A number of years ago John Drane, owner of Drane Plumbing & Supply, executed a Power of Attorney (POA) naming his eldest daughter LaTrina Drane as his attorney in fact. John’s debilitating stroke last weekend risks placing him in rehabilitation for months. Determined to continue the family business that offers its customers “Let Us Drain Your Swamp,” LaTrina dusts off John’s POA. Will Latrina have any problems? Continue Reading Returning “Power” to the Power of Attorney
For over a decade On the Skware Toy Soldiers and its owners, Boo & Woo, the Skware brothers, have enjoyed the shopping traffic brought to their retail store that’s located in the same shopping center as Athletics Authoritiez, a popular sporting goods retailer. However, over the last couple of years the Skware brothers have seen their overall numbers of shoppers go down and, with slowing traffic, their gross sales revenue has dropped by over 15% – straight off the bottom line. Now, blaming E-Commerce woes, the news media (supported by local scuttlebutt) is suggesting that Authoritiez is on the ropes and may close its store. Can Boo & Woo do anything to save On the Skware? Continue Reading E-Commerce Disruption – Tenant’s Tizzy
This will likely be the last piece I write on last month’s trial. We are scheduled to start another trial in January 2018, with additional trials in April and May, and they may gin up some additional insights that I think are useful to pass along. Today I have some quick thoughts about opening statements and closing arguments, as well as jury deliberations. Continue Reading Some Quick Thoughts on Opening Statements, Closing Arguments and Jury Deliberations
Although our judicial system historically prefers live witness testimony over testimony of witnesses through a deposition, today’s technology allows even seasoned trial lawyers the ability to present witnesses through videotaped deposition testimony that can be even more effective than having the witness appear live. I know because I just finished a 3-week trial where 75% of the witnesses we called in our case appeared by videotaped deposition. The defense also called approximately 75% of their witnesses by deposition, The result: after a half-day of deliberations the jury found the defendants negligent and awarded our clients $217.7 million.
Federal courts and most state courts have rules that govern the use of deposition testimony at trial. The instances when parties may introduce deposition testimony are limited: Continue Reading Why Videotaped Deposition Testimony can be More Powerful than Live Witnesses
We covered firework laws several times in the past but it’s always a good reminder as we approach the Fourth of July weekend where fireworks are more than likely in your plans. Below are Texas’ top 10 firework laws you should consider before lighting the fuse. Remember though, laws may vary county to county.
And, don’t forget that any County Commissioners Court in Texas can issue a burn ban prohibiting burning of any kind – including fireworks anywhere in that county, whether within the incorporated city limits or not. Because sparklers burn at approximately 2000 degrees Fahrenheit, they count as fireworks / fire as well.
For nine years, Tilting the Scales has brought legal issues with a business slant –practical and conversation points. Many who we represent are entrepreneurs who prefer to avoid lawyers and, certainly, the courthouse. Few of our Tilting issues focus upon third party resolution of disputes.
This post discusses my arbitration that dodged the “Top 8 Pitfalls of Arbitration” discussed in Tilting’s January 2016 article and attorney insight on the steps of a trial. Continue Reading Personal Insights into Arbitration and Trial
A huge fan of the Hill Country, Skare D. Katz buys a large piece of undeveloped land from the Solable Family outside of Austin. Skare D. plans to build a ranch for retirement. One Saturday while Skare D. is visiting the property to visualize his plans, a woman shows up and stands underneath a large oak tree, staring at the ground. Skare D. approaches the woman and asks her for her name. The woman responds, “Inka Solable.” When Scare D. asks Inka what she’s doing there, Inka responds, “This is where my great-grandfather is buried. I come pay my respects every Saturday.” Dumbfounded, Skare D. responds, “Ma’am, I appreciate that, but I own this property now. I don’t want you coming by every Saturday.” Inka replies, “I have a right under the law to access this property when I want. I’ll see you in Court!” Is Inka right? Continue Reading The Grave Reality of a Cemetery on Your Property
Beginning as a part-time college job walking friends’ dogs, Cary Barker’s full time business now employs over 30 college students to walk neighborhood dogs and to deliver them for daily activities to and from his Barkingham Palace Doggie Day Care Center, LLC. Although not yet ready to seek investors and begin franchising, Cary wants to grow Barkingham Palace, protect its blind spots, get alternative perspectives from other’s experiences and expand his network of friends. Cary’s friend Bayh Lawz suggests that Cary should select a board of directors. Should he? Continue Reading Selecting an Advisory Board – Do’s & Don’ts
Spurred by the frenzy of mid-century modern furniture of the 1950s and 1960s returning in popularity, a growing number of collectors are investing in and holding vintage furniture. Capitalizing on that craze, N. Stile Sune’s start-up Mothbalz Antiques cannot grow fast enough to meet demand. To buy more old warehouses and re-fit them into climate controlled spaces, N. Stile must raise over $2 million and is willing to give his investors an equity interest. Can N. Stile use crowdfunding or must he go the old fashioned route of a private placement memorandum (PPM)?
Due to Sune’s $2 million in capital needs (and more) crowdfunding is not a viable option.
