Music and Band Legal Issues and Texas Law

With SXSW coming up in Austin in early March, I thought it was interesting to look at Texas law related to music and intellectual property rights.  Granted, most Copyrights are federal in nature (the Article I, Section 8, Clause 8 of the Constitution dictates this), but there are rights above and beyond the Copyrights.  Rather than fully regurgitate, there is an excellent article that was in the March issue of the Texas Bar Journal.  See that article HERE. One of the things most frequently missed is that the ownership of the music Copyright does not necessarily confer the right to use the artist's name and image, which for those producers can be a trap for the unwary.  Which basically is something that is more words to the wise, be sure to get any agreements related to the production of video and music rights in writing.  This includes you venues out there...just because they played at your restaurant and you recorded it doesn't mean you have the right to post same on Youtube.  If you want to post it, make sure you get that right in an agreement (and perhaps ought to be in your agreement related to payments to the band). 

What is a Texas Public Information Report (PIR)?

A Public Information Report in Texas is an annual report made to the Texas Comptroller under Tax Code Section 171.203 by "any corporation or limited liability company on which the franchise tax is imposed even if those businesses are not required to pay the tax". 

The report generally must contain:

• the name of each corporation or limited liability company that the filing business owns 10% or greater interest in and the percentage owned; 
• the name of each corporation or limited liability company that owns a 10% or greater interest in the filing business;
• the name, title, and mailing address of officer or director of the filing business when the report is filed and the expiration date of each of the terms;
• the name and address of the agent for the service of process for the filing business ; and
•  the address of the business’s principal office and principal place of business.

The report must be sent to all of the filing business’s non-employee officers and directors. Finally, a person authorized by the filing business must sign the report and certify that all of the information in the report is correct and that a copy has been sent to all of the required people.

Interesting to note, a public information report is only required of LLC's and corporations (S corps and C corps), but it appears to not be required for other entities, like limited partnerships or limited liability partnership.  Also, it is filed with the Texas Comptroller's Office (not the Texas Secretary of State), for the Comptroller will forward same to the Secretary of State.  The report is mailed by the filing business to the non-employee officers and directors so that said officers have the opportunity to object to their inclusion with a sworn statement disclaiming the role (to avoid potential imposed liability).

(Drafted by Eric Rupe; Edited by Marc L. Lippincott for the firm.)

Complying with Standards for Accessibility by Persons With Disabilities

Texas’ statutory standards for accessibility by individuals with disabilities to privately owned buildings, including commercial establishments are contained in the Texas Accessibility Standards (TAS) of the Architectural Barriers Act. A copy of TAS is here. TAS substantially follows federal standards for accessibility established under the Americans With Disabilities Act (ADA). As one might expect, TAS is lengthy and complex, replete with exceptions, exemptions, minimum requirements and alternative guidelines.

Compliance is generally monitored and enforced by the Texas Department of Licensing and Regulation, which has established its own regulations and guidelines related to accessibility. However, persons with disabilities may also bring a private lawsuit to seek enforcement of TAS and/or damages for being denied access to a business establishment. Various civil rights organizations also pursue claims on behalf of individuals with disabilities to ensure that all public establishments remain open and accessible.

Many business owners are surprised to find themselves served with demands or even litigation seeking enforcement of TAS for access in buildings which they do not own. Merely leasing the premises does not excuse a business owner from compliance with TAS.

When a business owner receives a demand or is served with a lawsuit concerning accessibility, it should conduct an immediate investigation and formulate a plan of action. Early identification of the issues and evaluation of possible alternative methods to ensure accessibility (such as signage identifying assistance available to persons with disabilities) often leads to significantly reduced costs for compliance, as well as decreasing the potential for an award of damages and attorneys’ fees.

A business owner should also seek assistance from outside sources. For example, your lease agreement may contain terms related to remodeling and renovation, or allocate responsibility for ensuring compliance with building codes such as TAS. If it does not, you may wish to negotiate such terms in future leases. Additionally, certain types of commercial insurance policies may provide the policy-holder with coverage related to accessibility claims.

