Six Approaches to Effective Negotiation

1. Understand your Opponent’s Position

a. Crawl into the shoes of the other guy. When you understand your opponent, you have a        better chance of reaching a successful conclusion. That means paying attention to how they    view the issues.

2. Build Trust through Personal Relationships

a. Through mutual trust, you are able to achieve things that benefit both sides. When there      is trust, you can talk about their assumptions, strategies, and even fears.

3. Build Confidence

a. Confidence building keeps the parties talking. The best way to think about a big                      negotiation is in a series of small negotiations. Start with an issue that could be resolved          quickly, reasonably and amicably.

b. The longer you can keep the sides talking with one another – instead of delivering                  sermons to one another – the better the chances that a middle ground can be reached.

c. Once the two sides are able to take small steps in unison, you can move to larger and            more complicated issues.

4. Compromise

a. Negotiation is by definition the art of compromise. But no compromise should be taken        to the extreme of sacrificing core principles. Know what you are willing to give up before the    negotiations start, and by abiding by Approach #1, you should have a pretty good idea what    the opponent can live without.

b. President Reagan once said; “I’d rather get 80% of what I want that to go over the cliff          with my flag waiving”.

5. Timing

a. Recognize when to press a point and when to withdraw. Like a good poker player, you          have to know when to hold them and know when to fold them.

b. On the other hand, bad timing can undermine successful negotiation.

6. Maintain a deep Appreciation of and Respect for Politics

a. The difference between success and failure is often measured by the ability to understand    how political constraints shape the outcome of any negotiation. Understand the external          influences the opponent may have.

b. Appreciate what objectives, arguments, and trade-offs are important to your opponents.

c. A public official must have the power to make the decision. That power largely derives          from public support or support of a board of directors.

d. A public official who loses public or board confidence also loses power. Understand that      the opposing negotiator may have to save face to get the deal done. Understand what is            necessary for the official to save face.

How one considers these six approaches will change from situation to situation. An approach to timing that proved effective in one negotiation might not work in another. Always remain flexible.

There are three maxims that remain absolute. Ignoring one of these maxims can seriously jeopardize a successful negotiation.

Maxim 1: Never lie.
Maxim 2: Nothing should be deemed agreed to until everything is agreed to.
Maxim 3: Keep a written record of all discussions.

Food Security Act – 1 ; UCC1 – 0

April17BlogSCOREBOARD
This is a Warning regarding The Food Security Act.

Do not leave the gate open, all your cattle (collateral) will disappear!
At first glance, the Federal Food Security Act of 1985 appears to severely disadvantage perfected parties with security interests in farm products. But the Act’s primary aim is to establish a framework of enhanced notice for buyers, sellers, and secured parties of farm products. Nevertheless, secured creditors of farm products may find themselves without recourse against buyers of farm products in the ordinary course of business if they are not adequately informed of the various pitfalls within the Act.

For the most part, senior perfected secured parties reign supreme under Article 9 of the Uniform Commercial Code. A senior perfected party, for instance, will prevail over a conflicting security interest perfected in the same collateral. See U.C.C. §§ 9-317; 9-322(a). This policy is sensible because it permits lenders to extend credit at fair interest rates in exchange for security. However, a significant deviation from this rule involves “buyers in the ordinary course of business” (“BIOCOB”). Under Article 9, a BIOCOB, “takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.” See U.C.C. §§ 9-320(a), 1-201(b)(9). Here, the policy varies from the general rule– that is, such a buyer needs protection from a secured party’s enforcement of a security interest.

Nonetheless, even the BIOCOB exception includes an exception. A person buying farm products, such as livestock and crops, from a person engaged in farming operations does not take free of a security interest created by their sellers. See U.C.C. § 9-320(a). For example, suppose Farmer, grants a security interest in all his cattle to Bank, in exchange for a loan. Farmer who is experiencing financial difficulties, then sells all his cattle to “Joe” in the ordinary course of business. Under Article 9, Joe is not protected by the BIOCOB principle. Instead, Joe’s purchase of the cattle is subject to Bank’s security interest in the cattle. Therefore, Bank will be able to enforce its security interest in the cattle against Joe.

