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Let’s Talk Trademarks: Part 2

2021-07-15

A Guide to Trademarking for Texas Business Owners

By Ali A. Akhtar

In the first of our two-part series on trademarks, we cleared up some of the most common myths about trademarks and how they apply to business owners. Hopefully, you now have a better understanding of trademarks, their uses, and their value, especially in a competitive industry.

In this second part of the series, we’ll outline the nuts and bolts of the trademarking process, providing you with a practical guide to trademarks as a Texas business owner.

STEP 1: Identify Your Trademark

Your trademark can be any name or logo (or a combination of the two) that is used to identify your product or service and distinguish it from others in the industry. The first step in creating your trademark is to know what it is that you will be trademarking and to ensure that it distinguishes you from your competitors.

Ask yourself a few easy questions: 1) What product are you providing or what service are you selling? 2) What name will you be using to label that product or service? 3) Is the name distinctive as applied to that product or service?

For example, if your service is doing general home repairs and you brand yourself “The Handyman,” it is very unlikely you will be able to claim a trademark on that name because it is simply descriptive of your services and is a generic term used in the industry for that service.

Also remember, you don’t have to trademark your business or company name unless it’s the same name you are using to market your product or service. For more information about the difference between your company name and your trademark, refer to Myth #3 in the first part of this series, "5 Common Myths and Misconceptions about Trademarking.”

STEP 2: Make (and Keep) Your Trademark Distinctive

Now that you’ve identified your trademark, it’s essential that you distinguish it! Put the ^TM designation on every usage of your trademark (printed materials such as letterheads, brochures, and business cards, and digital content like your website, social media, and banner ads).

By establishing a record of use as early as possible, you give yourself an advantage over other business owners who may be unaware of the “first to use” basis that the USPTO (United States Patent & Trademark Office) operates on. Remember from our last blog, you don’t have to register a trademark before you use the ^TM symbol!

Next, continue to brand yourself with the full name-and-product designation, and don’t let your product or service name become generic! An iconic example of a well-known trademark is Kleenex ® for tissues. The brand name is so popular that the word “Kleenex” is now a common substitute in everyday language for “tissues,” but the company continues to reinforce its brand by advertising as Kleenex ® facial tissues or Kleenex ® hand towels, in order to not let "Kleenex" become a generic word.

You might wonder why this matters. Did you know that once upon a time, words such as “cellophane” and “styrofoam” were not everyday English words, but were actually trademarks for those products? However, because those words came to be so often used as the generic description of those products, and the branding was not done properly, they lost their distinctive trademark status and became generic (as determined by the USPTO).

STEP 3: Register Your Trademark

Now you’re ready to apply for a trademark. But before you do, be sure to discuss the scope of your business with an attorney to determine whether you should apply for a state or federal trademark. A federal trademark is much more powerful, but more expensive and longer to obtain, and may not make sense for a local shop owner or service provider with no plans to expand beyond the State of Texas.

Furthermore, because of the nature of this field of law, it’s important to properly vet the attorney you use. He or she must at least understand the following concepts:

For a State of Texas trademark:

● The application is done with the Secretary of State of Texas.

● Fees are generally $50 per mark per class of goods/services.

● The timeline for this process is generally only a few months (much shorter than the federal process).

● There’s not currently a free public database for searching registered Texas trademarks. If you have an SOS Direct account, you can input searches for $1.00/search. If not, you can submit a free e-mail inquiry to trademarks@sos.texas.gov and wait for 1-2 business days for a response.

For a Federal trademark:

● The application is done with the United States Patent & Trademark Office (USPTO).

● Fees are generally $350 per mark per class of goods/services.

● The timeline is generally a year or so, as there is a massive backlog of applications for federal trademarks (several months before your application is even assigned to a USPTO trademark examiner!).

● Before applying, you should go onto the USPTO website and use the free Trademark Search System database. Check out all the registered/pending trademarks and get an idea of what’s already out there in your industry. Unfortunately, something similar or even identical may already exist, and you need to know before investing significant money and time in the application process.

STEP 4: Enforce (and Use) Your Trademark

Once you have your registered trademark, the work is done and the rest will take care of itself, right...?

Wrong!

It’s up to you, the trademark owner, to enforce your rights. Your trademark will not police or enforce itself.

First, when using your federally registered trademark, make sure to display the ® designation with every usage in your printed and online materials; it’s your well-earned right to do so! For State of Texas trademarks, you can still only use the ^TM symbol, as ® is specifically reserved for Federal trademarks.

Second, keep an eye out in your industry, online, etc., for any infringing uses (same or confusingly similar names or logos) of your trademark. When you spot something, have your attorney send a cease-and-desist notice to warn that third party of your trademark rights and your potential remedies for any continued infringement.

If it should be necessary, federally registered trademarks can be enforced in federal courts, and state-registered trademarks can be enforced in Texas courts. In either case, you can sue for damages (i.e., profits) and attorney fees. Additionally, if “willful infringement” is proven, you can get treble damages (i.e., three times the amount) plus attorney fees.

In some cases, you may need to pursue a special administrative proceeding to enforce your trademark rights, such as when another company is making a bad-faith use of your trademark in its website domain name. The Internet Corporation for Assigned Names and Numbers (ICANN) oversees a process called a domain-name dispute proceeding in cases where one website owner may be wrongly appropriating another company’s trademark in its website name or webpage extension. Also, many online services, such as Shopify, YouTube, eBay, etc., which allow users to upload and feature their own content, have enacted proactive and aggressive “take-down” policies when notified that a user has uploaded, and is wrongfully using, someone else’s trademark or copyright materials.

Conclusion

As your company grows, your profits increase and your name brand becomes more recognizable, having a trademark can be a powerful tool and valuable asset. Make sure to consult with a Texas business attorney to learn how to get one efficiently, use it properly, maximize its value, and keep it protected!

Let’s Talk Trademarks: Part 1

2021-07-01

5 Common Myths and Misconceptions about Trademarking

By Ali A. Akhtar

Intellectual property is a high-stakes field of law, and a company’s trademarks, patents, and other forms of intellectual property can be extremely valuable. Unfortunately, this is an area of the law that many business owners are not well-versed in, and there are many myths and misunderstandings.

