Louisiana

By William J. Kolarik, II

On April 25, 2017, State Representative Sam Jones requested that the Louisiana House Committee on Ways and Means voluntarily defer HB628, which would have imposed a commercial activity tax upon many business organizations doing business in Louisiana.  The Committee’s vote to voluntarily defer the bill means that the proposed commercial activity tax is likely dead for the 2017 legislative session.  The proposed commercial activity tax was the centerpiece of Louisiana Governor Edwards’ tax package and the deferral of the proposed bill means that Governor Edwards and Louisiana legislators will need to resolve Louisiana’s current budget crisis through other means.  The Kean Miller State and Local Tax team is reviewing proposed Louisiana tax legislation and will update its blog when our review is complete.

louisiana

By R. Lee Vail, P.E., Ph.D.

At the very end of 2016, the Fifth Circuit Court of Appeals vacated two Occupational Safety and Health Administration (“OSHA”) citations for alleged violations of Process Safety Management (“PSM”) regulations. In that case, the Court held that OSHA was barred from issuing a citation for the failure to act on Process Hazard Analysis (“PHA”) findings/recommendations that remained open beyond the six month statute of limitations provided in 29 U.S.C.A. §658(c) of the Occupational Safety Health Act of 1970. See, Delek Ref., Ltd. v. Occupational Safety & Health Review Comm’n, 845 F.3d 170, 179 (5th Cir. 2016).

Conversely, violations of the Clean Air Act are recognized to be subject to the general federal five-year statute of limitations established by 28 U.S.C. § 2462. See Nat’l Parks & Conservation Ass’n, Inc. v. Tennessee Valley Auth., 502 F.3d 1316, 1322 (11th Cir. 2007). Consistent with this, the “duration of violation” factor under the Environmental Protection Agency (“EPA”) “Combined Enforcement Policy for Clean Air Act Sections 112(r)(1), 112(r)(7) and 40 C.F.R. Part 68 ” reaches its maximum at 60 months. At first glance, it would appear that the Delek decision might have little or no impact on RMP penalties, but that would be incorrect.

Some RMP violations are not continuing violation.

In considering PHA recommendations, the Fifth Circuit concluded:

Just as a single violation “occurr[ed]” in Volks when the company failed to create the records within the prescribed time-period, so too a violation of subsections (e)(5) and (o)(4) “occur[s]” within the meaning of Section 658(c) when an employer does not “promptly” or “timely” do as Section 1910.119 directs.

Id. at 176–77.

RMP has the exact same requirements, albeit at 40 C.F.R. 68.67(e) and 40 C.F.R. 68.79(d). Aligning RMP with PSM based on Delek, no duration of violation factor should apply to violations of §68.67(e) or §68.79(d). Further, this ruling could apply to other RMP provisions that only require compliance by a particular date. For example, this case strengthens the argument that the failure to conduct a specific Management of Change (“MOC”) is a one day violation and not subject to “duration of violation” factor. Delek could similarly affect other RMP requirements.

Prior PHA’s might not be a basis of violation.

Consider the following example. A facility conducts a PHA in 2010, and a second five years later in 2015. Also assume that a recommendation from the 2010 PHA remains open seven years later in 2017. Any single violation based on the 2010 PHA is time barred five years after the facility failed to act promptly or timely. If for argument sake, prompt and timely is considered two years, the five year statute of limitation bars enforcement of the omission by 2017. Further, the EPA might have issues with citing a violation of the open issue based on the 2015 PHA as it may not yet be past the prompt or timely criteria.

Time will tell to what degree Delek will impact the existing RMP penalty policy. Regardless, it could have an impact.

cms

By Lyn Savoie

On March 27, 2017, the Centers for Medicare and Medicaid Services (CMS) posted revisions to the Voluntary Self-Referral Disclosure Protocol (SRDP), which provides a process for the disclosure of potential or actual violations of the federal physician self-referral law (commonly known as the Stark Law).  In an attempt to streamline the self-disclosure process, CMS issued new required forms and a financial worksheet for use by an entity when making a disclosure.  Under the revised SRPD, the disclosing party must submit the following items:

(a) the SRPD Disclosure Form, which includes information about the disclosing party, the history of the noncompliance conduct, and steps taken to prevent future noncompliance;

(b) the Physician Information Form, which collects information regarding the noncompliant financial relationship between the physician and the disclosing party (Note that a separate form is submitted for each physician in a noncompliant relationship.  Therefore, if a physician practice fails to meet the Stark Law definition of group practice, a separate form would be required for each physician whose compensation arrangement with the group was noncompliant.);

(c) a Financial Analysis Worksheet (submitted in Excel-compatible format), which quantifies the overpayment associated with each physician referral and describes the methodology used to calculate the overpayment amount; and

(d) a certification of the truthfulness of the information contained in the disclosure.

