This creates a problem when the client comes to me because their customer won't pay their bill. There's no dispute, they're just not paying their bills, probably because of the economy.
This is a discouraging discovery. Now instead of just walking a few blocks to the court house to file suit to collect the debt and then probably taking a default judgment or getting a summary judgment in a short time against the deadbeats, we face the problem of having to go to the extra expense of opening an arbitration claim. Or if we file suit, we run the risk that they'll actually respond to the lawsuit by demanding arbitration, pursuant to the contact. If they do that, our court filing fee is down the drain and now we have to pay again for the arbitration fees.
Arbitration. Not faster, not cheaper. Not necessarily. Especially if all you are doing is trying to collect a debt. Getting a default judgment is cheaper and easier than trying to do the same in arbitration. Plus, even after you get your arbitration award, you're still not done. To collect, you then have to file (and pay for) an action with the court to confirm the arbitration award. What a bunch of hassle just to collect an undisputed debt.
A small business that likes arbitration would be wise to at least exempt their own collections claims from their own mandatory arbitration provisions in their own contracts.
]]>1. Dodeka, LLC v. S.P., Travis County, July 2008. Case dismissed after I filed for summary judgment.
2. Dodeka, LLC v. R.S., Travis County, September 2008. Case dismissed after I filed for summary judgment.
3. Dodeka, LLC v. E.W., Travis County, October 2008. Case dismissed after I filed for summary judgment.
4. L.G. v. Dodeka, LLC, Travis County, October 2008. After getting Dokeka's case dismissed against my clients in Denton County, I filed a FDCPA lawsuit against Dodeka and its lawyers in Travis County. Dodeka paid us $3,037 to settle. My clients received $1,500 of this and the rest went to my attorney fees. The case against the lawyer is still pending.
5. Dodeka, LLC v. B.M., Williamson County, February 2009. Judgment for my client.
6. Unifund CCR Partners v. C.E., Travis County, April 2009. Unifund dismissed its claims and paid $2,000 to my client to reimburse her for my attorney fees and for statutory damages.
7. Capital One v. F.T., Travis County, April 2009. Case voluntarily dismissed.
8. CACH, LLC v. M.A., Williamson County. My motion to vacate an arbitration award was granted and the case was dismissed with prejudice.
9. Unifund v. L.P., Williamson County, June 2009. Amount of claim: $28,693.71 plus attorney fees and interest. We settled for $500.
10. Pharia, LLC v. K.J., Bastrop County, June 2009. Case dismissed after we filed for summary judgment.
11. CACH, LLC v. W.W., National Arbitration Forum, June 2009. Claim voluntarily dismissed after I filed a petition to stay arbitration.
12. Discover v. K.L., Harris County, July 2009. Case voluntarily dismissed after I filed for summary judgment.
13. CACH, LLC v. A.B., Travis County, August 2009. Case voluntarily dismissed.
14. Portfolio Recovery Associates v. P.S., Travis County, August 2009. Case and counter-claim mutually dismissed by agreement after I filed for summary judgment.
15. CACH, LLC v. P.K., Travis County, August 2009. This was a lawsuit to confirm an arbitration award of over $65,000, which was awarded against my client prior to my representation. After I was hired, I filed a plea to the jurisdiction and the case was dismissed.
16. Amex v. D.W., Travis County, September 2009. Amount of suit was over $200,000. Case was voluntarily dismissed after I defeated AMEX's motion for summary judgment and after the court order the parties to mediation.
17. Dodeka v. W.W., Lubbock County, September 2009. My client paid $500 to settle.
18. Midland Funding v. E.O., Hays County, September 2009. Case voluntarily dismissed.
19. Midland Funding v. M.B., Parmer County, September 2009. Plaintiff dismissed the case and paid us $650 in attorney fees.
20. Pharia, LLC. v. R.M., Brazoria County, September 2009. My client paid $500 to settle. I filed a motion for summary judgment but the settlement saved my client my travel expenses.
21. Chase Bank v. L.B., National Arbitration Forum, October 2009. Claim voluntarily dismissed after I filed a petition to stay the arbitration.
22. Pharia, LLC v. L.F. November 2009, Dallas County. I filed a motion to dismiss. My client paid $500 to settle in order to save on paying for my travel expenses to Dallas.
23. Hilco Receivables, LLC v. E.W., Travis County, December 2009. Case voluntarily dismissed after I filed a motion for summary judgment.
24. Arrow Financial Services, LLC v. J.P., Travis County, December 2009. Case voluntarily dismissed after I filed a motion to dismiss.
]]>Tex. Civ. Prac. & Rem. Code §16.004(a)(3) establishes a four year statute of limitation on an action for a debt, and the four years starts running from the day the cause of action accrues. In a breach of contract case, the cause of action accrues at the time of the default. Jones v. Blume, 196 S.W.3d 440, 446 (Tex.App.--Dallas 2006, pet. denied). If the debt action is on an open or stated account, the cause of action accrues on the day of the last payment by the debtor. Livingston Ford Mercury, Inc. v. Haley, 997 S.W.2d 425, 429 (Tex.App.--Beamont 1999, no writ.), Tex. Civ. Prac. & Rem. Code §16.004(c).
But it gets better.
If a debt collector files a lawsuit against a consumer to collect on a credit card debt after the statute of limitations has run, and if the debt collector knew or should have known it was past the statute of limiations, this is considered to be an unfair and unconscionable practice. It is a knowing and intentional violation of 15 U.S.C. § 1692f of the Fair Debt Collection Practices Act (FDCPA). Kimber v. Federal Financial Corporation, 668 F. Supp. 1480, 1487 (M.D. Ala. 1987).
In such cases, I file a counterclaim for violation of the FDCPA and seek damages and attorney fees. When we can prove the statute of limitations and a violation of the FDCPA, the end result is that the debt collector's case is dismissed and the debt collector has to pay damages and attorney fees.
]]>Each of these cases involved an arbitration award from the National Arbitration Forum (NAF).
One of these cases involved an arbitration award of over $64,000 and was less than a month away from trial when I got hired. I set the case for a hearing on a plea to the jurisdiction and got the case dismissed. Even though the debt collectors had an arbitration award, they could not prove with admissible evidence that they were the owners of the debt. Without evidence that they owned the debt, they did not have standing to bring a court action and the court did not have subject matter jurisdiction to hear the case.
The debt collector had about four affidavits and about 50 pages of evidence. Every single page of evidence was inadmissible.
We snatched victory from the jaws of defeat.
]]>Instead, the fixed gear cyclist stops or slows down the pedals with his feet, and this action will necessarily stop or slow down the chain that is affixed to the rear wheel's fixed gear. This in turn stops the rear wheel because, remember, there is no freewheel or coasting mechanism. This is how the "fixies" stop their bikes and it takes some skill and strength to accomplish.
Now, here is the question. Does this constitute a brake system under Texas law?
Texas law requires that bicycles used on public roads must be equipped with a brake.
The Texas Transportation Code 551.104 (Safety Equipment) states:
"(a) A person may not operate a bicycle unless the bicycle is equipped with a brake capable of making a braked wheel skid on dry, level, clean pavement."
Can a rider of a fixed gear bicycle meet this stopping requirement by back peddling or standing on the pedals? I don't know. But let's assume they can. If they can, does that qualify as having equipped the bike with a "brake"?
