On June 1st, the firm welcomed commercial trial and appellate lawyer Gregory A. Eyster to our team of dedicated legal professionals. Greg is a native of Austin, Texas, and served Tarrant County for several years in the Tarrant County District Attorney’s Office before entering private practice in Fort Worth. Greg’s extensive trial and appellate experience gives him a significant edge in pursuing effective solutions for business clients, both at the courthouse and in the boardroom.

After completing his undergraduate studies at The University of Texas at Austin, Greg received his law degree magna cum laude from St. Mary’s University School of Law, where he served as Comment Editor of the St. Mary’s Law Journal. After graduation, he clerked at the Texas Court of Criminal Appeals.

“I met Greg when he was my opponent on a case several years ago,” said firm member Kimberly Sims. “I was impressed by his skill and professionalism, and am excited that he will now be working with me instead of against me. We are delighted he has joined our firm.”

Greg is a recently-qualified keel boat sailor who also enjoys fishing and golfing. He and his wife Rebecca, who is also an attorney, are busy raising their daughter and four sons in Hurst, Texas.

COVID-19 and Commercial Leases: What Texas Tenants And Landlords Should Consider During This Public Health Emergency

With the recent emergence of social distancing guidelines and shelter-in-place orders in areas such as Dallas County, the novel coronavirus, which causes the disease known as COVID-19, has substantially disrupted the day-to-day operations of many businesses across the Texas. Some businesses face the very real prospect of being shuttered by the sheer weight of accumulated financial obligations that cannot readily be satisfied because of the virus and accompanying governmental orders. Many business owners may wonder, among other things, if they have any recourse to avoid – or, at the very least, postpone – their obligations as tenants under their respective commercial leases.

This article provides a high-level summary of potential avenues that commercial tenants may, depending on their circumstances, utilize to secure much needed relief during these difficult times.

Plain Language of Contractual Provisions in Commercial Leases

Commercial tenants should begin, first, by carefully reviewing their lease documents to see if they have included any specific contractual provisions that could help them to accomplish their goals. For example, many commercial leases have what is known as a “force majeure” clause, commonly referred to as an “act of God” clause. Under Texas law, the term “force majeure” describes a particular type of event which may excuse performance under a contract; usually, it is an unexpected event outside of the control of either party. To determine whether a certain event excuses performance, courts typically look to the language that the parties specifically bargained for in the contract to determine the parties’ intent, rather than resorting to any traditional definition of the term. Indeed, contractual terms are controlling regarding force majeure with common law rules merely filling in gaps left by the document. In other words, when the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.

Because the application of a force majeure clause turns on the exact language contained in that provision, it is very important for commercial tenants and landlords to carefully review the language to determine if a situation such as the current COVID-19 pandemic would qualify. A concerned tenant or landlord should look for terms such as “pandemic,” “contagion,” “disease,” and “public health emergency.”

Common Law Doctrine of Frustration and Impossibility

Another potential tool that a struggling commercial tenant might employ is the common law doctrine of frustration and/or impossibility. Under these legal doctrines, if the purpose of a lease is totally frustrated by a supervening event of which the lease says nothing, and compliance with the obligations is rendered impossible, the lease may be dissolved and the parties may be excused from their obligations thereunder. The case law on this subject is not extensive in the context of health pandemics such as COVID-19, which are historically rare. Nevertheless, in light of more stringent lockdown measures such as the recent shelter-in-place order by Dallas County, and potentially more to come from other counties, a tenant might be able to use the doctrines of frustration and impossibility to avoid (or postpone) its obligations under the commercial lease.

Seeking Relief Directly from Landlords

If a commercial lease force majeure provision does not account for a pandemic or public health emergency, or if the circumstance of a particular case does not rise to the level of frustration or impossibility, a tenant’s only recourse may be to have a frank and honest conversation with the landlord to obtain short-term relief. These types of interactions are never easy, but they may be necessary for a struggling business. In today’s global environment, many landlords are feeling pressure to work out short-term, temporary deals with their tenants, especially where eviction may be halted or stymied by court closures. Nevertheless, it is important to understand that a landlord may not have the flexibility to forgive or postpone rent if they are subject to are strict loan or insurance requirements.

COVID-19 presents new challenges for many commercial tenants and landlords, and their respective attorneys. It is safe to say that future contracting parties will no longer look at the terms in force majeure provisions the same way. Tenants and landlords should consult with real estate and property law professionals to examine their specific circumstances to determine what they can do to reduce the financial impact of this global pandemic.

Nathanial Martinez is a civil litigation attorney in Dallas, Texas who focuses on commercial real estate, construction, and employment law at his firm Palter Sims Martinez, PLLC. He expressly incorporates herein all disclaimers of all law firm blogs everywhere. These are his opinions, not the opinions of his firm or clients, so do not cite any part of this post against him in an actual case. Every case is different, so do not rely on this post as legal advice for your case.

In August 2019, Nathanial Martinez of Palter Sims Martinez PLLC secured a favorable  jury verdict on behalf of his clients Hertz Electric LLC and HJC Global Electric LLC against James Benge and Benge General Contracting LLC. The Benge parties had initially filed the lawsuit against the Hertz parties alleging defective workmanship as the basis for not paying the Hertz parties for the work they performed. Martinez was able to obtain dismissal of all of the Benge parties’ affirmative claims through summary judgment before trial and directed verdict during trial.  After a four-day trial,  Dallas County jury unanimously found that the Benge parties had committed both breach of contract and fraud against the Hertz parties in connection with certain electrical and painting work performed at several commercial projects in DFW, including restaurants such as Quill Lounge and Matchbox Pizza. The jury awarded the Hertz parties damages under both the fraud and contract theories of the case and their attorneys’ fees. In addition, the jury found that James Benge was the “alter ego” of Benge General Contracting LLC because he had caused Benge General Contracting to be used for the purpose of perpetrating and did perpetrate an actual fraud on HTJ Global and Hertz Electric primarily for his own direct personal benefit.

