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Tilting the Scales

Business Issues with a Legal Slant

Foreseeability and a Business Owner’s Liability for Criminal Acts of Others

Posted in *Way Out - Advice, Criminal Law, Legal Risk Management

Recently we’ve discussed how the foreseeability of the potential harm caused by a person’s actions can make them liable for negligence. Recent horrific events in Garland and Waco, Texas bring up a related question: can a business owner ever have a duty to protect his customers from the wrongful – even criminal – acts of another? The answer is yes – if those criminal acts are foreseeable.

Recently, the Twin Peaks restaurant in Waco, Texas became a hang-out for “outlaw” motorcycle clubs. The Twin Peaks management had encouraged the bikers to patronize the restaurant, going so far as to hold bike events for them. The Waco police repeatedly requested that the restaurant eject the bikers or stop allowing them to hold events on the premises, citing the strong likelihood of intergang violence; however, the managers refused.

Just a few days ago, the police warning proved prophetic as several biker gangs started a brawl that turned into a massive gunfight, leaving nine bikers dead, more wounded, and bullet-riddled cars throughout the parking lot. Luckily, no citizens or police officers were wounded – but if they had been, could they have held the Twin Peaks restaurant liable for their injuries, even though the injuries were actually caused by the bikers?

Yes, if the crime is foreseeable. Generally in Texas, a business owner is not liable for injuries caused by the criminal acts of a third party. However, the Texas Supreme Court has held that there is an exception when “the risk of a crime [is] sufficiently unreasonable and foreseeable to justify imposing a duty on [business owners] to protect [their customers] while they are on the [business owner’s] property.” Generally in Texas, the courts analyze previous acts of crime on the premises and weigh the proximity, publicity, recency, frequency, and similarity of the prior crimes to determine if the crime in question was foreseeable. In this case, there have been no reports of similar prior crimes in the past. However, according to the police the restaurant owners were warned of the possibility of a violent clash of biker gangs in advance. If a person were injured during the melee, they could have good reason to claim that the crime was foreseeable – and that the restaurant owners were liable for their injuries.

Tilting the Scales in Your Favor. So what should business owners do to prevent being held liable for the criminal acts of third parties on their premises? Luckily for them, it is generally difficult for a plaintiff to establish that criminal activity is foreseeable, and Texas appellate courts are quick to second guess juries’ determinations of foreseeability. Nevertheless, the prudent business owner should take reasonable steps to prevent criminal activity on their premises when it is routine or when the police give an express warning of future criminal acts.

Update! Not surprisingly, a lawsuit has already been filed as a result of the shootout in Waco. One of the Twin Peaks restaurant’s neighboring business sued the Twin Peaks management and national franchisor alleging that the management failed to “exercise ordinary care and operate its place of business in a reasonable and prudent manner.” The suit seeks damages including the profits lost while the neighboring restaurant was closed during the police investigation and for damage to its property. The suit also alleges that the franchisee management is the “agent” for the national franchisor, rendering the national franchisor liable to the same extent as the franchisee. Alleged negligent acts include the negligent hiring of the independent franchisor’s management, failing to heed warning from the police about motorcycle related violence, and failing to supervise and control patrons.

It will be interesting to follow the course of this litigation; the legal theories asserted by the plaintiff appear to be novel and in some cases contrary to existing Texas law. Typically, a business owner’s duty to prevent criminal acts is limited to its patrons; this case seeks to greatly expand that doctrine. Time will tell if the courts agree that these claims have merit.

 

Business Owners Don’t Have Crystal Balls: Foreseeability and Liability for Criminal Actions

Posted in *Way Out - Advice, Legal Risk Management

Crystal BallRecently we’ve discussed how the foreseeability of the potential harm caused by a person’s actions can make them liable for negligence. Recent horrific events in Garland and Waco, Texas bring up a related question: can a business owner ever have a duty to protect his customers from the wrongful – even criminal – acts of another? The answer is yes – if those criminal acts are foreseeable.

Recently, the Twin Peaks restaurant in Waco, Texas became a hang-out for “outlaw” motorcycle clubs. The Twin Peaks management had encouraged the bikers to patronize the restaurant, going so far as to hold bike events for them. The Waco police repeatedly requested that the restaurant eject the bikers or stop allowing them to hold events on the premises, citing the strong likelihood of intergang violence; however, the managers refused.

