New Year s Resolutions You Can Keep

Transcription

1 New Year s Resolutions You Can Keep Michael Morfey January 8, 2019 Joe Buoni Ashley Kahn This presentation has been prepared for informational purposes only and does not constitute legal advice. The provision of information is not intended to create (and receipt does not constitute) a lawyer-client relationship. Readers should not act on this information without seeking professional legal counsel.

2 2019: New Year, New You 2

3 Resolution #1: Stay Current 3

4 Recent Changes to Rule 23 Rule 23 is the procedural rule that governs class actions in the federal system Class actions are a big deal! Last longer Cost more Threaten greater liability Amendments to Rule 23 are rare 4

5 What You Need to Know The changes were effective 12/1/18 Not fundamental changes, but still significant Settlements in particular will be affected 5

6 What You Need to Know Notice can be by electronic or other appropriate means No preference for any one means of notice Courts are to consider the capacity and limits of current technology, including class members likely access to such technology New requirements for notice of a proposed settlement Parties now must show that court will likely be able to approve the proposed settlement under Rule 23(e)(2) and certify the class for judgment 6

7 What You Need to Know Uniform core factors for court approval of settlements Adequate representation by class counsel and representatives Arm s length negotiation Relief provided for the class is adequate Class members treated equitably relative to each other Protections against bad faith objectors No payment or other consideration for forgoing or withdrawing an objection unless approved by the court after a hearing 7

8 Resolution #2: Learn Something New The TCPA has become a valuable tool in defending a wide range of lawsuits 8

9 Why You Should Care Puts plaintiff on the defensive early Suspend all discovery Sneak-peek into the plaintiff s evidence (e.g., affidavits from key witnesses) The upside if you win Early dismissal of claims Mandatory award of reasonable attorney s fees Little downside if you lose Interlocutory appeal Attorney s fees are discretionary and unlikely You still forced plaintiff s hand and tested resolve 9

10 Grounds for Dismissal Free Speech A party can move to dismiss any claim relating to the exercise of the right of free speech Applies to any communication made in connection with a matter of public concern Matters of public concern are issues relating to Health or safety Environmental, economic, or community well-being A good or service in the marketplace The government or a public official / figure 10

11 Grounds for Dismissal Association TCPA also protects the exercise of the right of association Defined as communications between individuals who join together to collectively pursue common interests No public concern requirement 11

12 TCPA Casts A Wide Net Statute interpreted as written Broader than First Amendment Applies to public and private communications Internal company communications re: poor job performance Misappropriation of trade secrets and breach of fiduciary duty re: forming competing business Breach of contract Tortious interference 12

13 TCPA Burden Shifting Show allegations relate to protected activity Plaintiff must then show clear and specific evidence of every element of every claim to avoid dismissal Preponderance of evidence of each affirmative defense element 13

14 TCPA Should Apply in Federal Court Limited case law Procedural issues Clifford v. Trump C.D. California Clifford from Texas Motion filed late POTUS won and received attorney s fees 14

15 The Key Takeaways Defendants can (and often should) use the TCPA in commercial litigation First Amendment principles are irrelevant Plaintiffs must prepare to avoid TCPA traps Obtain evidence in advance (e.g., pre-suit discovery) Downplay protected communications in petition Consider waiting for discovery to add claims likely to trigger TCPA motion 15

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17 Resolution #3: Be Ready to Adapt 17

18 Traditional Oil and Gas Principles in the World of Unconventional Drilling 18

19 Texas Case Law Browning Oil Co. v. Luecke, 38 S.W.3d 625 (Tex. App. Austin 2000, pet. denied) Rule of capture does not apply to horizontal wells drilled in highly fractured formations Lightning Oil Co. v. Anadarko, 520 S.W.3d 39 (Tex. 2017) Surface licensee s drilling of horizontal well through mineral estate to obtain minerals on adjacent lease is not a sufficient injury to support a claim for trespass Murphy Exploration v. Adams, 560 S.W.3d 105 (Tex. 2018) Principle that offset well must be proximate to the draining well does not apply in the context of horizontal drilling and hydraulic fracturing in the Eagle Ford Shale 19

