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Three main methods of acquiring business

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on October 10, 2019.


Travis Harrison

Travis E. Harrison is a transactional attorney who represents individuals and both privately-held and public companies in a wide range of transactional matters.

By Phillips Murrah Attorney Travis E. Harrison

Acquiring a business is done through three main methods: merging with the selling company, referred to as the target company; purchasing the assets of the target company; or purchasing the stock or other equity interests of the target company. Each method has pros and cons depending on the legal, tax and business implications. Therefore, it is imperative the parties carefully consider these at the outset.

A merger is simply a combination of two legal entities becoming one. The one that survives the merger, called the surviving entity, assumes all assets and liabilities of the other. The logistics of a merger are driven by state statute and case law, which informs the parties of the legal requirements and procedures. For example, an Oklahoma limited liability company that is the surviving entity must file articles of merger or consolidation with the Oklahoma secretary of state containing details of the merger and entities involved. Additionally, the parties should review the organizational documents to ensure compliance with any contractual procedures.

Purchasing the assets of the target company means the buyer acquires the assets of the target company, including real property, IP, equipment, inventory and licenses. The buyer also acquires contractual liabilities and tax obligations. This method affords the parties great flexibility for the buyer to choose specific assets and liabilities, and to carve out liabilities the target company should keep. However, this method can be more complicated because it may need preparation of ancillary agreements to transfer contracts, tangible property and title to certain assets.

Purchasing the stock of the target company means the buyer acquires all of the target company’s assets and liabilities. In this method, the stock purchase buyer essentially acquires the target company rather than the components of the business. A stock sale can benefit sellers where it effectively transfers all liabilities without requiring all of the formalities in an asset purchase agreement, such as documents to retitle assets to the buyer. A stock acquisition generally will not have the same statutory constraints of a merger.

Each method has unique advantages and disadvantages depending on the specifics of the deal. The parties need to analyze and evaluate all implications for each method. Careful consideration and planning leads to the best deal for both sides and prevents unnecessary complications down the line.

Travis E. Harrison is an attorney with the law firm of Phillips Murrah.

Partners are not employees

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on August 29, 2019.


Jessica Cory web

Jessica N. Cory represents businesses and individuals in a wide range of transactional matters, with an emphasis on tax planning.

By Phillips Murrah Attorney Jessica N. Cory

On June 28, the Internal Revenue Service finalized Treasury regulations relating to the tax treatment of partners (T.D. 9869).

These regulations confirm that owners of an entity treated as a partnership for federal income tax purposes, including limited liability companies, cannot be treated as employees for purposes of employment taxes and income tax withholding. Instead, an owner is treated as “self-employed” to the extent he or she receives compensation for services rendered to the partnership. This has important tax consequences for both the owner and the partnership.

For example, because an owner is not an employee, the partnership will not withhold taxes from his or her check or share the responsibility of paying any employment tax. Instead, an owner will be responsible for making estimated income tax payments and paying 15.3% self-employment tax on his or her compensation. Owners must also treat any partnership-paid health insurance premiums as income and are barred from participating in the partnership’s cafeteria plan, unlike the partnership’s employees. In addition, the partnership must report any owner compensation on Schedule K-1 versus the more traditional Form W-2.

Because many owners prefer to be treated as employees, especially current employees awarded an ownership interest in the company as compensation, partnerships have attempted to develop a work-around to these rules. One popular structure involved the formation of a wholly owned subsidiary to employ the partnership’s owners. In this scenario, the subsidiary would be disregarded for federal income tax purposes, allowing the partnership to continue filing a single Form 1065, U.S. Return of Partnership Income, but respected for employment taxes, enabling the partnership to treat its owners as W-2 employees rather than self-employed. The recently finalized Treasury regulations shut down this structure by clarifying that a disregarded entity cannot be used to convert an owner of a partnership into an employee.

Now that the IRS has finalized rules prohibiting this structure, it is important for tax partnerships, including many limited liability companies, to reevaluate how they are treating their owners for federal income tax purposes. To the extent a partnership has owners that would prefer to be treated as employees, or plans to offer an equity interest in the partnership to key employees as an incentive, the business should reach out to an experienced tax attorney to discuss potential structuring alternatives.

Jessica N. Cory is an attorney at Phillips Murrah who represents businesses and individuals in a wide range of transactional matters with an emphasis on tax planning.

Who should define the terms of an oil and gas lease?

Whose job is it to determine which expenses can be deducted from royalty payments under the terms of an oil and gas lease? Is it the lessee or the operator? People argue both positions and all parties desire clarity in who bears this burden.

Molly Tipton

Molly Tipton is an attorney in the Energy & Natural Resources Practice Group. She represents both privately-owned and public companies in a wide variety of oil and gas matters, with a strong emphasis on oil and gas title examination.

Unfortunately, there are many interpretations of the differing forms of deductions language in leases, and the courts have not had the opportunity to make a decision. Many operators have recently requested input from the lessee on royalty valuation, but some lessees may balk at this idea because current practice typically provides that the operator cuts the checks.

Pursuant to 52 O.S. § 570.8(A), a working interest owner in a gas well shall furnish to the operator the name, address, royalty interest, taxpayer identification number, and payment status of royalty interest owners for whom they hold a lease. While this language does not place the burden on the working interest owner to tell the operator how royalty proceeds should be valued under the terms of the lease, it is understandable that an operator wishes for input from the lessee, as they are a party to the lease.

However, when an operator asks a lessee to determine how royalty proceeds should be valued under the terms of the lease, the lessee may fear liability to the royalty interest owner in the event that the operator is paying the royalty contrary to how the lessor interprets the terms of the lease.

The lessee should take comfort in the language in 52 O.S. § 570.9(D), which states that any working interest owner that pays or causes to be paid royalty proceeds for gas production in accordance with the Production Revenue Standards Act valued according to the terms of such working interest owner’s lease shall be relieved of all liability to the royalty interest owners for any further payment of proceeds from such production.

The valuation of royalties will affect both the royalty owner and the lessee, and without any guidance from the courts, there is no definitive answer as to who should define the exact terms of the lease. One can understand why neither the operator, nor the lessee, wants the burden of defining the lease terms, as they affect royalty deductions. Only time will tell whose job it is after all.

 


By Phillips Murrah Attorney Molly E. Tipton

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on May 30, 2019.

Gender parity and the rise of women in the boardroom

It should come as no shock that, although women make up just over half of the U.S. population, they are underrepresented in corporate executive management, as well as in the boardrooms of public companies in the U.S. This is often due to stereotypes that characterize female leaders as abrasive, aggressive and emotional. This disparate societal perception rewards certain characteristics in men while condemning them in women, which damages women striving for leadership roles.

Kendra Norman Web

Kendra M. Norman represents individuals and businesses in a broad range of transactional matters.

A 2016 Catalyst report found that in the U.S., women made up only 21.2% of the S&P 500 board seats.

A recent push for diversity on corporate boards of directors may change the gender lines of corporate culture. For example, California is the first state to statutorily require female representation on boards of directors.

