And the Working Mother

You were engaged in your career for several years and had managed to successfully navigate through that illusory balance between work and family. You loved your job, your boss loved your work and you just got the opportunity to lead an eighteen month long project that makes you the envy of all your coworkers. Next step, Manager!

But the very next day you discover that your child’s ill. Not the take-a-day off kind of illness, but seriously ill. You’re forced to take the family leave time needed to nurse your child back to health. In two months she’s recovered, your thrilled, and its time to go back to work.

When you arrive back at the office the boss says that the project’s “too far along” to add you back into the mix at all, none-the-less in your former lead position. He explains that although the situation with your child was unavoidable, her illness just made it “too risky” to reinsert you into a project of that magnitude. You’re disappointed but you understand.

Six months later you’re thrilled to discover that you’re pregnant. Two years later you’re still waiting for that next big assignment and that promotion to Manager is just a distant memory. When you complain to your boss, he explains that “when your kids get a little older and you’re done with having more babies,” he has great plans for your career.  “Just be patient” he advises, “We’ll get past this Mom thing.”

Do you continue to understand, or do you call your attorney to ask about gender discrimination?

Meet Elana Back. She was a school psychologist at a New York elementary school, who may be able to help you answer this question. Ms. Back took a three-month parental leave and claimed that upon her return her female supervisors made discriminatory comments regarding her motherhood, suggesting such things as waiting to “get pregnant until she retires,” or until “her son was in kindergarten.” They also suggested that she may not have the ability to work because she had “little ones” at home and it may not possible to be a good mother and perform her job.

She was denied tenure and terminated. The school alleged that she was terminated because she “lacked organizational and interpersonal skills.” Her position was that she was termination because her employer felt that she could not succeed in her job while being a mother of young children. Back v. Hastings-On-Hudson Union Free School District (2004).

In a 2004 ruling, the U.S. Court of Appeals for the Second Circuit said that the use of motherhood stereotypes of female employees is gender discrimination under the Equal Protection Clause of the 14th Amendment, which prohibits discrimination on the basis of sex in public employment. The appeals court found that Back’s factual allegations regarding the comments made about “a woman’s inability to combine work and motherhood” constituted direct evidence of gender discrimination.

A rationale for the decision may have been the U.S. Supreme Court’s ruling in Nevada Department of Human Resources v. Hibbs (2003). In Hibbs, the court ruled that “notions that mothers are insufficiently devoted to work, and that work and motherhood are incompatible” constitute gender discrimination. The basis of their finding was that it was easy to determine that stereotypical statements that a woman cannot be a “good mother and have a job that requires long hours,” or that a mother who received tenure “would not show the same level of commitment [she] had shown because [she] had little ones at home” were discriminatory.

Generally, discrimination cases require that the Plaintiff show that others not in their protected class are treated differently. Back failed to offer such evidence as 85% of the teachers in her school were female. The court agreed that Back’s case would have been stronger had she offered comparative evidence about men but the court held that such evidence was not required.

This decision was rendered based on Ms. Back being a public employee (Equal Protection Clause, 14^th Amendment). Our hypothetical could be in the public or private sector. In either event though, the legal rationale should be consistent and any presumption by your employer that combining work and motherhood are incompatible and make you a less capable or devoted employee, may constitute gender discrimination.

The Force is with You!

Are you interested in partaking in a statistical experiment?

If the approximately 20 million firms that exist in American were each assigned identification numbers and you were selected to randomly select a single phone number to call from those firms, odds are that when you were patched through to an owner, the voice on the other end would be female. Surprised?

According to the Center for Women’s Business Research, nearly 10.4 million firms are owned by women and they generate $1.9 trillion in sales! Of those firms, 7.7 million (74%) are controlled by women (who own 50% or more). Majority women-owned businesses grow at around two times the rate of all firms. Women have clearly arrived!

Statistically, women tend to be risk takers, employe more relationship focused management styles and belong to more formal business organizations or networks. They are also more likely to rely on external professional services such as accountants, financial advisors and attorneys (YEAH!)