Buyers of farm products undoubtedly despised this result, and in 1985, convinced Congress to protect them under the Federal Food Security Act. Section 1631(d) of the Act effectively eliminated the exception to the BIOCOB rule relating to buyers of farm products. Now, “a buyer who in the ordinary course of business buys a farm product from a seller engaged in farming operations shall take free of a security interest created by the seller, even though the security interest is perfected; and the buyer knows of the existence of such interest.” See 7 U.S.C.S. §1631(d).

In their congressional findings, Congress noted that certain State laws permitting secured lenders to enforce liens against purchasers of farm products even if the purchaser did not know that the sale of products violated the lender’s security interest in the products exposed purchasers of farm products to double payment for the products; once at the time of purchase, and again when the seller fails to repay the lender. This exposure to double payment, Congress said, “inhibits free competition in the market for farm products” and “constitutes a burden on and an obstruction to interstate commerce in farm products.” See 7 U.S.C.S. §1631(a). Therefore, “notwithstanding any other provision of Federal, State, or local law”, buyers of farm products benefit from the same rights as other BIOCOB.

The Federal Food Security Act, however, affords two procedures for perfected secured parties to reclaim priority status over BIOCOB of farm products. Under the first mechanism, the State where the farm product is produced must have established a “central filing system.” This type of filing system is intended to provide heightened notice to prospective buyers of farm products. Currently, all fifty states have public filing systems for U.C.C. Article 9 financing statements. However, only nineteen (19) states have set up a central filing system under the Act. Here is a link showing which States have central filing systems certified by the U.S. Department of Agriculture as meeting the requirements of Section 1631 of the Food Security Act of 1985: https://www.gipsa.usda.gov/laws/cleartitle.aspx. Notably, Texas has not established a central filing system complying with the Act.

The second mechanism (applicable to Texas) of providing secured parties priority status over BIOCOB of farm products involves a seldom followed and impracticable notice procedure. Under the Act, a buyer of farm products takes subject to a security interest created by the seller if within one year before the sale of the farm products, the buyer receives from the secured party or the seller written notice of the security interest in the relevant farm products. The written notice must be an original or reproduced copy thereof, containing the name and address of the secured party and person indebted to the secured party, describing the farm products subject to the security interest, and noting “any payment obligations imposed on the buyer by the secured party as conditions for the waiver or release of the security interest.” See 7 U.S.C. §1631(e).

As noted above, only nineteen States have certified central filing systems, which leaves secured parties of farm products in most States with limited options in protecting their security interests. In the previous example above highlighting the exception to the BIOCOB rule, Bank is entitled to enforce its security interest in the cattle against Joe, the purchaser of the cattle from Farmer under Article 9. Under the Federal Food Security Act in most states, however, Bank would lose its priority status with regards to the cattle and would be unable to enforce its security interest against Joe, unless Bank complies with either one of the Acts two mechanisms for reclaiming priority status.

In Texas, the legislature adopted Article 9 of the U.C.C. but has not established a certified central filing system under the Federal Food Security Act. As a result, a scenario much like the one where the Bank loses its priority status to Joe is almost certain to occur. Therefore, creditors have two main options when dealing with farm products as security in Texas: 1) a creditor could accept farm products as collateral under a security agreement and comply with the second mechanism under the Act for reclaiming priority status; or 2) the creditor could reject farm products as security all together. The first option is clearly the riskier choice for a creditor because complying with the second mechanism hinges entirely on the seller of farm products notifying the secured creditor of the sale. Oftentimes, debtors are forgetful or in financial distress and will fail to notify a secured party of a sale on secured collateral. Either way, creditors and buyers of farm products should proceed with caution when dealing with farm products as security in Texas. You have been warned!

If you have any questions or if you need our help, Contact us Today!

Not Having a Valid Will and Testament Can Become a Burden to Your Family

Many people assume that if they dies without a Last Will and Testament (“Will”), their property will just automatically pass to their spouse or children without any action required to be taken by their heirs, such as having to go to probate court. However, without proper estate planning, this is rarely the case.

While some assets in your estate necessitate having to go to probate court even with a Will, the process of probate court when you do not have a Will is much more time consuming and costly.