Just a few days ago, the police warning proved prophetic as several biker gangs started a brawl that turned into a massive gunfight, leaving nine bikers dead, more wounded, and bullet-riddled cars throughout the parking lot. Luckily, no citizens or police officers were wounded – but if they had been, could they have held the Twin Peaks restaurant liable for their injuries, even though the injuries were actually caused by the bikers?

Yes, if the crime is foreseeable. Generally in Texas, a business owner is not liable for injuries caused by the criminal acts of a third party. However, the Texas Supreme Court has held that there is an exception when “the risk of a crime [is] sufficiently unreasonable and foreseeable to justify imposing a duty on [business owners] to protect [their customers] while they are on the [business owner’s] property.” Generally in Texas, the courts analyze previous acts of crime on the premises and weigh the proximity, publicity, recency, frequency, and similarity of the prior crimes to determine if the crime in question was foreseeable. In this case, there have been no reports of similar prior crimes in the past. However, according to the police the restaurant owners were warned of the possibility of a violent clash of biker gangs in advance. If a person were injured during the melee, they could have good reason to claim that the crime was foreseeable – and that the restaurant owners were liable for their injuries.

Tilting the Scales in Your Favor. So what should business owners do to prevent being held liable for the criminal acts of third parties on their premises? Luckily for them, it is generally very hard for a plaintiff to establish that criminal activity is foreseeable, and Texas appellate courts are quick to second guess juries’ determinations of foreseeability. Nevertheless, the prudent business owner should take reasonable steps to prevent criminal activity on their premises when it is routine or when the police give an express warning of future criminal acts.

The Top 3 Things Tom Brady Can Learn From Blue Bell Creameries: “Nothing is More Important To Us Than Maintaining Your Trust”*

Posted in *Way Out - Advice, Legal Risk Management, Social Media & The Internet
  1. Tom_Brady_vs._Vikings_2014Take it Seriously. A week ago, when asked about the “elephant in the room,” New England Patriots quarterback Tom Brady replied before 4,000  cheering and laughing Patriots fans “Where? When I digest it fully, I’ll be sure to let you know how I feel about it… This is like a Patriots pep rally.”

Last March Blue Bell announced a product recall for the first time in 108 years after discovering what was then believed to be a single machine producing a limited amount of frozen snacks with a potential listeria problem. Crisis Communication Rule 1: Treat Serious Matters Seriously.

2.  Actions Count. Although Brady appeared for an interview and voluntarily answered questions, his failure to cooperate contributed to his punishment when he refused to produce texts and emails even with his attorney being allowed to screen and limit production strictly to responsive materials.

Last April Blue Bell reiterated its commitment “…to doing the 100 percent right thing, and the best way to do that is to take all of our products off the market until we are confident that they are all safe…. [bringing] in one of the world’s most respected food safety microbiologists to inspect our plants and systems to help us get to the bottom of this issue.” Crisis Communication Rule 2: Actions Speak Louder than Words.

3.  Accountability is Critical. Brady’s agent blasted the 243 page Wells report and vowed to appeal the decision. Patriots’ owner Bob Kraft, who last week said he would accept any punishment despite his serious misgivings about the Wells report’s findings, denounced both the penalties and the initial report.

In its latest May press release, Blue Bell reported that it collected approximately 8 million gallons of ice cream sold domestically and internationally, and closed production plants in Brenham, Texas, Oklahoma and Alabama to thoroughly clean and sanitize each facility and review all operating procedures and its production process to eliminate possible contamination pathways. Crisis Communication Rule 3: When You are Wrong, Admit it and Take Your Medicine.

Tilting the Scales in Your Favor. Nothing is more important than your reputation, and a key ingredient to reputation is trustworthiness. Rather than denying outright any knowledge or participation in “Deflategate,” had Brady first communicated that he was a fierce competitor who looked to take advantage of every opportunity to help his team win and later acknowledged that the air pressure was below recommendations, Brady might have preserved his reputation as a fierce yet forthright competitor.

When challenged by a crisis, you must have a plan– Failing to Plan is Planning to Fail.