Armed with this information, you may say to yourself, “Self, I’m a capable woman, why don’t I start my own business?” Good question. Then your next thought might be, “What do I need to consider in starting a business?” I’m glad you asked.

Although, a comprehensive list of considerations would be quite extensive, we’ll discuss some of the more important issues. First, is your idea or concept new and proprietary and does it merit patent or copyright consideration? Regardless of the answer, have you determined the level of personal risk you and/or your family are willing to take to be in business? You should be aware that if you choose to be a sole proprietor and not form a corporation, limited liability company or limited partnership, you expose yourself to potential personal liability that may be protected in properly structured, managed and papered alternative entities.

There are simple items that need to be addressed such as understanding the land use or zoning for the location you may select for your business, other than your home. If you locate a business outside your home you may need a certificate of occupancy from the city or town. Entering into a lease agreement for your office or retail space? You may want to understand what’s contained in those twenty-five pages. Are you familiar with triple net leases, CAM charges, guarantor obligations?

You would want to speak with your insurance agent to understand what insurance coverage’s might be available to protect you and your business. A visit with a CPA will help you be aware of tax implications related to the entity structure you choose for your business. Subchapter S corporations, limited liability companies and partnerships can all be designed to allow income and expenses to “flow through” to the owner(s) own personal tax statement. You need to understand how you account for franchise taxes, guaranteed payments and distributions?

If you are going to have employees there are a number of issues in which your CPA and attorney can advise you including employment and contractor law and agreements as well as payroll, franchise, withholding taxes and the like.

What about purchasing a franchise or an existing business? Again there are a multitude of items to be examined and details to be comprehended. The purchase of a business should involve a seasoned attorney who can assist you in contract preparation and the orderly transition to ownership. There are far too many considerations to leave this to chance. One of the saddest situations that we deal with are individuals and entrepreneurs who enter into agreements without the counsel of an attorney only to find out that they did not get what they thought they’d bargained for or they got trapped by a contractual nuance that they thought they understood but didn’t.

Another issue you may want to address, whether starting a business or as a part of an existing business is what happens to your business in the event of death, divorce, or disability. If you have a business partner do you want to have their spouse as a partner if your partner dies or is divorced? Many times the answer is no. These issues can often be dealt with at the time your entity is formed in the by-laws or regulations that govern the operations of the entity.  You can also create buy-sell agreements that provide for an orderly transition in the event of death and, if backed by life insurance, can provide a funding mechanism for the purchase of a partner or shareholders interest.

Forming, managing, documenting and operating your business can seem like a daunting task, but with proper advise and attention to detail, you should do fine.

Remember women of corporate America, you’re already at the wheel of the business ship at least half the time. You’re risk takers with compassion. You are succeeding in record numbers. You are the force!

What you should know

Do you want to hear an amazing statistic? More than sixty per of the eligible people in the U.S. have no will (power). No, I’m not talking about the willpower it takes to be able to push away from the table; I’m talking about the Will power that ensures your loved ones are taken care of after you are gone.

The fact is most people just do not want to deal with their own mortality. Consequently, they avoid thinking about it, talking about it and certainly planning for it. Guess who suffers? Your spouse and yours kids.

Who needs a will you ask? Just about everyone who has a job, an asset or a minor child.

You should know that if you do not have a will the sate of Texas has one for you. In the event you die intestate (without a will) your estate will be distributed according to an inflexible plan, which must be adhered to by the probate court. These intestacy rules may or may not reflect how you would prefer your assets to be distributed or how you’re minor children will be cared for.

You should know that your will controls the entire distribution of your estate except for the community property of your assets that are already owned by your spouse, jointly owned assets with the right of survivorship, where an asset has a specific beneficiary designation (think life insurance policies) or where an asset has a automatic transfer on death designation (think checking and savings accounts).

You should know that your spouse is taken care of. A will may designate that all of the deceased spouse’s assets pass to the surviving spouse. Without a will, this would not be true as both your spouse and your children would have a portion of the estate pass to them by law.

