By Claire Juneau

Governor John Bel Edwards has sued Louisiana Attorney General Jeff Landry over Mr. Landry’s refusal to approve certain private legal counsel contracts. Governor Edwards alleges that Mr. Landry is the “chief legal officer of the state,” is “charged with the assertion or protection of any right or interest of [Louisiana],” and “is ethically required by the Rules of Professional Conduct promulgated by the Louisiana Supreme Court to abide by [his] client’s decisions concerning the objective of representation and to consult with [his] client as to the means by which they are to be pursued.” Governor Edwards seeks the immediate issuance of an alternative writ of mandamus compelling Mr. Landry “to perform his statutory ministerial duty to give written approval of the choice of counsel of the executive branch entities…” Governor Edwards alleges that Mr. Landry has rejected most of the contracts “on the grounds that the contracting attorneys should not have agreed not to discriminate in employment and the rendering of services in accordance with Executive Order No. JBE 2016-11.”

Governor Edwards alleges that the procedures for retention and employment of private counsel for the State of Louisiana are found in Louisiana Revised Statute § 42:262 and Louisiana Revised Statute § 49:258. Specifically, Revised Statute § 42:262(F)(1) provides in pertinent part:

In the event it should be necessary to protect the public interest, for any state board or commission to retain or employ any special attorney or counsel to represent it in any special matter for which services any compensation is to be paid, the board or commission may retain or employ such special attorney or counsel solely on written approval of the governor and the attorney general and pay only such compensation as the governor and the attorney general may designate or approve in the written approval.

And Revised Statute § 49:258 provides in pertinent part:

Notwithstanding the provisions of any other law to the contrary and specifically the provisions of any law that authorizes the state or a state agency to appoint, employ, or contract for private legal counsel to represent the state or a state agency, including but not limited to the provisions of R.S. 42:261, 262, and 263, and R.S. 40:1299.39(E), any appointment of private legal counsel to represent the state or a state agency shall be made by the attorney general with the concurrence of the commissioner of administration.

Governor Edwards argues that Revised Statute § 42:262 cannot be read alone and the discretion set forth with respect to boards and commissions is superseded by Revised Statute 49:258, which sets forth a “ministerial process for approval of private counsel, by both the Division of Administration and the Attorney General, and appointment by the Attorney General.” Governor Edwards asserts that Mr. Landry “has refused to perform” this ministerial duty.

A copy of the Petition for Writ of Mandamus can be found here:  Edwards v Landry.



By Jason R. Cashio

Continuing a trend among other courts, a recent ruling from U.S.D.C., Middle District of Louisiana, recognized the discoverability of plaintiff’s social media postings.  Baxter v. Anderson, 2016 U.S. Dist. LEXIS 110687 (M.D. La. Aug. 18, 2016).  In Baxter, Magistrate Judge Bourgeois addressed the discoverability of social media in a recent discovery ruling on August 19, 2016.  The discovery requests calling for production of plaintiff’s social media information, as propounded, were overly broad.  However, the court was still willing to permit the discovery with some limitations. 

Magistrate Judge Bourgeois was not willing to permit unfettered access to a plaintiff’s social media account just because a personal injury lawsuit was filed, which placed plaintiff’s mental and physical conditions at issue.  However, the ruling permitted access to any postings that met one of the following criteria:

  1. Postings by the plaintiff that relate to the accident;
  2. Postings related to any emotional distress or treated received that relate to the accident;
  3. Postings or photographs that relate to alternative potential emotional stressors, or that are inconsistent with the alleged mental injuries;
  4. Postings that relate to physical injuries sustained as a result of the accident and any treatment therefor;
  5. Postings that relate to other, unrelated physical injuries; and,
  6. Postings or photographs that reflect physical capabilities that are inconsistent with the alleged injuries at issue.

Accordingly, the court acknowledged that social media posts/photographs are subject to discovery, which is consistent with numerous other rulings within Louisiana, as well as around the nation.  



