Publications Archive

The 10 Scariest Things in Arkansas Real Estate Law

October 2016

by J. Cliff McKinney II |

J. Cliff McKinney II was a presenter at the Arkansas Bar Association seminar, Scariest Things You Don’t Know:  Frighteningly Common Mistakes Lawyers Make, held on October 31, 2016, in Little Rock.  Mr. McKinney’s topic was real estate law and his presentation included the pitfalls of magic language, silence regarding mineral rights, the correct way to list the name of a trust, due diligence, warranty deeds, the Clean Water Act, the National Historic Preservation Act, and dower and curtesy.  Please click the link below to see the course materials.

For more information, please contact J. Cliff, McKinney 501-379-1725 or cmckinney@QGTlaw.com

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Common Mistakes Lawyers Make – Agricultural Law

October 2016

by R. Seth Hampton |

R. Seth Hampton was a presenter at the Arkansas Bar Association seminar, Scariest Things You Don’t Know:  Frighteningly Common Mistakes Lawyers Make, held on October 31, 2016, in Little Rock.  Mr. Hampton’s topic was agricultural law and his presentation covered impacts of federal conservation and agricultural programs on sales and leases of farmland, security interests in farm products and landlord’s lien, common pitfalls to consider when drafting agricultural lease agreements, and applicability of Section 18-16-105’s requirements for terminating oral leases for farmland.  Please click the link below to see the course materials.

For more information, please contact R. Seth Hampton at 501-379-1774 or shampton@QGTlaw.com

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Unjustly Sued: Problems with Unjust Enrichment Claims Against Contractual Non-Parties

September 26, 2016

by Lindsey C. Pesek |

Joseph Price and I recently represented a co-defendant sued in Arkansas state court by a plaintiff for breach of contract.  The client was not a party to the contract at issue, so the plaintiff also brought an unjust enrichment claim based on the same underlying facts as the breach-of-contract claim.  The case of Servewell Plumbing, LLC v. Summit Contractors, Inc., 362 Ark. 598, 210 S.W.3d 101 (2005), addressed this situation.

Arkansas law is well established that, absent a few exceptions[1], unjust enrichment “has no application when an express written contract exists.”  Servewell, 362 Ark. at 612, 210 S.W.3d at 112.  The Eighth Circuit explained the general rule:

The reason for the rule that someone with an express contract is not allowed to proceed on an unjust enrichment theory, is that such a person has no need of such a proceeding, and moreover, that such a person should not be allowed by means of such a proceeding to recover anything more or different from what the contract provides for.

U.S. v. Applied Pharmacy Consultants, Inc., 182 F.3d 603, 609 (8th Cir. 1999).  In Servewell, the Arkansas Supreme Court expanded the application of this general rule to non-parties to the contract.  See 362 Ark. at 612, 210 S.W.3d at 112.

Servewell involved a contract dispute between a subcontractor and a general contractor and owner of a development project.  Among other allegations, the subcontractor brought a claim for unjust enrichment against the developer of apartment buildings.  The claim was based on the general contractor’s failure to pay the subcontractor for property enhancements pursuant to a written contract between the general contractor and subcontractor.  See id. at 601, 210 S.W.3d at 104.  The developer was not a party to the contract between the subcontractor and general contractor.  See id.  The subcontractor argued that the developer had been unjustly enriched by the subcontractor’s improvements to the developer’s property, while the subcontractor had received no compensation for its performance in providing the benefits to the developer.  See id. at 612, 210 S.W.3d at 111-12.  The circuit court rejected the subcontractor’s argument and dismissed the claim because the contract between the general contractor and subcontractor governed the payment for services aspect of the parties’ relationship.  Id., 210 S.W. 3d at 112.

On appeal, the Supreme Court upheld the circuit court’s ruling that the subcontractor’s claim against the developer for unjust enrichment lacked merit.  Id. at 612-13, 210 S.W.3d at 112.  In doing so, the Supreme Court reaffirmed the “settled principle” that a party may not recover under a theory of unjust enrichment when a valid contract exists.  Id. at 612, 210 S.W.3d at 112.  The Supreme Court, however, recognized a new and narrow exception to that settled principle, stating that the “subcontractor could recover from a [non-party to the contract], even when a separate contract exist[ed] between the subcontractor and general contractor, if the [non-party] has agreed to pay the general contractor’s debt or if the circumstances surrounding the parties’ dealings can be found to have given rise to an obligation to pay.”[2]  Id. at 612-13, 210 S.W.3d 112 (quoting U.S. E. Telecomm., Inc. v. U.S. W. Commc’ns Servs., Inc., 38 F.3d 1289, 1296-98 (2d Cir. 1994)).  Despite this recognition, the Supreme Court affirmed the dismissal of the subcontractor’s unjust enrichment claim because “there [was] no evidence of any such agreement between [the parties]…the general rule—that one cannot recover in quasi-contract when an express contract exits—governs the matter.”  Id. at 613, 210 S.W.3d at112.

While Servewell is not a new case, and the majority of the opinion discusses construction law issues, Servewell did not limit its holding to the particular facts and more recent non-construction case law cites ServewellSee Tuohey v. Chenal Healthcare, LLC, No. 4:15CV00506 JLH, 2016 WL 1180339, at *5 (E.D. Ark. Mar. 25, 2016) (“This rule also applies to defendants who are not a party to the express contract.”) (citing Servewell); King v. Homeward Residential, Inc., No. 3:14CV00183 BSM, 2014 WL 6485665, at *2 (E.D. Ark. Nov. 18, 2014) (“Indeed, the existence of a valid and enforceable written contract usually precludes recovery in quasi-contract, even against a third party.”) (citing same).

The tenets set forth in Servewell should be considered when representing a client sued for unjust enrichment when the case includes a written contract, even when the client is not a party to that contract.

[1] Exceptions to this general rule may arise when an express contract is void or does not fully address a subject.  See Campbell v. Asbury Auto., Inc., 2011 Ark. 157, 23, 381 S.W.3d 21, 37; see also Klein v. Arkoma Prod. Co., 73 F.3d 779, 786 (8th Cir. 1996).

[2] Despite this narrow exception, you should be aware of the statute of fraud’s prohibition for these types of agreements.

For more information, please contact Lindsey C. Pesek at 479-444-5211 or lpesek@QGTlaw.com.

Note:  This article appeared in the September 26, 2016, issue of the Arkansas Association of Defense Counsel newsletter.  Click the link below to read the actual publication.

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Arkansas Supreme Court Cures Defect in Thousands of Orders in Two Arkansas Counties

September 2016

by Sarah Keith-Bolden |

A recent decision by the Arkansas Court of Appeals temporarily “call[ed] into question the effectiveness of thousands of orders in this state.”  In re Admin. Order No. 2(b)(2), 2016 Ark. 172, at 2 (per curiam).  Before the court was a judgment that was stamped “RECORDED” by the Baxter County Circuit Clerk’s office.  Havner v. Ne. Ark. Elec. Coop., 2016 Ark. App. 149, at 3.  Neither party questioned the effectiveness of the judgment.  See id. (“Whether an order is final and appealable is a matter going to our jurisdiction; jurisdiction is an issue that we are obligated to raise on our own motion.”).

The Arkansas Court of Appeals, however, noted that a judgment is entered—and potentially appealable[1]—only when the circuit clerk “stamp[s] or otherwise mark[s] it with the date and time and the word ‘filed.’”  Id. at 4 (emphasis added) (quoting Ark. Sup. Ct. Admin. Order No. 2(b)(2));  see Nat’l Home Cntrs, Inc. v. Coleman, 370 Ark. 119, 120-21, 257 S.W.3d 862, 863 (2007) (explaining that a ruling from the bench is not final and appealable until it is “reduced to writing and filed of record”).  Because the order before it had been “recorded but never filed,” the court held, it was not final or appealable.  Havner, 2016 Ark. App. 149, at 5.  The court dismissed the appeal without prejudice.  Id.

Petitioning for rehearing by the Arkansas Court of Appeals or review by the Arkansas Supreme Court, the appellant attached an affidavit by the Baxter County Circuit Clerk, who affirmed that the software utilized by the clerk’s office since February 2015 stamped all documents as “recorded” and that the judgment was considered “filed” by the clerk’s office.  Appellant’s Petition for Rehearing at Ex. 3, Havner v. Ne. Ark. Elec. Coop., No. CV-15-468 (Ark. Ct. App. Mar. 14, 2016); Appellant’s Petition for Review at Ex. 3, Havner v. Ne. Ark. Elec. Coop., No. CV-16-219 (Ark. Sup. Ct. Mar. 14, 2016).  It turned out that the Pike County Circuit Clerk, too, had been stamping documents as “recorded” rather than “filed” since May 2013.  In re Admin. Order No. 2(b)(2), 2016 Ark. 172, at 1–2 (per curiam).  All of the orders purportedly entered in Baxter County for a year and Pike County for nearly three years were, therefore, potentially “in limbo,” and the time period for appealing these orders might not have begun to run.  See Deer/Mt. Judea Sch. Dist. v. Kimbrell, 2013 Ark. 393, at 4-5, 7-8, 430 S.W.3d 29, 35 (explaining that claims “remain[] ‘in limbo’ until all outstanding claims [a]re either finally adjudicated or [a]re otherwise no longer a bar to finality and a final order [i]s entered”); see also Ark. R. App. P.–Civil 4(a) (providing that a notice of appeal must be filed within 30 days of the “entry of the judgment, decree or order appealed from”) (emphasis added).

The Arkansas Supreme Court responded with a per curiam order that chastised clerks for failing to comply with the court’s “clear directive . . . to stamp or otherwise mark judgments, decrees and orders . . . with the word ‘filed’” but decreed that all orders “marked ‘recorded,’ or ‘presented’ and ‘recorded,’ for the period beginning May 1, 2013, and ending April 14, 2016,” would be deemed “filed.”  In re Admin. Order No. 2(b)(2), 2016 Ark. 172, at 1–2 (per curiam).    From April 14th on, however, clerks are expected to stamp all judgments, decrees, and orders with the word “filed.”  Id.  As for the Havner parties, although the Arkansas Court of Appeals declined to reconsider its holding, the Arkansas Supreme Court granted review.  Letter Order, Havner v. Ne. Ark. Elec. Coop., No. CV-15-468 (Ark. Ct. App. Apr. 6, 2016); Letter Order, Havner v. Ne. Ark. Elec. Coop., No. CV-16-219 (Ark. Sup. Ct. Apr. 21, 2016).  The appeal is now pending before the Arkansas Supreme Court.  Assuming the judgment passes muster apart from the clerk’s stamp, the court will be able to consider the appeal.

[1] Rule 2 of the Arkansas Rules of Appellate Procedure–Civil outlines the types of civil orders, such as final judgments, from which an appeal may be taken.

