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In a decision that could have far-reaching implications, the United States Supreme Court issued a June 10 opinion holding that California’s wage-and-hour laws do not apply to workers on oil and gas platforms located in open water on the Outer Continental Shelf. The plaintiffs in Parker Drilling Management Services, Ltd. v. Newton, were offshore rig workers who filed a class action asserting that their employer violated California’s minimum wage and overtime laws by failing to pay them for stand-by time while they were on the drilling platform. Both parties agreed that the platforms were governed by the Outer Continental Shelf Lands Act (“OCSLA”), but they disagreed regarding whether the California’s wage-and-hour laws were incorporated into OCSLA and therefore applicable to workers on the platform.

OCSLA provides that federal law governs the Outer Continental Shelf, but also states that an adjacent state’s laws are deemed to be incorporated into federal law “to the extent they are applicable and not inconsistent with other federal law.” In this case, the employer argued that because the federal Fair Labor Standards Act (FLSA) addressed minimum wage and overtime, California’s state laws on those issues were necessarily inconsistent with federal law and could not apply. In opposition, the employees argued that the FLSA and California laws were not incompatible under any ordinary preemption analysis, and therefore California law, which is more generous to employees than the FLSA, should apply.

The district court relied on Fifth Circuit precedent and dismissed the employees’ claims, holding that the FLSA was a comprehensive wage-and-hour scheme such that there is no gap in federal law that would make California state law applicable under OCSLA. The Ninth Circuit reversed, holding that California’s laws were applicable to the issue and not inconsistent or incompatible with the FLSA, so they must also apply.

A unanimous Supreme Court reversed the Ninth Circuit, explaining that the statutory scheme of OCSLA and previous Supreme Court precedent make clear that OCSLA is to be interpreted under the “federal enclave model,” meaning that federal law is exclusive and state law only applies where there “is a gap in federal law’s coverage.” Accordingly, the Court held that under OCSLA, “where federal law addresses the relevant issue, state law is not adopted as surrogate law on the [Outer Continental Shelf].” In other words, for purposes of determining whether a state law would apply under OCSLA, “the question is whether federal law has already addressed the relevant issue; if so, state law addressing the same issue would necessarily be inconsistent with existing federal law and cannot be adopted as surrogate federal law.” Here, because the FLSA establishes rules regarding payment for stand-by time and a minimum wage, there is no gap or void in federal law for the California wage-and-hour laws to fill with respect to those issues.

In addition to providing a measure of certainty to employers in the wage payment context, the Court’s straightforward analysis of OCSLA will have applicability to all manner of legal issues arising on the Outer Continental Shelf. Companies operating offshore should pay particular attention to this precedent and how it may affect the application of other state laws to offshore work, on platforms or otherwise.  Your Liskow & Lewis attorneys can assist with this analysis.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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The June 5 Releases

Today we focus on the new SEC interpretative release on the fiduciary duties of investment advisers and provide a brief summary of its contents (“The Fiduciary Duty Release”).[1]  This Release is part of a package of new rules and interpretations adopted by the SEC on June 5, 2019.  In total, there are four new rules and interpretations:

  1. Regulation Best Interest (“BI”);
  2. Form CRS, a new form for advisers and brokers;
  3. the Fiduciary Duty Release; and
  4. the Release on the “solely incidental” investment adviser exclusion.[2]

Together these four Releases total a mammoth 1336 pages and define and differentiate the duties owed by brokers and investment advisers.

We will address Regulation BI and Form CRS in a later blog post after we have had time to digest completely the four releases.  In brief, Regulation BI establishes a new standard of broker-dealer conduct to address concerns that led to the now vacated DOL Fiduciary Rule.  It requires that brokers act in the best interest of the client, but does not impose a fiduciary duty.  It is essentially an extension of the existing suitability and fair dealing obligations of broker-dealers.  Form CRS is a new disclosure form that broker-dealers and investment advisers will be required to deliver to retail clients. The form summarizes information about services, fees, costs, conflicts of interest, and disciplinary history of the firm and individuals. The compliance date for Regulation BI and Form CRS is June 30, 2020.