You should know that without a will your children will be treated equally regardless of need or special circumstances. They will also be entitled to receive their full inheritance upon turning 18 to spend as they see fit. Admit it. An eighteen year old with money might be just a bit unsettling. And by the way, who’s in charge of the minor children in the event both parents should die? Without a will a judge you have never met that doesn’t know your kids or your sister or any family member, may make that decision for you.

You should know that if you have elderly parents who depend on you for support that they may be left with no options upon your death. Also, that college fund money or that classic pick-up that you had designated for your grandchild becomes part of the probate estate to be distributed according to the intestacy laws if you do not have a will.

You should know that without a will that your sister, whom you dearly love except when she’s with her domineering, overbearing husband, may be appointed executor by the court to make decisions for the estate, to administer the distribution of the assets and possibly to help the judge decide that it is in the best interest of the children to live with she and her husband. Yes that’s the same husband that you won’t even leave your kids with for an afternoon.

There are many other issues to consider, including tax implications in the event your estate is reasonably substantial.

One other tidbit for you to consider, situations change; your assets grow, you have another child, you get an inheritance, your kids are all adults. Does your current will cover your current situation? If not, you should consider a visit to your lawyer to address the changes that have occurred in your life since your last will was drafted.

Remember this; the long-term well-being of your spouse and your children is tied up in your decision to have a will or to die intestate. Only you know what is in the best interest of your family and the only way that you can ensure what happens after you have departed is to have WILL (POWER) while you are still with them.

(The Stories Men Tell)

A repeating scenario that plays itself out in the offices of lawyers throughout Texas goes something like this:

A woman, distraught over the eminent break-up of her marriage arrives at the offices of her chosen attorney for the initial consultation. Before the attorney has a chance to glean the details of her situation, the woman, hump-shouldered at the conference table, tears welling in her eyes, says, “I don’t know what I’m going to do. My husband has always handled the finances and I know nothing about divorce, very little about what we own or our investments, what’s in our bank accounts or how much money we have. I can’t even afford an attorney.

“He says he can prove I’m a bad Mother and get custody of the kids. He says the business he owns but that we started together is his. He even says he’ll get possession of the house. He’s got a huge retirement account that he says I can’t touch. What am I going to do.”

First, stop listening to your husband! It’s likely that he doesn’t know any more about divorce law and property rights than you. (This may be true of your well-intentioned friends as well.)

Second, do not agree to any settlement without consulting an attorney. Bet your money that he’ll be represented and if your not, you probably fair poorly.

Texas is a community property state and often refereed to as an “equitable distribution” state. That’s important for you to remember. The concept of “community property” in Texas was spawned from Spanish Civil Law and continues to this day in Texas as its civil law process. The community property system is driven by both the “operation of law” and case law decisions and does not require voluntary agreement from the spouses. Spouses do not have the option not to be governed by the laws of community property and in Texas the presumption of the community estate is automatic. Although courts have discretion in dividing property in a divorce and may not divide property “equally”, they typically make their decisions equitably along “community property” lines. Married couples may though, during the marriage and by agreement, choose to divide their community property into separate property (this is a topic for another day).

During the marriage, neither the wife nor the husband acquires ownership of community assets through the other. The community interest occurs at the moment assets are acquired and continues so as long as the couple owns the asset. In the event that the legal ownership to an asset is vested solely in the name of one of the spouses, that spouse generally holds the property for the community estate (half for the other spouse), during the term of the marriage. Accordingly, in Texas, the wife and husband share equally in assets acquired during the term of the marriage. (This does not apply to assets owned prior to and brought into the marriage and may be different if assets were acquired while living in another state.)

So how does the woman in our example respond armed with this knowledge?

She smiles and says, “Well, Mr. Man, I happen to know that Texas is a community property state. Half of anything we acquired during our marriage, including our house, our investments, our savings and cash, as well as ‘your business’ may already be mine. Oh, and don’t forget the retirement account too.”

“As for the kids, talk to my attorney.”

GOOD OR BAD?

By Chuck Elsey

Most of us are aware of the McDonalds case where a 79 year old woman was awarded $200,000 in compensatory damages and $2.7 million in punitive damages because she spilled a cup of McDonald’s hot coffee in her own lap. I’m sure like most Texans you were immediately shocked by the size of the award. Cases such as this fostered cries for tort reform.