For more information, please contact Sarah Keith-Bolden at 501-379-1789 or sbolden@QGTlaw.com.

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How the Change to Rule 26 is Changing Discovery

September 2016

by Amber Davis-Tanner |

Litigants – especially defendants – have historically lamented the broad scope of discovery allowed by the Federal Rules of Civil Procedure.  Discovery often is the most time-consuming and contentious aspect of litigation.  In 2010, the Committee on Rules of Practice and Procedure met at the Duke University School of Law to develop strategies to “improve the disposition of civil cases by reducing the costs and delays in civil litigation…and furthering the goals of Rule 1 ‘to secure the just, speedy, and inexpensive determination of every action and proceeding.’ ”

For more information, please contact Amber Davis-Tanner at 501-379-1784 or adtanner@QGTlaw.com.

Note: The above is an excerpt from the article published in the Fall/Winter 2016 issue of USLAW Magazine. Click the link below to read the actual publication.

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The FDIC’s Expanding View of Golden Parachute Payments

Summer 2016

by Daniel. J. Beck |

“In the immediate aftermath of the financial collapse in 2008, the phrase ‘golden parachute’ was repeatedly printed in headlines when referring to large bonuses executives were receiving after leaving their companies and the world economy in ruins.  As the Treasury tried to stem the tide of bank failures through recapitalization efforts such as TARP, it prohibited certain incentive compensation practices for institutions who received funds through such programs.  Under the TARP regulations, any company receiving TARP funds could not give ‘golden parachute payments’ to senior executive officers for any reason, except for payments for services performed, until such funds were repaid to the Treasury.”

For more information, please contact Daniel J. Beck at 501-379-1762 or dbeck@QGTlaw.com.

Note:  The above is an excerpt from the article published in the Summer 2016 issue of The Arkansas Community Banker.  Click the link below to read the actual article.

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Taxation of Build-Out Allowance

July 2016

by C. Ryan O’Quinn |

In negotiating a build-out allowance from its landlord, does a tenant create income for itself?  Unless the tenant has met the requirements of Internal Revenue Code Section 110, the answer is probably unclear.  The crux of the analysis in determining whether a tenant has income from landlord-funded improvements is whether the tenant “owns” the improvements.  If the tenant owns the improvements, then it has been enriched from the landlord-provided allowance and has realized income.

But what is “ownership” in this context? Outside of IRC 110, the IRS has determined ownership for these purposes by examining seven factors:  (1) who has legal title, (2) how have the parties to the transaction treated it, (3) did the tenant acquire an equity interest in the property, (4) who has the right to possess the asset, (5) which party pays the property tax, (6) which party bears the risk of loss or damage to the property, and (7) which party receives the profits from the operation and sale of the property.  While these seem reasonable, seven-factor tests from the IRS rarely produce consistent, reliable results.

Section 110 of the Internal Revenue Code is meant to provide consistency and reliability in determining the taxation of landlord-provided build-out allowances.  If Section 110 applies to a build-out allowance, then it is not included in the gross income of the tenant (whether as cash or a rent reduction).

Section 110 has a few requirements:

  1. The lease must be a short-term lease of retail space. Section 110 is only helpful for retail tenants.  For purposes of Section 110, a retail tenant is any person that sells tangible personal property or services to the general public.  A “short term lease” is a lease having a duration of fewer than 15 years
  2. The build-out allowance has to be for the purpose of constructing or improving qualified long-term real property for use in the tenant’s trade or business at such retail space. “Qualified long-term real property” means nonresidential real property that is part of or present at the retail space of the tenant.  The construction or improvements must revert to the landlord at the end of the lease.
  3. The lease agreement must expressly state that the build-out allowance is for the purposes of constructing the improvements. It is crucial that the lease agreement not simply provide a discounted rent to allow the tenant additional funds to complete the build-out.
  4. The build-out allowance must be noted in a statement attached to the tenant’s and landlord’s income tax returns.

By complying with Section 110, a retail tenant can ensure its treatment of a build-out allowance for tax purposes is respected by the IRS.

For more information, please contact C. Ryan O’Quinn at 501-379-1736 or roquinn@QGTlaw.com.

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Federal Regulation of Natural Gas Production and Storage Expands in 2016

July 2016

by Michael B. Heister |

In the last couple of months, the federal government has implemented two key efforts – one by regulation and one by law – of great importance to Arkansas’s natural gas producers.  These laws are part of the broader trend nationwide of trying to enhance the nation’s energy infrastructure, which has been justified on a variety of grounds including national security, anti-terrorism, environmental protection, and supporting domestic employment.  The declines in energy prices over the last few years may have depressed resource production in Arkansas for the time being, but it is critical that owners/operators be aware of these developments to ensure that when they do resume production, it is in compliance with standards that might not have been in effect when production was halted in 2012 or 2013.

The first of these became law on June 3, 2016, when the U.S. Environmental Protection Agency (“EPA”) released its final rules for reducing methane emissions from the oil and gas industry – Oil and Gas Sector:  Emission Standards for New, Reconstructed, and Modified Sources (the “2016 NSPS”).  See 81 Fed. Reg. 35,942 (June 3, 2016).  Although mainly focused on methane, the 2016 NSPS also seeks to reduce emissions of smog-forming volatile organic compounds (“VOCs”) and air toxics.

The 2016 NSPS rule contains several significant changes of interest to most producers.  First, it requires that owners/operators of natural gas equipment meet methane emissions limits using technologies that are cost-effective and readily available.  To a certain degree, this is an extension of an EPA rulemaking from 2012, and thus might be familiar to some owners/operators.  However, the 2016 NSPS rule has broader application than the 2012 rule insofar as the new rule could reach hydraulically fractured oil wells that might contain natural gas, pneumatic pumps at well sites and gas production plants, and compressors and pneumatic controllers at transmission and storage facilities.  Furthermore, the 2016 NSPS rule requires owners/operators to find and repair leaks (i.e., fugitive emissions) from two to four times per year depending on the location (e.g., well sites, gathering and boosting stations, transmission compressor stations).  Of course, the 2016 NSPS rule provides detailed requirements for how the foregoing must be done.

The 2016 NSPS rule also attempts to resolve the uncertainty regarding when emissions must be aggregated for adjacent facilities.  The 2016 NSPS rule defines “adjacent” to mean equipment and activities that are under common control if they are located on the same site or are on sites that share equipment and are within a quarter of a mile of each other (although this does not apply to offshore operations).  Under this new definition of “adjacent,” some owners/operators may find themselves subject to the rule when they had previously been exempt.

Later that same month, a second significant law was put into effect when President Obama signed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the PIPES Act), Pub. L. 114-183, reauthorizing the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) through 2019.  The PIPES Act unanimously passed both the U.S. House of Representatives and the Senate.  A key component of this reauthorization was a mandate that PHMSA promulgate rules for underground natural gas storage, largely in response to a leak in California in 2015, and represents another key regulatory consideration for Arkansas’s natural gas producers.

Although PHMSA and its federal predecessors have had the legal authority to mandate safety regulations for natural gas storage for decades, they generally have not done so.  Instead, they have preferred to rely on the states to develop safety standards and encouraged the use of industry standards.  A key problem with this approach is the only enforceable requirements were state-based, and those could not be applied out-of-state, and arguably could not be applied to the in-state part of facilities that were interstate.  Section 12 of the PIPES Act was Congress’s response in June of 2016.  It gives PHMSA two years to promulgate standards for underground natural gas storage facilities.  The U.S Energy Information Administration estimates that Arkansas has approximately 21 million cubic feet of natural gas storage capacity in Arkansas, and while many states have far greater storage capacity, this still suggests the new storage rule will have application in Arkansas.  Nonetheless, those Arkansas entities that will be affected by this rulemaking should monitor it closely and consider whether to submit comments to PHMSA to ensure the rule reflects the experience and needs of the Arkansas entities that will be regulated under the new rule.

Please contact Michael B. Heister (501-379-1777 or mheister@QGTlaw.com) for additional information.

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How to Hire a Lawyer

June 2016

by Vincent O. Chadick |

“Over time, I have heard frequently that lawyers — while able to communicate effectively with other lawyers and judges — take for granted that laypersons understand them.  And I’ve been told about a general reluctance even to consult a lawyer, out of concern that the lawyer will be too busy, too complicated or (you guessed it) too expensive.  So what follows are modest suggestions for contacting and, if appropriate, hiring a lawyer.  And doing it right.”

For more information, please contact Vincent O. Chadick at 479-444-5208 or vchadick@QGTlaw.com.

Note:  The above is an excerpt from the article published in the June 13, 2016, issue of Arkansas Business.  Click the link below to read the actual article.

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Landlord Tenant Law: Here’s What You Should Know

June 2016

by Jeb. H. Joyce |

“Lawyers dealing with commercial landlords and tenants often are in the same role as ESPN anchors, educating clients with court decisions or legal positions of which they may not be aware.  This article shares some ‘Did You Know?’ facts in the area of Arkansas commercial landlord tenant law.”

For more information, please contact Jeb H. Joyce at 476-444-5202 or jjoyce@QGTlaw.com.

Note:  The above is an excerpt from the article published in the June 6, 2016, issue of the Northwest Arkansas Business Journal.  Click the link below to read the actual article.

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New Rules for Incentive-Based Compensation

Spring 2016

by  Daniel J. Beck |

“In April, the OCC, Fed, FDIC, FHFA, NCUA, and SEC issued a proposed rule implementing Section 956 of the Dodd-Frank Act which sets restrictions on incentive-based compensation for banks.  The goal of the new rule is to curb short term incentives and excessive risk.  The most onerous restrictions on incentive-based compensation apply to covered institutions with over $50 billion in consolidated assets.  However, smaller institutions will still need to maintain, document, and enforce incentive-based compensation plans which reduce the risk of material financial loss to the institution.”

For more information, please contact Daniel J. Beck at 501-379-1762 or dbeck@QGTlaw.com.

Note:  The above is an except from the article published in the Spring 2016 issue of The Arkansas Community Banker.  Click the link below to read the actual article. 

 

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Justice in the Hinterlands: Arkansas as a Case Study of the Rural Lawyer Shortage and Evidence-Based Solutions to Alleviate It

Published April 2016

by J. Cliff McKinney II |

“In recent years, state high courts, legislatures, bar associations, and other justice system stakeholders have become aware that a shortage of lawyers afflicts many rural communities across the nation and that this dearth of lawyers has implications for access to justice.”

For more information, please contact J. Cliff McKinney II at 501-379-1725 or cmckinney@QGTlaw.com.

Note:  The above is an excerpt from the article in the University of Arkansas at Little Rock Law Review.  Click the link below to read the actual publication.

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A Checklist for Buying Real Property

March 2016

by J. Cliff McKinney II |

“No one buys a car without researching it — looking up facts from the maker, reading reviews, test driving, etc.  In other words, a car buyer does his or her due diligence before making a purchase.  The same concept applies for real estate, only on a much larger scale because of the high price of real estate and complicated issues.”