The Fiduciary Duty Release

The Fiduciary Duty Release in clear, readable, easy to understand language explains the duties of an investment adviser.  The Fiduciary Release does not create any new duties, but “reaffirms, and in some cases clarifies, certain aspects of the federal fiduciary duty an investment adviser owes to its clients.”[3]   It is effective immediately.  In the Release, the SEC emphasized that advisers owe a principle-based fiduciary duty of loyalty and care that is more substantial than a broker-dealers’ duties.  The adviser’s duty is different not only because an adviser historically has owed a fiduciary duty to its clients, but also because of the fundamental difference in compensation between brokers and advisers — commission-based fees on a transaction-by-transaction basis versus asset-based fees over a long-term relationship.

The SEC divides the advisers’ fiduciary duty into two branches:  (1) a duty of loyalty and (2) a duty of care.  The overarching principal of both duties is that the adviser must act in the best interest of the client at all times.  The duties are not limited to just the giving of investment advice and apply to the entire adviser-client relationship.  Moreover, the duties cannot be waived, although the scope of the duties can be limited by agreement and by the nature of the client (institutional vs. retail).  In fact, under the SEC’s interpretation, blanket waivers of conflicts, fiduciary duties, or obligations under the Advisers Act violate the Advisers Act.  The SEC offered this example to illustrate the different duties based on the scope of the adviser-client relationship:

For example, the obligations of an adviser providing comprehensive, discretionary advice in an ongoing relationship with a retail client (e.g., monitoring and periodically adjusting a portfolio of equity and fixed income investments with limited restrictions on allocation) will be significantly different from the obligations of an adviser to a registered investment company or private fund where the contract defines the scope of the adviser’s services and limitations on its authority with substantial specificity (e.g., a mandate to manage a fixed income portfolio subject to specified parameters, including concentration limits and credit quality and maturity ranges).

Duty of Care

The SEC breaks down the duty of care into three components:

  1. Duty to provide advice in the best interest of client;
  2. Duty to seek best execution; and
  3. Duty to provide advice and monitoring over course of relationship.

The duty of best interest requires that the adviser (i) make a reasonable inquiry into the client’s objectives and (ii) have a reasonable belief that the advice given is in the best interest of the client (which includes a reasonable investigation into the investments recommended).  The duty extends to advice about account type (commission-based or fee), roll-overs, and strategy. The duty of best execution requires that an adviser seek to obtain the “execution of transactions for each of its clients such that the client’s total cost or proceeds in each transaction are the most favorable under the circumstances.” The duty to provide advice and monitoring depends on the type of relationship.  Advisers receiving periodic fees will have an extensive duty (i) to monitor and to evaluate the account and (ii) to provide advice based on that evaluation.  An adviser that provides a one-time plan will not have a monitoring duty.

Duty of Loyalty

With regard to its duty of loyalty, an adviser must “eliminate or make full and fair disclosure of all conflicts of interest.”  The SEC distilled the essence of the duty of loyalty as “an investment adviser must not place its own interest ahead of its client’s interests.”  To meet this duty of loyalty, an adviser must make full and fair disclosure of all material facts in the advisory relationship, including the nature of the relationship and any conflicts of interest.  The disclosure must be “sufficiently specific so that a client is able to understand the material fact or conflict of interest and make an informed decision whether to provide consent.”  The SEC specifically found the use of the word “may” with regard to a particular conflict is inappropriate if in fact the conflict exists.  Like the duty of care, whether disclosure is sufficient will depend on the nature of the client, the scope of the services, and the conflict.  Sufficient disclosure for a retail client will be more involved than for an institutional client.  The disclosure of conflicts can be in the advisory agreement, the ADV Pt.2, or other documents.  The client’s consent can either be explicit or implicit  A client, after receiving a disclosure, would implicitly consent, for example, by entering into or continuing the relationship with the adviser.

Conclusion

We urge advisers to review the Release.  In the SEC’s words, “advisers should have greater clarity about their obligations after reading it.”  This document would be ideal to distribute to new employees and certainly will be cited often in the future.

