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SAAS Services vs. Licensed Software

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Privacy, Technology and Perspective

SAAS Services vs. Licensed Software. Let’s focus on the difference between software-as-a-service (SAAS) and licensed software. The distinction is important.  Here, we’ll look at why, and help you spot outdated agreements and fill in missing terms.

Background

More and more software providers have transitioned to SAAS-based offerings, which rely on data storage and software stored in the cloud.  Compare previous times when software was delivered via CD-Roms, disk drives, and over file transfer protocol sites, for example.

Despite today’s extensive use of SAAS services, many companies still rely on legacy contracts to cover those services.  That is a problem because legacy licensing agreements often do not cover SAAS services – they only cover the use of the software.

Here are a few clues that you may be working from an outdated agreement:

·       Use of the term “license;”

·       No definitions for the terms “Authorized User,” “Customer Data,” and “Services.”

·       No terms regarding data privacy and security; and

·       Thin representations and warranties (or disclaimers) covering only the software (and not the “Services”).

What terms do SAAS agreements need?  Here are some ideas:

A comprehensive SAAS services agreement under which the subscriber gets access to and use of the SAAS services based upon the conditions set forth in the contract;

Definitions which expressly set out who is an “Authorized User, and define “Customer Data,” “Provider IP,” and “Services;”  

Specific provisions regarding access, use of the services, use restrictions, and support;

Robust confidentiality provisions covering, at minimum, confidential intellectual property, trade secrets, third-party confidential information, and other sensitive or proprietary information, including Customer Data;

A provision that asserts Customer’s ownership of Customer Data and restricts access to and use of it, including, if appropriate, restricting derivative uses of “insights” derived from Customer Data, in whole or in part.  The agreement should also clarify what happens to Customer Data when the Services terminate, or the agreement expires (most organizations want their data returned and want their providers to delete their data);

Privacy and security provisions, such as a privacy and data security addendum or data processing agreement, as appropriate;

A provision regarding fees and the subscription period. Customers should require certainty in the contract itself, including the fees for the services, payment requirements, invoicing terms, and any renewal fee notification or process (as well as any caps on renewal fees);

Reps and Warranties in and around the SAAS services (at a minimum, they should conform in all material respects to the specifications – which is one reason why it is so important to define the Services well, including descriptions and specifications).

Customers should also ask their Provider to include at least basic privacy and security reps and warranties;

Termination rights that provide straightforward ways for both parties to end their agreement, and are clear about what steps must be taken then; and

A service level agreement that addresses performance issues (such as uptime and speed of performance) and provides credits for unplanned downtime.

Suppose you find yourself looking at a legacy contract that is missing these terms (or an amendment that purports to address a SAAS-based offering, but its underlying agreement is missing these terms). In that case, likely, you don’t have a SAAS services agreement in front of you, and you’ll need a new document.

A final point – It’s important to educate your procurement group on the difference between SAAS services and licensed software.  Too many important issues may slip through the cracks otherwise.

Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.

 

(Originally posted by Hosch And Morris)
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Journal of Legal Advice on Freedom – An Overview

An interesting query has arisen in worldwide regulation as the world considers what’s to be one of the simplest ways of coping with the crisis in Libya. The Australian authorities is looking for legal recommendation from its inside lawyers as Colonel Gudafhi’s Regime continues to battle insurgent forces as the nation descends into civil battle. […]

The post Journal of Legal Advice on Freedom – An Overview first appeared on Family in Law.

(Originally posted by Teel Marcus)
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Will DOJ Really Bring Criminal Monopolization Charges?

The Department of Justice has signaled that criminal monopolization cases could be on the horizon. In this week's episode, Axinn's Tiffany Rider illustrated what such a case could entail.

     
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Firefighter visitation schedules for those who work 24-hour shifts

The classic American conception of the workday begins at 9 and ends at 5. How many songs have been written about the nine to five work schedules? We can probably hum or sing a couple of those to ourselves right now. Rolling into work when the sun is getting up and getting home by dinnertime is what most of us are used to up in our working lives. This allows us to maintain a somewhat normal schedule as far as our body clocks are concerned. We do not have to get off-kilter as far as our eating, sleep, or other habits.

The other thing that working a typical nine-to-five work schedule allows us to do is be on the same schedule as our children. When kids are in school, they go to school during the daytime without fail. There are no night school options for children. If we work hours that do not allow us to be at home the moment our children get off from school then there are after-school activities, daycare, and other arrangements that can be made. This has been a development during the past three or four generations when women began to enter the workforce more consistently and left the home.

Working during the same hours that our children are in school makes sense on many levels. Fortunately, most people can work fairly standard hours that allow them to be at home when their children are also off from school. However, if you are a firefighter then you may have some concerns about how to build meaningful relationships with your children because of your work schedule. I can’t speak for every single firefighter, but I know of many firefighters who work shifts where they will be asked to remain on call for at least 24-hour shifts and then we’ll have multiple days off from work. Depending upon the needs of your fire station or department you may be asked to take on either longer or shorter shifts with variable times where you can be off from the work period

To this point in your life working these shifts may not have been completely intolerable for you and your family. Having a spouse by your side who can be home during the hours when you were working with your children means that there will always be someone present to care for your kids when they are home. Additionally, you can go to work and serve your community and not be concerned about the well-being of your children while you were away. After all: marriage is a team sport and you and your spouse are teammates in all things. This includes raising children. 

However, this discussion can change to a great extent when you consider the challenges posed by a firefighter’s divorce. Once a divorce begins and certainly after the divorce case is over you are no longer raising children in a pure team environment. Yes, there is such a thing as co-parenting after a divorce where you and your ex-spouse we’ll need to work together and communicate to raise your children. With that said the nature of your relationship will never be as good as it once was when you and your spouse had a working marriage. In that case, you need to consider what challenges may be present in terms of raising a child while being a firefighter.

Probably the most significant consequence of getting a divorce as a parent of children under the age of 18 is needing to figure out how you are going to structure possession, visitation, and conservatorships issues regarding your kids. While most parents understandably concern themselves with the visitation and possession questions primarily conservatorships is also a topic that you and your attorney should work hard on while engaging in negotiations for your divorce case. Do not overlook the importance of being able to make decisions for your child and retain duties to care for your child because of your divorce. 

Firefighters especially run the risk of losing time, decision-making capabilities, and duties for their children because of their profession. This does not mean that you are a bad firefighter or a bad parent. What it does mean is that children typically do best with a parent who works consistent hours in a stable environment. While your work schedule man self is consistent the hours do not necessarily coincide with your child’s school and extracurricular activities. As a result, it is difficult for you to commit to being present for your child as much as he or she may require. Whereas while you were married your spouse was able to fill in these gaps for you the reality is that as a single adult the same cannot be said. 

All of this, I believe, should not cause you major concern and an endless amount of worry. It should certainly be on your radar for this is not a situation for you to try to avoid or one for you to despair over. Rather, by working with an experienced family law attorney you can take your work schedule, needs of your children, and other circumstances in your life and combine them into a whole life approach geared towards benefiting your children and strengthening the relationship that you have with them. The question you need to ask yourself is how you are going to connect all of these dots? 

By contacting the experienced family law attorneys with the Law Office of Bryan Fagan you can begin to learn more about divorce in Texas. It is true that all divorces, no matter who you are, follow the same general steps and process. However, every divorce tends to look different due to the number of individualized factors involved in your case compared to another person. Do not underestimate the degree to which your work schedules, that of your spouse, or the needs of your children will play a role in the negotiation of your divorce case. When you consider that most Texas divorces are settled out of court rather than determined in court by a judge that makes negotiation and planning even more important.

A free-of-charge consultation with one of our experienced family law attorneys can begin the process of you learning more about your case and how to approach the different issues that are relevant to you and your family. These consultations can take place at one of our two Houston area locations, over the phone, or even via video. We want to help accommodate your needs and your work schedule as much as possible. Please reach out today if you have questions or simply want to learn more about getting a divorce in Texas. Our attorneys can help guide and provide you with information that can be of great assistance to you and your family.

Working out a plan for visitation with your children during and after a divorce

Work-life balance is something that we hear a lot about these days. Everyone wants to be able to achieve great success both as a parent and in the workplace. This is the equivalent of wanting to have your cake and eat it too. However, most people who have raised children while working can tell you that there are seasons of life where more attention needs to be paid at work and more attention than will need to be paid at home. There is no permanency or being able to provide constant attention either at home or at work period that plan simply will not work for most people. Rather, you need to be able to pick your spots and focus your attention on important times both at work and at home when the time is right. 

For example, if there is a performance review, training exercise, or another part of your firefighting work that needs to have your attention for a season of time then you may need to shift some of your focus away from home and place it on your work during this time. That doesn’t mean you don’t care about your home life or your kids. However, it is simply acknowledging that there are commitments at work that require you to pay attention. Once the season is over at work you can go back to applying a normal amount of attention to your family or children. 

By the same token, if your child is struggling with your divorce, academics, or in any other area of your life, you may need to take some time away from normal work activities to provide your child with the attention that he or she needs. For example, it may be that you must provide your child with counseling or other therapy for any reason. It’s not as if you can leave your child to attend those meetings on their own. Being present with your child and asking your employer to make temporary accommodations for you it’s just a part of parenting. It will not last forever and you will be able to r resume a more standard work-life balance once you have addressed the issue with your child.

The bottom line is that being able to achieve a perfect work-life balance is simply not possible. There will always be times when one area of your life will take away from the other. Wellbeing a firefighter and working the type of hours that you do is a unique condition for firefighting the inability to achieve a constantly perfect work-life balance is not unique to firefighters. All adults who are parents of young kids struggle from time to time at being able to achieve the desired amount of work-life balance that we strive for. Again, this does not make us bad parents or bad employees. It is just an acknowledgment that there’s nothing wrong with striving for a great work-life balance even if that balance is sometimes hard to achieve.

When it comes to you being a firefighter you should always pursue opportunities to advance your career in hopes of being able to benefit the life of your child and yourself. Rising through the ranks of the firefighter it’s probably different than doing so in corporate America or a typical office environment. However, you should learn what it takes what the chief of your department or other supervisors looks for when assigning shifts and allowing people to advance in their careers as a firefighter. Having discussions and understanding expectations is a key part of this process.

I mentioned this to you not because I am a career coach but because advancing in the ranks of a firefighter may allow you to achieve a greater work-life balance. Well, I have never been a firefighter personally I have known and worked on behalf of firefighters in the past. From what I understand certain roles within the fire department allow for more consistent and stable hours compared to the typical shift work that a firefighter is expected to endure. If ultimately your goal is to have more standard hours in terms of your work schedule, then asking how to get to that stage in your career would make a lot of sense to me. If you are just starting as a firefighter, it may take some years of service to get to that point. However, if you are a veteran firefighter then your ability to get into those sorts of positions may be somewhat easier than you had believed previously. Asking and then learning and obtaining information is usually the first step in this process. You may be surprised to learn just how achievable it is for you to be able to rise in the ranks of firefighters. 

