................93917-2:3.2 Elements of Claim ...................................93917-2:3.3 Damages and Other Relief .......................941
17-2:4 Implied Covenant to Market.....................................94117-2:4.1 Scope of Duty..........................................94117-2:4.2 Elements of Claim ...................................94217-2:4.3 Damages and Other Relief .......................944
17-2:5 Implied Covenant to Diligently and Properly Operate ................................................94417-2:5.1 Scope of Duty..........................................94417-2:5.2 Elements of Claim ...................................94517-2:5.3 Damages and Other Relief .......................946
17-3 SUBSURFACE TRESPASS ...................................................94717-3:1 Nature of the Claim ..................................................94717-3:2 Subsurface Trespass Resulting From Horizontal
Or Directional Drilling .............................................94717-3:3 Subsurface Trespass Resulting From Hydraulic
Fracturing .................................................................94917-3:4 Geophysical Trespass ................................................951
17-4 LEASE TERMINATION ......................................................95317-4:1 Nature of Lease Termination ....................................95317-4:2 Trespass-to-Try-Title.................................................95317-4:3 Declaratory Judgment ..............................................95517-4:4 Breach of the Lease ..................................................956
17-5 SURFACE DAMAGE CLAIMS ...........................................95717-5:1 The Divided Estate: Severance of Mineral
and Surface Estate ....................................................95717-5:1.1 The Mineral Estate Is the Dominant
Estate .......................................................95817-5:1.2 Contractual Limitations on Mineral
Lessee’s Usage of Surface ........................95917-5:2 The Accommodation Doctrine .................................959
17-5:2.1 Application of the Accommodation Doctrine ..................................................960
17-5:2.2 Reasonable Alternative Method of Surface Use .........................................961
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17-5:3 Surface Restoration Issues ........................................96117-5:4 Surface Damage Claims ............................................961
17-6 BREACH OF DUTY BY EXECUTIVE RIGHTS HOLDER ...............................................................96217-6:1 Creation of the Executive Right................................96217-6:2 Duties of Executive Right Holder .............................96317-6:3 Breach of Duty to Non-Executive ............................964
17-6:3.1 Breach of Executive Duty by Self-Dealing ........................................964
17-6:3.2 Breach of Executive Duty by Refusal to Lease ..................................964
17-7 POOLING CLAIMS ..............................................................96517-7:1 Railroad Commission of Texas Regulatory Scheme ...96517-7:2 Purpose of Pooling ...................................................96517-7:3 Legal Effect of Pooling .............................................96617-7:4 Voluntary Pooling .....................................................96617-7:5 Compulsory Pooling .................................................968
17-7:5.1 The Mineral Interest Pooling Act ............96817-7:5.2 Required Voluntary Pooling Offer ...........96817-7:5.3 Requirements for Compulsory
Pooling Order ..........................................96917-7:5.4 Appeal of Compulsory Pooling Order .....970
Chapter 18: Preservation of Error – Appeal Tactics ............................97118-1 INTRODUCTION .................................................................97118-2 PLEADING ...........................................................................972
18-2:1 Petition .....................................................................97218-2:2 Special Exceptions ....................................................97318-2:3 Answer .....................................................................974
18-3 PRETRIAL MOTIONS .........................................................97618-3:1 Special Appearance ...................................................97718-3:2 Motion to Transfer Venue .........................................97918-3:3 Motion to Dismiss ....................................................98018-3:4 Plea to the Jurisdiction..............................................98018-3:5 Motion to Recuse .....................................................98118-3:6 Motion for Summary Judgment ................................98218-3:7 Motion in Limine ....................................................985
18-4 BENCH TRIALS ...................................................................98518-4:1 Overview ...................................................................98518-4:2 Findings of Fact and Conclusions of Law ................986
18-5 JURY SELECTION ...............................................................98718-5:1 Specific Questions Refused .......................................987
