HUD Announces Moratorium On Certain Foreclosures And Evictions

2 minute read

(Last updated March 19, 2020)

On Wednesday, March 18, in an effort to mitigate the continuing economic impact of the COVID-19 pandemic, the Department of Housing and Urban Development (“HUD”) announced a moratorium through the end of April on certain foreclosures and evictions. This moratorium on foreclosures applies to homeowners whose mortgages are insured by the Federal Housing Administration. The suspension on evictions affects only those living in HUD-owned properties. In addition, the federal housing financing agency suspended foreclosures for homeowners with mortgages backed by Fannie Mae or Freddie Mac.

There is not currently an “all stop” nationwide moratorium on all residential and commercial evictions and foreclosures, although many housing advocates and attorneys are encouraging such a nationwide suspension. Dallas County, Texas, has taken action related to evictions. In Amended Order of County Judge Clay Jenkins issued March 18, 2020, section 6, Judge Jenkins advised all Dallas County Justices of the Peace to “suspend eviction hearings and writs of possession for at least the next sixty days to prevent renters from being displaced.”

Some other states and municipalities have instituted a ban on evictions, including the states of Kansas (until May 1) and New York and Maryland (until further notice) and the following cities and counties:
Austin, Texas (through April 1)
San Antonio, Texas (through April 1)
Orlando, Florida
Seattle, Washington
Newark, New Jersey
Charleston, South Carolina
Detroit, Michigan
Philadelphia, Pennsylvania
Cleveland, Ohio
Los Angeles, California
San Jose, California
San Francisco, California
San Diego, California
Miami Dade County, Florida

This list is changing daily. Carrington Coleman’s list will be kept up to date.

Please consult one of the real estate attorneys below before initiating any foreclosure or eviction procedures, either commercial or residential:

 
Bonnie BarksdaleCharles JordanDavid Drumm
[email protected][email protected][email protected]
214.855.3119214.855.3021214.855.3032
David HeidenreichMichael Lin
[email protected][email protected]
214.855.3031214.855.3525

Dallas (Potentially) Begins Enforcing Paid Sick Leave Ordinance On April 1, 2020

2 minute read

(Last updated March 19, 2020)

As the COVID-19 pandemic strikes and more employees stay home, employers should keep in mind that the Dallas Paid Sick Leave Ordinance remains in effect and will authorize penalties beginning April 1, 2020.

A little history—The Dallas Ordinance is modeled after similar laws in Austin and San Antonio, but courts blocked the Austin and San Antonio ordinances before their effective dates. The Supreme Court of Texas has been considering whether the Austin ordinance is unconstitutional, which could effectively invalidate ordinances like these statewide. But the Supreme Court of Texas has still not ruled, and a direct federal court challenge to the Dallas Ordinance has been pending unresolved for months.

So, although the Dallas Ordinance technically became effective months ago, in light of the uncertainty, Dallas announced it would not enforce the law, except for violations of the anti-retaliation provision, until April 1, 2020. Unfortunately, we are in the last half of March with no additional clarification from the courts. April 1 may arrive with the Dallas Ordinance fully intact.

Accordingly, employers should understand their obligations under the Dallas Ordinance. As a reminder, April 1 is when the City can issue written notices of violations after which there is a ten-day cure period. Without cure, penalties can be up to $500 per violation.

To read the breakdown of the Dallas Ordinance, see our previous alert: How to Navigate the Dallas and San Antonio Paid Sick Leave Ordinances, click here.

If you have questions about the Dallas Ordinance, please contact:

Mike Birrer, Partner, Carrington Coleman
Mike BirrerParker GrahamMaria Garrett
[email protected][email protected][email protected]
214.855.3113214.855.3350214.855.3020

COVID-19 Family Law Update No.2

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My previous blog discussed the immediate issue of spring break periods of possession, but as school districts throughout the state have started to move beyond extended spring break to suspending classes indefinitely, questions regarding parent possession periods remained beyond the spring break issue.  

Periods of possession in the Texas Family Code’s standard possession order, such as weekends for example, permit periods to begin when school is dismissed on Friday and to end when school resumes on Monday morning.

As a statewide emergency has been declared by Governor Greg Abbott, the Supreme Court of Texas has issued an emergency order (linked here) declaring that possession periods under the standard possession order will be determined by the child’s school calendar as originally published, despite the fact that the child’s school may not be currently in session.

This order provides a comprehensive and uniform statement for parents and children throughout the state of Texas, and will remain in effect through May 8, 2020 unless extended by the court.

The post COVID-19 Family Law Update No.2 appeared first on Home Court.