Notice that the law doesn't just state that the bicyclist must be able to stop the bike. The law says the bike has to be "equipped with a brake."
When I think of "brakes" on a wheeled vehicle, I usually think of a device that slows or stops the wheels by applying friction through calipers, discs or drums. The fixed gear bike is not equipped with any kind of friciton device. It just has the ability for the cyclist to peddle backwards, like on a unicycle. But unlike the unicyclist, the fixed gear bicyclist might be able to make the rear wheel skid. If so, isn't that a brake, if it meets the performance standards?
I don't think so. I have not found an applicable definition of the word "brake" within the Texas Transportation Code. The courts might look to the ordinary meaning of the word "brake" but that is not much help.
Most people would probably agree that these fixed gear bikes don't have a brake in the ordinary sense of the word. There is a way to slow down these bike, but is not really through the application of a brake.
Any vehicle is capable of stopping by being put into reverse. Boats don't have brakes, but to stop a boat, you put the engines in reverse. Does anyone refer to that as a "brake"? No. They just refer to that as stopping the boat.
Somehow I don't think the Texas Legislature was contemplating the fixed gear bike when it enacted this law. Until the recent fixed gear fad popularized these bikes, this kind of technology was considered obsolete and wasn't on anyone's mind when enacting these laws. This law was enacted in 1995 and amended in 2001 and at that time, you would have been hard pressed to find any fixed gear bikes on the roads in Texas.
I think the legislative intent was that bikes be equipped with a brake, whether by a foot activiated coaster brake or a hand brake. I don't think they were thinking of the ability to peddle backwards on a fixed gear bike as a brake. But that is just my opinion. The law seems rather vague, and its vagueness is one possible ground for challenging the law. If a law is too vague, it is not enforceable. The law is pretty clear on what performance standard the brake must meet but is vague as to what type of equipment constitutes a brake.
Until there is some precedent, the fixed gear cyclist can always try defending a violation of this statute by arguing that he or she can in fact brake by rearward peddling. It would make a fun day in court for the defendant to demonstrate that skill to the jury out in the court house parking lot.
Personal note: I've never ridden a fixed gear bike. My commuter bike has two hand brakes.
]]>These days, more often than not, I represent small businesses and refer cases from employees to other lawyers who specialize in plaintiff's work, but I will consider representing an employee in an appropriate case, assuming there is no conflict of interest.
The first thing you need to understand is that Texas is an "employment at will" state. Employment at will doesn't offer much protection to an employee who has been treated badly, but it does provide for freedom and flexibility. It provides you the freedom to tell a boss to take this job and shove it. The flip side of that is that it often gives a boss the same freedom to tell you to hit the road, Jack. Whether you like it or not, Texas is an employment at will state and complaining about the unfairness of that doctrine won't get you anywhere. Yes, the law does often allow bosses to be unfair jerks without getting sued. It also allows employees to be slackers and screw ups without getting sued. Mostly, it is a free market where employees and employers are free to come and go without the involvement of the courts. But that is not to say there are no legal protections.
In legal terms,"employment at will" is a legal doctrine in which either the employee or an employer can end the employment at any time, with or without notice, for any reason, or for no reason. Because the employment can be ended "at the will" of either party, it doesn't matter why or how the relationship ended, unless some other legal right is implicated.
Most employees in the private sector in Texas are "at-will." Unless you have a contractual agreement that provides you are hired for a certain length period of time or unless it provides that certain procedures, notices or requirements have to be met before termination or other adverse action can be taken, you are probably at will.
Some people have a hard time grasping the at-will concept, which is probably because so much is tied up in our jobs that we find it hard to believe that our employment really can be at the whim of an employer. Often people will tell me that they can prove their boss was wrong for firing them. Sadly, the answer is often "so what?"
Even if you can prove that your firing was wrong and that you should get your job back, the employer could turn around and fire you again the next day. Let's say your employer fires you because you were late. You can prove that you were on time. So? Even if you can prove that you should not have been fired, the employer can come up with another reason. The employer doesn't even need a reason, just like you don't need a reason to quit. (A bogus reason for firing you that is used as a cover up for illegal discrimination is another matter. That is called "pretext" and if you can prove it, you can win a discrimination case - assuming that discrimination laws apply to your case).
Union employees are an exception. If there is a collective bargaining agreement between the union and the company that alters the at-will nature of your employment, then you may have a case if the company didn't follow the rules set forth in the collective bargaining agreement. If you are a union employee, you are probably already aware of some of these procedures. Talk to your union representative.
Likewise, if you are a government employee, you are protected by the applicable civil service laws.
But even you if you are a non-union and non-government employee, it is possible you actually have an agreement that takes you outside of the employment at will status. If you have an agreement to remain employed for a certain length of time or until a certain date (and assuming that agreement is enforceable) then you are not an at-will employee. Contracts of that nature usually only allow an employee to be fired for certain causes, such as poor performance, or for misconduct.
It is also possible that you have an employment agreement that requires notice or imposes some other requirement, such as progressive discipline or warnings before you can be fired. Sometimes an employee handbook or memo might be construed to form a contract, even if you didn't sign it. You don't necessarily need to have signed a written contract to have a contract that takes you outside of employment at will. Generally, employee contracts and handbooks used by larger companies are carefully written by lawyers to remain "at-will" but this is not always the case. So if you find yourself in this situation, you need to look through all of these materials and bring them with you when you meet with a lawyer.
Also, discrimination and harassment based upon race, age, sex, marital status, pregnancy, religion, national origin, and disability are not excused by the employment at will doctrine. Most people are aware of these employee protections, but many people are not aware that these laws do not apply to all employers. Employers with fewer than 15 employees in each of the 20 or more calendar weeks of the current or proceeding calendar year are not covered by these laws in Texas. So if your employer was small and the reason you were fired was discriminatory, you may be back to looking to see if you had an employment contract.
A private sector employee may have a common law cause of action against an employer who retaliates against the employee because the employee refused to do something illegal. This should not be confused with "whistleblower" statutes. Whistleblower statutes protect governmental employees from adverse actions taken in retaliation for the employee blowing the whistle on some improper or illegal conduct undertaken by the employer. Private sector employees do not enjoy the same protections for blowing the whistle on their employers, but at least may have a case if they are fired for refusing to do something illegal.
Finally, there are a number of state and federal laws that protect workers, such as minimum wage and overtime laws, workers compensation and occupational safety laws. These laws can have implications when an employee is fired. For example, the Texas Payday Law requires an employer to timely pay employees, and this includes the last paycheck(s) for an employee who has been fired. The law also protects employees from retaliation for making a worker compensation claim and in connection with OSHA matters.
So as you can see, there are a lot of questions that have to be asked before a lawyer can answer this question, and this subject involves laws from a variety of sources, such as the common law of Texas, plus state and federal statutes. The information above is just a general overview and is not substitute for legal advice from your attorney.
If you think you have a case against your employer, you should consult with an attorney, and quickly, because there are short deadlines for taking action in many of these kinds of cases.
In 2008 and 2009, we have seen a large increase in demand for our collection and litigation services. We typically represent small businesses in their debt collections against other businesses, but also defend many consumers in debt collection cases brought by lenders and debt collectors. We generally do not represent lenders or creditors in cases against consumers, though we have defended a consumer debt collector in Fair Debt Collection case.