So long as there is a Will to probate that allows for independent administration, the probate process is relatively simple and straightforward and generally proceeds as follows: An application to probate a will is filed by the proposed Executor/Executrix with the probate court in the county in which you had your primary residence. Once the application has been on file with the court for a certain number of days, the Executor/Executrix will be allowed to set a hearing with the court where the court will appoint that person as Executor/Executrix, and that person will then take an oath. Once the Executor/Executrix has been appointed and taken their oath, Letters Testamentary (often called “Letters”) will be issued. It is these Letters that let third parties know the Executor/Executrix has the authority to act on behalf of your estate. Within three months after receiving Letters, the Executor/Executrix will be required to file an inventory, appraisement and list of claims or an Affidavit in Lieu of Inventory, which must be provided to all beneficiaries in the Will. Once Letters have been granted, your Executor/Executrix is able to take whatever steps and actions are necessary to administer your estate without any further court involvement.

When there is not a Will to probate, then there are several options that your family will need to consider and then decide on the best probate option based on the particular facts, circumstances and type of assets in your estate.

Dependent Administration: A dependent administration is the most common type of administration that is created when you die without a Will in place. In order to have your assets distributed, someone, usually a family member, must apply to the court to be appointed as dependent administrator. A dependent administrator MUST have court permission to take any action with regard to your estate such as distributing money, selling property, etc. The dependent administrator must also file an annual report every year that the administration is open, which is usually several years. Because of these factors, a dependent administration is very time consuming and costly to your family.

Independent Administration with Heirs’ Consent: There is a possibility that, if all of your heirs agree, they can ask the court to allow the agreed-upon applicant to serve as an independent administrator, without the requirement of court supervision (much like if you had died with a Will that allowed independent administration). However, this means that all heirs must agree upon the same person to serve as independent administrator and that all heirs are adults who have not been adjudicated incapacitated. While that seems easy enough, you will be surprised how the possibility of money can turn family against one another, and if you had a child who predeceased you but left grandchildren, then you may end up with a minor beneficiary who does not have the legal capacity to agree to such an appointment.

No matter if your family chooses to go the route of a dependent administration or an independent administration with consent, each of those options requires an additional step that is not required when you die with a Will. The court will be required to determine who are your legal and proper heirs, which is accomplished via a process called a “Heirship Determination” or “Judgment to Declare Heirs”.

In an Heirship Determination, the court will appoint an “attorney ad litem” whose job it is to determine that the heirs that are listed in the application for either dependent administration or independent administration with consent are true and accurate, that no heirs have been omitted, and to confirm that there are no unknown heirs. The cost for the attorney ad litem is paid by the decedent’s estate, and the costs can range anywhere from about $500 to a $1,000 or more depending on how much work the attorney ad litem is required to undertake to determine the heirs. However, as an estate has not yet been officially opened, the cost usually has to come directly out of the applicant’s pocket until the estate is opened, and then the applicant can be reimbursed by funds from the estate.

Even if you believe that you have taken all the steps necessary to have your assets pass directly to your heirs, it is important that you also execute a basic Will as a safety net for assets that are later acquired, assets that you forgot you owned, or in the event a direct beneficiary predeceases you. For example, 401(k) plans can pass outside of probate and directly to a specific beneficiary by listing them as a beneficiary on the required forms with your plan administrator. However, if you don’t list a beneficiary or the beneficiary you list predeceases you and you fail to update your beneficiary, then in order for your 401(k) funds to be distributed, the plan administrator will want authorization from the probate court. If you did not have a Will, then this would be accomplished via a Heirship Determination, at the minimum. However, if you had a Will, then this could be accomplished via the simpler and cheaper independent administration with the issuance of Letters Testamentary.

The extra steps that are required to administer your estate if you die without a will can be time consuming and a drain on your loved ones, both financially and emotionally.

At Murray | Lobb, we have the expertise in estate planning and probate matters to ensure that your passing does not become a burden on your family. We can assist you with executing a Will, updating a Will, executing a Statutory Power of Attorney, a Medical Power of Attorney and a Physician’s Directive (also known as a Living Will). While you are at our office executing your Will, be sure to ask us about the steps you can take to have most of your assets pass outside of probate and directly to your heirs.

A Few “Factors” to Consider

Should a Subcontractor be allowed to assign, sell, or otherwise transfer (factor) an account receivable due from a general contractor for work performed on a construction project? We say, absolutely not. Here’s the problem.

Construction funds are trust funds. Texas Property Code §162.001(a) (commonly referred to as the “Trust Funds Statute”). Even loan receipts are trust funds. Texas Property Code §162.001(b).