George Bush was and is a huge supporter of tort reform and began pushing the issue when he was Governor of Texas. Effective September 1, 2003 Texas adopted a medical malpractice bill that limited non-economic damages to a total of $250,000 from all doctors and other individuals, $250,000 from each hospital or other institution and a total of $500,000 from all institutions.

Tort reform is a controversial issue that divides the country mostly along party lines. If you like tort reform, get ready, because there’s a good chance more is on the way.

An important development that may well be the deciding factor in determining the extent of tort reform is the “new”, more conservative, Supreme Court’s apparent sympathy to business.

There seems to be a new willingness among the justices to become involved in business litigation which could have a substantial impact on tort reform. The U.S. Chamber of Commerce filed friend-of-the-court briefs in 15 cases on behalf of its corporate members, winning 13 of those cases, the highest winning percentage in its 30-year history. According to Akin, Gump, a law firm with an active Supreme Court practice, 40% of the cases heard by the court during the current term involved issues significant to business compared to about 30% during the previous two terms. Nearly 50% of cases for the next session involve business. Given recent decisions by the Court, there is a current push to have it go beyond its recent decisions and set out a formula to cap punitive damages.

America’s current tort system has been under attack for being too costly and incapable of administering fair and timely awards. A recent actuarial study by Tillinghast-Towers Perrin indicates that tort costs rose 125% ($67 to $152 billion) from 1984 to 1994. The costs of litigation have burdened American families and businesses with higher insurance premiums, reduced incentives for auto safety features, and higher medical costs. In addition, it often costs plaintiffs 33 percent of their awardl (lawyer’s contingency fees) just to have access to the current American tort system.

Although primarily a Republican backed cause, Senator Joe Lieberman, a prominent Democrat, supports tort reform. A spokesman for Lieberman, Dan Gerstein, told the Wall Street Journal that the tort system “drives up costs, stifles innovation, limits products available to consumers and undercuts the competitive advantage our leading companies have.”

Conversely, Senator and former V. P. candidate John Edwards asks what happens when a child is blinded or paralyzed for life because of someone’s negligence?  “He [Bush] proposes what they get for that is $250,000.”  (Mike Allen and Amy Goldstein, Washington Post, Jul. 26).  This seems to be a sound argument but as Edwards knows, damages to cover future earnings, the costs of care, and other identifiable damages, would often amount to millions of dollars in actual damages in such a case and would be collectable even given proposed tort reform. Current tort reform is focused on only that portion of the awards which covered “non-economic” elements such as pain and suffering and punitive damages.

The fact that awards for punitive and pain-and-suffering damages are at this time calculated at two to three times actual medical costs sometimes lead to excessive use of physician and chiropractor services. Proposed legislation prevent the system’s current payment of two dollars paid out for every dollar paid by an injured party for actual damages and out-of-pocket costs, and would radically reduce attorney’s estimated $15 to $20 billion annual take from auto cases.

The arguments against further tort reform are many. Most injured parties in a tort action cannot afford to pay to prosecute a lawsuit (which can range from several thousand dollars to millions in large complex litigation cases) and therefore they may have no access to the court system given the limitations of proposed tort reform. Accordingly, lawyers have often accept these type cases on a contingency fee bases where they can earn 33% up to 45% of the settlement or verdict. Lawyers take great risk in accepting cases on a contingency fee bases. If they lose they earn nothing for their efforts. Therefore they deserve to be rewarded for both their work and incentivized for their risk.

Also, minimization of pain and suffering and punitive damage awards eliminates much of the upside for lawyer’s who, heretofore, have been willing to take such risks. To realize the downside to you, the individual, of this type tort reform, one only need find a patient who has tried to find a lawyer to take a medical malpractice case since the law changed in 2003. With the upside incentive statutorily eliminated, many lawyers have reduced or abandoned their practice in this area of law. The same could be true if tort reform creeps in to other areas of litigation.

The question for each of us to answer as a voter is whether we are willing to have a tort system that many think has been unfair and resulted in unfathomable verdicts be overhauled, knowing that we are being asked to sacrifice our individual rights to make the world a better place for business and to lessen the drain on the economy?

