» 2010 » July

Contingency Fee Cases May Increase

The U.S. Chamber of Commerce reported on July 14, 2010, that the U.S. Department of Treasury may be about to grant plaintiffs’ attorneys long-sought tax write-offs for the costs associated with fronting contingency-fee lawsuits.

As the law currently stands, attorneys outside of the Ninth Circuit who represent clients on a contingency fee basis cannot take a tax write-off for case related expenses in the year they are incurred. Since expenses on contingency cases often run into the tens or hundreds of thousands of dollars, this tax law has greatly discouraged attorneys from assisting clients who can only afford to seek justice on a contingency basis.

Legal Newsline cited a speech at the American Association for Justice, the trade association for the trial bar, in Vancouver where one of the group’s leaders told members he’s expecting a Treasury ruling on the write-offs soon.

So are the rumors true? For now, Treasury isn’t commenting. Similar situations have resulted in such rulings sooner rather than later, perhaps more so during the volatile economic times of the past several years.

Apparently at the heart of the matter is an April letter Sens. Max Baucus (D., Mont.) and Richard Durbin (D., Ill.) sent to Michael Mundaca, assistant secretary for tax policy, seeking clarity on the 9th Circuit ruling in the 1995 case of Boccardo v. Commissioner.

In the Boccardo case, the IRS asserted that out-of-pocket expenses incurred by attorneys on behalf of clients while prosecuting contingency cases are not deductible because the law firm expects reimbursement upon getting a settlement or judgment. The Tax Court agreed.

The 9th Circuit took up the matter. The letter sums up the ruling like this:

The court “held that attorneys who represent clients in contingency fee cases may treat litigation costs that are paid by the attorneys, such as filing fees and witness expenses, as deductible ordinary and necessary business expenses . . . when the attorney and client agree to a specific fee arrangement known as a gross fee contract.”

The IRS issued a memo saying that the ruling applied only to attorneys in the 9th Circuit. But the Tax Court has since recognized the validity of the decision in at least one other case, according to the letter.

Sen. Baucus introduced legislation in 2008 to allow attorneys to take an immediate deduction for attorneys’ fees in contingency cases in order to provide tax fairness. U.S. Sen. Arlen Specter tried to include a similar write-off in a 2009 tax bill. Such a write-off is extremely significant and could lead to firms taking on more cases.

Gregory D. Jordan is an Austin business attorney, Austin employment lawyer, and Austin business litigation lawyer. To learn more, visit Theaustintriallawyer.com.

Court Finds for Wrongfully Fired Employee

The Austin Court of Appeals found that an employee who was fired for refusing to illegally drive an unsafe commercial vehicle can collect punitive damages. Employment attorney Gregory D. Jordan, who represented the employee, offers pertinent comment.

A recent opinion from the Texas Court of Appeals, Third District, at Austin ruled that an employee who is fired for refusing to commit a criminal act can recover punitive damages.

Safeshred, Inc. fired Louis Martinez after he refused to drive a commercial vehicle he found to be unsafe and noncompliant with federal and state regulations. Martinez sued Safeshred, alleging he had been terminated for refusing to commit an illegal act. The initial lawsuit filed by Martinez asserted an exception to the at-will employment doctrine. After a jury trial, the trial court entered judgment awarding Martinez $7,569.18 in economic damages for lost wages and benefits, $10,000 in compensatory damages for non-economic losses, including mental anguish, and $200,000 in exemplary or punitive damages. Safeshred appealed, and the appellate court affirmed the awards of economic and exemplary damages and reversed the award of compensatory damages for non-economic losses.

“I think it’s crucial that an employee should be able to recover punitive damages if he or she is fired for refusing to commit a criminal act,” explained Austin-area employment attorney Gregory D. Jordan who represented Martinez, “That type of conduct by an employer is despicable. The Austin Court of Appeals rightly recognized the important deterrent effect of punitive damages.”

Martinez began work delivering documents for Safeshred’s sister company, Safesite, on September 25, 2007. After only three days of work, Martinez was promoted to a position driving commercial vehicles for Safeshred. At Safeshred, Martinez’s responsibilities included driving an eighteen-wheeler hauling a flatbed trailer stacked high with 18-foot long steel upright and heavy metal shelves.

On numerous occasions, Martinez reported safety violations in the condition of the flatbed trailer or in the way in which the steel uprights and shelves were secured to the flatbed trailer by his employer, but his employer consistently told him to go ahead and haul the load. The situation grew progressively worse, as Martinez was asked by Safeshred to deliver increasingly dangerous and illegal loads of uprights and shelving. When Martinez determined that it was simply too dangerous to drive one of the illegal loads, he refused to drive the truck and his employer fired him. When the employer had another person drive the truck, the 18-foot long steel uprights and metal shelves broke loose and crashed through the rear window of the cab. Amazingly, no one was killed.

