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NewsOK Q&A: Federal income tax challenges for medical marijuana businesses in Oklahoma

Jessica Cory web

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

In this article, Oklahoma City Attorney Jessica N. Cory explores the conflict between federal and state law as it pertains to medical marijuana businesses.

What is the primary federal tax issue for Oklahoma medical marijuana businesses?

Jessica Cory, attorney with Phillips Murrah law firm answers: The primary tax issue for Oklahoma medical marijuana businesses stems from the conflicting treatment of the marijuana industry under federal and state law. Although the approval of State Question 788 last summer legalized the use, growth and sale of medical marijuana for state purposes, marijuana remains an illegal drug under the federal Controlled Substances Act. Special tax provisions apply to penalize anything deemed illegal drug trafficking under federal law, including licensed medical marijuana businesses.

What are the specific federal tax burdens a medical marijuana business will face?

Internal Revenue Code Section 280E represents the biggest tax challenge for medical marijuana businesses. Generally, the Internal Revenue Code allows a taxpayer to take a deduction for all “ordinary and necessary” business expenses paid or incurred during the taxable year. Congress has created an exception to this rule in certain instances, however.

One such exception is Code Section 280E, which prohibits a taxpayer engaged in the business of “trafficking in controlled substances” from taking a deduction for ordinary business expenses. Because the federal Controlled Substances Act defines marijuana as a Schedule I drug, Code Section 280E severely limits the types of deductions available to a medical marijuana business.

Although Code Section 280E prevents a marijuana business from taking normal business deductions, it does not bar a business from offsetting its gross receipts with its cost of goods sold (“COGS”). This means a business can at least reduce its potential taxable income by its direct costs of production. However, the Internal Revenue Code has issued guidance strictly limiting the types of costs a taxpayer engaging in a marijuana business can allocate to COGS, to prevent an end-run around Code Section 280E.

Case law supports this narrower interpretation of COGS for the marijuana industry, including prohibiting resellers of marijuana from including any indirect costs — costs other than the price paid for inventory plus any transportation or other necessary acquisition costs — in COGS.

Is there anything marijuana business owners can do to minimize their federal tax burden?

Yes, a tax professional can help marijuana businesses develop strategies for minimizing the impact of Code Section 280E. For example, a tax adviser can help a business differentiate between COGS and business deductions to take full advantage of the COGS offset allowed under federal law. In addition, a tax professional may be able to help a company structure its business to separate out its different activities to avoid having Code Section 280E apply too broadly. It is also essential for marijuana businesses to keep careful records, particularly if the business also engages in additional activities unrelated to growing, processing or selling marijuana.

Has there been any effort in Congress to fix the disparity in treatment under federal and state law?

Members of Congress have repeatedly introduced legislation to exempt marijuana businesses lawfully operating under state law from the parameters of Section 280E. For example, the Strengthening the Tenth Amendment through Entrusting States (“STATES”) Act, which would amend the Controlled Substances Act to protect people operating within the bounds of state cannabis laws, was recently reintroduced. Unfortunately, despite bipartisan support and the backing of several 2020 presidential candidates, the odds are not in favor of passage at this time.

Jessica Cory is an attorney with Phillips Murrah law firm.

Firm selects Employee of the Month for April 2019

Monica Ball

Monica Ball

Monica Ball, Accounting, is Phillips Murrah’s Employee of the Month for April 2019.

The Employee of the Month is selected anonymously by Phillips Murrah staff on merits of teamwork and overall contributions to the Firm.

“Monica is a valued member of the Accounting Department and her contributions help to make the Firm run efficiently,” Controller Stephanie Oseland said. “She is a hardworking and positive person, and it is a pleasure to work with her. She deserves this honor.”

The Firm recently began making a donation to the winner’s charity of choice, and Monica chose Infinity Farms Animal Sanctuary and Rescue.

“Infinity Farms Animal Sanctuary and Rescue is a nonprofit organization providing needy animals with shelter, food, and companionship,” said Brianna Greathouse, Foster Coordinator and Adoption Specialist for Infinity Farms. “We help animals all around the state of Oklahoma who are in urgent need.

“We take them under our wing, rehabilitate them, nurture them socialize them, and adopt them out to approved, wonderful, forever homes.”

To learn more about Infinity Farms, click here.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

NewsOK Q&A: #MeToo movement reaches merger transactions

Erica K. Halley

Erica K. Halley represents individuals and businesses in a broad range of transactional matters.

In this article, Oklahoma City Attorney Erica K. Halley discusses the “#MeToo” movement and the Weinstein Clause as they relate to requirements in buying and selling companies.

What is the #MeToo movement and how did it start?

In October 2017, The New York Times published an article detailing decades of sexual misconduct by film producer Harvey Weinstein. The scandal ultimately left Weinstein disgraced, his film studio bankrupt and victims of sexual harassment and assault emboldened. The #MeToo movement ensued, wherein victims tweeted (or otherwise went public with) their experiences, which highlighted the prevalence of such misconduct in the workplace. As a result, the chickens have come home to roost for many predators in power. This means, among many other things, companies must adapt and prepare for the potential PR and legal nightmare that necessarily follows misconduct allegations against employees, particularly those having influence over compensation, promotions/demotions and workplace culture. One way we see the #MeToo movement in the doldrums of corporate paperwork is through what is becoming known as the “Weinstein Clause” in merger and acquisition agreements.

What is a Weinstein Clause?

When a company is sold or merged, the selling company is typically required to make a litany of representations to the buyer concerning the status of the selling company. A Weinstein Clause is a representation made by the selling company where the seller promises that none of the selling company’s employees is the subject of allegations of sexual misconduct. In its broadest form, a seller represents that no allegations of sexual harassment or misconduct have been made to the company against any individual in his or her capacity as an employee of the company or any of its affiliates. Usually, if a seller makes a false representation, the buyer can sue the seller for all damages resulting from the breach.

How do sellers negotiate Weinstein Clauses in M&A transactions?

Just like any representation in an M&A (merger and acquisition) transaction, sellers will try to limit the scope of the representation by adding knowledge qualifiers (ex: to the seller’s knowledge, there are no sexual harassment or misconduct allegations), defining or reducing the look-back period (ex: the seller represents that there have been no allegations in the past five years) and minimizing the number or type of employees subject to such allegations (ex: the seller represents that there have been no allegations against executive level employees). In addition, the lawyers on both sides will probably spend time negotiating the definitions of “sexual harassment” and/or “sexual misconduct,” as such terms are open to interpretation and, therefore, ambiguity. After the representation itself is determined, if the seller is aware of any such allegations, the seller will try to negotiate an exception to the representation and describe the allegations on a schedule attached to the agreement. In this case, the seller is essentially saying, “except for that one time, which buyer is going to overlook, there have been no allegations of sexual harassment/misconduct.”

Why should people care?

The Weinstein Clause itself will probably not have a noticeable impact on the viability or essential terms of M&A transactions. And most people will probably never lose sleep over how broadly or narrowly any Weinstein Clause is negotiated. However, everyone is affected by companies (some more directly than others), and most companies are led by individuals who have power and influence over other employees. The emergence of the Weinstein Clause is indicative of a broader social change. The Weinstein Clause provides evidence that sexual harassment and misconduct by such individuals is not tolerated, safe and respectful company cultures matter, and victims of sexual harassment and misconduct ought to be protected.

 

Published: 5/7/19; by Paula Burkes
Original article: https://newsok.com/article/5630647/metoo-movement-reaches-merger-transactions

NewsOK Q&A: Doing business by email can cause legal concerns

A. Michelle Campney

As a litigation attorney, A. Michelle Campney represents companies in a wide range of business litigation matters with an emphasis on the construction industry.