For more information, please contact J. Cliff McKinney II at 501-379-1725 or cmckinney@QGTlaw.com.

Note:  The above is an excerpt from the article published in the March 28, 2016, issue of Arkansas Business.  Click the link below to read the actual publication.

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A Quick Review of the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys

March 2016

by Grant M. Cox |

On February 23, 2016, the revised Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys (the “2016 Standards”) issued by the American Land Title Association (ALTA) and the National Society of Professional Surveyors went into effect.[1]  This revision is the latest since the 2011 changes to the minimum standards (the “2011 Standards”).  As most real estate professionals are aware, the purpose of the 2016 Standards is to allow the production of a survey acceptable to a title company to insure title to real property free and clear of survey matters other than those shown by the survey.  As such, these standards go to the heart of any purchaser’s due diligence when purchasing real property.

While not a complete overhaul of the 2011 standards, the 2016 Standards contain some important changes which surveyors, title professionals, attorneys and others involved in real estate matters should note.  First, the 2011 Standards were known as the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys.  The 2016 Standards substituted ALTA/ACSM for ALTA/NSPS as the National Society of Professional Surveyors, Inc. (“NSPS”) is the legal successor organization to the American Congress on Surveying and Mapping (“ACSM”).  Many of the revisions in the 2016 Standards merely reflect this change.

However, some of the larger revisions include changes to Sections 4, 5, 6 and & Table A of the 2011 Standards governing records research, fieldwork, plat/maps and survey specifications, respectively.  In the 2011 Standards, Section 4 stated that certain Record Documents[2], documents of record referred to in the Record Documents, documents necessary to determine junior/senior rights and other documents which affect the property being surveyed shall be provided to the surveyor.  The 2016 Standards clarify the documents which must be provided to a surveyor in order to complete an ALTA/NSPS Land Title Survey.   While recorded documents must be provided to the surveyor, unrecorded documents affecting the property being surveyed may only be provided if so desired by the client.  If recorded documents or unrecorded documents are not provided to the surveyor or if non-public or quasi-public documents are required to complete the survey, the surveyor is only required to research if it is required by the state’s statutory or administrative requirements and if such research has been previously negotiated between the surveyor and the client.  While the changes with regards to Section 4 do not seem to be that great, they do clarify what documents are necessarily required and what research, if any, a surveyor is required to perform.

The revisions to Section 5 of the 2016 Standards similarly make certain clarifications to the 2011 Standards.  For instance, pursuant to the 2016 Standards, the surveyor is to determine the appropriate degree of precision based on the planned use of the property only if such planned use is reported in writing to the surveyor by the client.  If the planned use is not reported in writing, the surveyor is to determine the appropriate degree of precision based on the existing use of the property.  Additionally, the revisions clarify that trees, bushes, shrubs and other natural vegetation do not need to be located on the survey unless required by the contract or unless such natural vegetation is deemed to be evidence of possession by occupants or adjoiners.  Further, the revisions clarify that water features running outside the property must only be identified if they are within five (5) feet of the perimeter boundary of the surveyed property.

One of the most notable changes in the 2016 revisions is in Section 6 regarding the preparation of a new description for the surveyed property.  As with the 2011 Standards, the 2016 Standards generally disfavor the preparation of a new description except in the case of an original survey.  However, the 2016 Standards go further and make clear that if a new description is prepared, the surveyor is to make a note on the map or plat stating that the new description describes the same real estate as the record description or, if it does not, then how the new description differs from the record description.  This is specifically helpful because new descriptions are often created as the ability to measure distances has become more precise.  Further, such notes on the map or plat will greatly assist attorneys and title insurers in determining whether to use older record legal descriptions or newly prepared legal descriptions when both are listed on the plat or map.

Finally, two of the bigger changes with regards to Table A of the 2016 standards revolve around zoning and identification of utilities.   Item #6 in Table A has been revised to provide that a surveyor must only list the current zoning classification, setback requirements, the height and floor space area restrictions and parking requirements if the client provides the surveyor with a zoning report or letter.  The 2011 Standards only required a surveyor to list the zoning classification if provided by the insurer.  Additionally, if the client desires the surveyor to graphically depict such building setback requirements, the surveyor is only required to do so if the client provides a zoning report or letter and such requirements do not involve an interpretation by the surveyor.  Item # 11 in Table A was revised in 2016  to recognize that  calls to 811 or other similar utility locate requests from surveyors may be ignored or result in an incomplete response.  If this happens, the surveyor is now required to note whether such utility locate request was ignored or incomplete and how it affected the surveyor’s assessment of utility location.

While the 2016 Standards do not provide a whole host of revisions from the 2011 standards, title professionals, attorneys and purchasers should review them to understand exactly what information they will receive from a surveyor.  Some of the revisions now require different information be provided to the surveyor or certain items to be negotiated in the contract between the surveyor and client.  Without reviewing the 2016 Standards, clients or other real estate professionals may not get the information they received in the past.

[1] This article is based on the redline of the 2016 Standards to the 2011 Standards found at http://c.ymcdn.com/sites/www.nsps.us.com/resource/resmgr/ALTA_Standards/2016_Standards_REDLINE_20151.pdf .

[2] The 2011 Standards defined “Record Documents” as complete copies of the most recent title commitment, the current record description, the current record descriptions of adjoiners, any record easements benefiting the property, record easements or servitudes and covenants burdening the property.

For more information, please contact Grant M. Cox at 501-379-1756 or gcox@QGTlaw.com.

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Expanding Qualified Mortgages

Winter 2016

by Daniel J. Beck |

“On December 4, 2015, the Fixing America’s Surface Transportation Act or “FAST Act” was signed into law.  The FAST Act provides relief to community banks by allowing small banks to petition the Consumer Financial Protection Bureau (“CFPB”) to expand areas that are considered “rural” by the CFPB.  The FAST Act may also ease the threshold of mortgage loans that must be originated in rural areas by small banks to qualify for exceptions to qualified mortgages under the Truth in Lending Act (“TILA”) depending on how the CFPB interprets the change to TILA.”

For more information, please contact Daniel J. Beck at 501-379-1762 or dbeck@QGTlaw.com.

Note:  The above is an excerpt from the article published in the Winter 2016 issue of The Arkansas Community Banker.  Click the link below to read the actual article.

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Financing Arkansas’s Agricultural Producers – A Brief Primer on Proper Collateral Securitization and Alternative Financing That Every Agricultural Lender Should Know

February 2016

by R. Seth Hampton |

Agricultural lenders now face significant competition in the agricultural credit market from not only banking institutions, but also many nonbank lenders, including the Farm Credit System, United States Department of Agriculture Farm Service Agency and agricultural vendors, such as equipment manufacturers and seed companies who provide limited-purpose financing for purchases of their products. To remain competitive in the increasingly competitive agricultural lending market, lenders must be able to provide producers with financing on terms comparable to those offered by others (namely, nonbank lenders), while managing the inherent risks presented by agricultural lending.

The risks associated with financing crop production are virtually unavoidable, as credit repayment is primarily dependent on successful crop production and marketing by the producer, and is often secured by illiquid collateral serving as the secondary source of repayment. Because of a producer’s inability to control the weather, commodity prices and other factors affecting crop production, even the most prudent producer, as well as its lender, can be left with little control over sufficient yields and prices necessary for repayment of a loan.  Set forth below is a brief primer on proper loan collateralization and alternatives available for extending crop production financing that every agricultural lender should know when extending credit for production of agricultural commodities.

I.   Properly Securing Collateral

  1. Real Estate as Collateral

If a production loan will be secured by real estate, a mortgage should be executed by all persons or entities with fee simple title to the real estate and filed of record in the office of the circuit clerk of the county where the property is located. Unless the mortgage is properly executed and filed of record, the lender’s interest in the real estate may not be perfect.  To ensure the mortgage is executed by the proper party(s), the lender should obtain a commitment for a title insurance policy from a title company to confirm the parties executing the mortgage are the legal owners of the real estate.

The mortgage must also be properly acknowledged.  Unless a mortgage or any other instrument affecting the title to real property is properly acknowledged, it may not be filed of record.  See Ark. Code Ann. §§ 16-47-101 and 18-12-208. The Arkansas General Assembly recently enacted a statute establishing forms of acknowledgement for all mortgages and other written instruments affecting the title to real property located in Arkansas.  See Ark. Code Ann. § 16-47-107.  A lender should confirm the mortgage’s acknowledgement is consistent with the statutory form, as the statute also provides that any instrument containing the form acknowledgement is deemed to be valid and sufficient for recordation.  Id.

Additionally, the mortgage must contain a maturity date or third parties may assume the mortgage is scheduled to expire five (5) years after the date the mortgage is filed of record.  See Ark. Code Ann. § 18-40-103.  See also Clark v. Shockley, 205 Ark. 507, 508 (1943).

With respect to the recording location, the mortgage should be filed of record in the office of the circuit clerk of the county where the property is located.  In addition to recording in the proper county, in some instances a mortgage must also be recorded in the proper county district.  Arkansas has ten counties with two county seats, or districts, which are as follows:

  1. Arkansas County – DeWitt and Stuttgart;
  2. Carroll County – Berryville and Eureka Springs;
  3. Clay County – Corning and Piggott;
  4. Craighead County – Jonesboro and Lake City;
  5. Franklin County – Charleston and Ozark;
  6. Logan County – Paris and Booneville;
  7. Mississippi County – Blytheville and Osceola;
  8. Prairie County – Des Arc and DeValls Bluff;
  9. Sebastian County – Fort Smith and Greenwood; and
  10. Yell County – Danville and Dardanelle.

If a mortgage is given on property located in any of these ten counties, it must be recorded in the office of the circuit clerk for the county and district where the property is located.  For example, if a mortgage is given on real estate located in the Southern District of Prairie County, it should be recorded in the Office of the Circuit Clerk for the Southern District of Prairie County located in DeValls Bluff.

  1. Farm Equipment and Crops as Collateral

Arkansas has adopted the Uniform Commercial Code (“UCC”) with only minor variations.  Revised Article 9 establishes the rules for acquiring and perfecting a lien on personal property, such as farm equipment and crops.  See Ark. Code Ann. § 4-9-101, et seq. If farm equipment or crops will serve as collateral securing a production loan, a lender should require the producer to execute a security agreement granting the lender an interest in the equipment/crops.  The security agreement must contain an accurate description of the personal property given as collateral for the production loan.

Under current law, a financing statement covering farm equipment/crops must be filed with the Office of the Arkansas Secretary of State to perfect the lender’s interest in farm equipment/crops.  To ensure the lender’s interest has priority over any other securing interest, the lender should obtain copies of all UCC filings filed against the producer (and, if the producer is an entity, the persons owning an interest in the entity).