In 2018, roughly 25% of California-based companies had no female directors on their board. In October, Gov. Jerry Brown signed a law requiring all public companies having principal executive offices in the state to have at least one woman on the board by the end of 2019. By the end of 2021, any California public company with five directors must have a minimum of two female directors, and those with six or more directors must include at least three women. The law imposes a $100,000 fine for a first-time violation and a $300,000 fine for subsequent violations.

California follows several European countries, including Germany, France, Norway, and Sweden, which have implemented quotas and fines to increase female representation in the boardroom. Additionally, shareholder advisory firms such as Institutional Shareholder Services and Glass, Lewis & Co. are now using gender diversity as a factor for shareholder vote recommendations.

While a government-mandated requirement may not be the ultimate solution, it could accelerate the achievement of gender equality.

Such a change in gender representation is likely to benefit companies, as gender and culture diversity results in diverse perspectives, which is likely to improve a company’s performance. It will also create less gender discrimination in recruitment, promotion, and retention.

While Oklahoma continuously ranks in the bottom of states for women when it comes to the income gap, workplace environment, education, and health, Oklahoma ranks 20th with respect to the executive positions gap, according to a recent 2018 WalletHub study. While there is much room for improvement, there may be hope for Oklahoma in achieving executive gender equality.


By Phillips Murrah Attorney Kendra M. Norman

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on April 18, 2019.

Gavel to Gavel: The uphill battle faced by creditors in bankruptcy

Bankruptcy is a debtor’s remedy, meaning many of the rules and regulations are more favorable to debtors than to creditors. To even the playing field a bit, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005.

Gretchen Latham Web

Gretchen M. Latham’s practice focuses on representing creditors in foreclosure, bankruptcy, collection and replevin cases.

Several of its provisions were put in place to provide assurances to creditors that the system is fair and impartial. Of note, those that file must now undergo credit counseling both prior to filing and prior to receiving a bankruptcy discharge.

Also of significance are the changes to the Bankruptcy Code regarding what chapter of case a debtor is eligible to file. Prior to enactment of BAPCPA, many creditors were missing out on substantial payments because most debtors elected to file a Chapter 7 case, which acts as a total liquidation of debts, other than debts that are reaffirmed. The result was that most unsecured creditors were losing out on repayment of their entire outstanding balance.

With BAPCPA, debtors are no longer free to decide what type of case to file. Rather, a complex mathematical computation is performed prior to filing, and if the results show a debtor has funds available to repay a portion of their unsecured debt, that debtor may be required to file a Chapter 13 case.

Chapter 13 is similar to debt consolidation, in that the debtor proposes a plan of repayment to all creditors, to include paying back a percentage of unsecured debt. The result is that unsecured creditors, such as credit card companies and medical providers, receive some payment.

A creditor is also permitted to file an objection to the proposed repayment plan. The most common objections are to the interest rate and value of secured claims. There are other bases for objecting, including that plan is not feasible or that the case was filed as a delay tactic.

Aside from having a statutory basis for objecting, a creditor must also adhere to the Bankruptcy Court’s local rules when objecting to avoid the risk of an improperly filed objection.

While bankruptcy is still a very viable option for those with overwhelming debt, the arena is now viewed as being much more equal. Creditors have many tools at their disposal when a consumer files bankruptcy and should take full advantage of those tools to maximize repayment where possible.


By Phillips Murrah Attorney Gretchen M. Latham

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on March 7, 2019.

Lawyers know everything – almost

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on October 25, 2018.


Dave Rhea

Dave Rhea is the Marketing Director for Phillips Murrah law firm.

By Phillips Murrah Marketing Director Dave Rhea

What is brand affinity? What is SEO? Many attorneys admittedly don’t know much marketing jargon. Historically speaking, marketing is a relatively new addition to the legal industry. Only 41 years ago, the U.S. Supreme Court recognized lawyers’ right to advertise.

From what I understand – as a non-attorney working in a large law firm – law schools don’t offer many, if any, classes about marketing methods. Thus, these activities can seem as impractical to lawyers as dancing does to steelworkers.

However, in today’s digital landscape, it’s reasonable for attorneys to consider adopting a marketing mindset. Technology, coupled with the growing inclination of law firms to onboard marketing professionals, allows attorneys to easily demonstrate their expertise to a much wider audience while sacrificing fewer billable hours.

What can attorneys do to develop more business in the digital age? There are numerous ways to leverage new media to effectively enhance one’s visibility and reputation in the community, but for this column I would like to concentrate on one such activity, in particular.

The biggest bang for the non-billable hour is thought-leadership authorship. Writing short-form articles on a consistent basis for publication on the firm’s website, or blogging, is an easy way to position oneself as an industry leader. Such articles can have a long shelf life and are versatile in how they can be disseminated. This activity also allows for exposure outside of the attorneys’ usual circles of influence while building a body of work that increases their digital footprint, which allows the attorney-authors and their firms to be found more easily on Internet search engines.

Savvy, marketing-minded author-lawyers can also use such articles to heighten awareness and demonstrate excellent customer service to their clients and prospects. Using direct outreach via one-to-one email, these attorneys can show proactive attention and demonstrate knowledge of the targets’ industries, thereby harnessing a proven way to nurture relationships and win new business.

Old-school rainmakers with existing books of business and established reputations may not view blogging as a beneficial use of their time. However, many of these key influencers still understand the benefit of developing a marketing-mindset culture within their firms and go the extra mile to promote buy-in from junior partners and associates.

Dave Rhea is marketing director at the law firm of Phillips Murrah in Oklahoma City.

Avoid a clawback

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on September 13, 2018.


Clayton Ketter

Clayton D. Ketter is a Director and a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

By Phillips Murrah Director Clayton D. Ketter

A business owner learns that one of her customers has filed for bankruptcy. She rushes to check her books and breathes a sigh of relief after seeing that the customer paid all of their outstanding invoices just days before going bankrupt. Unbeknownst to the business owner, those payments may have to be paid back to the bankruptcy estate as a preference.

One of the principal policies underlying bankruptcy law is fairness to creditors, which attempts to ensure that similarly situated creditors are treated equally. To promote this goal, creditors in a bankruptcy are placed into classes, with members of each class sharing proportionally in distributions of a bankrupt debtor’s assets.

This policy can be hampered when a debtor pays a preferred creditor immediately before a bankruptcy, to the detriment of other creditors. To ensure that a debtor’s limited money does not disappear to creditors favored by the debtor, the Bankruptcy Code allows a bankruptcy trustee to claw back such payments.

A payment is considered a preference if it meets five criteria: It is made to a creditor; for a debt owed prior to the payment being made; while the debtor was insolvent; during either 90 days before the bankruptcy filing for ordinary creditors or one year for insiders of the debtor; which allowed the creditor to receive more than it would have received in distributions from the bankruptcy estate.

If a payment is a preference, it must be paid back to the trustee unless a valid defense can be established.

Several defenses are available to creditors, including for substantially contemporaneous exchanges. Typically, point-of-sale transactions and those that involve cash on delivery will meet this defense. Another common defense exists for payments made in the ordinary course of business, which analyzes the typical transactions between the parties and in the relevant industry. If it is common for a debtor to pay invoices within 60 days of delivery, for example, those payments may meet the ordinary course defense.