A contractor, subcontractor or owner, or an officer, director, or agent of a contractor, subcontractor, or owner, who receives trust funds or who has control or direction of trust funds, is a trustee of the trust funds. Texas Property Code §162.002.

An artisan, laborer, mechanic, contractor, subcontractor, or materialman who labors or who furnishes labor or material for the construction or repair of an improvement on specific real property is a beneficiary of any trust funds paid or received in connection with the improvements. Texas Property Code §162.003.

A general contractor is a trustee of construction funds paid to it by the owner. A subcontractor would be a beneficiary of the trust funds paid to the general contractor in connection with the improvements at the project. In turn, once paid, the subcontractor becomes a trustee.

A trustee who, intentionally or knowingly or with intent to defraud, directly or indirectly, retains, uses, disburses, or otherwise diverts trust funds without first fully paying all current or past due obligations incurred by the trustee to the beneficiaries of the trust funds, has misapplied the trust funds. Texas Property Code §162.031.

A trustee who misapplies trust funds amounting to $500 or more in violation of Chapter 162, with intent to defraud, commits a felony of the third degree. Texas Property Code §162.032 (b). If the misapplication of trust funds by a trustee constitutes another offense punishable under the laws of this State, the State may elect the offense for which it will prosecute the trustee. Texas Property Code §162.033.

Under Section 9.406 of the Texas Business and Commerce Code, once the account debtor (General Contractor) receives notification of the assignment of an account (invoice), the account debtor cannot discharge its obligation by paying the assignor (Subcontractor). After receipt of the notification, the account debtor (General Contractor) may discharge its obligation only by paying the assignee (Factor Company).

This situation results in a legal paradox.

1. On the one hand, Subcontractor has relieved itself from the implications of the Trust Fund Statute. Subcontractor is no longer receiving “trust funds” for its services provided at the construction project. It is receiving funds for the work from a third source, Factor Company. After receipt of these funds, Subcontractor can “retain, use or disburse” those funds any way it chooses without worry of the implications imposed by the Trust Fund Statute.

2. Factor Company would argue that it is not a Trustee, subject to the Trust Fund Statute. Thus, after receiving payment of trust funds from the account debtor, it does not have to pay any beneficiaries of Subcontractor.

3. On the other hand, General Contractor is required to pay Subcontractor under the Trust Fund Statute. If General Contractor pays Factor Company, General Contractor, its owners, or officers, or directors face potential criminal liability. Further, if General Contractor pays Factor Company, and Factor Company does not pay Subcontractor beneficiaries, the project is subject to lien. If General Contractor does not pay Factor Company, then General Contractor is subject to liability under Section 9.406 of the Texas Business and Commerce Code.

By factoring the accounts receivable, Factor Company, Subcontractor, its owner or officers, and directors have circumvented the trust fund statute, is not a trustee, and thus can use those funds for any purpose thus avoiding a criminal penalty. This unintended result cannot be tolerated in the construction setting.

Keeping an owner’s construction project property free and clear of liens is a constant concern for general contractors. Because subcontractors typically purchase materials to be incorporated into the construction project from third parties, it is important that the flow of funds from the owner to the general contractor to the subcontractor make their way to the suppliers to prevent liens filed by these outside third party suppliers. If a subcontractor were allowed to assign (factor) its account receivable due under a construction contract, and if payment would have to be made to the assignee, how would the assignor’s (subcontractors) suppliers, materialmen, and laborers be paid to prevent liens?

It could be argued that Subcontractor could (and should) pay the funds it receives from the factor to the beneficiaries. However, in the real world that does not happen. That’s why we have the Trust Fund Statute. It is for these reasons that the factoring, sale, or assignment of a right to payment under a construction contract for construction or repair of an improvement on specific real property in this State be declared void as against public policy. A seemingly legal means to avoid criminal prosecution should not be tolerated and in the interest of public policy should be invalidated and voided.

Good News for Owners of a Construction Project? We think so!

On May 8, 2015, the Texas Supreme Court, in a case of first impression, interpreted Chapter 95 of the Chapter 95 of the Texas Civil Practice and Remedies Code, which relates to limitations on a property owner’s liability for injury, death, or property damage to an independent contractor while constructing, repairing, renovating, modifying, or improving the real property.