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18-5:2 Time Constraints ......................................................98818-5:3 Challenges to Venire Members ..................................988
18-6 TRIAL RULINGS .................................................................99118-6:1 Jury Demand ............................................................99118-6:2 Final, Appealable Judgments and Orders .................99218-6:3 Admission and Exclusion of Evidence ......................993
18-6:3.1 Objections ................................................99318-6:3.1a Objections Must Be Timely,
Specific and Ruled Upon ......99318-6:3.1b Continuing Objections
Necessary .............................99418-6:3.1c When Evidence Has Limited
Admissibility ........................99518-6:3.2 Offers of Proof ........................................99618-6:3.3 Challenges to Experts ..............................99618-6:3.4 Formal Bills of Exceptions ......................99718-6:3.5 Bystanders Bill .........................................998
18-6:4 Directed Verdict ........................................................99918-6:5 Closing Argument ................................................... 1000
18-7 JURY CHARGE .................................................................. 100118-7:1 Overview of Texas Jury Charge Practice ................. 100118-7:2 The Jury Charge Conference ................................... 1001
18-7:2.1 “Informal” and “Formal” Conferences ... 100118-7:2.2 Objections and Requests ........................ 1002
18-7:2.2a Objections .......................... 100218-7:2.2b Requests ............................. 1004
18-7:2.3 Relaxing the Error Preservation Rules ... 100518-7:3 Special Issues .......................................................... 1006
18-7:3.1 Valid and Invalid Theories of Recovery... 100618-7:3.2 Importance of Error Preservation .......... 100718-7:3.3 Deemed Findings ................................... 100718-7:3.4 Incomplete Verdicts and Inconsistent
Findings ................................................. 100818-8 POSTTRIAL MOTIONS ..................................................... 1009
18-8:1 Motion for Judgment on the Verdict ....................... 100918-8:1.1 Overview and Procedure ........................ 100918-8:1.2 Appellate Review ................................... 1009
18-8:2 Motion for Judgment Notwithstanding the Verdict ..................................................................101018-8:2.1 Overview ................................................ 101018-8:2.2 Procedure ............................................... 101118-8:2.3 Appellate Review ................................... 1011
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18-8:3 Motion for New Trial ............................................. 101118-8:3.1 Overview ................................................ 101118-8:3.2 Procedure ............................................... 101218-8:3.3 Appellate Review ................................... 1013
18-8:4 Motion to Modify, Correct Or Reform the Judgment ........................................ 101418-8:4.1 Overview ................................................ 101418-8:4.2 Procedure ............................................... 101418-8:4.3 Appellate Review ................................... 1015
18-8:5 Motion for Remittitur ............................................. 101518-8:5.1 Overview ................................................ 101518-8:5.2 Procedure ............................................... 101618-8:5.3 Appellate Review ................................... 1016
18-8:6 Motion for Judgment Nunc Pro Tunc ..................... 101818-8:6.1 Overview ................................................ 101818-8:6.2 Procedure ............................................... 101918-8:6.3 Appellate Review ................................... 1019
18-8:7 Request for Findings of Fact and Conclusions of Law ......................................... 102018-8:7.1 Overview ................................................ 102018-8:7.2 Procedure ............................................... 102018-8:7.3 Appellate Review ................................... 1021
18-9 APPEALS ........................................................................... 102218-9:1 Appellate Jurisdiction ............................................. 102218-9:2 Types of Appeals .................................................... 1023
18-9:2.1 Appeals From Final Judgments ............. 102318-9:2.2 When Is Judgment “Rendered” .............. 102518-9:2.3 Interlocutory Appeals ............................ 1026
18-9:3 Perfecting the Appeal .............................................. 102818-9:3.1 Notice of Appeal ................................... 102818-9:3.2 Docketing Statement ............................. 1031
18-9:4 Appellate Record .................................................... 103118-9:4.1 Clerk’s Record ....................................... 103218-9:4.2 Reporter’s Record .................................. 1033
18-9:5 Suspending the Judgment ....................................... 103418-9:5.1 Agreement to Suspend Judgment ........... 103418-9:5.2 Superseding the Judgment Via
Appellate Security .................................. 103518-9:5.3 Suspension of Judgment
