Blog | The Law Offices of Gregory D. Jordan

Texas Court Rules in Subcontractor’s Favor in Prompt Payment Act Claim

The Prompt Payment Act is a federal law that was passed to ensure the timely payment to all tiers of contractors who work on federally funded construction projects. The Act accomplishes this by providing a timeline of when payments will be released to the prime contractor, subcontractors, and suppliers. The State of Texas has its own version of the Prompt Payment Act that applies to state-funded construction projects.

Recently a state appellate court issued an opinion in a Texas construction payment dispute case under the Prompt Payment Act. The lawsuit arose when a window company, a subcontractor, installed windows on a hotel construction project at the request of the general contractor. The two companies entered into an agreement outlining the terms of the project, as well as how payment would be made.

As the project got underway, the owner of the hotel contacted the general contractor, concerned that the construction was not going according to schedule. As a result, the owner of the hotel began to withhold payment to the general contractor. Eventually, the general contractor submitted a bill to the hotel owner, including an amount for the windows that were installed by the subcontractor. However, while the hotel owner paid most of the amount due, it withheld a certain sum that was designated for the general contractor’s “overhead and profit.” Rather than take the potential loss itself, the general contractor kept the money and only paid select subcontractors. The window company was not paid by the general contractor. Eventually, after finding out what the general contractor had done, the hotel owner terminated the general contractor for cause.

The hotel owner then sued the general contractor, and the window company intervened in that lawsuit, claiming breach of contract, violation of the Prompt Payment Act, quantum meruit, breach of fiduciary duty, violation of the Construction Trust Fund Act, and unjust enrichment. The general contractor responded by explaining that the hotel owner did not pay the general contractor, and that it was permissible to pass this loss on to the subcontractor.

The trial court heard and granted the subcontractor’s motion for summary judgment, and awarded the subcontractor the amount it was due.

The Court’s Analysis

The court began its analysis by citing the language from the Prompt Payment Act, which provides:

A contractor who receives a payment from the owner . . . in connection with a contract to improve real property shall pay each of its subcontractors the portion of the owner’s payment, including interest, if any, that is attributable to work properly performed or materials suitably stored or specially fabricated as provided under the contract by that subcontractor, to the extent of that subcontractor’s interest in the owner’s payment. The payment . . . must be made not later than the seventh day after the date the contractor receives the owner’s payment.

The court went on to explain that the only exception to this requirement arises when there is a “good faith dispute concerning the obligation to pay or the amount of payment.”

The court then noted that, to prove its claim under the Prompt Payment Act, the subcontractor needed to show that the general contractor received payment from the hotel owner that was attributable to the work performed by the subcontractor. The general contractor argued that, because some of the windows were installed after the hotel owner started to withhold payment to the general contractor, the hotel owner was responsible for paying the subcontractor. However, as the court pointed out, the agreement between the general contractor and subcontractor provided that the general contractor would pay the subcontractor, not the owner of the hotel.

Ultimately, the court agreed that the subcontractor was entitled to payment from the general contractor, pursuant to their agreement. In so holding the court rejected the general contractor’s argument under the Construction Trust Fund Act. The Construction Trust Fund Act provides that:

It is an affirmative defense to prosecution or other action brought under section 162.031(a) that the trust funds not paid to the beneficiaries of the trust were used by the trustee to pay the trustee’s actual expenses directly related to the construction or repair of the improvement or have been retained by the trustee, after notice to the beneficiary who has made a request for payment, as a result of the trustee’s reasonable belief that the beneficiary is not entitled to such funds or have been retained as authorized or required by statute.

In reaching this conclusion, the court noted that the subcontractor was not a beneficiary to the Construction Trust, and that the Act did not apply.

Is Your Business Dealing with a Complex Texas Contract Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin contract dispute or business litigation attorney to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 30 years of experience helping all types of businesses deal with the full range of legal issues they confront, including breach of contract claims and business fraud cases. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

COVID-19 and How It May Impact the Rights of Texas Employers and Employees

The COVID-19 pandemic has dramatically impacted our country since arriving on United States soil. City, county, state and federal lawmakers have scrambled to keep up with the rapid spread of the virus. In Texas, Governor Abbott signed a state-wide stay-at-home order, requiring the closure of schools, non-essential businesses and many government offices. Cities and counties have issued their own orders, and Governor Abbott has revised and amended his orders. These actions have created many concerns regarding Texas employment law.