  1. Crop Insurance as Collateral

It is common practice for lenders to require a producer to maintain certain types and amounts of crop insurance on the crops to be produced with the loan proceeds.  Crop insurance basically comes in two varieties:  (i) yield-based insurance, which insures against loss of crops caused by natural disasters such as droughts, floods and hail; and (ii) revenue-based insurance, which insures against revenue losses caused by yield or commodity price shortfalls.  If crop insurance will serve as collateral for a production loan, the lender should have the producer execute a document assigning the producer’s rights to the insurance proceeds to the lender.  Because crop insurance is federally subsidized and because of the limitations imposed by the “actively engaged” requirements under the current Farm Bill, this author suggests use of a separate document for securing the lender’s interest in any crop-insurance proceeds, in addition to requiring the insurance policy to name the lender as an additional insured.

It should also be noted that, while it is permissible for lenders to require producers to carry crop insurance in connection with a production loan, federal law prohibits a lender from requiring the producer to purchase crop insurance from a specific provider.  Accordingly, the loan agreement should not require the producer to purchase crop insurance from a specific insurance agent or agency.

  1. Government Payments as Collateral

Although direct and counter-cyclical payments were repealed by the current Farm Bill, program payments are still made under other farm and conservation programs administered by agencies of the United States Department of Agriculture, which can serve as collateral for a production loan and help with cash flow.  The primary sources of program payments are paid through the two new safety net programs administered by the Farm Service Agency (“FSA”)—Agricultural Risk Coverage (“ARC”) and Price Loss Coverage (“PLC”)—and the Conservation Stewardship Program (“CSP”) administered by the Natural Resources Conservation Service (“NRCS”).  If PLC, ARC or CSP payments will serve as collateral securing a production loan, the lender should require the producer to execute the proper document assigning the producer’s rights to the payments to the lender.

To properly assign PLC and ARC payments, FSA Form CCC-36 should be used and filed with the FSA office for the county where the land subject to the payments is located and with the FSA office designated as the producer’s “home office” by FSA.  Unlike PLC and ARC, CSP is administered by NRCS, which has its own form of assignment.  Specifically, NRCS Form CPA-1236 should be used for assignments of CSP payments and filed with the NRCS office for the county where the land subject to the payments is located and with the NRCS office located in the county where the producer’s designated FSA home office is located.

II.  Limiting Risk through Alternative Financing

  1. FSA Guaranteed Loans

Lenders may limit the risk associated with production loans by extending credit under the Guaranteed Loan Program.  The Program is administered by FSA and provides a credit safety net for both producers and lenders by allowing lenders to provide financing under competitive terms and with minimal risk. Loans available under the Program include loans to purchase farmland, livestock, farm equipment, insurance and inputs (such as seed, fuel and chemicals), construct or repair buildings, improvements and other fixtures, develop farmland to promote soil and water conservation, refinance existing farm debt and cover family living expenses.

Under the Program, the loan is made directly to the producer by the lender, and FSA provides the lender with a guarantee to cover up to ninety-five percent (95%) of loss of principal and interest incurred by the lender on the loan. FSA will guarantee loans under the Program of up to $1,399,000.00 (adjusted annually based on inflation).  In exchange, the lender is charged a one and a half percent (1.5%) guarantee fee, which may be passed onto the producer.  Interest rates are negotiated between the lender and the producer, but may not exceed the average rate offered by the lender for non-guaranteed loans. The guaranteed portion of the loan may be sold by the lender on the secondary market.  Before a lender may participate in the Program, the lender must be certified as a “qualified lender” by FSA.  To learn more about the Program and how to become a qualified lender, a lender should contact the local FSA office.

  1. FSA Emergency Loans

When shortfalls caused by natural disasters present repayment issues, rather than extending additional credit (which, in turn, entails assuming additional risk) or foreclosing a loan, a lender may work with a producer to obtain additional credit through the Emergency Loan Program.  The Program is administered by FSA and offers additional financing to producers in designated areas where property damage or production losses have occurred due to a natural disaster, such as flooding or drought.  The designated areas consist of those counties declared by the President or designated by the Secretary of Agriculture as primary disaster areas or quarantine areas, as well as all counties adjacent to the counties declared or designated disaster or quarantined areas.

Under the Program, FSA will loan up to $500,000.00 directly to producers to cover losses of property, equipment and income resulting from the disaster.  Specifically, emergency loan funds may be used to restore or replace property or equipment essential to the producer’s farming operation, pay production costs incurred during the disaster year, refinance certain debts (excluding real estate) and pay essential family living expenses and for reorganizing farming operations.  Emergency loans are generally structured on a repayment plan of between one and seven years.  It should also be noted that the $500,000.00 limit on emergency loan funds is in addition to funds available to producers under the Guaranteed Loan Program and other programs administered by FSA (such as PLC, ARC and the Marketing Assistance Loan Program).

For more information, please contact R. Seth Hampton at 501-379-1774 or shampton@QGTlaw.com.

 

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Common Hurdles Implementing the New TRID Rule

February 2016

by Daniel J. Beck |

“As you are well aware, the third of October marked the deadline for implementation of the new TILA-RESPA Integrated Disclosure (TRID) Rule.  Lenders, title companies and real estate brokers are handling the implementation quite well, but there are a few common issues that have persisted in the brief time since the rule has taken effect.”

For more information, please contact Daniel J. Beck at 501-379-1762 or dbeck@QGTlaw.com.

Note:  The above is an excerpt from the article published in the Fall 2015 issue of the Arkansas Community Banker.  Click the link below to read the actual publication.

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U.S. Fish and Wildlife Service Issues Final Rule on Protection of Threatened Species in Arkansas

February 2016

by William A. (Al) Eckert III |

In 2015, the Northern Long-Eared Bat was listed as a “threatened” species by the U.S. Fish and Wildlife Service under the Endangered Species Act of 1973, as amended, due to drastic population declines caused by a fungal disease known as “white-nose syndrome.”  The Northern Long-Eared Bat occurs in 37 states (including Arkansas) and 13 Canadian Provinces.  The final 4(d) rule (50 CFR 17) which goes in effect February 16, 2016, allows the U.S. Fish and Wildlife Service to define protection of the Northern Long-Eared Bat as a “threatened” species, which is any species likely to become an “endangered species” (a species at the brink of extinction) within the foreseeable future throughout all or a significant portion of its range.

The Northern Long-Eared Bat is a forest-dependent species typically roosting in trees, and predominately hibernates in winter in caves and abandoned mines.  During the summer, the Northern Long-Eared Bat typically roosts singly or in colonies in cavities, underneath bark, crevices, or hollows of both live and dead trees and/or snags. In areas of Arkansas impacted by the white-nose syndrome fungal disease, the final 4(d) rule prohibits any harm, harassment or mortality to the Northern Long-Eared Bat that may occur “incidental” to an otherwise lawful activity, such as tree removal for a construction project.  “Tree removal” is the cutting down, harvesting, destroying, trimming or manipulation in any other way the trees, saplings, snags, or any other form of wooded vegetation likely to be used by the Northern Long-Eared Bat.  This “incidental take” prohibition applies to the hibernation site for the Northern Long-Eared Bat, including tree removal activities with a quarter-mile of a hibernaculum (a place of abode occupied by an animal during winter) or from activities that cut down or destroy known occupied maternity roost trees, or from June 1st to July 31st the cutting down or destruction of trees within a 150 foot radius from a maternity roost tree.

The U.S. Fish and Wildlife Service has developed a Northern Long-Eared Bat Consultation Area for areas of Arkansas where migration of the Northern Long-Eared Bat has occurred.  Consultation with the U.S. Fish and Wildlife Service is to ensure that tree removal activities are not likely to jeopardize the continued existence of the listed species or adversely modify designated critical habitats.  The U.S. Fish and Wildlife Service has issued a Survey Guidance for Arkansas to assess the requirements for U.S. Fish and Wildlife Service consultation and a bat survey, to determine the presence or absence of the Northern Long-Eared Bat, if necessary.

  1. No Consultation Area – if a project requiring tree removal occurs outside of the identified Consultation Area, no consultation with U.S. Fish and Wildlife Service is necessary.
  1. Consultation Area (Winter)

(a)        If a project requiring tree removal from October 15th to April 1st occurs inside a Consultation Area, but outside of a hibernaculum or catch record individual buffer, consultation with U.S. Fish and Wildlife Service is required.  (A bat survey may not be required.)

(b)        If a project between October 15th and April 1st requiring tree removal, other than forest conversion/clear cutting, occurs within a 2.5 mile catch record individual buffer and known maternity roosts, consultation with U.S. Fish and Wildlife Service is required.  If between October 15th and April 1st forest conversion/clear cutting occurs within a 2.5 mile catch record individual buffer, consultation is required and an affect determination by U.S. Fish and Wildlife Service will be assessed on a case-by-case basis.

(c)        If a project requiring tree removal from November 30th to March 15th for other than forest conversion/clear cutting and occurs within a three mile buffer of a known hibernaculum, consultation with U.S. Fish and Wildlife Service is required.  If from November 30th to March 15th forest conversion/clear cutting within a three mile hibernaculum individual buffer occurs, consultation with U.S. Fish and Wildlife Service is required, and an affect determination by U.S. Fish and Wildlife Service will be assessed on a case-by-case basis.

  1. Consultation Area (Summer)

(a)        If a project requiring tree removal from April 1st to October 15th occurs inside a Consultation Area but outside an identified buffer and is one acre or less, consultation with U.S. Fish and Wildlife Service is required.

(b)        If a project requiring tree removal from April 1st to October 15th occurs inside a Consultation Area but outside an identified buffer and is more than one acre, consultation and bat surveys will be required between May 15th and August 15th if suitable habitat is present.

(c)        If a project requiring tree removal from April 1st to October 15th occurs within a 2.5 mile catch record individual buffer and known maternity roosts and suitable habitat is present, consultation with U.S. Fish and Wildlife Service is required.

(d)        If a project requiring tree removal from March 15th to November 30th occurs within a 3 mile buffer of a known hibernaculum and suitable habitat is present, consultation with U.S. Fish and Wildlife Service is required.

A habitat assessment should be conducted prior to conducting a bat survey to ensure a habitat is suitable for the Northern Long-Eared Bat.  A presence/absence bat survey is not required in areas with unsuitable habitat.  For more information, contact the Arkansas Ecological Field Office of U.S. Fish and Wildlife Service at 501-513-4403 or the website at www.fws.gov/arkansas-es/.

For more information, please contact William A. (Al) Eckert III at 501-379-1712 or aeckert@QGTlaw.com.