Hopefully, sound minds prevail and the “new” tort reform system will be constructed to create equilibrium between the overall economic benefit to the country of such reform and the need for individuals to have adequate entrée into the court system to recover reasonable damages for pain and suffering and some modicum of punitive damages for the negligence of others.

This information is not intended to be legal advice and is intended to provide general information only. Do not assume that any information contained herein applies to your specific situation without consulting an experienced attorney. Sending e-mail or requesting an initial consultation does not create an attorney client relationship.

Chuck Elsey is the senior member of Elsey & Elsey, a general practice law firm located in Flower Mound, Texas (972-906-9695). In 2006 Elsey & Elsey was voted the “Best Law Firm in Denton County” by readers of The News Connection.

The issue of urban drilling has become a political maelstrom tearing at the fiber of our peaceful community.

The Town of Flower Mound, known to have one of the strictest oil and gas drilling ordinances in north Texas, recently supported a decision by its Oil and Gas Board of Appeals standing by the Boards ruling regarding the denial of fifteen variances requested by Red Oak Gas to permit a drill site on the property now known as the “River Walk.” The decision was unanimous and the Board will defend its decision in Denton County court.

The Town’s decision on this particular application does not seem to be arbitrary given that as of May, the Town has already provided drilling permits for 21 wells on 9 separate drill site locations, most in less densely populated areas.

Passions related to urban drilling in Flower Mound run deep on both sides from the “just say no to drilling” campaign to mineral owners who feel overly restrictive Town ordinances are denying them their rights which they say constitute an undue taking of their property. Conversely, citizens who have invested significantly in their residences feel that urban drilling without tight restrictions threaten the value of their properties and the beauty of their environment. This may sound intransigent; but ask yourself how much you would pay for a home with a four acre production facility 300 feet from your backyard?

There is no doubt that the atmosphere in Flower Mound is supercharged and battle lines are being drawn around this topic.

Obviously, the issues are complex, both politically and legally. Texas was built on oil and gas and consequently there is strong case law that supports the right to extract minerals. To the confusion of many, the law is consistent in holding the mineral estate as the dominant estate, and as such, it takes precedent over the surface estate.

Many legal and energy experts opine that several area cities could face costly litigation if they don’t reconsider their seemingly recalcitrant setback rules separating homes from gas wells. Those supporting 1,000 foot setbacks cite noise reduction, safety, property values and a pristine Flower Mound as reason enough to prevent the proliferation of “sub-division” wells.

The genesis of any such litigation would be in the undue taking of property, in this case the minerals, which could result in millions of dollars of potential liability related to the value of the unrecoverable minerals. It stands to reason that if an individual owns property that has significant value and a company has invested hundreds of thousands of dollars for the right to capture that value, that city policies rendering both the minerals and the investment valueless will be challenged.

Many other cities who have been confronted with this possibility have either backed off stricter restrictions or opted to adopt less stringent rules to avoid potential litigation. With Red Oak’s filing of their appeal, Flower Mound has become the recipient of the first salvo in what could be a long and arduous battle.

Remember, this is not a lawsuit; it is an appeal of a governmental ruling. Existing legal precedent notwithstanding, there is not necessarily a clear cut favorite in this matter. In this case Red Oak has been denied fifteen separate variances related to its drilling application. If the Town’s decision was only related to offsets, it might struggle to prevail since it has received letters of support for the drilling application from the offset land owners. However, the denied variances include issues related to the floodplain, environmentally sensitive water issues, protecting upland and riparian habitat, tank battery location and right-of-way issues. Even if the Town loses in regard to the setback issues, it is possible that it could still prevail in blocking the application by being successful on only one of these remaining issues.

If litigation evolves from urban drilling it will not turn on the angst of those Town citizens who are generally in opposition. The issues are specific and differ for each location and those immediately affected by such drilling will have the loudest voice in the courtroom.