*Paul Kruse, CEO & President of Blue Bell Creameries in March 27, 2015 letter to customers

Paying Child Support: Are Your New Hires Being Honest?

Posted in *Way Out - Advice, Criminal Law, Employment & Labor, Family Issues, Legal Risk Management, Money

divorceKnowing that his old high school friend Iman Dedbeet had just been taken to the cleaners by his ex-wife Goldilocks in a nasty divorce, Johnny Clueless decided to help Iman out by hiring him as his general sales manager at Clueless Automotive. Johnny knew that Goldilocks got full custody of Dedbeet’s kids and that Dedbeet owes Goldilocks back child support. Nevertheless, when Clueless handed Dedbeet the IRS Form W-4 to complete, Dedbeet urged Clueless to make him an independent contractor and pleaded, “You know what I need Johnny. Goldi doesn’t deserve another penny.” Relenting, Clueless classifies Dedbeet as a 1099 independent contractor. Is Clueless getting taken for a ride?

Employers Must Report New Hires. Within 20 days of hiring a new employee Employers must report the new hires to the Texas Attorney General’s Child Support Division. However, this requirement is limited to new personnel classified as employees. An employer is not required to report new hire independent contractors, allowing new hires to avoid having child support withheld from their paycheck.

Employers Are Liable for Falsely Reporting a New Hire’s Status. Johnny Clueless should know, however, that Texas law subjects employers to a $500 fine for conspiring with a new hire to fail to submit a new hire report, or submit a false report. By agreeing to Dedbeet’s pleas Clueless risks sharing Iman Dedbeet’s responsibilities because he knew that his new hire wants to avoid the possibility of having child support withheld.

Proposed Legislation Would Remove Loophole Senate Bill 1727 currently before the Texas Legislature would add “independent contractor” to the definition of “employee” in Texas and close the loophole used by some to avoid child support withholding.

Tax Issues Both Clueless and Dedbeet also create tax issues by misclassifying Dedbeet as an independent contractor. Clueless will not pay FICA. Instead, Dedbeet will have to pay the Self Employment tax on a quarterly basis.

Tilting the Scales in Your Favor Although misclassifying employees may not look overly penal, it will cause a substantial disruption in your business when you have to deal with the Attorney General’s investigation and, is it worth it? It’s easier (and the law) to classify the employee correctly before the hire for any number of reasons. If a new hire asks to be classified as an independent contractor, and particularly if you know the hire owes child support, make sure that the hire is truly serving as an independent contractor – which means the hire provides all of their own tools and equipment, and has complete control over the manner in which it performs tasks.

Avoiding Job Applicants who Smoke: Is Snuffing out Smokers Discrimination?

Posted in *Way Out - Advice, Employment & Labor, Legal Risk Management

smokingFaced with increasing healthcare costs and wanting to be a good role model, Gus Grohcer of Canned Foods 4 Less advises all prospective employees that he does not hire smokers and tests for nicotine, making all job offers “contingent upon passing a pre-hire drug screen including nicotine test.” During the ninety day probationary period, Chimm Nee Stax volunteered a urine sample for testing. When the test returned positive, Gus Grohcer advised Chimm Nee that he was canned. Can Canned Foods 4 Less butt into the lives of its smoker-employees like Stax? Does Chimm Nee Stax have a claim for discrimination, for wrongful termination or for violation of ERISA by interfering with his rights?

Discriminate Against Smokers in Texas? Yes, Gus Grohcer and Canned Foods 4 Less can refuse to hire smokers despite any threat or complaint of Chimm Nee Stax. Smokers are not a protected class under federal law, nor is being short, being overweight or being ugly. Refusing to hire smokers is not illegal in Texas and some 19 other states where it is perfectly legal for an employer to ask if you are a smoker and let that be determinative of hiring.

Eighteen states prohibit discrimination against tobacco users; and eight protect an employee’s right to use in the workplace an otherwise lawful consumable product. Four states prohibit discriminating against employees engaged in lawful activities outside work, including smoking tobacco in California, Colorado, New York and North Dakota, where it is illegal to not hire you simply because you smoke. What about a marijuana smoking Colorado employee Chimm Nee Stax might ask? A case is pending before the Colorado Supreme Court. Even in those some 30 states that prohibit discrimination, if being a nonsmoker is an important part of a specific job’s qualifications, such as an antismoking advocacy group like the American Lung Association, smokers can be rejected.