For the time being, however, you may need to just figure out how to manage your work schedule in terms of being able to build a visitation and possession schedule with your kids. As I mentioned at the beginning of today’s blog post it is not as if your work hours and your child’s school hours will ever perfectly coalesce. That is probably a dream that will never be fully realized. However, you can take your work schedule as a firefighter and then build a possession schedule around it as best as possible. What that looks like for you depends a great deal upon the needs of your children and your availability to meet those needs. 

For example, suppose that you work a schedule where you are on call for 48 hours and will be away from home. After that, you will be available to spend time with your children for three days at a time. Your schedule rotates like that on a predictable and consistent basis. What can this mean for you as far as opportunities to spend meaningful time with your kids? Well, it may mean that you and your Co-parent need to work together to negotiate a possession schedule that works well for your children and both of you. The idea that your spouse will become frustrated and simply tell you that he or she will not work with you on negotiation for the subject is not reasonable or realistic. The fact is that as a family court judge we will not penalize you for being a firefighter if it comes to going to a trial. 

Rather, even firefighters get time with children and divorce trials. He was a firefighter who can be awarded time with your children even if you do not work a traditional 9 to 5 schedule. However, a standard possession order likely will not work well for you considering that weekends are not always available to you. For that reason, you may have to come up with a schedule that allows you to see your children as much as possible during the week and on the weekends when you are available. If you know that your schedule is going to be the same for an extended period, then that is something that you should negotiate through in your divorce. Look at your calendar and then the needs of your children. Negotiate with your spouse on a schedule that will not disrupt the lives of your children but will allow you to see them as much as possible. 

The last item I will note is that living close to your ex-spouse can make all of this a lot easier for you and your children. The less time you spend in the car the more time you can spend with your children. When you consider the challenges related to traveling in and around the Houston area by car with children then you know exactly what I mean. Limiting the amount of car travel to pick up and drop off your children means that you have more time with them to spend. This is a factor of many people do not consider during a divorce and I think that is a mistake, especially for firefighters. 

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about firefighter divorce cases as well as about any other family law case in Texas and how it may impact you and your children moving forward.

Original author: Bryan Fagan
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Firefighter visitation schedules for those who work 24-hour shifts

The classic American conception of the workday begins at 9 and ends at 5. How many songs have been written about the nine to five work schedules? We can probably hum or sing a couple of those to ourselves right now. Rolling into work when the sun is getting up and getting home by dinnertime is what most of us are used to up in our working lives. This allows us to maintain a somewhat normal schedule as far as our body clocks are concerned. We do not have to get off-kilter as far as our eating, sleep, or other habits.

The other thing that working a typical nine-to-five work schedule allows us to do is be on the same schedule as our children. When kids are in school, they go to school during the daytime without fail. There are no night school options for children. If we work hours that do not allow us to be at home the moment our children get off from school then there are after-school activities, daycare, and other arrangements that can be made. This has been a development during the past three or four generations when women began to enter the workforce more consistently and left the home.

Working during the same hours that our children are in school makes sense on many levels. Fortunately, most people can work fairly standard hours that allow them to be at home when their children are also off from school. However, if you are a firefighter then you may have some concerns about how to build meaningful relationships with your children because of your work schedule. I can’t speak for every single firefighter, but I know of many firefighters who work shifts where they will be asked to remain on call for at least 24-hour shifts and then we’ll have multiple days off from work. Depending upon the needs of your fire station or department you may be asked to take on either longer or shorter shifts with variable times where you can be off from the work period

To this point in your life working these shifts may not have been completely intolerable for you and your family. Having a spouse by your side who can be home during the hours when you were working with your children means that there will always be someone present to care for your kids when they are home. Additionally, you can go to work and serve your community and not be concerned about the well-being of your children while you were away. After all: marriage is a team sport and you and your spouse are teammates in all things. This includes raising children. 

However, this discussion can change to a great extent when you consider the challenges posed by a firefighter’s divorce. Once a divorce begins and certainly after the divorce case is over you are no longer raising children in a pure team environment. Yes, there is such a thing as co-parenting after a divorce where you and your ex-spouse we’ll need to work together and communicate to raise your children. With that said the nature of your relationship will never be as good as it once was when you and your spouse had a working marriage. In that case, you need to consider what challenges may be present in terms of raising a child while being a firefighter.

Probably the most significant consequence of getting a divorce as a parent of children under the age of 18 is needing to figure out how you are going to structure possession, visitation, and conservatorships issues regarding your kids. While most parents understandably concern themselves with the visitation and possession questions primarily conservatorships is also a topic that you and your attorney should work hard on while engaging in negotiations for your divorce case. Do not overlook the importance of being able to make decisions for your child and retain duties to care for your child because of your divorce. 

Firefighters especially run the risk of losing time, decision-making capabilities, and duties for their children because of their profession. This does not mean that you are a bad firefighter or a bad parent. What it does mean is that children typically do best with a parent who works consistent hours in a stable environment. While your work schedule man self is consistent the hours do not necessarily coincide with your child’s school and extracurricular activities. As a result, it is difficult for you to commit to being present for your child as much as he or she may require. Whereas while you were married your spouse was able to fill in these gaps for you the reality is that as a single adult the same cannot be said. 

All of this, I believe, should not cause you major concern and an endless amount of worry. It should certainly be on your radar for this is not a situation for you to try to avoid or one for you to despair over. Rather, by working with an experienced family law attorney you can take your work schedule, needs of your children, and other circumstances in your life and combine them into a whole life approach geared towards benefiting your children and strengthening the relationship that you have with them. The question you need to ask yourself is how you are going to connect all of these dots? 

By contacting the experienced family law attorneys with the Law Office of Bryan Fagan you can begin to learn more about divorce in Texas. It is true that all divorces, no matter who you are, follow the same general steps and process. However, every divorce tends to look different due to the number of individualized factors involved in your case compared to another person. Do not underestimate the degree to which your work schedules, that of your spouse, or the needs of your children will play a role in the negotiation of your divorce case. When you consider that most Texas divorces are settled out of court rather than determined in court by a judge that makes negotiation and planning even more important.

A free-of-charge consultation with one of our experienced family law attorneys can begin the process of you learning more about your case and how to approach the different issues that are relevant to you and your family. These consultations can take place at one of our two Houston area locations, over the phone, or even via video. We want to help accommodate your needs and your work schedule as much as possible. Please reach out today if you have questions or simply want to learn more about getting a divorce in Texas. Our attorneys can help guide and provide you with information that can be of great assistance to you and your family.

Working out a plan for visitation with your children during and after a divorce

Work-life balance is something that we hear a lot about these days. Everyone wants to be able to achieve great success both as a parent and in the workplace. This is the equivalent of wanting to have your cake and eat it too. However, most people who have raised children while working can tell you that there are seasons of life where more attention needs to be paid at work and more attention than will need to be paid at home. There is no permanency or being able to provide constant attention either at home or at work period that plan simply will not work for most people. Rather, you need to be able to pick your spots and focus your attention on important times both at work and at home when the time is right. 

For example, if there is a performance review, training exercise, or another part of your firefighting work that needs to have your attention for a season of time then you may need to shift some of your focus away from home and place it on your work during this time. That doesn’t mean you don’t care about your home life or your kids. However, it is simply acknowledging that there are commitments at work that require you to pay attention. Once the season is over at work you can go back to applying a normal amount of attention to your family or children. 

By the same token, if your child is struggling with your divorce, academics, or in any other area of your life, you may need to take some time away from normal work activities to provide your child with the attention that he or she needs. For example, it may be that you must provide your child with counseling or other therapy for any reason. It’s not as if you can leave your child to attend those meetings on their own. Being present with your child and asking your employer to make temporary accommodations for you it’s just a part of parenting. It will not last forever and you will be able to r resume a more standard work-life balance once you have addressed the issue with your child.

The bottom line is that being able to achieve a perfect work-life balance is simply not possible. There will always be times when one area of your life will take away from the other. Wellbeing a firefighter and working the type of hours that you do is a unique condition for firefighting the inability to achieve a constantly perfect work-life balance is not unique to firefighters. All adults who are parents of young kids struggle from time to time at being able to achieve the desired amount of work-life balance that we strive for. Again, this does not make us bad parents or bad employees. It is just an acknowledgment that there’s nothing wrong with striving for a great work-life balance even if that balance is sometimes hard to achieve.

When it comes to you being a firefighter you should always pursue opportunities to advance your career in hopes of being able to benefit the life of your child and yourself. Rising through the ranks of the firefighter it’s probably different than doing so in corporate America or a typical office environment. However, you should learn what it takes what the chief of your department or other supervisors looks for when assigning shifts and allowing people to advance in their careers as a firefighter. Having discussions and understanding expectations is a key part of this process.

I mentioned this to you not because I am a career coach but because advancing in the ranks of a firefighter may allow you to achieve a greater work-life balance. Well, I have never been a firefighter personally I have known and worked on behalf of firefighters in the past. From what I understand certain roles within the fire department allow for more consistent and stable hours compared to the typical shift work that a firefighter is expected to endure. If ultimately your goal is to have more standard hours in terms of your work schedule, then asking how to get to that stage in your career would make a lot of sense to me. If you are just starting as a firefighter, it may take some years of service to get to that point. However, if you are a veteran firefighter then your ability to get into those sorts of positions may be somewhat easier than you had believed previously. Asking and then learning and obtaining information is usually the first step in this process. You may be surprised to learn just how achievable it is for you to be able to rise in the ranks of firefighters. 

For the time being, however, you may need to just figure out how to manage your work schedule in terms of being able to build a visitation and possession schedule with your kids. As I mentioned at the beginning of today’s blog post it is not as if your work hours and your child’s school hours will ever perfectly coalesce. That is probably a dream that will never be fully realized. However, you can take your work schedule as a firefighter and then build a possession schedule around it as best as possible. What that looks like for you depends a great deal upon the needs of your children and your availability to meet those needs. 

For example, suppose that you work a schedule where you are on call for 48 hours and will be away from home. After that, you will be available to spend time with your children for three days at a time. Your schedule rotates like that on a predictable and consistent basis. What can this mean for you as far as opportunities to spend meaningful time with your kids? Well, it may mean that you and your Co-parent need to work together to negotiate a possession schedule that works well for your children and both of you. The idea that your spouse will become frustrated and simply tell you that he or she will not work with you on negotiation for the subject is not reasonable or realistic. The fact is that as a family court judge we will not penalize you for being a firefighter if it comes to going to a trial. 

Rather, even firefighters get time with children and divorce trials. He was a firefighter who can be awarded time with your children even if you do not work a traditional 9 to 5 schedule. However, a standard possession order likely will not work well for you considering that weekends are not always available to you. For that reason, you may have to come up with a schedule that allows you to see your children as much as possible during the week and on the weekends when you are available. If you know that your schedule is going to be the same for an extended period, then that is something that you should negotiate through in your divorce. Look at your calendar and then the needs of your children. Negotiate with your spouse on a schedule that will not disrupt the lives of your children but will allow you to see them as much as possible. 