As the possible number of drillable locations diminish and as companies struggle to find a drill site that can meet Town restrictions, the outcry from both sides of this issue will grow louder. So far the Town and its Council have chosen to stick to their collective guns, choosing to fight each battle on its merits and resisting efforts to loosen restrictions to the dismay of many mineral owners.

It is a very interesting and sensitive balancing act in which our Town leaders have been burdened. Both sides have very legitimate arguments regarding the dispute over urban drilling and something to lose depending on its outcome.

It seems almost certain that with swords drawn and deep lines etched in the dirt on both sides, that in the foreseeable future the debate will rage, the newspapers will continue to follow the issue and many of us may be jamming courtrooms to discover the definitive answer.

As we are all aware the divorce rate in the United States has continued to rise. Accordingly, there are more divorced people entering into second marriages. An offshoot to this is a rise is the use of marital agreements which can address a myriad of issues as couples enter into subsequent unions and wish to establish what is to be characterized as separate (owned by the individual) or community (owned by both) property during the marriage. This written premarital agreement is more commonly known as a prenuptial agreement.

A premarital agreement is simply an agreement between prospective spouses made in contemplation of marriage to become effective at the time of the marriage.

Premarital agreements allow persons about to marry to confirm and modify the characterization of their property. Such agreements can also be used to award alimony, allocate the management of property during the marriage, designate or waive homestead interests, and provide for the choice of law to be applied in any future dispute.

Property which may be subject to a premarital agreement can be broadly defined to include any “interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” Tex. Fam. Code Ann. § 4.001(2). This far-ranging definition of property encompasses a variety of assets, including retirement benefits, stock options, leasehold interests, and unsecured debt. The following matters may be addressed in a premarital agreement:

(1) the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;

(2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;

(3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;

(4) the modification or elimination of spousal support;

(5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
(6) the ownership rights in and disposition of the death benefit from a life insurance policy;
(7) the choice of law governing the construction of the agreement; and

(8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. Tex. Fam. Code Ann. § 4.003(a).

The premarital agreement must be in writing and be signed by both parties, and the agreement is enforceable without consideration. Tex. Fam. Code Ann. § 4.002. Each party needs to have separate legal counsel in the negotiation of the terms of the agreement.

It is important to note that any right of a child to support may not be adversely affected by a premarital agreement. Tex. Fam. Code Ann. § 4.003(b). Therefore, any provision in a premarital agreement that eliminates or reduces a party’s child support obligation in the event of divorce would be unenforceable. Agreements for private education, college expenses, or cars for children might be enforceable as a contract between the parties as long as it was found to not be a “violation of public policy” if it infringes on a parent’s rights or against a child’s best interests.

The Family Code permits the parties to contract in a premarital agreement with respect to any matter listed and any other matter not in violation of public policy or any statute imposing a criminal penalty. All provisions of a premarital agreement are subject to a public policy review standard. Although never addressed by a Texas court, other states have found that agreements requiring one party to pay the other party money or property upon divorce in an amount unreasonably large or not conditioned upon further consequences to be unenforceable and void under public policy.

Parties may agree that income from separate property is the owner’s separate property. As a matter of fact, in agreements made after September 1, 2003, the partition and exchange of property, including future earnings and income arising from the property, is the separate property of the owning spouse, unless the agreement specifies that the future earnings and income will be community property.

Premarital agreements are most often used to create equity between future spouses based on their respective financial positions as they enter the marriage.

Married couples also have the option to enter into post-marital agreements, called Partition Agreements, which are similar in nature to premarital agreements and allow the parties to assign assets and liabilities as separate or community property according to the circumstances and desires of the parties.

Until the promulgation and passage of the “Mineral Interest Pooling Act of 1965” (“MIPA”) there was no specific code in Texas that addressed the consequence of a mineral owner being left out of or refusing to participate in a pooled unit. The law seemed to satisfy the rights of mineral owners seeking their way into a unit, but was a nebulous collection of words forming an amorphous blob of ambiguity as it related to a mineral owner being forced into a unit against his or her will.