Business owners and employees face different, yet equally serious, concerns about how the novel coronavirus and the state’s response to it will affect them. Lawmakers have stepped in to address some of these concerns.

The Families First Coronavirus Response Act

One of the most important new laws that Texas employers and employees should familiarize themselves with is the Families First Coronavirus Response Act (Families First Act). The Families First Act requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. The amount of leave employers that are covered by the Act must provide is dependent on the reason for the requested leave:

Two weeks of paid sick leave at an employee’s regular rate of pay must be provided to:

  • Employees who are unable to work because they are quarantined pursuant to state, federal or local orders, or have been ordered to do so by a healthcare professional; or
  • Employees who are experiencing symptoms of COVID-19 and are seeking a medical diagnosis.

Two weeks of paid sick leave at two-thirds of an employee’s regular rate of pay must be provided to:

  • Employees who need to take time to care for an individual who is in quarantine;
  • Employees who need time to care for a child whose school is closed due to concerns surrounding COVID-19; or
  • Employees who are experiencing a substantially similar condition.

Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds of an employee’s regular wage must be provided to:

  • Employees who have been with the organization for 30 or more days and are unable to work because they must care for a child whose school or childcare provider is closed due to the COVID-19 pandemic.

The Act covers the period between April 1, 2020 and December 31, 2020 and only applies to covered employers. The Act defines a covered employer as:

  • Public employers, and
  • Private employers with fewer than 500 employees.

Notably, small businesses with fewer than 50 employees may be exempt from the Families First Act’s provision regarding paid leave for an employee’s child-care needs, if providing such leave would jeopardize the business’ continued viability. Additionally, all employees, regardless of the amount of time they have been employed with an organization, are eligible for the two weeks of paid sick leave. However, only employees who have worked for the organization for more than 30 days are eligible for the 10 weeks of expanded family and medical leave.

The Act also imposes limits on the total amount employers are required to pay. For example, employees who cannot work because they are quarantined can receive a maximum of $511 per day, or a total of $5,110. Employees who take leave to care for a child are eligible for a maximum of $200 per day, or $2,000 in total.

To be sure, the interplay between the Families First Act and the Family and Medical Leave Act (FMLA) can be complicated, and employers or employees who have questions about the required amount of leave should reach out to a dedicated Austin employment lawyer for immediate assistance.

Contact a Travis County Employment Attorney

If you have concerns about your rights, either as an employee or as an employer, contact the Law Offices of Gregory D. Jordan. Attorney Jordan is a veteran Texas employment attorney with over 30 years of experience representing both employees and employers in a diverse range of employment matters. He commands an in-depth understanding of various state and federal employment laws, and is ready to put this advanced knowledge to use in your case. To learn more, and to schedule a consultation today, call 512-419-0684 today.

Texas Court Discusses the Formation of a Texas Contract Through Email

In Texas, a contract can be something as simple as an agreement between two parties that is supported by consideration. Notably, not all contracts need to be written to be enforceable. However, before a court determines that a contract is enforceable, the party in favor of the contract must show that there was, indeed, an agreement between the parties. In contract law, this is referred to as a “meeting of the minds.”

Recently, a state appellate court issued a written opinion in a case involving a Texas contract dispute illustrating how courts analyze agreements. The specifics of the purported agreement are not particularly relevant to the court’s discussion. Essentially, a group of sellers, the defendants, agreed to develop and eventually sell a group of assets worth hundreds of millions of dollars. The sellers moved forward with development and, when it came time to sell the assets, enlisted the assistance of a third-party.

The third-party solicited bids from several potential buyers. The plaintiff was one of the high bidders. The parties exchanged several emails back and forth. Eventually, the plaintiff sent a counter offer with the following email:

We will not be modifying or accepting any changes to the base deal described above and don’t want to be jerked around anymore. We will give you till 5:00 pm CST tomorrow to accept. Best we can do and you hopefully understand I have recommended to my Board to pass if the timeline is not met or a counter proposal is sent.

An agent for the sellers responded that they are ready to “move forward” with the sale. However, before the contract was drawn up, another bidder revised their offer, making it more favorable to the sellers. The sellers then accepted the other buyer’s offer and the plaintiff filed a breach-of-contract claim against the sellers.