In this article, Oklahoma City Attorney A. Michelle Campney discusses email practices that could be considered in legal matters.

What are the general legal concerns regarding conducting business through email?

It is estimated that there will be almost 3 billion email users by the end of this year, with an average of 128 business emails sent and received per person, per day. Often, only passively mentioned in employee handbooks and with little to no training during onboarding, employers and employees adopt varied practices for email use. The sheer volume of emails creates logistical problems for businesses (e.g., server space, data protection), but it can also create legal issues when exchanges can bind companies or reveal confidential, privileged or personal information.

How can emails bind someone until they actually sign an agreement?

Does the party you are working with know that you require hard copy agreement with handwritten signatures? If not, and if the email contains all the material terms and the facts, and circumstances surrounding that show that you were conducting the transaction electronically, then you could have an enforceable agreement under the Oklahoma Uniform Electronic Transactions Act (“UETA”).

But no one actually signed the agreement, so how can it be enforceable?

Not all agreements have to be signed to be enforceable, and specifically under the UETA, a signature only need be “attributable to a person if it was the act of the person.” Furthermore, an electronic signature under the act is “determined from the context and surrounding circumstances at the time of its creation, execution, or adoption … .” While Oklahoma does not have any case law on the issue, a Texas court found a simple “Thank you, Clyde” typed above the signature block was sufficient for a signature. Parks v. Seybold (Tex. App.—Dallas, 2015). Additionally, some courts (including those in Texas) broadly interpret the signature requirement to include an automatically generated signature block.

What are other potential concerns for email?

Let’s say that your company is involved in litigation regarding a contractual dispute. Most attorneys ask that all communications, including email communications, regarding the issue be turned over during the discovery process. While the communication may not ultimately be admissible in court, if there are emails between employees discussing the dispute and the surrounding facts and circumstances, those will generally have to be turned over to the other side. Additionally, if certain individuals are involved then you may have to turn over all emails regarding that person. Thus, if any mentions of any disciplinary action regarding that person or even your own personal feelings about the person are on email those may have to be turned over. While the emails may not ultimately impact your case, they could embarrass your company.

Are there any practices or policies that would help alleviate the concerns surrounding email?

While policies and procedures will be specific to each type of business and its standard practices, at the most basic level, having a robust email use policy will set a good foundation and, if properly drafted, help educate your employees on what to do and not to do. One important thing to remember is that email will only continue to grow as a means of communication. Setting good groundwork for how it is to be used in your company may help prevent issues down the road.

 

Published: 4/11/19; by Paula Burkes
Original article: https://newsok.com/article/5628396/doing-business-by-email-can-cause-legal-concerns

NewsOK Q&A: Some qualifications necessary to conduct businesses in other states

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.

In this article, Oklahoma City Attorney Travis E. Harrison discusses practical legal issues related to out-of-state business practices.

When is a corporation, limited liability company or other registered legal entity “transacting business” in another jurisdiction?

A legal entity required to be registered under the laws of one state must be cognizant of whether its structure or business activities constitute “transacting business” in another state. For example, a corporation formed under the laws of Oklahoma might provide services or buy and sell real estate in Texas. If Texas law defines this activity as “transacting business,” then the corporation should take the required steps to qualify to do business in Texas — as the failure to do so may result in unforeseeable fines or other consequences. Each state establishes its own variations on what activities by a foreign (out-of-state) business constitute doing business in that state. As a practical matter, a business that has a strong presence or engages in successive transactions in another state is likely “transacting business” and will need to take the appropriate steps to qualify in that state.

What are the consequences of failing to qualify to do business in another state?

Similar to the issue of what activities constitute “transacting business” in another state, the ramifications for failing to qualify to do business are a creature of state statute and vary by jurisdiction. However, the most common legal consequences for failing to qualify are fines and the inability to utilize that state’s court system to bring a lawsuit. For example, assume the previously mentioned corporation formed under the laws of Oklahoma fails to qualify to do business in Texas even though it meets Texas’ criteria for “transacting business.” If the Oklahoma corporation files a breach of contract action in Texas, then its case may be dismissed because it failed to qualify to do business in Texas. This pitfall is especially problematic if the corporation is jurisdictionally restrained from bringing the lawsuit in Oklahoma because of other procedural issues.

How does a business qualify to do business in a state other than its state of formation?

As mentioned above, a business should be cognizant of whether its operations in other states require it to qualify to do business in those states. Generally, a business qualifies by filing a certificate with information about the business and its good standing and paying the respective filing fee with the state’s secretary of state (or other designated office). Additionally, a business should ensure that it complies with the other state’s applicable tax requirements for foreign businesses. In Oklahoma, for example, a foreign corporation’s failure to pay annual franchise taxes may subject it to unnecessary penalties.

 

Published: 2/21/19; by Paula Burkes
Original article: https://newsok.com/article/5623523/some-qualifications-necessary-to-conduct-businesses-in-other-states

NewsOK Q&A: IP assignment agreement is key to invention ownership

Phillips Murrah Patent Attorney Cody J. 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.

In this article, Oklahoma City Patent Attorney Cody J. Cooper discusses the rights inventors have when inventing under the employment of someone else.

Q: When an employee invents something during the course of his or her employment, who owns the invention?

A: The employee owns the invention. Inventors’ exclusive right to their inventions is specifically written into the United States Constitution and, as such, courts have generally interpreted ownership of inventions to favor individuals, except in very narrow circumstances.

Q: How can an employer assure ownership when an employee conceives of an invention on the job?

A: The employer must have employees sign an intellectual property (IP) assignment agreement. Because the general rule is that an inventor owns the rights, courts strictly interpret IP assignment agreements. Recent case law has instructed employers that how you draft the assignment agreement is equally as important as having an agreement in the first place. In fact, the Federal Circuit recently determined, in Advance Video Technologies LLC v. HTC Corporation Inc., that an IP assignment must include language saying the employee “assigns” — present tense, not future tense — their employer all IP rights. The small difference in language had a tremendous impact on the employer’s ability to sue another company for patent infringement.

Q: Should IP assignment agreements only be used by businesses in manufacturing, research or product development?

A: No. I would suggest any company consider having its employees sign an IP assignment agreement if the company expects employees to create work or inventions to which the company would expect to have rights and expects to protect it through application for apply for a trademark, patent, copyright or other appropriate protection to keep others from using it without permission.

Q: What are some other employer considerations regarding IP assignment agreements?

A: Make sure that your employees sign IP assignments before they begin working for you, and make sure that you consult an attorney on the drafting of the IP assignment to ensure that it complies with current law and effectively assigns the IP rights you are seeking to protect.

Q: What if an employer has employees who’ve already created inventions that the employer presumed the company owned but doesn’t have an IP assignment in place? Can the company enter into an IP assignment agreement retroactively?

A: If this is the case, the invention is owned by the employee, and the employer likely has no rights to the invention. Nevertheless, the employer and employee can still enter into a IP assignment agreement, but there must be some sort of consideration (exchange in value) passed between the parties. The law makes clear that it is not enough for the employer to say that the consideration the employee is receiving is that they get to keep their job — there must be something more passing to the employee for their assignment of their invention (i.e. money, stock, etc.).

 

Published: 1/30/19; by Paula Burkes
Original article: https://newsok.com/article/5621521/qa-with-cody-j-cooper-ip-assignment-agreement-is-key-to-invention-ownership

 

NewsOK Q&A: Mineral owners should be informed about leasing, selling options

Zac Bradt

Zac Bradt is an attorney in the Energy & Natural Resources Practice Group. He 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.