Congress Passes The Families First Coronavirus Response Act

4 minute read

(Last updated March 18, 2020)

On March 18, 2020, the Senate voted to approve the revised House bill that addresses the coronavirus (“COVID-19”) outbreak currently sweeping the world. President Trump is expected to sign the bill into law. We summarize the most important employment-related provisions below: paid sick leave, expanded FMLA coverage, and employer tax credits to cover associated costs.

Emergency Paid Sick Leave

What Does the Law Do? The Emergency Paid Sick Leave (“Emergency PSL”) requirements apply to private employers with fewer than 500 employees. Employers of 50 or less may apply to the Department of Labor for an exemption if complying would jeopardize the viability of the business as a going concern.

Which Employees Are Eligible? Emergency PSL is available to all current employees, regardless of time of service, full-time/part-time status, and exempt/non-exempt status.

What Is the Leave For? This is far more expansive than the allowable use of Emergency FMLA. Employees can take Emergency PSL for any of the following:

(1) The employee is subject to a Federal, State, or local quarantine related to COVID 19;
(2) The employee is advised by a health care provider to self-quarantine due to COVID-19;
(3) The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
(4) The employee is caring for an individual who is subject to a quarantine or advised to self-quarantine (as described in sections (1) and (2));
(5) The employee is caring for a son or daughter if the school or place of care has been closed due to COVID-19, or if the child’s caretaker is unavailable due to COVID-19; or
(6) The employee is experiencing any other conditions specified by the Secretary of Health and Human Services (unless the employee is a health care provider or emergency responder, in which case the employer can exempt the employee from this sub-section).

What Does the Leave Provide? Full-time employees are entitled to 80 hours of Emergency PSL; part time employees get the average number of hours worked in a two-week period. For employees who take Emergency PSL under (1), (2), and (3) above—essentially, for a need directly related to the employee’s own exposure or concern—PSL is paid at the employee’s regular rate of pay, not to exceed $511 per day and $5,110 in the aggregate. For those who take leave under (4), (5), and (6) above—leave related to caring for others or other conditions specified by the Government—PSL will be paid at two-thirds the employee’s regular rate of pay, with a cap of $200 a day and $2,000 in the aggregate. The DOL will issue further guidance on calculating rate of pay for Emergency PSL within 15 days of the law’s enactment date.

When Does the Law Take Effect? Emergency PSL benefits will be available 15 days after the President signs the law into effect.

When Does This End? Emergency PSL requirements expire on December 31, 2020. Unused Emergency PSL will not carryover to next year.

Other Important Notes: Emergency PSL does not diminish the rights employees have to paid leave under other laws or current company policies. In other words, employers cannot take away vacation days or other accrued PTO because leave is now available under the Act, and an employee can stack his or her Emergency PSL and other PTO. Employees who have other accrued PTO can elect to use Emergency PSL first, and employers cannot require that an employee first use other accrued PTO.

Emergency Family and Medical Leave Expansion

What Does the Law Do? Require certain employers to provide eligible employees with Emergency Family and Medical Leave (“Emergency FMLA”) for the purpose described below.

Which Employers Are Covered? All private employers with fewer than 500 employees. But employers with fewer than 50 employees can request an exemption from the Department of Labor if complying would jeopardize the viability of the business as a going concern. Certain public employers are also covered by the law.

Which Employees Are Eligible? Employees must have been employed for at least 30 calendar days. Employers can choose to exclude employees who are health care providers or emergency responders from Emergency FMLA benefits.

What Is the Leave For? Employees may take leave if they are unable to work or telework because they need to care for a son or daughter because the child’s school or place of care has been closed. The child must be under 18 years of age. This also applies if the childcare provider—presumably a nanny or other caretaker compensated for such services—is unavailable due to COVID-19.

What Does the Leave Provide? Generally, employees can take up to 12 weeks of leave. The first 10 days of Emergency FMLA leave are unpaid. But, the rest of the days taken must be paid at two-thirds the employee’s regular rate of pay, up to $200 per day and $10,000 in the aggregate. The employee can elect to use any available, accrued vacation, sick leave, or other PTO during the first 10 days of unpaid leave.

When Does the Law Take Effect? The Emergency FMLA Expansion takes effect 15 days after the enactment date of the Act. The enactment date is anticipated to be the date on which the President signs the law.

What are the Rules on Reinstatement? As with regular FMLA, employees who take Emergency FMLA generally should be restored to their prior or equivalent job position upon return from leave. Employers with fewer than 25 employees have some additional (yet limited) leeway with regard to restoration obligations.