[1] “Commission Interpretation Regarding Standard of Conduct for Investment Advisers,” SEC Advisers Act Release No. IA-5248 (June 5, 2019) (https://www.sec.gov/rules/interp/2019/ia-5248.pdf).
[2] Earlier versions of the rules and releases were published April 18, 2018.
[3] “SEC Adopts Rules and Interpretations to Enhance Protections and Preserve Choice for Retail Investors in Their Relationships With Financial Professionals,” Securities and Exchange Commission Press Release 2019-89 (June 5, 2019).  https://www.sec.gov/news/press-release/2019-89.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

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In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013), the Delaware Court of Chancery clarified that under Delaware law the privilege for pre-merger communications passes to the surviving company after a merger is consummated. The privilege transfer would include the privilege for pre-closing communications regarding the merger itself.  The communications at issue in Great Hill were the sellers’ pre-closing communications with the target company’s outside counsel that were in buyer’s possession post-close. The Court urged merger parties to consider the need for contractual provisions that would protect against a privilege transfer should a different result be desired, the so-called privilege claw-back provision, which was absent from the Great Hill merger agreement.

Last week, in Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. No. 2018-0517-KSJM (Del. Ch. May 29, 2019), the Court upheld a privilege claw-back provision in a private-company merger transaction, consistent with its guidance in Great Hill. RSI acquired Radixx Solutions International, Inc. in 2016. A post-closing dispute arose between the parties related to purchase price adjustments and, in its efforts against the sellers, RSI sought to rely on emails of the target company that contained privileged pre-merger communications with its outside counsel.  But the Court disallowed such reliance in deference to the contractually negotiated privilege claw-back provision.  The RSI privilege claw-back provision not only stated that the privilege survived the merger but also assigned control of the privilege to the sellers’ stockholder representative and prohibited RSI, as the buyer, from using or relying on any privileged communications.  The Court rejected RSI’s arguments of lack of post-closing privilege or that any privilege had been waived, despite assertions that sellers and Raddix had not restricted RSI’s access to the email communications or taken steps to delete or isolate the email communications from the target company’s systems or other non-privileged communications.

The RSI opinion further highlights the critical need for thoughtful language regarding the parties’ intent with respect to privileged pre-merger (or pre-sale) communications, particularly if the sellers intend to preserve authority and control over the privilege after the transaction closes (while considering buyer’s interest in materials relating to third party claims for the pre-closing period).

The Delaware Court of Chancery’s RSI opinion can be found here.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On May 28, 2019, United States District Judge Martin Feldman issued a sixty-four page Order and Reasons which granted motions to remand filed by Plaquemines Parish and the State of Louisiana in The Parish of Plaquemines v. Riverwood Production Co., et al.  That case is one of forty-two Coastal Zone Management Act (“CZMA”) cases that were removed to Federal court in May 2018.  Those cases generally allege that more than 200 oil and gas companies violated Louisiana’s State and Local Coastal Resources Management Act of 1978 (“SLCRMA”) by either failing to obtain or violating state coastal use permits.  The cases were removed to Federal court by Defendants pursuant to 28 U.S.C. § 1442 (the federal officer removal statute) and 28 U.S.C. § 1331 (the federal question statute) on the basis that Plaintiffs’ claims (1) implicate wartime and national emergency activities undertaken at the direction of federal officers, and (2) necessarily require resolution of substantial, disputed questions of federal law.  In response, Plaintiffs filed motions to remand.  In those motions, Plaintiffs argued that (1) the removal was not timely because Defendants had notice of the grounds alleged in the removal notice more than thirty days before the cases were removed, (2) the Defendants could not satisfy the elements of the jurisdictional test for “federal officer” removal jurisdiction, and (3) Defendants could not satisfy the test for substantial federal question jurisdiction set forth by the United States Supreme Court.

In granting Plaintiffs’ motion to remand, the Court first found that Defendants’ removal, which was predicated on allegations made in Plaintiffs’ April 30, 2018 expert report (“Rozel Report”), was “simply too late.”  The Court’s conclusion was based on its determination that Plaintiffs previously placed at issue whether the defendants’ activities were lawfully commenced prior to the enactment of SLCRMA.  Instead of being triggered by the allegations in the Rozel Report, as Defendants argued, the Court found that the 30-day “other paper” removal period was triggered on April 13, 2017 (at the latest) by allegations contained in Plaintiffs’ memorandum in support of Plaintiffs’ motion to compel production of pre-SLCRMA documents.  Thus, the Court concluded, removal predicated on the April 30, 2018 Rozel Report was untimely.  Second, the Court determined that the Defendants failed to establish the “acting under” and “causal nexus” elements required for “federal officer” removal jurisdiction.[1]  With regard to the “acting under” requirement, the Court found that “the defendants at most demonstrate extensive but mere oversight regulation” which was insufficient to support a finding that Defendants were “acting under” the direction of a federal officer.  In analyzing the “causal nexus” requirement, the Court concluded that the government did not, in fact, exercise sufficient control over the oil and gas industry during World War II to establish a causal nexus between Defendants’ actions and Plaintiffs’ claims.  Lastly, the Court found that the Defendants did not establish federal question jurisdiction because Defendants did not sufficiently identify “necessary” or “substantial” federal issues raised by Plaintiffs’ claims.