In this article, Oklahoma City Oil and Gas Title attorney Zachary K. Bradt discusses the advantages mineral owners have when taking action with their mineral interests.

Q: What options are mineral owners faced with in today’s market?

A: As oil and gas activity in the state remains strong, mineral owners are seeing more opportunities related to their mineral interests. Some are being approached about signing new leases, while others are receiving calls and letters about selling their mineral interests. Whether leasing or selling, mineral owners are being presented with options that create certain advantages to an informed mineral owner.

Q: What advantages can leasing provide over selling?

A: The obvious answer is that the mineral owner will get to keep their mineral interest. By signing a new lease, the mineral owner will receive a bonus payment that is calculated based on the number of mineral acres owned, and a royalty on any production occurring during the term of the lease. The bonus and royalty can be negotiated with the lessee, but mineral owners should be aware of the inverse relationship between the two. A higher bonus will offer a lower royalty, whereas a lower bonus will provide for a higher royalty.

Q: What advantages can selling provide over leasing?

A: Selling mineral interests presents a financial advantage over leasing. If a mineral owner is financially incentivized, they may feel comfortable selling their interests away to a third party. Much like the bonus payment, mineral owners will receive a price per mineral acre offer to buy from third parties. The difference with selling is that there is a direct correlation between the royalty and purchase price. Minerals with a higher lease royalty will bring in a higher price per acre from potential buyers.

Q: How can a mineral owner decide what is the best option?

 

Published: 9/25/18; by Paula Burkes
Original article: https://newsok.com/article/5609461/qa-with-zac-k.-bradt-mineral-owners-should-be-informed-about-leasing-selling-options

NewsOK Q&A: Surface owners have rights regarding oil and gas development

Zac Bradt

Zac Bradt is an attorney in the Energy & Natural Resources Practice Group. He 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.

In this article, Attorney Zachary K. Bradt discusses protections land owners have in regards to surface rights in oil and gas exploration.

Q: Why should surface owners be concerned about the development of oil and gas?

A: In Oklahoma, courts have ruled that the mineral estate is superior to the surface estate for purposes of oil and gas development. Oil and gas operators have the right to enter upon your property and make reasonable use of the surface to explore for oil and gas.

Q: As a surface owner in Oklahoma, what laws are in place to protect my interests?

A: In an effort to better protect the rights of surface owners throughout the state, the Oklahoma Legislature passed the Surface Damage Act that went into effect on July 1, 1982. Prior to July 1, 1982, operators had the right to enter upon a surface owner’s property and make reasonable use of it to conduct their operations without paying any damages. With the passage of the Surface Damage Act, surface owners were afforded more protections and operators were required to follow procedural steps as defined under the act before entering upon the property.

Q: What procedural requirements does an operator have to meet?

A: Operators are first required to send a letter by certified mail providing notice of their intent to drill and informing the surface owner of the proposed location of the well and the approximate date drilling will commence. Within five days of delivery, the operator must engage in good-faith negotiations with the surface owner. If the parties agree upon damages, a written contract is executed, damages are paid, and drilling operations can commence.

Q: What if the surface owner and operator don’t reach an agreement?

A: If the good-faith negotiations don’t result in an executed damages contract, the operator must petition the court for the appointment of appraisers. Then, an operator may enter the property and commence its operations. Although drilling may be commenced, the determination of surface damages will remain before the court. The three appraisers (one from each party, who then choose a third) will inspect the property and submit a report to the court estimating the surface damages. Once the report is submitted, you can accept the suggested amount or challenge in court. Before you demand court consideration, you should make yourself aware of the related costs.

 

Published: 5/22/18; by Paula Burkes
Original article: https://newsok.com/article/5595368/surface-owners-have-rights-regarding-oil-and-gas-development

NewsOK Q&A: Budget act makes auditing partnerships easier, more efficient

From NewsOK / by Paula Burkes
Published: January 19, 2018
Click to see full story – Budget act makes auditing partnerships easier, more efficient

Click to see Erica K. Halley’s attorney profile

Erica K. Halley represents individuals and businesses in a broad range of transactional matters.

Q: What is the Bipartisan Budget Act of 2015 and why should LLCs and other partnerships pay attention?

A: Effective this month, the Bipartisan Budget Act of 2015 changes how the Internal Revenue Service audits and assesses taxes of entities taxed as partnerships, including most limited liability companies. One such change includes replacing the “Tax Matters Partner” with the “Partnership Representative,” which is much more than a mere name modification. In essence, the act makes auditing partnerships easier and more efficient for the IRS, so understanding the weight of designating your Partnership Representative is critical in preparing for your company’s increased exposure to potential audits beginning this year.

Q: What is the difference between the Tax Matters Partner and the Partnership Representative?

A: There are two key differences between the Tax Matters Partner of the past and the Partnership Representative of the present and future. First, the Partnership Representative isn’t necessarily a partner (or member, in the case of an LLC) of the entity. Like a manager of an LLC, a Partnership Representative may be any person the company deems fit to serve in such role, who may or may not be an owner of the company. Second, the Partnership Representative has complete authority to act on behalf of the company when communicating with the IRS. Importantly, and unlike the laws previously in effect, there’s no statutory obligation to notify the partners or members of the existence or status of an audit, much less include them in any decisions that may significantly impact the tax treatment of the company.

Q: What do businesses need to do to prepare for the change?

A: The partners or members of a company will need to agree on the expectations they have for their Partnership Representative and the desired scope of his or her authority. Then, they should amend their company’s governing documents, such as their partnership agreement or operating agreement, accordingly. In addition to providing for the appointment, removal and replacement of the Partnership Representative, they also should consider demanding timely notice to each partner or member of all IRS communications. Other considerations include requiring the Partnership Representative to make certain elections on behalf of the entity, or obligating the Partnership Representative to use his or her best efforts. Companies also may want to add certain indemnification provisions that bind the Partnership Representative to his or her duties with respect to an audit. Finally, and essentially, they must designate their Partnership Representative on their entity’s return each year. As the IRS isn’t bound by any partnership or operating agreement, if a company fails to make the designation on the return, the IRS may select a company’s Partnership Representative for them.

NewsOK Q&A: Some mortgage, business loans may need updating with looming bank rate phaseout

From NewsOK / by Paula Burkes
Published: November 16, 2017
Click to see full story – Some mortgage, business loans may need updating with looming bank rate phaseout

Click to see Kendra M. Norman’s attorney profile

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

Q: What is LIBOR?

A: The London Interbank Offered Rate (LIBOR) is the daily calculation of an average of estimated interest rates that a panel of around 20 banks calculate they’d be charged to borrow from other banks. LIBOR serves as the primary reference interest rate that’s overwhelmingly used by lenders to set their own interest rates including mortgage and student loan lenders, as well as credit card companies. It’s been used since 1986 for this purpose. LIBOR hasn’t been without its scandals, and in 2012, media outlets began to allege that LIBOR was being manipulated by the very banks that set the rate, leading to fines levied against financial institutions and prison sentences for individuals involved in the rate manipulation as well as regulatory backlash. The Financial Conduct Authority is the regulatory agency for LIBOR, and on July 27, in an apparent effort to replace rather than reform LIBOR, Chief Executive Andrew Bailey announced the recommendation that LIBOR be phased out at the end of 2021 due to a lack of confidence in the calculation as well as unwillingness among banks to use it.

Q: What’s the future of LIBOR and how could it affect consumers?