While the increased demand for collections services is an unfortunate sign of these hard economic times, we still have many entrepreneurial clients seeking our legal services in transactions such as starting a new business, buying or selling a business, trademarks, intellectual property agreements, contracts, leases, warranties, website terms of use, and other general business matters. Despite the economic downturn, Austin is still filed with an entrepreneurial spirit and we are pleased there is still demand for our legal services in these areas.
Highlights of Some Of Our Recent Plaintiff Victories
Securities fraud case, U.S. District Court, Texas, April 2009
$1.7 million agreed judgment. We have collected $327,500 from the defendant for our clients as of July 2009 and the remainder is scheduled to be paid according to an agreed schedule.
Other cases:
1. Pilgrim's Pride, breach of warranty and breach of contract, Harris County, TX, 2006.
$55,000 settlement. Pilgrim's Pride delivered a shipment of chicken in which some of the boxes contained chicken with bones, though our client ordered boneless chicken. Although the boxes were properly labeled, our client wasn't expecting any bones and they didn't discover the error until the chicken had already gone into their product. When we made our demand for compensation, the big firm Dallas lawyer hired by Pilgrim's not only denied our claim, but threatened us with sanctions if we filed suit. We filed suit, and Pilgrim's paid us to amicably settle the case.
2. Utility Company Damage to Electronic Equipment. Bastrop County, TX, 2006.
$17,604 settlement. The electronic control systems were damaged on our client's manufacturing equipment by excess voltage levels. Despite laws and contracts that favor the utilities, the utility company paid our demand in full.
3. Landlord Tenant Dispute, Travis County, TX, 2008
We won a summary judgment representing a tenant in a dispute with his landlord and were awarded actual and treble damages. Our client was paid a settlement prior to the hearing on our attorney's fees.
4. Commercial debt collection, Travis County Court, June 2009.
$15,000 settlement, paid in full. Amount of debt sued for: $13,992.
5. Commercial debt collection, Williamson County Court, July 2009
$17,800 agreed judgment. Amount of debt sued for: $15,800. $3,000 collected to date with remainder to be paid over tenth months.
Highlights of Some of Our Recent Defense Victories (and some golden oldies)
1. DirecTV cases, U.S. District Court, Austin, TX, 2005
In a classic instance of David versus Goliath, satellite TV giant DirecTV, Inc. sued thousands of individuals across the country for satellite piracy, based on the consumer's purchase of certain electronic "smart cards" that had allegedly been configured by the manufacturers for bypassing satellite encryption. We represented some local defendants and got their cases dismissed after we filed for summary judgment. We represented other individuals at the demand stage and persuaded DirecTV not to sue or further bother our clients.
2. Trucking accident, Harris County District Court, TX, 2006.
An injured truck driver sued our client, an independent trucking company, for personal injuries arising from an accident he blamed on faulty brakes and maintenance. Plaintiff claimed permanent disability and sought six figure damages. We settled the case for $5,000.00, which was less than the cost of going to trial. The previous law firm had used up most of our client's retainer. With what was left, we took over, took depositions, prepared the case for trial and got it settled, all on a shoe string budget. The owner credited us with saving his business.
3. Frisch v. General Motors, Llano County, TX, 2006
Case dismissed. Frisch sued GM for products liability, alleging serious injuries and paralysis from a truck rollover. We served as local counsel and took a major role in preparing the summary judgment that resulting in plaintiff dropping the case.
4. Personal Injury and Assault Case, Travis County, TX, 2007
Our client was sued for motor vehicular assault on two individuals and was arrested on the same charges. Plaintiffs sought punitive damages and the case had the potential to become a high profile case. We quietly settled the civil case for $2,000.
6. Dodeka, LLC v. S.P., consumer debt case, Travis County, July 2008.
Case dismissed after we filed for summary judgment.
7. Dodeka, LLC v. R.S., consumer debt case, Travis County, September 2008
Case dismissed after we filed for summary judgment.
8. Dodeka, LLC v. E.W., consumer debt case, Travis County, October 2008.
Case dismissed after we filed for summary judgment.
9. Dodeka, LLC v. B.M., consumer debt case, Williamson County, February 2009
Judgment for defendant.
10. Unifund CCR Partners v. C. E., consumer debt case, Travis County, April 2009
Settlement in our favor. Unifund paid our client $2,000 for attorney fees and damages on our FDCPA counterclaim and my client paid Unifund nothing.
11. Family Law and Privacy case, Travis County, April 2009
Our client's phone records were subpoenaed in a child custody case. Our client was not a party to the custody dispute and resented the invasion of his privacy. The party seeking the records was wealthy and hired one of the most prominent family law and criminal defense law firms in town. We got the subpoena quashed on the grounds of privacy and we were awarded attorney fees.
12. Capital One v. F.T., consumer debt case, Travis County, April 2009
Case voluntarily dismissed by Capital One.
13. CACH, LLC v. M.A., consumer debt arbitration award confirmation case, Williamson County, April 2009.
Motion to vacate arbitration award granted, case dismissed with prejudice.
14. State of Texas v. R&S, Navarro County, TX, April 2009
ADA violation complaint: voluntarily dismissed.
15. Unifund v. L.P., LLC consumer debt case, Williamson County, June 2009.
Amount of claim was $28,693.71, plus attorney fees and interest. We settled it for $500.
16. Pharia, LLC v. K.J., consumer debt case, Bastrop County, June 2009
Case dismissed after we filed for summary judgment.
17. Discover v. K.L., consumer debt case, Harris County, July 2009
Case dismissed after we filed for summary judgment.
18. State of Texas v. A.P., regulatory violation, Travis County, July 2009
Amount of claim: $6,750.00. We settled it for $1,000.00.
17. CACH, LLC v. A.B., Travis County, August 2009
18. CACH, LLC v. P.K., Travis County, August 2009
Plaintiff had an arbitration award for over $65,000 and filed a petition to confirm the award. The case had been on file for two years and was set for trial. We came less than 30 days before trial, filed a plea to the jurisdiction, and got the case dismissed.
Case dismissed.
Deals and Transactions
In addition to numerous successful trademark applications, contract review and negotiations, we have worked on some deals for clients whose products and services are just plain fun to mention.
Toy Joy, sale of business, Austin, TX, 2008. We represented the buyer.
Abel's on the Lake, Austin, TX, 2009. Entity formation, negotiations with minority members.
Consistently, I have found that when the credit card debt has been purchased by a debt collector, the debt collector does not have the necessary admissible evidence to overcome my properly raised hearsay objections. Usually, the debt collector cannot prove that it actually owns the debt, or cannot prove the amount of the debt. It isn't for lack of trying or lack of bluster on their part. They invariably come forward with documents they claim prove their case. But these documents seldom meet the requirements for the business records exception to the hearsay rule.
Sometimes, these battles are hard fought, and other times they come relatively easy. For example, in the past few months, I had one credit card case in which the debt collector was about to go to trial. I got hired by the consumer at the last minute, soon before the pretrial hearing. The debt collector didn't show up. Whether that was because I had made an appearance, I can only speculate. Of course, the case was dismissed.
Another case had lingered for over a year. I had done my discovery and everything else I knew to defend the case and was simply waiting for the plaintiff to make a move. Then the debt collector simply dismissed the case out of the blue one day. Oddly enough, this case was brought by the credit card company and not a third party debt collector. Thus, they had access to the evidence they needed but just gave up, for reasons only known to them.