The disclosing party may also submit an optional cover letter that includes information it believes may be relevant to CMS’ evaluation of the disclosure.

Although the new forms are only required to be used starting on June 1, 2017, the CMS website encourages providers to begin using the revised forms at this time.  The new forms are available here.

fifth

By Chase Zachary

On April 18, 2017, the U.S. Court of Appeals for the Fifth Circuit released a published opinion in Guilbeau v. Hess Corp.[1] The court affirmed the application of Louisiana’s subsequent purchaser doctrine to claims for environmental damages allegedly caused by activities of a former mineral lessee prior to the date that the plaintiff owned the property. Although the Fifth Circuit previously reached a similar conclusion in an unpublished decision,[2] Guilbeau is the court’s first precedential opinion addressing the subsequent purchaser doctrine.

As discussed on Kean Miller’s Louisiana Law Blog, here[3] and here,[4] the subsequent purchaser doctrine bars a plaintiff’s claims for property damages that occur prior to the plaintiff’s ownership of the property. The Louisiana Supreme Court provided a “thorough analysis”[5] of the doctrine in Eagle Pipe & Supply, Inc. v. Amerada Hess Corp.[6] There, the court “clarified that damage to property creates a personal right to sue, which unlike a real right, does not transfer to a subsequent purchaser ‘[i]n the absence of an assignment or subrogation.’”[7] However, plaintiffs have argued that the Eagle Pipe opinion did not address whether the subsequent purchaser doctrine applies “to fact situations involving mineral leases or obligations arising out of the Mineral Code.”[8]

The facts of Guilbeau are straightforward. Defendant Hess Corporation’s (“Hess’s”) predecessors operated until 1971 on the property-in-suit under several mineral leases.[9] All of those leases expired in 1973.[10] The plaintiff purchased the property-in-suit in 2007.[11] The “sale did not include any assignment of rights to sue for pre-purchase damages.”[12] After the plaintiff sued Hess for alleged contamination to the property, the federal district court granted Hess’s motion for summary judgment and dismissed the plaintiff’s claims based on the subsequent purchaser doctrine.[13] The Fifth Circuit affirmed.[14]

Making an “Erie guess” of how the Louisiana Supreme Court would decide the issue,[15] the Fifth Circuit identified a “clear consensus . . . among all Louisiana appellate courts that have considered the issue . . . that the subsequent purchaser rule does apply to cases . . . involving expired mineral leases.”[16] After tracing those Louisiana appellate decisions,[17] the Court found “no occasion to depart from the above-described precedent” and held that the subsequent purchaser doctrine barred the plaintiff’s claims.[18] The Court also noted that “the Louisiana Supreme Court has had multiple opportunities to consider this issue and has repeatedly declined to do so.”[19] Notably, the Fifth Circuit declined to certify the subsequent purchaser issue to the Louisiana Supreme Court on the basis that “[w]hen, as here, the appellate decisions are in accord, the law is not unsettled, and certification is unwarranted.”[20]

The Fifth Circuit is simultaneously considering a companion case, Tureau v. Hess Corp.[21] That suit involves an identical issue—i.e., whether the district court correctly applied the subsequent purchaser doctrine to dismiss claims for alleged property damage against former mineral lessees. The Fifth Circuit previously held Tureau in abeyance pending its decision in Guilbeau, and a decision in Tureau is expected shortly.

The Fifth Circuit’s Guilbeau opinion affirmatively resolves, for Louisiana federal courts, whether the subsequent purchaser doctrine applies to property damage claims against current and former mineral lessees. The decision accordingly provides much-needed certainty to both property owners and oil and gas operators involved in “legacy” litigation.

_____________________________

[1] No. 16-30971, — F.3d –, 2017 WL 1393709 (5th Cir. Apr. 18, 2017), http://www.ca5.uscourts.gov/opinions/pub/16/16-30971-CV0.pdf

[2] See Broussard v. Dow Chem. Co., 550 F. App’x 241 (5th Cir. 2013).

