Mineral Interests: Executive Right Holder Liable for Refusing to Lease

A Texas Supreme Court ruling in Texas Outfitters Limited v. Nicholson explains why there is no bright-line rule delineating the duty of the executive right holder in resolving disputes among the mineral interest family, according to Gray Reed & McGraw.

The article in the firm’s Energy & the Law blog explains that the case presented an opportunity for the court to apply the guidelines outlined in an earlier ruling to a different scenario: whether the executive breached the duty by refusing to lease.

The ruling in “Outfitters reinforces the message that surface protection is not the only goal an executive is allowed to pursue – especially if a co-owner has leased.”

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Disclaiming Reliance in Texas Requires Specificity

The Supreme Court of Texas in its recent IBM v. Lufkin Indus. decision provided further clarity to what contracting parties must say in their contracts to disclaim fraudulent inducement claims, according to a post on the website of King & Spalding.

Craig Stanfield and Chad Stewart write that the court endorsed provisions that disclaim reliance on any representations other than those explicitly made in the agreement, further clarifying its previous holdings on this issue.

They explain that the court “held that the contractual language at issue must ‘clearly and unequivocally express[] the party’s intent to disclaim reliance on the specific misrepresentations at issue.’ The Court further noted that it must look to the contract language and the totality of circumstances surrounding the contract.”

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Key Terms in Negotiating a Statement of Work

The importance of the terms in a state of work is sometimes overlooked by both business and legal teams because an SOW is commonly considered a business document rather than a legal document, writes Stephen F. Pinson in a Scott & Scott blog post.

He writes that it’s important for an SOW to address who will be providing the services, the scope of work being provided, the start date and timeline for the work, where the services will take place, the scope of work and the exact deliverables, and how the service ultimately be performed/delivered and paid.

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Federal Appeals Court Upholds $9.5 Million Judgment for Encompass Office Solutions

The 5th U.S Circuit Court of Appeals has affirmed a 2016 jury verdict and 2017 trial court judgment that ultimately awarded $9.5 million to a Dallas-based health care company, according to a post on the website of Androvett Legal Media & Marketing.

In a majority opinion, the appellate court found that BlueCross BlueShield of Louisiana failed to properly reimburse Encompass Office Solutions for in-office medical procedures, and distributed a defamatory letter to physicians with false information regarding the company and its services. That letter threatened to terminate the network contracts of doctors who continued to work with Encompass.

Subsequent to the opinion in the case, the court has denied a motion for rehearing.

A trial team from Thompson & Knight LLP represented Encompass throughout the district court hearings and before the 5th Circuit.

“This case has a lengthy history spanning several years, and we’re pleased that finally Encompass will be properly compensated for the services it provided and the damages the company has incurred,” said Jennifer Rudenick Ecklund, a trial partner at Thompson & Knight who argued the case before the trial court and 5th Circuit. The judgment remains subject to the awarding of interest and legal fees to Encompass.

Other members of the Thompson & Knight trial team included William L. Banowsky, Andrew C. Cookingham, Greg W. Curry, Richard B. Phillips, Jr. and Reed Randel.

Encompass provides mobile ambulatory surgery services that allow doctors to safely perform surgeries in their offices. Encompass’s business is primarily focused on women’s health, allowing patients to have sensitive gynecological procedures done in the comfort and safety of the doctor’s offices while providing the necessary anesthesia care. This method reduces the infection risks associated with hospitals and ambulatory surgery centers, and provides both doctors and patients with a more efficient and cost-effective means of delivering medically necessary surgical care.

 

 




How to Draft a Contract with Severability in Mind

A “severability” or a “partial invalidity” clause can prevent a court from declaring an entire contract invalid or unenforceable just because a single provision in the contract is declared invalid or unenforceable, advises Julie Brook in a post for California’s Continuing Education of the Bar.

“Whether a contract is severable or entire depends on the parties’ intention, as revealed in the language of the contract itself and the surrounding circumstances,” she explains.

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Technology Service Provider Contracts with Banks

Bank sign

Image by Mark Moz

The Federal Deposit Insurance Corporation has issued a Financial Institution Letter identifying gaps, particularly involving business continuity and incident response risks, that some examiners had noted in their review of contracts between banks and technology services vendors, points out Ropes & Gray in a client alert.