In the case of Abutahoun v. The Dow Chemical Company, the Supreme court held that Chapter 95 applies to independent contractors’ claims against property owners for damages caused by negligence when those claims arise from the condition or use of an improvement to real property where the independent contractor constructs, repairs, renovates, or modifies the improvement. In so finding, the Court held that Chapter 95 limits property owner liability on claims for personal injury, death, or property damage caused by negligence, including claims concerning a property owner’s own contemporaneous negligent activity.

In this case Dow Chemical contracted with Win–Way Industries to install insulation on a system of pipelines at Dow’s facility in Freeport, Texas. Robert Henderson was a Win–Way employee, and he assisted with the insulation work. Dow’s Freeport facility contained thousands of pipes in a pipeline system that ran throughout the facility. While working for Win–Way on the asbestos-insulated pipeline system Henderson was allegedly exposed to asbestos dust by Dow employees who were installing, sawing, and removing asbestos insulation nearby. He was also allegedly exposed to asbestos dust as a result of his own direct contact with the insulation products.

Eventually, Henderson was diagnosed with mesothelioma, and he and his wife, Tanya, sued Dow and over a dozen other defendants, alleging under various negligence and product liability theories that the defendants were responsible for Henderson’s injuries due to asbestos exposure. The jury returned a verdict in which it found that Dow’s negligence proximately caused Henderson’s injuries, and that Dow was 30% responsible for causing Henderson’s injuries. Based on the jury verdict and several adjustments, the trial court rendered judgment against Dow for $2.64 million plus interest and court costs.

Dow appealed the verdict and argued that Chapter 95 does not distinguish between a property owner’s liability for exposure caused by the activities of contractors and their employees and exposure that the property owner’s own employees’ activities caused. Further, Dow argued that Chapter 95 applied to bar all of the Hendersons’ negligence claims because the Hendersons did not establish that Dow had both control over Robert Henderson’s work and actual knowledge of the dangers of asbestos exposure as Chapter 95 requires. The Hendersons argued that Dow could not “avail itself of the heightened protections afforded by Chapter 95” because their claims against Dow were “based solely upon the negligent activities of Dow employees, and not from injury arising from the condition or use of an improvement of real property of Henderson.

The court of appeals agreed with Dow’s interpretation of the statute. The court of appeals reversed the trial court’s judgment and rendered a take-nothing judgment in favor of Dow, holding that Chapter 95 applied to the Hendersons’ claims against Dow. The Hendersons filed a petition for review to the Supreme Court, which was granted. The Court affirmed the Court of Appeals that the Hendersons take nothing.

The heart of Chapter 95 are sections 95.002 and .003, which establishes Chapter 95’s applicability, and limitations on a property owner’s liability for personal injury, death, or property damage to independent contractors, respectively.

Regarding applicability, section 95.002 states that Chapter 95 “applies only to a claim.” A “claim” is specifically defined as “a claim for damages caused by negligence.” Section 95.002 then explains that Chapter 95 applies only to a claim for damages caused by negligence:

(1) against a property owner, contractor, or subcontractor for personal injury, death, or property damage to an owner, a contractor, or a subcontractor or an employee of a contractor or subcontractor; and
(2) that arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement.

Section 95.003 establishes the limitations on a property owner’s liability for a claim to which Chapter 95 applies, and states:
A property owner is not liable for personal injury, death, or property damage to a contractor, subcontractor, or an employee of a contractor or subcontractor who constructs, repairs, renovates, or modifies an improvement to real property, including personal injury, death, or property damage arising from the failure to provide a safe workplace unless:

(1) the property owner exercises or retains some control over the manner in which the work is performed, other than the right to order the work to start or stop or to inspect progress or receive reports; and
(2) the property owner had actual knowledge of the danger or condition resulting in the personal injury, death, or property damage and failed to adequately warn.

In short, a property owner is not liable for personal injury or death to a contractor, subcontractor, or employee of a contractor or subcontractor, while constructing, repairing, renovating, modifying, or improving the real property.

However, when a claim does not arise from a condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates, or modifies the improvement, Chapter 95 does not apply. In such a case the independent contractor or subcontractor can recover in common law negligence.

imgres

Charles E. Lobb, Jr. is a founding partner of Murray | Lobb, PLLC. Mr. Lobb focuses his practice in construction law and has authored and spoken at Construction Law Seminars. Should the situation arise he may be contacted at 281-488-0630 or at lobb@murray-lobb.com

Visit and Like our Facebook Page

Is Notice to the Address of Record in the Loan Agreement always Sufficient? We'll See…

Many years of past precedent had established that a lenders notice to the debtor’s address of record in the Loan Agreement was almost always sufficient. However, one case from the Texas Supreme Court, and another in which Petition for Review has been filed may change established law.