By Jennifer J. Thomas

The Centers for Medicare and Medicaid Services, Office of the Inspector General (“OIG”) published a Proposed Rule in the September 20, 2016 Federal Register that would change the structure and expand the authority of State Medicaid Fraud Control Units (“MFCU”). The OIG wants to change the Federal participation in the costs attributable to establishing and operating a MFCU as well as incorporate into the rule statutory and policy changes that have occurred since 1977. Those changes include:

  1. raising the Federal matching rate for ongoing operating costs from fifty (50) to seventy-five (75) percent;
  2. establishing a Medicaid State plan requirement that a State must operate an “effective MFCU”;
  3. establishing standards under which MFCUs must be operated;
  4. allowing MFCU’s to seek approval from the Inspector General to investigate and prosecute violations of State law related to fraud in any aspect of the provision of health care services under any Federal health care program, including Medicare, as long as the fraud is primarily related to Medicaid; and
  5. giving MFCUs the option to investigate and prosecute patient abuse, neglect, or misappropriation of patient funds regardless of whether the providing facility receives Medicaid payments.

The Proposed Rule adds or revises several definitions to expand the authority of the MFCU to prosecute. For example, “board and care facility” would be added so that under item (5) listed above the MFCUs investigative authority would now include complaints of abuse or neglect at facilities at non-Medicaid assisted living facilities. The definition of “provider” would be amended to include those who are required to enroll in a State Medicaid program, such as ordering and referring physicians. The intent of this amendment is to clarify the providers who are not furnishing items or services for which payment is claimed directly under Medicaid, such as those providers enrolled in managed care, can be the subject of a MFCU investigation and prosecution. A definition of “fraud” is to be added to clarify the MFCU’s authority to investigate and prosecute both criminal and civil fraud.

The Proposed Rule would change MFCU staffing requirements to require all employees, whether part-time or full-time, to devote their “exclusive effort” to MFCU functions. Each MFCU must employ a director who would supervise all MFCU employees. The MFCU must be a “single identifiable entity in State government” and would operate under its own budget separate from that of its parent agency.

All MFCU’s under the Proposed Rule would be required to submit all convictions to the OIG for purposes of program exclusion within 30 days of sentencing. MFCUs would also be required to make information on investigations involving the same suspects or allegations to the OIG investigators and attorneys.  If the MFCU discovers an overpayment made to a provider or facility, the MFCU must either recover the overpayment or refer the matter to the proper State agency for collection.

The MFCU changes outlined in the Proposed Rule are not yet final. Any person can submit comments to the OIG by 5:00 p.m. Eastern Standard Time on November 21, 2016. If the changes in the Proposed Rule are made, it could result in increased investigations and prosecutions by State MFCUs against a broader scope of providers and facilities.

row of bottles and pills on a chemists counter

By Jennifer J. Thomas

The Louisiana Board of Pharmacy promulgated a Final Rule on September 20, 2016 giving Louisiana licensed pharmacists the authority to perform medication synchronization and refill consolidation services for their patients.   Under the Rule, the pharmacist may adjust the dispensing quantity and refill schedule for multiple medications so that all of the patient’s medications can be dispensed on the same day each month ultimately reducing the number of trips a patient has to make to the pharmacy.

While the pharmacist may adjust the quantity or refill schedule originally ordered by the prescribing physician, the pharmacist cannot dispense more than the total quantity of the original prescription plus refills. For example, if the original prescription was for thirty (30) pills taken over thirty (30) days with three (3) refills, the total quantity of pills would be one hundred and twenty (120) pills. With refill consolidation, the pharmacist can adjust the quantity to initially dispense 15 pills with refills of 45, 30, and 30 to achieve the same total quantity originally prescribed over the same time period.

If the prescription is for a controlled substance where refills have been authorized by the prescriber, the pharmacist can partially fill the prescription, but cannot exceed the quantity noted on the original prescription. If the prescription is for a Schedule II controlled substance and the pharmacist is unable to supply the full quantity called for in the prescription, the pharmacist may partially fill that prescription; however the remaining portion of the prescription should be dispensed within 72 hours. Otherwise, the pharmacist must notify the prescriber and a new prescription must be written.

The intent of medication synchronization and refill consolidation is to help reduce medication waste and improve medication adherence. According to the Louisiana Board of Pharmacy, there is evidence that patients with simple medication schedules are more likely to actually take their medications. By synchronizing medications prescribed by multiple prescribers such that a patient only has to make one visit to the pharmacy each month, there is also an increased likelihood of reducing transportation costs for the patients.

The Louisiana Board of Pharmacy notified all pharmacies and pharmacists of the new medication synchronization rule on September 21, 2016. Therefore, consumers can now work with their local pharmacists to get all of their prescription medications in sync.