Strangely, the debt collectors who fight me the hardest are the ones who have the most rotten cases. I used to routinely see them drop these cases soon after I started defending them, but now they seem to want to fight. I don't know if this is a function of the economy or because they are getting tired of me beating them and think somehow they are going to school me. This is foolish on their part. You do not school your opponent by going to trial with your weakest case, unless you think it somehow schools your opponent by handing him an easy victory.
I have seen a drop in the number of cases they are filing past the statute of limitations deadline, but they're still doing it. It's a violation of the Fair Debt Collection Practices Act (FDCPA) for a debt collector to serve a lawsuit on a consumer for a consumer debt if the lawsuit was filed after the statute of limitations and the debt collector or their lawyers knew or should have know that it was past the statute of limitations.
In Texas, the statute of limitations is four years. Usually it is calculated from the date of the last payment, because that is the date of your last "dealing" with them. If it has been more than four years since your last payment and the time they file suit, you may have a FDCPA claim. If so, you may be able to recover statutory damages of $1,000 per suit, plus actual damages, attorney's fees and court costs. And of course, their claim against you should be completely barred by the statute of limitations. So, on these cases, they get nothing, my clients get some damages, and we can make them pay the attorney's fees.
You do, however, bear the burden of proof on the statute of limitations defense and the FDCPA. I am often asked how can we prove this defense? Well, your own testimony is proof, assuming you remember when you made your last payment. Your bank records are another source of proof. Your old credit card statements are another source.
Other times, we rely upon information provided by the plaintiffs. Incredibly, these plaintiffs sometimes state in the petition or its exhibits when the last payment was made. If that date was more than four years before they filed suit, they have a problem. In those instances, I strongly recommend to my clients to file a counter-claim for violation of the FDCPA. It is hard for them to claim they didn't know the debt was past the statute of limitations when you can tell it is just from reading the petition.
A growing trend in credit card debt collection is to file the claims with the National Arbitration Forum (NAF). A consumer group did a study and found that the debt collection and credit card industry wins those arbitrations about 94% of the time. The perception is that this is not a fair forum. This much I know. Its rules of procedure afford a defendant much less opportunity to defend his or her self than the defendant would have in a Texas state court. It is my perception that the arbitrators at the NAF will be much more lax about the rules of evidence than would be a Texas state judge.
Thus, the key to winning before the NAF is not to go there in the first place. Before consenting to arbitration before the NAF, the debtor should first determine whether he or she ever signed an arbitration agreement or otherwise agreed to arbitration.
Typically, credit card companies send consumers a notice of some kind informing them that if they continue to use the card, they are agreeing to arbitration. Or so the credit card companies claim. If the credit card company cannot prove that there was a binding, valid arbitration agreement, then the consumer can either file an objection to the arbitration with the NAF, or file a petition in state court to stay the arbitration.
Assuming you can afford the filing fee, I recommend filing a motion in state court and not just relying upon filing an objection to the arbitration forum itself. Why? Somehow, I don't expect the arbitrators with the NAF are going to side against themselves and rule there was no arbitration agreement. If they do that, they are biting the hand that feeds them.
Most business owners recognize the value in setting up their business as a corporation or limited liability company. The main value of either form of entity is the potential protection from personal liability for the debts and liabilities of the company. This can be a huge advantage. Along with adequate insurance, this is the obvious and easiest way to limit your personal liability as a business owner.
But small business owners are often confused by the choice between a limited liability company or an S corporation.
The trend in Texas for the small business owner is towards using the limited liability company. Limited liability companies are more flexible in who can be an owner and can be easier to operate. There are a few less forms to fill out.
But one size does not fit all. In some instances, the S corporation still offers a tax advantage that makes it a better choice.
I don't give advice on this issue until after I have carefully interviewed a client to determine which form of entity is going to be the best fit and have the best tax advantages. Which form is best for you depends on your facts and circumstances.
But in general, for a small family owned and operated business, with no outside investors, I still favor the S corporation because of the potential savings in payroll taxes on the owner's salaries. In contrast, if there will be outside investors or owners who do not work for the company, I favor the limited liability company.
Speaking of investors, quite a number of small business people don't realize that offering to sell investors an interest in your company may get you in trouble for violating securities laws if it is not done correctly. This is where a lawyer's advice and guidance is important.
There are lots of do-it-yourself websites that will sell you some forms for incorporation, but none of them are going to help you with securities law or offer you any legal advice on how to properly maintain your corporation or limited liability company.
These on-line incorporation services charge too much for what little they offer. Finding and filling out the forms is the easy part. If all you want is forms, get them for free from the Texas Secretary of State's website. Don't waste your money paying some so-called legal website $149 for some forms you could have gotten for free.
It is the legal knowledge, experience, advice, professionalism and service that you are paying for when you hire a lawyer to help you start a business. You can't get that from an on-line incorporation service.
I offer a low, discounted flat fee to clients who hire me to help them start a corporation or limited liability company.
-Have you been sued by someone other than the original creditor?
-Sued by some company with an odd sounding name like AIS Services, CACH, Credigy, Commonwealth, Dodeka or Unifund?
-Is the debt past the statute of limitations?
-Did you already pay off or settle the debt and still they are suing you?
-Are they harassing you?
I have helped a lot of people with these cases. The usual outcome is that I get the case dismissed. Sometimes I can even recover your attorney's fees and damages.
Part One: About me
Civil litigation is a major part of my law practice. My clients tend to be small businesses, but I also represent individuals. I have been an attorney since 1995. I have successfully defended people against many credit card cases.
www.creditdefenselaw.com
Part Two: The Statute of Limitations Defense
There are time limits on filing a lawsuit. These are called "statute of limitations." Under Texas law, the statute of limitations on credit card debt is four years from when you breached your contractual obligation to pay the credit card bill. If more than four years have passed since your credit card became past due and you have not made a payment since then, the statute of limitations has probably run. If the credit card company did not file the lawsuit until after these four years, then you should be able to get the case dismissed.
Unfortunately, there are things you can do to reset the statute of limitations clock, like making a payment or signing an agreement with the credit card company.
The statute of limitations is an affirmative defense. This means you have to raise the defense in your answer to the lawsuit. You also have the burden of proof on this defense. This is something you should be able to prove by looking through your bank records and credit card records. At the very least, you need to be willing to testify under oath that the default was more than four years ago.
Part Three: Other Defenses: Standing To Bring the Lawsuit
Often times, the companies who purchased these debts from the credit card companies don't have sufficient records to prove that they actually own the debt. They try to fake it, but their so called "business records" often are inadmissible if you know how to challenge them. If they can't prove they own the debt, I can get the case dismissed.
Part Four: The Fair Debt Collection Practices Act
If a debt collector sues you (or even threatens to sue you) for a debt that it knew (or should have known) was past the statute of limitations, that is a violation of the Federal Fair Debt Collection Practices Act (FDCPA). If you can prove they violated the FDCPA, you can sue them for actual damages, statutory damages of $1,000, and attorney's fees.
Other violations of the FDCPA include making threats to put a lien on your homestead, threats to have you arrested, misrepresenting themselves as law enforcement or a government agency, calling you at odd hours, refusing to verify the debt, and so on. There is a whole list of bad behavior that violates the FDCPA. If you hire me, I will go through the facts of your case with you to see if you have a FDCPA claim.
