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If i were Avellan, I'd have taken the L via frantic, loud submission as soon as Palhares had the leg isolated the first time, out of bounds or not. Nothing good comes from resisting heel hooks.
Palhares tried to let it be the first time, and I really can't fault him on this. As soon as the ref restarted it, both guys tried to blitz. Palhares just happed to lock it in faster than Avellan escaped.
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We had a seminar from Palhares recently here and he came to class twice. IMO he was a really calm relaxed dude with a good sense of humor.
I think heel hooks go wrong when both competitors are to competitive. You can't wait and see how long you can lat before tapping with something like a heel-hook because there is so little space between making your opponent tap and fucking up his leg.