“These gaps may require banks to take additional steps to mitigate the risks that arise from them,” the authors write. “The FDIC took the opportunity to reiterate regulatory requirements for these contracts, noting that banks remain ultimately responsible when contracts do not adequately address certain risks. Cybersecurity threats remain at or near the top of risks of concern to federal banking regulators.”

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Double Trouble: The Executory Effect of a Clerical Error

The United States Bankruptcy Court for the Northern District of Texas issued an opinion holding that an unintentional, duplicate obligation remaining under a contract can render the contract executory, even if perhaps in contravention of the plain language of the contract.

Writing for Weil, Gotshal & Manges’ Bankruptcy blog, David Li discusses In re TM Village, Ltd.:

The TM Village opinion framed the issues as whether the parties’ prepetition settlement agreement was an executory contract, and if so, whether the debtor could reject it in its business judgment (the court held in the affirmative on both issues).  The court reaffirmed that the plain language of a contract may be read in a broader context to avoid an “unreasonable, inequitable and oppressive outcome.” The case serves as a cautionary tale that even a simple clerical error may have unintended and prolonged consequences.

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When Union Contracts And Overtime Law Conflict: Court Provides Balance For Employers

The 9th Circuit recently handed down an opinion that helps provide guidance to those employers trying to comply with collective bargaining agreements while simultaneously being challenged to apply potentially inconsistent definitions in California’s overtime law, writes Rebecca King for a Fisher & Phillips website post.

The case involved an offshore oil worker whose contract called for 12-hour shifts for a week and required him to be on the off platform between shifts. He wanted to be paid for the hours he was required to be on site.

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Waiving Class-Wide Arbitrations in Contracts

While certain courts look with skepticism on class-action waivers in arbitration agreements, it is clear from the Supreme Court’s decisions, beginning with AT&T Mobility LLC v. Concepcion through the court’s most recent decision in Epic Systems Corporation v. Lewis, that class action arbitration waivers do not violate the law, according to a Faegre Baker Daniels website post.

Ehren M. Fournier writes that Epic Systems reiterates the Court’s deference to arbitration agreements.

He discusses several points to consider when drafting an arbitration agreement with a class action waiver, including an opt-out option, conspicuous language, delegations to an arbitrator to decide enforcement, authority to allow class action, cost and fee provisions, severance language, and a claimant-friendly forum.

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Key Considerations When Contracting Cloud

The cloudA post on the website of Baker McKenzie discusses what a general counsel should consider when looking at a contract for cloud and AI services.

“As cloud-based software will continuously change, the user cannot easily prove that certain functionality used to work fine, but is no longer available or working. For this reason it makes sense to check whether the key features are (or can be) described in a document and to refer to that description in the agreement,” according to the post.

The discussion covers moving to another provider, verification that everything is in check, and spelling out the right restrictions on use of data.

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Mineral Interests: Net Royalty Acres Defined

The term “net royalty acre” is used by mineral and royalty buyers to price a mineral or royalty interest that is subject to an oil and gas lease. It is related to, but different from, a “net mineral acre,” explains John McFarland of Graves, Dougherty, Hearon & Moody in the firm’s Oil and Gas Lawyer Blog.

“Mineral buyers often make offers in terms of dollars per net royalty acre. If the recipient of the offer does not know for sure what she owns, it can be difficult to evaluate the offer,” he writes.

In the article, McFarland explains the difference between the two terms and provides formulas that can be used to calculate each one.

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Why Do I Want/Need a Waiver of Subrogation?

Ira Meislik of Meislik & Meislik, writing in the firm’s Ruminations real estate law blog, examines the use of subrogation clauses in real estate leases in relation to insurance policies.

He states that the term “waiver of subrogation” is a misnomer when it comes to a lease provision.

“It is the insurance policy where the carrier waives its subrogation right. It isn’t the lease that waives an insurance company’s subrogation right. What the lease needs to do is waive claims. Secondarily, but importantly, a lease needs to require each party to have insurance policies that aren’t invalidated by such a waiver of claims,” he explains.

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What Should be in Every Construction Agreement

ConstructionParties to a construction project can have a better agreement by addressing six topics described in a post in The Lien Zone blog.

Alex Barthet, author of the post, advises contract drafters to define the scope of the work that will be provided, list all the exclusions, explain the change order process, verify the schedule, refine the dispute resolution procedure, and make sure the winner gets legal fees.

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Audit Provisions in Services Agreements

Many considerations go into drafting appropriate audit rights, including the types of services that the customer is receiving, and the industry in which the customer’s business operates, explain Anastasia Dergacheva and Katherine B. O’Keefe in Morgan Lewis Tech & Sourcing blog.