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Arkansas Supreme Court Extends Notice Provisions of UCC to Services Contracts

December 2015

by Joseph R. Falasco |

The Uniform Commercial Code (UCC), codified in Arkansas at Ark. Code Ann. § 4-1-101 et seq., typically applies only to sales of goods and does not apply to an agreement for services.  When an agreement involves both the sale of goods and services, the UCC applies when the transaction is fundamentally an exchange of goods.  B & B Hardware, Inc. v. Fastenal Co., 688 F.3d 917, 921 (8th Cir. 2012).  Notwithstanding, the Arkansas Supreme Court recently ruled that the UCC provides guidance with respect to contracts for services that are not covered by the UCC.  See Hartness v. Nuckles, 2015 Ark. 444.  Specifically, the Court ruled in Hartness that the UCC notice requirements from Ark. Code Ann. § 4–2–607 apply to express or implied warranties created in a contract for services.  Thus, even in service contracts, reasonable notice of breach must be given before a lawsuit can be filed.

The Court used broad language in Hartness, suggesting the UCC will inform all contracts.  The Court stated that it “has often looked to the UCC for guidance on contract principles by analogy” and that it has a “well-established practice of reasoning to the UCC by analogy in contracts for services.”   Given the Court’s opinion, persons seeking to sue for breach of contract should carefully consider UCC provisions regardless of whether the UCC is strictly applicable.  Likewise, parties sued for breach of contract can look to the UCC for defenses even when the UCC does not govern the transaction.

For more information, please contact Joseph R. Falasco at 501-379-1776 or jfalasco@QGTlaw.com.

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Automatic Stay Exceptions Provide Leeway for Financial Institutions

December 2015

by Mary-Tipton Thalheimer |

“Once a debtor files a petition for protection under the United States Bankruptcy Code, an automatic stay goes into effect, providing the debtor with breathing room from its creditors and preventing the creditors from racing to the courthouse.”

For more information, please contact Mary-Tipton Thalheimer at 501-379-1742 or mthalheimer@QGTlaw.com.

Note: The above is an excerpt from the article published in the November 2015 issue of The Arkansas Banker. Click the link below to read the actual publication.

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The Attorney General Issues Opinion Regarding Timing of Release of Electronic Records Requested Under Freedom of Information Act

December 2015

by Brandon B. Cate and Lindsey C. Pesek |

When Arkansas enacted its version of the Freedom of Information Act (the “FOIA”) in the 1960s, the General Assembly deemed it “vital in a democratic society that public business be performed in an open and public manner so that the electors shall be advised of the performance of public officials and of the decisions that are reached in public activity and in making public policy.”  Ark. Code Ann. § 25-19-102.  Since its passage, the FOIA has been used for many noble purposes.  Through review of public records and admission to public meetings, Arkansas citizens—including members of the press and attorneys—have used the FOIA to monitor the performance of public officials as well as to access the public decision-making process.  In November 2015, however, in response to an inquiry of State Senator Jeremy Hutchinson, Arkansas Attorney General Leslie Rutledge issued an opinion that incorrectly interprets the FOIA and may result in Arkansas citizens receiving delayed responses to FOIA requests for certain public records.  See Ark. Op. Att’y Gen. No. 2015-095.

The FOIA says that “all public records shall be open to inspection and copying by any citizen of the State of Arkansas during the regular business hours of the custodian of records.”  Ark. Code Ann. § 25-19-105(a)(1)(A).  Arkansas law professors John Watkins and Richard Peltz—who jointly authored the seminal treatise on the FOIA—as well as an Attorney General opinion from the 1990s make clear that this statutory language means that, when a citizen makes a request for records, the records shall be produced immediately.  See John J. Watkins & Richard J. Peltz, The Arkansas Freedom of Information Act, 273 (Arkansas Law Press, 5th ed. 2009); Ark. Op. Att’y Gen. No. 94-225.  The only exception to this rule is for those records that are in “active use or storage and therefore not available at the time a citizen asks to examine it.”  See id.; see also Ark. Code Ann. § 25-19-105(e).  In this circumstance, the custodian of the record has up to three business days in which to produce the requested record.  See Ark. Code Ann. § 25-19-105(e).

Mr. Hutchinson’s inquiry of Ms. Rutledge asked whether electronic files on a computer or smart phone, including voice-mail messages, should be produced immediately upon a FOIA request or if they qualified as records in use or storage, thus adding three additional days for their production.  See Ark. Op. Att’y Gen. No. 2015-095.  Ms. Rutledge opined generally that “most records are in active use or storage” and then referenced dictionary definitions of the term storage in support of her conclusion that custodians have three business days to disclose electronic files because they are stored on a computer or smart phone.  Id.

Ms. Rutledge’s opinion is at odds with the directives of the FOIA.  While Ms. Rutledge looked to dictionary definitions, she ignored a prior opinion from Attorney General Winston Bryant determining that the FOIA’s use of the term storage means only “those records which at the time of the FOIA request are located in a place which makes immediate access impossible or impractical.”  Ark. Op. Att’y Gen. No.  94-225.  Indeed, the FOIA provides that the storage exception applies only to those records that are “not available at the time a citizen asks to examine it.”  Ark. Code Ann. § 25-19-105(e).  In this modern world of instant access due to the rapid evolvement of technology, it is doubtful that immediate access to most electronic files would be “impossible or impractical.”  This is particularly true considering the General Assembly’s technology directives in the FOIA.

The FOIA contemplates requests for electronic files and directs that “[a]ny computer hardware or software acquired [after 2001] shall be in full compliance with the requirements of [the FOIA] and shall not impede public access to records in electronic form.”  Ark. Code Ann. § 25-19-105(g).  A “citizen may request a copy of a public record in any medium in which the record is readily available or in any format to which it is readily convertible with the custodian’s existing software.”  Ark. Code Ann. § 25-19-105(d)(2)(B).  Further, the FOIA directs that “[r]easonable access to public records and reasonable comforts and facilities for the full exercise of the right to inspect and copy those records shall not be denied to any citizen.”  Ark. Code Ann. § 25-19-105(d)(1).  The upshot of these three statutory requirements is that electronic files shall not be kept by the custodian in a manner that would make their retrieval impossible or impractical.  Rather, custodians shall keep electronic records in a manner allowing immediate access to citizens, citizens may request a copy of the electronic file in any medium that is readily available or in any format to which it is readily convertible, and citizens shall be afforded reasonable access and reasonable comforts and facilities in which to review or copy the electronic file.  In view of these FOIA dictates from the General Assembly, Ms. Rutledge’s conclusion that custodians have three business days to disclose electronic files merely because they are located on a computer or smart phone is contrary to Arkansas law and should be rejected by Arkansas courts.

Moreover, the Supreme Court of Arkansas holds that the FOIA is to be “liberally” construed in order “to accomplish its broad and laudable purpose that public business be performed in an open and public manner.”  Thomas v. Hall, 2012 Ark. 66, 4-5, 399 S.W.3d 387, 390.  Exceptions to the FOIA’s requirements—such as the three-day extension—are narrowly construed and, when there is doubt, the exception “will be interpreted in a manner favoring disclosure.”  Id.  Accordingly, even if there is any doubt in the language of the FOIA regarding the timing of the release of electronic files—and there should not be—Arkansas courts should determine that such records be released immediately upon request.

For more information, please contact Brandon B. Cate at 479-444-5205 or bcate@QGTlaw.com or Lindsey C. Pesek at 479-444-5211 or lpesek@QGTlaw.com.

Note: A version of this article was published in the Arkansas Democrat-Gazette and the Northwest Arkansas Democrat-Gazette on December 11, 2015.  See Brandon B. Cate & Lindsey C. Pesek, Opinion In Error:  FOI Interpretation Incorrect, Ark. Dem.-Gaz., Dec. 11, 2015, at B7, available at http://www.arkansasonline.com/news/2015/dec/11/opinion-in-error-20151211/; Brandon B. Cate & Lindsey C. Pesek, Opinion In Error:  FOI Interpretation Incorrect, N.W. Ark. Dem.-Gaz., Dec. 11, 2015, at B7, available at http://www.nwaonline.com/news/2015/dec/11/opinion-in-error-20151211/?opinion.

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Employment-At-Will Doctrine in Arkansas: Do Employment Manuals Create For-Cause Employment?

December 2015

by Philip A. Elmore |

Arkansas courts recognize the right of employers to fire employees under the “employment at-will doctrine” where an employer-employee relationship remains completely terminable at will (other than for discriminatory reasons related to age, sex, race or religious beliefs) by either the employer or employee, unless there is an agreement to the contrary.

However, the employment at-will doctrine is not absolute as Arkansas courts recognize a number of exceptions to the general rule.  One such exception involves employment manuals and handbooks.  In Gladden v. Arkansas Children’s Hospital, 292 Ark. 130 (1987), the Arkansas Supreme Court held that a for-cause employment contract was formed between an employer and employee even though the employer referred to the employment as strictly at-will.  The employment was determined to be for-cause because the employment manual’s terms and conditions contained a definitive list of grounds and conditions for dismissal.  The Court considered this list to be a provision that the employee would not be discharged except for cause due to its exhaustive nature, even though the employment was for an unspecified term.

The Arkansas Supreme Court also stated that an employment manual creates a for-cause employment contract if it contains an express provision against termination except for cause upon which the employee relies.  If such provisions exist, employers that arbitrarily discharge their employees face potential liability for both breach of contract and wrongful discharge under the employment agreement.

Arkansas courts continue to follow the Gladden decision.  In Cisco v. King, 90 Ark. App. 307 (Ark. Ct. App. 2005), former employees of St. Francis County, Arkansas filed a wrongful-termination claim against the county.  They alleged that the county’s employment manual created an employment contract under which they could be discharged only in accordance with the manual’s terms.

The county’s employment manual specifically stated that the tenure of an employee with “permanent status” shall “continue during good behavior and satisfactory performance of his duties.”  The manual distinguished this from “probationary employees,” all of whom were required to “serve a probationary period,” during which they “may be terminated for any reason without recourse….”

The county argued that the terms relating to employee job security were not sufficiently definite and comprehensive and should be distinguished from the manual in Gladden.  The Arkansas Court of Appeals disagreed, and stated that the promise to “permanent employees” amounted to a “promise not to terminate a permanent employee without cause.”  The court also stated that the clear distinction between “permanent” and “probationary” employees strengthened this interpretation of the employment manual.

If an employer wishes to retain at-will employment for its employees under Arkansas law, it should look very closely at its own employment manuals.  Such manuals need to be very carefully constructed.  An employment manual should not provide a definitive list of events that would be considered grounds and conditions for dismissal.

The employer should also confirm that any employment manuals do not contain express provisions against termination except for cause.  Employers have unintentionally provided employment manuals with such provisions to employees they thought were strictly at-will.  Such circumstances can be avoided if the employer takes the time to review the terms actually contained in the manual.