In July 2015, in a landlord verses tenant case, (“Katy Venture v. Cremona Bistro”) the Texas Supreme Court ruled that because the landlord had used an outdated “registered” address even though it knew of a new “unofficial” mailing address, a fact issue was presented to defeat Landlord’s Motion for Summary Judgment in a bill of review proceeding after default judgment was entered against the Tenant.

Following the “Katy Venture” decision, the Fort Worth Court of Appeals, in a Lender verses Guarantor case, the Court held that the Guarantor raised a genuine issue of material fact to defeat a summary judgment. The Court held that because some summary judgment evidence exists that the Bank knew the Guarantor’s current address but nonetheless utilized an outdated “official” address in its certificate of last known address, a fact issue exists precluding summary judgment. This is true even assuming the Bank conclusively established the Guarantor’s negligence in failing to update his contractually-agreed-to address for notice.

Petition for review has been filed to the Texas Supreme Court. We’ll see in the coming year how the law of adequate notice evolves.

Practice point: Send notices to the borrowers and guarantors “official” address of record, but also send notice to ay other addresses which the bank knows, or with reasonable diligence and investigation should have known, where the borrowers and guarantors receive their mail or reside.

Do Builders have Protection from Construction Defects?

hammer-sledgehammer-mallet-tool-medium

If you’re a builder who is hired by a lender after foreclosure to complete a home and are worried about prior construction defects, fear not, Texas law protects you. Section 59.011 (c) of the Texas Finance Code provides that a builder hired by a lender to complete the construction of a foreclosed home is not liable for any construction defects of which the builder had no knowledge that existed prior to the acquisition of the home by the lender.

However, the builder is subject to the Texas Residential Construction Act found in Chapter 27 of the Texas Property Code for the work it performed for the lender after acquisition of the home by the lender.

brush-painting-paint-brushes-8133-medium

This makes perfect sense and in laymen terms: a builder is not liable for the work done by another but is liable for his own work.

Get Ready for the New Overtime Rule

May 18, 2016 – The U.S. Department of Labor has released its final rule on overtime under the Fair Labor Standards Act. The Administration estimates that the new rule will extend overtime protections to 4.2 million Americans who are not currently eligible under federal law. Once effective, the rule will raise the salary level from its previous amount of $455 per week (the equivalent of $23,660 a year) to $913 per week (the equivalent of $47,476 per year) in 2016. The rule will also raise the compensation level for highly compensated employees from its previous amount of $100,000 to $134,004 annually. The final rule also establishes a mechanism for automatically updating the salary level every three years, with the first update to take place in 2020. These changes take effect on December 1, 2016. The Final Rule can be viewed here: https://www.dol.gov/whd/overtime/final2016/

person-apple-laptop-notebook-medium

The final rule does not make any changes to the duties test for executive, administrative and professional employees, which affects the determination of who is exempt from overtime. Administrative employees who do not meet the special provision for administrative employees will be eligible for overtime if they earn below the salary level set in the final rule and they work more than 40 hours in a week.

In response to the new overtime rule, employers have the option of:

A. Paying time-and-a-half for overtime work;

B. Raising the workers’ salaries above the new threshold;

C. Limiting worker’s hours to 40 per week; or

D. Some combination of the above.

“Series, LLC” -The Next Generation of Asset Protection for Investors

A series limited liability company allows a traditional limited liability company to separate into an unlimited number of multiple parts or “cells” with the establishment of one or more series of members, membership interests, managers, or assets – each a series – and each series is essentially treated like its own limited liability company (“LLC”). Currently, only the following states have statutes authorizing some form of series LLCs: Alabama, Delaware, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Utah, Wisconsin and Texas. Texas enacted its statue in 2009 and it can be found in the Texas Business Organizations Code (“TBOC”), title 3, subchapter M, sections 101.601 – 101.621.