At the end of the opinion, the Court recognized the Defendants’ right to appeal the Court’s remand order as it pertains to Defendants’ “federal officer” predicate for removal.  In addition, the Court granted Defendants’ request to certify for interlocutory appeal the federal question predicate for removal pursuant to 28 U.S.C. § 1292(b).

In response to the Court’s Order and Reasons, Defendants filed a Motion to Stay Remand Order Pending Appeal and a Motion for Expedited Consideration of the Motion to Stay on May 28, 2019.  The Motion for Expedited Consideration notes that the parties have agreed to the following proposed briefing schedule (1) Plaintiffs’ Opposition to Defendants’ Motion to Stay shall be filed by June 5, 2019, (2) Defendants’ Reply shall be filed by June 10, 2019, and (3) Defendants’ Motion to Stay shall be submitted for decision as of June 10, 2019.

[1] The Court did not address whether the defendants asserted colorable federal defenses, which is another required element for “federal officer” removal jurisdiction.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive

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After years of inconsistent rulings, the Fifth Circuit is poised to address a removal issue with significant ramifications for Louisiana tort cases. The previous version of 28 U.S.C. § 1442 authorized removal to federal court of a suit against a federal officer “only when the state suit was ‘for any act under color of such office.’” The Fifth Circuit, interpreting this language, held that the removing party must show a causal connection between its actions and the plaintiff’s claims. The causal connection requirement demands more than “mere federal involvement[;] instead, the defendant must show that its actions taken pursuant to the government’s direction or control caused the plaintiff’s specific injuries.”

In 2011, Congress amended § 1442 to allow removal of a state suit against a federal officer “for or relating to any act under color of such office.” While the Third and Fourth Circuits shifted their jurisprudence to comply with this new language, the Fifth Circuit has not. Instead, it continues to apply the pre-amendment causal nexus test to post-amendment cases.

This outdated approach stems from the Fifth Circuit’s “rule of orderliness.” Under that rule, a 3-member panel may not overturn a prior panel “absent an intervening change in law, such as by statutory amendment, or the Supreme Court, or the en banc Court.” With respect to federal officer removal, the first case to interpret the new statute was Bartel v. Alcoa Steamship Co. But rather than acknowledge the effect of the 2011 amendment, the Bartel court continued to apply pre-amendment jurisprudence.  This meant that subsequent Fifth Circuit panels would be bound by Bartel.

Despite this bar, the Fifth Circuit has slowly chipped away at Bartel’s viability. In Zeringue v. Crane Company, the Fifth Circuit reaffirmed Bartel but recognized that the 2011 amendment broadened the scope of the statute. In Savoie v. Huntington Ingalls, Inc., the court denied en banc rehearing on procedural grounds but found there was a “colorable argument that, in regard to the negligence claims, this action is removable because of the 2011 statutory amendment . . . .” In Legendre v. Huntington Ingalls, Inc., the court—again constrained by Bartel—stated that “a revised approach may have merit.” The Court explained that “by adding ‘relating to,’ Congress preserved a nexus requirement, but it is unclear the relationship must be causal.”

Latiolais v. Huntington Ingalls, Inc. is the latest Fifth Circuit panel to be handcuffed by the rule of orderliness. This time, however, the court provided extensive commentary criticizing its current approach. The court ultimately affirmed remand “but in hopes that our precedents will be reordered.” Those precedents may finally be “reordered” when the Fifth Circuit rehears Latiolais en banc. Oral argument is set for the week of September 23, 2019.

Whatever the Fifth Circuit decides, the outcome will have a tremendous impact on Louisiana tort cases. For more information about this Article or related issues, please contact attorneys Sara Grace Sirera (ssirera@liskow.com), Philip Dore (pdore@liskow.com), or Scott Seiler (scseiler@liskow.com).