A: LIBOR has been used pervasively as a benchmark rate for loans for over 30 years. Most consumers have at least one agreement in effect that references LIBOR, whether it be a mortgage or business loan. Many of these contracts are long-term and won’t expire before 2021 when LIBOR will be phased out. Some of these loan contracts based upon LIBOR contain a fallback provision and reference an equivalent or alternative interest rate to be used in place of LIBOR, laying the foundation for those instruments to be governed by LIBOR’s eventual successor. However, lenders and borrowers should review existing loan documents, especially those continuing after 2021, to ascertain whether they’re LIBOR-based loans and then whether they reference an alternative rate in the event that LIBOR is no longer published. Those documents without fallback provisions or an alternative rate should be amended and updated so that they reference a substitute or new rate to avoid legal uncertainty once LIBOR is replaced.

Q: What will replace LIBOR?

A: LIBOR’s administrator will continue to produce LIBOR until 2021 and possibly after that time if banks continue to contribute to the benchmark rate, so there’s still time to figure out what will replace LIBOR, but there’s currently no go-to replacement. Lenders and borrowers should consider use of fallback provisions and flexible amendment provisions due to the unavailability of LIBOR in the future.

NewsOK Q&A: Not all jokes, propositions necessarily workplace sexual harassment

From NewsOK / by Paula Burkes
Published: November 14, 2017
Click to see full story – Not all jokes, propositions necessarily workplace sexual harassment

Click to see Kathryn D. Terry’s attorney profile

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

Q: What is sexual harassment?

A: The word “harassment” gets thrown around and used in a lot of contexts. or employment law purposes, unlawful sexual harassment is conduct in a work-related environment that reasonable persons would characterize as offensive and sexual in nature, which actually offends a person and can be said to affect the terms of conditions of the sufferer’s employment.

Q: What does “work-related” mean?

A: First, unlawful sexual harassment doesn’t just occur at work or work events. In fact, more often than not, harassment takes place outside the office and after hours. All of the following are common: one co-worker shows up on the doorstep of another, uninvited and unwelcome; after work drinks; work-related texts that turn personal. If the relationship is primarily work-related and a problem develops, it could be an issue for the employer. Secondly, the employer must actually be an “employer.” Today, almost every employer engages independent contractors and consultants — people who are not employees. If one or both of the persons involved aren’t actually employees, while the conduct at issue may be offensive, even reprehensible or unlawful, it may not be sexual harassment. For example, if an employee makes unwelcome and offensive advances to a courier or caterer who isn’t an employee but interacts with the company and its personnel, that isn’t technically sexual harassment for employment law purposes. Incidentally, although an employer in this situation may not be required to address the situation, it should. If another instance occurs, the first incident likely would demonstrate the employer had notice of bad conduct by the employee but took no remedial action.

Q: How offensive is offensive?

A: First, the proverbial “reasonable person” has to be offended. What offends someone in Oklahoma may be commonplace elsewhere. Every joke, or even every proposition, isn’t necessarily harassment. If a co-worker invites another co-worker out to dinner, the second declines and that’s the end of story, that exchange is not very likely to be characterized as sexual harassment here in middle-America, regardless of whether the invitee was actually offended by the invitation. Second, actual offense must occur. One co-worker could make routine, crude, offensive, sexual remarks toward a specific co-worker. However, if those remarks aren’t offensive to the recipient (he or she takes them, rightfully so, as jokes), there’s no sexual harassment, no matter how vulgar the remarks may be. There are important caveats to be considered, however. Oftentimes persons who complain about long-standing harassment say they went along with the behavior hoping it would stop, fearing retaliation or thinking it was a joke and then it turned more serious. Thus, if a situation like this develops in the workplace, a prudent employer not only will inquire of the persons involved as to their comfort levels, but also will direct the employees involved, regardless of their congenial relationship, to tone it down and be respectful not only of each other, but also of other co-workers who are present.

Q: How bad does sexual harassment have to be to be deemed harassment?

A: The buzzwords are that is has to adversely affect the “terms and conditions” of employment; it has to make the sufferer’s job worse in a meaningful way. But, for example, repeatedly asking out a co-worker despite being rebuffed and asked to cease the invitations, probably can be considered harassment. Moreover, as recent news events demonstrate, one severe incident can be very significant harassment. Conversely, little and subtle remarks and conduct over time can be detrimental to a person’s employment environment and an employer who knows of this type of conduct but fails to take action does so at its peril. A couple of major red flags also exist. If the employee alleging harassment also suffers an adverse economic impact (for example, demotion, reassignment or failure to give a bonus) or if there’s any kind of physical contact (even an unwelcome hug), very careful scrutiny of the events and the relationship is warranted.

NewsOK Q&A: Manufacturing sales tax exemption is tool for attracting, maintaining investment

From NewsOK / by Paula Burkes
Published: November 3, 2017
Click to see full story – Manufacturing sales tax exemption is tool for attracting, maintaining investment

Click to see Jim Roth’s attorney profile

Jim A. Roth, Phillips Murrah

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Q: What is Oklahoma’s manufacturing sales tax exemption?

A: Goods and equipment used in a manufacturing operation can be purchased exempt from sales and use tax by manufacturers. This type of sales tax exemption is designed to attract and promote business. It’s a proven tool that governments employ to make their communities more attractive. The rationale is simple: draw out-of-state investment and keep in-state investment rather than relinquishing that investment (and the associated jobs, taxes and infrastructure) to a competing location.

Q: What is the relevance of the sales tax exemption to the energy industry?

A: Under Oklahoma law, the term “manufacturing” includes the conversion of materials and natural resources into other materials that have a different form or use. This definition encompasses processes ranging from the manufacturing of oil field equipment to petroleum refining. Electric power generation is also considered manufacturing. As a result, power generators such as natural gas-fired power plants, coal-fired power plants and wind energy facilities are deemed manufacturers and are permitted to purchase equipment to be used in the power generation process exempt from sales and use tax. Ultimately, the exemption is designed to help qualifying energy companies stay afloat — especially during capital-intensive phases — and keep investing in Oklahoma.

Q: This exemption has been a hot topic at the state Capitol during special legislative session. What are some of the issues at hand?

A: Oklahoma is facing a historic budget shortfall, with risks of further cuts to state agencies becoming a very real possibility. Legislators are searching for dollars to help plug financial holes before the ship sinks, and many of our state’s tax incentives and exemptions may be on the chopping block. There has been discussion of removing wind energy companies from access to the manufacturing sales tax exemption. While wind developers have made it publicly clear they’re already invested in Oklahoma to the tune of billions and plan to stay for the long haul, it’s important to revisit the reason for such exemptions in the first place and consider that the opposite is also true: if certain companies or industries are punitively cut out of such exemptions while still paying millions in taxes, it may make Oklahoma a difficult place to do business, which will, in the long run, discourage investment and aggravate our state’s budget problems.

 

NewsOK Q&A: Data security, cyber threats are everyone’s concern

From NewsOK / by Paula Burkes
Published: September 20, 2017
Click to see full story – Data security, cyber threats are everyone’s concern

Click to see Fred Leibrock’s attorney profile

Fred A. Leibrock is an experienced trial lawyer who has tried dozens of jury trials and has served as lead counsel in a number of significant cases involving complex, multi-jurisdiction issues.

Q: With the recent breach of Equifax, it seems that vulnerability to identity fraud is everywhere. Are there measures I can take on behalf of my company and employees to minimize risk?

A: Act now and seek professional technical assistance. Hire the right technical person or firm to help you test your systems, assess your vulnerabilities and implement your protection and recovery plans. The question isn’t whether someone will try to steal your data, but when. You need to be ready.

Q: From a legal standpoint, if my company’s data is breached, can my company be held liable for harm to employees or customers whose information may have been compromised?