In this blog, we’ll analyze five common misconceptions about trademarks, and give business owners some crucial information to know in order to avoid trademark mistakes.

MYTH #1: The first to file a trademark is the one who owns it.

It may seem logical that the first entity that goes through the filing process is the one that claims the trademark. However, the “first to file” system is generally how patent and trademark rights are determined in European countries. Here, the USPTO (United States Patent & Trademark Office) operates generally on a “first to use” basis.

In patent law, this means that if a person can prove he or she was the first to invent a product (not just the idea but the actual invention itself), that inventor can claim the patent rights and prevent others from doing so. Likewise, in trademark law, the USPTO will award the trademark to the entity that can prove it was the first to use the trademark in its industry (called “first use in commerce”). For example, if Business A can show that it was using a name in commerce on an earlier date than Business B who is applying for it, then Business A can effectively block Business B's registration through a USPTO process called an opposition proceeding.

For this reason, the date of first use in commerce is one of the most important parts of a trademark application.

MYTH #2: The ™ symbol next to a brand name means that the name has been trademarked.

In reality, the ^TM superscript is a common-law designation that any business owner can use in order to show that it is trying to build up trademark rights in its company, product, or service name. It does not have to be registered; in fact, it doesn’t even have to be in the application pending process. Therefore, any business that eventually wants to claim proprietary rights in its company or product name, can and should start using the ^TM symbol in connection with that name as soon as possible!

The same is true of the copyright symbol ©. Anyone who authors any original written, audio, or visual work (e.g., a book, an article, a webpage, a song, or a work of art) can use the © symbol in connection with that work without first registering it with the U.S. Copyright Office.

The one thing an entity cannot do is use the ® symbol unless and until it has been granted an official USPTO registration. The ® symbol is specifically reserved for federally registered trademarks, and there are federal penalties for using it without registration!

MYTH #3: Registering a company name is the same as having a trademark on it.

In the State of Texas, a new business owner registers its company name by filing a certificate of formation with the Secretary of State (for a corporation or LLC). However, that does not grant any trademark in that name, nor does it guarantee that the business owner will be able to apply for a trademark later in that name.

The Secretary of State’s job is simply to make sure that it does not register any new company name that is confusingly similar to an existing company name in Texas. It is the entity’s responsibility to ensure that it is not infringing on someone else’s trademark (federal or state) by doing business under that name or selling products or services under that name.

On a related note, it is not necessary that your business name be the same as the product or service name being marketed to the public. A common (and time-saving) technique is to register a general business name in Texas (for example, Akhtar Enterprises, Inc. or LLC), but then have a product or service with a distinctive brand name, and apply for a trademark for that.

MYTH #4: All trademarks have to be registered with the USPTO.

The USPTO exists in order for businesses to file for federally registered trademarks, which means they will have exclusive rights to use that name or logo, in that particular field of goods or services, throughout the United States. But this is not necessary for every business owner.

Filing a trademark application with the USPTO usually doesn’t make sense for small businesses in Texas, such as local stores, restaurants, or landscaping services that have no plans for expanding, franchising, or selling goods/services outside the state. Instead, they should consider registering a Texas trademark through the Secretary of State’s office. The scope of protection will be limited to the State of Texas, of course, but the investment of time and filing fees are reduced significantly.

If the business eventually grows to the point that it would be beneficial to operate in multiple states, it can always apply for a federal trademark later and can rely on the initial usage in Texas for the “first use in commerce” date, as discussed earlier in this blog!

MYTH #5: If I get a trademark, that gives me the right to the website domain name.

Although there is some overlap, trademark law and Internet law are generally separate fields of law and specialties. Having one (a trademark or a website) doesn’t guarantee the other.

Ever since the early 1990's, when Internet use exploded, both national and local companies saw the value in buying websites that matched their names. For example, let’s say that a local baker, Jim Goldsmith, with a pie store in Amarillo, decided to purchase the website name www.goldsmithpies.com, in 1995. Then, he put photos of his pie store and pies on that website and eventually started advertising the individual pies and their prices (perhaps even started offering a pie delivery or shipping service). Satisfied with his local success, Mr. Goldsmith had no interest in trademarking.

Now, let’s imagine that a national company began selling and distributing frozen pies to be stocked in grocery stores under the name Goldsmith Pies and eventually became recognizable enough that they successfully registered a trademark with the USPTO. This does not mean the company gets to acquire www.goldsmithpies.com and take it away from Jim Goldsmith! The Goldsmith Pies company will have to either opt for a .net or .biz site or will have to find another variation for its domain name, such as www.goldsmithfrozenpies.com.

There are some cases when a trademark owner can successfully take possession of someone else's domain name, for example, when it can be shown that the domain name owner is not making any legitimate commercial use of that name. Some website owners create "landing pages" in order to advertise unrelated goods, and get click-revenue, by driving traffic to the website using some variation of a well-known trademark name. In cases like these, the trademark owner can pursue a domain-name dispute proceeding, as well as a trademark infringement lawsuit.

Conclusion

As a business owner in Texas, it’s important to be familiar with the basics of intellectual property law and the importance of trademarks. Hopefully, we’ve cleared up some of the myths above, and given some good information to Texas business owners in how to build up trademark rights in their goods or services. If you want to learn more about your rights when it comes to your brand name, make a call and set up a consult with a Texas business and trademark attorney right away!

Beware of Using Employment Contracts!

2021-06-15

Hiring Help Without Unintended Consequences

By Ali A. Akhtar

Hiring employees is not only a big step for a small business, it is a serious legal responsibility. It is crucial for business owners to be clear on how to bring in (or let go of) help without certain legal consequences. In this blog, we’ll discuss the basics of “employment-at-will” in the State of Texas, as well as the issues surrounding employment contracts.

Employment-At-Will

The baseline law in the State of Texas is that employment is “at will.” This means that either the employer or employee can terminate the employment relationship at any time, with or without cause.