Businesses can take steps to shield payments received from financially troubled customers from being subject to preference liability. The most effective means is to require prepayment, COD, or point-of-sale transactions only. Businesses can also strategically apply payments to invoices in a manner designed to fit within preference defenses.

To recover a preference, the bankruptcy trustee must commence a lawsuit within the bankruptcy case, typically preceded by a demand letter. Any business that receives such a letter should consult with bankruptcy counsel to determine whether they have valid defenses to the claim. Consulting with a bankruptcy attorney is also advisable prior to entering into sizable business transactions with a financially troubled company to attempt to eliminate preference risk. Doing so can help reduce the risk that a business gets embroiled in a bankruptcy, and worse, has to repay money that it was owed.

Clayton D. Ketter is a litigation attorney at Phillips Murrah P.C. who specializes in financial restructuring.

Monkey’s business?

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on June 21, 2018.


Cody Cooper

Cody Cooper is a Patent Attorney in the Intellectual Property Practice Group and represents individuals and companies in a wide range of intellectual property, patent, trademark and copyright matters. His practice also includes commercial litigation.

By Phillips Murrah Attorney Cody J. Cooper

In 2011, a nature photographer in an Indonesian nature reserve left his camera unattended in the forest. A 7-year-old crested macaque monkey named Naruto, perhaps in an effort to increase its Instagram followers, decided to take several selfies using the camera. The photographer then, in 2014, published the monkey’s photographs in a book for sale online.

People for the Ethical Treatment of Animals sued as next friend of Naruto seeking to enforce Naruto’s copyrights to the photographs and to recover profits from the sale of the book.

The question became whether Naruto had statutory standing to claim copyright infringement on what became referred to as Monkey Selfies. According to the 9th Circuit Court of Appeals, the answer is no.

Humans, unlike monkeys, have a constitutional right to protect their works and inventions under Clause 8 of Section 8 contained within Article I of the Constitution, and those rights are further set out in the United States Copyright Act. These rights include the right to use, distribute, sell, duplicate, display and create derivative works. These rights are most commonly associated with books, magazines, plays, paintings and photographs, but can also apply to things like architecture and even graffiti.

The 9th Circuit, in Naruto, et al., v. Slater, et al., No. 16-15469 (9th Cir. April 23, 2018) affirmed the trial court’s ruling that, despite the fact that the monkey had standing under Article III of the U.S. Constitution, Naruto did not have standing under the Copyright Act to bring the lawsuit. In other words, monkeys (or any other animal) cannot bring copyright infringement claims because the Copyright Act does not expressly authorize it. So, Naruto’s case was dismissed.

Citing Cetacean Cmty. v. Bush, 386 F.3d 1169, 1175 (9th Cir. 2004) as precedent, the 9th Circuit Court of Appeals held that “if an Act of Congress plainly states that animals have statutory standing, then animals have statutory standing. If the statute does not so plainly state, then animals do not have statutory standing.”

If Naruto teaches nothing else, it should be to remember that if you see your pet attempting to take a selfie with an abandoned camera, be sure to take the picture yourself, in case it becomes famous. Someone will be making money on it, and it might as well be you.

Cody J. Cooper is a patent attorney with the Oklahoma City law firm of Phillips Murrah.

Business websites under legal pressure

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on May 10, 2018.


Kathryn Terry

The emphasis of Kathryn D. Terry’s litigation practice is in the areas of insurance coverage, labor and employment law and civil rights defense. She also represents corporations in complex litigation matters.

By Phillips Murrah Director Kathryn D. Terry

The Americans with Disabilities Act prohibits discrimination against people with disabilities in several areas, including employment, transportation, public accommodations, communications, and access to government programs and services.

The third section of ADA, Title III, addresses places of public accommodation, such as retailers, hospitals and state agencies. Under these rules, and in general, places of business are obligated to provide access to physical locations in the form of wheelchair ramps, signs that feature braille, and other means by which patronage of businesses is made possible for disabled persons.

Currently, similar attention is being focused on websites, as many businesses offer information and opportunities and conduct commerce via their website. Lawsuits are being brought claiming that these websites should be fully usable for persons with disabilities, just like brick-and-mortar locations.

To address Title III compliance, the World Wide Web Consortium developed an evolving set of standardized guidelines for improving accessibility to website content. The most recent, widely accepted version is called Web Content Accessibility Guidelines 2.0 AA, commonly referred to as WCAG 2.0 AA, which recommend, among many suggestions, text alternatives to graphics for visual disabilities, and captions to audio for those with hearing impairments.

Within the past few years, growing exponentially in 2017, lawsuits on behalf of disabled persons have been filed claiming website-related violations of ADA Title III. Recently, the lawsuits have been coming in waves, with online retailers being the first obvious targets, followed by online financial institutions, such as banks and credit unions, both large and small.

While there are no laws mandating WCAG 2.0 AA compliance at this time, the absence of any regulatory requirement does not shield businesses from ADA liability under Title III. Most businesses that have more than 15 full-time employees are subject to the ADA, and even if a business has less than 15, Oklahoma’s state law still applies.

However, in Oklahoma, there is a new statute that requires prior notice and an opportunity to cure the website issues in advance of any litigation under state law only. Businesses should consider this statute carefully if they receive a demand or lawsuit.

Many businesses are smartly getting ahead of this issue by reviewing their websites to identify potential accessibility barriers and implementing WCAG 2.0 AA guidelines as part of regular IT upgrades.

Kathryn D. Terry is a director at the law firm of Phillips Murrah.

The ins and outs of impeachment

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on March 29, 2018.


Mark E. Hornbeek

Mark E. Hornbeek represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

By Phillips Murrah Attorney Mark E. Hornbeek

It has been a Stormy few months for the current administration. With the headlines full of names like Robert Mueller, James Comey and Vladimir Putin, there has been plenty of speculation surrounding the possibility of impeachment. Talking heads love to throw the term around, but how does impeachment work?

The Constitution doesn’t give much guidance into the impeachment process. The ability to bring impeachment charges against the president, the vice president or a public officer is given to the House of Representatives, which investigates public officials and then puts each impeachment charge to a simple majority vote. Afterward, the Senate has the ability to convict the accused by conducting a trial with a requirement of a two-thirds vote to remove the accused from office.

There are three grounds for impeachment, two of which are self-explanatory: bribery and treason. The third, high crimes and misdemeanors, is more akin to “covfefe,” in that it could mean practically anything. The framers chose this term in an attempt to clarify an earlier draft of the Constitution, which used the word “maladministration.” Perhaps there should have been a third draft for further explanation, as public officials have been impeached and convicted for offenses as diverse as perjury, tax evasion and even drunkenness. That last one seems particularly spiteful.

Simple incompetence generally doesn’t qualify as an impeachable offense, but even so, Congress has wide latitude to determine who deserves impeachment, and both parties have been accused of using the device as a political weapon.

Historically, a whopping 60 impeachment proceedings have been initiated by the House, but few have been successful. To date, only two presidents have been impeached by the House of Representatives. In 1868, Andrew Johnson was impeached for violating federal law, followed 130 years later by Bill Clinton’s impeachment for obstruction of justice and perjury. Neither was convicted by the Senate.

