Jackson Law Firm

Eminent Domain and Business in Texas

2023-08-25T17:00:43Z

The Fifth Amendment to the U.S. Constitution provides: “Nor shall private property be taken for public use, without just compensation.” U.S. Const. amend. V. From this—the Takings Clause—it follows that the federal government may appropriate private property, so long as the appropriation satisfies two basic requirements: (1) the taking must be for a valid public use, and (2) just compensation must be given to the owner.

The Texas Constitution contains similar language but creates a higher threshold. Article I provides:

No person’s property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation being made, unless by the consent of such person, and only if the taking, damage, or destruction is for:

(1) the ownership, use, and enjoyment of the property, notwithstanding an incidental use, by:

(A) the State, a political subdivision of the State, or the public at large; or

(B) An entity granted the power of eminent domain under law; or

(2) The elimination of urban blight on a particular parcel of property.

Tex. Const. Art. I, § 17. As such, Texas possesses eminent domain powers and even constitutionally confers them upon certain private entities. Still, any use of those powers must meet requirements beyond those found in the Federal Constitution.

Texans should acquaint themselves with the possibility that their private property can be taken by the State (or by a private entity in some circumstances). More importantly, businesses should have a base-level understanding of when their property can be taken and whether a given taking is valid.

A. Public Use

A valid exercise of the eminent domain power requires that it be a for a public use. “[T]he ultimate question of whether a particular use is a public use is a judicial question to be decided by the courts.” Maher v. Lasater, 354 S.W.2d 923, 925 (Tex. 1962). An important part of answering that question is considering the extent to which the public benefits. In Maher, the Court held that a taking of private property to construct a road that only one party, a private individual, would benefit from is not a public use. See id. at 926. A pipeline, to provide another example, may serve a public use, so long as the transportation of resources through the line is not subject to the builder’s exclusive use. See generally Denbury Green Pipeline-Texas, LLC v. Tex. Rice Land Partners, Ltd., 510 S.W.3d 909 (Tex. 2017). The building of railroad lines, public parks, and sewage systems may also constitute public uses.

Under the paramount-public-importance doctrine, “a condemnation authority may not condemn land already dedicated to a public use if doing so would effectively destroy its existing use, unless the condemnor can show that the intended use is of ‘paramount public importance’ and cannot be achieved by any other means.” Hidalgo Cty. Water Improvement Dist. No. 3 v. Hidalgo Cty. Irrigation Dist. No. 1, 669 S.W.3d 178 (Tex. 2023).

B. Necessity

The Local Government Code imposes an additional restriction on municipal takings, adding that “the condemnor must consider the taking necessary for public use.” City of Austin v. Whittington, 384 S.W.3d 766, 772 (Tex. 2012). The Code states: “When the governing body of a municipality considers it necessary the municipality may exercise the right of eminent domain for a public purpose to acquire public or private property . . . for any other municipal purpose the governing body considers advisable.” Tex. Loc. Gov’t Code § 251.001(a). In short, as the Texas Supreme Court has explained, a municipality must “demonstrate: (1) that it intends to put the property to public use (the public use requirement); and (2) the condemnation is necessary to advance or achieve that public use (the necessity requirement).” Whittington, 384 S.W.3d at 772 (emphasis added).

C. Adequate Compensation

To start, the process through which the government subjects property to eminent domain is called condemnation. When the government condemns property, it must assess the property’s value in order to meet the “adequate compensation” requirement.

Typically, the condemnor “negotiates with the landowner to purchase the property.” Id. If the parties cannot agree on a price, the condemnor files a condemnation petition, which prompts a judge to order a value assessment by an uninterested third party. Tex. Prop. Code §§ 21.001, 21.012, 21.013.

“Compensation for land taken by eminent domain is measured by the fair-market value of the land at the time of the taking.” Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 627 (Tex. 2002). The general rule for determining fair-market value is “the before-and-after rule, which requires measuring the difference in the value of the land immediately before and immediately after the taking.” Id. (citing Callejo v. Brazos Elec. Power Coop., Inc., 755 S.W.2d 73, 76 (Tex. 1988)).

If only part of one’s land is taken, the same rule applies, but “compensation is measured by the market value of the part taken plus any diminution in the value to the remainder of the land.” Zwahr, 88 S.W.3d at 627. If, in such a case, the purpose of the government’s taking is, say, to build a state park, and the park’s placement enhances the landowner’s property value as a result, the project-enhancement rule applies. That rule prevents the factfinder from considering such value enhancements because to compensate the owner in that amount would “place the landowner in a better position than he would have enjoyed had there been no condemnation.” Id. This would conflict with the goal of “adequate compensation,” which is to “make the landowner whole.” Id.