The JOBS Act 2012 (Jumpstart Our Business Startups) was designed to encourage funding of U.S. small businesses and to ease various U.S. securities regulations affecting business investment. Enticingly entitled the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012,” Title III of the JOBS Act had visions of giving small individual investors access to early-stage investment and the enhanced ability to raise money beyond “friends and family,” through social media and from unknown investors like other sites such as Kickstarter.
When compared to other forms of private placements, crowdfunding is not a feasible option for our friend N. Stile Sune and Mothbalz Antiques. As explained in Forbes, here are ten reasons why:
- Issuers are capped to raising $1 million in any 12-month period.
- Shares issued are subject to a one-year restricted period.
- Crowdfunding is capped over a 12-month period at amounts depending upon net worth / income.
- Crowdfunding must be done through a registered broker-dealer or registered “funding portal.”
- The disclosure document (PPM) must be filed with the SEC prior to first sale and N. Stile Sune would have to file audited financial statements.
- Unlike JOBS Act changes affecting accredited investors, crowdfunding does not allow advertising except in narrow exceptions.
- Annual reports and possibly more frequent reports must be filed with the SEC.
- Legal prospectus liability applies to disclosures.
- Extensive due diligence is required, including background checks on management and large stockholders.
Tilting the Scales in Your Favor
Beware. Crowdfunding is far from a start-up fund raising panacea. You can still be sued for fraud for an actual or perceived misrepresentation or omission. One of the best ways to legally protect yourself and your business is also one of the most effective means for garnering serious investor interest. Disclose as much information as possible about your business, ensuring that if things begin to fall apart and investors threaten to sue for securities fraud or other issues, you can use your disclosure as a powerful defense – through the traditional Private Placement Memorandum – or PPM for short.
Growth in the DFW metroplex is booming, and the City of Flourish is one of the driving forces. Unfortunately, the City has had a difficult time keeping up its infrastructure with the growing population. Recently the City selected a bid from Slab Mixer Co., a concrete pipe manufacturer, for culverts for a project widening some of the City’s streets. After the City and Slab signed their contract, a group of Flourish citizens, concerned with how the City’s spending might affect their taxes, requested a copy of the contract under the Texas Public Information Act (TPIA). When the City notified Slab of the request, Slab asserted that some of the terms in the contract needed to be redacted because they would give Slab’s competitors an advantage in future contracts. Does Slab have the right to do that?
Background on the Texas Public Information Act
The Texas Public Information Act provides the public with the right to access information the government collects, subject to approximately 60 exceptions. Tex. Gov’t Code §§ 552.221, 552.101-.154. One exception is “information that, if released, would give advantage to a competitor or bidder.” Id. at § 552.104(a). Historically, the Texas Attorney General’s Office, which is charged with interpreting the Act and maintaining its uniformity, has taken the position that this exception only protects the governmental body, and not a private party. In other words, the AG believed the Act only allowed a governmental body to protect information that would place it at a disadvantage with other governmental bodies inside and outside of the State of Texas.
Do Private Parties Have a Right to Protect Their Bid Information?
Yes. In 2015 the Texas Supreme Court in The Boeing Company et al. v. Paxton held that “a private party may assert the exception to protect its competitively sensitive information.” The Court found that the plain language of the exception was not limited to a governmental body’s right to protect that information. It also noted that the governmental body had the right to defer to the private party to assert its competitive interests were at stake and request that the competitively sensitive information be withheld. Thus, Boeing had standing to assert the exception, but would have to show that the information requested, “if released, would give advantage to a competitor or bidder.”
What about Citizens’ Right to Know How Much Their Government is Spending?
Some have claimed the Texas Supreme Court’s decision in Boeing has given governmental bodies a carte blanche loophole to avoid turning over any information about their contracts. According to these critics, the Court’s decision allows the governmental bodies to assert that disclosing that information would give an advantage to the successful bidder’s competitors in the future.
While it’s a superficially appealing position from a taxpayer’s perspective, it ignores another argument that the governmental bodies assert to protect disclosure of this information. As mentioned above, the governmental bodies have asserted the exception protects disclosure of sensitive information that the body believes will give other governmental bodies an advantage.
For example, the Boeing case points out that the Attorney General ruled the exception protected disclosure of information concerning the Texas Governor’s marketing meetings with businesses in other states because the State is competing with other states to recruit those businesses to relocate. The release of that information would give other states the advantage to approach those businesses with competing or better incentives.
Companion bills (HB 792 and SB 407) have been filed in the Texas House and Senate to address the Texas Supreme Court’s decision in Boeing. If enacted, the legislation would make clear that the exception only allows a governmental body to protect information that it believes would harm its competitive interests. It would also apply an “exception to the exception” that would require governmental bodies to disclose that competitive information after the body awards the contract. HB 792 was recently referred to committee. SB 407 was referred to committee, where it was discussed but not voted upon yet.
Tilting the Scales in Your Favor
That depends on how your business has been affected by the competitive bidding process. If you have won bids in the past, and your proposals contain proprietary information that gives you a competitive advantage, you should ask the governmental body to redact that information if anyone requests it under the TPIA. On the other hand, if your business has consistently lost out in the bidding process, you may want to press the Legislature to pass HB 792 and SB 407 this session so that you can see your competitor’s proposals and try to figure out how you can match, or beat, them in the future.