For business owners, this has quite a few practical benefits, such as: not having to establish detailed employment policies, not having to publish employee handbooks or manuals, and not having to worry about lengthy processes for termination of employees. Contrary to popular belief, for instance, there is no requirement in Texas for a private employer to pay a “severance” upon termination.

Exceptions to the At-Will Doctrine

There are some exceptions to this at-will doctrine, the most common being terminations that violate Federal law (e.g., discrimination on the basis of race, gender, religion, etc.) or State law (e.g., terminating an injured Texas employee for filing a worker’s compensation claim).

Additionally, there is an exception when there is a binding employment contract between the employer and employee. Employers often end up in this pitfall when they decide to write up a long list of policies, procedures, and commitments and have their employees sign them. By doing so, they run the risk of creating a contract in which they lose their ability to hire and fire employees at will and end up being subject to the same terms and restrictions that are applicable to the employees in the signed agreement.

For example, some employers try to have their employees sign a “minimum commitment” agreement based on the fact that the employer invests time and money in training and onboarding the employees; such a clause might say that if the employee quits before 6 or 12 months of service, he or she is liable to pay back some or all of the training expenses.

While this may seem like a form of protection for the employer, it creates a problem because it can be interpreted as creating the same obligation on the employer, i.e., that the employer cannot terminate the employee before that initial term is up (without being liable for damages). For this reason, a Texas business should never try to create a signed employment contract for its employees without having a lawyer review it!

Other Agreements

There are other agreements that an employer and employee can sign, without altering the at-will status of the relationship. For example, a job may involve the employee getting access to confidential technical or financial information, which is sensitive and competitive in the industry. In this case, employers can have what are called “restrictive covenants,” i.e., terms which restrict what the employee can do with such information.

One example of such a covenant is a non-disclosure agreement, which prevents the employee from using, sharing, or disclosing such information even after the termination of the employment. Another example is a non-compete agreement, which prevents a departing employee from engaging in a directly competitive business with the former employer for a defined length of time and within a defined geographic area. Such agreements are enforceable in Texas so long as they are reasonably and narrowly tailored.

These restrictive covenants are based on the nature of the business and industry, and the type of information that the employee gets access to, and they do not create problems in terms of altering the at-will nature of the employment.

Independent Contractors

Another way that Texas employers get into trouble is when they try to characterize workers as independent contractors when they are really employees. Just because you have your workers sign something called an “independent contractor agreement” does not mean it will be viewed that way by the law! Texas businesses get penalized for trying to escape their state obligations toward employees (e.g., establishing unemployment insurance accounts, etc.) by trying to incorrectly label them as contractors.

Many small businesses believe that simply because they don’t withhold taxes, and make their workers responsible for their own taxes, that this makes them all contractors. However, that is only one of many factors that the Texas Workforce Commission (TWC) looks at in determining the employee’s status under the law.

One of the biggest factors is, does the employer make the worker agree to devote full-time efforts to the business or is the worker free to work for other businesses as well? If the former is the case, the worker will be more likely classified as an employee. Likewise, is the worker subject to the business’s direction and control in terms of how to get the job done, or does that get left to the worker’s professional discretion? If the former is the case, the worker will be more likely classified as an employee.

For a complete list of all the factors analyzed by the TWC for determining employees vs. contractors, please visit the TWC webpage on comparing employment with independent contracting.

Conclusion

In summary, what matters most is not the labels you use, but the substance of the arrangement. No matter what title you put at the top of your agreements, you will need an experienced Texas business lawyer to review them with you and make sure that when you hire part-time or full-time help for your business, you don’t take on more than you bargained for!

Getting What You’re Owed

2025-09-25

Creating a Consistent Method for Collections

By Ali A. Akhtar

A business that’s owed money and can’t collect will soon be a dead business. Having a standard operating procedure for the collection of payment is an essential aspect of any business plan. In this blog, I will outline some important steps businesses can take to ensure they collect what’s owed to them, and discuss a few alternatives:

Step 1: Send a Thirty (30) Day Notice

When you haven’t received payment from customers and reminders aren’t working, the first step is to send a thirty (30) day notice. This is the beginning step of action to remedy the problem and gives customers one final, formal reminder to pay before legal action.

One of the reasons for a 30-day notice is to be able to recover attorney fees in the event of a lawsuit. The Texas Civil Practice & Remedies Code, Chapter 38 (see here), authorizes the recovery of attorney fees in any suit based on a contract, or goods/services rendered without a contract, provided you make the demand 30 days before filing the suit.

Sending this notice is easy -- any written method satisfies the legal requirements. Typically, businesses would send this notice via certified mail to create a record of delivery and receipt, for court. However, in modern times, there are faster and easier alternatives. Sending by fax will give confirmation of delivery. And these days, e-mail is the most common method of communication; you can easily attach a “read receipt” or delivery tracker to the message.

Step 2: Adding Interest and/or Late Fees

Adding interest and/or late fees to past-due payments incentivizes customers to resolve their debts as soon as possible.

However, you can’t just add interest or fees automatically. Interest or fees must be specified in your contract in order to be enforced, and that’s why it is crucial that you properly structure your contracts and have an attorney review them before use (for more information on the core business contracts, check out my previous blog, “Four (4) Core Contracts that Every Business Owner Should Know”).

Also, certain statutes may exist which limit your ability to charge late fees. A landlord, for example, is restricted from charging late fees that exceed a stated percentage of the rent and has to fulfill certain other conditions, which are set forth in the Texas Property Code (see here). A Texas business attorney can give you the expert guidance you need to make sure you don’t get penalized for violating the law in your efforts to collect payment!

Step 3: Filing a Lawsuit

In the event a customer ignores all legal warnings, you as a business owner are faced with a difficult decision: to sue or not to sue. A detailed cost-benefit analysis should be done before filing a lawsuit, because of the time, effort, and expense required to take legal action. A consult with a Texas business litigation attorney is essential before rushing into this situation.

Many cases can be done in small claims court, which eliminates the need for an attorney. The standard rules of civil procedure and evidence, and other formalities, don’t apply in small claims, making it possible for business owners to take the case to court themselves. The monetary limit of small claims courts (also known as “justice courts”) has recently gone up to $20,000 (Texas Gov’t Code 27.031). Prior to September 2020, the monetary limit used to be $10,000, and years before, it was only $5,000!