The last item I will note is that living close to your ex-spouse can make all of this a lot easier for you and your children. The less time you spend in the car the more time you can spend with your children. When you consider the challenges related to traveling in and around the Houston area by car with children then you know exactly what I mean. Limiting the amount of car travel to pick up and drop off your children means that you have more time with them to spend. This is a factor of many people do not consider during a divorce and I think that is a mistake, especially for firefighters. 

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about firefighter divorce cases as well as about any other family law case in Texas and how it may impact you and your children moving forward.

(Originally posted by Bryan Fagan)
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Court Holds That Engineer Does Not Owe Fiduciary Duties To A Non-Client

In Hussion St. Bldgs., LLC v. TRW Eng’rs, Inc., the plaintiff landowner claimed its real property was injured by the failure of an engineering firm involved in developing the adjoining property to include a water-detention plan. No. 14-20-00641-CV, 2022 Tex. App. LEXIS 2193 (Tex. App.—Houston [14th Dist.] April 5, 2022, no pet. history). The landowner asserted claims of negligence and breach of fiduciary duty, and the trial court granted the engineering firm’s summary-judgment motion on the grounds that limitations barred the negligence claim and licensed engineers do not owe fiduciary duties to non-clients. The court of appeals reversed the summary judgment on the negligence claim because the engineering firm failed to conclusively establish that the landowner’s claims accrued more than two years before this suit was filed. Turning to the breach of fiduciary duty claim, the court held:

TRW moved for summary judgment on Hussion’s breach-of-fiduciary-duty claim on the ground that engineers do not owe fiduciary duties to non-clients under Texas law. TRW is correct. Indeed, courts have declined to hold that engineers owe fiduciary duties even to their own clients. See Sheffield Dev. Co. v. Carter & Burgess, Inc., No. 02-11-00204-CV, 2012 Tex. App. LEXIS 10599, 2012 WL 6632500, at *10 (Tex. App.—Fort Worth Dec. 21, 2012, pet. dism’d). The provisions of the Administrative Code on which Hussion relies do not create fiduciary duties owed to the public at large, nor do they purport to do so. They do not refer to “duty” at all, much less to the elevated duties owed by fiduciaries.

Hussion nevertheless argues that the Administrative Code creates an informal fiduciary relationship. This argument misapprehends the nature of an informal fiduciary relationship. An informal fiduciary relationship, also known as a “confidential relationship,” may arise “where one person trusts in and relies upon another, whether the relation is a moral, social, domestic or merely personal one.” ... Fiduciary duties arise only in the context of fiduciary relationships, and Hussion does not claim to have had a relationship of trust and confidence with TRW that existed independently from, and prior to, TRW’s work on the Project.... If a business transaction is involved, “the special relationship of trust and confidence must exist prior to, and apart from, the agreement made the basis of the suit.” ... Because TRW owed no fiduciary duties to Hussion, we conclude that the trial court properly granted summary judgment against Hussion on its breach-of-fiduciary-duty claim.

Id.

Original author: David Fowler Johnson
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Court Holds That Engineer Does Not Owe Fiduciary Duties To A Non-Client

In Hussion St. Bldgs., LLC v. TRW Eng’rs, Inc., the plaintiff landowner claimed its real property was injured by the failure of an engineering firm involved in developing the adjoining property to include a water-detention plan. No. 14-20-00641-CV, 2022 Tex. App. LEXIS 2193 (Tex. App.—Houston [14th Dist.] April 5, 2022, no pet. history). The landowner asserted claims of negligence and breach of fiduciary duty, and the trial court granted the engineering firm’s summary-judgment motion on the grounds that limitations barred the negligence claim and licensed engineers do not owe fiduciary duties to non-clients. The court of appeals reversed the summary judgment on the negligence claim because the engineering firm failed to conclusively establish that the landowner’s claims accrued more than two years before this suit was filed. Turning to the breach of fiduciary duty claim, the court held:

TRW moved for summary judgment on Hussion’s breach-of-fiduciary-duty claim on the ground that engineers do not owe fiduciary duties to non-clients under Texas law. TRW is correct. Indeed, courts have declined to hold that engineers owe fiduciary duties even to their own clients. See Sheffield Dev. Co. v. Carter & Burgess, Inc., No. 02-11-00204-CV, 2012 Tex. App. LEXIS 10599, 2012 WL 6632500, at *10 (Tex. App.—Fort Worth Dec. 21, 2012, pet. dism’d). The provisions of the Administrative Code on which Hussion relies do not create fiduciary duties owed to the public at large, nor do they purport to do so. They do not refer to “duty” at all, much less to the elevated duties owed by fiduciaries.

Hussion nevertheless argues that the Administrative Code creates an informal fiduciary relationship. This argument misapprehends the nature of an informal fiduciary relationship. An informal fiduciary relationship, also known as a “confidential relationship,” may arise “where one person trusts in and relies upon another, whether the relation is a moral, social, domestic or merely personal one.” ... Fiduciary duties arise only in the context of fiduciary relationships, and Hussion does not claim to have had a relationship of trust and confidence with TRW that existed independently from, and prior to, TRW’s work on the Project.... If a business transaction is involved, “the special relationship of trust and confidence must exist prior to, and apart from, the agreement made the basis of the suit.” ... Because TRW owed no fiduciary duties to Hussion, we conclude that the trial court properly granted summary judgment against Hussion on its breach-of-fiduciary-duty claim.

Id.

(Originally posted by David Fowler Johnson)
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Appellate Court Affirmed Receivership Order Where Appellant Waived His Complaints By Not Securing Rulings And By Not Challenging All Potential Grounds Upon Which The Order Was Based

In In re Estate of Vines, a probate court appointed a receiver over a business that was owned by a decedent. No. 01-21-00003-CV, 2022 Tex. App. LEXIS 2327 (Tex. App.—Houston [14th Dist.] April 12, 2022, no pet. history). After the decedent died, her grandchildren challenged a new will and other documents that were executed by their grandmother in favor of the grandmother’s nephew. The trial court appointed a temporary administrator and later appointed a receiver over a business that was owned by the grandmother, but that was now controlled by the nephew. The nephew appealed the receivership order on multiple grounds.

The nephew first argued that the business had been transferred to him outside of probate, and that the probate court had no jurisdiction to appoint a receiver over that non-probate asset. The court of appeals held that he waived that argument by not securing a ruling on it, and the court held that the issue was still before the trial court. The nephew also challenged the appointment of a receiver under Texas Civil Practice and Remedies Code Section 64.001(3). That provision provides that a court may appoint a receiver:

(1) in an action by a vendor to vacate a fraudulent purchase of property; (2) in an action by a creditor to subject any property or fund to his claim; (3) in an action between partners or others jointly owning or interested in any property or fund; (4) in an action by a mortgagee for the foreclosure of the mortgage and sale of the mortgaged property; (5) for a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights; or (6) in any other case in which a receiver may be appointed under the rules of equity.

Id. (citing Tex. Civ. Prac. & Rem. Code § 64.001(a)). The court of appeals noted that the trial court’s receivership order simply cited to Section 64.001 and did not specify which subsection it was basing its ruling on. The court then held that the nephew waived his complaint by not challenging all grounds upon which the trial court based its ruling:

The probate court’s January 11, 2021 order appointing a receiver stated it was appointing a receiver pursuant to Chapter 64 of the Texas Civil Practice and Remedies Code, but it did not specify which subsection it was relying on in granting the appointment of a receiver. Thus, on appeal, it was incumbent on Kenneth to attack all possible grounds. Here, Kenneth does not attack all independent grounds that support the probate court’s order. Specifically, Kenneth assigns no error to subsection (a)(6), which generally allows a probate court to appoint a receiver under the rules of equity. By failing to attack this independent ground, Kenneth has waived error, if any

Id. The nephew also challenged the order under Texas Business Organizations Code Section 11.404, but the court similarly held that he waived that argument by not challenging all grounds thereunder. The court affirmed the receivership order.

Original author: David Fowler Johnson
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Appellate Court Affirmed Receivership Order Where Appellant Waived His Complaints By Not Securing Rulings And By Not Challenging All Potential Grounds Upon Which The Order Was Based

In In re Estate of Vines, a probate court appointed a receiver over a business that was owned by a decedent. No. 01-21-00003-CV, 2022 Tex. App. LEXIS 2327 (Tex. App.—Houston [14th Dist.] April 12, 2022, no pet. history). After the decedent died, her grandchildren challenged a new will and other documents that were executed by their grandmother in favor of the grandmother’s nephew. The trial court appointed a temporary administrator and later appointed a receiver over a business that was owned by the grandmother, but that was now controlled by the nephew. The nephew appealed the receivership order on multiple grounds.

The nephew first argued that the business had been transferred to him outside of probate, and that the probate court had no jurisdiction to appoint a receiver over that non-probate asset. The court of appeals held that he waived that argument by not securing a ruling on it, and the court held that the issue was still before the trial court. The nephew also challenged the appointment of a receiver under Texas Civil Practice and Remedies Code Section 64.001(3). That provision provides that a court may appoint a receiver:

(1) in an action by a vendor to vacate a fraudulent purchase of property; (2) in an action by a creditor to subject any property or fund to his claim; (3) in an action between partners or others jointly owning or interested in any property or fund; (4) in an action by a mortgagee for the foreclosure of the mortgage and sale of the mortgaged property; (5) for a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights; or (6) in any other case in which a receiver may be appointed under the rules of equity.

Id. (citing Tex. Civ. Prac. & Rem. Code § 64.001(a)). The court of appeals noted that the trial court’s receivership order simply cited to Section 64.001 and did not specify which subsection it was basing its ruling on. The court then held that the nephew waived his complaint by not challenging all grounds upon which the trial court based its ruling:

The probate court’s January 11, 2021 order appointing a receiver stated it was appointing a receiver pursuant to Chapter 64 of the Texas Civil Practice and Remedies Code, but it did not specify which subsection it was relying on in granting the appointment of a receiver. Thus, on appeal, it was incumbent on Kenneth to attack all possible grounds. Here, Kenneth does not attack all independent grounds that support the probate court’s order. Specifically, Kenneth assigns no error to subsection (a)(6), which generally allows a probate court to appoint a receiver under the rules of equity. By failing to attack this independent ground, Kenneth has waived error, if any

Id. The nephew also challenged the order under Texas Business Organizations Code Section 11.404, but the court similarly held that he waived that argument by not challenging all grounds thereunder. The court affirmed the receivership order.

(Originally posted by David Fowler Johnson)
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Appeals Court Sides With Cops in Lawsuit Over Parody Police Facebook Page Arrest

Despite siding with police on qualified immunity, the panel said the underlying arrest may not have been not warranted.

     
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Cummings Decided

I have been blogging since December, 2011. In all that time, I can count on one hand the number of times that I have blogged more than once during a week. As far as I can recall, I have never blogged on back-to-back days. I had actually completed two drafts of the blog entry that hit the mailboxes today before seeing a breaking news alert from Law 360 that Cummings had been decided by the United States Supreme Court, so I went ahead and finished the blog entry that hit the mailboxes earlier in the week and then did Cummings the next day.