“In many cases, the customer is the auditing party and the service provider is the audited party, but there are situations where the roles will be reversed,” they write.

The article provides an overview of several key issues to consider when drafting audit rights for services agreements.

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What Did I Agree To? Importance of Reviewing Arbitration Provisions

The law firm Polsinelli recently defeated a motion to dismiss a client’s judicial review of an arbitration award, successfully arguing that adopted arbitration rules that waive appellate rights do not waive a party’s right to judicial review under the Federal Arbitration Act.

A post on the firm’s website introduced the case:

The case presented a conflict between the parties’ contractually-adopted arbitration rules and an individual party’s statutory rights under the FAA. Although ultimately successful, the case served as an important reminder for parties to thoroughly review contractual arbitration provisions – and any procedural rules referenced therein – before agreeing to them.

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Invalidating a Non-Compete Agreement

Employment contractThere are circumstances that allow a departing employee to challenge the legitimacy of a non-compete agreement, even if this type of contract meets all the legal requirements, writes Romy Jurado of Jurado & Farshchian.

In her article, she discusses two questions that arise when an employee challenges a non-compete: Should an employee actually challenge the agreement? And: How exactly does an employee challenge it?

She also discusses the three basic approaches an employee might take to challenge the agreement: Ignoring it; negotiating with the employer; and filing a declaratory judgment action.

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Key Terms for Provider Contracts

Kim Stanger, writing for Holland & Hart, offers a brief summary of some terms or issues that should be considered in provider agreements.

The article discusses such topics as regulatory compliance, written agreements, parties, the nature of relationships, services, schedules, location, independence, intellectual property, use of information, outside activities, qualifications, representations and warranties, performance standards, medical records, employer obligations, compensation, bonuses, benefits, exempt status, referrals, assignment of fees, liability insurance, and more.

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An Anti-Reliance Clause Should Actually Disclaim Reliance on Extra-Contractual Representations

Nothing is more fundamental to private equity deal practice than limiting the exposure of private equity sellers for post-closing claims, writes Glenn D. West for Weil, Gotshal & Manges LLP’s Global Private Equity Watch.

He believes that exposure to the discussion of fraud allegations, “whether though extra-contractual fraud claims (because of ineffective anti-reliance clauses or undefined fraud carve-outs), or claims based on less than deliberate and knowing misrepresentations (by the private equity seller itself) regarding the express, bargained-for representations set forth in the acquisition agreement (as a result of undefined fraud carve-outs), requires the most vigilance to avoid.”

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Keeping Boilerplate Coupled to the Transaction: The Ongoing Struggles with ‘Wrap’ Arbitration Provisions

To get around the unilateral character of adhesive contracting, U.S. courts have, over the past five decades, refocused contract formation on constructive notice, points out Henry Allen Blair in Arbitration Nation.

“If a reasonable person in the position of the recipient of boilerplate should have seen the terms, the recipient will be bound by those terms, regardless of whether she ever actually read or understood the them. Constructive awareness coupled with an individual purchasing something from a commercial party amounts to assent,” he adds.

The article discusses Starke v. SquareTrade, Inc., in which the Second Circuit concluded that the a purchaser of a consumer product protection plan did not have reasonable notice of an arbitration provision contained in the terms and conditions communicated via a hyperlink in a post-sale email.

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Unambiguous Terms of Written Contract Trump Claims of Fraudulent Inducement

A recent Texas Supreme Court opinion provides a definitive answer to the question of whether a party can ignore the written words of a contract that directly contradict what you are being told by your counterparty is the real deal.

Glenn D. West, writing for Weil, Gotshal & Manges LLP’s Global Private Equity Watch, discusses Mercedes-Benz USA, LLC v. Carduco Inc.

“While it is often said that fraud vitiates a contract that was entered into based upon that fraud (and such fraud would also trump the parol evidence rule), that statement is only true if there was actually legally-recognized fraud that induced the making of the contract. But a fraud cause of action does not consist simply of an allegation that the defendant made a false statement of fact to the plaintiff, knowingly or recklessly,” West writes.

The Texas Supreme Court found that “[b]ecause the conduct and action of [the defendants] on which [the plaintiff] relies to establish its fraudulent-inducement claim are directly contrary to the unambiguous terms of the contract it signed, we conclude that [the plaintiff’s] reliance thereon was unjustified as a matter of law.”

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