[3] http://www.louisianalawblog.com/coastalwetlands-issues/louisiana-supreme-court-expands-judicial-limitations-on-landowner-tort-claims/.

[4] http://www.louisianalawblog.com/energy/louisiana-second-circuit-court-of-appeals-upholds-application-of-subsequent-purchaser-doctrine-in-oilfield-legacy-case/.

[5] Guilbeau, 2017 WL 1393709, at *2.

[6] 79 So. 3d 246 (La. 2011).

[7] Guilbeau, 2017 WL 1393709, at *2 (quoting Eagle Pipe, 79 So. 3d at 279) (emphasis in original).

[8] 79 So. 3d at 281 n.80.

[9] Guilbeau, 2017 WL 1393709, at *1.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *2.

[17] Id. at *2-4.

[18] Id. at *4.

[19] Id.

[20] Id.

[21] No. 16-30970.

air

By Maureen N. Harbourt

EPA is required by Section 109(d) the Clean Air Act to review the adequacy of each National Ambient Air Quality Standard (“NAAQS”) every five years to determine if new scientific evidence justifies a change to the standard.  The current primary[i] NAAQS for nitrogen dioxide (“NO2”) is 53 ppb annual mean and 100 ppb NO2 as 98th percentile of 1-hour daily maximum concentrations, averaged over 3 years.  The annual average was first adopted in 1971, and was not changed during (overdue) reviews completed in 1985 and 1996.  In the next completed review in 2010, EPA added the 1 hour NO2 NAAQS to the standard based on a conclusion that the annual standard alone was not protective enough due to potential health impacts associated with short term exposures.[ii]  The 2010 review also indicated that there was a lack of data concerning near roadway exposures, which was of concern given that 34% of NO2 emissions are estimated to be generated from roadway vehicles.  Thus, the 2010 review led to EPA requiring states to install near-roadway monitors in urban areas during the 2014-2017 period.

EPA has just completed a final Policy Assessment reviewing the adequacy of the 2010 NAAQS and has concluded that no change to the existing standard is recommended.  82 Fed. Reg. 17947, April 14, 2017. The EPA Clean Air Science Advisory Committee (“CASAC”) also recommended no change to the standard.  The EPA’s Policy Assessment indicated that the additional roadway monitors installed as a result of the 2010 NAAQS rule have not been gathering data for a sufficient period (only 1-2 years) to fully evaluate such information, although the data that was available showed higher NOx concentrations near roadways than at nearby non-roadway monitors.[iii]  The Policy Assessment is the last step of the periodic NAAQS review process before any final EPA decision to revise or not revise the existing standards. It considers the Integrated Science Assessment, the Risk/Exposure Assessment, and the advice of the CASAC.

________________________________________________

[i] The primary NAAQS are set at a level to protect human health with an adequate margin of safety.  A secondary NAAQS is set at a level to protect human welfare, including decreased visibility and damage to animals, crops, vegetation, and buildings.  The secondary NAAQS for NO2 is currently equivalent to the annual primary standard (53 ppb annual mean).  EPA has recently completed an integrated science assessment for the secondary standards for NO2, sulphur oxides and particulate matter and has requested that the CASAC review that assessment.  82 Fed. Reg. 15701, March 30, 2017.

[ii] The EPA’s decision to add the 1-hour NO2 NAAQS was upheld in American Petroleum Institute v. Environmental Protection Agency, 684 F.3d 1342 (D.C. Cir. 2012), cert. den. 133 S.Ct. 1724 (2013).

[iii] The full EPA Policy Assessment is available here.

 

 

 

la house of reps

By William J. Kolarik, II

On April 17, 2017, the legislation that composes the centerpiece of Governor Edwards’ proposed tax reforms was filed in the Louisiana House of Representatives.  House Bill 628, introduced by state Rep. Sam Jones, contains the legislation that would establish the commercial activity tax.  The Kean Miller State and Local Tax team is reviewing the proposed legislation and will update its summary of the proposed Louisiana tax reform package after our review is complete.

 

refinery1a

By R. Lee Vail, P.E., Ph.D.