 

I previously blogged on the oral argument in Cummings here. I made a prediction in that blog entry based upon the questions that were asked in the oral argument. It turns out my prediction was way off. As usual, the blog entry is divided into categories and they are: Justice Roberts majority opinion holding that the Rehabilitation Act and the Affordable Care Act do not allow for emotional distress damages; Justice Kavanaugh’s concurring opinion; Justice Breyer’s dissenting opinion; and thought/takeaways. Of course, the reader is free to focus on any or all of the categories.

 

 

I

Justice Roberts Majority Opinion Holding That the Rehabilitation Act and the Affordable Care Act Do Not Allow for Emotional Distress Damages.

 

Congress has broad power under the Spending Clause of the Constitution to set terms for dispersing federal funds. Such legislation is in the nature of a contract whereby in return for federal funds, the recipient agrees to comply with federally imposed conditions. Legislation enacted under the Spending Clause of the Constitution may be enforced through implied rights of actions and private plaintiffs can secure injunctive or monetary relief in such suits. Punitive damages are not available for such suits per Barnes v. Gorman, which can be found here. Congress has enacted four statutes prohibiting recipients of federal financial assistance from discriminating based upon certain grounds. Those statutes are: title VI of the Civil Rights Act, which forbids race, color, and national origin discrimination in federally funded programs or activities; title IX of the Education Amendments of 1972, which prohibits sex-based discrimination; the Rehabilitation Act of 1973, which bars funding recipient from discriminating because of disability; and the Affordable Care Act, which outlawed discrimination on any of the preceding grounds, in addition to age, by healthcare entities receiving federal funds. None of the statutes mentioned in ¶ 3 provide victims of discrimination a private right of action to sue the funding recipient in federal court. Nevertheless, the United States Supreme Court previously found an implied right of action in such statutes. Congress also later acknowledged that right in amendments to those statutes leading the Supreme Court to conclude that Congress had ratified the Court’s prior holding that private individuals may sue to enforce those statutes. Both the Rehabilitation Act and the Affordable Care Act expressly incorporate the rights and remedies provided under title VI. Spending Clause legislation operate based on consent. That is, in return for federal funds, the recipient agrees to comply with federally imposed conditions. So the key question is whether the recipient voluntarily and knowingly accepts the terms of that contract. Recipients cannot knowingly accept the deal with the federal government unless they would clearly understand the obligations that come along with doing so. If Congress intends to impose a condition on the grant of federal monies, it has to do so unambiguously. When considering whether to accept federal funds, a prospective recipient would surely wonder not only what rules it must follow, but also what sort of penalties might be on the table. So a particular remedy is thus appropriate relief in a private Spending Clause action, only if the funding recipient is on notice that by accepting federal funding, it exposes itself to liability of that nature. In other words, the question is whether a prospective funding recipient at the time it engages in the process of deciding whether to accept federal dollars, would have been aware that it faced such liability. A recipient is on notice to whatever remedies are explicitly provided in relevant legislation. Since it is Spending Clause legislation, a recipient is also on notice with respect to those remedies traditionally available in suits for breach of contract, compensatory damages and injunctive relief. Such an approach also means that punitive damages, per Barnes, are out because they are not generally available for breach of contract. Under Barnes, it can be assumed that a federal funding recipient is aware that for breaching Spending Clause based contract with the federal government, that it will be subject to the usual contract remedies and private suits, excepting punitive damages. It is hornbook law that emotional distress is not generally compensable in contract. Accordingly, it is not possible to treat federal funding recipient as having consented to damages for emotional distress as such damages are not traditionally, generally, or normally found in suits for breach of contract. The approach offered by Cummings pushes the notion of offer and acceptance beyond its breaking point. It is one thing to say that funding recipients know the basic, general rules. However, it is quite another to assume that funding recipients know the parameters of every contract doctrine, no matter how idiosyncratic or exceptional those doctrines may be. Such an approach also risks overturning legislative power. Barnes mandates that courts imply only those remedies that are normally available for contract actions, and a court is not free to treat statutory silence as a license to freely supply remedies that it cannot be sure Congress would have chosen to make available. The Restatement of Contracts saying that emotional distress damages are available where the contractor’s breaches are of such a kind that serious emotional disturbance with a particularly likely result simply doesn’t hold up on further analysis. The Restatement approach does not reflect the consensus rule among American jurisdictions. The Court goes on to explain that states are all over the place with respect to the Restatement with some following it, others rejecting it, and others finding a middle ground. As such, is not possible to argue that clear notice exists for allowing emotional distress damages in Spending Clause legislation where no such damages are explicitly stated in the statute.

 

 

 

II

Justice Kavanaugh Concurring Opinion (Justice Gorsuch Joined)

 

The contract analogy is an imperfect way to determine the remedies for this particular implied cause of action. So, it is Congress and not the Supreme Court that should extend those implied causes of action and expand available remedies. Since that has not been done, emotional distress damages are not in play.

 

III

Justice Breyer Dissenting Opinion (Justice Sotomayor and Justice Kagan Joined)

 

Citing to the Restatement Second of Contracts, emotional distress damages have long been traditionally available when the contract or the breach was of such a kind that serious emotional disturbance was a particularly likely result. A private cause of action does exist for enforcing the four antidiscrimination statutes tied into Spending Clause legislation. The majority opinion will affect the remedies available under all four of those statutes, impacting victims of race, sex, disability, and age discrimination alike. Compensatory damages serve contract law’s general purposes, however, punitive damages go beyond compensating the injured party for lost expectation and instead put him in a better position than had the contract been performed. Most contracts are commercial contracts in nature entered for pecuniary gain. Pecuniary remedies are therefore typically sufficient to compensate the injured party for their expected losses. Contract law treatises make clear that expected losses from the breach of a contract entered for nonpecuniary purposes might reasonably include nonpecuniary harms. So contract law traditionally does award damages for emotional distress where other than pecuniary benefits are contracted for or where the breach is particularly likely to result in serious emotional disturbance. Such contracts have included, among others: 1) contracts for marriage; 2) contract by common carrier, innkeepers, or places of public resort or entertainment; 3) contract relating to the handling of a body; and 4) contracts for delivery of a sensitive telegram message. In all of those cases, emotional distress damages are compensatory because they make good the wrong done. Breach of a promise not to discriminate falls into the same kind of contract as those described in ¶ 6. The purpose of statutes seeking to eradicate invidious discrimination is clearly nonpecuniary. Also, discrimination based upon race, color, national origin, sex, age, or disability is particularly likely to cause serious emotional harm. In fact, often times emotional injury is the primary and sometimes only harm caused by the discrimination, with pecuniary injury at most secondary. For this point, Justice Breyer cites to: 1) a case involving a high school student repeatedly sexually assaulted by her teacher; 2) a person using a wheelchair who was forced to crawl up two flights of stairs to access the courthouse (Tennessee v. Lane, here); and 3) many historical examples of racial segregation in which black patrons had to use separate facilities or services. Regardless of whether financial injuries were present in these cases, a major and foreseeable harm was emotional distress caused by the indignity and humiliation of discrimination itself. Justice Goldberg stated when affirming the Civil Rights Act of 1964 that antidiscrimination laws seek the vindication of human dignity and not mere economics. It is difficult to believe that perspective funding recipients would be unaware that intentional discrimination based on race, sex, age, or disability is particularly likely to cause emotional suffering. Justice Breyer also does not believe that recipient would be unaware that in the event of an analogous contractual breach they could also be held legally liable for causing emotional distress. The majority opinion overly narrows Barnes, which did not contain the limitation that perspective funding recipients could only be expected to be aware of basic, general rules and not the exceptions or subsidiary rules governing specific circumstances. The majority opinion’s comparison to punitive damages is simply not persuasive because punitive damages are not embraced by contract law analogy since they do not serve the central purpose of compensating the injured party. So, the punitive damages exception cited by the majority opinion is not relying on contract law principles at all, but rather on tort law. According to The Restatement, when contract and tort claims overlap, contract law does not preclude an award of punitive damages if such an award is appropriate under the law of torts. The Restatement does not attribute the availability of emotional distress damages to tort rather than contract law. Nothing in Barnes requires the Court to ignore directly applicable contract rules in favor of the less applicable general rule on which the majority opinion relies. The majority opinion creates an anomaly. Other antidiscrimination statutes that Congress has provided an express cause of action for do permit recovery of compensatory damages for emotional distress, such as §§1981, 1983 claims. What the majority opinion means is that until Congress fixes the lack of emotional distress being explicitly stated for in the statute, remedies available under certain statutes would not be available under other statutes, such as to students suffering discrimination at the hands of the teachers, patients suffering discrimination at the hands of their doctors, and others. It is difficult to square the majority opinion’s holding with the basic purposes that antidiscrimination laws seek to serve. One of those purposes is vindicating human dignity and not mere economics. The majority opinion allows victims of discrimination to recover damages only if they can prove that they have suffered economic harm even though the primary harm inflicted by discrimination is rarely economic. Victims of intentional discrimination may sometimes suffer profound emotional injury without any attendant pecuniary harms. The majority opinion leaves those victims with no remedy at all.

 

IV

Thoughts/takeaways

 

The majority opinion means that unless the particular Spending Clause legislation has an explicit provision in its statute for recovery of emotional distress damages, emotional distress damages will not be recoverable. So, be sure to check the appropriate Spending Clause legislation to see if an explicit emotional distress statutory provision exists. If not, emotional distress is going to be out, though traditional contract compensatory damages and injunctive relief are in. The statutes are all fee shifting statutes. So, attorney fees are also in play. Both the majority and dissenting opinions rely heavily on Barnes v. Gorman, which you can read for yourself here. The Supreme Court did affirm that under all of the statutes a private cause of action exists. Justice Kavanaugh’s concurring opinion to my mind raises a question associated with standing as well. That is, if it is Congress that establishes causes of action, why isn’t that a cause of action in and of itself not sufficient to allow for standing? Justice Kavanaugh’s approach does bring into question, to my mind anyway, the validity of the holding of the Court in TransUnion, which we discussed here. It is hard for me to understand how it is arguable that the purposes of statutes seeking to eradicate invidious discrimination are not clearly nonpecuniary. That is, it is clear that such laws seek the vindication of human dignity and not mere economics. Previously, we discussed that getting damages under title II of the ADA and the Rehabilitation Act in 1973 means proving deliberate indifference per this blog entry. So, the question becomes whether deliberate indifference is now necessary to prove compensatory damages when emotional distress damages are not in play. If so, and that indeed may be very well the case after this opinion, it is hard to believe that many plaintiff’s lawyers will be interested in taking on title II/§504 cases on a contingency fee basis because you are talking about a relatively high standard for damages that don’t even pertain to emotional distress. I will say that my experience is that many attorneys operating in §504/title II of the ADA do not work on contingency basis, though some do. For those working on a contingency fee basis, this decision may severely impact how they go about deciding what cases to take on. All that said, attorney fees are still in play, but you can expect after this decision that fewer and fewer plaintiff side attorneys will take title II and §504 cases. This case also has a huge impact on title III standing cases with respect to serial plaintiffs, especially Internet accessibility serial plaintiffs. That is, since emotional distress damages are out of bounds, how can the stigmatic harm be even possible to confer standing. This is especially so considering damages are not even allowed under title III of the ADA per 42 U.S.C. § 12188.
Original author: William Goren
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Cummings Decided

I have been blogging since December, 2011. In all that time, I can count on one hand the number of times that I have blogged more than once during a week. As far as I can recall, I have never blogged on back-to-back days. I had actually completed two drafts of the blog entry that hit the mailboxes today before seeing a breaking news alert from Law 360 that Cummings had been decided by the United States Supreme Court, so I went ahead and finished the blog entry that hit the mailboxes earlier in the week and then did Cummings the next day.