Surprisingly, the worst perpetrators of high crimes and misdemeanors appear to be federal judges. A total of eight judges have been impeached by the House and convicted by the Senate. Three more judges have been impeached but, not liking their chances, resigned before the Senate could hold a vote.

If America does, indeed, have to endure another impeachment, Semisonic’s Closing Time would make an appropriate theme song for the proceedings: “You don’t have to go home, but you can’t stay here.”

Mark E. Hornbeek is a litigation attorney at the law firm of Phillips Murrah in Oklahoma City.

Avoiding construction contract litigation

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on February 15, 2018.


Samuel D. Newton is an attorney practicing in Oil and Gas, Construction, and Health Care Law.

By Phillips Murrah Attorney Samuel D. Newton

Oklahoma heavy civil and oil and gas construction will likely increase in the near term due to increased activity in the oil and gas fields and President Trump’s proposed $1.5 trillion investment in infrastructure.

Often seen as a heavily litigious industry, construction projects don’t have to end in litigation if contracts are carefully drafted and parties enforce the provisions during the course of the project. Here are some points to consider when drafting and/or reviewing.

Know your deadlines. Most construction contracts impose liquidated damages in the event of delay. While substantial/final completion is likely non-negotiable, (sub)contractors should raise, and try to draft around, any potential milestone concerns during negotiations to prevent the assessment of liquidated damages or exercise of the contract default provisions. Additionally, all parties need to be aware of the timeline for making claims or submitting change orders. Both are often waived under the contract if the proponent of the claim/change doesn’t submit the appropriate notice to the appropriate person in the requisite period of time.

Know the payment scheme. Payments are also often a litigious issue in construction. All parties should be aware of lien and, if applicable, bond claim rights, as they vary based on who the contracting entity is and where the project is located. Additionally, “pay if paid” and “pay when paid” clauses should not be confused. “Pay if paid” clauses shift the risk for nonpayment to lower tiers if payment is not received from higher tiers. “Pay when paid” generally only acts to give the (sub)contractor time to pay after it receives payment. Case law suggests that “pay if paid” clauses would need to be explicit to be enforceable in Oklahoma, though no cases directly examine the clause.

Know your contracting partners. Conduct due diligence to ensure that those you are contracting with – at each tier – have the skills and financial stability to complete the project. Consider including (or modifying) clauses that allow suspension and/or termination of the contract, if the representations and warranties you relied on when deciding to enter into the contract were untrue or grossly overstated.

Know your contract. Finally, don’t simply sign the contract and put it in a drawer. All parties should know the provisions and educate their employees about provisions relevant to their scope of work.

Samuel D. Newton practices construction and oil & gas law at Phillips Murrah P.C.

What’s in a name? Tremendous value

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on January 4, 2018.


Cody Cooper is a Patent Attorney in the Intellectual Property Practice Group and represents individuals and companies in a wide range of intellectual property, patent, trademark and copyright matters. His practice also includes commercial litigation.

By Phillips Murrah Attorney Cody J. Cooper

The holiday season is coming to an end, and most people have opened their Xboxes and Legos, eaten some HoneyBaked Ham, braved the cold in their North Face jackets and thrown away holiday trash in Hefty trash bags.

With a glut of advertising during the holidays, the power of brand recognition is obvious, and successful companies recognize the influence their names have on consumer behavior. This makes protecting a company’s trademark, typically the company’s name, critical, especially as their market exposure and customer base grows.

The trademark associated with the goods and services of a company is commonly one of its most valuable assets. For example, the ubiquitous Coca-Cola Co., the fifth most valuable brand in 2017, has a market capitalization (total value of all outstanding stock) of $195 billion and the Coca-Cola name, alone, is worth $56.4 billion, which accounts for almost 30 percent of its value. To round out the top five corporate monikers, Apple takes the top spot with its name being worth $170 billion, followed by Google ($101.8B), Microsoft ($87B) and Facebook ($73.5B).

The same legal considerations of brand value for large companies applies equally for many smaller, growing companies and organizations. Because consumers instantly associate an entity’s name with its good or services, protecting the name with a trademark has tremendous value.

Generally, a business has common law rights to exclude others from using a trademark that is confusingly similar to its own trademark. The scope of this right greatly expands or contracts based on whether a trademark has been registered, and the level at which the mark is registered. There are two avenues to take when looking to protect a company’s trademark: file for a state trademark or a federal mark.

State trademarks are typically cheaper, faster and easier to obtain, yet they also afford far less protection. Conversely, federal marks have a more rigorous application process, cost more, and take longer, but they afford the greatest amount of protection since they provide protection throughout the United States and supersede state trademarks.

Smart company leaders spend significant time and money building the value of their company and brand, and they realize the importance of protecting the company’s most valuable consumer-facing asset by securing a trademark.

Cody J. Cooper is a patent attorney with the Oklahoma City law firm of Phillips Murrah.

Why Weinstein’s creditors hired bankruptcy counsel

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on November 16, 2017.


Clayton D. Ketter is a Director and a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

By Phillips Murrah Director Clayton D. Ketter

Since the onslaught of sexual misconduct allegations against Hollywood producer Harvey Weinstein, his film studio, The Weinstein Company, has wasted no time in firing its founder. Yet, the namesake studio has been unable to distance itself from Mr. Weinstein’s bad press, and it is questionable how willing moviegoers will be to support anything associated with the toxic moniker. This has prompted speculation that a bankruptcy is looming.

While The Weinstein Company has not filed for bankruptcy, and denies any plans to do so, some of the company’s debtholders reportedly have already retained bankruptcy attorneys. Why? At first glance, it may seem odd for creditors to hire bankruptcy counsel before a filing is even initiated. However, there are strategic reasons as to why early retention makes sense.

Often, a company facing financial pressure will attempt, prior to filing, to work with its largest lenders to craft a strategy that is mutually beneficial to all parties. Cooperation among debtors and creditors increases the likelihood of a successful bankruptcy and can significantly reduce associated attorneys’ fees.

Even if the parties won’t work together, bankruptcy counsel can provide vital pre-bankruptcy assistance to a creditor. It is normal for the debtor to file a number of pleadings on the day the bankruptcy is commenced or shortly thereafter. These typically include mundane items such as authority to continue to use bank accounts, pay employees and employ legal professionals. However, it is also possible for significant relief to be requested as part of these first-day motions, including post-bankruptcy financing arrangements or even requests to liquidate assets. Having bankruptcy counsel at the ready and fully engaged allows a creditor to immediately respond to any such requests to ensure the creditor’s rights are protected.

Should The Weinstein Company file bankruptcy, it is likely to begin with a motion seeking to liquidate its highly portable assets, which include its film library, and movie and television development projects. Those assets could be acquired by a rival studio and washed of the Weinstein name, thereby increasing the potential value. The Weinstein Company’s significant creditors would want to ensure that they won’t get blindsided by a sudden bankruptcy filing and a first-day motion to sell. Their early retention of bankruptcy counsel will help prevent such a scenario from happening.

Clayton D. Ketter is a director and litigation attorney at Phillips Murrah P.C. who specializes in financial restructuring.

Sharp spike in EEOC lawsuits

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on October 5, 2017.