Top view of family paper chain on a doctor desk. Medical worktable with keyboard, blue stethoscope, pills and eyeglasses. Family healthcare, medicine and insurance concept.

By Jennifer J. Thomas

The Louisiana Department of Health issued two Emergency Rules in the September 20, 2016 Louisiana Register amending licensing standards governing Pediatric Day Health Care Facilities in an effort to avoid a budget deficit in the medical assistance program. The Emergency Rules revised the PDHC’s Program description and criteria to provide that in order to receive PDHC services, a Medicaid recipient must not only have a medically fragile condition, but also must have a medically complex condition involving one or more physiological or organ systems and requires skilled nursing and therapeutic interventions performed by a registered nurse or licensed practical nurse on an ongoing basis in order to:

  1. preserve and maintain health status;
  2. prevent death;
  3. treat/cure disease;
  4. ameliorate disabilities or other adverse health conditions; and/or
  5. prolong life.

The above list is new and supersedes the former list of medically necessary interventions that could previously be performed by “professionals” at the PDHC centers, but now require performance by a licensed nurse.

The Emergency Rules further require that a physician must order the PDHC services and prepare a plan of care not to exceed 90 days specifying the frequency and duration of services. The Emergency Rules also changed the requirement that a re-evaluation of PDHC services be performed at least every one hundred and twenty (120) to now mandate that the PDHC’s medical director review the plan of care with the PDHC staff and the prescribing physician every ninety (90) days. The evaluation must include a review of the current plan of care and the provider agency’s documented current assessment and progress toward goals. A face-to-face evaluation must also be held every ninety (90) days by the child’s prescribing physician.

Finally, the Emergency Rules clarify that a parent, legal guardian or legally responsible person providing care to a medically complex child in a home or any other extended care or long-term care facility is not considered a PDHC facility and shall not be enrolled in the Medicaid Program as a PDHC services provider.

The Emergency Rules took effect September 1, 2016, and are expected to reduce expenditures in the Medicaid Program by $527,764.00 in state fiscal year 2016-2017.


By Trippe Hawthorne

One of the activities regulated and licensed by the Louisiana State Licensing Board for Contractors is Mold Remediation.  Any person engaging in or holding herself/himself out as engaging in mold remediation must have a mold remediation license issued by the Louisiana State Licensing Board for Contractors.  Persons violating that prohibition are subject to administrative and criminal sanctions.

One of the requirements for a mold remediation license is completing four hours of instruction in Louisiana’s Unfair Trade Practices and Consumer Protection Law, given by a board-approved provider. Kean Miller is a board approved provider, and one of the ways Kean Miller is helping the region recover from the 2016 flooding is offering this training on an on-demand basis.  If you are interested in Kean Miller’s board approved four hour course on Louisiana’s Unfair Trade Practices and Consumer Protection Law, please contact Steve Boutwell at (225) 389-3736 or




By Linda Akchin and Chris Dicharry


Louisiana law imposes a sales tax on “sales at retail.”  “Sale at retail” is defined in the sales tax law, and the definition provides that the term does not include “sales of materials for further processing into tangible personal property for sale at retail.”    This provision is commonly referred to as the “further processing exclusion.”[1]  The most recent Louisiana Supreme Court’s decision interpreting this “further processing exclusion,” Bridges v. Nelson Indus. Steam Co., 2015-1439 (La. 5/3/16), 190 So.3d 276 (the “NISCO decision”), recently became final.  The decision is significant for all taxpayer-manufacturers.  It provides an excellent explanation of applicable legal principles relating generally to interpretation of the further processing exclusion and a comprehensive explanation of the three-prong jurisprudential test for application of the exclusion.  In response to the NISCO decision, and before it became final, the Legislature passed an Act amending the further processing exclusion.[2]  The purpose of this writing is to (i) provide some general information regarding applicable rules of law to be gleaned from the NISCO decision; and (ii) identify questions arising from the recent legislative amendment to the law.


The further processing provision applies to byproducts.