Finally, employers should attempt to avoid, whenever possible, the creation of a distinction between “permanent” and “probationary” temporary employees in the employment manual. A distinction for “permanent” employees could be construed by courts to create a promise to not terminate the permanent employee at-will.

For more information, please contact Philip A. Elmore at 479-444-5203 or pelmore@QGTlaw.com.

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E-Discovery Alert: Proportionality

November 2015

by Meredith M. Causey and Michael B. Heister |

Demonstrating the burden or expense of complying with discovery often requires an affidavit or other evidentiary proof of the time or expense involved in responding to the discovery request.  The IT personnel in charge of the requested information is usually a good starting point.  A June 2015 decision by the U.S. District Court for the District of Kansas discusses a party’s insufficient proof regarding its proportionality objection.

In Cargill Meat Solutions Corp. v. Premium Beef Feeders, LLC, No. 13-cv-1168-EFM-TJJ, 2015 WL 3937410 (D. Kan. June 26, 2015), the court considered the defendants’ motion to compel and the plaintiff’s objection to discovery based on proportionality.  In this breach of contract case, the defendants sought to compel production of documents related to “hedging and/or risk management strategies and/or policies for all cattle purchased” pursuant to the agreement at issue in the case.  The plaintiff objected that the discovery sought was not proportional and should not be compelled.

The court held that a party asserting an unduly burdensome objection to a discovery request must show “not only undue burden or expense, but that the burden or expense is unreasonable in light of the benefits to be secured from the discovery.”  In addition, a party must “provide sufficient detail in terms of time, money and procedure required to produce the requested documents.”

In this case, the plaintiff failed to meet its burden by only providing an estimate that complying with the discovery request would require searching additional custodian records and cost $4,000 to $5,000 per custodian.  The plaintiff did not identify how many custodians would be involved and failed to explain why this cost would be disproportionate to the amount in controversy, which was in excess of $2 million.  The court granted the motion to compel and concluded that the plaintiff failed to adequately establish the alleged burden of producing the requested discovery.

For more information, please contact Meredith M. Causey at 501-379-174.3 or mcausey@QGTlaw.com or Michael B. Heister at 501-379-1777 or mheister@QGTlaw.com.

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The Differing Durations of Judgments and Judgment Liens

November 2015

by Daniel D. Boland |

There are a variety of means by which a judgment may be enforced against a judgment debtor in Arkansas. Among the most common are writs of execution, where the sheriff is directed to seize the debtor’s property for the purpose of having it sold to satisfy the judgment, and writs of garnishment, where the debtor’s employer or bank is required to withhold wages or bank deposits and pay them to the judgment creditor. Another potential aid in collecting a judgment is the judgment lien, which attaches to all real estate owned by the judgment debtor in the county where the judgment was rendered. It often goes unrecognized that the period during which a judgment is generally enforceable against the debtor and the duration of the judgment lien do not necessarily coincide. They are governed by different statutes and different rules of common law. A statutory amendment adopted in the 2015 Arkansas legislative session highlights and reinforces this distinction.

The period during which a judgment is generally enforceable against the debtor is governed by Arkansas Code § 16-56-114 — the statute of limitations applicable to judgments. It provides for a ten year limitation period after which, unless the period has been extended, further enforcement action is barred. However, if the debtor makes a payment on the judgment debt, or if the creditor causes the issuance of process or execution, including a writ of garnishment, to attempt to collect the judgment before it is barred, the statute of limitations will be tolled and a new ten year period for enforcing the judgment will commence. See, e.g., Primus Automotive Financial Services vs. Wilburn, 2013 Ark. 258, 428 S.W.3d 480 (2013).

The judgment lien, on the other hand, is governed by Arkansas Code § 16-65-117. Under that section, the duration of the lien is also ten years from the date of the judgment, but, unlike the statutory period for general enforcement of the judgment, a judgment lien will not be extended by payments made by the debtor or the issuance of process or execution to collect the judgment. A judgment lien on real estate may be extended only by suing out a scire facias using the procedure set forth in Arkansas Code § 16-65-501, which involves having a writ issued in the action in which the judgment was rendered. Act 1113 of the 2015 legislative session amended Arkansas Code § 16-65-117(d)(1) to state more explicitly that suing out a scire facias is the exclusive means by which the duration of a judgment lien may be extended.

Judgment creditors should be aware that, even if it has been more than ten years since a judgment was rendered and no scire facias has been sued out, the judgment may nevertheless remain enforceable by virtue of some earlier payment by the debtor or effort by the creditor to collect the judgment, any of which may have extended the life of the judgment. Conversely, title examiners can take comfort in the fact that none of those actions will extend the duration of the judgment lien. An examiner can conclusively determine whether an old judgment remains a lien simply by reviewing the court file for the case in which the judgment was rendered to see if a scire facias was ever sued out.

For more information, please contact Daniel D. Boland at 501-379-1710 or dboland@QGTlaw.com.

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NLRB’s New Joint-Employer Standard and the Practical Effect for Arkansas Employers

October 2015

by Madeline K. Moore |

In what is being hailed by many as a monumental decision, the National Labor Relations Board (“NLRB”) recently reversed its decades-old “direct control” standard for determining joint- employer status. In the 3-2 Browning-Ferris Industries of California decision released August 27, 2015, the majority cited concerns that the “Board’s joint-employment jurisprudence [had become] increasingly out of step with changing economic circumstances.” The Board went on to embrace a new standard that looks to whether two or more employers possess the authority to “share or codetermine th[e] matters governing the [workers’] essential terms and conditions of employment,” going a step further to clarify that a joint employer need only “possess,” not actually “exercise” such authority. The direct-control standard required that an employer actually exercise the authority over the workers before being determined a joint employer.

Browning-Ferris Industries of California (“BFI”) used a staffing firm to provide workers outside of a recycling plant under an Agreement that stated that the firm was their sole employer. The staffing firm recruited and hired the workers, staffed them to cover each of BFI’s three shifts, and employed separate supervisors to oversee them. Even so, the Board found that BFI still acted as a joint employer due to its ability to determine the terms and conditions of employment. The practical effect of the decision is that companies employing individuals through staffing agencies are more likely to be held liable for labor violations committed by employees of subcontractors or franchisees and incur an obligation to bargain with unions representing those outsourced employees.

The Browning-Ferris decision, though it will likely be appealed, also foreshadows the outcome of the still-pending McDonald’s case. In that case, the NLRB’s General Counsel maintains that McDonald’s is a joint employer that cannot avoid liability for alleged unfair labor practices and illegal retaliation based on the argument that its individual restaurants are operated by franchisees.

Perhaps the bigger take-away for Arkansas employers is the general trend that employers may be less likely to avoid liability and obligations for workers that are labeled as independent contractors,

“1099”s, or employees of a separate subcontractor. As government and enforcement agencies such as the Department of Labor (“DOL”), IRS, and NLRB embrace broader tests for imposing employer liability, employers must face the “economic reality” that they may be required to provide benefits to additional workers, and be exposed to increasing financial liability for employment practices under myriad state and federal regulations. See Information Regarding DOL Initiative To Address Misclassification of Employees as Independent Contractors at http://www.dol.gov/whd/workers/misclassification/.

Employers, particularly those operating as franchisors or employing individuals through staffing agencies or as independent contractors, should look carefully at their practices.

Quattlebaum, Grooms & Tull PLLC regularly advises employers with respect to labor and employment compliance and represents employers in employment-related investigations and litigation.

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E-Discovery Alert: Preserving Text Messages

September 2015

by Michael B. Heister and Meredith M. Causey |

A recent decision by the Court of Chancery in Delaware serves as another reminder of the need for attorneys to advise their clients early and often about preserving non-traditional electronic communications. In Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210 (Del. Ch. July 22, 2015), the court confronted the problem of text messages on a lost cellular phone.

In Kan-Di-Ki, LLC, the defendant sold his interests in two medical equipment companies to the plaintiff in two transactions totaling roughly $4.3 million. A couple of years after selling his interests, the defendant went to work for a customer of the plaintiff, and defendant helped the customer re-negotiate existing agreements with the plaintiff and eventually the customer fired plaintiff. Plaintiff sued the defendant for breach of contract, among other things.

Before the trial, plaintiff moved for discovery sanctions regarding two types of evidence. The first was for emails that were deleted in the ordinary course before the defendant became aware that plaintiff might sue him. The interesting part of the court’s decision pertained to the second collection of evidence – text messages that defendant sent third parties after he became aware of the possibility that plaintiff would sue him. The plaintiff claimed his lost his cell phone roughly a year after the lawsuit was filed.

The court ruled that the plaintiff had acted recklessly by failing to preserve the contents of his phone. The court’s ruling was premised in large part on the fact that defendant had asked for plaintiff’s text messages before the phone was allegedly lost and had been told that they were not “subject to deterioration, manipulation, or even just being forgotten.” The court awarded defendant up to $20,000 in attorneys’ fees and made “narrowly tailored” inferences against the plaintiff where the record seemed incomplete due to the absence of text messages that “probably” had existed.

This opinion reinforces a few key lessons familiar to attorneys who work on e-discovery issues. First, be sure to analyze non-traditional sources of electronic information such as text messages. Second, discuss with your client whether that information is safe. Fires happen. Cellular phones get dropped in the bathtub. Telling the client not to erase the data may no longer be enough. Finally, communicate with opposing counsel early, and in writing, about potential sources of electronic information. If you educate opposing counsel about what should be preserved, the court is likely to be more sympathetic to you if a problem arises later because your guidance was ignored and evidence was lost.

For more information, please contact Michael B. Heister at 501-379-1777 or mheister@QGTlaw.com or Meredith M. Causey at 501-379-1743 or mcausey@QGTlaw.com.

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Eminent Domain: Summary of Recent Legislative Changes

August 2015

by Michael N. Shannon |

Arkansas law regarding eminent domain was amended in the 2013 and 2015 legislative sessions in several meaningful ways.

In 2013, a provision was added in Ark. Code Ann. § 27-67-317(b) entitling the landowner to an award of appraisal costs, expert witness fees and attorneys’ fees if the compensation awarded by the jury exceeded the amount of money deposited by the State of Arkansas by ten percent (10%) or more. This provision applied only to condemnation actions filed by the State Highway and Transportation Department. The opportunity to receive fees and costs was an important step in allowing aggrieved landowners the opportunity to challenge the valuation of their property in Court. Otherwise, true “just compensation” could not be achieved in any case where the landowner disputed the value from the Highway Department and required the service of an attorney.

In 2015, the attorney and appraisal fees’ provision was extended to apply to other condemning authorities in addition to the Highway Department including, for example, public utilities and improvement districts. Currently, only counties and cities are exempted from the fees and costs provision. See Ark. Code Ann. § 18-15-103(b)(11). However, the threshold for an award of fees and costs was increased from ten percent (10%) to twenty percent (20%) for the applicable condemning authorities.