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On May 9, 2019, the Louisiana Supreme Court issued an important opinion restricting application of the collateral source rule in personal injury lawsuits. In Simmons v. Cornerstone Investments, LLC, et al., 2018-CC-0735 (La. 5/8/19), the Court held the collateral source rule inapplicable to medical expenses charged above the amount actually paid by a workers’ compensation insurer pursuant to the workers’ compensation medical fee schedule.

Kerry Simmons, a Cintas warehouse employee, was injured on the job and received workers’ compensation benefits from Cintas, including disability and medical expenses. Id. Invoices from healthcare providers totaled $24,435, but the charges were reduced to $18,435 in accordance with the Louisiana Workers’ Compensation Act Medical Reimbursement Schedule, resulting in a “write off” of $6,000. Id. In Simmons’ tort suit against the third party building owner and its insurer, the defendants filed a motion in limine to exclude any evidence of medical expenses “written off” by the workers’ compensation insurer.  The trial court granted the defendants’ motion and ruled that the only evidence to be presented to the jury was that of amounts actually paid under the fee schedule.  The court of appeal denied the plaintiff’s writ in a 2-1 decision.  Thereafter, the Louisiana Supreme Court granted the writ to determine the applicability of the time-honored collateral source rule to the medical write off.

The Court began its analysis noting that the question of whether a plaintiff may benefit from the “written off” portion of medical expenses is subject to a two-part analysis:

  • Whether the plaintiff paid any consideration, or suffered any diminution to patrimony, for the “written off” amount; and
  • whether application of the rule will further the major policy goal of tort deterrence.

The Court held that neither consideration applied and upheld the lower courts’ exclusion of the “written off” amount. Id. at 9. In support, it relied on Bozeman v. State, 03-1016 (La. 7/2/04), 879 So.2d 692,  and Hoffman v. 21st Century North American Ins. Co., 14-2279(La. 10/2/15), 209 So.3d 702.  Both opinions held the collateral source rule did not apply when a plaintiff had paid no consideration for the benefits. Simmons at 3-4. In Bozeman, the Court considered whether the collateral source rule applied to medical expenses “written off” under the Medicaid program and concluded that because Medicaid is a free medical service for which no consideration is given by a patient, the plaintiff was unable to recover the write off amount. Bozeman, 879 So.2d at 705. Similarly, in Hoffman, the Court declined to apply the collateral source rule to an attorney-negotiated medical discount, finding the discount, obtained through the litigation process, fell outside the ambit of the collateral source rule since the plaintiff suffered no diminution of his patrimony. Hoffman, 209 So.3d at 706.

The Court also looked to the recent United States Fifth Circuit opinion of Deperrodil v. Bozovic Marine, Inc., 842 F.3d 353 (5th Cir. 2016), a decision that was “legally indistinguishable,” albeit only persuasive and non-binding.  Simmons at 7.  In Deperrodil, the Fifth Circuit held that a plaintiff may not recover from a third-party tortfeasor the amount of medical expenses “written off” by its employer/carrier under the Longshore and Harbor Workers’ Compensation Act.

The Simmons Court followed this line of jurisprudence and found the “written off” amount under the state workers’ compensation act was a “phantom charge that [p]laintiff has not ever paid nor one he will ever be obligated to pay.” Simmons, 2018-0735, p. 7.  With this reasoning, the Court concluded there was no basis to differentiate the “written off” amount created by a reduced reimbursement fee under workers’ compensation and those of a Medicaid program or an attorney-negotiated medical discount.  The Court gave only brief consideration to the argument that inclusion of the “written off” costs would further the policy of tort deterrence. While acknowledging the importance of tort deterrence in the tort system, the Court found that “there is no true deterrent effect to allowing [p]laintiff to recover expenses over and above what was actually paid” and noted that a ruling allowing plaintiff to recover such a windfall would amount to an unauthorized award of punitive damages Id. at 9.  As a result, the Court ruled the collateral source rule did not apply. Id. at 9-10.