D. What Businesses Should Know

Section 402.031 of the Texas Government Code provides that the Attorney General must notify a landowner that their land is subject to condemnation and provide a Landowner’s Bill of Rights, and sums up all the rights that landowners should be cognizant of. These rights, many of which have already been discussed in this article, include:

1. notice of the proposed acquisition;

2. a bona fide good faith effort to negotiate with the condemnor;

3. an assessment of damages to the owner that will result from the taking;

4. a hearing under Chapter 21 of the Property Code, including a hearing on damages;

5. an appeal of a judgment, in a condemnation proceeding, including an appeal on the assessment of damages; and

6. the right to file a written complaint with the Texas Real Estate Commission regarding any alleged misconduct on behalf of the condemnor.

It thus goes without saying that there are ways to push back on any attempted exercise of eminent domain on privately owned commercial property. If anything, businesses should know that they can respond to a condemnation notice by seeking counsel and initiating a takings proceeding if compensation negotiation doesn’t proceed amicably or fruitfully.

How inflation impacts your business

2023-06-20T06:44:09Z

In general, the value of the US dollar decreases due to inflation. This year inflation is higher than it has been in 30 years, and it may hurt businesses that cannot pass along the higher costs. Inflation on consumer goods increased 8.3% over the last 12 months. While consumer goods such as food and personal products do not necessarily mean inflation on commercial property and businesses, they can. All aspects of the economy are connected, and inflation may cause trouble for your company in many ways, such as:

Your employees: Even if your company does not provide consumer products such as food or goods, your workforce still needs them. Regardless of how generous, their salaries may not go as far, leading many to seek new employment elsewhere.
Your inputs: If consumer products prices have risen, the chances are that the materials that go into them are also growing. Even if your business is primarily service-based, such as marketing or accounting, your overheads may rise.
Your energy costs: Energy costs are rising across the country and here in Texas. Rising energy costs go hand in hand with rising overhead costs, but it is so significant that it is a concerning issue on its own.
Your customers: With rising costs all over, your customers may find themselves unable to pay for your services. You may end up raising prices to meet expenses and lose your customer base.

Inflation anxieties are ever-present for any business, large or small. While a larger, more established company may initially weather these changes well, extended inflation will likely cause wide disruption. The worst effects of inflation most often hit companies that stick to “business as usual.” Today’s business landscape requires nimble, thoughtful responses to rapidly changing circumstances.

How to protect trade secrets during discovery

2023-06-20T06:44:21Z

Discovery is the crucial stage in the litigation process where parties seek to obtain the evidence they need to support their positions. Since parties may generally obtain “discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action,” broad swaths of documents and information are often requested. But what happens if information that must remain confidential, such as trade secrets, is asked for in discovery? Today we discuss how trade secrets can be kept out of discovery. Do we have to disclose our trade secrets? Businesses walk a fine line during litigation. While relevant information must generally be disclosed if requested, the disclosure of trade secrets can be detrimental to a business. Luckily, there are ways to protect certain proprietary information. Texas Rule of Evidence 507, known as the trade secrets privilege, gives parties facing the prospect of having to disclose trade secret information some relief. According to the rule, “[a] person has a privilege to refuse to disclose and to prevent other persons from disclosing a trade secret owned by the person….” Despite the trade secrets privilege, courts may still compel discovery of trade secrets if nondisclosure would “conceal fraud or otherwise work injustice.” The key challenge for the party asserting the trade secret privilege is proving that the information sought qualifies as a trade secret. If the party asserting the trade secret privilege meets its burden, “the burden shifts to the party seeking the trade secret discovery to establish that the information is necessary for a fair adjudication of its claim.” Determining whether information is a trade secret A trade secret can be “any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.” Courts weigh six factors when evaluating whether information is a trade secret:

The extent to which the information is known outside of the business;
The extent to which it is known by employees and others involved in the business;
The extent of measures taken to guard the secrecy of the information;
The value of the information to the business and its competitors;
The amount of effort or money expended in developing the information; and
The ease or difficulty with which the information could be properly acquired or duplicated by others.

Many people think of trade secrets as a company’s “secret sauce.” This idea leads some to believe their business doesn’t have any trade secrets. But the truth is, most companies have information that would qualify as a trade secret. It could be manufacturing processes, marketing tactics, or even customer information. Protect your business’s assets during litigation Today’s economy focuses on information more than ever, and companies in every industry must take steps to protect their trade secrets and other confidential information. If your business is facing a possible lawsuit, trade secret protection is an essential part of building a litigation strategy to preserve what is often a business’s most valuable asset.