 

I previously blogged on the oral argument in Cummings here. I made a prediction in that blog entry based upon the questions that were asked in the oral argument. It turns out my prediction was way off. As usual, the blog entry is divided into categories and they are: Justice Roberts majority opinion holding that the Rehabilitation Act and the Affordable Care Act do not allow for emotional distress damages; Justice Kavanaugh’s concurring opinion; Justice Breyer’s dissenting opinion; and thought/takeaways. Of course, the reader is free to focus on any or all of the categories.

 

 

I

Justice Roberts Majority Opinion Holding That the Rehabilitation Act and the Affordable Care Act Do Not Allow for Emotional Distress Damages.

 

Congress has broad power under the Spending Clause of the Constitution to set terms for dispersing federal funds. Such legislation is in the nature of a contract whereby in return for federal funds, the recipient agrees to comply with federally imposed conditions. Legislation enacted under the Spending Clause of the Constitution may be enforced through implied rights of actions and private plaintiffs can secure injunctive or monetary relief in such suits. Punitive damages are not available for such suits per Barnes v. Gorman, which can be found here. Congress has enacted four statutes prohibiting recipients of federal financial assistance from discriminating based upon certain grounds. Those statutes are: title VI of the Civil Rights Act, which forbids race, color, and national origin discrimination in federally funded programs or activities; title IX of the Education Amendments of 1972, which prohibits sex-based discrimination; the Rehabilitation Act of 1973, which bars funding recipient from discriminating because of disability; and the Affordable Care Act, which outlawed discrimination on any of the preceding grounds, in addition to age, by healthcare entities receiving federal funds. None of the statutes mentioned in ¶ 3 provide victims of discrimination a private right of action to sue the funding recipient in federal court. Nevertheless, the United States Supreme Court previously found an implied right of action in such statutes. Congress also later acknowledged that right in amendments to those statutes leading the Supreme Court to conclude that Congress had ratified the Court’s prior holding that private individuals may sue to enforce those statutes. Both the Rehabilitation Act and the Affordable Care Act expressly incorporate the rights and remedies provided under title VI. Spending Clause legislation operate based on consent. That is, in return for federal funds, the recipient agrees to comply with federally imposed conditions. So the key question is whether the recipient voluntarily and knowingly accepts the terms of that contract. Recipients cannot knowingly accept the deal with the federal government unless they would clearly understand the obligations that come along with doing so. If Congress intends to impose a condition on the grant of federal monies, it has to do so unambiguously. When considering whether to accept federal funds, a prospective recipient would surely wonder not only what rules it must follow, but also what sort of penalties might be on the table. So a particular remedy is thus appropriate relief in a private Spending Clause action, only if the funding recipient is on notice that by accepting federal funding, it exposes itself to liability of that nature. In other words, the question is whether a prospective funding recipient at the time it engages in the process of deciding whether to accept federal dollars, would have been aware that it faced such liability. A recipient is on notice to whatever remedies are explicitly provided in relevant legislation. Since it is Spending Clause legislation, a recipient is also on notice with respect to those remedies traditionally available in suits for breach of contract, compensatory damages and injunctive relief. Such an approach also means that punitive damages, per Barnes, are out because they are not generally available for breach of contract. Under Barnes, it can be assumed that a federal funding recipient is aware that for breaching Spending Clause based contract with the federal government, that it will be subject to the usual contract remedies and private suits, excepting punitive damages. It is hornbook law that emotional distress is not generally compensable in contract. Accordingly, it is not possible to treat federal funding recipient as having consented to damages for emotional distress as such damages are not traditionally, generally, or normally found in suits for breach of contract. The approach offered by Cummings pushes the notion of offer and acceptance beyond its breaking point. It is one thing to say that funding recipients know the basic, general rules. However, it is quite another to assume that funding recipients know the parameters of every contract doctrine, no matter how idiosyncratic or exceptional those doctrines may be. Such an approach also risks overturning legislative power. Barnes mandates that courts imply only those remedies that are normally available for contract actions, and a court is not free to treat statutory silence as a license to freely supply remedies that it cannot be sure Congress would have chosen to make available. The Restatement of Contracts saying that emotional distress damages are available where the contractor’s breaches are of such a kind that serious emotional disturbance with a particularly likely result simply doesn’t hold up on further analysis. The Restatement approach does not reflect the consensus rule among American jurisdictions. The Court goes on to explain that states are all over the place with respect to the Restatement with some following it, others rejecting it, and others finding a middle ground. As such, is not possible to argue that clear notice exists for allowing emotional distress damages in Spending Clause legislation where no such damages are explicitly stated in the statute.

 

 

 

II

Justice Kavanaugh Concurring Opinion (Justice Gorsuch Joined)

 

The contract analogy is an imperfect way to determine the remedies for this particular implied cause of action. So, it is Congress and not the Supreme Court that should extend those implied causes of action and expand available remedies. Since that has not been done, emotional distress damages are not in play.

 

III

Justice Breyer Dissenting Opinion (Justice Sotomayor and Justice Kagan Joined)

 

Citing to the Restatement Second of Contracts, emotional distress damages have long been traditionally available when the contract or the breach was of such a kind that serious emotional disturbance was a particularly likely result. A private cause of action does exist for enforcing the four antidiscrimination statutes tied into Spending Clause legislation. The majority opinion will affect the remedies available under all four of those statutes, impacting victims of race, sex, disability, and age discrimination alike. Compensatory damages serve contract law’s general purposes, however, punitive damages go beyond compensating the injured party for lost expectation and instead put him in a better position than had the contract been performed. Most contracts are commercial contracts in nature entered for pecuniary gain. Pecuniary remedies are therefore typically sufficient to compensate the injured party for their expected losses. Contract law treatises make clear that expected losses from the breach of a contract entered for nonpecuniary purposes might reasonably include nonpecuniary harms. So contract law traditionally does award damages for emotional distress where other than pecuniary benefits are contracted for or where the breach is particularly likely to result in serious emotional disturbance. Such contracts have included, among others: 1) contracts for marriage; 2) contract by common carrier, innkeepers, or places of public resort or entertainment; 3) contract relating to the handling of a body; and 4) contracts for delivery of a sensitive telegram message. In all of those cases, emotional distress damages are compensatory because they make good the wrong done. Breach of a promise not to discriminate falls into the same kind of contract as those described in ¶ 6. The purpose of statutes seeking to eradicate invidious discrimination is clearly nonpecuniary. Also, discrimination based upon race, color, national origin, sex, age, or disability is particularly likely to cause serious emotional harm. In fact, often times emotional injury is the primary and sometimes only harm caused by the discrimination, with pecuniary injury at most secondary. For this point, Justice Breyer cites to: 1) a case involving a high school student repeatedly sexually assaulted by her teacher; 2) a person using a wheelchair who was forced to crawl up two flights of stairs to access the courthouse (Tennessee v. Lane, here); and 3) many historical examples of racial segregation in which black patrons had to use separate facilities or services. Regardless of whether financial injuries were present in these cases, a major and foreseeable harm was emotional distress caused by the indignity and humiliation of discrimination itself. Justice Goldberg stated when affirming the Civil Rights Act of 1964 that antidiscrimination laws seek the vindication of human dignity and not mere economics. It is difficult to believe that perspective funding recipients would be unaware that intentional discrimination based on race, sex, age, or disability is particularly likely to cause emotional suffering. Justice Breyer also does not believe that recipient would be unaware that in the event of an analogous contractual breach they could also be held legally liable for causing emotional distress. The majority opinion overly narrows Barnes, which did not contain the limitation that perspective funding recipients could only be expected to be aware of basic, general rules and not the exceptions or subsidiary rules governing specific circumstances. The majority opinion’s comparison to punitive damages is simply not persuasive because punitive damages are not embraced by contract law analogy since they do not serve the central purpose of compensating the injured party. So, the punitive damages exception cited by the majority opinion is not relying on contract law principles at all, but rather on tort law. According to The Restatement, when contract and tort claims overlap, contract law does not preclude an award of punitive damages if such an award is appropriate under the law of torts. The Restatement does not attribute the availability of emotional distress damages to tort rather than contract law. Nothing in Barnes requires the Court to ignore directly applicable contract rules in favor of the less applicable general rule on which the majority opinion relies. The majority opinion creates an anomaly. Other antidiscrimination statutes that Congress has provided an express cause of action for do permit recovery of compensatory damages for emotional distress, such as §§1981, 1983 claims. What the majority opinion means is that until Congress fixes the lack of emotional distress being explicitly stated for in the statute, remedies available under certain statutes would not be available under other statutes, such as to students suffering discrimination at the hands of the teachers, patients suffering discrimination at the hands of their doctors, and others. It is difficult to square the majority opinion’s holding with the basic purposes that antidiscrimination laws seek to serve. One of those purposes is vindicating human dignity and not mere economics. The majority opinion allows victims of discrimination to recover damages only if they can prove that they have suffered economic harm even though the primary harm inflicted by discrimination is rarely economic. Victims of intentional discrimination may sometimes suffer profound emotional injury without any attendant pecuniary harms. The majority opinion leaves those victims with no remedy at all.