by Governmental Entities ...................... 103618-9:5.4 Suspending Execution by
Injunction .............................................. 1037
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18-9:6 Challenges to Legal and Factual Sufficiency of the Evidence ....................................................... 1038
18-9:7 Briefs ...................................................................... 103818-9:7.1 Appellant’s Brief .................................... 103818-9:7.2 Appellee’s Brief ...................................... 104318-9:7.3 Appellant’s Reply Brief .......................... 1043
18-9:8 Motion Practice ...................................................... 104418-9:8.1 Particular Motions ................................. 104518-9:8.2 Deadlines for Motions to
Extend Time ............................................104618-9:9 Oral Argument and Submission .............................. 104718-9:10 Opinion and Judgment ........................................... 104818-9:11 Motions for Rehearing and En Banc
Reconsideration ...................................................... 105018-9:11.1 Motion for Rehearing ............................ 105018-9:11.2 Motion for En Banc Reconsideration .... 1051
18-9:12 Mandate ................................................................. 105218-9:13 Appellate Timetable ............................................... 1053
18-10 SUPREME COURT REVIEW ............................................ 105818-10:1 Jurisdiction ............................................................. 105818-10:2 Petitions for Review ................................................ 1059
18-10:2.1 Purpose .................................................. 105918-10:2.2 Requirements of Procedure
and Form ............................................... 106118-10:2.3 Contents ................................................ 106218-10:2.4 Response to Petition for Review ............. 106718-10:2.5 Reply to Response to Petition
for Review .............................................. 107018-10:3 Direct Appeals ........................................................ 107018-10:4 Briefs on the Merits ................................................ 107118-10:5 Appellate Record .................................................... 107318-10:6 Oral Argument and Submission .............................. 107418-10:7 Opinion and Judgment ........................................... 107518-10:8 Motions for Rehearing ............................................ 107618-10:9 Mandate ................................................................. 107718-10:10 Supreme Court Timetable—Petition for Review ..... 1078
18-11 ORIGINAL PROCEEDINGS ............................................. 108218-11:1 Overview ................................................................. 1082
18-11:1.1 Writ of Mandamus ................................ 108218-11:1.1a Clear Abuse of Discretion ...108318-11:1.1b No Adequate Remedy
by Appeal ........................... 1083
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18-11:1.1c Special Situations Where Mandamus Is Used in Business Litigation ........ 1084
18-11:1.2 Writ of Prohibition ................................ 108518-11:1.3 Writ of Injunction ................................. 1085
18-11:2 Procedure ................................................................ 108618-11:2.1 Parties to an Original Proceeding ........... 108618-11:2.2 The Original Proceeding Action............. 108618-11:2.3 Preparation of the Mandamus
Record ................................................... 108718-11:2.4 Temporary Relief ................................... 108718-11:2.5 Court’s Ruling on a Petition
for Extraordinary Relief ........................ 1088
Chapter 19: Speech Based Torts: Libel, Slander, Business Disparagement and Invasion of Privacy ........................... 1089
19-1 INTRODUCTION ............................................................... 108919-2 WHEN TO FILE A LIBEL ACTION ................................. 1092
19-2:1 Retraction Statutes ................................................. 109319-2:2 Self-Help Remedies ................................................. 1094
19-3 WHERE TO FILE A LIBEL ACTION ............................... 109519-3:1 State Or Federal ...................................................... 109519-3:2 District Or County Court ....................................... 109619-3:3 Venue ...................................................................... 109619-3:4 Personal Jurisdiction ............................................... 1097
19-4 WHAT TO ALLEGE ........................................................... 109819-4:1 New Pleading Standard Under TRCP 91a
and Twombly and Iqbal ........................................... 109819-4:2 Elements of the Cause of Action ............................ 1099
19-4:2.1 Publication ............................................. 109919-4:2.2 Of and Concerning Plaintiff, Including
Businesses and Groups .......................... 110119-4:2.3 False Statement of Fact
Not an Opinion ..................................... 110319-4:2.4 Defamatory, Libel Per Se
and Defamatory Impressions ................. 110619-4:2.5 Fault ...................................................... 1111