Even if you intend to handle the matter in small claims court, it will greatly benefit you to review your case with an attorney and establish a plan of action. If it turns out that your dispute is complex, you may still need to have a lawyer present your case in court.

Step 3 (Alternative): Sending to Collections

When a customer fails to pay and you simply don’t have the time or resources to pursue them in court, collections agencies exist to help get your money. These agencies work by different methods -- some take a percentage of what they recover for you, some do it on a flat fee, and some actually purchase the debt from you at a reduced price. Collection agencies are governed by different statutes (e.g., the Federal Fair Debt Collection Practices Act and the Texas Debt Collection Act) and can be held liable for using prohibited debt collection methods such as harassing calls, visits to places of employment, etc.

Many businesses prefer this alternative to a lawsuit because it takes the issue off their hands.

Step 3 (Alternative): Filing a Lien

Depending on the type of goods or services involved, a business may have even more powerful collection methods available. For example, some contracts create security interests (i.e., collateral that can be claimed if the customer doesn’t pay). A car loan gives the lender the right to repossess the car, and a home loan gives the lender the right to foreclose on the mortgage and take the home. In these cases, the lender is a lien-holder, with a lien on the goods.

In other cases, a business that does special labor on a home or commercial property may be able to file a lien for unpaid fees. The Texas Property Code, Chapter 53 (see here), states the conditions under which a contractor, builder, plumber, landscaper, etc. may be able to file and enforce a lien on the property due to payments not made by the owner. However, this must be done very carefully and in accordance with strict laws and procedures, or else the business faces penalties on top of its past-due invoices. Once again, make sure you get the advice of a Texas attorney before trying it yourself!

Conclusion

One of the biggest challenges for a business is cash flow. It’s one thing to do the work, it’s another thing to get paid for it. Collecting from late-paying clients is challenging for many reasons, and this is why discussing it with an attorney and having a pre-determined and consistent method for your collections will help save you money, time, and mental energy.

4 Core Contracts Every Business Owner Should Know

2021-05-15

Contracts: The Foundation of All Business and Commerce

by Ali A. Akhtar

Contracts are written legal agreements, and they are the foundation of all business and commerce. Business owners should become fluent with basic contract language so they can know what to look for in their contracts and avoid common pitfalls. In this blog, I’ll explore the four foundational contracts that every business owner should know.

1. Operating Agreements

An operating agreement is a governing document for any business entity. It is a signed contract between the owners of a company (members, partners, or shareholders depending on whether the company is an LLC, partnership, or corporation) that outlines their rights and responsibilities to each other and the company.

It can be as simple or detailed as the owners want but should contain at least the basic terms such as: what each person’s ownership/profit interest is, what each person’s capital contribution is, what the voting/decision-making procedure is, how owners can be withdrawn or added, and under what circumstances the company may cease operations or dissolve. Even as the sole owner of a business, having an operating agreement helps you adhere to a standard operating procedure and assists with good record-keeping. It’s also helpful to have in the event that you need to add someone to your business as a prospective partner or member of your team.

One of the most common mistakes I encounter with my Texas business clients is not having an operating agreement in place -- even close friends or family members running a business together should take the time to think through and draft an operating agreement, to prevent misunderstandings or disputes from arising down the road.

2. Independent Contractor Agreements

These contracts can get you the help you need without many of the legal commitments of an employer-employee relationship. Independent contractor agreements are flexible documents that can be drafted to hire and compensate the contractor in a variety of ways, such as at an hourly rate, on a project-by-project basis, or at a flat fee for the services.

Hiring independent contractors can be advantageous because you don’t have to withhold or pay taxes for them, provide benefits such as health insurance and P.T.O., or register them for unemployment accounts with the Texas Workforce Commission (TWC). This keeps operations and paperwork simple for business owners.

It is important to note that, once you use an independent contract, you must comply with the written terms and procedures of the contract. Business owners cannot dismiss a contractor “at will” the way an employee can be hired or fired at-will in the State of Texas. Additionally, you cannot make independent contractors agree to devote full-time hours and efforts to your business or they may lose their independent contractor status and be treated by law as employees. The TWC is experienced at catching employers and businesses who try to mischaracterize personnel as independent contractors when they’re really employees, so beware! I’ll be discussing more of these pitfalls in my forthcoming blog, “Beware of Using Employment Contracts!”

3. Client/Customer Service Agreement

Depending on your industry and type of business, you may have customers or clients sign a contract called a service agreement. It is essential that businesses not engage in work for customers based solely on verbal agreements or simple quotes, so these contracts are especially important in fields like construction, remodeling, and other specialty trades or professions.

Knowing the laws and regulations governing your industry is especially important because businesses are responsible for following these codes even if they’re not included in the contract. If you don’t know your industry-specific legal requirements, you’ll want to contact an experienced Texas attorney for that guidance.

Your service agreement should outline the key terms, such as: scope of work, fees, approved methods of payment, warranties and liabilities that you will/will not assume, warranties and liabilities that your customer will/will not assume, and dispute resolution procedures.

4. Vendor Agreements

A vendor agreement is a contract made between your business and another business. This other business will likely be a supplier or a service provider, but it could be any business with whom you may be subcontracting or doing any sort of common enterprise. It may take the form of a purchase and sale agreement, a warranty contract, or a service/maintenance agreement, just to name a few.

More often than not, the company supplying products or services to you will have its own agreement for you to sign. While this makes working with them easy, it’s always a good idea to have your Texas business lawyer review the document and advise you on the terms contained in the contract before signing. Agreements with long, costly cancellation clauses or terms that waive too many warranties and liabilities on the part of the other company are traps, so it’s important you spot and avoid them upfront.

Conclusion

Whether you’re growing your business by bringing on help or changing your supplier for a product, having a general understanding of the nature and purpose of these contracts will enable you to conduct business more smoothly and confidently.