 

IV

Thoughts/takeaways

 

The majority opinion means that unless the particular Spending Clause legislation has an explicit provision in its statute for recovery of emotional distress damages, emotional distress damages will not be recoverable. So, be sure to check the appropriate Spending Clause legislation to see if an explicit emotional distress statutory provision exists. If not, emotional distress is going to be out, though traditional contract compensatory damages and injunctive relief are in. The statutes are all fee shifting statutes. So, attorney fees are also in play. Both the majority and dissenting opinions rely heavily on Barnes v. Gorman, which you can read for yourself here. The Supreme Court did affirm that under all of the statutes a private cause of action exists. Justice Kavanaugh’s concurring opinion to my mind raises a question associated with standing as well. That is, if it is Congress that establishes causes of action, why isn’t that a cause of action in and of itself not sufficient to allow for standing? Justice Kavanaugh’s approach does bring into question, to my mind anyway, the validity of the holding of the Court in TransUnion, which we discussed here. It is hard for me to understand how it is arguable that the purposes of statutes seeking to eradicate invidious discrimination are not clearly nonpecuniary. That is, it is clear that such laws seek the vindication of human dignity and not mere economics. Previously, we discussed that getting damages under title II of the ADA and the Rehabilitation Act in 1973 means proving deliberate indifference per this blog entry. So, the question becomes whether deliberate indifference is now necessary to prove compensatory damages when emotional distress damages are not in play. If so, and that indeed may be very well the case after this opinion, it is hard to believe that many plaintiff’s lawyers will be interested in taking on title II/§504 cases on a contingency fee basis because you are talking about a relatively high standard for damages that don’t even pertain to emotional distress. I will say that my experience is that many attorneys operating in §504/title II of the ADA do not work on contingency basis, though some do. For those working on a contingency fee basis, this decision may severely impact how they go about deciding what cases to take on. All that said, attorney fees are still in play, but you can expect after this decision that fewer and fewer plaintiff side attorneys will take title II and §504 cases. This case also has a huge impact on title III standing cases with respect to serial plaintiffs, especially Internet accessibility serial plaintiffs. That is, since emotional distress damages are out of bounds, how can the stigmatic harm be even possible to confer standing. This is especially so considering damages are not even allowed under title III of the ADA per 42 U.S.C. § 12188.
(Originally posted by William Goren)
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GOP Veteran Lawyer James Bopp Jr. Takes Marjorie Taylor Greene Appeal to 11th Circuit

Bopp is perhaps best known in legal circles for his litigation challenging campaign finance limits.

     
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Judge Pressures DOJ to Report Jan. 6 Defendant's Social Security Benefits

"He drove all the way from New York, went to the rally, listened till the last speech, standing the entire time," said Chief Judge Beryl Howell. "This does not look like a man who is disabled or has any troubles with mobility."

     
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April 29, 2022 Weekly Round Up

It is hard to believe we have reached the end of April, but here we are!  Lots of agricultural law news happening around the country.

Photo by Bailey Alexander on Unsplash

*Article highlights nuance with 10% cap on residence homestead tax.  My colleague, Dr. Blake Bennett, recently published a fact sheet looking at a nuance within the Texas Property Code related to the 10% cap on the yearly increase for residence homestead taxes in Texas.  The Texas Property Code places a 10% limitation on the amount a County Appraisal District may increase the appraised value of a residential homestead from one year to the next.  Critically, however, that exemption does not take effect until January 1 of the tax year following the first tax year the owner qualifies the property for the exemption.  Dr. Bennett’s article offers several examples to show how this plays out.  This is great information, particularly as people are currently receiving Notices of Appraised Values and determining whether they wish to protest.  [Read article here.]

*Texas Central Railway allegedly behind $600,000 in property taxes.  A number of Texas counties have filed an amicus brief in Miles v. Texas Central Railway alleging that Texas Central has failed to pay approximately $600,000 in property taxes on the parcels of land for which the company is listed as owner.   [Read article here.]

*US Supreme Court will not review ruling striking down Kansas “ag gag” law.  The United States Supreme Court denied Kansas’ Petition for Certiorari to review a Tenth Circuit Court of Appeals decision holding the Kansas law unconstitutional.  I did a prior blog post on the Tenth Circuit opinion here.  [Read article here.]

*Arizona cage-free mandate requirement pushed back to 2025.  Arizona egg producers will have additional time to prepare to comply with a state law mandating that all eggs sold in the state come from cage-free hens.  Initially, the law was set to go into effect in May 2023, but the Arizona Department of Agriculture has pushed that deadline to January 2025.  There is a minimum floor space requirement that will be imposed in the interim, going into effect from October 1, 2022 through the end of 2024.  [Read article here.]  Do keep in mind that all eyes are on the United States Supreme Court and the Constitutional challenge to California’s Prop 12.  [Read prior blog post here.]  The outcome in that case certainly could have significant impacts on this Arizona law as well.

*Widow offers advice on what to do after losing a spouse.  I read an article offering a seemingly simple tip after someone dies: Be sure to get bills out of their name.  Additionally, the article also highlights the importance of having a valid will and designating an executor of the estate as ways to help simplify the process for loved ones left behind.  [Read article here.]

*Study shows that longer-term leases likely to increase conservation measures.  DTN Progressive Farmer recently highlighted the results from an Iowa State University study looking at the adoption of conservation practices on leased land. Not surprisingly, the study found that farmers are more likely to implement conservation practices on leased land when the lease is for a term of more than 2 years.  This is likely because it is difficult for a farmer to  reap the benefits and recover the costs of implementing these practices in a two-year time frame. I think that is an interesting consideration for both landowners and tenants when negotiating lease agreements.  [Read article here.]

Upcoming Programs

On Monday, I’ll be in Kansas City presenting on carbon contracts with Dr. Jordan Shockley at the CIPA Meeting.  On Thursday, I’ll be headed back to the homeland with an opportunity to speak on carbon contracts with Dr. Justin Benavidez in Clovis, New Mexico.

Also, we are excited to have registration up and running for our “Where’s the Beef: Legal & Economic Considerations for Direct Beef Sales Businesses” programs!  These FREE events will offer a deep dive for anyone interested in selling beef directly to the consumer.  We’ll be in Amarillo on June 17 (register here) and in Brenham on August 26 (register here).

As always, find my full upcoming program list here.

The post April 29, 2022 Weekly Round Up appeared first on Texas Agriculture Law.

Original author: Tiffany Dowell
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April 29, 2022 Weekly Round Up

It is hard to believe we have reached the end of April, but here we are!  Lots of agricultural law news happening around the country.

Photo by Bailey Alexander on Unsplash

*Article highlights nuance with 10% cap on residence homestead tax.  My colleague, Dr. Blake Bennett, recently published a fact sheet looking at a nuance within the Texas Property Code related to the 10% cap on the yearly increase for residence homestead taxes in Texas.  The Texas Property Code places a 10% limitation on the amount a County Appraisal District may increase the appraised value of a residential homestead from one year to the next.  Critically, however, that exemption does not take effect until January 1 of the tax year following the first tax year the owner qualifies the property for the exemption.  Dr. Bennett’s article offers several examples to show how this plays out.  This is great information, particularly as people are currently receiving Notices of Appraised Values and determining whether they wish to protest.  [Read article here.]

*Texas Central Railway allegedly behind $600,000 in property taxes.  A number of Texas counties have filed an amicus brief in Miles v. Texas Central Railway alleging that Texas Central has failed to pay approximately $600,000 in property taxes on the parcels of land for which the company is listed as owner.   [Read article here.]

*US Supreme Court will not review ruling striking down Kansas “ag gag” law.  The United States Supreme Court denied Kansas’ Petition for Certiorari to review a Tenth Circuit Court of Appeals decision holding the Kansas law unconstitutional.  I did a prior blog post on the Tenth Circuit opinion here.  [Read article here.]

*Arizona cage-free mandate requirement pushed back to 2025.  Arizona egg producers will have additional time to prepare to comply with a state law mandating that all eggs sold in the state come from cage-free hens.  Initially, the law was set to go into effect in May 2023, but the Arizona Department of Agriculture has pushed that deadline to January 2025.  There is a minimum floor space requirement that will be imposed in the interim, going into effect from October 1, 2022 through the end of 2024.  [Read article here.]  Do keep in mind that all eyes are on the United States Supreme Court and the Constitutional challenge to California’s Prop 12.  [Read prior blog post here.]  The outcome in that case certainly could have significant impacts on this Arizona law as well.

*Widow offers advice on what to do after losing a spouse.  I read an article offering a seemingly simple tip after someone dies: Be sure to get bills out of their name.  Additionally, the article also highlights the importance of having a valid will and designating an executor of the estate as ways to help simplify the process for loved ones left behind.  [Read article here.]

*Study shows that longer-term leases likely to increase conservation measures.  DTN Progressive Farmer recently highlighted the results from an Iowa State University study looking at the adoption of conservation practices on leased land. Not surprisingly, the study found that farmers are more likely to implement conservation practices on leased land when the lease is for a term of more than 2 years.  This is likely because it is difficult for a farmer to  reap the benefits and recover the costs of implementing these practices in a two-year time frame. I think that is an interesting consideration for both landowners and tenants when negotiating lease agreements.  [Read article here.]

Upcoming Programs

On Monday, I’ll be in Kansas City presenting on carbon contracts with Dr. Jordan Shockley at the CIPA Meeting.  On Thursday, I’ll be headed back to the homeland with an opportunity to speak on carbon contracts with Dr. Justin Benavidez in Clovis, New Mexico.

Also, we are excited to have registration up and running for our “Where’s the Beef: Legal & Economic Considerations for Direct Beef Sales Businesses” programs!  These FREE events will offer a deep dive for anyone interested in selling beef directly to the consumer.  We’ll be in Amarillo on June 17 (register here) and in Brenham on August 26 (register here).

As always, find my full upcoming program list here.

The post April 29, 2022 Weekly Round Up appeared first on Texas Agriculture Law.

(Originally posted by Tiffany Dowell)
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Tax Court in Brief | Valentine v. Commissioner | Taxability of Military Pension and Disability Payments and Business Expense Substantiation

The Tax Court in Brief – April 25th- April 29th, 2022

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.

Tax Litigation:  The Week of April 25th, 2022, through April 29th, 2022

Sestak v. Comm’r, TC Memo. 2022-41| April 25, 2022 | Weiler, J. | Dkt. No. 17285-18

Valentine v. Comm’r, TC Memo. 2022-42| April 28, 2022 | Gustafson, J. | Dkt. No. 6724-19

Opinion

Short Summary: Tracy Valentine, a veteran of the U.S. Army, failed to timely file her 2016 Form 1040, and she did not pay any income tax for 2016 beyond the amounts that had been withheld from her wages from and retirement distributions by payors, as reported on Form W-2 and Form 1099-R. The IRS, pursuant to section 6020(b), prepared a substitute for return using information provided by third parties (i.e., those who employed Valentine during the tax year). On February 19, 2019, the IRS issued a statutory notice of deficiency of $11,034 for 2016, as well as additions to tax. On March 25, 2019, Valentine filed a 2016 return on Form 1040, through which Valentine (1) excluded $20,643 of $23,801 she had received in military retirement distributions, (2) claimed itemized business expense deductions on Schedule C, “Profit or Loss From Business,” and (3) she claimed a refund of $2,626.

Key Issues:

Whether Valentine may exclude a portion of her retirement distributions from gross income? Whether Valentine is entitled to certain business expense deductions claimed? Whether she is liable for the section 6651(a)(1) and (a)(2) additions to tax determined by the IRS?

Primary Holdings:

A retired service member may exclude a portion of retirement distributions in an amount equal to the benefit that the individual “would be entitled to receive as disability compensation from” the Veteran’s Administration, but only if the individual is not currently receiving excludable disability benefits from the VA, as Valentine was receiving. And, Valentine made no showing that she had a “combat-related injury,” which may have permitted Valentine to exclude the retirement distributions from gross income. Valentine failed to keep detailed logs and records of her business travel and expenses as required by the Code and the regulations. Thus, she failed to meet the higher substantiation requirements for deduction of expenses for travel, meals, and lodging. Yes, Valentine was liable for the additions to tax for her failure to timely file. Her testimony that she could not find an accountant was insufficient to establish reasonable cause for failure to file.