Relationship Between Smokers and Healthcare Costs? When the smoke clears, Gus Grohcer and Canned Foods 4 Less are not missing the mark on reducing labor costs. The Center for Disease Control reports that smoking is the leading preventable cause of death, disease and disability in the United States, is responsible for more than 480,000 deaths per year, costs more than $289 billion a year, including at least $133 billion in direct medical care for adults, and costs more than $156 billion in lost productivity. Eliminating smokers will increase the bottom line because tobacco users’ annual health care costs are $3,000 to $4,000 greater than non-smokers.

And Gus is not the only one. Estimates are that 61% of large employers are surcharging tobacco users. Hospitals like Baylor Health Care System lead the way with 21% of all hospitals having bans this year (one-third are expected to have bans next year) by imposing a health insurance surcharge on smoking employees of greater than a thousand dollars annually. Those smokers seeking health insurance through the exchanges are seeing insurance rates of approximately $4,000 per year above those for a comparable nonsmoker.

Socioeconomic Discrimination? Since smoking is unevenly distributed, some argue that by refusing to hire Chimm Nee Stax, Gus and others like him are unethical because they are cherry-picking ‘low-risk’ employees and denying smokers employment, risking hurting vulnerable groups. “More than 36% of Americans living below the federal poverty line are smokers, as compared with 22.5% of those with incomes above that level.” And since about 45% of unemployed people smoke, no-hire policies would create a “double-whammy” among this group.

Tilting the Scales in Your Favor. The uncertainty of the costs and regulatory implications of Obamacare undoubtedly encourages every company, including Gus Grohcer and Canned Foods 4 Less to promote the health and well being of its employees. Whether the rationale is as fickle as physical appearance or as pragmatic as healthcare costs and productivity, a non-smoking, fit employee has fewer unplanned, missed work days and is likely to be less burdensome upon the company’s healthcare program. The result? A better, cheaper insurance plan for all employees of Canned Foods 4 Less. Our Gray Reed employment experts Ruth Ann Daniels and Michael Kelsheimer[1] advise that companies are becoming more mindful of excluding job applicants who smoke and are obese. Some companies are even modifying their Employee Handbooks to motivate the reduction and even elimination bad health habits and to promote healthier habits, including health club memberships and the like.

* Thanks to one of our faithful readers Mary Ann Markowitz who recommended this April Tilting article. We welcome recommendations for any legal or business issue affecting your closely held company.

RELATED ARTICLES: Avoiding Job Applicants Who Tip the Scales and Coming Up Short: Is it the Height of Prejudice Not to Hire Short People?

Safety Over Convenience: When Should Employers Investigate their Employees’ Mental State?

Posted in *Way Out - Advice, Legal Risk Management

busStephen F. Austin is the CEO of Alamo Lines, a bus line servicing Central Texas. One night, a young, promising driver, David Boone, confessed to Stephen that he was suffering from severe depression and suicidal thoughts. Boone did not mention that his depression was due to the breakup of his romantic relationship with co-worker, Samantha Houston. Austin, concerned only that he might have to cancel that night’s San Antonio-to-Schlitterbahn Run, asked Boone if he was “ok” to drive, but took no other action. Boone said he was fine.

Just before leaving on his route, Boone got into an argument with and assaulted Samantha in the Alamo offices. In a desperate attempt to commit suicide, he later drove his bus off of the road and into a ditch, injuring 30 passengers. A subsequent government investigation revealed that Boone had a previous conviction for assault. Is Alamo Lines liable for Samantha’s injuries? For the injuries to the passengers on Boone’s bus?

No and Yes. Alamo Lines is not liable to Samantha because her injuries were unforeseeable. However, Alamo Lines is probably liable to its passengers because the harm caused to them was foreseeable.

