On March 26, 2009, McDowell, Rice attorney Tom Buchanan obtained a landmark ruling from the Supreme Court of Nevada. In turn, the ruling led to an extremely favorable settlement of a major case for his client, a national engineering firm. In this case, The Mandalay Resort Group sued for negligence and breach of contract arising out of the design and construction of the Mandalay Bay Hotel and Casino in Las Vegas, Nevada. Mandalay ultimately claimed damages of approximately $32 million alleged to have resulted from the settlement or subsidence of the structure.

Mr. Buchanan filed in the United States District Court of Nevada a motion for summary judgment asserting that the negligence claims were barred by Nevada’s economic loss doctrine and that breach of contract was the only potential remedy. The question was crucial because the contract, which Mandalay had not signed, included a limitation of liability clause of $50,000. The federal court certified the question to the Nevada Supreme Court, which agreed with Mr. Buchanan that the economic loss doctrine bars negligence-based claims against design professionals who provide services in commercial property development, when plaintiffs attempt to recover purely economic losses. The ruling precluded Mandalay Resort Group from pursuing a negligence claim. The focuses after remand were (1) the terms of the contract between the parties and (2) whether the contract with the limitation-of-liability clause was the operative agreement. By severely limiting the potential damages, Mr. Buchanan was able to reach a satisfactory settlement at essentially the cost of defense for all claims in the lawsuit and avoid a lengthy and expensive trial. Mr. Buchanan worked with McDowell, Rice attorney Linda McFee in the briefing and he made the oral argument before the Nevada Supreme Court on this case.

Pete Smith is well known in the legal community for his tenacious and effective trial advocacy.  However, he also is recognized nationally for his expertise in guiding clients through difficult business and economic problems. In today’s troubled economy, clients call on Mr. Smith for practical legal advice and creative solutions to their business difficulties.  He routinely is quoted in the press as a knowledgeable source of information on commercial transactions, business development, and bankruptcy law.

A recent noteworthy case is the highly publicized Chapter 11 bankruptcy case involving the large West Edge multi-use development project on the Country Club Plaza in Kansas City, Missouri.  Mr. Smith represents the developer, Trilogy Development Company.

Mr. Smith has been profiled in many Kansas City area publications, including the Kansas City Business Journal, The Kansas City Star, Ingram's magazine, and Super Lawyers magazine.  A recent story about Mr. Smith and his law practice was featured in The Hills, a Kansas City publication.

On June 9, 2014, the United States Supreme Court issued a unanimous opinion clarifying the procedure to be followed in a "Stern"case, a case involving a matter which Congress classified as within a Bankruptcy Court's "Core" jurisdiction, but which the Constitution does not permit to be decided by a non-Article III judge. The Court held the appropriate procedure in such a case is for the Bankruptcy Court to submit proposed findings of fact and conclusions of law, for the District Court to consider de novo and render judgment. Executive Benefits Insurance Agency v. Arkison, Chapter 7 Trustee of Estate of Bellingham Insurance Agency, Inc., 2014 WL 2560461 (Case No. 12-1200, June 09, 2014).

The recent decision comes three years after Stern v. Marshall, 564 U.S. ___, 131 S.Ct. 2594 (2011), involving a dispute between Vickie Marshall (known as Anna Nicole Smith) and the estate of her late husband. Stern held that Congress' attempt to provide bankruptcy courts with jurisdiction over a tortious interference counterclaim asserted by a debtor in bankruptcy against a creditor's proof of claim violated the Constitution's separation of powers. Although Congress classified such counterclaims as "Core" proceedings which bankruptcy court judges could hear and determine, the Supreme Court had held that Article III does not permit such claims to be finally determined by a judge who does not have the tenure and salary protections of an Article III judge, and that Congress' attempt to withdraw matters of private right from determination by Article III judges was an impermissible encroachment on the Constitution's separation of powers.

The ruling that some core proceedings could not constitutionally be finally determined by bankruptcy court judges was perceived as creating a procedural gap, because bankruptcy judges were not explicitly authorized to propose findings of fact and conclusions of law in a core proceeding, but only in non-core matters, under 28 U.S.C. § 157(c).  

The decision in Executive Benefits addresses how courts should proceed when presented with a Stern claim, and rules that the procedures applicable to non-core matters under 28 U.S.C. § 157(c) apply to fraudulent transfer claims, assuming without deciding that such claims are  Stern claims that Article III does not permit to be finally determined by bankruptcy judges.