The NISCO decision is the first in which the Supreme Court directly addresses the question of whether the further processing exclusion from tax applies to purchases of materials that are further processed into a byproduct of a manufacturing process.  The Supreme Court held that it does.  Noting that the exclusion applies to “tangible personal property,” and the sales tax regulation interpreting the exclusion provides that whether materials are further processed or simply used in the processing activity will depend entirely upon an analysis of the “end product,” the court reasoned that it found nothing in the law that requires the “end product” be the enterprise’s primary product, explaining:

“The plain language of the statute makes the exclusion applicable to articles of tangible personal property.  There simply is no distinction between primary products and secondary products. . . . At the end of the day, the ash [NISCO’s byproduct] is produced and sold . . . making it an ‘article of tangible personal property for sale at retail.’”[3]

The NISCO decision applies and interprets the long-established three-pronged test for application of the exclusion.

The Court applied the jurisprudentially-established three-pronged test for application of the further processing exclusion as it related to NISCO’s ash byproduct:  The test is:

(1) the raw materials become recognizable and identifiable components of the end products;

(2) the raw materials are beneficial to the end products; and

(3) the raw materials are materials for further processing, and as such, are purchased with the purpose of inclusion in the end products.[4]

In applying the test the Court clarifies and reinforces aspects of the application of the test that all taxpayers would be well-served to keep in mind.   Those clarifications include:

(1)       The further processing provision constitutes an “exclusion” not an “exemption” from tax, and as such, must be liberally construed in favor of the taxpayer;[5]

(2)       When the material purchased is processed into less than all of the end products produced, the analysis involves only consideration of the end product(s) into which the material is further processed, without regard to other end products.[6]

(3)       In order to satisfy the “benefit” prong of the test it is not necessary to conduct tests to determine the qualities of the material purchased or its beneficial impact on the end product.  It is sufficient that elemental components of the material purchased become integral components of the molecular makeup of the end product.  That “integration” is in and of itself of some benefit to the end product.[7]

(4)       The “purpose” prong of the test does not involve a primary purpose test; and the “purpose” test involves a “manufacturing purpose” inquiry, not a “business purpose” or “economic purpose” inquiry.  Only the manufacturing process and the physical and chemical components and the materials involved in the process are germane to the “purpose” test.[8]

(5)       There is no legal basis for an “apportionment” approach to the further processing exclusion, whether based upon the percentage of the material or some assigned value of the components that actually end up in the end product, and any such approach is impractical in application.[9]

The New Law

The 2016 Legislative amendment, effective June 23, 2016, amends the law to provide that “[t]he term ‘sale at retail’ does  not include sale of materials for further processing into articles of tangible personal property for sale at retail when all of the criteria in Subsubitem (I) of this Section are met.[10]  Those criteria consist of a re-statement of the three-pronged test:  (1) the raw materials become a recognizable and identifiable component of the end product; (2) the raw materials are beneficial to the end product; and (3) the raw materials are material for further process, and as such are purchased for the purpose of inclusion into the end product.

The amendment goes further, however, and adds a “Subitem II” to the definition of “sale at retail.”  This addition represents new law and provides, in short, that “[i]f the materials are further processed into a byproduct for sale, such purchases of materials shall not be deemed to be sales for further processing and shall be taxable.”  The term “byproduct” is defined to mean “any incidental product that is sold for a sales price less than the cost of the materials.”


Did the Legislature intend to overrule the NISCO decision?

The first question that arises is whether the clarifications to the three-prong jurisprudential test that are set forth in the NISCO decision may be applied under the amended law’s verbatim codification of the three-prong jurisprudential test.  It is a well-accepted rule of statutory construction that those who enact statutory provisions are presumed to act deliberately and with full knowledge of existing laws on the same subject, with awareness of court cases and well-established principles of statutory construction, with knowledge of the effect of their acts and a purpose in view; and that when the Legislature changes the wording of a statute, it is presumed to have intended a change in the law. [11]  Thus, legislative language will be interpreted based upon assumption that the Legislature was aware of judicial decisions interpreting those statutes, including among others, the NISCO decision.[12]  Because the amended law adopts the three-prong judicial test verbatim, we believe a strong argument may be made that there is no legislative intent to vary from the Supreme Court’s interpretations of that test, except to the extent the language of the amended law expressly varies from the Supreme Court’s prior interpretations.  The Legislature has never hesitated to expressly state its intent to legislatively overrule a Louisiana Supreme Court decision, when that is indeed its intent.  Here, no express statement of such intent was made, and we do not believe that the Louisiana Supreme Court will infer intent to overrule any aspect of the NISCO decision, except to the extent the language of the amendment is inconsistent with the court’s interpretation in NISCO.

What constitutes a “byproduct” for purposes of the new law?