Key Points of Law:

Burdens of Proof. The taxpayer bears the burden of proving that the Commissioner’s determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Taxpayers must satisfy the specific requirements for any deduction claimed. INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992). Exclusion of Military Retirement Pay from Gross Income. Gross income means “all income from whatever source derived”. 26 U.S.C. § 61(a). Pensions and retirement allowances constitute gross income unless otherwise excluded by law. at § 61(a)(11); Treas. Reg. § 1.61-11(a). Military retirement pay is pension income within the meaning of section 61(a)(11). Wheeler v. Commissioner, 127 T.C. 200, 205 n.11 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008). Statutory exclusions from income are narrowly construed, and to benefit from an exclusion, taxpayers must “bring themselves within the clear scope of the exclusion.” See Commissioner v. Schleier, 515 U.S. 323, 328 (1995); Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998). Generally, amounts received as a pension, annuity, or similar allowance are not included in gross income when they arise from personal injuries or sickness resulting from active service in the armed forces of any country. 26 U.S.C. § 104(a)(4). For example, disability payments from the U.S. Veterans’ Administration are generally excluded from gross income. Military retirement distributions, however, do not usually fit within the statutory exclusion, unless the pension, annuity, or similar allowance is paid by reason of “combat-related injury,” at § 104(b)(2)(C). Also, pursuant to section 104(b)(2)(D), if a taxpayer is entitled to receive combat-related disability payments from the VA,” § 104(b)(2)(D), the amount excludable from gross income is “not . . . less than the maximum amount which such individual, on application therefor, would be entitled to receive as disability compensation” from the VA. See id. at § 104(b)(4) (emphasis added). A retired service member may receive both a disability pension from the VA (which is excludable from income) and retirement distributions (such as a service pension) from the service member’s respective branch of the armed forces. But, payments under retirement plans should generally be included in income regardless of the existence of a VA disability determination, except where certain exceptions may apply. See Lambert v. Commissioner, 49 T.C. 57 (1967); Sidoran v. Commissioner, T.C. Memo. 1979-56, aff’d, 640 F.2d 231 (9th Cir. 1981). Where a petitioner already receives an excludable disability benefit from the VA, “a VA disability determination does not prove that a portion of [additional retirement distributions are] received for injuries sustained during active service” for the purpose of section 104(a)(4). Holt v. Commissioner, T.C. Memo. 1999-348, 78 T.C.M. (CCH) 625, 627. A retired service member who did not receive a disability determination from the VA and who is not currently receiving disability benefits may exclude from gross income a portion of the retired service member’s retirement benefits under section 104 if the service member can prove that he or she would qualify for a disability determination from the VA. A service member who receives a retroactive disability determination by the VA may exclude from gross income a portion of the retirement benefits he or she received during the retroactive period equal to the percentage of his or her disability determination (if he or she did not already exclude them prior to the determination). See, e.g., Strickland v. Commissioner, 540 F.2d 1196 (4th Cir. 1976), rev’gC. Memo. 1974-188; see also Rev. Rul. 78-161, 1978-1 C.B. 31. Deductibility of Schedule C Expenses. A taxpayer may deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. 26 U.S.C. § 162(a). A taxpayer may deduct reasonable and necessary travel expenses such as meals and lodging incurred “while away from home in the pursuit of a trade or business.” at § 162(a)(2). Except where specifically enumerated in the Code, no deductions are allowed for personal, living, or family expenses. Id. at § 262(a). The taxpayer must satisfy the specific requirements for any business expense deduction claimed pursuant to section 162(a). See INDOPCO, Inc., 503 U.S. at 84. Taxpayers are required to maintain records sufficient to substantiate items underlying the claimed deductions. See 26 U.S.C. § 6001; Treas. Reg. § 1.6001-1(a), 1.6001-1(e). Section 274(d) establishes higher substantiation requirements for expenses related to travel, meals, and lodging while away from home, entertainment, gifts, and “listed property”, defined in section 280F(d)(4) to include passenger automobiles. For expenses associated with “listed property”, taxpayers must prove: (1) the amount of each separate expenditure with respect to such property; (2) the amount of each business use (such as mileage for automobiles); (3) the date of the expenditure or use with respect to listed property; and (4) the business purpose for an expenditure or use with respect to such property. Treas. Reg. § 1.274- 5T(b)(6), (2)(ii)-(iii) (defining “time” and “place” for these purposes). No deduction is allowed unless the taxpayer substantiates by adequate records or by sufficient and credible evidence corroborating his or her own statement the amount, time and place, and business purpose for each expenditure. See 26 U.S.C. § 274(d) (flush language); Treas. Reg. § 1.274- 5T(b)(2)(ii)-(iii) (defining “time” and “place” for these purposes). Adequate records for this purpose include an account book, log, or similar record and documentary evidence, contemporaneously made with the expense, that together are sufficient to establish each element of the expenditure. See id. at § 1.274-5T(c)(2)(i)-(ii)(C). If a taxpayer’s trip is primarily personal, the traveling expenses are not deductible, even if the taxpayer engages in business activities at the destination. See id. at § 262(a); Treas. Reg. § 1.162-2(b)(1). Expenses paid or incurred at the destination that are properly allocable to the taxpayer’s trade or business are deductible even if the traveling expenses to and from the destination are not deductible. Treas. Reg. § 1.162-2(b)(1). Deductions for most meal and entertainment expenses is limited to “50 percent of the amount of such expense or item which would . . . be allowable as a deduction.” 26 U.S.C. § 274(n); see Reg. § 1.274-5A(h) (providing a per diem method by which taxpayers may elect to use a specific dollar amount for meals while traveling, in lieu of substantiating the actual cost of those meals). The IRS has adopted the “per diem” rates published by the General Services Administration for substantiating the cost of meals, incidental expenses, and lodging for a given period and locality. Rev. Proc. 2011-47, 2011-42 I.R.B. 520. Additions to Tax, Section 6651. Section 6651(a)(1) authorizes the imposition of an addition to tax for failure to file a timely return (unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful neglect). The addition consists of 5% per month (up to a maximum of 25%) of “the amount required to be shown as tax on such return”. 26 U.S.C. § 6651(a)(1). Section 6651(a)(2) provides for an addition to tax for failure to timely pay “the amount shown as tax on any return specified in paragraph (1)” unless the taxpayer establishes that the failure was due to reasonable cause and not willful neglect. The addition consists of 0.5% per month (up to a maximum of 25%) of “the amount shown as tax on such return”. at § 6651(a)(2). The amount of the addition to tax under section 6651(a)(2) reduces the addition to tax under section 6651(a)(1) for any month for which both additions to tax apply. See id. at § 6651(c)(1). The IRS bears the burden of production with respect to additions to tax under section 6651(a)(1) and (2). See at § 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446–47 (2001). To meet this burden, the IRS must produce sufficient evidence that it is appropriate to impose the addition to tax. If that burden is met, the taxpayer then bears the burden of proof as to reasonable cause or other mitigating factors. See Higbee, 116 T.C. at 447. When a taxpayer has not filed a return, the section 6651(a)(2) addition to tax may not be imposed unless the IRS has prepared a substitute for return that meets the requirements of section 6020(b). An substitute for return prepared by the IRS under section 6020(b) is treated as a taxpayer return for purposes of determining the addition to tax under section 6651(a)(2). 26 U.S.C. § 6651(g)(2); see Rader v. Commissioner, 143 T.C. 376, 382 (2014).

Insights: This case provides insight on the taxability or deductibility of military pensions and retirement allowances received by a retired member of the armed forces. Payments under retirement plans are generally included in income regardless of the existence of a Veterans’ Administration disability determination, except where an exception clearly applies. The case also illustrates that the U.S. Tax Court may evaluate claimed itemized business expense deductions on a trip-by-trip, item-by-item, or expense-by-expense basis to determine if a taxpayer has, for each such deduction amount, met the higher substantiation requirements of section 274 and related Treasury Regulations.

The post Tax Court in Brief | Valentine v. Commissioner | Taxability of Military Pension and Disability Payments and Business Expense Substantiation appeared first on Freeman Law.

Original author: Freeman Law
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Tax Court in Brief | Valentine v. Commissioner | Taxability of Military Pension and Disability Payments and Business Expense Substantiation

The Tax Court in Brief – April 25th- April 29th, 2022

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.

Tax Litigation:  The Week of April 25th, 2022, through April 29th, 2022

Sestak v. Comm’r, TC Memo. 2022-41| April 25, 2022 | Weiler, J. | Dkt. No. 17285-18

Valentine v. Comm’r, TC Memo. 2022-42| April 28, 2022 | Gustafson, J. | Dkt. No. 6724-19

Opinion

Short Summary: Tracy Valentine, a veteran of the U.S. Army, failed to timely file her 2016 Form 1040, and she did not pay any income tax for 2016 beyond the amounts that had been withheld from her wages from and retirement distributions by payors, as reported on Form W-2 and Form 1099-R. The IRS, pursuant to section 6020(b), prepared a substitute for return using information provided by third parties (i.e., those who employed Valentine during the tax year). On February 19, 2019, the IRS issued a statutory notice of deficiency of $11,034 for 2016, as well as additions to tax. On March 25, 2019, Valentine filed a 2016 return on Form 1040, through which Valentine (1) excluded $20,643 of $23,801 she had received in military retirement distributions, (2) claimed itemized business expense deductions on Schedule C, “Profit or Loss From Business,” and (3) she claimed a refund of $2,626.

Key Issues:

Whether Valentine may exclude a portion of her retirement distributions from gross income? Whether Valentine is entitled to certain business expense deductions claimed? Whether she is liable for the section 6651(a)(1) and (a)(2) additions to tax determined by the IRS?

Primary Holdings:

A retired service member may exclude a portion of retirement distributions in an amount equal to the benefit that the individual “would be entitled to receive as disability compensation from” the Veteran’s Administration, but only if the individual is not currently receiving excludable disability benefits from the VA, as Valentine was receiving. And, Valentine made no showing that she had a “combat-related injury,” which may have permitted Valentine to exclude the retirement distributions from gross income. Valentine failed to keep detailed logs and records of her business travel and expenses as required by the Code and the regulations. Thus, she failed to meet the higher substantiation requirements for deduction of expenses for travel, meals, and lodging. Yes, Valentine was liable for the additions to tax for her failure to timely file. Her testimony that she could not find an accountant was insufficient to establish reasonable cause for failure to file.