Tax Credits for Emergency PSL and Paid Emergency FMLA

Generally, the federal government will provide quarterly tax credits for qualified Emergency PSL and Emergency FMLA wages paid. “Qualified” wages means only the wages required to be paid under the Act, and is limited to the caps mentioned above (e.g., $511 a day in Emergency PSL taken for personal COVID-19 exposure or concern). If the tax credit exceeds the amount of employment taxes the employer owes for any relevant quarter, the employer will be entitled to a refund of the excess tax credit.

If you have questions about the Dallas Ordinance, please contact:

Mike Birrer, Partner, Carrington Coleman
Mike BirrerParker GrahamMaria Garrett
[email protected][email protected][email protected]
214.855.3113214.855.3350214.855.3020

Carrington Coleman’s Commitment To Our Clients

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(Last updated March 18, 2020)

During this challenging and unsettling time, we want to reassure you that Carrington Coleman is here to help you and ready to respond to any legal needs you might have.

The health and well-being of our attorneys, staff, clients, and their families — and our community as a whole — is of the utmost importance to our firm.

We want you to know:

  • Our attorneys and staff are able to work outside the office in a secure environment, and we will be able to provide the high level of legal services you expect and deserve on an ongoing basis;
  • In accordance with the CDC’s COVID-19 event guidance, we are postponing all firm events scheduled in the next eight weeks.
  • We will continue to monitor legislation, executive orders, and court orders that impact our clients and their legal matters. We will send alerts periodically to keep our clients apprised of potential legal issues that arise from the pandemic.
  • We are following best practices to avoid the spread of infection to our attorneys and staff.

Our attorneys will continue to be accessible via e-mail and phone. They will also be available for teleconference/videoconference meetings. All attorney contact information is available on their bios.

If you have any additional concerns regarding Carrington Coleman’s COVID-19 preparedness, please feel free to reach out to me.

We wish that you, your staff and colleagues, and your families are able to stay in good health and good spirits in these difficult times.

Bruce Collins, Managing Partner

COVID-19 Family Law Update

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Many schools in the area have announced that they will be extending Spring Break for one week in light of the evolving Covid-19 situation. This has led to questions whether this would extend a parent’s Spring Break possession period with the children this year.

Collin County District Courts have announced through their Facebook page that they are of the opinion that spring break as set forth in the Texas Family Code’s standard possession order is determined per the school district calendar as originally published. The majority of Dallas County Family District Courts have issued a similar statement.

While these informal expressions of opinion by the courts are not formal court rulings or orders rendered after a hearing in any particular case, they are certainly an indication of how the courts might approach this issue. Hopefully, these announcements will reduce confusion and anxiety, particularly for the children, in an already uncertain situation

Moving forward, common sense and civility should be the guide in all things, and especially co-parenting.

The post COVID-19 Family Law Update appeared first on Home Court.

Super Lawyers Rising Stars Names Five Carrington Coleman Attorneys

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(Last updated March 6, 2020)

Congratulations to our Carrington Coleman attorneys named to the 2020 Super Lawyers Texas “Rising Stars” list. They were recognized in the following areas: Parker Graham – Employment & Labor, Alex More – Securities Litigation, Debrán O’Neil – Business Litigation, Andrea Perez – Business Corporate, and Brent Rubin – Business Litigation.

The Rising Stars list recognizes no more than 2.5 percent of attorneys in each state. To be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger, or in practice for ten years or less.

Carrington Coleman Founder Jim Coleman Leaves Lasting Impact On Legal Ethics, Professionalism

2 minute read

(Last updated February 24, 2020)

For generations of lawyers, James E. “Jim” Coleman Jr. of Dallas defined what it means to practice law with professionalism and integrity. In a career spanning more than six decades, he was a role model and mentor to countless attorneys, a trusted advisor to his clients, a gifted and successful trial lawyer, and a tireless advocate who upheld the legal profession’s highest standards.

Jim Coleman passed away on Saturday, February 22, in Dallas. He was 96.


Mr. Coleman’s diligence on behalf of his clients and his reverence for the law profession leave a lasting influence not only on Carrington, Coleman, Sloman & Blumenthal, L.L.P, the firm he founded in 1970, but also on those who knew him personally and professionally. For Mr. Coleman, being a lawyer was a calling, rather than about “winning and getting the biggest fees.” That dedication to justice motivated him to continue a regular work schedule at the firm he founded well into his 90s.

“I love being a lawyer because the law is the most beautiful thing you can do. It is about helping people,” he told Texas Lawbook in a 2013 profile published on the eve of his 90th birthday.