In the last ten years the act was used only 41 times, none resulting in a meaningful decision on this issue by the Texas Rail Road Commission (“TRRC”), the administrative body which is designated by the state to oversee matters related to oil and gas drilling and production. That all changed August 25, 2008 based on a ruling of the TRRC in regard to an application to force pool unleased and/or unfound mineral owners into the drilling of a Barnett Shale well in Tarrant County.

Pursuant to its application, Finley Resources was unable to come to terms with or find the owners (“holdouts”) of 26 lots consisting of approximately 5.704 acres that were to be included in a 96.32 acre pooled unit to be drilled by Finley. Finley was asking the TRRC to “force pool” such interests into its pooled unit for the drilling of a new Barnett Shale well pursuant to the MIPA. As amazing as it seems given the rich history of oil and gas drilling in the Texas, this specific issue had not been administratively adjudicated by the TRRC.

The MIPA language seems plain enough on the surface as to an operator’s right to “force pool” unleased or unfound mineral interest owners, but was silent regarding the rights of such owners. Finley went through the appropriate application process, dotted its i’s and crossed its t’s and had Chesapeake Energy’s support of its application to the TRRC.

Although the issues are many and far too complex to completely address herein, to be successful in the application and approval process, the main points that Finley had to establish were that: 1. the applicant is in compliance with the process; 2. the applicant made a fair and reasonable offer to the unleased interest in the form of a lease, a farmout agreement, or participation; 3. the unleased interest refused the offers; and 4. the decision will protect the correlative rights of all the parties, prevent unnecessary drilling and basically serve the greater good. Also considered in the final decision is the risk related to the drilling of the well (“penalty risk”). This is the risk taken by the “paying” operator on behalf of the mineral owners who are “carried” in the well and can be a factor in determining if there will be any “penalty” assessed against such “carried” mineral owners interest related to the risk assumed by the operator of the well being successful.

The TRRC came down with a landmark decision in this case and, in a first time administrative decision, ruled in favor of Finley, allowing the company to “force pool” such “holdout” interest into the well and unit as participants, the cost of the well to the “forced” participant to be recovered by the operator out of the proceeds of production. Such “forced pooling” is common in other states such as Oklahoma but has never been so interpreted by the TRRC in Texas.

The TRRC held that the offers made by Finley were “fair and reasonable” (Finley had established its offers were “as good as or better” than the offers made to other mineral owners in the unit); that the “force pooled” mineral interest should receive a 20% royalty (which was the same royalty paid to other owners) and an 80% working interest proportionately reduced by the owners share of expenses. The TRRC also held that the “penalty risk” was zero because of the generally low risk of failure associated with Barnett Shale wells. Finally, the TRRC held that the decision “will serve the purposes of protecting the correlative rights and avoiding the drilling of unnecessary wells i.e., “for the greater good,” (my words).

What might this Landmark decision potentially mean to mineral owners who do not want to see drilling of any kind, whose neighbor’s have already  leased their mineral interests, ceding control to the operators,? Emboldened operators ready to take their fight to the TRRC to force unwilling mineral owners to make a decision or be “forced” to participate in the drilling of a well against their wishes. The Finley case played out in a relatively non-affluent area. In more affluent areas, where mineral owners have the wherewithal and the will to defend their position, the outcome may well be similar to the courthouse march that is beginning in regard to operator’s perceptions of overly restrictive city  permitting codes and the coming march by gas pipeline companies to condemnation hearings and potential jury trials.

Mediation has garnered tremendous momentum in Texas and nationally as an effective process in disposing of family law disputes (divorce, child custody, child support, etc.) in lieu of the more involved and more costly adversarial proceedings that wind their way through the judicial process.

Historically, the most common means of mediation has been the “caucus” mediation, which typically follows the filing of an action by an attorney on one side of the dispute. The other side answers the petition; discovery and possibly other motions ensue and often times the judge then orders the parties to mediation. A mediator is selected, who reviews the files, offers his understanding of the issues and seeks a commitment from each party that they will negotiate in good faith to resolve all outstanding issues. The mediator separates the parties and their attorneys, reviews each parties understanding of the issues and their positions and then shuttles between the separated parties in an attempt to narrow the gap between those positions. If an agreement is reached (which is not always the case) the mediator or one of the attorneys reduces the agreed upon to terms to writing, the parties execute the agreement and it is then presented to the court.