The decision in Simmons is yet another substantial and appropriate clarification in the law (1) denying recovery of costs that were never incurred and (2) allowing recovery of only actual medical costs paid.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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In a victory for the oil and gas industry, the Third Circuit rendered a decision rejecting attempts by the Louisiana Department of Revenue to impose severance taxes on crude oil production based on index pricing.  The Third Circuit reaffirmed that severance taxes should be based on the “gross proceeds” obtained in an arm’s length sale at the lease.  The Department had sought additional severance taxes from numerous Louisiana producers that sold crude oil in arm’s length sales at the lease. The contracts provided that the sales price of the crude oil was based on index pricing, less an amount sometimes designated as a “transportation differential” or simply as a deduction. The Department argued that this “differential” or deduction must be “disallowed” when computing severance taxes, effectively imposing severance taxes on the index pricing.  The Louisiana Board of Tax Appeals, faced with numerous cases raising this same issue, heard a “test case” involving Avanti Exploration, LLC. The BTA held that the Department’s theories were invalid, and severance tax properly was based on the actual “gross receipts” received by the producer in an arm’s length sale.  In a decision issued on April 17, 2019, the Louisiana Third Circuit Court of Appeal affirmed, holding that, pursuant to the Louisiana Constitution, the severance tax statutes, and the Department regulations, in the absence of any “posted field price,” severance taxes must be based on the actual “gross receipts” received by the producer in an arm’s length sale at the lease.

The decision can be found here.

The attorneys involved in Avanti case are Cheryl Kornick, James Exnicios, Robert Angelico, and R.J. Marse.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

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A Lender in a real estate financing transaction often requires borrower’s counsel to opine on certain aspects of the transaction as a condition to the closing.  Often, the negotiations between borrower and lender counsel are as contentious and extended as are negotiations regarding the loan documents themselves.  The respective attorney opinion committees of the American College of Real Estate Lawyers, the American College of Mortgage Attorneys, and the Real Property, Trust and Estate Law Section of the American Bar Association have worked for years to produce opinion reports that are fairly balanced between the needs of lenders and borrowers and that can reduce the negotiations over real estate finance opinions.  The first opinion report specifically addressing financing opinions in real estate transactions was the Real Estate Opinion Letter Guidelines published in 38 Real Prop. Prob. & Tr. J. 241 (2003).  The next report was the comprehensive The Real Estate Finance Opinion Report of 2012 published at 47 Real Prop. Tr. & Est. L. J. 213 (2012) and The ACREL Papers 121 (Spring 2013).  The Local Counsel Opinion Letters – A Supplement to the Real Estate Finance Opinion Report of 2012, 51 Real Prop. Tr. & Est. L. J. 167 (2016) directly addresses the particular issues facing local counsel in real estate finance transactions.  The latest report, just published at 53 Real Prop. Tr. & Est. L. J. 163 (Fall 2018/Winter 2019), is Uniform Commercial Code Opinions in Real Estate Finance Transactions (the “UCC Opinion Report”).  In addition to accessing these reports in the Real Property Probate and Trust Journal, the Legal Opinion Resource Center of the ABA Business Law Section contains these and many other opinion reports and resources.

The principle behind a UCC Opinion Report drafted specifically for real estate lawyers is that while many real estate financings involve only a deed of trust or mortgage and an assignment of leases and rents, many others will involve UCC collateral, such as fixtures, as-extracted collateral, timber to be cut, deposit accounts, and investment property.  While the UCC Opinion Report may not replace other reports of various working groups designed purely for the most sophisticated UCC financings, it provides a detailed explanation of applicable UCC laws regarding creation and perfection of security interests in those types of collateral most often included in real estate financings and includes a representative form of opinion for UCC opinions.  As the UCC Opinion Report notes that priority is not typically covered in UCC opinions (at least in most real estate financings), it does not provide a deep dive into many priority issues.

Real estate counsel will find the UCC Opinion Report a good addition to the existing reports that can assist in streamlining the contentious opinion negotiation process.  For additional background on the report, see “UCC Opinions in Real Estate Financings.”

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On March 29, 2019, the U.S. Environmental Protection Agency (EPA) announced it had finalized a voluntary disclosure program for new owners of upstream oil and natural gas exploration and production facilities. Under the program, EPA will not impose any civil penalties on new owners of these facilities (which include well sites and associated tanks and vapor control systems) who find, self-disclose, and correct Clean Air Act violations pursuant to an audit program agreement with EPA. EPA is offering the program to such new owners because EPA and states have seen significant excess emissions and Clean Air Act noncompliance from vapor control systems at these facilities.