Remember: weak, incomplete, or “form” contracts can cause serious problems for you and your business down the road. That’s why it is imperative that an attorney reviews and advises you on your contracts before they’re used, especially if you use a software or online service (e.g., LegalZoom) to generate them.

Which Entity Should I Form for my Texas Business?

2021-05-04

The Pros and Cons of Different Entity Types

by Ali A. Akhtar

Forming an entity is the first legal step for business owners, and it is important to do it correctly to avoid issues down the road. In this blog, I will give some insight into the main options for entrepreneurs and small business owners starting their businesses in Texas:

How to Know if You Have a Case?

2014-04-05

Think of the Three-Legged Stool

by Ali A. Akhtar

Injuries and losses happen all the time. Every day, bad things happen to good people. Sometimes, it is simply an unfortunate fact of life; as the saying goes, “into every life, a little rain must fall.”

Sometimes, however, these things happen because of the negligence, recklessness, or fraud of others. In cases like these, there can and should be a remedy under the law.

So, how can you tell the difference? If you suffer from an injury, a financial loss, or an act of fraud, how do you know whether you have a case worth pursuing?

Nothing can substitute for the advice and counsel of a knowledgeable attorney. Cases often involve complex issues that require experienced legal analysis. For this reason, the remainder of this article is simply an informative tool that you can use to understand why some cases we take, and others we don’t. It is not meant to substitute for legal advice, or to encourage you to make a final judgment on your own case!

The easiest way to answer the question above is to visualize a common three-legged stool. As we all know, that stool needs to have three good legs in order to stand up. If any one of those legs is weak, or missing altogether, the stool wobbles and falls. The seat of the stool is your case, and it rests on three legs: (1) liability; (2) damages caused by that liability; and, (3) a source for recovery.

(1) Liability

The first question that must be asked is whether someone else is liable, i.e., is someone at fault for what happened to you?

In most cases, this is easy to determine. For example, if another driver rear-ends you and causes you injury, he is liable. If he turns into a cross-walk while pedestrians have the right of way, and hits someone, he is liable. If an employee is using a piece of machinery, and because of poor maintenance it malfunctions, or because of lack of proper safety equipment the employee is badly hurt, the employer is liable.

If there is no liability, then no matter how strong the other two legs are, the stool falls over and there is no case. For example, suppose a driver in front of you suddenly comes to a stop, and you swerve to miss him, causing your car to go into a ditch and roll over. No matter how severely you are injured and no matter how much insurance the other driver has, there is no case because he is not liable to you. It was not his fault that you couldn’t stop in time; your basic driver’s education course teaches you to leave enough distance between yourself and the car ahead so that you can stop if it does.¹

There are other more complicated cases where one might think liability exists, but the law says differently. For example, I’ve gotten many calls where potential clients have inquired whether they have a case when they underwent surgery at a hospital, and then developed serious infection post-surgery, requiring additional hospital stay, extensive medical treatment, and substantial pain and suffering. Many people believe that if they develop an infection while in the hospital, the hospital is liable for medical malpractice. However, this is very rarely the case.

It is a well-known risk of being in a hospital environment that no matter how careful the hospital staff may be, many bacteria exist there, and infections may develop, particularly after surgery. In fact, the “informed consent” form, which you sign as a patient prior to undergoing a procedure, discloses to you all known risks of the procedure, and the risk of infection is almost always at the top of that list.

(2) Damages Caused by the Liability

Once liability is established, the question then becomes, were there damages caused by that liability?

Again, in many cases, this is fairly easy to determine. For example, if another driver runs a red light and hits your car broadside, causing you fractured ribs, then you have clearly suffered damages as a result of the liable act. Or if a truck’s fuel tank explodes due to an igniting spark from the battery box (which can occur in a defectively designed fuel tank system on commercial trucks), causing a major fire and second or third degree burns to the driver, he has clearly suffered damages as a result of the defective design.

If there are no damages, then it does not matter how strong the other two legs are; again, the stool will fall over and so will the case. Some people have been able to walk away from major accidents miraculously unharmed. In such situations, there is no case because no matter how clear a driver’s liability is, if the other driver suffers no injuries, then there are no damages to pursue.

Again, there are cases where this analysis is more complicated. One case comes to mind where a client underwent a surgical procedure and had a chest drainage tube put in. After the surgery and recovery were done, she was discharged from the hospital — with the tube still in her chest! The hospital staff had forgotten to take it out. A day or so later, while taking a shower, she discovered it still in her chest, and had to return to the hospital to have it removed. A very unsightly scar developed on her chest afterwards.

Although there was clearly liability (the hospital staff negligently discharged her without removing the tube), and the ugly, permanent scar seemed like clear damage to her, there was simply no way to prove that the act of leaving the tube in was what caused the damage. In other words, it may well have been that she would have developed the scar anyway, even if the chest tube had been removed before she was discharged. There was no one who could testify with medical certainty as to the cause of the scar. For this reason, there was no case to pursue, because it was unclear at best that the damage was actually caused by the liable act.

(3) Source for Recovery

If both liability and damages caused by the liability have been determined, the third and last leg to be established is the presence of a recovery source. Will you have the ability to collect your damages from somewhere?

Sometimes that question is easily answered “yes.” In the case of the driver who ran a red light and caused you to suffer fractured ribs, if he has auto insurance, then there is a source from which to recover your damages. Or, if he has little or no insurance, but you have uninsured/underinsured motorist coverage, you will still have a recovery source for your damages. A grocery store or restaurant, in which you slip and fall and suffer a back or hip injury because of a poorly maintained floor, will have a general liability policy or else will be self-insured and therefore have adequate money to compensate your damages.

If there is no recovery source, then unfortunately, no matter how clear the liability is, and no matter how severe the damages are, there will be no case to pursue because there is no potential recovery. Again, the absence of one leg causes the stool to fall over.