Filing a countersuit for violation of the FDCPA can be a very effective strategy, and it is the main method by which you can recover attorney's fees and damages in these cases.
Part Five: Settlement
Sometimes, the plaintiffs do manage to prove the debt, there is no statute of limitations defense, and the violations of the FDCPA, if any, add up to less than what you are being sued for. In those cases, it is not likely that the case will get dismissed, but I can try to negotiate a favorable settlement.
Part Six: Contacting Me
You are probably wondering what it will cost to hire me. After you and I have discussed your case, I will be glad to explain my fees to you. I won't charge you anything to call or email me to discuss whether or not I am willing to take your case. I won't charge you anything to discuss my fee arrangements. The first call is free.
If you are thinking of hiring me, don't delay. The deadline to answer a lawsuit is pretty short, and it is really short in the small claims and justice of the peace courts.
Part Seven: Information I Need
If you email me or call me, please have the following information ready:
-your name, address and telephone number;
-the geographic location of the court and the name of the court;
-the date on which you were served with the lawsuit;
-the last date on which you paid the credit card;
-the date the lawsuit was filed (look up in the top right corner of the first page of the petition for a date stamp);
-the amount you are being sued for;
-the name of the lawfirm or lawyer who is suing you; and
-the name of the plaintiff who is suing you.
Part Eight: Past Outcomes
Past outcomes or results are no guarantee or prediction of your results. Each case is unique and the outcome depends on the facts and other factors.
Having said that, people nevertheless want to know what kind of results I have obtained in these cases.
The most common result is that I get the case dismissed without my client paying any money to the debt collector. While my clients do have to pay my legal fee, my legal fee have always been far less than what they were being sued for and less than what the debt collector would have been willing to settle for.
In some cases, I also am able to recover damages and attorney's fees. To get damages and attorney's fees takes a stronger case than those that just result in a dismissal. We have to be able to prove that the debt collector knowingly violated the FDCPA or otherwise acted carelesssly or in bad faith. If I recover a sufficient amount of attorney's fees on the counterclaim, then my representation ends up being free for my client, and any damages collected are paid directly to my clients.
please visit my other website devoted exclusively to credit card lawsuits: www.creditdefenselaw.com
If you wish to contact me about your case, please send me an email. Please do not submit a comment to this blog for that purpose. You can email me at info@simmonspc.com
Entrepreneurs know the importance of securing a domain name or web site address to match the name of their new business.
Some entrepreneurs also mistakenly assume that once they acquire the domain name and start using it in connection with their business, a trademark for the domain name is sure to follow.
This is not the case.
Now, it is possible to have a trademark that matches your domain name. Amazon.com is a good example of it.
And it is also possible that your use of a domain name in connection with the sale of goods or services may help you establish your eligibility for a trademark. The fact that you own or have registered a domain name, however, is not how the Patent and Trademark Office determines if your domain name is eligible for trademark protection under federal law.
So, before investing in a company name, you should determine if the desired domain name is available and also determine if the name is available and eligible for trademark protection.
What if you don’t care about a trademark and just want to use the domain name? Well, if another company has a trademark that is the same or similar to your domain name, then you may be facing a trademark infringement action, depending on whether your use of the domain causes a likelihood of confusion. The fact that you registered a domain name is not a strong defense against a claim of trademark infringement by the owner of a federally registered trademark.
For the do-it-yourself crowd, you can apply for a trademark by going to the U.S. Patent and Trademark Office (USPTO) website, http://www.uspto.gov
If you would rather have an attorney guide you through the process, we offer a full range of trademark services, including trademark searches, eligibility analysis, trademark applications and trademark litigation.
If you would like to consult with us on a trademark matter, please contact us directly by email or telephone.
If you would just like to leave a general comment, please feel free to post your comment here.
]]>Recreational scuba divers are taught to always dive with a buddy for safety. A dive buddy is another scuba diver who presumably will stay nearby throughout the dive and be there at the diver’s side to help in the event of an equipment failure or other problem. Within the limits of a diver’s training and ability, it is also assumed the dive buddy will attempt to aid or rescue the other diver in the event of an emergency. Rescue techniques are the focus of numerous recreational diving courses, starting with the basic open water class, in which divers learn how to share their air supply with an out-of-air buddy, through more advanced courses devoted entirely to the subject of rescuing divers, whether they are buddies or strangers.
The entire system of recreational diving seems to be based on the assumption that a diver will come to the aid and rescue of his buddy. But what if a diver bails out on his buddy? Can a diver whose failure to aid his buddy contributes to the buddy’s death or injury be held legally responsible under Texas law?
The answer depends upon whether being a dive buddy constitutes a “special relationship” under Texas law. And the answer is not clear under the law. I would argue, however, that in general, no such legal duty should exist. The duty should be a moral duty, not a legal duty. There may be special factual circumstances in which a special relationship should be imposed on dive buddies, but in general, to do so would cause more harm than good to the sport and its safety.
Legal AnalysisTexas law imposes no general duty to come to the rescue of others who, through no fault of the would-be rescuer, are found to be in peril. For example, a motorist who happens to witnesses a pedestrian having a heart attack on the sidewalk is under no legal duty to stop and provide assistance. See Howell v. City Towing Associates, 717 S.W.2d 729, 733-34 (Tex. App. – San Antonio 1986, writ ref. n.r.e.), citing Section 314A of the Restatement (Second) of Torts.
This is true even if the person realizes that action is necessary on his part for another’s aid or protection, see Section 314A of the Restatement (Second) of Torts. The Restatement gives an illustration of a strong swimmer who sees another swimmer floundering in deep water and obviously unable to swim. The strong swimmer is under no duty to rescue, because the other swimmer has fallen into peril through no conduct of the strong swimmer. It would not even matter if the strong swimmer hated the other swimmer and failed to rescue him for that reason. If there is no duty to rescue, the reason for failing to rescue is irrelevant. Id.
Thus, it should be clear under Texas law that one diver does not owe a duty to rescue some other distressed diver who he happens to come upon who is not his buddy.
But the analysis does not end there. An exception to the no-duty-to-rescue doctrine is when there is a special relationship between the victim and would-be rescuer. See Howell v. City Towing Associates, 717 S.W.2d 729, 733-34 (Tex. App. – San Antonio 1986, writ ref. n.r.e.). A legal duty to provide aid to others can imposed by certain special relationships, such as the relationship between a common carrier and passenger, employer-employee, doctor-patient, attorney-client, parent-child, hirer-independent contractor, and parties to a contract. A person who fails to meet this duty can be sued for negligence if his failure causes harm to the other person.
In Howell, the court found that a tow truck operator had a legal duty to provide aid to a passenger whose car he was towing, because by transporting the passenger, he was acting as common-carrier, which is one of the special relationships recognized by the law. The court held the tow truck company could be sued for the driver’s failure to take the passenger to the nearest hospital when he suffered a heart attack while riding in the tow truck. Howell, 717 S.W.2d at 733-34. In other words, the tow truck driver had a duty to rescue his passenger because the tow truck was a common carrier.
So, we know if dive buddies have a special relationship, there is a duty to rescue. There are, however, no reported Texas decisions deciding whether the relationship between dive buddies constitutes a special relationship.