20 What You Need to Know Oil and gas jurisprudence will continue to adjust to accommodate unconventional technologies What s settled law may not be so settled after all Future issues likely to bubble up: Whether preferential rights of purchase (AAPL Model Form Operating Agreement) apply to acreage swaps? Whether allocation wells require formation of a pooled unit? 20

21 Key Takeaways Review your existing forms now Leases, operating agreements, etc. Consider drafting special provisions to clarify issues that will likely come up in the future Rider to make clear that preferential rights clause applies only to outright purchases and not acreage swaps Specific provisions that speak to allocation, etc. 21

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23 Resolution #4: Stay Cool Under Pressure 23

24 Weathering TROs and Injunctive Relief Stressful for both sides Months of litigation crammed into two weeks Temporary injunction hearing is a mini-trial 24

25 What You Need to Know From plaintiff s side, slow down if at all possible Many technicalities and pitfalls: TRO requirements Application must be verified TRO bond Winning the TRO hearing is just the beginning 25

26 What You Need to Know From defendant s side, you have limited time use it wisely Consider a divide and conquer approach Chess moves after a TRO is granted Appeal rights 26

27 Resolution #5: Work On Your Relationships 27

28 With Your Contract Counterparties 28

29 Look for Signs of Financial Distress Is your counterparty Offering discounts for prompt payment? Selling AR to a factoring company? Unexpectedly increasing or decreasing orders? Making late, sporadic, or partial payments? Has your counterparty Significantly altered its debt profile (e.g., revolver drawdown, borrowing base redetermination)? Undergone any internal restructurings (e.g., divisional mergers, exchange offers, assignments to affiliates)? 29

30 Evaluate Your Ongoing Relationship Should you end a bad relationship? Request adequate assurance of future performance Renegotiate contract or revise course of dealing Payment in advance or COD Letter of credit Reduce pricing in exchange for longterm commitment? Terminate pre-bankruptcy 30

31 Manage Preference Exposure Clawback preferential payments so GUCs are treated equally A preference is value provided: By the debtor On account of an antecedent debt Within 90 days before a bankruptcy filing Preferences must be returned unless an exception applies 31

32 Manage Preference Exposure (cont.) Prioritize contemporaneous exchanges of value Avoid extraordinary payments Payment should at least be consistent with prior dealings or industry practice Large, late payments increase exposure Protect extraordinary payments Provide new value on credit after receiving payment Consider trade credit insurance 32

33 Key Takeaways Identify financial distress early Implement a preference strategy Best defense will be fact-specific Cash is still king Monitor bankruptcy filings and act promptly post-petition Reclamation rights (20 days) Setoff and recoupment rights With proper planning, you can minimize your losses 33

34 Resolution #6: Come Clean (and Stay Clean) 34

35 Cybersecurity Risks and Disclosures Not just guarding against data breaches and cyber attacks Increased focus on disclosure Many companies not disclosing risks; those that do often use boilerplate language Disclosures often fail to give genuine sense of the risk cyber attacks included in laundry list of potential events If not careful, exposure to SEC enforcement actions and shareholder suits (Yahoo, Equifax, PayPal) 35

36 What You Need to Know Update cybersecurity governance, policies and procedures Risk Management and Incident Response Plan Establish cybersecurity response team (set out key roles and responsibilities) Define triggers for mobilizing response team Provide clear roadmap to follow when incidents occur Conduct frequent cybersecurity training and awareness Tabletop exercises, etc. 36

37 What You Need to Know If subject to SEC reporting requirements, adequately disclose risk factors Probability of occurrence and potential magnitude of cybersecurity incidents Preventative actions taken to reduce risks Aspects of business and operations that give rise to material cybersecurity risks If an incident occurs, disclose it carefully and quickly Understand the nature of the compromise, the data/systems at issue, whether insiders are involved Consider consulting third-party forensic experts and PR experts 37

38 The Bad News According to U.S. News, approximately 80% of New Year s Resolutions fail by the second week of February 38

39 You re motivated You re informed You can do this! The Good News! 39

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41 Contact Information Michael Morfey Hunton Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas (713) direct dial Joe Buoni Hunton Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas (713) direct dial Ashley Kahn Hunton Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas (713) direct dial 41