The case ultimately came down to whether a contract was formed through email. If so, then the sellers were committed to selling the assets to the plaintiff. However, if a contract had not formed by the time the sellers accepted the other bidder’s offer, then the sellers were under no obligation to the plaintiff.

The court determined that no contract existed, and that the sellers were free to accept the other bidder’s offer. The court explained that, in general, parties are free to write contracts however they see fit. Included in this freedom of contract, is the ability to insert language into negotiations explaining when a contract comes into existence. Here, the sellers included the following language in the Confidentiality Agreement that they sent out to all prospective buyers:

The Parties hereto understand that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof.

The court explained that this “no obligation” clause required a definitive agreement before a legally enforceable contract could be formed. The court then held that the emails between the parties did not constitute a definitive agreement.

In concluding that the emails were not a definitive agreement, the court explained that the emails resembled a preliminary agreement in that they represented a “precontractual understanding in which two commercial parties allocate their contributions to an undertaking but do not specify all the important terms of the deal.” The court noted that a definitive agreement requires a “final solution” that is “authoritative and apparently exhaustive.”

The court explained that the emails contemplated the need for an upcoming formal agreement. In fact, the court pointed out that the emails even referenced a purchase and sale agreement. In addition, the court found that a contract was not created merely by laying out the “assets to be sold, the purchase price, a closing day, and other key provisions.” The court explained that the emails “left much to the imagination” and that there were still key areas that needed to be negotiated.

Is Your Business Dealing with a Complex Texas Contract Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin contract dispute attorney to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 30 years of experience helping all types of businesses deal with the full range of legal issues they confront, including breach of contract claims and business fraud cases. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Texas Federal Court Addresses Pregnancy Discrimination Claim

Early February, a federal court issued a written opinion in a Texas employment discrimination lawsuit. The case involved an employee’s allegations that her employer illegally discriminated against her based on her pregnancy, as well as her pregnancy-related disabilities. The woman brought several claims. This case arose when the defendant employer filed a motion for summary judgment, asking the court to dismiss each of the employee’s claims. The court discussed two important issues in its opinion.

First, the court addressed the timeliness of the employee’s claim with the Texas Workforce Commission (TWC). Under Texas law and unless the deadline is deferred, employees who believe that they have been subjected to illegal employment discrimination must file a claim with the Texas Workforce Commission within 180 days. Under recent Supreme Court case law, this requirement is not a jurisdictional one, meaning that non-compliance will not bar a court from hearing a claim. However, the charge-filing requirement is still a mandatory pre-requisite, and can limit the amount of time that a court can consider an employer’s allegedly discriminatory conduct.

As a matter of general procedure, once filed, the Texas Workforce Commission will review the employee’s claim to ensure that it meets all the necessary criteria and, if it does, then provide a “charge of discrimination” form to the employee for her to sign. Once the charge of discrimination form is signed, the TWC will investigate the employee’s claim, sometimes in conjunction with the Equal Employment Opportunity Commission.

The TWC or EEOC can later issue a right to sue letter, and the employee can then file a claim in court. In some rare cases, the EEOC or TWC will sue on an employee’s behalf.

According to the court’s opinion, the employee first noticed that she was being discriminated against in April or May of 2017. The court did not discuss the exact details of the employer’s allegedly discriminatory actions; however, the employee filed a claim with the Texas Workforce Commission on March 20, 2018. Thus, the court noted that it was only able to consider conduct occurring in the 180 days before the complaint was filed. The court explained that there is a possible exception to the 180-day filing requirement when an employer is engaged in continuing violations. However, the employee, in this case, did not allege continuing violations. Thus, although the employee claimed that she was discriminated against starting in April or May of 2017, because she did not file a claim with the TWC until September, the court could only consider potentially discriminatory conduct that occurred on or after September 21, 2017 (180 days before the filing date of March 20, 2018).

Next, the court considered the employee’s claim that her employer interfered with her right to take leave under the Family and Medical Leave Act (FMLA). The FMLA provides employees of certain companies with the right to take leave under certain conditions, including childbirth or a serious health condition. Employers cannot interfere with this right or retaliate against an employee for taking leave under the FMLA. However, employers can terminate an employee for a valid reason, even if they have already arranged to take FMLA leave in the near future. Additionally, an employee who obtained her requested leave cannot file an FMLA interference claim, as she got what it is that she was seeking. However, arguably, any adverse employment action stemming from an employee’s decision to take leave could be considered retaliation if properly plead.