What Risks Must Alamo Guard Against? Generally, employers have no duty to guard against unforeseeable risks. However, employers do generally have a duty to hire employees who are competent at their jobs. While a company that employs drivers has a duty to ensure that its drivers are safe and competent drivers – which may include running a background check on their driving record – employers in Texas generally have no duty to conduct criminal background checks on their employees because those employee’s potential criminal acts are, as a matter of law, unforeseeable. Because Texas courts hold that an employee’s criminal acts are not foreseeable. Therefore, because Boone’s assault of Samantha was unforeseeable, Alamo Lines is not responsible.

On the other hand, Alamo Lines not only employed an unsafe, suicidal driver – it actually was aware of Boone’s mental problems and suicidal thoughts before allowing him to drive one of its buses. Even if Alamo Lines did not have a duty to give its drivers psychological tests, a court could conclude that, with actual knowledge of Boone’s severe mental problems, Alamo Lines was obligated to sideline Boone until a psychiatrist cleared him to drive.

Tilting the Scales in Your Favor. Employers are unquestionably required to hire and retain people who are competent at their jobs, and generally do not have a duty to prevent unforeseeable accidents. Employers who do get actual knowledge of an employee’s violence or severe mental illness are put on notice to proactively take steps to ensure the safety of fellow employees, your company and your customers.

Partner Liability: Out of the Woods?

Posted in *Way Out - Advice, Legal Risk Management, Money

Business conceptDebbett Runnup Partnership, a Texas general partnership, was sued by Widgets R Us in 2010 for failing to pay Widgets R Us invoices. Judgment was granted to Widgets in 2012 against Debbett Runnup for $300,000. After chasing Debbett for over three years, Widgets’ lawyer Plinn T. Agreshun realizes that Debbett is penniless. Knowing that partners are also responsible for partnership debts, Agreshun sues Cash Kau, a multimillionaire Debbett partner. Cash’s army of lawyers argue that the Widgets R Us lawsuit is too late and barred by the statute of limitations. Can Widgets R Us collect from Cash Kau almost five years after the invoices were sent?

Partners Are Liable for the Partnership’s Obligations. Yes. Texas law generally makes a partner jointly and severally liable for all of the obligations of the general partnership. However, Widgets R Us must sue and get a judgment against Cash Kau because a judgment against a partnership is not, by itself, a judgment against its partner. To do so, Widgets R Us could have named Cash Kau as a defendant in the lawsuit against the partnership, or in a separate lawsuit. Widgets R Us must get a judgment against the partnership, and the judgment must go unsatisfied for 90 days before Widgets R Us may seek to satisfy from Cash Kau.

A Creditor’s Claim Against a Partner Accrues After Judgment Against the Partnership But what about the Texas statute of limitations of four years? Widgets R Us slides under the wire. The Texas Supreme Court recently considered whether a creditor’s claim against the partner accrues (i.e., starts the limitations clock) at the time the partnership breached, or on the date the creditor obtained the judgment against the partnership. The court held that the limitations clock does not start running against the partner until the creditor can actually proceed against the partner’s assets, which is 90 days after the judgment, or 2012. The court concluded that Texas partnership law does not require a creditor to sue a partner in the same suit as the partnership, and the creditor could not proceed against the partner until after the 90 day period.

Tilting the Scales in Your Favor. Luckily for Widgets R Us the Texas Supreme Court sided with its interpretation of the statute of limitations. Claimants against general partnerships are better served by naming all of the partnership’s partners as defendants in the collection lawsuit. Doing so also leverages settlement negotiations because the partners probably want to avoid having a judgment rendered against them personally. Additionally, the partners must be careful not to transfer or dissipate assets because those could be considered fraudulent conveyances.

Finally, if you are a partner in a general partnership, strongly consider converting to a limited liability partnership, a limited liability company or a corporation. A valuable aspect of any entity is the shield it offers owners of these entities from personal liability for the entity’s obligations and liabilities.

The Coming Silver Tsunami: Families May Lose 70% in Wealth Transfer

Posted in *Way Out - Advice, Family Issues, Legal Risk Management, Money

baton passRecord Wealth Transfer. Over the next 30-40 years about $12 trillion from those born in 1920s and 30s will be transferred to the baby boomers, and the boomers are expected to transfer some $30 trillion to their heirs, with more than an estimated $59 trillion transferred from 93.6 million American estates from 2007 to 2061. Much of the wealth is the family business.