Suppose that, in the case of the driver who ran the red light, he has no liability insurance, and you have no uninsured/underinsured motorist coverage. Now there is simply no source for recovery of your damages, and no ability to pursue a case on your behalf.²

This problem arises in other contexts as well. Suppose that your employer carries worker’s compensation coverage, and you suffer a serious injury due to the employer failing to maintain a safe workplace. Liability is present, and damages caused by that liability are present also. However, by law, when you work for an employer covered by worker’s compensation insurance, then you forfeit your right to sue the employer or recover any pain and suffering damages for on-the-job injuries caused by the employer’s negligence.³

The worker’s compensation insurance carrier should pay for your medical expenses as well as the major percentage of your lost wages for time missed from work. If the carrier denies you benefits that you should be getting, a worker’s compensation attorney can help you appeal and get those benefits. However, there can be no case pursued against the employer for your pain and suffering; the employer simply is not a recovery source for those damages in a worker’s compensation case.

As the above examples illustrate, sometimes the issues of liability, damages, and recovery are clear, and sometimes they are not. If you have suffered an injury or loss, do not delay — consult an experienced attorney as soon as possible in order to get the most competent advice on whether you have a case, and how your attorney can best help you pursue it.

References:

¹ Frequently referred to as the “two-second” rule. In other words, you should leave enough space between yourself and the car ahead, that no matter what speed you may be traveling, if the car ahead passes a stationary object, it should be at least two seconds before you reach the object.

² It is highly unlikely that you would recover any money from a personal judgment against him. For a detailed discussion of this nightmare scenario, and how to make sure you avoid it ever happening to you, please see Protect Yourself... If You Don't, Who Will? (akhtarlaw.com/blog/protect-yourself), also featured on this website.

³ Texas Labor Code Sec. 408.001(a).

Don’t Lie to Your Lawyer!

2014-04-05

An Actual Client Case

by Ali A. Akhtar

The following is a true account of an actual case I handled on a client’s behalf (as always, names and details have been omitted in order to protect the identity and confidentiality of the client!):

A mutual friend introduced me to a man that had been in a rear-end accident. While waiting at a red light to turn left, he had been forcefully struck from behind by another driver who obviously was not paying attention. He declined an ambulance, but had a friend take him to the emergency room, where he complained of severe pain in the head, neck, lower back, and right hip.

X-rays revealed no fractures, so he received some pain prescriptions and was discharged to follow up with his own doctor. He then went to see an orthopedic doctor, and told that doctor that he had never before received any injury to his head, neck, back, or hip. He said the same to me when I interviewed him.

Based upon this information, the orthopedic doctor referred the man to undergo MRI (magnetic resonance imaging) scans of the neck and back. These scans revealed some serious and major injuries, specifically, herniated (i.e., ruptured) vertebral discs in the neck and in the lumbar spine, and irritation of the right-side nerve roots in the lower back. Therefore, it seemed like all of the symptoms the man was complaining about were consistent with, and confirmed by, the objective findings of this exam. Because of the extent of these findings, the doctor did not think physical therapy could help, and said steroid injections would be needed in the upper and lower spine, and quite likely, surgery. The man did not have health insurance or out of pocket funds to undergo surgery, however.

Also, the responsible driver was uninsured, so the case was being pursued against the client’s own uninsured motorist policy.

It sounded like a strong, straightforward case, and the man appeared very sincere. I took the case, and aggressively argued with his insurance company that he deserved the full policy limits of his uninsured motorist coverage, because of the severity of his injuries and his need for future surgery.

Then came the wrinkles in the case. The insurance adjuster made surprisingly and (what I believed at that time to be) ridiculously low offers for settlement. I repeatedly demanded to know why, and was simply told by the adjuster that they had “reason to believe” that the injuries were not caused by this accident. With no further details being given to me, I repeatedly questioned my client if he knew what the insurance adjuster could be talking about.

“No,” he declared. “I never filed for injuries before. They’re lying.”

With no evidence to the contrary, I was bound to stand by my client, so I filed suit against the insurance company to seek either a better settlement offer, or take the case to trial if necessary.

Once a defense attorney got involved, the offers went up, but not by much. The defense attorney told me on a couple of occasions that this person had filed “multiple prior injury claims.” I again called my client, demanding to know everything I needed to know, otherwise I could not effectively represent him.

Again, he strongly denied any of these claims, calling them “all lies.” He maintained innocence and stated that he had no such prior injuries to these areas.

Eventually, I was able to request the defense insurance company (through demand for written discovery) for the names of some other insurance companies that my client used to have policies with. I then ordered (at considerable cost to my firm) copies of all medical records and claim files from those insurance companies.

When I received these files, I couldn’t believe my eyes. Sure enough, my client had been outright lying to me all along. On at least four (4) separate prior occasions, he had filed auto accident claims and worker’s compensation claims, alleging injuries to the exact same parts of his body: head, neck, back, and right hip. In fact, MRI scans of the neck and back taken about five (5) years earlier revealed the exact same findings of herniated discs.

This man had been milking his injuries for all he could get. Every time he got a little hurt on the job or in a car accident, he would claim he was feeling these same injuries “for the first time.”

Not only had he deceived the doctor with these lies, but also my firm, which had invested considerable money in the case by taking it through lawsuit. Even more frustrating was that the client continued to feign innocence, claiming he just “honestly forgot” about those prior injuries.

We promptly settled it for what little we could get, enough to cover our costs and the medical bills. The client got some recovery in his pocket as well, and in my opinion, anything was more than what he deserved.

A reputable plaintiff’s attorney is not in the business of cheating the system and representing frauds. People like these cause the worst labels and stereotypes to be attached to the field of personal injury law, and ruin it for deserving people with legitimate claims.

If I had not ordered all of the prior medical records and claim files, and had continued pursuing the case to trial based on the client’s false promises, I can only imagine how much more money would have been lost. If he had been confronted with the evidence of his prior medical records for the first time on the witness stand, there is no doubt the jury would have punished him with a zero verdict. In such a case, it is not the client who loses the money, it is the law firm, because plaintiffs’ lawyers take on the risk and advance all expenses on these types of cases.

A lawyer cannot effectively represent and protect a client if the client conceals and fails to disclose crucial information that his lawyer needs to know. A client may believe that he can get away with it, but sooner or later, the evidence will be discovered in the course of the lawsuit. Not only is there financial risk to the law firm, but the client exposes himself to criminal risk, both for lying in general¹ and for committing fraud against an insurance company in particular.²

The moral of the story should be obvious, but is worth repeating: do not lie to your lawyer!