Here, the court noted that the employee asked for, and took, a portion of her FMLA leave. After returning from an initial leave, but before going back on leave in December of 2017, the employee was terminated. Resultingly, the court held that the employee was not able to bring an interference claim as to the portion of her leave that she was able to take. However, the court did allow for the employee to continue with her claim of interference for the unused portion of her leave.

The above discussion illustrates a few of the complex issues that can arise in a Texas employment discrimination case. It is important to keep in mind that, while the case discussed a few of the employee’s claims against her employer, several other claims were not mentioned in the opinion.

Contact a dedicated Austin employment discrimination attorney

At the Law Offices of Gregory D. Jordan, Attorney Jordan represents both employers and employees in all types of Texas employment lawsuits and arbitration matters. Attorney Jordan has over 30 years of relevant experience assisting businesses and employees in Travis County and throughout Central Texas. Contact the Law Offices of Gregory D. Jordan at https://www.theaustintriallawyer.com/.

Texas Lawmakers Pass Law to Curtail Common Oil and Gas Scam Tactic

To some extent, the history of Texas is closely tied to the state’s historically ample supply of oil and gas. Texas has been at the forefront when it comes to establishing oil and gas laws throughout the country. Unfortunately, due to the value of the commodity, over the years, enterprising scammers have come up with ways to bilk unsuspecting landowners of their mineral rights. Earlier last year, Texas lawmakers passed HB 3838, which was designed to stop one of the more common Texas oil and gas scams.

The scam worked like this: someone posing to be an employee of a reputable oil and gas operator approaches a landowner who is receiving nonparticipating royalties with what looks to be an “oil and gas lease.” The document looks and reads as though it is a typical lease for mineral interests; however, it is an agreement by which the landowner sells their interest in the land for what is termed a “bonus.” While this should be a red flag because nonparticipating royalty holders are not technically permitted to sign a lease — few owners are aware of this fact, and scam artists have been able to take advantage of this.

To help curb this dishonest practice, Texas lawmakers recently passed HB 3838. The bill was signed into law by Governor Abbott last year in June and took effect in September. It is currently codified at Texas Property Code Section 5.152, and it clarifies what language an oil and gas royalty lease must contain to be valid. The new law applies to contracts that convey mineral or royalty interests but are presented to the owner in the form of a document that “is titled an oil and gas lease or an oil and gas royalty lease.” Under the terms of the new law, for such a document to be valid, it must contain the following language in size 14 font, at the top of the document’s first page: THIS IS NOT AN OIL AND GAS LEASE. YOU ARE SELLING ALL OR A PORTION OF YOUR MINERAL OR ROYALTY INTERESTS IN (DESCRIPTION OF PROPERTY BEING CONVEYED). In addition, the same language must be displayed immediately above the signature line of the agreement. If this language is not included in an agreement, the contact will be deemed void.

As noted above, the new law went into effect in September 2019. That said, those who have been bilked prior to the passage of the new law may have other remedies available to them. However, aggrieved right holders need to act quickly to preserve all of their rights as the statutes of limitations that govern these disputes are relatively short.

Are you involved in a Texas oil and gas dispute?

If you believe that you have been the victim of a Texas oil and gas scam, contact Austin oil and gas attorney Gregory D. Jordan for immediate assistance. Choosing an attorney to represent you or your business in a Texas oil and gas dispute is a crucial decision that can save months or even years of litigation, and many thousands of dollars. At the Law Offices of Gregory D. Jordan, Mr. Jordan has been effectively handling Texas oil and gas cases for over 30 years.

Texas Court Holds Plaintiff Failed to “Pierce the Corporate Veil” of Employer 

One of the primary factors business owners consider when choosing how to set up their company is how each type of structure will impact their personal liability, should the business fail, or incur sizable debt during its operation. Historically, there have been three main types of business organization structures: sole proprietorship, partnership and corporation. Sole proprietorships and partnerships generally do not protect business owners’ personal assets. On the other hand, limited partnerships and corporations can protect businessowners’ individual assets, limiting liability to their ownership of the business. It was not until more recently that business owners had the choice to set up their business as a Limited Liability Company (LLC), which also can protect a business owner’s individual assets.