If this issue is ever presented to a Texas court, it will have to apply a risk versus utility test to determine if a special relationship exists. See Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990). The court must balance several interrelated factors. It must weigh the risk, foreseeability, and likelihood of injury against the social utility of the actor's conduct, the magnitude of the burden of guarding against the injury, and the consequences of placing the burden on the defendant. Id. Another factor is whether one party had superior knowledge of the risk or a right to control the actor who caused the harm. Graff v. Beard, 858 S.W.2d 918, 920 (Tex. 1993).
Factors such as risk, foreseeability and the likelihood of injury weigh in favor of imposing a special relationship. The risks of failing to aid a dive buddy include serious injury or death, the serious injury or death is foreseeable, and the likelihood of injury or death from failing to aid or rescue is great. For example, a diver who refused his buddy to share air with a buddy who signaled he was out of air is surely aware that his refusal is risking his buddy’s death.
In contrast, factors such as the magnitude of the burden of guarding against injury and the consequences of placing the burden on the rescuer weigh against finding a special relationship. While some aid or rescue situations impose no real burden, other rescue situations, like that of a diver in panic, can place the would-be rescuer in real danger. Likewise, racing after a buddy who had descended too deeply, in an effort to stop his further ascent, can surely risk killing both divers.
The consequence of imposing a special relationship on dive buddies could be to discourage the practice of dive buddies altogether, which would destroy much of the camaraderie and social nature of the sport. Typically, in dive clubs and on dive boats, divers will readily pair up with other divers in order to form buddy groups as well as to be sociable. Fear of lawsuits could only discourage divers from being buddies, and would make it more difficult for less experienced or capable divers from finding a buddy at all.
The imposition of special relationship liability on dive buddies would tend to chill the social aspect and make it harder for divers to find buddies. This would tend to encourage more solo diving, which is regarded as an unsafe practice for most recreational divers, who lack the necessary experience, training and redundant equipment for solo diving.
Granted, fear of lawsuits might also discourage the practice of “same ocean” dive buddies. These are dive buddies who make no effort to stay near and monitor their buddy, and whose “same ocean” proximity defeats any real safety value. Imposing legal liability on such buddies might result in a small incremental improvement in dive safety, but the chilling effect on the social nature of the sport would outweigh this small incremental improvement.
The factor of superior knowledge is the one that poses the biggest dilemma. On the one hand, an experienced dive buddy would seem to owe a duty to look after the less experienced buddy. Indeed, in many recreational diving situations, inexperienced divers will be teamed with an experienced diver just for this reason, and worried family members on shore may even be counting on the experienced diver to keep a close eye on the inexperienced diver. In such circumstances, to abandon the inexperienced diver in a crisis would be reprehensible. On the other hand, imposing a special relationship simply because one diver was more experienced would tend to discourage experienced divers from taking the less experienced divers under their wings. That would reduce the overall safety of the sport and make the journey from inexperienced to experienced diver a more perilous and lonely journey.
There is one “buddy” situation in which the law is clear. Under both statutory law and the “marine rescue doctrine,” a diver who is also the operator or captain of a boat owes a duty to provide aid to a buddy who falls overboard or who is otherwise injured in a collision or casualty, if he can do so without serious danger to his vessel, crew or other passengers. Tex. Parks and Wildlife Code § 31.104; Ricardo N, Inc. v. de Argueta, 907 S.W.2d 423 (Tex. 1994). But this duty arises out of the diver’s status as a boat operator, and not out of his status as a dive buddy.
In conclusion, there is currently no answer to this question under Texas law. Should the question arise, the outcome will probably depend heavily on the facts of the case.
Copyright 2007 by Andy Simmons
]]>Anyone who has taken a scuba diving class or has been diving on a commercial dive boat in the past several decades probably signed a liability release or waiver as a condition of participation. But are they enforceable in Texas?
If done properly, scuba diving liability releases can limit a dive professional’s exposure to liability. Whether a release will be enforceable in any given case will depend on the facts and circumstances surrounding the execution of the release as well as the language and format of the release.
Why is A Release Even Necessary?Why is a release even necessary? Isn’t assumption of the risk of injury or death implied from a diver’s voluntarily participation in a “risky” sport like scuba diving? Answer: No. Once upon a time, anyone who voluntarily participated in a supposedly risky or dangerous activity such as scuba diving “assumed the risk” of injury or death and was therefore precluded from holding other people responsible for his or her injuries, but this is no longer the law. This is no longer the law. See Farley v. M.M. Cattle Co., 529 S.W.2d 751, 758 (Tex. 1975). The express-negligence doctrine now requires that assumption of the risk be expressed in a written agreement between the parties. See Dresser Industries v. Page Petroleum, 853 S.W.2d 505, 507-08 (Tex. 1993.)
Assumption of the risk is still implied in some competitive contact sports like polo, see Connell v. Payne, 814 S.W.2d 486, 488 (Tex. App.—Dallas 1991, writ denied.) Assumption of the risk even applies to sports like golf, though golf it is not considered to be a contact sport in the same manner as polo or football. But as the court explained with regard to golf in Hathaway v. Tascosa County Club, 846 S.W.2d 614 (Tex. App.—Amarillo 1993, no writ), “[a]cts that would be negligent if performed on a city street or in a backyard are not negligent in the context of a game where a risk of inadvertent harm is built into the sport.” Id. at 616-17. In such sports, to have a case, the injured player must prove that the defendants acted recklessly or intentionally and not just carelessly or negligently. This is usually difficult to prove.
Texas courts have consistently refused to extend this implied assumption of the risk to non-contact sports like parasailing, see Bangert v. Shaffner, 848 S.W.2d 353, 356 (Tex.App.—Austin 1993, writ denied) and scuba diving; see Newman v. Tropical Visions, Inc., 891 S.W.2d 713 (Tex.App.—San Antonio 1994, writ denied.) While it may surprise the reader that assumption of the risk still applies to “safe” sports like golf but not to “dangerous” sports like scuba diving, the deciding factor is not whether the sport is “dangerous,” but rather, whether the game carries an inherent risk of injury from competitive contact by the other players. Golf may be a gentleman’s sport, but the risk of hitting another golfer with a ball is inherent, and to impose liability on golfers for slicing would destroy the game. The inherent risks in scuba, in contrast, do not come from competitive contact with other divers and it would not destroy the sport to impose liability for diving injuries caused by negligent instruction or dive boat activities.
So we see that a written release is necessary. But how do we know if a release will be enforceable?
The Only Texas Scuba Case: Newman v. Tropical Visions, Inc.The question of the enforceability of a liability release in scuba diving has only been decided once by a Texas court of appeals. Newman v. Tropical Visions, Inc., 891 S.W.2d 713 (Tex. App.—San Antonio 1994, writ denied) was a lawsuit filed in Bexar County, Texas against a San Antonio dive shop and a scuba instructor. The lawsuit was filed by the family of a woman, age 65, who died while completing open water scuba certification course taught by the defendants at Lake Travis, Texas on May 6, 1990. The opinion does not discuss any of the details of the accident. The family alleged negligence, gross negligence and violation of the Texas Deceptive Trade Practices Act.
While there is no mention of the accident details, the court decision notes some very important pre-accident facts. One fact is that prior to her first class, the diver signed a PADI (Professional Association of Diving Instructors) “Affirmation and Liability Release,” along with an enrollment application, a “Statement of Understanding for Skin and Scuba Diving,” a medical statement, and a “Standard Safe Diving Practices Statement of Understanding.” Another fact was that the instructor went over these forms with his students, no student was compelled to sign them, and students could have received a refund if they chose not to participate by not signing the form.