In the last several years’ mediation has moved more towards “pure form” mediation. In this process the mediator meets directly with the two parties to help them resolve their differences. This may involve multiple sessions between the mediator and the disputing parties. After each session the mediator may assign to each party tasks to perform or goals to consider prior to the next meeting. As the parties come closer together the mediator will work to close any remaining gaps and, at the time resolution is achieved, the mediator often prepares a final agreement and accompanies the parties to court for formal prove-up. Although it is not necessary to have an attorney present throughout the process, parties often retain attorneys to consult with so that they can receive independent advise on issues that are more complex or legally beyond the understanding of the party. The parties may also want to consult with their CPA during the process in regard to financial considerations and the determination of “equal value” if diverse assets are involved.

Although there are distinct advantages to “pure form” mediation and generally cost savings as well, it is always advisable to consult an attorney to get a full understanding of the process and its advantages and disadvantages. It is not the solution to every dispute and can end in “no decision” and necessitate the courthouse trip that the parties intended to avoid when they embarked on the mediation.

Uh oh! You’ve been you’ve been sued or injured (financially or personally)!

What for you ask? Possibly its a matter affecting your business, maybe a dispute with your neighbor, and all too often it’s for divorce, or over a custody issue or child support payments, but put that question aside for the moment because its time to act!

Maybe for the first time in your life you are forced to seek the counsel of an attorney. What do you do? What questions do you need to have answered? Today we will attempt to bring some order to the uncertainty and chaos that frequently surrounds the multitude of decisions with which you are now faced.

If you have been served with a lawsuit, before you do anything else, read the petition. In the petition it will state the number of days from the date of service that you have to file an answer. Your failure to answer the petition may result in a default judgment against you. You will need time to source an attorney and that attorney will need time to file an answer. You know its time to get busy but you ask yourself…..

How do I source an attorney that is right for me and my situation? As we all know the website and the phone book are chock-full of ads for attorneys but is it possible to know from the printed word which one is right for you and your situation? A better way is to ask your friends and business associates for recommendations. Call your area Chamber or other outlets that you know that are familiar with the community. Ask questions about the firm’s reputation. How are they to work with? Do they get results?

After you’ve completed your research and chosen one or more firms to visit call them and ask if they will provide a free consultation. Many firms will meet with you for a half hour or more to discuss your situation at no charge. Be sure to show up with a list of questions.

#1. How long have you been in practice and in what areas of law do you focus? Make sure that you feel comfortable that the attorney you select has the experience to effectively represent you in your unique circumstances.

#2. Who will be working on my case? This question may be more important than you think. You need the focus of an experienced lawyer. On the other hand more junior lawyers and paralegals are far less expensive. You would like the best of both worlds. Make sure that your case is being prosecuted with the highest level of competence at the most reasonable cost.

#3. What are your fees, will you require a retainer and how does that work? Fees vary based on the lawyer. Most firms (there are a few in the area that do contingency fee cases) require that you pay an upfront amount in the form of a retainer, which is held in the Trust Account of the attorney. Itemized invoices are then sent to you but billed against the retainer until it is depleted. If your case exceeds the amount of the original retainer the attorney will most likely expect you to replenish the retainer account.

#4. Are most of your cases settled or do they go to court? There is not necessarily a right answer to this question. Many cases are settled prior to litigation and that is often a good thing. It is important though that you understand that the attorney you select understands the mediation process and also knows their way around the courthouse.

#5. Do you carry malpractice insurance? Hopefully this never becomes an issue, but not all attorneys carry malpractice insurance.

#6. What are you expectations of me? Client cooperation can be critical to the success of a case. Attorneys expect that their clients will fully cooperate and make themselves available as needed. Conversely, you have the right to expect that the attorney will keep you informed and make themselves or their staff available to respond to you as well.

This information is not intended to be legal advice and is intended to provide general information only. Do not assume that any information contained herein applies to your specific situation without consulting an experienced attorney. Sending e-mail or requesting an initial consultation does not create an attorney client relationship.