Byrona J. Maule is a Director and litigation attorney as well as Co-Chair of the Firm’s Labor & Employment practice group. She represents executives and companies in a wide range of business and litigation matters with a strong emphasis on employment matters.

By Phillips Murrah Director Byrona J. Maule

Fall is a time of change. But this fall, the transition from summer isn’t the only change we’re experiencing. This fall has also brought extraordinary action from the Equal Employment Opportunity Commission. Starting in July, the EEOC has filed a flurry of federal lawsuits against both private and public employers.

In July 2017, the EEOC filed 20 lawsuits, compared to eight in July 2016, according to EEOC.gov’s announcements. At first, I thought this was some type of anomaly, but it continued into August 2017 with another 20 lawsuits filed, compared to eight last August. In September, they filed a whopping 69 lawsuits, as opposed to 22 in September 2016. To date, the EEOC has filed 241 lawsuits in 2017, compared to 86 in all of 2016. With three months left in 2017, there is no reason to believe the rest of 2017 will trend any differently.

Other changes in the EEOC’s activity include an inclination to file suit against an employer in a single plaintiff case, as opposed to lawsuits in which the outcome would have a broad impact on society. The EEOC’s 2012-2016 Strategic Plan emphasized using litigation mechanisms to identify and attack discriminatory policies and other instances of systemic discrimination. This emphasis seems to have waned.

Considering the life cycle of an EEOC lawsuit from charge to the EEOC’s decision to file a lawsuit takes multiple years, this sharp spike in the number of merit lawsuits being filed does not indicate that workplace behavior has drastically changed in recent months. Rather, the change appears to be in the decision-making process of the EEOC when deciding if it is going to file a lawsuit and what types of lawsuits the EEOC pursues. In one recent case involving Home Depot, the EEOC filed charges despite the company’s position it had reached agreement with the EEOC on the major terms of a settlement.

What does it all mean? It is difficult to know at this point. The real significance for employers is there are significantly more lawsuits being brought by the EEOC in 2017 than at any time between 2012 and 2016. Employers need to be very aware of this, and approach EEOC charges with increased attention.

Byrona J. Maule is a partner and co-chair of the labor and employment practice group at Oklahoma City-based law firm Phillips Murrah.

Amendment sharpens valuable tool

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on August 24, 2017.


Hilary Hudson Clifton is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

By Phillips Murrah Attorney Hilary Hudson Clifton

The Oklahoma Open Records Act, Okla. Stat. tit. 51, § 24A.1, et seq, has been in place since 1985, but its value as a tool for discovering information related to private parties can still go overlooked. A recent amendment to the act, which goes into effect on Nov. 1, further strengthens the measure, demonstrating the ongoing utility of citizen open records requests.

Often discussed in the context of government transparency, the Oklahoma Open Records Act also provides an avenue for litigators and potential litigants to obtain reliable information about private parties through relatively discreet and non-adversarial channels. Often, information like license and permit applications, safety inspection results, and communications between businesses and government employees are fair game to those who think to ask.

A generally straightforward measure, the act requires all public bodies and public officials to make their records available for inspection or copying. No formal written request is required, as the act requires public bodies to have a designated record custodian available at all times to release records during regular business hours.

The recent amendment to the act, passed via Senate Bill 191, further advances the act’s policy of speedy disclosure. The amendment requires any delay in providing access to records to be limited solely to the time required for preparing the requested documents and the avoidance of excessive disruptions of the public body’s essential functions, and states that simple records requests cannot be delayed pending the completion of more complex requests. These changes send a clear message that the act mandates not just transparency, but efficient and responsive transparency.

In litigation, discovery disputes are common and commonly reviled by judges and attorneys alike. The records custodian responding to your request, on the other hand, likely has no ax to grind. If a government agency might have the information you seek, try picking up the phone and finding out how helpful your local government employees can be. Keep in mind, however, as the act states, “persons who submit information to public bodies have no right to keep this information from public access.” For private parties divulging information to the government for business purposes, that’s a knife that cuts both ways.

Hilary A. Hudson is an attorney at Phillips Murrah and a member of the firm’s Litigation Practice Group.

In consideration of a living inheritance

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on July 13, 2017.


Robert O’Bannon is a Director and member of the Firm’s Tax, Trusts and Estate Planning, Energy and Natural Resources, and Corporate Law Practice Groups. He represents individuals and both privately held and public companies in a wide range of transactional matters.

By Phillips Murrah Director Robert O. O’Bannon

When parents are in the financial position to give money or assets to their adult children, there are benefits for the donor and the child.

Rather than a parent holding on to wealth until after death, gifting allows them to share it with heirs when they likely need it most. At the same time, this decision can reduce the tax liability on an estate transfer at death.

The beneficiaries of such gifting are generally in their 40s and typically experiencing their most financially challenging decade. They often have children of their own who are in high school or entering college. Other financial obligations typically include a hefty home mortgage, medical costs associated with middle age and the challenges associated with their own inevitable retirement.

For wealthy, retirement-aged people, it is easy to acknowledge that their adult children and vicariously, their grandchildren, will likely benefit more from gifting at this stage of life rather than waiting until the event of death, at which point the adult children are generally more self-sufficient.

For those transferring wealth to the next generation, holding on to a larger estate flies in the face of limiting the tax liability. For example, upon death in 2017, estates worth more than $5,490,000 are taxed at 40 percent (for married couples, $10.98 million).

Gifting, or transferring either money or assets to someone else without receiving something of equal value in return, is available in various forms, including pre-loading college 529 accounts. Additionally, paying for medical, dental and tuition expenses do not count toward gifting limits as long as the provider is paid directly.

An individual may transfer assets to anyone free of gift tax in the amount of $14,000 per year. In this case, a married couple may gift up to $28,000 per individual. For a couple with two married children and four grandchildren, that would total $224,000.

There are numerous exceptions to the general rules of gift and estate taxation, which can be easily explained by your tax and/or estate planning attorney.

Robert O’Bannon is a director at Phillips Murrah and member of the firm’s Tax, Trusts and Estate Planning, Energy and Natural Resources, and Corporate Law Practice Groups.

The wrong approach

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on June 1, 2017.


Eric Davis is an attorney in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group. He represents clients in a range of regulatory and energy matters.

By Phillips Murrah Attorney C. Eric Davis

Oklahoma! Where the wind comes sweepin’ down the plain – and if some lawmakers have their way, it will be further taxed as it blows through.

For the wind industry, the tax landscape in Oklahoma changed dramatically in 2017. First, the five-year exemption from ad valorem taxes was allowed to expire beginning Jan. 1. Then the Legislature repealed the tax credit for electricity produced from zero-emission facilities powered by wind. These two tax changes represent millions of dollars annually, which will now be applied to mitigate the state’s revenue shortfall.

Now, a third major proposal has emerged: a per-kilowatt-hour production tax on wind energy, a rarity in the United States. At first blush, a production tax on wind energy may seem sensible. After all, natural gas is used to generate electricity, and it is subject to a gross production tax, so why not also impose such a tax on wind? A closer look, however, shows that the comparison is clearly strained.

Presently, the state’s gross production tax, or severance tax, as state law interchangeably refers to it, applies to the production of mineral resources. Such activities are extracting, or severing, non-renewable mineral resources. However, wind is not severed from the land. Theoretically, Oklahoma can benefit from wind energy for as long as the wind blows.