The signed and completed “Affirmation and Liability Release” read:
“PADI AFFIRMATION AND LIABILITY RELEASE (read carefully before signing)
I HAVE FULLY INFORMED MYSELF OF THE CONTENTS OF THIS AFFIRMATION AND RELEASE BY READING IT BEFORE I SIGNED IT.”
Beneath this last line appeared Ms. Newman’s signature, address and age.
After the lawsuit was filed, the dive shop and instructor filed a motion for summary judgment. A motion for summary judgment is a procedure used by defendants to dismiss a case without the necessity of a trial. Normally, it is the role of a jury to decide the facts and determine the amount of damages owed, if any, but if the undisputed facts show that the defendants are not liable under the law, the judge can dismiss the case without a trial by granting a motion for summary judgment.
The defendants based their motion upon two affirmative defenses: (1) release; and (2) consent/express assumption of the risk. By raising these affirmative defenses, the defendants claimed that even if the allegations against them were taken as true, the release signed by the diver absolved them of any legal liability for her death.
The trial court granted the defendants’ motion and dismissed the case, and the plaintiffs filed an appeal to the San Antonio Court of Appeals and raised nine legal challenges to the summary judgment. While an analysis of every point would be beyond the interest of divers, there are some valuable lessons to be learned from this case. The court of appeals did find the release was enforceable, but it is important to understand how and why the court reached this decision.
The Circumstances Of The Release Are ImportantIn Newman v. Tropical Visions, Inc., one of the challenges raised by the plaintiffs on appeal concerned the circumstances surrounding the signing of the release. For a release to be valid, the person signing it must do so under circumstances in which it is voluntary, without duress, and the diver must clearly understand that what she is signing is a release of liability for injury or death. This reality is recognized in PADI’s own literature. “Courts often examine the circumstances in which a release is signed to determine whether the signer understood the contents and consequences of the release.” The Law and The Diving Professional, by E. Steven Coren, J.D., PADI 1995, page 57.
To prove the circumstances in Newman v. Tropical Visions, Inc., the defendants’ motion for summary judgment included an affidavit from the instructor, in which he testified that each of the students was given the release to inspect and sign, read and understood the release, and was given the opportunity to ask questions about the release. He also testified that the students were not forced to sign the release. Any student who was unwilling to sign the release would not be able to participate but could obtain a refund.
The plaintiffs challenged the fairness of allowing this affidavit as summary judgment evidence, because the diver had died and was therefore not available to contradict the instructor’s testimony. The court rejected this challenge, however, because the other students were still available, yet the plaintiffs did not present any testimony from the other students to contradict the instructor’s statement.
Thus, we see that it is important for dive professional to do more than just collect signed releases. The dive professional should inform the students that they are being asked to sign an important legal document that is intended to release the dive shop and instructor from liability for injuries, even if those injuries are caused by the negligence of the dive shop or instructor. The dive professional should “not belittle the nature of the release or give the students the impression that it is merely one more piece of insignificant paperwork.” The Law and The Diving Professional, by E. Steven Coren, J.D., PADI 1995, page 57.
The dive professional should give the divers an opportunity to read the release and ask questions about it before they sign it. And this procedure should be conducted in a group setting, so that there will be witnesses to it. If there are no witnesses, then testimony about the circumstances may be just the dive professional’s word against that of the injured diver, and in the case of a deceased diver, may not be admissible in a summary judgment proceeding.
One caveat, however, is that the dive professional should not go so far as to attempt to interpret or explain the legal effect or consequences of the release. Doing so could result in the student misunderstanding the nature of a release. Id. Does this sound like a contradiction? The dive professional walks a fine line. It must be made clear that the divers are signing a liability release, and the dive professional should be willing to answer questions, but if the questions call for legal opinion or interpretations, the instructor should inform the students he cannot give them any legal advice. It is the dive professional’s duty to inform the divers as to what they are signing, but it is not his duty to provide legal opinions.
Another lesson to draw from this case is the issue of refund. The court in Newman noted that divers could obtain a refund if they were unwilling to sign the release. Though the court did not elaborate on this aspect, it is significant because a release must be voluntary to be enforceable. Offering a refund to a diver who is unwilling to sign a release helps eliminate the ability of the diver to later claim that he did not voluntarily sign the release.
Many Texas dive boats operators do not ask the diver to sign and furnish a release until after the diver has already paid the local dive shop, taken time off from work, driven hundreds of miles down to the gulf where boat is located, and is walking aboard the boat with his scuba gear. It could be argued that a release signed under these circumstances is too late and has become less than fully voluntary. At this point, the diver has already made a substantial investment in time, money and emotional commitment to the dive and would forfeit all of these things if he refused to sign. Most divers know in advance that they will be asked to sign such a release, which may undermine the argument, but it is still not a best practice. Divers should be required to sign a release before they make their investment in the dive trip. While it may annoy customers, it would not hurt to require the diver to sign the same release again before they board the boat, so that divers cannot claim they had forgotten about the previous release they had signed at the time of the reservation.
The PADI Release Is Found To Be ClearTo be enforceable, the liability release form must clearly show its intention to release the dive shop and instructor from any liability for injuries or death cause by their negligence.
In Newman v. Tropical Visions, Inc., the plaintiffs argued on appeal that the PADI release did not clearly state that the diver was assuming the risks of diving. The court of appeals disagreed. While the form did not use the precise words “assumption of the risk,” the court held “[i]t would be difficult to imagine language more clearly designed to put a layperson on notice of its legal significance and effect. We therefore hold that under the agreement Newman effectively assumed all of the risks of any injury she might suffer as a result of the defendants’ negligence during the scuba training course.” Id, 891 S.W.2d at 719.
Before one concludes that the PADI form is bullet proof, however, it should be noted that several potential challenges to the release in Newman v. Tropical Visions, Inc., were not considered by the court because the plaintiffs’ attorney did not raise the challenges until the case reached the court of appeals, which was too late. But other plaintiffs in other cases are still free to raise these challenges. These are discussed below.
Fair Notice RequirementTexas courts traditionally have disapproved of parties avoiding liability for harm caused by their actions, so courts have strictly construed liability releases to prevent parties from avoiding liability by vague, deceptive or confusing releases. Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex. 1987). Thus, the Texas courts require that a liability release must give fair notice in order to be valid. Fair notice consists of meeting two requirements: (1) the express negligence doctrine; and (2) conspicuousness. See Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex. 1990.)
The express negligence doctrine requires the intent to release a party from its own negligence be stated within the release, and it specifically requires that word “negligence” be used in the release. See Victoria Bank & Trust Co. v. Brady, 811 S.W2d 931, 938 (Tex. 1991).
The conspicuousness requirement mandates that the release use clear and unequivocal language, so that a reasonable person would notice that the form they are signing is releasing the other party of negligence. See K&S Oil Well Serv., Inc. v. Cabot Corp., 491 S.W.2d 733, 737-38 (Tex.Civ.App.—Corpus Christi, writ ref’d n.r.e.). This requirement can be met by using bold print, capital letters, larger print or red ink to highlight and contrast the portion of the release that contains the release language. See Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex. 1990). In contrast, putting the release language on the back side of a contract or in fine print will not meet this requirement.