While corporations, limited partnerships and LLCs all provide for the protection of a business owner’s individual assets, that protection is not absolute. In a recent Texas employment dispute, an employee argued that his employer’s misconduct should allow him to pierce the corporate veil and hold the business owners personally liable.

According to the court’s opinion, an employee was working in an at-will position with a sign company. One day, the employee was seriously injured while working on a job. His employer did not subscribe to the Texas Workers’ Compensation program, so the injured employee was unable to obtain workers’ compensation benefits. The employee, however, filed a claim against the business and two of the business’ owners, claiming that the two owners were “the alter ego” of the sign company and also because the sign company was “a sham entity used to perpetrate a fraud.” In a brief opinion, the trial court dismissed the employee’s claim without providing a reason. The employee appealed to a higher court.

On appeal, the employee argued that the lower court should have held that the business owners’ conduct pierced the corporate veil. The court began by noting that, in general, “a corporation is presumed to be a separate entity from its officers and Shareholders.” However, a court may ignore this protection if a plaintiff can establish one of at least three situations:

  1. The corporation is an alter ego of its shareholders;
  2. The corporation is being used for an illegal purpose; or
  3. The corporation is being used as a sham to perpetrate a fraud.

Here, the court noted, that the only claim raised by the employee was that the business owners were alter egos of the sign company. The court explained that there is a general reluctance for courts to allow a corporate veil to be pierced, and that it is reserved for “exceptional circumstances.” When it comes to piercing the corporate veil on the basis of the business being the alter ego of the shareholders, courts consider whether 1) the corporation is being used as a mere conduit for another, 2) there is such “unity between corporation and individual that the separateness of the corporation has ceased” and 3) holding that only the corporation was liable would result in an injustice.  

The court went on to explain that certain facts may support a finding that a business is an alter ego of its owners, including:

  • A failure to keep the assets of the business separate from those of the business owner;
  • Inadequate capitalization;
  • The use of company profits for personal reasons;
  • Any representations that the business owner will financially back the corporation; and
  • The payment of corporate debts with personal checks, or other evidence that business owners commingled personal and business funds.

Here, the court weighed each of the factors and determined that the employee did not present sufficient evidence to pierce the corporate veil. Specifically, the court considered that there was no evidence that the business owners paid corporate debts with personal funds, comingled business and personal funds, made any representation that they would financially back the business, or used the business profits for personal use. Thus, the court rejected the employee’s claim against the business owners.

Is Your Texas Business Dealing with a Complex Legal Issue?

When success matters, every decision you make for your business is essential. Choosing which Austin business litigation firm to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 30 years of experience helping all types of businesses deal with the full range of legal issues they confront, including breach of contract claims, and business fraud cases. We can confidently handle many problems your business may be facing. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Texas employees who are pregnant or recently returning from maternity leave are protected from employment discrimination

In 1964, the United States Congress passed the Civil Rights Act. The Civil Rights Act was a landmark piece of legislation that ended segregation of public places and banned discrimination based on the basis of race, color, religion, sex or national origin. The Civil Rights Act did much to combat the discrimination that was common throughout the United States at the time. However, as years passed, it became clear that the Act was not as comprehensive as lawmakers may have hoped or believed.

In the wake of the Civil Rights Act, women were still being made the victim of discrimination. This is at least partly because the Civil Rights Act protected female employees only on the basis that they were women. Thus, soon after the passage of the Civil Rights Act, courts held that an employer could legally base an employment decision on whether an employee was pregnant.

The seminal Supreme Court decision came down in 1974, and involved the availability of medical benefits. In that case, a public employer refused to cover the costs of health benefits for pregnant women. The court held that an employer who uses an employee’s pregnancy status as a basis for an employment decision is not making a decision based on a woman’s sex, and is not prohibited.

In 1978, however, the United States Congress passed the Pregnancy Discrimination Act, which amended the Civil Rights Act of 1964. Quite simply, the Act prohibited employers from discriminating based on pregnancy. The Act clarified language in the Civil Rights Act, noting that the terms “because of sex” or “on the basis of sex” include, “because of or on the basis of pregnancy, childbirth, or related medical conditions.” The Act goes on to mandate that women who are affected by a pregnancy, childbirth or related medical conditions shall be treated the same for all employment-related purposes.