Typically, each series (i) owns its own assets and has its own liabilities; (ii) has the availability to have different members, managers and types of membership interests; (iii) has the ability to sue and be sued; (iv) can have its own business purpose; (v) has the ability to contract in its own name; and (vi) can grant a security interest in its own name.

Generally, the debts, liabilities, losses, obligations, and expenses of one series will not be enforceable against another series’ assets or the assets of the “parent” limited liability company. This makes it a viable option for any business where it is desirable to separate assets or business lines into distinct entities, such as investment companies, real estate development companies, oil and gas companies and licensing or regulatory companies. The TBOC provides that in order for the liability shield to exist three requirements must be satisfied: (i) the certificate of formation of the main LLC must contain a “notice provision”, which references the liability protection provided for by TBOC section 101.602(a); (ii) the company agreement of the main LLC must contain a statement setting forth the liability protection provided for by TBOC section 101.602(a); and (iii) records must be maintained for each series that “account for the assets associated with that series separately from the other assets of the [parent LLC] or any other series”.

One of the great benefits of series LLCs are the cost savings related to organizational filing fees. In Texas, the filing fee to create a series LLC is the same as an individual LLC; $300.00 (non-expedited). Thus, to create six LLCs would be a minimum cost of $1,800.00 versus the cost of creating a series LLC of $300.00. Oftentimes, series LLCs may also result in lower legal costs as it reduces the need for separate operating agreements and some document preparation.

While there are still issues to be considered when determining whether a series LLC might be right for a particular business, series LLCs are growing in popularity and are an additional tool in any investor’s or businesses’ proverbial toolkit.

ML_Logo_Color

Labor Day: A Celebration of The American Worker

As youngsters everywhere return to the classroom, and we all bask in the waning glow of summer, it is worthwhile to take a moment to reflect upon the history of and reasons behind the existence of Labor Day. Far more than just an opportunity to fire up the grill, lounge poolside or hit the links, Labor Day is a time to celebrate the economic and social achievements of the American worker. This year, we at Murray-Lobb urge you to take a moment and consider the monumental contributions that legions of workers have made and continue to make to our nation’s economy, defense and overall prosperity.

Gradual Evolution of the Holiday

The history of Labor Day in America differs somewhat from other federal holidays, in that it took shape in a rather piecemeal fashion. During the 1800s, it was customary for workers’ groups to hold picnics, parades and other large assemblies as a means to demonstrate support for issues affecting laborers. Rallies were routinely held as a means to advocate for shorter working hours or to call for wage strikes. However, in terms of the creation of a singular national holiday celebrating workers, it is often a particular gathering on September 5, 1882, in New York City which gets the credit.

The late 19th century was a time during which the labor movement in America was gaining real steam. New York’s Central Labor Union amassed power by linking many smaller unions into one large advocacy force. In May of 1882 it was proposed that all of the unions gather together in early September for a massive festival. After months of planning, the workers were set to congregate at what was then the largest park in the city on the appointed September day.

Though the planned parade got off to a slow start, crowds of laborers began to arrive, and the event ultimately drew thousands. Music, beer, food, dancing, fireworks and inspirational speeches from union leaders all combined to create a memorable day for those involved. In the end, major newspapers deemed the assembly an utter success, and each subsequent year brought more and more similar events to cities across the country.

Federal Recognition of Labor Day

Over time, localities from coast to coast began to emphasize the importance of honoring the nation’s labor force, with local municipalities being the first to pass ordinances creating official observances. These developments led to initiatives calling for similar action on the state level, with Oregon being the first to pass such legislation in 1887. Very quickly, four additional states established Labor Day as a statewide holiday. By 1894, well over 20 states had created such a holiday, and in June of the same year, the United States Congress passed its own legislation decreeing that the first Monday in September would henceforth be a federally recognized holiday known as Labor Day.

Celebrating America’s Labor Force

Though it is easy to focus primarily on squeezing in a last bit of summertime fun before fall descends upon us, it is important not to overlook the underlying reason for Labor Day’s existence. America’s labor force, past and present, has been a vital factor in the creation of an economic powerhouse the likes of which the world has never seen. At Murray-Lobb, we hope you will take some time this holiday weekend to contemplate the incomparable achievements of the American workforce and pay tribute to the countless contributions laborers have made to the establishment of our robust way of life as well as our political democracy. In the ever-astute words of the Greek dramatist Sophocles, “without labor, nothing prospers.”