Key Points of Law:

Burdens of Proof. The taxpayer bears the burden of proving that the Commissioner’s determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Taxpayers must satisfy the specific requirements for any deduction claimed. INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992). Exclusion of Military Retirement Pay from Gross Income. Gross income means “all income from whatever source derived”. 26 U.S.C. § 61(a). Pensions and retirement allowances constitute gross income unless otherwise excluded by law. at § 61(a)(11); Treas. Reg. § 1.61-11(a). Military retirement pay is pension income within the meaning of section 61(a)(11). Wheeler v. Commissioner, 127 T.C. 200, 205 n.11 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008). Statutory exclusions from income are narrowly construed, and to benefit from an exclusion, taxpayers must “bring themselves within the clear scope of the exclusion.” See Commissioner v. Schleier, 515 U.S. 323, 328 (1995); Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998). Generally, amounts received as a pension, annuity, or similar allowance are not included in gross income when they arise from personal injuries or sickness resulting from active service in the armed forces of any country. 26 U.S.C. § 104(a)(4). For example, disability payments from the U.S. Veterans’ Administration are generally excluded from gross income. Military retirement distributions, however, do not usually fit within the statutory exclusion, unless the pension, annuity, or similar allowance is paid by reason of “combat-related injury,” at § 104(b)(2)(C). Also, pursuant to section 104(b)(2)(D), if a taxpayer is entitled to receive combat-related disability payments from the VA,” § 104(b)(2)(D), the amount excludable from gross income is “not . . . less than the maximum amount which such individual, on application therefor, would be entitled to receive as disability compensation” from the VA. See id. at § 104(b)(4) (emphasis added). A retired service member may receive both a disability pension from the VA (which is excludable from income) and retirement distributions (such as a service pension) from the service member’s respective branch of the armed forces. But, payments under retirement plans should generally be included in income regardless of the existence of a VA disability determination, except where certain exceptions may apply. See Lambert v. Commissioner, 49 T.C. 57 (1967); Sidoran v. Commissioner, T.C. Memo. 1979-56, aff’d, 640 F.2d 231 (9th Cir. 1981). Where a petitioner already receives an excludable disability benefit from the VA, “a VA disability determination does not prove that a portion of [additional retirement distributions are] received for injuries sustained during active service” for the purpose of section 104(a)(4). Holt v. Commissioner, T.C. Memo. 1999-348, 78 T.C.M. (CCH) 625, 627. A retired service member who did not receive a disability determination from the VA and who is not currently receiving disability benefits may exclude from gross income a portion of the retired service member’s retirement benefits under section 104 if the service member can prove that he or she would qualify for a disability determination from the VA. A service member who receives a retroactive disability determination by the VA may exclude from gross income a portion of the retirement benefits he or she received during the retroactive period equal to the percentage of his or her disability determination (if he or she did not already exclude them prior to the determination). See, e.g., Strickland v. Commissioner, 540 F.2d 1196 (4th Cir. 1976), rev’gC. Memo. 1974-188; see also Rev. Rul. 78-161, 1978-1 C.B. 31. Deductibility of Schedule C Expenses. A taxpayer may deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. 26 U.S.C. § 162(a). A taxpayer may deduct reasonable and necessary travel expenses such as meals and lodging incurred “while away from home in the pursuit of a trade or business.” at § 162(a)(2). Except where specifically enumerated in the Code, no deductions are allowed for personal, living, or family expenses. Id. at § 262(a). The taxpayer must satisfy the specific requirements for any business expense deduction claimed pursuant to section 162(a). See INDOPCO, Inc., 503 U.S. at 84. Taxpayers are required to maintain records sufficient to substantiate items underlying the claimed deductions. See 26 U.S.C. § 6001; Treas. Reg. § 1.6001-1(a), 1.6001-1(e). Section 274(d) establishes higher substantiation requirements for expenses related to travel, meals, and lodging while away from home, entertainment, gifts, and “listed property”, defined in section 280F(d)(4) to include passenger automobiles. For expenses associated with “listed property”, taxpayers must prove: (1) the amount of each separate expenditure with respect to such property; (2) the amount of each business use (such as mileage for automobiles); (3) the date of the expenditure or use with respect to listed property; and (4) the business purpose for an expenditure or use with respect to such property. Treas. Reg. § 1.274- 5T(b)(6), (2)(ii)-(iii) (defining “time” and “place” for these purposes). No deduction is allowed unless the taxpayer substantiates by adequate records or by sufficient and credible evidence corroborating his or her own statement the amount, time and place, and business purpose for each expenditure. See 26 U.S.C. § 274(d) (flush language); Treas. Reg. § 1.274- 5T(b)(2)(ii)-(iii) (defining “time” and “place” for these purposes). Adequate records for this purpose include an account book, log, or similar record and documentary evidence, contemporaneously made with the expense, that together are sufficient to establish each element of the expenditure. See id. at § 1.274-5T(c)(2)(i)-(ii)(C). If a taxpayer’s trip is primarily personal, the traveling expenses are not deductible, even if the taxpayer engages in business activities at the destination. See id. at § 262(a); Treas. Reg. § 1.162-2(b)(1). Expenses paid or incurred at the destination that are properly allocable to the taxpayer’s trade or business are deductible even if the traveling expenses to and from the destination are not deductible. Treas. Reg. § 1.162-2(b)(1). Deductions for most meal and entertainment expenses is limited to “50 percent of the amount of such expense or item which would . . . be allowable as a deduction.” 26 U.S.C. § 274(n); see Reg. § 1.274-5A(h) (providing a per diem method by which taxpayers may elect to use a specific dollar amount for meals while traveling, in lieu of substantiating the actual cost of those meals). The IRS has adopted the “per diem” rates published by the General Services Administration for substantiating the cost of meals, incidental expenses, and lodging for a given period and locality. Rev. Proc. 2011-47, 2011-42 I.R.B. 520. Additions to Tax, Section 6651. Section 6651(a)(1) authorizes the imposition of an addition to tax for failure to file a timely return (unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful neglect). The addition consists of 5% per month (up to a maximum of 25%) of “the amount required to be shown as tax on such return”. 26 U.S.C. § 6651(a)(1). Section 6651(a)(2) provides for an addition to tax for failure to timely pay “the amount shown as tax on any return specified in paragraph (1)” unless the taxpayer establishes that the failure was due to reasonable cause and not willful neglect. The addition consists of 0.5% per month (up to a maximum of 25%) of “the amount shown as tax on such return”. at § 6651(a)(2). The amount of the addition to tax under section 6651(a)(2) reduces the addition to tax under section 6651(a)(1) for any month for which both additions to tax apply. See id. at § 6651(c)(1). The IRS bears the burden of production with respect to additions to tax under section 6651(a)(1) and (2). See at § 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446–47 (2001). To meet this burden, the IRS must produce sufficient evidence that it is appropriate to impose the addition to tax. If that burden is met, the taxpayer then bears the burden of proof as to reasonable cause or other mitigating factors. See Higbee, 116 T.C. at 447. When a taxpayer has not filed a return, the section 6651(a)(2) addition to tax may not be imposed unless the IRS has prepared a substitute for return that meets the requirements of section 6020(b). An substitute for return prepared by the IRS under section 6020(b) is treated as a taxpayer return for purposes of determining the addition to tax under section 6651(a)(2). 26 U.S.C. § 6651(g)(2); see Rader v. Commissioner, 143 T.C. 376, 382 (2014).

Insights: This case provides insight on the taxability or deductibility of military pensions and retirement allowances received by a retired member of the armed forces. Payments under retirement plans are generally included in income regardless of the existence of a Veterans’ Administration disability determination, except where an exception clearly applies. The case also illustrates that the U.S. Tax Court may evaluate claimed itemized business expense deductions on a trip-by-trip, item-by-item, or expense-by-expense basis to determine if a taxpayer has, for each such deduction amount, met the higher substantiation requirements of section 274 and related Treasury Regulations.

The post Tax Court in Brief | Valentine v. Commissioner | Taxability of Military Pension and Disability Payments and Business Expense Substantiation appeared first on Freeman Law.

(Originally posted by Freeman Law)
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Majed Nachawati Named Among Nation’s Leading Plaintiff Consumer Attorneys 

Trial lawyer Majed Nachawati has been included among Lawdragon’s 500 Leading Plaintiff Consumer Lawyers. Each year, the legal guide recognizes the country’s top legal talent involved in high-profile national litigation encompassing matters such as defective products, dangerous drugs, and water contamination.

As founder of Fears Nachawati, Mr. Nachawati has used his law firm to take on the drug manufacturers and distributors responsible for the nation’s opioid epidemic. He has been heavily involved in multidistrict litigation against makers of PFAS “forever chemicals” and defective IVC blood filters. He recently defended those hurt and killed in the 2021 winter storms which heavily affected the state of Texas.

“When I speak with someone who’s been hurt by a negligent company, I feel for them. It’s something I take personally,” said Mr. Nachawati. “I’m thankful to be in a position to really help these folks and make a difference in their lives. And I’m thankful for the recognition from organizations like Lawdragon, and to be named along with so many talented attorneys.”

Selection to the Lawdragon 500 Leading Plaintiff Consumer Lawyers list is based on a rigorous process that includes internal research of top verdicts and settlements, as well as unprompted surveys of attorneys nationwide, in which they are asked to identify other lawyers they admire and who they would hire in a personal legal matter.

The full 2022 Lawdragon 500 Leading Plaintiff Consumer Lawyers list can be found at:
https://www.lawdragon.com/guides/2022-04-19-the-2022-lawdragon-500-leading-plaintiff-consumer-lawyers.

The post Majed Nachawati Named Among Nation’s Leading Plaintiff Consumer Attorneys  appeared first on Fears Nachawati Law Firm.

Original author: Tammy Covert
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Majed Nachawati Named Among Nation’s Leading Plaintiff Consumer Attorneys 

Trial lawyer Majed Nachawati has been included among Lawdragon’s 500 Leading Plaintiff Consumer Lawyers. Each year, the legal guide recognizes the country’s top legal talent involved in high-profile national litigation encompassing matters such as defective products, dangerous drugs, and water contamination.

As founder of Fears Nachawati, Mr. Nachawati has used his law firm to take on the drug manufacturers and distributors responsible for the nation’s opioid epidemic. He has been heavily involved in multidistrict litigation against makers of PFAS “forever chemicals” and defective IVC blood filters. He recently defended those hurt and killed in the 2021 winter storms which heavily affected the state of Texas.

“When I speak with someone who’s been hurt by a negligent company, I feel for them. It’s something I take personally,” said Mr. Nachawati. “I’m thankful to be in a position to really help these folks and make a difference in their lives. And I’m thankful for the recognition from organizations like Lawdragon, and to be named along with so many talented attorneys.”

Selection to the Lawdragon 500 Leading Plaintiff Consumer Lawyers list is based on a rigorous process that includes internal research of top verdicts and settlements, as well as unprompted surveys of attorneys nationwide, in which they are asked to identify other lawyers they admire and who they would hire in a personal legal matter.

The full 2022 Lawdragon 500 Leading Plaintiff Consumer Lawyers list can be found at:
https://www.lawdragon.com/guides/2022-04-19-the-2022-lawdragon-500-leading-plaintiff-consumer-lawyers.

The post Majed Nachawati Named Among Nation’s Leading Plaintiff Consumer Attorneys  appeared first on Fears Nachawati Law Firm.

(Originally posted by Tammy Covert)
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