In Executive Benefits, the Debtor, Bellingham Insurance Agency, Inc. (BIA) was owned by Nicolas Paleveda. BIA became insolvent in early 2006 and ceased operation on January 31, 2006. The next day, Paleveda used Bellingham funds to incorporate Executive Benefits Insurance Agency, Inc. (EBIA) and by the end of the year Paleveda caused BIA's assets to be transferred to EBIA. On June 1, 2006, BIA filed a voluntary Chapter 7 bankruptcy. The Chapter 7 trustee filed a complaint against EBIA to recover the BIA assets transferred to EBIA, alleging claims of fraudulent conveyance under 11 U.S.C. § 544 and under state law. The Bankruptcy Court granted summary judgment in favor of the trustee on all claims. EBIA appealed to the District Court, which conducted de novo review and affirmed, entering judgment for the trustee.

EBIA appealed to the Ninth Circuit Court of Appeals, and after filing its opening brief, the Stern case was decided. In light of Stern'sruling that Article III of the Constitution did not permit a Bankruptcy Court to enter final judgment on a tortious interference counterclaim though statute authorized final adjudication of the claim by the Bankruptcy Court, EBIA moved to dismiss its appeal for lack of jurisdiction. The Ninth Circuit denied EBIA's motion and affirmed the District Court. In re Bellingham Ins. Agency, Inc., 702 F.3d 553 (2012). The Ninth Circuit concluded that Article III does not permit a bankruptcy court to enter final judgment on a fraudulent conveyance claim against a noncreditor unless the parties consent, but the Bankruptcy Court's adjudication of the claim was permissible because EBIA had impliedly consented to the Bankruptcy Court's adjudication of the claim. The Ninth Circuit also observed that the Bankruptcy Court's judgment could be treated as proposed findings of fact and conclusions of law subject to de novo review by the District Court. 702 F.3d at 565-566.

On certiorari, the Supreme Court held that when a bankruptcy court is presented with a Stern claim, the proper course is to issue proposed findings of fact and conclusions of law, which the district court will then review de novo and enter judgment. Executive Benefits, slip op. 4. The Court determined that the case did not require addressing whether EBIA in fact consented to the Bankruptcy Court's adjudication of the claim and whether Article III permits a bankruptcy court to enter final judgment on a Stern claim with consent of the parties, but the Court explicitly "reserve[d] that question for another day." Id., slip op. 4, note 4. 

The Court reviewed the historical distinction between summary jurisdiction of bankruptcy courts and plenary jurisdiction belonging to a district court or appropriate state court prior to adoption of the Bankruptcy Code in 1978, and its determination in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) that the 1978 Act could not constitutionally vest bankruptcy judges with jurisdiction to decide a state law contract claim against an entity not otherwise a party. Northern Pipeline distinguished cases involving public rights, which may be removed from the jurisdiction of Article III courts and cases involving private rights, which may not. In the wake of the Northern Pipeline decision, Congress amended the jurisdictional statutes in 1984. The amendments provided for district courts to have original and exclusive jurisdiction of all cases under title 11, and may refer to bankruptcy judges any proceedings arising under, arising in or related to a case under title 11. The 1984 amendments divided matters into core and non-core proceedings. A nonexclusive list of sixteen categories of "core" proceedings includes counterclaims by the estate against persons filing claims against the estate, and proceedings to determine, avoid or recover fraudulent conveyances. § 157(b)(2)(C), (H). The statutes authorize bankruptcy judges to hear and determine such claims and to enter appropriate orders and judgments on them, § 157(b)(1), with appeal to the district court. The statutes provide that in non-core proceedings that are "related to a case under title 11" the bankruptcy court may hear the proceeding and "submit proposed findings of fact and conclusions of law to the district court," § 157(c)(1), which the district court must review de novo and enter final orders or judgments. The statute provides an exception that permits the bankruptcy judge to hear and determine and enter orders and judgments if all parties consent.  § 157(c)(2). 

In Stern, the Court held that by designating a common law counterclaim against a creditor as a core proceeding and authorizing the bankruptcy court to adjudicate such claim to final judgment, Congress had improperly vested the Bankruptcy Court with judicial power which Congress could not, consistent with Article III of the Constitution, confer on the Bankruptcy Court. Executive Benefits, slip op. 8. In Executive Benefits, the Court addressed how the bankruptcy court should proceed when presented with a claim labeled as "core" by Congress, but which may not be adjudicated by a bankruptcy court.