Another provision added in 2015 confirmed that when a trial is required to determine just compensation, the decision must be made by a twelve-person jury. Ark. Code Ann. § 18-15- 103(9). While this has always been the case for actions filed by the Highway Department, it is now true in all condemnation actions. This requirement does not prevent a landowner from settling an eminent domain action out of court, but it does ensure a right to a jury trial if needed.

Next, the term “just compensation” was substituted for “market value” in the section describing the landowner’s rights. Ark. Code Ann. § 18-15-103(b)(1). This change recognizes that “just compensation” may include damages other than the mere market value of the property taken – such as the damage done to the value of the remainder of a landowner’s property after the loss of the property taken.

Finally, the law was amended to require that the condemning authority provide an assessment of just compensation prior to or contemporaneously with a good-faith offer of just compensation. Ark. Code Ann. § 18-15-103(b)(5). The good-faith offer and the assessment must be provided before a lawsuit seeking condemnation of the property is filed.

If you have questions about your rights when property is taken by eminent domain, please do not hesitate to contact us.

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Just What the Doctor Ordered? Tips for Employee Wellness Programs

Spring/Summer 2015

by Amber Davis-Tanner |

“Workplace wellness programs have gained popularity over the past several years. According to the Equal Employment Opportunity Commission (“EEOC”), 94 percent of employers with more than 200 employees and 63 percent of companies with fewer employees have some sort of wellness program. These programs take many forms. Employers promote health for their employees in many ways, including subsidizing gym memberships or healthcare premiums, providing access to weight-loss or smoking cessation programs, and improving healthful snack selections in break rooms.”

Note: The above is an excerpt from the article published in the spring/summer 2015 issue of USLAW Magazine. Click the link below to read the actual publication.

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Civil Monetary Penalties and the Gap in Bank D&O Coverage

Fall 2014

by Daniel J. Beck |

“While this is not a new issue, the FDIC thought it was important to remind banks in Financial Institution Letter 47-2013 that they cannot indemnify or pay for insurance policies which pay claims for civil monetary penalties assessed against a bank’s instituion-affiliated parties or “IAPs” (which generally includes officers, directors and controlling shareholders). In the letter the FDIC also made it clear that there is no exception from this restriction for banks that pay for such insurance, but are reimbursed by the IAP for the policy expense. This had become a common workaround that banks used to provide such coverage for their officers and directors, but it is now clearly prohibited.”

Note: The above is an excerpt from the article published in the Fall 2014 issue of Arkansas Community Banker. Click the link below to read the actual publication.

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Provisions Added to Perfect Interest in Personal Property

September 2013

by Timothy W. Grooms |

“Fundamental to the concept of taking a security interest is the ability of a secured party to remain perfected in its collateral. The Arkansas General Assembly recently passed Act 138 of 2013 (“Act”), which became effective on July 1, 2013, revising certain portions of Article 9 of the Uniform Commercial Code, the body of law governing the priority and perfection of security interests in personal property.”

Note: The above is an excerpt from the article published in the September 30, 2013, issue of The Banker’s Advocate.  Click the link below to read the actual publication.

 

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Caveat Who?: A Review of the Landlord/Tenant Relationship in the Context of Injuries and Maintenance Obligations

Summer 2013

by J. Cliff McKinney II |

“Bad things happen.  People make mistakes.  Evil exists in the world, as does stupidity, which may be the superlative source of many tort and contract claims.  Claims of liability will inevitably arise in the landlord/tenant relationship.”

Note: The above is an excerpt from the article in the University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

 

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Implementing Institutional Controls at Brownfields and Other Contaminated Sites

2012

by J. Cliff McKinney II |

“The Arkansas Department of Environmental Quality (ADEQ) regulates hazardous substances in Arkansas. ADEQ is vested with the authority granted by the EPA, specific state statutes, and the Arkansas Pollution Control and Ecology Commission (PC&E Commission).”

Note: The above is an excerpt from the Arkansas Bar Association Book.  Click the link below to read the actual publication.

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Even Courts Are Going Green. How to Protect Yourself From Greenwashing Litigation

Spring/Summer 2012

by Joseph W. Price II |

“This article was printed on biodegradable, post-recyclable paper with chemical- free ink, and produced in a carbon-neutral fashion by an energy-efficient printing com pany that uses only sustainable resources.  Got your attention?  Although untrue here, it is probably not the first time that you have heard an over-the-top, too-good-to-be-true line as it seems everyone is rushing to be “green” in the hopes of capitalizing on the environmentally-savvy consumer and his or her purchasing power.  If such assertions stretch the truth or are not capable of sufficient authentication, however, they also may catch the attention of governmental officials or enterprising class-action attorneys.”

Note: The above is an excerpt from the article published in the spring/summer 2012 issue of USLAW Magazine. Click the link below to read the actual publication.

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Deed Covenants of Title and The Preparation of Deeds: Theory, Law, and Practice in Arkansas

2011

by J. Cliff McKinney II |

“Let’s assume A sold B his 50-year-old bungalow, located on a platted, fenced city lot in Little Rock. A conveyed a typical ‘general warranty deed’ to B. The legal description in the deed contained the lot and block number. Delighted, B moved in; but her delight turned to dismay when she looked at an old survey A left behind when he moved out and saw that the fence was inside her lot lines by several feet, on two sides of her property. B was a lover of plants and wanted more room for her garden, so she pulled down the fence, tearing up her neighbors’ plants within the lot lines as shown on the survey, in order to expand her own yard.”

Note: The above is an excerpt from the article in the University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

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Negotiating Arkansas’s Law of Several Liability

Fall 2011

by Joseph R. Falasco |

“Life intersects art, sometimes. As a practicing lawyer, I have tried to employ rules, statutes, and laws in service of a defined and client- oriented goal. As a potter, I work to form a lump of clay into a functional piece of art. When the Arkansas General Assembly enacted the Civil Justice Reform Act in 2003, it provided a moist ball of clay. Tort reform is by nature controversial. We all knew that some of its provisions were going to be challenged—one way or another—in Arkansas’s courts. Regardless of how you feel about the Act, we can all agree that the General Assembly presented Arkansas lawyers with a new set of statutes to mold into a functional body of law. After some years of kneading by lawyers and the Arkansas Supreme Court, the Act as it exists today looks different than it did eight years ago. Yet, what remains of the Act must be further applied in a way so that it functions in a meaningful manner and does real work for all litigants. This writing provides background information on some lingering issues and suggests how the remaining clay can be put to good use by the legal potters–whether they be lawyers or judges.”

Note: The above is an excerpt from the article in The Arkansas Lawyer Fall 2011. Click the link below to read the actual publication.

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Adverse Possession and Boundary by Acquiescence in Arkansas: Some Suggestions for Reform

2011

by J. Cliff McKinney II |

“Some commentators have characterized adverse possession as a ‘strange and wonderful system,’ others as ‘legal[ized] land theft.’ Like Dr. Jekyll and Mr. Hyde, it has two faces. The positive face, a doctrine of repose, provides a way to cure title problems and promotes stability of title and of boundary lines. Its negative face allows wrongful possessors to gain title, occasionally makes headlines, causes consternation in first-year law students, and no doubt affirms the general public’s suspicion of law.”

Note: The above is an excerpt from the article in the University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

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Affirmative Acts and Antitrust: The Need for a Consistent Tolling Standard in Cases of Fraudulent Concealment

2011

by Amber Davis-Tanner |

“It is axiomatic that ‘no man may take advantage of his own wrong.’ It is also a fundamental principle of the American justice system that an exception should not swallow a rule. The doctrine of fraudulent concealment reflects the first principle: It is intended to ensure that a defendant does not ‘take advantage of [its] . . . wrong’ by permitting the statute of limitation to be tolled when a party has concealed a wrong. Various courts have established standards to determine when a statute of limitations will be tolled by fraudulent concealment in antitrust litigation. The ‘self-concealing’ standard that some courts have adopted threatens to swallow the rule established by the doctrine. The ‘affirmative-acts’ standard is a more moderate approach that avoids the breadth of the self-concealing approach while still ensuring that wrongdoers will be punished for their unlawful acts.”

Note: The above is an excerpt from the article in the University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

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Using Technology at Trial

January 2011

by E. B. (Chip) Chiles IV |

“Almost every trial now involves the use of technology by lawyers. The extent to which lawyers use technology at trial, of course, varies according to the differences in particular cases and the preferences of individual lawyers, but technology is now a fact of every trial lawyer’s life. Technology has contributed a variety of new tools that trial lawyers can employ to streamline the presentation of evidence, communicate information and ideas with greater force and clarity, and heighten credibility and persuasiveness. The following materials seek to assist lawyers in identifying and understanding available technology and using it to improve performance at trial.”

Note: The above is an excerpt from a presentation at the 2011 Arkansas Bar Association Mid-Year Meeting.  Click the link below to read the actual presentation. 

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Does Turning Off The Lights Mean Turning On A Lawsuit?

Fall/Winter 2010

by J. Cliff McKinney II |

“Everyone knows that we are living in tough economic times. Many retail businesses are looking for ways to cut costs. In some cases, national, regional and local retailers may decide to close some stores to focus resources on more profitable units. However, many retailers lease space that is subject to long-term leases. Rather than break the lease, these retailers may make the economic decision to keep paying the rent on a closed, or “dark,” store. However, there can be serious legal consequences for doing so; specifically, the retailer could be subject to a suit for breach of an implied covenant of continuous operation.”

Note: The above is an excerpt from the article published in the Fall/Winter 2010 issue of USLAW Magazine. Click the link below to read the actual publication.

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Arkansas Construction & Design Law

2009

by Timothy W. Grooms |

“Arkansas law does not heavily regulate private construction project negotiation and bidding with regard to project delivery systems. Arkansas requires that general contractors only perform construction management services in those fields in which they hold the proper classification…”

Note: The above is an excerpt from the Arkansas Bar Association’s State-By-State Guide to Construction & Design Law Current Statutes and Practices. Second Edition ©2009.  Click the link below to read the actual publication.

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Arkansas Commercial Lending Law

by Timothy W. Grooms |

“This survey is designed to provide commercial lenders and businesses contemplating the extension of credit to Arkansas borrowers a general overview of various issues of Arkansas law which affect commercial lending relationships. Neither Arkansas law governing consumer lending transactions nor issues of federal law are addressed in this survey. Because of the breadth of the topic, we cannot in this limited survey deal comprehensively with every issue that may arise in the context of a commercial lending transaction. Therefore, lenders should not rely solely on this survey for answers to questions involving the application of Arkansas law to a specific set of facts.”

Note: The above is an excerpt from the American Bar Association’s Commercial Lending Law:  A State-by-State Guide. ©2009.  Click the link below to read the actual publication.