70% Never Gets to Third Generation. Shirtsleeves to shirtsleeves in three generations. The first generation makes the money, the second spends it, and the third depletes what’s left. For 70% of all wealthy families, the money has been spent, or otherwise lost, before the end of the second generation and 90% of families no longer have their wealth by the end of the third generation. No planning, no leadership, no communication. No money.

High Divorce Rates and Children with Multiple Families. At its peak, the divorce rate at 50% affected these families and their children, many of whom did not grow up with both biological parents. Less than half (46%) of U.S. kids younger than 18 live with two married heterosexual parents in their first marriage. Blood is thicker than water, and often blood isn’t thick enough.

Geographic Separation. In today’s global society, most adult children live a long distance from their parents, relying upon air travel, cell phones and other technological devices to keep in contact across time and distance. Of about 34 million Americans who are caregivers for an older parent, 15% live one or more hours away and nearly one third of those are helping someone with Alzheimer’s disease or dementia.

Why do Wealth and Legacy Fail to Survive?

Success in the Immediate Wealth Transfer. Most have all the proper structures in place for assets to be seamlessly transferred to the first generation. However they have not properly planned and accounted for the impact of divorce on family relationships, families separated by time and distance and children unprepared to handle new found wealth. There are stumbling blocks that doom their success.

Tripping on Their Legacy. The greatest stumbling blocks?

  • No Family Mission – Lack of Purpose
  • Distrust or No Trust – Lack of Communication and Mishandled Communication
  • No Family Leadership – Lack of a Family Governance System and Lack of Family Leadership

Tilting the Scales in Your Favor. There’s more to your family legacy and your wealth transfer than your will. Planning to succeed. Hand off your wealth well and your legacy does not end when you sign your Last Will and Testament. That’s the easy part. Unless you plan for your estate to be liquidated and the cash distributed (and your children to have little contact with each other after you die), there’s more to be done. Start planning now.

Communication – Lack of and Mishandled.

The often present lack of communication or mishandling of communication is exacerbated by divorced parents who don’t communicate, ex-spouses who have different agendas, half-brothers and sisters who dislike the divorce and each other, and the separation of long distances. And, there’s no substitute for being there. While they had their promise, increasing use of ever-expanding computer technology innovations, such as the internet, e-mail Skype, , Facebook, Twitter, iPhone, iPad and so many other hardware and software developments redefined interpersonal relationships and family communications in unexpected ways.

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A Measle-ly Lawsuit: Can Parents Who Don’t Vaccinate their Children be Sued?

Posted in *BTW - Noteworthy, Family Issues, Legal Risk Management

vaccineYearning to leave the frozen wasteland of Dallas, Texas behind her if just for a moment, Penny McCrathy, an outspoken anti-vaccination advocate, took her unvaccinated children to Disneyland in Anaheim, California. Not knowing that her children had been exposed to measles by a foreign tourist, Penny brought them back to Texas and sent them back to public school, which they attended under a vaccination exemption based on their “personal beliefs”. One week later, her children came down with measles as well. Most of the children in their school were immunized, but unfortunately one young lady, Ima Munenot, had a severe immunodeficiency disorder and could never receive vaccinations. One week after the McCrathy kids came down with measles, so did Ima – but while the McCrathy children got over the disease, Ima was hospitalized with meningitis and nearly died. In addition to their emotional trauma, Ima’s family incurred tens of thousands of dollars in medical expenses. Might Ima’s family have a legal case against Penny for refusing to vaccinate her children and exposing Ima to a deadly disease?

Perhaps. Texas law recognizes a cause of action for the negligent transmission of infection diseases – for instance, plaintiffs have litigated and won cases involving the negligent transmission of genital herpes. Although there are no cases to date involving the negligent transmission of measles where the negligent act is a failure to vaccinate a child, it is certainly possible that a plaintiff might prevail on such a case if they can prove the essential elements of a negligence cause of action: (1) the existence of a duty from the defendant to the plaintiff, (2) breach of that duty, (3) harm to the plaintiff, and (4) that the breach of the duty caused the harm. The two greatest hurdles to a successful lawsuit in this case are duty and causation.