Article by Cynthia W. Veidt, Attorney

Waivers and Releases for Liens and Payment Bond Claims

During the 82^nd Legislative Session, House Bill 1456 was passed which provides statutory forms for waiver and release of mechanic’s liens and payment bond claims. Four statutory forms were created: (a) Conditional Waiver and Release on Progress Payment; (b) Unconditional Waiver and Release on Progress Payment; (c) Conditional Waiver and Release on Final Payment; and (d) Unconditional Waiver and Release on Final Payment.

The new law is effective for contracts entered into on or after January 1, 2012. In order for a waiver and release to be effective, the form of lien waiver and release must be in substantial compliance with the statutory forms.

The new law is set out in Subchapter L added to Chapter 53 of the Texas Property Code entitled “Waiver and Release of Lien or Payment Bond Claim.” The text of the new law can be found here.

Article by Sarah F. Berry

Disaster Remediation Contracts

The 82^nd Texas Legislature passed House Bill 1711 to regulate “Disaster Remediation Contracts” which became effective on September 1, 2011. House Bill 1711 is now Chapter 57 of the Texas Business & Commerce Code and regulates contracts for “the removal, cleaning, sanitizing, demolition, reconstruction, or other treatment of improvements to real property because of damage or destruction to that property caused by a natural disaster.”

A disaster declaration is made by the governor and a recent example would include the wildfires throughout Texas. Other examples would include hurricanes and tropical storms that devastated the Gulf Coast.

The new legislation requires a written contract that includes specific terms and disclosures. Failure to comply is a “Deceptive Trade Practice” under Chapter 17, Texas Business & Commerce Code and can result in a wide range of penalties.

There are a few exceptions to the applicability of the new legislation. Notably, the new statutory requirements do not apply to “local” contractors which are contractors that maintained a physical business address in the county in which the property is located or a county adjacent to the county in which the property is located for at least one year preceding the date of the contract.

If you are soliciting contracts in areas under a disaster declaration, you should review your contracts to ensure that the new required terms and disclosures are included.

Article by Sarah F. Berry, Attorney

How is a Promissory Note Different from a Forbearance Agreement?

Under Texas law, a promissory note “is a written unconditional promise to pay another a certain sum of money at a certain time.” (Edlund v. Bounds, 842 S.W.2d 719, 724 (Tex.App. —Dallas 1992, no writ). The time need not be a specific date, but it must be a time that will certainly arrive. For instance, a note payable on demand or “on or before” a specified date may constitute a promissory note. A promissory note is also a contract subject to the rules applicable to interpreting contracts. DeClaire v. G & B Mcintosh Family Ltd. P’ship., 260 S.W.3d 34, 44 (Tex.App.—Houston [1 Dist.] 2008, no pet.).

The difference between a promissory note and a forbearance agreement is that a forbearance agreement is an agreement not to enforce rights you already have.

A forbearance agreement is an agreement typically between a creditor and a debtor whereby the creditor agrees to forgo some legal right in return for concessions from a debtor who is in default. Swilley v. City Inv. Co., 288 S.W. 485, 486 (Tex.Civ.App.—Galveston 1926, writ ref’d) (explaining that forbearance of a legal right is sufficient consideration for a promise of guaranty). A forbearance agreement is a powerful tool for creditors who face debtors in or near default on their obligations, and often should be used in lieu of entering into a promissory note.

In a typical forbearance agreement, a creditor will agree not to sue on a balance due in exchange for certain concessions by the debtor, such as an increased interest rate, as well as various admissions that can prove invaluable to a creditor should the debtor fail to fulfill the terms of the agreement.

It may also contain the remaining balance on the indebtedness, and an admission that the debtor is in default. A creditor might also receive an increased interest rate and a waiver of various notice requirements in the event of a future default. The agreement typically will also contain a provision that allows the creditor to reassert the rights that have been forgone under the agreement should the borrower fail to make a payment, or fail to fulfill any obligation of the agreement by a certain date. If this occurs, the debtor’s signed admissions concerning the original note could prove invaluable in a lawsuit.

Prepared by Chris Patterson. Reviewed and revised by Marc L. Lippincott.