According to a recent article by the New York Times, despite the passage of the Pregnancy Discrimination Act, women are still experiencing discrimination in the workplace. Indeed, studies have shown that a woman’s pay is reduced, on average, four percent for each child they have, whereas a man’s pay increases by six percent when he becomes a father.

The article notes that the number of pregnancy discrimination claims filed with the Equal Employment Opportunity Commission has been steadily increasing for 20 years, and is near an all-time high. Claims of pregnancy discrimination are not limited to the private sector, as many of the claims were brought by women working for the state, local and federal governments.

The article notes that, as soon as a woman starts to show physical signs of pregnancy, employers begin to view a woman differently. The piece details the career of a particularly successful trader who was praised as being at the top of her field until she announced that she was pregnant. Shortly after sharing the news with her boss, she was told that her decision to get pregnant would “plateau” her career. Despite arranging her schedule to ensure that family would not interfere with her work obligations, the employee has been passed over for every promotion and received only cost-of-living salary increases when many of her colleagues were given more significant increases.

Unfortunately, this woman’s case is not unique. Some less than honorable employers routinely engage in sex discrimination. And the problems do not stop once the baby arrives. New mothers also frequently experience discrimination when returning to the workplace, either on the basis of having been recently pregnant or based on their new status as a mother. Mothers returning from maternity leave often face assumptions that their work is no longer their top priority. However, when employers act on this assumption without any evidence to support a decreased commitment to the job, they may be engaging in discrimination based on familial status.

As is often the case with most types of discrimination, pregnancy discrimination is commonly based on outdated beliefs and stereotypes. However, some truly well-intentioned employers can still go awry based on a lack of understanding of the applicable laws. Employers should be sure to have a firm understanding of the Family Medical Leave Act, short- and long-term disability, and the requirements of the Pregnancy Discrimination Act to ensure that they do not inadvertently discriminate on the basis of an employee’s sex. Employees who believe that they may have been the victim of pregnancy discrimination should consult with a dedicated Austin employment law attorney for assistance.

Contact a dedicated Austin employment discrimination attorney

At the Law Offices of Gregory D. Jordan, Attorney Jordan represents both employers and employees in all types of Texas employment lawsuits and arbitration matters. Attorney Jordan has over 25 years of relevant experience assisting businesses and employees in Travis County and throughout Central Texas. Contact the Law Offices of Gregory D. Jordan at https://www.theaustintriallawyer.com/.

Texas court rejects drilling company’s claim against co-lessee for its share of the profits

Earlier this year, the Court of Appeal for the Eighth District of Texas in El Paso issued an opinion in a Texas oil and gas case discussing whether the plaintiff company was entitled to an accounting for its share of the profits from a majority-interest co-tenant. Ultimately, the court concluded that the plaintiff company’s lease had expired, eliminating any right the company had to an accounting of the profits.

The facts of the case

According to the court’s written opinion, the plaintiff company leased a one-sixth interest in a tract of land in Ward County, Texas. Another oil and gas company, the defendant, leased the remaining five-sixths of the property. The plaintiff’s lease provided for a five-year term that was “paid-up,” plus an optional second term that was to continue “as long thereafter as oil or gas is produced from said land or from land with which said land is pooled.”

The plaintiff company requested permission from the defendant to drill wells on the property. However, as the primary lessee, the defendant was able to preclude the plaintiff from drilling by withholding permission. Thus, during the initial five-year period of the lease, the plaintiff did not drill a well or produce any oil. During that time, however, the defendant company drilled several productive wells. The plaintiff was paid a portion of these profits during the initial five-year period of the lease.

When that five-year period ended, however, the defendant stopped making payments to the plaintiff. The defendant’s position was that the plaintiff’s primary lease term was over, and because the plaintiff never produced oil or gas from the land, the lease was no longer valid. The trial court agreed with the defendant and dismissed the case, and the plaintiff appealed.

The court affirms the dismissal of the plaintiff’s case

On appeal, the Court of Appeal for the Eighth District affirmed the dismissal of the plaintiff’s lawsuit. The focus of the court’s inquiry was on whether the plaintiff’s lease was still valid. If so, then the plaintiff would still be entitled to an accounting of any profits generated from the property. However, if the plaintiff’s lease had expired, then the defendant had no obligation to provide an accounting.