The Court in Executive Benefits disagreed with the view of lower courts and of the Ninth Circuit that Stern claims result in a statutory procedural gap, because § 157(b) does not expressly authorize a bankruptcy court to submit proposed findings and conclusions in a core proceeding, such that the district court is required to hear all Stern claims in the first instance. The Court concluded the statute permits Stern claims to be treated under the non-core procedure of § 157(c), in light of the severability clause in 98 Stat. 344, note following 28 U.S.C. § 151. The Court held that the severability clause closes the so-called "gap." When a Stern claim is identified, the core label and its procedures are invalid, and the provisions of § 157(c) become applicable. The claim is treated as non-core, and "[t]he bankruptcy court should hear the proceeding and submit proposed findings of fact and conclusions of law to the district court for de novo review and entry of judgment." Executive Benefits, slip op. 10. Treating the invalid portion of the statute as severable and giving effect to the remainder is appropriate because it is not evident that Congress would have preferred no statute at all, and it is consistent with the statement in Stern that removal of claims from core bankruptcy jurisdiction does not "meaningfully change the division of labor in the current statute." Executive Benefits, slip op. 10; Stern, slip op. 37.

The Court noted that the Court of Appeals held and "we assume without deciding" that the fraudulent conveyance claims presented are Stern claims.  Syl., 2; slip op., 11. For purposes of the opinion, the Court stated the application of the "core" label and procedures had been held invalid, and the claims were encompassed by the "related to" provisions of § 157(c)(1). The Court observed that the Ninth Circuit held and "no party disputes" that the claims were not permitted to be treated as core under Article III. The Court stated that fraudulent conveyance claims, asserting that property that should have been part of the bankruptcy estate available for distribution to creditors was improperly removed, are "self-evidently 'related to a case under title 11' under any plausible construction of the statutory text," again emphasizing that "no party contends otherwise." The Court held the Bankruptcy Court was therefore permitted to submit proposed findings and conclusions under § 157(c)(1).

Although this procedure was not followed in Executive Benefits, the Supreme Court affirmed nonetheless. The Supreme Court explained that the District Court did not relabel the bankruptcy order as proposed findings and conclusions because EBIA did not argue the Bankruptcy Court lacked authority, but the District Court did review the Bankruptcy Court's grant of summary judgment de novo and separately entered judgment. EBIA argued it was constitutionally entitled to District Court review of the fraudulent transfer claims. The Supreme Court found it unnecessary to decide whether EBIA had consented to the Bankruptcy Court determining the matter or whether such consent is permissible, because EBIA "received exactly" what it claimed it was entitled to receive: an Article III court reviewing de novo the fraudulent transfer claims. The Supreme Court held the District Court's de novo review and entry of its own order "cured any error."  Slip op. 12-13.

Don Scott practices in McDowell Rice's Bankruptcy, Workouts & Financial Restructuring group.

McDowell Rice Smith & Buchanan PC announced that Ania Wlodek Moncrief has joined the Firm as an Associate and will practice in the Firm’s Litigation & Dispute Resolution Group. 

Prior to joining McDowell Rice, Ms. Moncrief served as a law clerk for several of the judges of the District Court of Johnson County, Kansas. 

Ms. Moncrief received her law degree, magna cum laude, from the College of William & Mary School of Law in 2012, where she was a staff member of the William & Mary Journal of Women and the Law, and coached the undergraduate mock trial team. She received her Bachelor of Arts degree in History and French, magna cum laude, from The University of Missouri-Kansas City in 2009.

The Merriam-Webster Dictionary defines social media as, “forms of electronic communication through which users create online communities to share information, ideas, personal messages, and other content.” 

In 2013, the Pew Research Centers Internet & American Life Project reported that 73% of online adults now use a social media/networking site of some kind. Facebook is the dominant social networking platform but 42% of online adults now use multiple social networking sites.  Other social media sites include LinkedIn, Twitter and Instagram. Similarly many conversations occur through other forms of electronic communication like text messages, emails or photos.

Given the large percentage of online adults using social media, this information is often critical evidence in family law and other types of cases. It can help, hurt or destroy chances for a successful resolution or favorable result. Social media could be requested through the discovery process or produced as exhibits as trial. The following guidelines provide practical and helpful information regarding social media usage:

• Do not discuss your case with others through any medium. Email can be forwarded or printed, postings on FaceBook are seen by the public, photos can be taken out of context and texting on phones all are considered statements released to the public. Friends and family members have no obligation to keep your communications confidential.
• Be careful about communications with your attorney or their staff on a device provided by your employer or shared with someone else.
• Create a private email account and use a password for that account accessible only by you. If someone else knows your passwords for private accounts, create new passwords.
• Do not comment on blogs or public forums about your case or your feelings towards others.
• Examine the privacy settings on your electronic accounts. Be sure you know what content is public and what content is private. Keep in mind that no electronic or written content is truly ever private.
• Do not access social media accounts, phones, email accounts or electronic devices that don’t belong to you. Do not send messages from an account that doesn’t belong to you or pretend to be another person. 
• Do not ask friends or family to “friend” adverse parties so that they can obtain information about that person.
• If you receive concerning electronic communications from an adverse party, document the information and talk with your attorney about it.
• If you have children, make sure you know the accounts and devices they can access. Don’t forget that accounts may be accessible on an old device given to your child. 
• Think before you post; think before you click “send.” Act as though every text message, email or post will be read by the Judge or some other third party in your case; what would they think of your message?