At the very end of 2016, the Fifth Circuit Court of Appeals vacated two Occupational Safety and Health Administration (“OSHA”) citations against an employer that allegedly failed to timely resolve open findings and recommendations from Process Hazard Analysis (PHA). The 2008 citation related to multiple PHAs that occurred over a decade (with the last being 2005) and a 2005 compliance audit. In doing so, the Court narrowed these process safety management requirements to no more than addressing and resolving the findings in a timely manner:

Neither Section 1910.119(e)(5) nor (o)(4) mandates that the employer actually remedy the issues addressed in a PHA or audit recommendation. See 29 C.F.R. § 1910.119(e)(5), (o)(4). Subsection (e)(5) directs the employer to “address” the findings from a PHA and to “resolve[ ]” them in a timely manner. Likewise, subsection (o)(4) directs employers to “determine and document an appropriate response” to the audit compliance findings.

Delek Ref., Ltd. v. Occupational Safety & Health Review Comm’n, 845 F.3d 170, 178 (5th Cir. 2016)

This case followed AKM LLC dba Volks Constructors v. Sec’y of Labor, 675 F.3d 752 (D.C. Cir. 2012), where the Court concluded the obligation to create a record was a onetime event and that OSHA was barred from citing a facility six months after that record should have been created. In considering PHA recommendations, the Fifth Circuit concluded:

Just as a single violation “occurr[ed]” in Volks when the company failed to create the records within the prescribed time-period, so too a violation of subsections (e)(5) and (o)(4) “occur[s]” within the meaning of Section 658(c) when an employer does not “promptly” or “timely” do as Section 1910.119 directs.

Id. at 176–77.

OSHA’s argued that the “address and resolve” obligation was continuous and that any failure was a continuing violation. Arguably, if the violation is continuing, a violation accrues on the first non-timely day and every day thereafter. According to the holding in this case, six months after that first non-timely day, OSHA is barred from issuing a citation. So what is timely? The Fifth Circuit noted that OSHA has historically placed this timely obligation at 1 – 2 years.

The Secretary has, on at least one occasion, taken the position that a response to PHA and audit recommendations is “timely” when it is done within “one to two years.” See Secretary of Labor v. BP Prods. N. Am., Inc., 2013 WL 9850777, at *37 (OSHRC Aug. 12, 2013). We need not address this issue here, however, because the Secretary has not argued that the citations underlying Items 4 and 12 would be timely under the interpretation of Section 658(c) we now adopt, even if Section 1910.119’s references to “timely” or “prompt” action afforded an employer more than one or two years to resolve open PHA or audit recommendations.

Id. at 177.

As such, if two years is timely, a citation issued within two years of the PHA recommendation would be premature; a citation issued after two and a half years would be barred. Such will likely place OSHA in a quandary . . . in order to argue that similar PHA citations are not time barred, OSHA may need to provide more time to “address and resolve.” Even then, an action becomes barred six months after whatever OSHA defines as timely. Only a six month window exists where OSHA can issue a citation with the big question being “where does the window start?”

This decision could have a much broader effect. For example, is the failure to conduct a pre-startup review no longer citable six months after startup?

Industrial Strength Graphic Only

By Greg Anding

For years, plaintiffs in asbestos litigation have been filing suit in the plaintiff-friendly jurisdictions of St. Louis, Missouri and Madison County, Illinois.  Some estimate that more than half of all mesothelioma claims filed in the United States are filed in Illinois and Missouri.  Many of those claims arise out of alleged exposures completely outside of those two states: some sources cite as many as 72%.  Under guidance from the United States Supreme Court’s ruling in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), Missouri appears to be bringing that trend to an end, which will likely mean an increase in filings in states such as Louisiana where the alleged exposures actually occurred.  A similar issue is currently pending in Illinois, and a similar ruling would likely mean more filings in Louisiana as well.