A: Yes. Although this is a rapidly emerging area of the law, as a general rule an entity that is negligent in safeguarding confidential customer or employee data can be held liable as a result of a breach, or as a result of disregarding legal notice requirements after the breach. The principal question on the issue of liability is whether the entity took reasonable steps before the breach to protect the data, and after the breach to protect and notify the customers or employees. What’s reasonable is a moving target that must be determined on a case-by-case basis. However, there are few legitimate excuses in this day and age for a company to not take significant affirmative steps to safeguard electronic data.

Q: What are some of the bigger mistakes that companies make when it comes to protecting their data?

A: According to the Federal Trade Commission, the principal unreasonable practices that result in data breaches include weak password policies, lack of encryption, broad dissemination of administrative passwords, and lack of security between systems with sensitive data and other computers inside and outside the network.

Q: What measures can I take to protect my company from a data breach?

A: Engage in advance planning. To reduce the risks of a data breach, follow the recommendations of the National Institute for Standards & Technology by planning ahead of a breach to: identify the components of your systems and their vulnerabilities; protect the components from penetration; detect latent threats that may have already penetrated your systems; respond to a breach and recover from a breach. Also, train your employees to be alert to cybersecurity risks.

Q: It seems like all businesses rely on digital data transfer, whether it’s using file transfer services or sending sensitive documents through email. How do I continue to take advantage of these conveniences and still secure my information?

A: Avoid unnecessary risks. There are a million affordable products on the market that allow you to encrypt stored data and data in transmission. Use them and be willing to pay for data protection. If you must transmit sensitive data over an unsecure network, at a minimum encrypt it with a strong password before transmitting it.

NewsOK Q&A: Forced pooling in mineral land leasing has upsides, downsides

From NewsOK / by Paula Burkes
Published: August 31, 2017
Click to see full story – Forced pooling in mineral land leasing has upsides, downsides

Click to see Melissa Gardner’s attorney profile

Melissa Gardner is a Director who practices in the Energy & Natural Resources Practice Group.

Q: If you’re approached about leasing minerals, do you have options?

A: You do have options. However, none of those options include avoiding leasing your minerals. In Oklahoma, the development of minerals is a compelling state interest. Therefore, if you refuse to lease your minerals, you will be subject to forced pooling. Forced pooling of minerals is similar, in many ways, to acquiring property via eminent domain. However, in this context, it’s a private company acquiring the minerals for a period of time to develop a spacing unit. Because such acquisition is a “taking,” it’s in a much more limited form than leasing the same minerals.

Q: Why would the state allow companies to “take” individuals’ minerals?

A: If an individual in the middle of a spacing unit refused to negotiate or lease their minerals to an operator, their “holdout” would prevent the surrounding mineral owners from developing their assets. This, combined with the aforementioned state interest of developing oil and gas in our state, has led courts and the Legislature to determine it’s in everyone’s best interest to ensure production.

Q: What are the pros and cons of leasing versus being made subject to a forced pooling order?

A: If you choose to sign a lease, you will have the ability to negotiate more of the specifics of the usage of your minerals. You are in a position to get the oil and gas companies to agree to some conditions and special provisions. If you are subject to a forced pooling (as managed by the Oklahoma Corporation Commission), you’re not in a position to negotiate these details.

Second, you can negotiate bonus and royalty costs. If you are subject to a forced pooling order, you’re given three options, being a combination of the prevailing prices in the surrounding areas, with no option to negotiate those prices. In the alternative, if you allow yourself to be subject to the OCC forced pooling order, the applicant is given a shorter time within which it has to commence operations. The average lease is valid for three to five years, whereas the average pooling order is valid for six months to a year, both of which extend after production has been initiated. This keeps your minerals under contract for a shorter period of time.

Additionally, the minerals only are forced pooled as to certain, limited geological formations. If a well is drilled and producing from those zones, your minerals are still open and unleased as to other, non-pooled zones. In the alternative, most leases cover all depths or, at a minimum, from the surface to a certain depth below the surface. Finally, forced pooling orders expire at the end of production. If a producing well is drilled during the first year of a five-year lease and only produces for two years, the lease remains valid, and your minerals remain unmarketable for re-lease, for an additional three years.

NewsOK Q&A: Laws allow for various contingencies in dealing with bankrupt companies

From NewsOK / by Paula Burkes
Published: April 18, 2017
Click to see full story – Laws allow for various contingencies in dealing with bankrupt companies

Click to see Gretchen Latham’s attorney profile

Gretchen M. Latham’s practice focuses on representing creditors in foreclosure, bankruptcy, collection and replevin cases. She offers these services to her clients on a statewide basis as well as in all three Bankruptcy and Federal Court Districts in Oklahoma.

Q: Can a lender still do business with a bankrupt company?

A: Most generally, yes. When a business files for bankruptcy, the type of case is most commonly a Chapter 11 case. In a Chapter 11, it’s possible for the company to remain in possession of its assets, including equipment and inventory, and continue to do business. This includes interacting with vendors and lenders on a regular basis. As a creditor, the safeguard in place for repayment of any loan made to a company operating under a Chapter 11 is that post-petition debts are given priority as an administrative claim. This helps to eliminate some of the risk, and provide assurances of repayment. However, if the type of case filed is a Chapter 7, the company will no longer be operating its business and all of its assets are scheduled for liquidation.

Q: Can goods that are shipped to a Chapter 11 debtor be recovered?

A: The Bankruptcy Code does allow for reclamation of recently shipped goods, pursuant to 11 U.S.C. Section 546. There’s a somewhat tight timeline for exercising the right of reclamation, which must be precipitated by making demand.

Q: How can I get paid by a Chapter 11 debtor?

A: An option for making a payment claim, which is not unique to a Chapter 11 case, is for a creditor to file a proof of claim. The proof of claim will set forth the balance due and payment terms. The deadline to get a claim on file will vary from court to court, and the required form is typically provided with notice of the filing. Payment on a proof of claim can take a while, so be prepared to wait for the case to come to completion.

NewsOK Q&A: FBI warns against doctors, dentists using ‘anonymous mode’ computer servers

From NewsOK / by Paula Burkes
Published: April 12, 2017
Click to see full story – FBI warns against doctors, dentists using ‘anonymous mode’ computer servers

Click to see Mary Holloway Richard’s attorney profile

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families.

Q: What attention has the FBI recently given to protect Protected Health Information (“PHI”) from cyber criminals?

A: Under a “Private Industry Notification” dated March 22, the FBI’s Cyber Division has provided guidance that’s applicable specifically to medical and dental providers and focuses on protection of sensitive, identifiable health information.

Q: What does the notice specifically recommend?

A: The notification recommends these health care providers request that their IT services personnel take steps to further secure the information from cyber threats by checking networks for File Transfer Protocol (“FTP”) servers running in anonymous mode. FTPs routinely are used to transport information between network hosts. This is the case, for example, when a covered entity such as a hospital or group practice transfers information to a business associate, such as a billing company or a third-party payer, for the purpose of submitting claims for services provided.

Q: What does “anonymous mode” mean and what threat does it represent?

A: “Anonymous mode” refers to the situation where an FTP server can be structured to permit users who are anonymous, doesn’t require a password to enter, and accepts common user names such as “anonymous” or “FTP.” The danger is that, in such circumstances, sensitive patient information stored on a server could be accessed with little or no security.

Q: Why does the FBI guidance focus specifically on health care?