The plaintiff presented several arguments in favor of a finding that the lease was valid. Most importantly, the plaintiff argued that the lease was unclear, and that the defendant’s production of oil on the land could satisfy the continuation clause in the plaintiff’s lease. Essentially, the plaintiff argued oil was produced (by the defendant), and that the contract did not state whether the plaintiff had to be the one to produce it. The court disagreed, noting that notwithstanding the language in the lease, Texas courts have held such clauses to require the lessee to cause production in order to meet the continuation clause requirements. The court also noted that this interpretation was consistent with the intentions of the parties at the time the lease was formed, because the landowner would not likely have bothered leasing to the plaintiff if it planned on making no effort to extract oil or gas.

The court was similarly unpersuaded by the plaintiff’s policy argument that the court’s decision in favor of the defendant will negatively impact minority interest holders. By allowing the defendant to prevent the plaintiff from producing oil, the plaintiff claimed that the defendant effectively forced the termination of the plaintiff’s lease. The plaintiff argued that this was unfair, and would discourage others from obtaining minority interest rights in the future. The court dismissed the plaintiff’s argument, explaining that the parties were co-lessees and had no duty to each other. The court added that, presumably, the plaintiff knew of its rights when it entered into the minority-interest lease.

Are you involved in a Texas oil and gas dispute?

Oil and gas disputes can be very complicated. Choosing an attorney to represent you or your business is a crucial decision that can save months or even years of litigation, and tens of thousands of dollars. At the Law Offices of Gregory D. Jordan, we have been effectively handling Texas oil and gas cases for over 25 years. To learn more, and to schedule an initial consultation, call 512-419-0684. You can also contact us online.

Texas appellate court hears business dispute centering on tortious interference and misappropriation claims

Last month, a state appellate court issued an opinion in a Texas tortious interference case discussing whether the defendant corporation improperly “poached” workers whom the plaintiff corporation had “located and groomed.” Ultimately, the appellate court concluded that the defendant corporation was entitled to summary judgment on each of the plaintiff’s claims, affirming the dismissal of the case. 

The facts of the case

According to the court’s opinion, both plaintiff and defendant corporations are in the business of supplying offshore labor to energy companies. The plaintiff had a contract with two other companies in which one company would provide the plaintiff with laborers that the plaintiff would then place with one of its energy clients. In effect, the plaintiff corporation was the middleman in the staffing transaction. 

On December 15, 2015, the plaintiff’s client gave notice to the plaintiff that it would no longer continue to use the plaintiff’s services, because it needed a lower-cost option. After several months of discussion between the defendant corporation, the labor supplier and the plaintiff’s former client, the defendant was invited to submit a bid for the client’s business. The defendant corporation did so, and ultimately secured the client’s business. The agreement provided that the defendant would supply the same laborers that had previously been provided by the plaintiff corporation. The plaintiff corporation filed a lawsuit against the defendant alleging that the defendant engaged in tortious interference with its contracts between the labor supplier and its client. 

The trial court granted the defendant’s motion for summary judgment, noting that the plaintiff’s case was contingent on proving that the defendant misappropriated workers from the plaintiff. However, the court pointed out that the theory of misappropriation had not been applied to people, explaining “had the workers in question been employed by the plaintiff they could not have been prevented from going to work for defendants or anyone else. Why, then, where the plaintiff does not employ the workers in question, could plaintiff prevent them going to work for Defendants or anyone else?” The plaintiff appealed. 

The appellate court affirms the lower court’s decision

The court began its analysis by noting that a defendant bringing a motion for summary judgment must show “that no genuine issues of material fact exist on at least one essential element of the cause of action asserted against it and that it is entitled to judgment as a matter of law.”

To establish a claim of misappropriation, or unfair competition, the court explained that a plaintiff must establish three elements:

  • The plaintiff created a product through extensive time, labor, skill and money;
  • The defendant used that product in competition against the plaintiff, gaining a special advantage because the defendant did not have to incur the expense to develop the product; and
  • The plaintiff suffered commercial damage as a result.