Mr. Coleman enlisted in the U.S. Army following the attack on Pearl Harbor, rising to the rank of Second Lieutenant. As a platoon leader in Gen. George Patton’s Third Army, he earned the Silver Star for gallantry in action in the historic march through Europe. Buoyed by the G.I. Bill, Mr. Coleman completed his undergraduate degree at Georgia Tech in 1948. He graduated from the University of Virginia School of Law in 1951 shortly before receiving orders to report for deployment to Korea. Unknown to him at the time, the orders were actually from the Central Intelligence Agency, where he remained until 1953.

When he left the agency, he turned down the opportunity to join Sutherland, Asbill & Brennan, the Atlanta-based law firm that his father-in-law, William Sutherland, helped to found. He instead opted to move his young family to Texas, joining Carrington, Gowan, Johnson & Walker, opening its successor firm, Carrington Coleman on Jan. 1, 1970.

Over the course of his career, Mr. Coleman represented such notable clients as Ford Motor Co., GM, Uniroyal, John Deere, Enron’s Ken Lay, and numerous Texas-based insurance companies and banks.

Famously ambivalent about professional accolades, Mr. Coleman preferred to let his dedication and the quality of his work stand on their own. A veteran of hundreds of jury trials and immensely successful on behalf of his clients, Mr. Coleman is perhaps best known for the impact he had as a legal mentor, a promoter of gender and racial equality in the profession, and a champion of high ethics and professionalism.

“This profession is better for the simple fact that Jim Coleman had a passion for the law,” says Bruce Collins, the firm’s managing partner. “We will not see another like him, in terms of his approach to the law and the way he worked with people, in our lifetimes. He was the right person to lead the way for positive change and his example and values will always be this firm’s guiding principles.”

Brent Rubin Appointed To Dallas City Plan Commission

less than a minute

(Last updated February 6, 2020)

Brent Rubin has been appointed to the Dallas City Plan Commission by Mayor Eric Johnson.

Mr. Rubin, who practices commercial and appellate litigation, is one of fifteen members of the CPC, which handles planning and zoning matters in the City of Dallas. As the Mayor’s appointee, Mr. Rubin serves in an at-large capacity, compared to the other commissioners, who each serve in one of Dallas’s fourteen city council districts.

“I’m grateful to Mayor Johnson for entrusting me with this responsibility,” said Mr. Rubin. “The CPC plays a critical role in ensuring that Dallas follows a forward-thinking path in development, so the city can thrive both economically and in terms of the quality of life of its citizens and can rise to meet the challenges of a fast-changing world. I look forward to serving the people of Dallas as a Commissioner.”

Mr. Rubin is deeply committed to his legal practice as well as serving his community. He was honored by Super Lawyers as a Rising Star and is active in the Dallas Association of Young Lawyers. He also serves as a board member of his synagogue, Congregation Shearith Israel, and as an executive committee member of the Jewish Community Relations Council.

SEC Clarifies Fiduciary Duty of Private Equity Fund Managers

5 minute read

2020 Issue One

SEC CLARIFIES FIDUCIARY DUTY OF PRIVATE EQUITY FUND MANAGERS

By:  George T. Lee

The Securities and Exchange Commission (SEC) recently published its interpretation (the “Interpretation”)1 of the standard of conduct applicable to investment advisers – including managers of private funds. The Interpretation reaffirms and clarifies the SEC’s position on the fiduciary duty of investment advisers. This article will discuss some of the fiduciary duties specifically applicable to private equity fund managers and their affiliates.

Most private fund managers, regardless of whether they are registered with the SEC or not, have a fiduciary duty to their clients under the Investment Advisers Act of 1940 (the “Advisers Act”).2 Although the Advisers Act does not specify a standard of conduct applicable to investment advisers, Section 206 of the Act has been interpreted through case law and SEC guidance over the years to impose a fiduciary duty on investment advisers without defining the full scope of this duty.

The Interpretation lays out the components of an adviser’s fiduciary duty, clarifies that it comprises both a duty of loyalty and a duty of care, and that it is applicable to all investment advisers, whether registered under the Advisers Act, state law, or not at all. The Interpretation also confirms that an adviser’s fiduciary duty may not be waived, but the applicable standard of conduct may be modified depending on the sophistication of the client and the services being provided by the investment adviser. Although the Interpretation primarily focuses on investment advisers generally, the SEC makes clear that private fund managers also have both a duty of care and a duty of loyalty to the funds they manage.