A: Research conducted at the University of Michigan in 2015 resulted in a finding that more than one million FTP servers would allow such access. According to the FBI, some computer security researchers seek servers in anonymous mode as part of legitimate research, but others make such connections to facilitate nefarious activities such as launching cyber attacks, hacking, blackmailing, harassing and intimidating business owners. It’s the FBI’s purpose issuing this new guidance to both make health care business aware of the risks represented in their IT systems and to shore up weaknesses that pose cyber security risks. In addition to the precautions urged in the notice, the FBI has previously urged companies to buy and implement ransomware.

Q: Should additional actions be taken by medical and dental health care entities to provide additional protections against cyber crime?

A: The FBI encourages medical and dental health care entities to report suspicious or criminal activity to the local FBI field office (locate via www.fbi.gov/contact-us/field) or the FBI’s 24/7 Cyber Watch, CyWatch 855-292-3937 or CyWatch@ic.fbi.gov. Submitted reports must include available information regarding the date, time, location, type of activity, number of people and type of equipment used for the activity, the name and contact person for the entity submitting the report. Victim complaints can be filed with the internet Crime Complaint Center at www.ic3.gov.

 

NewsOK Q&A: Data on your personal phone may be available to your employer

From NewsOK / by Paula Burkes
Published: July 19, 2016
Click to see full story – Data on your personal phone may be available to your employer

Click to see Kathy Terry’s attorney profile

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

Q: What are personal electronic devices and why do they matter?

A: The use of personal electronic devices (PEDs) in the workplace is commonplace, but it’s not without risk for both the employer and the employee. If not managed properly, employers risk the dissemination of their confidential information and employees, perhaps rightly, have privacy concerns.

Q: What can an employer do to protect its business information?

A: Employers need a written PED, or bring your own device policy, signed by employees. Your policy should address several matters: the employer’s information always belongs to the employer; upon termination, it must be deleted immediately in the presence of the employer’s representative; all communications that go through the employer’s server are fair game for the employer and the employee has no expectation of privacy in those communications; only approved websites can be accessed via the employer’s server and accessing an unapproved website may result in severing of the server access and/or deletion of data, even the employee’s personal data, from the phone electronically; and the company always should have access to/be informed of the employee’s password for connectivity between the company server and the PED.

Q: So personal data, including contact lists, phone numbers and pictures, can be deleted from the employee’s own phone? 

A: Yes, though this area is evolving almost daily nationwide. There are lots of different federal laws and statutes in every state, including common law, which could be implicated. Please consult an attorney before charging ahead. Large companies are moving toward policies that give advance notice to an employee that upon termination if he/she fails to cooperate in the deletion of company information, the company can and will wipe all data from the phone (or other PED) and return it to factory settings. Most of the recent case law out there comes down in favor of the employer and rejects claims by employees under various federal laws, like the Electronic Communications Privacy Act or the Computer Fraud and Abuse Act.

Q: Don’t employees have a right to privacy in their own communications, on their own phones?

A: So far, there’s no case out there that has found an employer can’t, under any circumstances, search a PED for data. Courts looking at whether a private employer has overstepped by searching PED communications do emphasize privacy concerns and they recognize each case is fact specific. But, typically, if that data is coming through a company server, the company can take a look. We recommend the employer narrow any such search to work related/topic specific communications.

Q: Are the rules the same for government employers?

A: Not really. Governments have to worry about the Fourth Amendment, unreasonable searches and seizures, and more often than private employers, union contracts. So far, most court and administrative rulings favor the government employer who searches a PED, but those cases get close factual scrutiny. Also, in the case of public employees (elected officials included), the Freedom of Information Act and, here in Oklahoma, the Open Records Act, are applicable. Work-related communications, even on a PED, are public records. If a government employer needs to search for and retrieve communications that are work related from a PED, that search is going to be permissible.

Q: What about quality of life and working after hours?

A: If your employees aren’t overtime exempt, after-hours texting and emailing should be included in the employees’ time records, and they should be paid for it, even if it results in overtime pay at a higher rate. Employers concerned about the increased wage expenditures should consider limiting PEDs use to only overtime-exempt employees. If this isn’t possible, a policy should be written and adhered to that results in very limited after-hours communications, and includes clear guidelines on how to account for the time and resulting compensation when those communications do occur.

Q: Do we have to reimburse employees if they use PEDs for work?

A: In some states, the answer is yes. Here in Oklahoma, we don’t have a bright line rule requiring reimbursement for an employee who uses a PED to conduct work-related tasks. However, many Oklahoma employers are moving toward reimbursement, or partial reimbursement at minimum.

Q: What about litigation holds on electronic data that may be discoverable?

A: If you’ve ever had to produce electronic data during the course of a lawsuit, you know that can be very burdensome. You also know that if you’re on notice of a potential claim against your company, you will need to be sure the company has policies and practices in place that work to preserve potentially discoverable documents, communications and data. Certainly, if your company’s employees are communicating and working on PEDs, there needs to be a process in place designed to reasonably capture and preserve that information, communication and data that may be stored or saved to PEDs, as opposed to a company network server.

Director quoted as source in article on Oklahoma Supreme Court case

Heather L. Hintz primarily represents banks, commercial entities and municipalities in litigation in state and federal courts with an emphasis on protecting hard-fought rulings throughout the appeals process.

Phillips Murrah Director Heather Hintz defended her stance on Oklahoma State Question 777 in an article published on NewsOK.com on Wednesday.

Read Hintz’s comments from the article below:

Attorneys for opponents of the ballot measure have filed an accelerated appeal in the case, in hopes the Oklahoma Supreme Court will take up the matter before a deadline in late August for the Oklahoma Election Board to print the November ballot, said Heather Hintz, an attorney for plaintiffs in the case.

“We are asking the Supreme Court to retain the appeal because it’s a matter of public importance that has widespread public impact,” Hintz said.

The plaintiffs have challenged the constitutionality of State Question 777 on several grounds, and argue that the measure is so blatantly unconstitutional that it would be a waste of state resources and misleading to voters, Hintz said.

“There is a strong Oklahoma policy that something that is facially unconstitutional should not go to the ballot because it’s a waste of resources and it misleads voters,” she said.

Read more at NewsOK.com.

NewsOK Q&A: High court’s tie in assault affirms tribe’s self-determination right

From NewsOK / by Paula Burkes
Published: June 30, 2016
Click to see full story – High court’s tie in assault affirms tribe’s self-determination right

Click to see G. Calvin Sharpe’s attorney profile

G. Calvin Sharpe has 30 of years of experience in Oklahoma courtrooms, representing a diverse list of business clients in matters relating to medical malpractice, medical devices, products liability, insurance and commercial litigation.

Q: Generally speaking, what was the Dollar General case about, originally?

A: In the original case, there was a Dollar General store operating within the Reservation of the Mississippi Band of Choctaw Indians. A 13-year-old boy, a tribal member, was working at the store as a part of a youth opportunity program. In 2005, a suit was brought by the boy’s parents that alleged that the boy was sexually assaulted by the store’s nontribal manager in the summer of 2003. In the binding contract with the tribe to operate on tribal land, Dollar General agreed to tribal court civil jurisdiction, so the case went to a tribal court. The Choctaw courts denied a motion to dismiss the case due to lack of jurisdiction citing a 1981 Supreme Court Case, Montana v. United States, which held that a “tribe may regulate, through taxation, licensing, or other means, the activities of nonmembers who enter consensual relationships with the tribe or its members.” Dollar General subsequently sued in federal court to clarify the terminology, “other means.” (Dollar General Corp. v. Mississippi Band of Choctaw Indians)

Q: The Supreme Court decision was tied, 4-to-4, which means that the lower court decision of the U.S. Court of Appeals for the Fifth Circuit is upheld. What was that Fifth Circuit’s upheld decision?