The Newman case did not determine if PADI’s release form met either of these requirements because these issues were waived on procedural grounds. The PADI form probably would meet the express negligence requirement, because the form specifically mentions “negligence” and was otherwise clear about its intentions.
On the other hand, it does not appear that the PADI release utilized any conspicuous print except in the last sentence, which stated “I HAVE FULLY INFORMED MYSELF OF THE CONTENTS OF THIS AFFIRMATION AND RELEASE BY READING IT BEFORE I SIGNED IT.” While this last sentence is conspicuous, it does not contain the key language concerning the release of liability from negligence. It is the key language that must be conspicuous. This last sentence is a useful sentence, but it is not the key part of a liability release. The PADI release form that was the subject of the Newman case therefore did not met the conspicuousness requirement.
By contrast, the current PADI release forms contain the following key language in large capital letters that stand in contrast to the rest of the form: “I, __________, BY THIS INSTRUMENT AGREE TO EXEMPT AND RELEASE MY INSTRUCTORS, ___________, THE FACILITY THROUGH WHICH I RECEIVE MY INSTRUCTION, _________________ AND INTERNATIONAL PADI, INC., AND ALL RELATED ENTITIES AS DEFINED ABOVE, FROM ALL LIABILITY OR RESPONSIBILITY WHATSOEVER FOR PERSONAL INJURY, PROPERTY DAMAGE OR WRONGFUL DEATH HOWEVER CAUSED, INCLUDING BUT NOT LIMITED TO THE NEGLIGENCE OF THE RELEASED PARTIES, WHETHER PASSIVE OR ACTIVE.”
This current PADI form would appear to meet the conspicuousness requirement, as well as the express negligence doctrine. On the other hand, the average do-it-yourself release used by some small dive boat operations do not meet these requirements. They tend to lack bold print, capital letters or other appropriate forms of highlighting the key language in the release, and in their desire to avoid legalese, forget to mention “negligence” as required by the express negligence doctrine.
Gross NegligenceWe have now seen that a clearly written liability release that meets the fair notice requirements can be effective against negligence claims. But what about gross negligence? Will a release also be effective against claims of gross negligence? In Newman, the court held that it was, but this is questionable precedent.
Put in the simplest terms, negligence is carelessness. Negligence is the basis for most personal injury and wrongful death claims. Gross negligence, by contrast, is more than momentary thoughtlessness, inadvertence, or error of judgment. It means such an entire lack of care as to be conscious indifference to the rights, safety or welfare of others. Typically, gross negligence is alleged in a personal injury or wrongful death lawsuit, if at all, only as the basis for awarding punitive damages. Gross negligence is difficult to prove, and contrary to the impression given by sensational jury verdicts, punitive damages awards are relatively rare.
The difficulty of proving gross negligence does not stop plaintiff attorneys from alleging it. Indeed, it is almost a given that a plaintiff lawyer in Texas will allege gross negligence in a scuba diving case, if for no other reason than to get around a liability release.
In Newman, the plaintiffs alleged gross negligence and argued on appeal that a release which exempts a party from its own gross negligence is against public policy and is therefore invalid. The plaintiffs relied on Smith v. Golden Triangle Raceway, 708 S.W.2d 574 (Tex.App.—Beaumont 1986, no writ.) In Smith, the plaintiff was injured while in the pit area of a raceway. The plaintiff had signed a liability release in order to gain access to the pit area. The trial court granted a motion for summary judgment based on this release. The court of appeals found that the release was clear and valid as to the negligence claims, but remanded the case for trial on the gross negligence claims. Following the examples of numerous other states, the court held the release was against public policy and was unenforceable against gross negligence claims.
In Newman, the majority opinion altogether side stepped the public policy issue. Instead, the majority held that because the release prevented the plaintiffs from recovering any actual damages on their ordinary negligence claim, the plaintiffs therefore could not recover any punitive damages for gross negligence. The majority based its reasoning on the general rule that there must be an award of actual damages before there can be any award for punitive damages. Newman v. Tropical Visions, Inc., 891 S.W.2d at 722. One of the justices dissented, arguing that as long as the plaintiff has suffered actual damages, the fact that the damages are not recoverable due to a release does not preclude recovery under a claim for gross negligence. Id. at 725.
It is difficult to reconcile this aspect of the majority opinion in Newman with other Texas decisions, including subsequent Texas Supreme Court decisions. In particular, in Memorial Medical Center of East Texas v. Keszler, 943 S.W.2d 433, 435 (Tex. 1997), the Texas Supreme Court acknowledged the public policy argument in Smith v. Golden Triangle Raceway and appeared to be in accord with it. Likewise, the Court upheld an electric utility company’s rate plan, which acted similar to a release by limiting its liability for negligence, specifically because the plan did not go so far as to preclude claims based on gross negligence. Southwestern Electric Power Co. v. Grant, 73 S.W.3d 211, 220 (Tex. 2002).
Newman is at odds with these cases but has never been overturned. The law is therefore unclear, and dive professionals should not assume that a release will protect them from gross negligence claims.
ConclusionThe Newman case shows that releases can defeat a negligence claim against the dive shop and instructors who are named in the release. In particular, the releases will work if they are backed up by evidence of the proper circumstances in which the releases were obtained.
To be enforceable, the release must be clearly written. It must be clear that by signing the document, the diver is expressly assuming the risks associated with scuba diving. It must be clear that the document is intended to release the named parties from liability for injuries incurred while scuba diving. It must give fair notice by meeting both the express negligence doctrine and the conspicuousness requirement.
Though it is not entirely clear, even if the release meets all of these requirements, it probably will not work against claims of gross negligence. Though the release worked against a gross negligence claim in Newman, the release of gross negligence is generally against public policy and is at odds with other Texas appellate court opinions.
Given the difficulty of proving gross negligence, the existence of a good, valid liability release may discourage many lawyers from taking such cases, even if the release is ineffective as to gross negligence. If a claim or lawsuit is brought, a valid release of the negligence claims certainly makes the average case easier to defend, may substantially drive down the cost of settlement, or may provide the grounds for a summary judgment. For all of these reasons, a well written and properly executed liability release is an essential part of legal protection for the dive professional in Texas.
Copyright 2007 by Andy Simmons
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Think that doesn't influence the arbitrators? In an ideal world, it would not, and maybe with some arbitrators it does not, but in the real world, do you really think the arbitration services don't know which side the bread is buttered on? Do you think they are not aware of who keeps them in business? Do you think big businesses would keep using them if the results did not tend to favor big businesses?
In addition to this inherent bias against the small business or consumer, the little guy also loses an advantage when giving up the right to a jury in favor of arbitration. The theme of a large business running roughshod over a small company or consumer and acting like a bully will often play well with a jury and sometimes leads to large verdicts or punitive damages. Large companies who act badly have good reason to fear juries. But in front of an arbitration panel, the little guy is far less likely to find any sympathy. Why is that? Many of these arbitrators, by virtue of their own careers as big firm and big company lawyers, tend to be biased in favor of big companies. And they are not swayed by sympathy for the underdog.
Arbitration has its place. It is intended as a faster and less expensive alternative to the court system. Sometimes it meets those goals. And between parties of equal size, where neither one enjoys an advantage as a repeat customer, it can be a viable alternative. But you should always think twice before your sign away your rights to a jury trial. The jury trial is a cornerstone of our liberties as Americans. Talk to a lawyer before you sign away that right.
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