References:

¹ Making a false statement under oath, e.g., on a form which is required to be notarized, is perjury, which is a Class A misdemeanor under Texas Penal Code Sec. 37.02. Making a false statement under oath in the context of an official proceeding, e.g., a lawsuit, is aggravated perjury, which is a third-degree felony under Texas Penal Code Sec. 37.03.

² Texas Insurance Code Sec. 704.002(a) states, in part: “Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.”

Protect Yourself…

2014-04-05

If You Don’t, Who Will?

by Ali A. Akhtar

Let’s face it: no one likes having to purchase auto insurance. On top of paying your monthly car loan, filling up every week with high gas costs, and paying for maintenance or repairs, the last thing you want is another regular car expense. But the law in Texas requires you to carry liability insurance, and it makes sense why: an automobile accident can cause serious property damage and bodily injury, and the driver at fault is expected to be responsible for it.

Fair enough, you say. So you choose to buy the minimum coverage that Texas law requires: $30,000.00 per person / $60,000.00 per accident for bodily injury, and $25,000.00 per accident for property damage — also known in the industry as a “minimum limits” policy.¹ After all, if you buy the bare minimum coverage required, you will save money on your insurance premiums every month, and everyone likes to save money, right?

Unfortunately, those few dollars you save each month can wind up costing you thousands of dollars, or more, when you least expect it — and can least afford it.

Suppose, God forbid, that another driver is careless and gets into a major collision with you. It happens all the time on our busy streets and highways. You might need to be rushed to the emergency room with a fracture, get referred to a medical specialist, and also miss time from work in order to undergo treatment and recover from your injuries.

If the other driver is only carrying a minimum limits policy, then no matter how much your medical bills, lost wages, and pain and suffering are, the most you can collect from his insurance company is $30,000.00. This may not be nearly enough to cover all your out of pocket damages and compensate you fully. Even more frighteningly, suppose the other driver was carrying no insurance at all, or carelessly let it lapse before the accident. Now there is nothing to collect for your losses. Unfortunately, this also happens all the time on our streets and highways.

How will your losses be covered? Some may say you can try to sue the other driver and get a judgment against him. Good luck! The laws in Texas provide a number of protections to a judgment debtor. For example, you cannot attach a judgment to his primary home, and up to $60,000.00 of his personal property may also be exempt.² So, you may get a big judgment, but wind up not being able to collect any of it.

The good news is, you can (and definitely should) protect yourself from a nightmare like this by purchasing auto insurance coverage options that surprisingly few drivers know about or fully understand. These options are: uninsured/underinsured motorist (UM/UIM) coverage and personal injury protection (PIP) benefits.

UM/UIM coverage exists to compensate you for your injuries and property damage when another driver has either insufficient liability coverage, or no liability coverage at all, for losses that he caused you. When the other driver’s liability limits are exhausted, or he has no liability coverage at all, you can proceed with a claim for your own UM/UIM coverage for the remainder of your uncompensated losses.

At that time, your UM/UIM coverage basically “steps into the shoes” of another driver’s insurance policy and acts like the other driver’s insurance policy would. In other words, just as another driver’s insurance adjuster will skeptically review your medical records, bills, and lost wages, question your damages, and negotiate as low as possible, so will your own UM/UIM carrier when the time comes. But just as your attorney can aggressively represent you to get the best possible recovery against another driver’s insurance policy, he can do the same with your UM/UIM policy.

UM/UIM coverage is typically offered at the same levels as liability coverage. Standard policies will offer UM/UIM coverage as high as 100/300/50 (i.e., $100,000.00 per person / $300,000.00 per accident for bodily injury, and $50,000.00 per accident for property damage), with options to purchase even more. It is very highly recommended that you protect yourself by getting the highest possible UM/UIM coverage! You simply cannot trust other drivers out there to be responsible and carry adequate liability coverage. If another driver hits you and causes you major damages and injuries, you need to already be prepared and have the protection of adequate UM/UIM coverage. Many clients have learned this lesson the hard way — when it is too late.

PIP coverage is a no-fault benefit that can reimburse your out of pocket medical bills and lost wages. Minimum PIP coverage in Texas is $2,500.00 per person³ and is typically offered in higher amounts such as $5,000.00 or $10,000.00, at additional cost. This means, in the case of a $2,500.00 PIP policy, that you and any passenger in your car who may have to undergo medical treatment or lose wages from work as a result of an automobile accident, can be reimbursed for those out of pocket damages up to $2,500.00 per person.

PIP benefits do not cover pain and suffering damages, but only out of pocket losses such as medical bills and lost wages.⁴ The other key feature of PIP is that it is paid out without regard to who is at fault for the accident. So, if another driver causes the accident, you can collect PIP benefits from your own insurance policy for your out of pocket losses in addition to the liability settlement you would get from the other driver’s policy. If you are at fault for the accident, you can still use your PIP to cover your own out of pocket losses.⁵ Again, it is very highly recommended that you protect yourself by getting PIP coverage in the highest amount possible. It will definitely come in very handy when you need it most.

Insurance companies in Texas are required to offer both UM/UIM coverage and PIP coverage, and in fact, the law holds that both forms of protection are so essential that at the time you sign up for a new insurance policy, unless you reject those types of coverage with your signature, you will by default get them.⁶ Sadly, too many clients have rejected these highly important benefits just to save a few dollars on their premiums, and have learned the hard way, after suffering an accident, the consequences of being without them.

So, now that you know what UM/UIM and PIP coverage really are, call your insurance company and find out how much it will cost for you to add the highest levels of each to your auto policy. Don’t wait until the next time your policy is up for renewal; just pick up the phone and call today! You’ll be surprised to learn that it really does not add much to your monthly premium to carry these very important protections.⁷

Hopefully, the time will never come when you have to use them, but if it does, you will be very glad that you didn’t pinch pennies when it came to insuring yourself and the loved ones in your household.

The moral of the story is: protect yourself… because if you don’t, who will?