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Understanding The 2007 Revisions To The Arkansas Quiet Title Statutes: What Every Bank Should Know

Spring 2008

by J. Cliff McKinney II |

“Banks frequently face the problem of borrowers who want to purchase (or pledge as collateral) real property that has title flaws. The title flaws can be as minor as a fence-line dispute to as severe as multiple parties claiming title to the same property. In these cases, it is sometimes necessary to file a quiet title suit. A quiet title suit is a special type of lawsuit that asks a court to determine the rights of parties to real estate.”

Note: The above is an excerpt from the article published in the Spring 2008 issue of The Arkansas Community Banker. Click the link below to read the actual publication.

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Are You Trying to Imply Something?: Understanding the Various State Approaches to Implied Covenants of Continuous Operation in Commercial Leases

2009

by J. Cliff McKinney II |

“This article is being written during tough economic times. In September and October 2008, the Dow Jones Industrial Average dropped a couple thousand points. When economic times are this dire, companies may begin to rethink strategies and may look at store closings as a way to save money. For instance, Circuit City considered closing at least 150 stores in an unsuccessful effort to avoid bankruptcy. Many other retailers have either done the same or considered it. The same thing, however, can happen when the economy is good. Businesses may decide to abandon an existing store and relocate to a better location to follow shoppers or community trends. Businesses may also decide to leave a site that is simply unprofitable for whatever reason.”

Note: The above is an excerpt from the article in The University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

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Remote Deposit Capture – Risks and Solutions

by Daniel D. Boland |

“When the Check 21 Act, went into effect in October, 2004, one of its stated purposes was ‘to foster innovation in the check collection system.’ One emerging innovation made possible by the Act is ‘remote deposit capture,’ the process by which a bank customer can scan checks and deposit them electronically, without physically bringing the checks to a bank office or ATM.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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An Overview of Arkansas Tax Increment Financing District Law

by Jeb H. Joyce |

“Tax increment financing districts, otherwise known as ‘redevelopment’ or ‘TIF’ districts, are used in many states as an economic development tool. While fairly new in Arkansas, TIF districts have enjoyed an eventful existence. This article discusses the brief history of TIF districts, the fundamental structure of TIF law, and recent changes to TIF law enacted in the 2005 Arkansas General Assembly.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Environmental Law for The Arkansas Lawyer

by William A. (Al) Eckert III |

“The practicing lawyer in Arkansas through his experience gains some general knowledge about almost all areas of the practice of law and with time develops an expertise in certain areas of law to serve a specific need for his clients. The practice of environmental law has its own characteristics and requires not only an understanding of environmental laws and regulations but also an understanding of a unique administrative law system and its procedures. Arkansas attorneys unfamiliar with environmental practice may not be aware that the Administrative Procedures Act does not apply to administrative procedures before the Arkansas Pollution Control and Ecology Commission or that this commission and the Arkansas Department of Environmental Quality are separate regulatory bodies with separate functions and roles in the regulation of environmental law.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Factoring the Ambiguity: A Futile Attempt to Understand the Ambiguous Nature of the Integration Doctrine’s Five Factor Test

2003

by J. Cliff McKinney II |

“In 1961, the Securities and Exchange Commission (SEC) introduced five factors, launching more than forty years of ambiguity, confusion, and contradiction. The SEC developed the integration doctrine’s five factor test to assist issuers and judges determine whether supposedly separate offers are really part of the same integrated transaction. However, the SEC failed to provide any meaningful guidance to aid in the interpretation or application of these factors. As a result, courts have reached a wide-range of contradictory opinions, and issuers have little solid guidance to predict whether the five factor test will integrate offers.”

Note: The above is an excerpt from the article in the Security Regulation Law Journal ©2003.  Click the link below to read the actual publication.

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Frozen Embryos and Gamete Providers’ Rights: A Suggested Model for Embryo Disposition

Spring 2005

by Joseph R. Falasco |

“Procreational autonomy is one’s ability to choose when to have a child. Because advances in human reproduction technology allow one to create embryos with donated sperm and egg and freeze them for future use, it is important to analyze the resulting legal implications. This Article proposes a complete disposition model in cases where the egg and sperm donors disagree about the embryo’s ultimate fate. While embryos should be accorded a level of respect as a potential life, referring to an embryo’s legal status as ‘chattel’ is useful because it gives an embryo its deserved respect while bringing clarity to the law. This Article distills the policies alluded to in the scant case law dealing with the disposition of frozen embryos and argues that the right to avoid procreation is the stronger interest when attempting to resolve an embryo disposition dispute.”

Note: The above is an excerpt from the in the American Bar Association’s Jurimetrics Journal ©2005. Click the link below to read the actual publication.

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How Three Simple Lessons Can Save a Bank a Half-Million Bucks – Or, In Re Southwestern Glass Co., Inc.: The Effect of Garnishment On An Automatic Line of Credit

by J. Cliff  McKinney II |

“In June 2003, the Eighth Circuit Court of Appeals handed down its ruling in the case of In re Southwestern Glass Co., Inc. This case began with a $517,000 judgment against one of Bank of Arkansas’ customers and ended in a $583,628.52 ruling against the bank. This case provides a powerful warning to banks and important lessons on how to better respond to garnishments and structure automatic draw lines of credit.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Law Day: Fifty Years of Celebrating the Rule of Law

by J. Cliff McKinney II |

“In 1776, Thomas Jefferson penned the now famous words that became the philosophical foundation of our nation: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. The Founders fostered this idea by forging our system of governance around the concept of the Rule of Law. The Rule of Law is the principal that the government must exercise power only in accordance with lawfully enacted and fully disclosed laws that apply equally to all citizens, regardless of rank, prestige or power. The Rule of Law defends against the arbitrary enforcement of laws characteristic of totalitarian governments like that from which the Founders declared our nation’s independence.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Real Estate Practice Tips

by J. Cliff McKinney II |

“Unfortunately, too many lawyers cede the responsibility of drafting deeds to non-lawyers, such as secretaries, paralegals or title agents, who use form deeds. This has two potentially fatal flaws: 1. the deeds are often wrong; and 2. this leads to lawyer complacency. Lawyers should not rely on canned deeds prepared by non-lawyers. Instead, lawyers should draft deeds with extreme caution. Following are four particularly important points to consider, all based on mistakes I’ve seen in non-lawyer prepared deeds…”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Sizing Up a Multi-Party Tortfeasor Suit in Arkansas: A Tale of Two Laws–How Fault Is, And Should Be, Distributed

Winter 2004

by Joseph R. Falasco |

“In an era where lawyers, courts, and politicians have attempted to steer tort liability damage allocation in a more predictable direction, both the Arkansas Supreme Court and the General Assembly have recently turned multi-party tort law into a morass. The supreme court’s precedent drastically changed Arkansas’s traditional approach to contribution among tortfeasors, and the General Assembly’s reaction through the Civil Justice Reform Act equally nullified prior law. [FN1] For claims accruing prior to March 25, 2003, a settlement and release by plaintiffs can cost more than the traditional pro-rata share of the joint tortfeasor’s responsibility; a settlement can completely absolve other possible defendants of liability. [FN2] For claims accruing after March 24, 2003, a plaintiff’s ability to recover through trial has been severely tempered. The Arkansas Supreme Court has veered from its traditional approach of fault attribution in joint tortfeasor suits. The court erred in its interpretation of the law, and a more appropriate reading will be introduced along with an analysis of how attorneys can approach the multi-party tortfeasor suits in Arkansas for acts accruing prior to March 25, 2003. Moreover, the General Assembly created a unique framework for multi-party tortfeasor suits, and an analysis of the new law will follow.”

Note: The above is an excerpt from the in the University of Arkansas at Little Rock Law Review. Click the link below to read the actual publication.

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Soldiers’ and Sailors’ Civil Relief Act – What Every Bank Should Know

by J. Cliff McKinney II |

“In 1940, on the verge of United States involvement in World War II, Congress passed the Soldiers’ and Sailors’ Civil Relief Act (the “Act”). Although Congress has amended the Act, its principal purpose remains the same today. The purpose of the Act is to help service personnel devote their full attention to their military role by minimizing the distraction of financial or other legal burdens. The Act protects members of the military from the enforcement of certain legal obligations incurred prior to active duty which the serviceman is unable to meet due either to his absence from home or from the financial hardship caused by lower military pay.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Standard or Open? A Brief Primer on Insurance Designations

by J. Cliff McKinney II |

“All banks routinely require lenders to insure collateral for the benefit of the bank. However, bankers often do not know the difference between insurance endorsements and designations on policies obtained by borrowers. This article will briefly examine several of the more common types of insurance endorsements and designations and make suggestions regarding the type of language bankers should require in policies obtained by borrowers.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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What Financial Institutions Should Know Before Answering That Subpoena

by Timothy W. Grooms |

“This article encompasses customers’ privacy rights and a financial institution’s obligation to answer a subpoena and when it is necessary and safe to do so. There are three acts of importance with this issue. First, is the Gramm-Leach-Bliley Act that provides financial customers with the right to privacy regarding nonpublic personal information held at a financial institution. Second, is the Right to Financial Privacy Act which provides financial customers with the right to be informed by the government before it obtains nonpublic information from the financial institution. Third, is the USA PATRIOT Act (“the Patriot Act”) which was enacted after the attacks of September 11, 2001, to strengthen anti-terrorism and the Annunzio-Wylie Anti-Money Laundering Act. The Patriot Act allows the government to obtain personal information about a financial institution’s customers without the customer knowing or having any right to be informed that a suspicious activity report was made or requested.”

Note: The above is an excerpt from the article. Click the link below to read the actual publication.

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Who’s Getting Used in Arkansas: An Analysis of Usury, Check Cashing, and the Arkansas Check-Cashers Act

2002

by Joseph R. Falasco |

“Consider the following hypothetical. Ms. Luebbers needs immediate cash for food, and her checking account at Arkansas Bank does not contain the necessary balance. Therefore, she goes to Check Cashers, Inc. and issues a personal check for $400 payable to its order. Luebbers is the drawer of the check, Check Cashers, Inc. is the payee, and Arkansas Bank is the drawee. By written contract executed between the parties, Check Cashers, Inc. agrees not to present or deposit the check for fourteen days. Ms. Luebbers is given the right to repurchase her check for face value until the fourteen-day period expires. In consideration for the check, Check Cashers, Inc. gives Ms. Luebbers $350 (in effect charging her $50). The $50 charge represents two separate fees: 1) 10% of the face value of the check (that is, $40), plus 2) a $10 service fee for holding the check for fourteen days. If Luebbers does not repurchase the check, Check Cashers, Inc. can either deposit the check in its own depositary bank or present it to the drawee bank for payment, thus completing the deferred presentment check-cashing transaction. This simple hypothetical has presented controversial issues of legislation relating to usury in Arkansas.”

Note: The above is an excerpt from the article in the University of Arkansas Law Review. Click the link below to read the actual publication.

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