Tex. R. Evid. 507. Tex. R. Evid. 507. In re Cooper Tire & Rubber Co., 313 S.W.3d 910, 915 (Tex. App.-Houston [14th Dist.] 2010, no pet.). Computer Associates Intern., Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). In re Valero Ref.-Texas, LP, 01-14-00149-CV, 2014 WL 4115917, at *3 (Tex. App.-Houston [1st Dist.] Aug. 21, 2014, no pet.).

Blockchain technology may help to prevent real estate fraud

2023-06-20T06:44:28Z

Investors and others who are involved in Texas commercial real estate may have heard about the disruptive potential of blockchain. For instance, blockchain may bring about the advent of the smart contract. Smart contracts tend to allow for greater transparency between parties in a deal, which can increase trust between those parties. It may also result in the deed to a property being transferred immediately after the contract’s conditions are met. Furthermore, blockchain may help to prevent fraud in the commercial real estate sector. This can save hundreds of millions of dollars in costs related to fraud. Using a blockchain enables investors and others to verify who owns a property and where funds for a purchase or other investment have come from. It also allows interested parties to look through every transaction related to a property to verify that it occurred correctly. Another way blockchain could disrupt commercial real estate is by allowing for property tokenizing. This can allow individuals to purchase a portion of a property instead of having to purchase the whole thing. It can also individuals to gain access to the private equity market and other markets that those with modest means were generally restricted from in the past. For property owners, blockchain can make it easier to manage cash flow and other financial data. Having a record of transactions and other important information about a property may prevent real estate disputes from occurring. If they do occur, it may be possible to end them in a timely manner. Legal counsel may help a party in such a dispute gather evidence that bolsters their position in settlement talks or in court. For example, having the deed to a commercial building or rental property might put to rest any questions about who owns it.

Terminating a commercial lease

2023-06-20T06:44:35Z

Business owners in Texas and around the country strive for success. In some cases, this requires moving to another area or to a building with more space. As a result, it may be necessary to break an existing commercial lease. Business owners may prepare for this by negotiating exit language before the lease is signed. Otherwise, it may be possible to simply ask the landlord to be let out of a lease. The landlord may be amenable to this if they can find a new tenant willing to pay higher monthly rent. It may also be possible to buy out the remainder of lease to get out of it sooner. To increase the odds of getting out of a lease, an individual may offer to find a replacement tenant. If a landlord isn’t willing to work out new lease terms, it may be possible to leave and risk a lawsuit for unpaid rent. However, this is generally seen as a last resort for a commercial tenant. It is also important to know that a landlord has a duty to actively search for a new tenant. If one is found, the landlord cannot charge two tenants the same rent at the same time. In many cases, a commercial lease is not a rigid document. Commercial tenants and landlords may be able to engage in good faith negotiations to amend or revoke a lease in a timely and favorable manner to both sides. An attorney may be able to assist with negotiations or help a tenant in the event of a lawsuit. Legal counsel may also assist in negotiating the terms of a lease before it is signed.

What rising inflation means for the real estate market?

2023-06-20T06:44:43Z

Economic trends are showing signs of increased inflation in Houston and throughout the United States. The normal cues for inflation are occurring in different areas of the marketplace and evidenced by increased construction costs, labor shortages and rising costs of commodities. Commercial real estate has been largely relied on as a hedge to inflation. Rising rents become the norm when inflation rises due to the leasing rates rising in concert with the commercial price index. When prices and wages rise, the real estate market usually increases. Commercial mortgages, real estate closings and secured transactions can all be influenced by these inflation conditions. Rent and expenses will likely increase faster than income. Online retailers are competing with offline retailers as the closure of traditional stores are influenced by supply and demand factors. Rental rates for both commercial and residential real estate will likely increase as signs of uneven inflation continue. The Fed may respond by increasing short-term interest rates, which could cause increased Treasury yields. Increased capitalization rates might reduce any impact in the area of increased income. Uneven, fragmented inflation could make it increasingly difficult to implement conventional protective safeguards. Property and market factors may require a unique approach. Commercial real estate investors might still find it beneficial to acquire properties due to tax benefits and access to a tangible asset. When considering investing in commercial real estate, a business and commercial lawyer specializing in real estate litigation may assist with any sales and purchase agreements. Their experience in secured transactions, zoning laws, venture capital and real estate land use might be useful in helping clients understand the risks associated with the various investment options.