Is there Causation? Ima’s parents must prove both that Penny’s actions in failing to vaccinate her children was both the cause-in-fact of Ima’s disease and that the injury was foreseeable. According to a recent article in the Journal of Law, Medicine and Ethics, medical science can trace the spread of measles from person to person with a high degree of probability both through laboratory and epidemiological studies. It is thus very likely that Ima’s parents can prove that Penny’s children were the source of Ima’s measles. A jury could certainly find that Penny should have foreseen that Penny’s failure to vaccinate her children might spread the disease to others.

Is There a Duty? The larger hurdle for Ima is proving the existence of a duty. Courts, in determining whether a duty exists, traditionally apply a “risk-utility” test comparing the risk of harm by the actor against the social utility of the actor’s conduct. In this case, Penny’s conduct in not vaccinating her children has zero social utility and the risk is high: measles is one of the leading causes of death among young children and the measles vaccine is safe, readily available and inexpensive. Additionally, Texas statutes require that all children be vaccinated. However, those same statutes also state that a failure to comply with the statute requiring vaccination does not create a cause of action, and further that there is a statutory exemption for persons who sign an affidavit stating that they do not wish to vaccinate their children for “reasons of conscience”. In addition, persons who refuse to vaccinate their children for religious reasons may be protected by the Texas and United States Constitutions. Thus, Penny likely has a strong legal argument that she is not liable for Ima’s illness.

Tilting the Scales in Your Favor. The best protection against measles is vaccination, not litigation. However, infants and persons with suppressed immune systems cannot get vaccinated. Parents of children who cannot be vaccinated should demand that schools protect vulnerable students by banning unvaccinated children from attending school during outbreaks of measles and other diseases. In the worst case scenario, however, the threat of litigation may convince parents who are on the fence to have their children vaccinated.

Selling What You Don’t Have…What Happened to my Super Bowl Tickets?

Posted in *Weighing In - IMHO, Legal Risk Management, Money

Thursday before Super Bowl XLIX in Phoenix Ima Goen Nomattawatta, a huge Patriots fan, found an online broker Izzure Scalp with Super Bowl tickets for $2,500 apiece. Not believing that he could get 4 tickets at only $750 above face value, Nomattawatta quickly called three buddies, found flights and non-refundable hotel rooms, and all four headed for Phoenix. Although the Scalp promised ticket delivery to Nomattawatta’s hotel on Saturday, on Friday afternoon Scalp reported that he did not have tickets, and would be refunding the purchase price pursuant to their online contract. Angered at Izzure Scalp, Nomattawatta and his friends threatened to sue Scalp for their tickets, airfare and hotel accommodations. Does Izzure Scalp have any liability other than the cost of the tickets?

The “Fine Print.” No, probably not. Remember those mile long, unread online “terms and conditions” that you see when buying a smartphone, television, or new company service? Like you, I generally skim the document and routinely check the box that I “read, understand and agree” to the terms and conditions. Important contractual language in those online approvals include limitations of liability, arbitration agreements, and where you can sue provisions. Generally they are enforceable unless the consumer proves they are unconscionable or there is a public policy prohibiting them.   When Nomattawatta bought the tickets online, the broker’s terms of service limited the broker’s liability only to what Nomattawatta paid for the tickets.

Limitation of Liability Benefits. Companies include limitation of liability provisions for multiple reasons, including prohibiting certain types of damages such as punitive damages, capping damage exposures to the contract’s purchase price and limiting risk exposure to money damages, and eliminating non-monetary relief, such as an injunction. These provisions can substantially limit a company’s liability exposure. In fact, in one reported instance a company’s liability exposure was reduced by 90% because of the clause.

Tilting the Scales in Your Favor. Consider reviewing your company agreements with your attorney’s assistance. Limitation of liability clauses are common in many different types of contracts and across many industries. Generally-speaking they are more likely to be enforceable when found in contracts between sophisticated parties and employment contracts. Inclusion in online terms and conditions protecting vendors who do not have product needs to be addressed; as yet, default is to the ticket seller. It is not just advisable, but highly recommended, to include these provisions in your contracts.

Remember, though, that your customers are your company’s lifeblood, and treating them fairly will keep them around. This was exemplified during the Super Bowl where ticket brokers were simply refunding the purchase price, while others would honor their verbal agreements to provide tickets at the agreed-upon price.