It is critical to discuss with your attorney what social media and networks you use and appropriate interaction with others on social media before and during litigation.  Furthermore, it is imperative to discuss with your attorney, removing offending information, pictures, postings or media from your own profile prior to taking any action or prior to deleting or deactivating a social media account when entering into potential litigation. Generally it is best not to deactivate or delete an account or past information on a social media account when litigation is foreseeable or underway.

If you delete or even deactivate an account, you may run the risk of being accused of hiding or destroying evidence or spoliation of evidence. Spoliation occurs where evidence is destroyed or significantly altered or where a party fails to preserve property for another’s use as evidence in pending or reasonable foreseeable litigation. Mosaid Technologies v. Samsung Electronics, 348 F.Supp.2d 332, 335 (D.N.J 2004). Potential sanctions for spoliation include: dismissal of a claim or granting judgment in favor of a prejudiced party; suppression of evidence; an adverse inference, referred to as the spoliation inference; fines and attorney fees and costs. Id. at 335.

Social media can be a gold mine for use against an adverse party, but it can be a minefield as a client if you do know the potential risk and implications on your case. When in doubt, ask your attorney before communicating through any medium.

Missouri law previously required that to recover for retaliatory discharge based on the filing of a workers’ compensation claim, the terminated employee must show that the work comp claim was the “exclusive cause” for his or her discharge. In other words, the employee had to prove that the work comp claim was the only reason for the alleged retaliatory discharge. The employer’s proof of any other valid reason for termination generally defeated the employee’s retaliatory discharge discrimination claim.

In Templemire vs. W&M Welding (Case No. S.C. 93132-Supreme Court of Missouri), the Missouri Supreme Court changed that rule, and overruled all prior cases requiring exclusive causation. The discharged employee now need only show that his or her filing of a work comp claim was a “contributing factor” to the alleged discrimination or retaliatory discharge. Such proof allows the employee to defeat the employer’s summary judgment motion, and presumably submit his or her discrimination/ retaliatory discharge claim to the jury.

Employers should take care in discharging an employee with a current or recent work comp claim. It is possible, under the right facts, to show that the work comp claim played no part in the employer’s termination decision. But, because of the new contributing factor standard, it is even more important for the employer to properly and fully document the employee’s file and the legitimate reasons for discharge. Failure to do so may allow the employee to argue that because the stated reasons for termination are “weak,” the workers’ compensation claim must have played a part in the termination decision.

At its 2014 Annual Meeting, McDowell Rice Smith &  Buchanan, P.C., announced the re-election of R. Pete Smith as Chairman, Thomas R. Buchanan as President, Kristie Remster Orme as General Counsel, and Louis J. Wade.

Every year, our goal for the McDowell Rice Smith & Buchanan Volunteer Program is to achieve 100% participation, and we did so again in 2013 with every attorney and staff member volunteering their time for over 80 personally-selected charities.  In addition to our volunteer efforts, Firm members contributed and/or helped raise over $92,100  in support of  approximately 50 charities and various fundraising campaigns throughout the Kansas City area. 

Client is a family owned fast food restaurant.  In August, 2013, several of restaurant’s employees struck as a part of the nation-wide fast food workers’ strike.  Following the one day strike, one striker, with union assistance, brought a NLRB unfair labor practices charge against restaurant.  Employee claimed that restaurant cut his hours and changed his duties as a result of his participation in the strike. 

Gorman and restaurant answered the charge, providing evidence that disproved employee’s claim, including proof that employee’s change in hours resulted from the seasonal nature of restaurant’s business. At Gorman's direction, restaurant's owner and two management employees also submitted to interviews by, gave affidavits to, the NLRB. Shortly therafter, the NLRB dismissed the charge in a one-sentence Decision to Dismiss, stating "(t)here is insufficient evidence to establish a violation of the Act."

This year, McDowell Rice committed to a record-breaking number of adoptions, surpassing our former record. McDowell Rice also collected over $5,000 in donations during the 2013 United Way Campaign, slightly higher than last year's donations.