On February 28, 2017, the Missouri Supreme Court, in State ex rel. Norfolk So. Ry. Co. v. Hon. Colleen Dolan, No. SC95514 (2/28/2017), applying the United States Supreme Court’s landmark ruling in Daimler, dismissed plaintiff’s suit for lack of personal jurisdiction.  Russel Parker, plaintiff, was an Indiana resident who was allegedly injured in Indiana while employed by Norfolk Southern Railway Company (“Norfolk”), a Virginia corporation with its principal place of business in Virginia.  The court found that although Norfolk owned and operated railroad tracks in Missouri, Mr. Parker’s suit did not arise out of or relate to Norfolk’s activities in Missouri, and therefore, Missouri had no specific jurisdiction.  More significant was the court’s finding of no general jurisdiction despite Norfolk’s “substantial and continuous business in Missouri” as demonstrated by its ownership of 400 miles of railroad tracks in Missouri, 590 employees in the state and generation of approximately $232 million in annual revenue from its Missouri operations.  Finding that Norfolk also conducted “substantial and continuous business in at least 21 other states,” and its Missouri business amounted to only 2 percent of its total business, the court held this was insufficient to establish general jurisdiction over Norfolk.  The court also noted that Norfolk did not consent to suit over activities unrelated to Missouri simply by complying with Missouri’s foreign corporation registration statute.

For more information, please contact any member of our Louisiana Asbestos Defense and Occupational Exposure team.

Norfolk Opinion.

 

compass

By David P. Hamm, Jr.

Helping sellers navigate the uncertain horizon of post-closing indemnification claims is a crucial part of a deal lawyer’s job on the sell-side of any M&A transaction. According to a relatively recent study by Shareholder Representative Services (the “2013 SRS Study”), approximately 67% of private M&A transactions have “material post-closing issues.”[1]  While post-closing liability exposure is industry and deal specific, the empirical data presented by the 2013 SRS Study provides crucial insight for the deal lawyer tasked with helping her client navigate these uncertain waters. A copy of the full 2013 SRS Study can be found here.

2013 SRS Study Sample

The 2013 SRS Study is based upon claims made against escrow holdback funds for 420 private-target acquisitions that closed between 2007 and 2013. There were approximately 700 such claims made in connection with the analyzed acquisitions. Each of these claims was sorted by its type and size.

As the saying goes, a picture is worth a thousand words. To that end, two key graphics contained in the 2013 SRS Study are set forth below that highlight several of the study’s insights.

Breakdown of Claims in General

hamm pic

As the graphic above shows, roughly 400 of the 700 post-closing claims within the 2013 SRS Study Sample were related to alleged breaches of representations and warranties. The graphic below illustrates the representations and warranties that are most frequently the subjects of indemnification claims.

Breakdown of R&W Claims

hamm pic 2

This chart is the most valuable chart in the entire 2013 SRS Study as it provides a solid basis for clear counsel to sell-side clients in the M&A context. It also shows the particular representations and warranties that should be focused upon prior to closing to minimize post-closing claims.

Conclusion

The 2013 SRS Study enables the M&A lawyer to take the abstract notion of post-closing liability exposure and convert it into a discussion of empirical data. Again, while post-closing liability exposure is industry and deal specific, the 2013 SRS Study provides helpful market data that can help inform clients and prevent post-closing claims.

__________

[1] https://www.srsacquiom.com/files/2013escrowstudy.pdf

7th

By Erin Kilgore and Scott Huffstetler

On April 4, 2017, the Seventh Circuit Court of Appeals ruled that sexual orientation discrimination is prohibited by Title VII of the Civil Rights Act of 1964.

As previously noted, there has been much debate among the courts regarding the meaning of the term “sex” under Title VII and whether discrimination based on sexual orientation and/or transgender status falls within the scope of Title VII’s protection. With yesterday’s 8-3 ruling, the Seventh Circuit became the first appellate court to interpret Title VII’s prohibition on discrimination based on “sex” as barring discrimination based on sexual orientation.   The ruling is consistent with the Equal Employment Opportunity Commission’s interpretation of Title VII and is particularly significant given that the Seventh Circuit is considered among the relatively conservative federal appellate courts. Additional information regarding the decision can be found here.

This decision is only binding on employers in the Seventh Circuit (which encompasses Illinois, Indiana, and Wisconsin).   Courts in other jurisdictions have reached the opposite conclusion. For example, just a few weeks ago, a panel of the Eleventh Circuit Court of Appeals, another conservative jurisdiction, ruled that Title VII does not protect employees from discrimination on the basis of sexual orientation.  The Supreme Court may ultimately weigh-in on this issue to resolve the emerging split among the appellate courts.

The Fifth Circuit (which encompasses courts in Louisiana, Mississippi, and Texas) has not held that Title VII prohibits discrimination based on sexual orientation. Nevertheless, all employers should be aware of this decision. It is likely that attorneys, advocates, and federal agencies will rely on this ruling in an effort to expand the scope of Title VII in other jurisdictions.