A: At the heart of this decision is the question of whether tribal courts have the right to exercise civil authority over people who are operating within tribe’s jurisdiction, but who aren’t tribal members. In the federal case subsequent to the tribal rulings in Choctaw courts, Dollar General petitioned for certiorari, which means they asked a higher court to review the determination of a lower court. In the judgment of the U.S. Court of Appeals for the Fifth Circuit, Indian tribal courts have jurisdiction to adjudicate civil tort claims against nonmembers, including as a means of regulating the conduct of nonmembers who enter into consensual relationships with a tribe or its members.

Q: How has this Supreme Court ruling, essentially allowing the lower court decision to stay, changed the nature of tribal jurisdictional authority?

A: In the decision of the appeal to the Supreme Court of the United States of America, the high court was deadlocked, which allows the decision of the U.S. Court of the Appeals for the Fifth Circuit to stand. The judgment is affirmed by an equally divided court, (which) allows the case to proceed to resolution in tribal court without further appeals regarding authority. However, there’s the likelihood that, in a similar case, the Supreme Court would grant another certiorari when the Senate confirms a replacement for Justice Scalia.

Q: Why is this viewed as a success for tribal sovereignty and tribal governmental authority?

A: Thursday’s Supreme Court ruling served as a significant win in the fight for native tribal court authority. The Supreme Court tie affirms native groups’ right to self-determination. This allows federally recognized tribes to continue developing their own governmental bodies.

 

Levelland Productions puts OKC at top of Oklahoma music scene

levelland logoLevelland Productions got a lot of good press last week with their actions that are propelling the Oklahoma City music scene.

“It’s been exciting to see these guys get to this point,” said Phillips Murrah Director Juston R. Givens. “They’ve put in a lot of hard work and it’s fun to watch that come to fruition.”

For background, we mentioned Levelland in March as they broke ground on The Criterion, a premier live music venue that will allow A-list bands to come to Bricktown rather than playing at the various, road-trip-distance, edge-of-the-metro casino venues. Or in Tulsa, (which I’ll mention in a bit).

The Criterion is set to change the way we experience music in OKC with a world-class, dedicated-music venue comparable to what one would expect at a Hard Rock Live. Or a House of Blues (owned by Live Nation, which I’ll mention in a bit.).

Last week, Levelland announced a 15-year agreement to operate the iconic Tower Theater, an historic theater situated on 23rd Street between Hudson and Walker. This agreement will make Tower Theatre into a roughly a 1000-capacity music venue and an upscale cocktail bar.

Please see these great stories by OKC historian/contemporarian, Steve Lackmeyer, for the details:
Tower Theater in Uptown bought by local developers with history of success
Tower Theater signs long-term deal to host live music

On the heels of that announcement came word that Levelland Productions is teaming up with Live Nation for booking talent into The Criterion. The word on the street is that this move will put Oklahoma City on the map as the state’s music capitol.

From the NewsOK article, Live Nation Is Coming to Bricktown (It’s a Big Deal), Lackmeyer wrote:

“Live Nation is the big dog in the concert industry, and if there is any entity out there can smash apart the status quo of Oklahoma City taking a back seat to Tulsa when it comes to live music and not lose out other major acts to the casinos, it is Live Nation.”

Here is Lackmeyer’s full story about the The Criterion / Live Nation partnership.

 

Director and bankruptcy leader Tim Kline featured in The Oklahoman Q&A

kline paper

Click to see this on NewsOK.com

Although Phillips Murrah Director Tim Kline will recoil at the use of this descriptor, I (Marketing Director, Dave Rhea) am going to be so bold and reckless as to say he is legendary. As I listened to him review some of the highlights of his personal history, I felt like I was in the room with a great Oklahoma oral historian.

I found myself thinking on a couple of occasions, “too bad Tim doesn’t have a radio show.” But I guess he’s a little busy being one of the state’s preeminent bankruptcy attorneys. Oh well, I think he could have given Paul Harvey a run for him money.

Business reporter Paula Burkes, from The Oklahoman, was kind enough to stop by the firm recently to talk to Tim for one of the newspaper’s Executive Q&A features. It published Sunday, April 12 and gave people a glimpse into the storied life of a lawyer who has been practicing bankruptcy law since those infamous Penn Square days:


 

The morning of the 1982 Penn Square Bank collapse, Phillips Murrah Director Tim Kline — then a young general litigation attorney — was asked by his firm to call on Oklahoma City oilman Carl Swan, who was a director of the bank.

“It was the Monday following the July 4th weekend, and I was supposed to be off,” said Kline, who remembers he wasn’t too happy about the assignment.

In their meeting, Kline asked Swan if the bank was OK and Swan, in his notorious gruff manner, reported that it was; that the Federal Deposit Insurance Corporation agreed to capitalize millions more and give the bank more time, he said.

But when Kline arrived home and flipped on his TV, he learned the FDIC had pulled the plug on Penn Square Bank.

The infamous bankruptcy is what sparked a nearly 33-year career in bankruptcy law for Kline, whose late father and former Assistant U.S. Attorney David A. Kline Jr. served 14 years as a bankruptcy judge.

At the time of the collapse, Kline was helping his dad teach a bankruptcy law course at Oklahoma City University — largely on the 1978 Bankruptcy Reform Act, which the senior Kline had helped promote.

Tim Kline never intended to go into bankruptcy law but, following the oil bust, circumstances unfolded that way, he said. With so much demand for bankruptcy work, his dad left the bench and they formed Kline & Kline in February 1983, where they worked together for more than 25 years.

Kline in 2011 joined Phillips Murrah, where he continues to specialize in bankruptcy law.

From his offices on the 13th floor of the Corporate Tower, Kline, 65, sat down recently to talk about his life and career. This is an edited transcript:

Q: Tell us about your roots.

A: Of course, my father was an attorney and my mother was a homemaker. I’m the middle child of their three children. My brother is six years older and my sister is eight years younger. My father used to joke that he managed to raise three only children. But we were, and still are, close. In fact, we three and our mother, 94, all live within walking distance from one another on several hundred acres we bought in 1981 in the Jones Public Schools District in eastern Oklahoma County, 10 miles east of I-35, where we have dogs, chickens and horses. My brother-in-law raises cattle. When I was a bachelor, my home was like an overgrown cabin. But since Alyssa and I married, we’ve reinvented it three times. It’s three-storied and our second story overlooks a lake.

Q: Where did you go to school?

A: In elementary school, I was a Mayfair Chipmunk. We lived near 50th and May when Mayfair was a brand-new neighborhood. In the sixth- and seventh-grades, I attended Casady, after my brother was recruited there to play baseball. Once he graduated and went to OU on a baseball scholarship — and I lost my ride to school — I transferred to Putnam City, where I graduated. Growing up, I played baseball, football and basketball, but my siblings were far better athletes. My sister went to OCU on a tennis scholarship. I was into politics. At 7, I remember sitting up and crying when Adlai Stevenson lost; in 1960, I got to hear JFK speak in the municipal auditorium; and before I could vote, I was the Ward 1 campaign chairman for Eugene McCarthy. I also enjoyed speech, debate and plays. My favorite role was the lead my sophomore year in “Look Heavenward Angel.”

Q: What were some of your first jobs and first cars?

A: As a youth, I worked at the municipal ball park. My sophomore year in high school, I threw the first papers of the now-defunct Oklahoma Journal. By the summer of my senior year, I graduated to writing obits and writing some Friday night football stories. My freshman year of college, I was awarded a scholarship to UCO. My father told me if I took it, he’d get me a car, though it wasn’t a very nice car. It was a used light blue Ford Fairlane. When I was a junior, and doing well in school at OU, he bought me a purple Plymouth Road Runner.