Gregory D. Jordan is an Austin business attorney, Austin employment lawyer, and Austin business litigation lawyer. To learn more, visit Theaustintriallawyer.com.

Update on Non-Compete Agreements in Texas

It’s been almost four years since the Texas Supreme Court decided the landmark non-compete case of Sheshunoff v. Johnson and almost two years since it reached a decision in Mann Frankfort Stein v. Fielding. The battle over non-compete agreements in Texas rages on. Austin business litigation lawyer and employment lawyer Gregory D. Jordan offers some insights into the cases.

The important non-compete cases of Sheshunoff v. Johnson and Mann Frankfort Stein v. Fielding have come and gone. Even though the Texas Supreme Court articulated new standards in these cases for determining whether a non-compete agreement is enforceable, there’s still a great deal of rancor and disagreement over non-compete agreements in Texas. Why?

The short answer seems fairly straightforward. Although a non-compete agreement can protect one’s business, it can just as easily destroy another’s livelihood. “When a company’s survival may depend on enforcing a non-compete, but that same non-compete may effectively kill a former employee’s ability to earn a good living, disagreements are bound to occur,” says Austin, Texas-based business litigation attorney and employment lawyer Gregory D. Jordan. “If you are considering signing a non-compete agreement, or if you are involved in a dispute over a non-compete, you need a good lawyer.”

A pertinent issue about non-compete agreements is their enforceability. “Whether a non-compete is enforceable is often a question of whether the consideration for the non-compete is legally appropriate,” Jordan says.

The Sheshunoff case revisited the court’s 1994 decision in Light v. Centel Cellular Co., and overturned years of established law in Texas. The Court held that a non-compete agreement with an at-will employee could be enforceable if the employer promised to provide confidential information to the employee at some time in the future. The Mann Frankfort Stein case, on November 13, 2008, extended that holding to say that the promise from the employer could be implied. “It did not have to be in writing or even spoken,” Jordan says.

The ongoing disputes over non-competes tend to focus on two areas: (1) is the agreement enforceable and (2) are the restrictions reasonable. There have been dozens of appellate cases dealing with non-competes decided since Sheshunoff, and there are more and more creative arguments being raised on each of these issues.

“The bottom line,” Jordan says, is that “non-competes in Texas continue to be an evolving area of law. It will be very interesting to see how the courts will address all of the new arguments that are being raised to attempt to enforce these agreements or to invalidate them.”

To learn more visit, http://www.theaustintriallawyer.com.

Selecting an Attorney for a Wrongful Termination Claim in Texas

If you are an employee or an employer involved with a wrongful termination claim, a wise course of action is to consult with an experienced and knowledgeable wrongful termination lawyer practicing in Texas.

The state of Texas is an “employment at will” state which gives an employee the right to resign at any time for any reason, while an employer can terminate an employee at any time for any lawful reason. When an employee is terminated for any unlawful reason, this is often called a “wrongful termination.” There are a myriad of reasons why a termination could be considered a wrongful termination. Whether you are an employer or an employee, it is in your best interest to consult with a lawyer who is experienced and knowledgeable about Texas wrongful termination law if an employment termination has occurred or is being considered.

Some examples of a wrongful termination are when an employer fires an employee in breach of an employment contract, the firing is motivated by illegal discrimination, it is done in retaliation for filing a workers’ compensation claim, or the firing is intended as retaliation against a whistleblower or an employee who has refused to perform an illegal act.

Because of the complexity of employment laws, if you are an employer who is considering terminating an employee, having a wrongful termination attorney review any matters that may cause you concern, as well as make educated recommendations to minimize potential litigation, can be a prudent and necessary step. Consulting with a law firm that knows how to conduct internal workplace investigations if a complaint has been made or a problem is suspected, can also make life easier for you.

An unfortunate truth is that not all employers comply with all state and federal employment laws. Being wrongfully terminated can be devastating to one’s life and finances. If you believe that you have been wrongfully terminated, seek out a knowledgeable, experienced and successful wrongful termination attorney who can explain these laws to you, advise you as to whether your employer has engaged in illegal conduct against you, inform you of your rights and options, intercede with your employer when appropriate, represent you before the Texas Workforce Commission or Equal Employment Opportunity Commission, and aggressively prosecute your lawsuit if your case can’t be reasonably settled.

Whether you are the employer who has the task of terminating an employee or if you are the employee who has been terminated, seek qualified legal counsel in your area to know your rights.

Gregory D. Jordan is an Austin business attorney, Austin employment lawyer, and Austin business litigation lawyer. To learn more, visit Theaustintriallawyer.com.

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