In most cases, new owners will have nine months from the date of acquisition to notify EPA of their interest in participating in the program. New owners who acquired facilities in the twelve months before EPA finalized this program are also eligible. EPA has reserved the right not to enter into an agreement under this program if EPA or a state has already discovered Clean Air Act noncompliance at these newly-acquired facilities.

Following notification, the new owner will consult with EPA to determine the scope of the audit and the number of facilities covered by the audit. That scope will then drive the schedule for completing the audits and corrective action, which will be set forth in the customized audit agreement between the new owner and EPA. As part of this agreement, the new owner will be required to ensure its newly-acquired vapor control systems are: (1) designed to handle maximum and minimum system pressures based on production, and (2) operated and maintained in a manner that prevents excess emissions. According to the template for the audit agreement, violations identified through this vapor control system assessment process must be corrected within 180 days of discovery, although that timeframe can be extended. The template provides that new owners have 60 days to correct other violations, but that time may be extended as well.

Under the template, EPA will not impose any civil penalty for those violations that were disclosed and “satisfactorily corrected” consistent with the agreement’s requirements. EPA has acknowledged that this penalty relief is greater than what it offers under its preexisting audit policies – Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, 65 Fed. Reg. 19618 (April 11, 2000), and Interim Approach to Applying the Audit Policy to New Owners, 73 Fed. Reg. 44991 (Aug. 1, 2008) – which allow for the elimination of the gravity component of the penalty rather than the entire penalty. EPA has said that this new program for upstream oil and gas facilities “is separate from” and “does not change” those preexisting audit policies.

Notably, this new program is based on an audit policy agreement that EPA negotiated in 2017 with Range Resources, after it acquired numerous oil and gas assets in Louisiana. Under that agreement, Range Resources was given three years to complete audits for its 390 newly-acquired facilities, rather than the shorter timeframe that would have been available under preexisting audit policies. Mr. Louis Buatt of Liskow & Lewis provided legal counsel to Range Resources in connection with that audit.

Companies acquiring upstream oil and natural gas assets may find the new policy to be an effective way to mitigate environmental risk and to assure future compliance at the newly-acquired facilities.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On March 29, the UK House of Commons rejected, for the third time in three months, a draft withdrawal agreement for a negotiated exit of the UK from the European Union. The UK now has until April 12 to present the EU with a new exit proposal. The lack of a negotiated transition for the UK (a “no-deal Brexit”) could present uncertainty for participants in the global derivatives markets. In response to concerns over such potential uncertainty, regulators on both sides of the Atlantic are taking measures to reassure the markets that U.S.-UK derivatives activity will continue with minimal interruption. 

In February, a joint statement was issued by the CFTC, the Bank of England and the UK Financial Conduct Authority regarding the continuity of derivatives trading and clearing on a no-deal Brexit. The joint statement can be found here. Regulators highlighted measures including continued information sharing and supervisory cooperation between the U.S. and UK, the extension to UK firms of relief and comparability made available by the CFTC to the EU, and UK adherence to EU equivalency decisions for the US.

The CFTC also recently issued an interim final rule to provide relief from margin requirements for legacy non-cleared swaps that are transferred outside of the UK on a no-deal Brexit. These are swaps that existed before the compliance date under the CFTC margin rules and thus were not subject to those requirements. In the case of a no-deal Brexit, market participants may prefer or need to move derivatives contracts to an affiliate outside of the UK to ensure continued access to services needed for those contracts. This might arise if the current EU passporting regime is no longer available to the UK. The CFTC rule would allow a legacy swap to be transferred and amended without revising the swap date, which would otherwise subject the swap to margin requirements. The relief is available for transfers of legacy swaps solely in connection with a no-deal Brexit and would not support an amendment of the swap’s economic terms. If a legacy swap is amended outside of the bounds of the CFTC rule then that swap would be subject to the margin requirements of the CFTC. The CFTC interim final rule can be found here. It is open for comment and would take effect only if a no-deal Brexit occurs.

If we can answer any questions about these developments or assist you with any other derivatives matters, please contact Nina Bianchi Skinner, Shareholder.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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