Also, Oklahoma’s gross production tax on mineral production is imposed in lieu of ad valorem taxes. Wind energy is presently subject to ad valorem taxes, which represent a major source of funding for local governments and schools. Oklahoma State University researchers have estimated that, when considering past and forecasted payments for planned projects, the wind industry will pay more than $1 billion in ad valorem taxes to local communities. If a production tax is levied on wind energy in lieu of ad valorem taxes, this could reallocate that revenue away from local communities.

If a production tax were imposed in addition to ad valorem taxes, it would amount to a double-tax on wind energy. This could discourage further capital investment and raise electricity bills for Oklahomans.

Tax policy is not easy. However, imposing this tax on wind energy because others in the energy industry pay a gross production tax is the wrong approach.

C. Eric Davis is an attorney with Phillips Murrah. His practice focuses on clean energy as well as government relations and compliance.

Commercial lease covers it all – right?

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on April 20, 2017.


Jennifer Ivester Berry is a member of the firm’s Transactional Practice Group as an Of Counsel attorney. Jennifer represents individuals, privately-held and public companies in connection with a wide range of commercial real property matters.

By Phillips Murrah Of Counsel Attorney Jennifer Ivester Berry

For those involved in leasing commercial real estate – whether new to leasing or a seasoned industry pro – signing a lease can be a daunting endeavor.

The devil is in the details, and, more often than not, many standard forms omit critical considerations. Accordingly, a close examination of the terms is essential for a quality commercial lease.

Below are five important points to consider when leasing commercial property. These items are not intended to be exhaustive, but rather a starting point for the purposes of evaluation.

• Experience – Knowing the background and temperament of the other party is important. Is leasing commercial property the landlord’s primary business? Will a management company operate the property? Is the tenant established or just starting out? A knowledgeable, cooperative working relationship is imperative for a successful commercial lease.

• Type of lease – Details of what costs are covered and how they are apportioned should be carefully reviewed. For example, leases often described as triple net, meaning that the tenant is responsible for all costs associated with the leased premises other than structural repairs, can actually be a blend of two types of leases, triple net and gross. A gross lease splits the structural repairs and operation expenses between the landlord and tenant.

• Identification of leased premises – Often the outline of the space and delineation of its parameters is an attachment that does not make it into the lease until the end of the negotiations. It is important to verify up front that what is provided meets both parties’ expectations.

• Costs – Payments under a commercial lease can be categorized in several different ways, including rent, common area maintenance, assessments and dues. Awareness that a lower rental rate might be counterbalanced by a monthly fee for maintenance of the property, which is set to automatically increase each year, is essential. The ultimate focus should be on the full monthly cost, regardless of what it is called under the lease.

• Insurance – Insurance coverage requirements will vary based on lease type. It is important to identify two things: what the lease requires and whether such coverage is available, and whether the cost associated therewith is factored into the overall lease costs.

Jennifer Ivester Berry is an attorney at Phillips Murrah who specializes in commercial real estate property and energy-related matters.

Doing business in multiple states

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on March 9, 2017.


Kendra M. Norman represents individuals and businesses in a broad range of transactional matters.

By Phillips Murrah Attorney Kendra M. Norman

One of the first considerations in forming a business entity is where to organize or incorporate. However, there is another important and frequently overlooked inquiry, which is where else to qualify that entity to do business.

If a business entity functions outside of the state in which it was formed, it may need to qualify to do business in that foreign state. Each state has different requirements for what constitutes doing business for this purpose. For many states, certain activities within that state, without more, do not require qualification. These activities usually include maintaining bank accounts, carrying on activities concerning internal corporate affairs, acquiring indebtedness, owning real or personal property, or conducting isolated transactions completed in 30 days.

Thus, the threshold for requiring businesses to qualify is relatively high. While these acts may not constitute doing business for qualification purposes by themselves, the general standard for qualification is based on the cumulative effect of all of the activities performed in the state in question. Generally, to be required to qualify, the foreign entity must transact a substantial part of its ordinary business within the state. To constitute ordinary business, activities must be indispensable to the business rather than simply incidental.

Failure to qualify can result in many penalties. Entities can be barred from access to the courts in states where they are unqualified, including Oklahoma. This can mean they are unable to enforce contracts entered into in these states. Unqualified entities, and individuals acting on their behalf, can be fined by foreign states in which they do business, including Oklahoma, where there is a statutory provision imposing fines. These fines can include backward-looking fees and franchise taxes to the state for the period in which the entity has operated while unqualified in the state, as well as a fine per transaction while unqualified.

The best course of action when faced with these issues is to determine where a business entity will transact substantial business and examine the specific statutory and case law of that state to determine if qualification is required.

Practitioners should keep in mind that what constitutes doing business for qualification purposes may not be the same threshold for what constitutes doing business for taxation and service of process purposes in some states, including Oklahoma.

Kendra M. Norman is an attorney at Phillips Murrah, where she represents individuals and businesses in a broad range of transactional matters.

Medical bankruptcies likely to rise

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Jan. 26, 2017.


Clayton D. Ketter is a Director and a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

By Phillips Murrah Director Clayton D. Ketter

One of the central promises of Donald Trump’s candidacy was that, once elected, the Affordable Care Act (also known as Obamacare) would be repealed. Now, with President Trump in office, and aided by a Republican Congress, the ACA’s remaining days are likely numbered.

According to the U.S. Department of Health and Human Services, the ACA has resulted in an estimated 20 million people who previously lacked health insurance becoming insured. Along with the many other effects resulting from a large number of Americans becoming insured, one less discussed consequence was a drop in medical-related bankruptcy filings.

Research by Daniel A. Austen, an associate professor at the Northeastern University School of Law, found that medical costs were a predominant cause of between 18 to 25 percent of all bankruptcies. Since the ACA was passed, one study by the National Bureau of Economic Research found that medical debt had been significantly reduced for those covered by the act.

These findings are intuitive, as hospital visits are often unexpected and typically result in large bills. Without insurance, most individuals lack the financial flexibility to absorb those medical debts. Bankruptcy can be an effective tool in those situations, as it can either allow a person to repay the debt over time or, in some cases, wipe it out altogether.

Problems can arise, however, for those facing ongoing health issues. A bankruptcy filing will only eliminate past debt. It does nothing for liabilities incurred after the bankruptcy is filed. Further, there are certain time restrictions to how often a person can receive a bankruptcy discharge. Depending on the type of bankruptcy at issue, those time limitations can be up to eight years. Thus, if an uninsured person is faced with a health issue that forces them to seek bankruptcy, his or her financial options may be seriously constrained if health issues return before the time limitations have run.

Such scenarios are all too familiar to bankruptcy practitioners, especially given insurance companies’ distaste to insuring people who have histories of health issues. Although there has been a temporary decline in those types of cases, they are likely to make a comeback should Congress choose to repeal the ACA without enacting a replacement or stopgap.

Clayton D. Ketter is a litigator at Phillips Murrah with experience in financial restructurings and bankruptcy matters.

The tax audits are coming!

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Oct. 27, 2016.