Duty of Care. The duty of care of private fund managers includes, among other things: (i) the duty to perform adequate due diligence on the fund’s investments, (ii) the duty to manage the fund’s investment in the best interest of the fund, and (iii) the duty to carefully monitor the fund’s investments throughout the term of the fund. This requires the manager to follow the fund’s investment strategy as outlined in the fund’s offering documents and to have a reasonable belief that each investment is in the best interest of the fund based on these objectives.

Duty of Loyalty. The duty of loyalty requires that a private fund manager serve the best interest of the fund and not subordinate the fund’s interest to those of the manager or its affiliates. To fulfill this duty, the sponsor of the fund must make full and fair disclosure to prospective investors of all material facts relating to each conflict of interest. The manager must eliminate to the extent possible, or expose through specific disclosure, each conflict. This disclosure must be sufficiently specific to allow investors to make an informed decision whether to invest in the fund.

For a closed-end fund, such as a private equity fund, these disclosures should be made in the private placement memorandum (PPM) to the extent possible. The SEC makes clear that the PPM must specify each conflict of interest and how that conflict will be addressed. For example a disclosure that there may be conflicts of interest would not be sufficient. Instead, the PPM should disclose which conflicts exist at the time of the offering with enough specificity to allow investors to make an informed decision on whether to invest.

Conflicts of interest that arise during the term of the fund are tricky since a private equity fund does not allow investors to vote with their feet by withdrawing during the term of the fund. Those conflicts must be eliminated, or mitigated in a way that meets the manager’s fiduciary duty. It may not be practical to obtain the consent of each limited partner every time a conflict comes up. Best practice is to form an independent limited partner advisory committee (LPAC) to provide advance consent to each related party transaction and any other transaction that creates a conflict between the interest of the fund and those of the manager or its affiliates.

Examples of undisclosed conflicts of interest that have led to sanctions and substantial monetary penalties against private equity fund managers include (i) charging the fund for management, legal, or accounting expenses performed by an affiliate, (ii) accelerating portfolio monitoring fees, and (iii) allocating investment opportunities to a co-investment vehicle or another fund. Of course, full and fair disclosure in the PPM or the informed consent of an uninterested LPAC would mitigate these conflicts.

What constitutes full and fair disclosure will depend on the sophistication of the investors in the fund. For example, a conflict may be so complicated that it would be impossible to disclose it in a manner that would allow an unsophisticated investor to make an informed decision whether to invest. In this case, the conflict must be eliminated or adequately mitigated and disclosed in an understandable way that allows informed consent of all investors. As an alternative, the informed consent of the LPAC will be sufficient if the LPAC is independent of the manager and its affiliates, and is well informed.

No Waiver of Fiduciary Duty. The Interpretation makes clear that an agreement to completely waive an adviser’s fiduciary duty, such as (i) a statement that the adviser will not act as a fiduciary, (ii) a blanket waiver of all conflicts, or (iii) a waiver of any specific obligation under the Advisers Act, is inconsistent with the Advisers Act and may be a violation of law. Having a waiver of fiduciary duty in the fund’s offering documents can lead to liability for the general partner or sponsor of the fund.

Although an adviser’s fiduciary duty cannot be completely waived, the SEC acknowledges that the adviser and client can shape their relationship by contract, depending on the sophistication of the client, and whether there is full disclosure and informed consent. For a private fund, whether informed consent can be given depends on the nature of the investors. Most investors are not in a position to negotiate the terms of the fund’s governing documents. On the other hand, if a fund is limited to sophisticated institutional investors that have sufficient leverage to negotiate the terms of the fund’s partnership agreement, the investors could agree to a standard of conduct applicable to the manager of the fund and its affiliates.  For example, the Interpretation questions whether a retail investment advisory agreement could limit the adviser’s liability for its own negligence, but implies that a private equity fund partnership agreement could use a gross negligence standard.  Presumably this would depend on the negotiating power and sophistication of the fund’s investors.

TAKEAWAYS

• Disclose specific conflicts of interest in the PPM if possible.
• Form an independent LPAC to approve related party transactions that can’t be disclosed in the PPM.
• Do not include a waiver of fiduciary duty in the fund documents.
• Do specify the standard of conduct applicable to the general partner, the manager, and their affiliates.
• Consult qualified legal counsel regarding mitigation of conflicts of interest.

____________________________________________________

1. SEC Release IA-5248.
2. The Advisers Act may not apply to managers of certain funds, for example those that make direct investments in real estate or those that operate oil and gas interests, rather than passive investments in those assets.  Managers of all private funds are urged to consult legal counsel regarding the applicability of the Advisers Act and other securities laws.