Q: Did you always plan on being an attorney?

A: There was a time I considered becoming a philosophy teacher. At OU, I studied under the legendary J. Clayton Feaver and considered getting a Ph.D. in philosophy. I’d earned a graduate minor in it, along with a bachelor’s and master’s in polisci. But instead, I wound up taking the law school entrance exam. I like the problem solving in law, and helping people where they have a practical need. During law school, I interned with the U.S. Attorneys office and worked at the Redlands Racket Club and OKC Tennis Center. I got to play tennis with Colin Robertson. Before my father and I opened our own firm, I clerked for over three years for U.S. federal judge Luther Bohanon. He liked having me in the courtroom with him, so I got to see a lot of good lawyers at work in big trials. I worked the next three years for the firm of Jimmy Linn, a west Texas litigator who was a heavy hitter on the national level.

Q: What do you like about practicing bankruptcy law?

A: My work is really about avoiding bankruptcy as such. Whether I represent the debtor, creditor or a trustee, I try to bring together parties who are in financial stress and help them clarify what common interests are involved and how to maximize financial recovery. My goal is to do the most for the most people in the most efficient manner possible. Of course, like in all things in life, it takes two to tango. Sometimes, people aren’t cooperative and we have to go to a Plan B scenario and invoke legal remedies and be as confrontational as necessary. I’m as nice as the other side will allow.

Q: How did you meet your wife?

A: Alyssa is a native Canadian. We met at Christmastime 1976, when I went to British Columbia to visit relatives and friends, but then she was only a punk teenager. Her family and I kept in touch over the years and in the summer of ’85, she called to say she and her folks were going to Seattle and would I like to meet them there. She was 23; I was 36. I spent a couple days in Seattle, but had to fly back to Albuquerque for a big case. Three weeks later, I flew to British Columbia, where we wed and spent our honeymoon. She was shocked that it was 100 degrees in Oklahoma City, when our flight arrived home at 11 p.m. on Sept. 1. The next morning, she joked about getting an annulment. But this August, we will have been married 30 years. Alyssa earned an education degree at UCO and taught elementary school, before she had our daughters whom she home schools. After the girls were born, Alyssa’s parents moved to Oklahoma City. We’ve lost her mother, but her father lives in a retirement community. He’s 94 and was over for Easter.

You can view the whole story here: http://newsok.com/executive-qa-penn-square-bank-collapse-sparks-counselors-career-in-bankruptcy-law/article/5409410

 

In the news: Phillips Murrah President quoted in NewsOK clean energy article

Tom Wolfe is a trial attorney and commercial litigator whose practice is focused on complex business cases including product liability, oil and gas, mass tort and class action defense. Tom is also the president and managing partner at Phillips Murrah.

Tom Wolfe is a trial attorney and commercial litigator whose practice is focused on complex business cases including product liability, oil and gas, mass tort and class action defense. Tom is also the president and managing partner at Phillips Murrah.

Phillips Murrah President and Director, Tom Wolfe, is quoted in The Oklahoman regarding the Kingfisher wind project.

NewsOK: Kingfisher wind project pauses some construction as Texas oil company questions locations

by Paul Monies, Published: March 25, 2015

KINGFISHER — Apex Clean Energy has agreed to pause construction on part of its Kingfisher wind farm until more details can be shared with a Texas oil company concerned about the project affecting one of its top areas of exploration.

Newfield Exploration Mid-Continent Inc. pulled its request for an emergency temporary restraining order after attorneys for the company worked out a 15-day “stand-down” with Apex attorneys Tuesday afternoon at the Kingfisher County Courthouse.

(Later in story)

Tom Wolfe, an attorney with the Phillips Murrah law firm who represented Apex, said the 15-day stand-down covered five of the sections where Newfield was concerned about its oil and gas infrastructure being affected by underground electricity collection cables, lines needed to connect the turbines.

In return for the stand-down, Wolfe said Newfield agreed to drop its claim that Apex didn’t provide adequate notice of construction plans under a 2011 state law requiring notice to owners of mineral rights of new wind or solar projects.

Read the full story here on newsok.com.

Eminent domain raises questions when used on behalf of the private sector

Jennifer Berry Photo

Jennifer Ivester Berry is an attorney with a solid reputation in guiding real estate transactions with a focus on development, financing and energy. She represents individuals, and privately-held and public companies in connection with a wide range of commercial real property matters.

Q&A from NewsOK: Phillips Murrah attorney Jennifer Ivester Berry discusses the what, when, how and why of eminent domain.

View Jennifer Ivester Berry’s attorney profile page here.

By Paula Burkes – Published: March 25, 2015
View the article at NewsOK.com here.

Q: What is eminent domain?

A: Eminent domain, condemnation, taking power — these words sound ominous and forceful, as if the party on the receiving end has no choice but to succumb to the directive of the imposing party and give up something for nothing. However, stop for a moment and remember that with most constitutionally created powers come some series of checks and balances. Eminent domain, in its most simplistic form, is the power to acquire private property for a public use, provided that the property owner receives just compensation. Some of the most recognizable uses of the eminent domain power are for the establishment of roadways, hospitals, railroads and utilities. In more recent years, the use of eminent domain for purposes of economic development has sparked a public policy debate that will no doubt continue for years to come.

Q: When can eminent domain be used?

A: The power of eminent domain originates from the state’s constitution, and the Oklahoma Legislature enacts statutes that set out the manner, purpose and through whom such power may be exercised — a system of checks and balances. For example, municipalities are granted a general power of condemnation under the state statutes, so long as the taking is for a public use and the property owner is adequately compensated. There are certain circumstances and uses that the Legislature has identified as being for the benefit of the public and thus created specific statutes covering them, for example, the removal of dilapidated buildings, the improvement of water and sewer systems, and urban renewal. The Legislature also conferred the power of eminent domain on utility companies, public enterprises and common carriers. Private individuals or companies also may utilize the power of eminent domain for agricultural, mining and sanitary purposes, as well as for establishing private roadways where access in an issue.

Q: How does eminent domain work?

A: The party seeking to condemn property will usually have attempted to negotiate with the landowner to acquire the property. That said, if a municipality or utility company is dealing with numerous parcels of land with countless owners, using the condemnation proceeding can simplify the process and avoid negotiations that may or may not be successful. Once the condemnation proceeding is filed, the court appoints three individuals (commissioners) who will examine, evaluate and inspect the property. The commissioners are instructed to return an award to the court that reflects the fair market value of the property taken, as well as any injury to any part of the property not taken. The award is payable to the landowner even if the landowner owner contests the award. If, as a result of a contest, a jury finds the fair market value of the property to be an amount in excess of 10 percent of the commissioners’ award, the landowner may be entitled to reasonable attorneys and expert fees.

Q: Why do we need eminent domain?

A: Using eminent domain to obtain property for roadways and utilities is rarely a source of contention, even if ultimate ownership of such property is by a private party. The more controversial issue is whether the government can use its eminent domain power to aid a private party. The U.S. Supreme Court has blessed the use of eminent domain as a governmental incentive for economic development. However, numerous states, including Oklahoma, have taken a more narrow view and require that the use of eminent domain power for economic development must involve the removal, elimination or prevention of blight. Proponents of this power, whether the broader or more narrow application of it, argue that without it being available as an incentive for private development, economic development would be stifled significantly. Others, however, feel that failure to value individual property rights actually dissuades potential residents and business from moving into a community and as such cripples any potential for economic growth. One thing is clear, eminent domain will continue to be used for economic development and as such continue to be a debatable issue in the private sector.