Chase H. Schnebel is a member of the Tax and Private Wealth Practice Group and assists clients in a variety of tax, business, and asset management issues.

By Phillips Murrah Attorney Chase H. Schnebel

The state of Oklahoma has ramped up efforts to collect tax revenue from those that may not be paying their fair share. Senate Bill 1579, signed into law in May, directs the Oklahoma Tax Commission “to enhance agency efforts to discover and reduce fraud and abuse of sales and use tax exemptions provided pursuant to the Sales and Use Tax Codes and the nonfiling and underreporting of sales and use taxes due and owing.”

The fiscal impact statement for SB 1579 has an estimated cost of approximately $4 million, but estimates increased revenues in excess of $50 million, with $26 million from increased sales tax collections. The law also directs the OTC to increase its audit staff to detect “through the use of enhanced technology” those who may owe the state money. With an estimated addition of 50 auditors, there is no doubt that the number of audits will increase.

An audit will typically start with the OTC requesting access to substantial business records. During the process, a taxpayer can expect to receive ongoing requests for documentation and explanations. The audit process involves close scrutiny of accounting records, tax returns, transactional documents, banking records and other relevant business records. If the audit results in a determination that the taxpayer owes tax, the OTC will issue a proposed assessment that may also include penalty and interest assessments.

A tax audit can be an invasive process and, upon receipt of an audit notification, individuals and businesses often feel vulnerable. A strategic approach to organizing and producing business records can substantially reduce exposure to assessments and the amount of time and resources necessary to complete the audit. Experienced tax professionals have knowledge of OTC audit procedures, statutes and regulations, which can be helpful in closing the audit process. If the OTC issues a proposed assessment, there are administrative procedures available that allow taxpayers to protest the assessment, request a waiver of penalty and interest assessments, and request an installment agreement to ensure a one-time assessment does not result in closure of the business.

The prospect of a state tax audit can be frightening and the process can be disruptive. To achieve the most desired possible outcome, it is important to involve tax professionals at the very beginning of the audit.

Chase H. Schnebel is an attorney at Phillips Murrah PC who specializes in tax issues.

Judge orders plaintiff to produce Facebook file

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on June 23, 2016.


Cody J. Cooper is an attorney whose practice is concentrated in commercial litigation, product liability, and intellectual property.

By Phillips Murrah Attorney Cody J. Cooper

The prevalence of social media continues to change litigation practices. As the availability of data about individuals related to social media continues to increase, so do the requests by opposing parties for this information. This necessarily requires analysis by the courts.

In an April order, the U.S. District Court for the Eastern District of Missouri wrestled with this very issue when it ordered a plaintiff to provide the defendant with her “Download Your Info” report from Facebook. See Rhone v. Schneider Nat’l Carriers, Inc., et al., No. 15-cv-01096 (E.D. Mo. 2015).

That lawsuit arose from a car accident and the plaintiff claimed severe, permanent and progressive physical and mental injuries that affected her lifestyle and ability to work.

During discovery, the defendant requested all of the plaintiff’s social media posts made since the date of the accident. The plaintiff simply responded “none.” The defendant then conducted an independent investigation and discovered substantial activity on the plaintiff’s Facebook profile, including posts about dancing and socializing. The defendant contended this was directly relevant to the plaintiff’s injuries.

The parties failed to reach an agreement on production of the information, so the defendant filed a motion to compel plaintiff to produce her Facebook data file. The court found that the plaintiff had failed to comply with her discovery obligations and ordered the plaintiff to download and produce to the defendant the Facebook data file, which includes all active posts, photos, videos and check-ins. The defendant claimed information had already been deleted and requested sanctions against the plaintiff, but the court decided to wait to determine whether the data file would show the alleged deleted information.

The case is still active, and it demonstrates the continued developing trend on treatment of social media. Particularly in case of personal injuries, but even in purely business disputes, postings by either party can become relevant and will likely be subject to discovery; efforts to delete or hide this information will typically result in severe penalties.

If you want to download your Facebook data file, go to settings, then the general tab, and click the link on the bottom – “Download a copy of your Facebook data” – and follow the instructions.

What effect does bankruptcy have on oil and gas leases?

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Mar. 31, 2016.


Melissa R. Gardner is a Director who represents both privately-owned and public companies in a wide variety of oil and gas matters, with a strong emphasis on oil and gas title examination.

By Phillips Murrah Director Melissa R. Gardner

It is an understatement to say these are trying times in the oil and gas industry.

There are multiple reports in the news that predict we have not hit bottom and that our state will be uniquely affected. While oil and gas companies, contractors and service companies have industry insiders to rely on, many individual mineral owners might find themselves without resources or direction, wondering what effect these proceedings will have on the benefits they’ve come to expect under oil and gas leases.

Here’s some helpful information for those who have executed these leases, who are faced with persistent negative news about the companies holding the leases.

It is important to note that, if a company is considering bankruptcy, it could take various forms. Chapter 7 and Chapter 11 are the two most common types of business bankruptcy.

In the first, business typically ceases and a trustee takes control of all assets, including the business’s oil and gas leases, with any eye toward liquidation. However, in Chapter 11 bankruptcy proceedings, the company generally remains in control of its assets and develops a plan of reorganization, often with the goal of remaining in business after its debts are restructured. While Chapter 11 may be ultimately more favorable to the mineral owners, one can take comfort that current payments and leases are not necessarily in jeopardy in either case.

In a bankruptcy proceeding, the bankruptcy trustee or Chapter 11 debtor in possession is only ultimately entitled to property of the bankruptcy debtor, which generally would not include royalties payable to mineral owners. Likewise, in Oklahoma, oil and gas leases typically survive the bankruptcy. This means royalty payments frequently continue, virtually uninterrupted, after a bankruptcy case has been filed and the leases may continue to be developed for the benefit of all notwithstanding the bankruptcy.

Obviously, this downturn has been difficult for many in our state. Hopefully, these facts will provide a mineral owner with some comfort that, even in these times, the payments they have come to rely on under existing oil and gas leases will not automatically be affected adversely by a leaseholder’s bankruptcy. It’s certainly worth investigating more before you assume these benefits will disappear.

Bankruptcy as a backdrop

Clay Ketter’s guest column, Gavel to Gavel, originally published in The Journal Record on February 18, 2016.
View Clay Ketter’s attorney profile here.


Clayton D. Ketter is a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

Clayton D. Ketter is a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

Chesapeake Energy’s stock price took a hit last week after news outlets reported that it retained Kirkland & Ellis, widely recognized as one of the nation’s top corporate bankruptcy law firms. Chesapeake was quick to issue a press release stating that it has no plans to pursue bankruptcy, which led to a small rebound in its stock price.

People may wonder why a company with no plans to file bankruptcy would hire an experienced bankruptcy law firm. The answer is likely prudence; the company wants to be fully informed about available options.

When companies detect potential financial trouble, it is not unusual for them to retain a law firm’s restructuring specialists to assist in assessing the situation and weighing alternatives for resolving the issue in the best possible way. That may not include filing for bankruptcy protection, but, rather, simply help in restructuring debt obligations.