References:

¹ Texas Transportation Code Sec. 601.072(a-1). These newer minimum coverage limits have gone into effect not long ago. Prior to January 1, 2011, the minimum limits in Texas were: $25,000.00 per person / $50,000.00 per accident for bodily injury, and $25,000.00 per accident for property damage (i.e., a “25/50/25” policy). Prior to April 1, 2008, the minimum limits were even less: $20,000.00 per person / $40,000.00 per accident for bodily injury, and $15,000.00 per accident for property damage (i.e., a “20/40/15” policy).

² Texas Property Code Secs. 41.001 through 42.002.

³ Texas Insurance Code Sec. 1952.153.

⁴ Texas Insurance Code Sec. 1952.151(3).

⁵ Texas Insurance Code Sec. 1952.155(a)-(b).

⁶ Texas Insurance Code Secs. 1952.101 and 1952.152.

⁷ As a real-life example, my brother-in-law, a young married professional in Houston, took this advice and upgraded from minimum limits coverage with no PIP, to the highest standard liability and UM/UIM coverage, with $2,500.00 in PIP. The total added cost to his annual premium was just under $150.00 (approximately $12.00 extra per month); a small price to pay for such valuable coverage in the event of a major accident!

Unbeatable Logic

2014-04-05

An Actual Client Call

by Ali A. Akhtar

The following is a true account of an actual call made by a prospective client (as always, names and details are omitted in order to protect the identity and confidentiality of the caller!):

A gentleman called my office, from his hospital room, in order to get representation regarding a major injury he had suffered in a collision with a train. He stated that he was told he’d been in a coma for several days, and had just recently woken up.

This was the kind of case that would spark anyone’s curiosity. Not only did his injuries sound quite serious, but in a case involving a railroad crossing collision, there is a substantial amount of initial investigation and research to be done, all as soon as possible, in order to preserve crucial evidence.¹

I asked him if he could recall what happened.

All he could remember was that his job sent him out to a small town in east Texas, where he was driving his small Honda around the curve of a winding dirt road. Then, as he put it, “I came around the corner, and — BAM! Next thing I know, I’m woken up in a hospital.”

“Is that all you can remember? Were there any witnesses that you know of?”

He said he was the only one on the road at the time, as he was making a very early morning delivery run.

“Well, have you been able to speak with the police to find out what happened, and what investigation they did?”

“Yeah,” he replied. “They came to visit me in the hospital, and told me I ran into the 47th car of the train.”

I was somewhat confused at this point. “So, you ran into almost the back part of the train, according to the police? And you don’t remember anything about the train or the collision except for waking up in the hospital?”

“No, sir,” he replied.

“Then, why do you believe the train was at fault?”

“Well,” he replied matter-of-factly, “the police didn’t give me a ticket!”

Naturally, I did not pursue this case. It’s another fun story to tell. But some important words need to be said about the ‘unbeatable logic’ that this caller was using.

It is a very common misconception that every accident must result in a ticket for one of the parties. It is also a common belief that once a ticket is given (or not given), that constitutes an official and final “judgment” as to liability. In reality, neither one of these things is true.

An investigating officer has discretion to issue a citation (i.e., a ticket) for what he believes to be a violation of a particular traffic statute. He can make this particular determination after doing his own investigation and accident reconstruction, or by talking to eyewitnesses, or upon admissions from the involved parties. In a rear-end collision, for example, he may or may not choose to issue a citation to the liable driver for “failure to maintain assured clear distance.”

If the officer does in fact issue the citation, that is certainly helpful for insurance settlement purposes, but it does not prove the civil case if it must go to court. The injured plaintiff’s attorney must still prove, either through evidence or witness testimony, that the defendant driver was liable. In fact, in most cases, the fact that the defendant driver received a ticket cannot even be stated in court. It is inadmissible unless the driver actually pled guilty to the charge; if he simply pled nolo contendere (i.e., no contest) and paid the costs, the ticket cannot be brought into evidence.²

Finally, it must be noted that an investigating officer’s report, and even his issuance of a citation to any driver, is merely a reflection of his opinions regarding the factors causing or contributing to the collision. It is not an official or binding “judgment.” The police report by itself also cannot be admitted into evidence as proof of the conclusions contained in it, because that report would simply be hearsay.

I have had firsthand experience obtaining successful recovery for clients injured in accidents even when the investigating police officers had written reports placing the blame on the clients rather than the other drivers. In one such case, this involved filing suit against the defendant driver, taking written and recorded statements from eyewitnesses to the accident, and deposing the police officer (i.e., asking him questions under oath before a certified court reporter) in order to establish that he had relied merely on the word of the defendant driver, and conducted his own scene investigation without the benefit of hearing either the plaintiff’s version or speaking with any of the eyewitnesses.

The bottom line is: don’t try to rely on the presence or absence of a ticket or police report to argue your case to an insurance company! Contact an experienced trial lawyer right away in order to make sure all the evidence and witness testimony in your case is preserved and presented in the best possible manner.

References:

¹ For example, there are often several layers of investigation by local, state, and federal authorities in cases of serious railroad crossing collisions. The local city police or county sheriff’s office will often be the first responder to the scene, and will generate its own report after talking to involved parties and witnesses; it will often also take photographs of the scene and the damage done. Next, the State of Texas Department of Public Safety may have state troopers to assist on scene, and often the Texas Department of Transportation must do its own investigation as to whether there were any violations of railroad crossing regulations. Finally, accidents of this type must be reported to the Federal Railroad Administration, a division of the U.S. Department of Transportation, which will issue its own report regarding the accident. Certain aspects of railway operation are governed strictly by federal law, in order to create a uniform rule structure, under Title 49 of the United States Code. However, on certain issues where there is an absence of federal law, state law will control and must be carefully researched (e.g., maintenance of warning indicators at railroad crossings, or the length of time and distance that a train must sound its horn or warning bell as it approaches and crosses a railroad crossing, under the Texas Transportation Code). As you can see, the research and investigation of a railroad crossing collision can be fairly complex, and it is very important to have an experienced and dedicated attorney’s help in discovering and preserving crucial evidence.

² Texas Rule of Evidence 410.