The plaintiff’s claim centered on a finding that its system of locating, hiring, training and getting offshore laborers to domestic corporations constitutes a “work product.” In support of its claim, the plaintiff argued that the “institutional knowledge that it developed over time and used to craft this pool of labor,” and its “ability to navigate the international customs issues involved” constitute work product.

The court rejected the plaintiff’s claim. Initially, the court noted that knowledge, training and expertise, are not typically considered work product. The court went on to explain that the training and certification provided by the plaintiff were similarly not work product. These assets, the court held, could not be separated from the laborers themselves, once they were imparted. The court also noted that the contract the plaintiff relied on to establish its claim clearly states that the employees themselves were to remain employees of the labor-supplying corporation, meaning that they never “belonged” to the plaintiff.  

The court went on to affirm the denial of the plaintiff’s remaining claims, finding that the plaintiff’s evidence was insufficient to establish a claim of tortious interference. In so holding, the court noted that the contract between the plaintiff and its client was not in effect at the time when the defendant engaged the client, and that the plaintiff could not point to any evidence that the defendant induced the labor-supplying corporation to terminate its contract with the plaintiff.

Texas appellate court rejects employee’s claim of age discrimination, affirming arbitrator’s award in favor of employer

On July 30, 2019, the Texas Court of Appeals for the Eighth District issued a written opinion in a Texas employment discrimination lawsuit discussing whether an arbitrator correctly determined that the employee’s claim was not filed on time. The case is important for Texas employees and employers because it illustrates the need to act in a timely manner, and the deference that courts give to arbitrators’ decisions.

According to the court’s opinion, the plaintiff was hired as a trainer for Xerox in 2009. In 2016, the plaintiff was laid off. The plaintiff filed an age discrimination claim against Xerox, claiming that younger trainers with less seniority were not laid off. He also claimed that, during his tenure with the company, younger workers were given pay raises, while he was not.

The plaintiff initially filed a claim with the Equal Employment Opportunity Commission (EEOC) and the Texas Workforce Commission. On November 3, 2016, the EEOC provided the plaintiff with a right to sue letter, and the next day, the plaintiff filed a lawsuit. Xerox responded by seeking to compel arbitration of the claim under the company’s “Dispute Resolution Procedure,” (DRP) which required all claims that were not informally resolved to be handled through arbitration.

First, the parties argued over whether the plaintiff was required to arbitrate his claim. However, on May 5, 2017, the plaintiff withdrew his case and submitted his claim to an arbitrator of his choice. Xerox, however, objected to the plaintiff’s choice of arbitrator, arguing that the DRP specified the arbitrators that must hear claims against the company. Finally, on August 16, 2017, the plaintiff submitted his case to one of the arbitrators in the DRP.

The DRP provided that a plaintiff who files a claim for arbitration must bring a claim “within the time allowed by applicable law.” If a plaintiff files a case in court rather than proceeding directly to arbitration, the plaintiff must file within “ninety days after the date a party is ordered by the court to arbitration … or ninety days after the date the parties agree to submit the dispute to arbitration under the DRP.” Additionally, under the Texas Labor Code, the plaintiff had to file his claim within 60 days of receiving the right to sue letter from the EEOC.

Xerox claimed that the plaintiff filed his claim too late. The plaintiff argued that he filed his initial complaint with his chosen arbitrator within 60 days of receiving the right to sue letter. However, Xerox argued that by withdrawing his case, the plaintiff “wiped the slate clean” because there was no longer an active case to base the 60-day time period. Additionally, there was never a court order or agreement to arbitrate the claim, making the 90-day time limits mentioned above inapplicable. Thus, Xerox argued that the plaintiff was required to file his claim within 60 days of November 3, 2016, the day he received the right to sue letter. Xerox argued that the plaintiff’s initial claim with his selected arbitrator did not constitute “filing” under the DRP because it was not with the correct arbitrator.

The arbitrator found in favor of Xerox, holding that the plaintiff failed to bring a case against Xerox in the appropriate amount of time. The plaintiff filed a motion in district court to set aside the arbitrator’s award based on the alleged bias and misconduct of the arbitrator. The trial court agreed with the plaintiff and reversed the arbitrator’s decision. However, an appellate court reversed the trial court’s decision, finding that there was no actual conflict of interest, and the arbitrator did not limit the plaintiff’s ability to present evidence. Thus, the court ordered that the arbitrator’s decision in favor of Xerox be reinstated.

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