When a company experiences financial stress, there is value in thoroughly preparing a well-thought-out plan to address the problem, which often involves developing a bankruptcy strategy as a point of reference and being prepared to file, if appropriate. With a bankruptcy scenario as a backdrop, a company and its restructuring advisers typically attempt to work with the company’s creditors to restructure their agreements in a manner more favorable to the creditor than they might receive in bankruptcy. Ideally, this would allow the company to get back on the right financial track and, ultimately, to make things right with its creditors without a bankruptcy filing.

Creditors of large corporations, usually sophisticated financial institutions, will be aware that restructuring specialists are prepared to put the company into bankruptcy for its protection should an alternative agreement not be reached. However, bankruptcy can be a disruptive, risky process that does not always yield the best outcome for either side. Risks on one side include company ownership being transferred to the creditors, and on the other, the creditors’ recoveries being less than what they might have recovered in the absence of a bankruptcy.

Thus, bankruptcy considerations often educate and motivate both sides to work together to find an out-of-court solution to their debt issues and, thereby, avoid bankruptcy altogether.

However, in situations where parties are unable to come to terms, the due diligence done by the company and its restructuring advisers can be used to take appropriate action to protect the company and its interests.

2015 tax extenders – a PATH forward

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Jan. 7, 2016.


Robert O. O’Bannon is a Director who represents business clients in a variety of transactional matters with an emphasis on taxation and wealth planning issues for both businesses and individuals.

By Phillips Murrah Director Robert O. O’Bannon

On Dec. 18, President Obama signed into law a package of tax extenders called “The Protecting Americans from Tax Hikes Act of 2015,” or PATH.

Tax extenders are nothing new. Historically, as tax provisions expire, extenders are put forward to temporarily keep them active. This helped extend the provisions, but it did nothing to develop the kind of certainty that many in the business community want when planning for the future. The real breakthrough for PATH is that some of the tax extenders are made permanent, including those that benefit individuals as well as businesses.

For example, for businesses, there are enhancements and permanent extensions to the Research and Development Tax Credit; the Code Sec. 179 expensing limitation of $500,000, and the $2 million phase-out limit, are retroactively and permanently extended, and both are indexed for inflation for tax years beginning this year; and Bonus Depreciation, which allows retailers and restaurants to initially depreciate half of remodeling and improvement fees. For individuals, the Child Tax Credit, American Opportunity Tax Credit and the Earned Income Tax Credit are all strengthened and made permanent.

Another breakthrough for the PATH Act is in the bipartisanship it achieved. Republicans achieved supply-side expansion that favors business and growth and Democrats enhanced and made permanent tax laws that more directly favor individuals. On both sides of the aisle, PATH turned out to be a nice Christmas present.

Moving forward into 2016, here are some other items to keep in mind about the PATH Act:

  • A deduction for state and local general sales tax in lieu of state income tax is retroactively extended and made permanent.
  • Individuals at least 70 1/2 years of age may now exclude from gross income qualified charitable distributions from IRAs of up to $100,000 per year.
  • The New Markets tax credit is extended through 2019 and the carryover period for unused new markets tax credits is extended for an additional five years, to 2024.
  • The tax credit for new, energy-efficient homes built by a contractor and acquired for a residence in the tax year is retroactively extended for two years to 2017.

ACA compliance deadline near

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Nov. 19, 2015.


Catherine L. Campbell is a versatile and experienced appellate attorney whose practice is focused on commercial litigation and labor and employment matters.

By Phillips Murrah Director Catherine Campbell

The time is upon us when certain business employers must comply with the Affordable Care Act, or ACA. Starting on Jan. 1, along with businesses with 100 or more employees, companies with 50 to 99 employees are required to offer affordable insurance to qualified employees and their dependents.

But that is not all. The ACA requires applicable large employers, or ALEs, to provide employees, by Jan. 31, a summary of the health care they offer (Internal Revenue Service form 1095-C), and, later, to provide that summary to the IRS (IRS form 1094-C). Together these forms tell the IRS information it will use to determine whether ALEs are affording ACA-mandated coverage, employees are eligible for health care exchange subsidies, and the coverage offered satisfies the ACA individual mandate.

Consider the following as the deadline approaches:

• Are you an applicable large employer?

Applicable large employer companies are employers with 50 or more full-time employees. Determining the number of full-time-equivalent employees can be tricky. For instance, if a company that employs less than 50 full-time employees is a subsidiary of a larger organization, the subsidiary could fall into the ALE category.

• Who are full-time employees?

The ACA defines a full-time employee as one who averages 30 or more hours per week, or at least 130 hours in a month including hours worked, and paid off-time (vacation, sick leave, and paid holiday hours).

• Payroll: If an employee is responsible for a portion of the cost of health care, companies must submit information sufficient to allow a determination that the provided health care is affordable to the employee. To avoid penalties, an employer must insure that premium payments by employees do not exceed a certain percentage of their wages.

The good news? After implementing procedures to capture and report the required information, future compliance should be less burdensome. The process will be similar to submitting W-2 forms.

As with other IRS requirements, there are many complex extenuating considerations. To ensure proper compliance, check with your adviser to make sure you are aware of all the details that apply to your specific circumstances.

Taxing behavior

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on Oct. 8, 2015.


Dawn M. Rahme represents individuals and businesses in an array of transactional matters. The focus of her practice is assisting corporations, partnerships and individuals in general tax planning.

Dawn M. Rahme represents individuals and businesses in an array of transactional matters. The focus of her practice is assisting corporations, partnerships and individuals in general tax planning.

By Phillips Murrah Director Dawn Rahme

Generally, people think of taxes as money that governments charge citizens in order to facilitate infrastructure. However, in many cases, governments also use the tax system to modify behavior by using the power of the purse.

Behavior is undoubtedly affected by the tax code. For example, when Congress increases the expense deduction for businesses, it encourages businesses to spend money through equipment purchases or other qualifying expenditures. When they allow for charitable deductions, it encourages giving to qualified organizations.

Oklahoma also offers a variety of tax incentives, including the Quality Jobs Program and the Oklahoma Film Act, which offer credits and rebates to make Oklahoma more attractive to those deciding where to do business.

On the flip side, behavior can also be discouraged by the tax code. Some excise taxes are imposed on items deemed unhealthy, commonly referred to as sin taxes. For example, Oklahoma levies an additional tax on tobacco products, including cigarettes. The intent is to discourage tobacco use with the implication of having an overall effect on health care. Additionally, according to Bloomberg, Oklahoma sin tax revenue has risen about 200 percent in the past decade.

Some argue that sin taxes are regressive, or that they have a disproportionately higher burden on the poor because they spend a larger share of their income on consumption. However, in the case of luxury taxes, or taxes on products or services that are deemed to be unnecessary or nonessential, it can be difficult to make the argument regressive taxes affect only lower tax brackets.

There are some rather notorious examples of efforts to influence behavior, including a poorly conceived idea in Dallas to place a 5-cent fee on disposable plastic grocery store bags. The tax passed, only to be repealed six months later. And who can forget New York City’s failed effort to ban sugary drinks from being sold in containers larger than 16 ounces? Although their efforts failed, the city of Berkley, California, was able to pass a 1-cent-per-ounce tax on soft drinks.

The next time you are making a purchase, it may be an interesting exercise to ask yourself how much of an influence taxes have on your decision.