“This case had been reset for trial over nine times, and my clients were beginning to wonder if they would ever get this to a jury,” said Martinez. “I cannot begin to describe how elated they are with this hard-fought and well-deserved result.”

The case, styled Benge General Contracting LLC v. Hertz Electric LLC and HJC Global Electric LLC v. James Benge, Individually, was tried in the 160^th Judicial District of Dallas County, Texas, Honorable Aiesha Redmond, presiding.

Conformed-Final-Judgment-Benge-v-Hertz

 

On March 15, 2019, John Palter presented a paper on Business Dissolution, Termination and Winding-Up to the 10th Annual Course on “Essentials of Business Law: Practical Considerations,” co-sponsored by the Business Law Section of the State Bar of Texas.

John’s paper (co-authored with Jim Phillips) was entitled Closing Time — Issues to Consider when Terminating a Business, and outlined the various ways for ending a partnership or corporation under the Texas Business Organization Code. There are remarkably few judicial decisions providing definitive guidance on these issues, and Closing Time summarized the most helpful ones for course attendees.

For those interested in attending the course, there will be a video replay version presented in Houston on May 2 and 3, 2019 at the Hilton Houston Westchase, and the course will also be made available online in the near future.  To register, visit here.

Palter Sims Martinez PLLC is a proud sponsor of the annual 5K “Heart & Sole” Fun Run sponsored by Attorneys Serving the Community (ASC), an organization of female attorneys, founded in 1987, to support causes that help women, children and families in the North Texas area. This year’s Fun Run is on February 9, 2019, with proceeds benefiting Mosaic Family Services, a 501(c)(3) non-profit organization dedicated to serving survivors of human rights abuses from around the world and within our community. Mosaic Family Services serves domestic abuse survivors, refugees, and human trafficking victims, creating access to opportunities and empowering them toward independence. Mosaic’s mission is to equip future leaders with the skills to impact their own diverse communities for a stronger, more vibrant North Texas.

Kimberly Sims serves on the ASC 5K Fun Run committee and she and Kathy Palter are sustaining members of ASC. For more information about ASC or the “Heart & Sole” 5K Fun Run, click here.

Palter Sims Martinez PLLC is proud to announce that members John Palter, Kimberly Sims and Nathanial Martinez have once again been designated “Super Lawyers,”  as just announced in the 2018 edition of Super Lawyers magazine. Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process includes independent research, peer nominations and peer evaluations obtained and tabulated by research firm Thomson Reuters. Mr. Martinez received the special designation “Rising Star.” While up to 5 percent of the lawyers in Texas are named to Super Lawyers, no more than 2.5 percent are named to Rising Stars. To be eligible for Rising Stars, a lawyer must be 40 years old or younger, or in practice for 10 years or less.

Kimberly Sims became a member of CREW Dallas (an association of commercial real estate women professionals) in 2017.  With an average membership of 350 each year, CREW Dallas is the leading organization for decision-making executive women, providing opportunities for networking, education, leadership development and civic/philanthropic involvement. As part of CREW Network, the industry’s premier networking coalition, CREW Dallas is transforming the commercial real estate industry by advancing women globally, showcasing member expertise and successes and serving as a resource to its members and the industry.

Recently, Ms. Sims was mentioned in a profile of Eliza Solender  in the August 2018 edition of D Magazine (CEO edition).

John T. Palter, Kimberly Sims and Nathanial Martinez are pleased to announce the addition of Nathanial Martinez to the firm name. Effective July 1, the firm’s name will change to Palter Sims Martinez PLLC.

A graduate of Brigham Young University’s J. Reuben Clark Law School, Mr. Martinez joined PalterLaw in 2012. While associated with the firm, he has developed a litigation and arbitration practice focusing on complex commercial matters, including intellectual property disputes, trade secret misappropriation, breach of contract, and business torts. Mr. Martinez has also cultivated a special expertise in employment law, representing several small businesses and medical professionals in a variety of employment-related disputes.​  Mr. Martinez was an integral member of the PalterLaw litigation team, whose work over two years resulted in a favorable $2.4 million jury verdict on June 20, 2018.

“Coming off multiple successful jury verdicts and a very busy first and second quarters, we wanted to take a quick breather to recognize the accomplishments and commitment of our newest equity member Nathanial Martinez by adding his name,” said founding member John Palter. “Kimberly, Nathanial and I make a great team, and we look forward to serving our clients with innovative legal solutions, whether in the courtroom or the boardroom.”

PalterLaw was a Bronze Sponsor for the Annual Attorneys Serving the Community “Pot of Gold” Luncheon at the Hilton Anatole on June 22, 2018, 2018.  ASC’s 2018 Beneficiary was Rainbow Days, a 501(c)(3) organization, helping children and youth in adversity build coping skills and resilience to create positive futures. The keynote speaker was Liz Murray, who inspired luncheon attendees with her Honeless-to-Harvard life story and call to action.  Nicole Karam, Kathy Palter and Kimberly Sims, all members of Attorneys Serving the Community, attended the luncheon.

 

A Dallas County, Texas, jury reached a verdict [June 21, 2018] that puts two ex-executives for liquor distribution giant Glazer’s Inc. in line to receive nearly $2.4 million [read the full story at Law360 . . .]