19-4:2.5a Public Figures and Public Officials .............................. 1113
19-4:2.5b Private Figures ................... 111619-4:2.5c Media Defendants .............. 1116
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19-4:2.5d Private, Plaintiff, Non-Media Defendant, Subject Not a Matter of Public Concern ... 1118
19-4:2.5e Deceased Persons ............... 111819-4:2.6 Proximate Cause .................................... 111819-4:2.7 Damages ................................................ 1119
19-4:2.7a Presumed Damages ............ 111919-4:2.7b “Actual Damages,” Including
Reputational and Pain and Suffering ............................. 1120
19-4:2.7c Special Damages ................ 112119-4:3 Punitive Damages ................................................... 112119-4:4 Equitable Relief ...................................................... 1121
19-5 THE CITIZENS PARTICIPATION ACT (ANTI-SLAPP STATUTE) ................................................. 112419-5:1 What Triggers the TCPA? ....................................... 112519-5:2 When to File ........................................................... 112719-5:3 What the Plaintiff Must Prove ................................ 112819-5:4 When the Judge Must Rule ..................................... 112919-5:5 The Consequence of Not Ruling............................. 112919-5:6 Discovery While the Motion Is Pending.................. 113019-5:7 Interlocutory Appeal .............................................. 113119-5:8 Sanctions ................................................................ 113119-5:9 Attorney’s Fees ....................................................... 1131
19-6 SPECIAL EXCEPTIONS AND MOTION TO DISMISS UNDER RULE 91A ............................................................ 1134
19-7 THE ANSWER .................................................................... 113419-8 AFFIRMATIVE DEFENSES ............................................. 1135
19-8:1 Limitations ............................................................. 113519-8:1a Discovery Rule ....................................... 1136
19-8:2 Privileges................................................................. 113619-8:2a Statutory ................................................ 113619-8:2b Common Law ........................................ 1137
19-8:3 Immunity ................................................................ 113819-8:4 Invited Publication .................................................. 113819-8:5 Consent .................................................................. 113919-8:6 Communications Decency Act ................................ 1139
19-9 DISCOVERY ....................................................................... 114019-10 WHAT LAW APPLIES ........................................................ 114219-11 THE MOTION FOR SUMMARY
JUDGMENT ....................................................................... 1143
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19-12 INTERLOCUTORY APPEAL OF THE DENIAL OF SUMMARY JUDGMENT ............................................ 114319-12:1 Constitutionality of the Act .................................... 114419-12:2 Who Is a Member of the Press Entitled
to Protection?.......................................................... 114419-13 TRIAL ................................................................................. 114519-14 POST TRIAL ISSUES ......................................................... 1146
19-14:1 Take Down Notices ................................................ 114619-14:2 Collection of Fees ................................................... 1146
19-15 SLANDER ........................................................................... 114719-16 SLANDER DISTINGUISHED FROM LIBEL .................. 114719-17 BUSINESS DISPARGEMENT ........................................... 114719-18 BUSINESS DISPARGEMENT DISTINGUISHED
FROM LIBEL AND SLANDER ........................................ 114819-19 STATUTE OF LIMITATIONS ........................................... 114819-20 DAMAGES .......................................................................... 114919-21 INVASION OF PRIVACY ................................................... 1149
19-21:1 Intrusion ................................................................. 114919-21:2 Misappropriation/Right of Publicity ...................... 115119-21:3 False Light .............................................................. 115119-21:4 Publication of Private Embarrassing
Non-Newsworthy Facts .......................................... 115219-22 THE VEGGIE LIBEL STATUTE ....................................... 115319-23 SPECIAL PROBLEMS RAISED BY THE INTERNET .... 115419-24 APPELLATE ISSUES ......................................................... 1155
Chapter 20: E-Discovery ................................................................... 115720-1 INTRODUCTION ............................................................... 115720-2 ELECTRONIC DOCUMENTS AND OLD FASHIONED
DISCOVERY ....................................................................... 115820-2:1 Electronically Stored Information Versus Paper ..... 1160