Securing trade secrets

2023-06-20T06:44:50Z

Most businesses in Texas, and throughout the U.S., have trade secrets, which contribute to their operation and success. Sometimes, a business’ competitors may seek to obtain this information through nefarious means in order to catch up or gain a competitive advantage in the market. At The Jackson Law Firm, we often consult with businesses that have information that must be kept confidential. In this post, we will discuss trade secrets and how they can be protected. In general, trade secrets are confidential devices, techniques or information that a company uses to manufacture, distribute, sell or advertise its products. This could include food recipes or beverage formulas, as well as manufacturing techniques or marketing strategies. When the owner of these types of information makes an effort to keep them confidential, they may be protected by federal trade secret law. Although the trade secret theft is prohibited, it can, and does still occur. There are a number of steps that you can take to protect your trade secrets. Some of the most common methods for safeguarding secret information include the following:

Marking sensitive documents as confidential
Maintaining computer and network security
Requiring employees to sign nondisclosure agreements
Locking secret materials and information away after business hours

You may also choose take further actions to ensure your sensitive information remains confidential. This could include keeping secret materials or information in a locked safe, limiting employees’ access to sensitive information, and not disclosing which employees have knowledge and access to this information.

The importance of an enforceable contract

2023-06-20T06:44:57Z

A contract is one of the most important tools a freelance professional or business owner in Houston has at his or her disposal. Contracts form the foundation of the relationship between a business and a client. When properly written, contracts provide clarity and eliminate a variety of problems that could potentially arise. By creating certainty, a company can spend its time delivering a quality product or service. If a company or client breaches the terms of a contract, the document itself could spell out what the penalties are. If there is any confusion as to whether a contract has been breached, a written contract can serve as the starting point for negotiations. It can also obligate parties to go to mediation or present their case at an arbitration hearing before heading to court. There are events that neither party to a contract could reasonably see coming. For instance, an earthquake or a flood could wipe out a server or otherwise make it impossible for a company to meet its contractual obligations. If necessary, a contract could pave the way to ending or cancelling a relationship between a professional and a client. It can also give vendors a way to end a relationship with another business. If contract issues arise between two or more parties, it may be worthwhile to have an attorney review the contract. This might make it possible to determine if any party to the deal has breached the deal. An attorney may also assist in formal or informal actions to resolve any issues related to the breach.

Types of real estate fraud

2023-06-20T06:45:09Z

There has been an increase in mortgage and real estate scams in Texas, and throughout the U.S. While private homeowners are often the targets of these schemes, many businesses have also been taken advantage of in the commercial real estate market. In order to help protect yourself, and your business, it is important for you to have an understanding of real estate fraud. Commercial real estate fraud schemes are often complex and can take on many forms. There may be multiple people involved, including appraisers, accountants and brokers. The aim of these schemes is to take advantage of, deceive or exploit you, or your business. One of the most common types of real estate fraud is the misappropriation of funds. According to the Department of the Treasury, this happens when a borrower diverts funds obtained through a loan or payment to a project that they were not approved for. For example, you pay a property management company rent for the property that houses your business. Then, instead of paying the owner of, or mortgage on, the building, the property owner uses the funds to pay for another property. This could qualify as misappropriation of funds. Advance fee schemes are another common real estate fraud scam. This type of scam involves offering financing without the ability or intention to provide it and it can take on a number of forms. For example, you are struggling to obtain financing for a new property. A con artist approaches you and offers to assist you in finding a financing agreement. After you have paid a finder’s fee and signed a contract, you learn that you are not actually eligible for the financing the scammer offered. Commercial real estate fraud also frequently involves misrepresentations. This involves submitting falsified documents, making false statements or providing fraudulent statements. For example, a potential borrower gives you fabricated appraisals or financial statement. These statements bolster his or her loan application, so you provide him or her with a loan. In actuality, however, the borrower does not qualify for the loan, and may not be able to fulfill its obligations.

The Jackson Law Firm Successfully Defends Trial Court Victory on Appeal

2023-06-20T06:45:16Z

The litigation arose out of failed negotiations for an agency agreement designed to help the Jackson Law Firm’s client expand its international logistics operations into the United States. After negotiations failed, plaintiffs claimed they were owed a severance payment and reliance damages. When the Jackson Law Firm’s client rightfully refused to pay, plaintiffs filed suit in Harris County District Court.

On appeal, plaintiffs argued that the district court erred because there was at least a scintilla of evidence introduced to support each element of plaintiffs’ claims.