20-2:1.1 Everyone Is a File Keeper ...................... 116020-2:1.2 Metadata ............................................... 116120-2:1.3 Deleted Data .......................................... 116120-2:1.4 Multiple Sources of the Same Data ....... 116220-2:1.5 Back-Up Tapes ...................................... 116220-2:1.6 Key Players ............................................ 116420-2:1.7 Forms of Production ............................. 1165
20-3 FIRST STEPS TO E-DISCOVERY CHALLENGES .......... 116520-3:1 Familiarity Breeds Consent ..................................... 116620-3:2 Understanding Your Data ...................................... 1167
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20-3:3 Data Maps and People Maps .................................. 116920-3:4 Litigation Holds ..................................................... 117120-3:5 Dynamic Databases ................................................ 1176
20-4 PRESERVATION ISSUES ................................................... 117720-4:1 Third Parties ........................................................... 117720-4:2 Managing a Production .......................................... 117920-4:3 Types and Amount of Data .................................... 118020-4:4 Data Collection ...................................................... 118120-4:5 Filtering .................................................................. 1184
20-5 BRINGING IN ADDITIONAL TROOPS: THE OUTSIDE E-VENDOR .............................................. 118620-5:1 Processing ............................................................... 118820-5:2 Finding the Right Online Repository ...................... 118920-5:3 Dealing with a Production Team ............................ 1192
20-6 PRIVILEGE. PRIVILEGE. PRIVILEGE ........................... 119320-6:1 Rule 502 .................................................................. 119320-6:2 The Privilege Log .................................................... 119420-6:3 The Privilege After Production ............................... 1196
20-7 USING E-DOCUMENTS IN LITIGATION ...................... 119720-7:1 Reviewing Discovery Results for Useful
Information ............................................................ 119720-7:2 Getting It Admitted ................................................ 1199
20-7:2.1 General Standards ................................. 119920-7:2.2 Authentication ....................................... 120020-7:2.3 Business Records Affidavit ..................... 120320-7:2.4 Chain of Custody .................................. 120320-7:2.5 Best Evidence Rule ................................ 1204
20-8 EDUCATING CLIENTS .................................................... 120520-8:1 Document Preservation Programs .......................... 1205
20-8:1.1 Handling Electronic Data Responsibly .............................................1207
20-8:1.2 Beware of Spoliation ............................. 120820-8:1.3 Establish a Protocol Early ...................... 121020-8:1.4 Implement and Distribute Litigation
Holds as Soon as Possible ...................... 121020-8:1.5 Removing the Litigation Holds .............. 121220-8:1.6 Maintaining Your Hold as Things
Change .................................................. 121420-8:1.7 Negotiate Production Issues
with Opposing Counsel Early ................ 121520-8:1.8 Costs and Sanctions ............................... 1216
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20-9 HANDLING EMPLOYEES................................................ 121820-9:1 An Employer’s Right to Review Employee
Communication ...................................................... 121920-9:2 Representative Cases ............................................... 1221
20-9:2.1 In re Asia Global Crossing, Ltd. ............ 122120-9:2.2 Curto v. Medical World
Communications, Inc. ............................ 122220-9:2.3 National Economic Research
Associates v. Evans ................................ 122320-9:2.4 Stengart v. Loving Care Agency ............. 1224
20-10 2014 PROPOSED AMENDMENTS TO THE FEDERAL RULES .............................................. 122720-10:1 Rule 16(b)(3), Rule 26(f)—Contents
of Scheduling Order ............................................... 122820-10:2 Rule 26(b)(1)—Proportionality in Discovery ......... 122820-10:3 Rules 30, 31, 33, and 36—Numerical Limits
to Discovery ............................................................ 122820-10:4 Rule 37(e) Changes ................................................. 1229
20-11 CONCLUSION .................................................................... 1229CHAPTER 20—APPENDIX A: Sample Preservation Letter—
To Client ..................................... 1230CHAPTER 20—APPENDIX B: Document Collection and
Interview Form ........................... 1233CHAPTER 20—APPENDIX C: Sample Fed. R. Civ. P. 30(b)(6)
Deposition Notice ....................... 1241CHAPTER 20—APPENDIX D: Questions for Fed. R. Civ.
P. 30(b)(6) Deposition of Custodian of Electronic Records ....................................... 1243
Table of Cases .................................................................................. 1247
Index ................................................................................................ 1339
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