In cases where a product is sold for a sales price less than the cost of its materials, questions will likely arise as to whether the product is an “incidental product.”  Because the term “incidental product” is not statutorily defined by the legislature, we must give the words their commonly-accepted meaning.  The word “incidental” means “being likely to ensue as a chance or minor consequence,” or “occurring merely by chance or without intention or calculation.”[13]  Many products sold for a sales price less than the cost of their materials are intentionally manufactured and sold.  They are not manufactured by accident; and they are not the result of chance.  Instead, a conscious decision is made to choose a process design that will in fact create certain byproducts, with the intention to sell all the products of the process – both “primary products” and “byproducts,” with an overall profit motive.  While any particular byproduct may be of minor consequence economically speaking, when viewed in a vacuum, it may not be of economic “minor consequence” to the overall finances of the taxpayer; or it may not be of minor consequence in terms of volumes manufactured and sold, or investment made to develop, manufacture, market and sell the byproduct.  In our opinion, the Legislature’s amendment – a clear intent to vary from the NISCO decision’s holding that the further processing exclusion applies to all end products – merely creates more uncertainty, resulting in many more sales and use tax disputes and consequent litigation.  The taxing authorities will undoubtedly argue that the intent of the amendment was to create a rule to be applied when a byproduct, viewed in a vacuum, is not profitable; but that is not what the Legislature said.  The Legislature adopted a rule to be applied to “incidental products,” without defining that term.  Thus, we believe a proper interpretation requires that a determination must first be made regarding whether the byproduct is an “incidental product;” and only if it is an incidental product, does the second part of the “test” – whether it is sold for a sales price less than the cost of its material – apply.

May the new law be applied retroactively?

Taxpayers may expect the taxing authorities to impose the new law going forward.  Serious questions arise, however, regarding the applicability of the new law to taxes already reported and paid, or incurred, before the new law became effective.

The new law expressly provides that it “shall not be applicable to any existing claim for refund filed or assessment of additional taxes due issued prior to the effective date of this Act for any tax period prior to July 1, 2016, which is not barred by prescription.”  If a taxpayer’s claim or dispute with the taxing authority falls within the language of this provision, the new law should not be applied by the taxing authorities.  It is not clear what is meant by the terminology “claim for refund filed.”  Does it mean the submission of a refund request or claim with the taxing authority, or a suit for refund, or both?  Likewise, it is not clear what is meant by “assessment of additional taxes due issued” – does it include notices of intent to assess (“proposed assessments”), notices of assessment (“final assessments”), petitions for redetermination of assessments, or suits to collect tax, or all four.  We recommend that taxpayers apply the most liberal interpretation of the language unless and until guidance is provided by regulation or judicial decision.

There will undoubtedly be cases in which no claim for refund has been filed or assessment issued before the effective date of the act, but involving tax periods prior to July 1, 2016.  In such cases, we believe a strong argument may be made that retroactive application of the new law to pre-amendment tax periods is unconstitutional.  The Legislature stated in the Act that it “is intended to clarify and be interpretive of the original intent and application of” the further processing exclusion, and that “[t]herefore, the provisions of this Act shall be retroactive and applicable to all refund claims submitted or assessments of additional tax due which are filed on or after the effective date of this Act.”  Despite this statement by the legislature, we believe that the amendment to the law is not merely clarifying and interpretive.  We believe the changes are substantive in nature.  Generally, substantive laws may be applied prospectively only.  And despite express legislative intent to the contrary, it is uniquely the province of the courts to determine if an Act is substantive, or merely clarifying and interpretive.  And, if the law is substantive, it will not be applied retroactively by the courts because to do so impinges upon the authority of the judiciary in violation of the constitutional doctrine of separation of powers and divests taxpayers of substantive rights and causes of action that accrued and vested in the taxpayer before the effective date of the Act, such that imposition of the new law would constitute a denial of due process.[14]

Was the amendment to the law constitutionally enacted?

In the case of an attempt by a taxing authority to apply the new law retroactively to pre-amendment tax periods, or in the case of a purely prospective application of the new law to post-amendment tax periods, a question still exists regarding the constitutionality of the law’s enactment.  The Louisiana Constitution provides that enactments levying a new tax or increasing an existing tax require a two-thirds vote of both houses of the Legislature to become law.[15]  Here, the Act at issue did not have a two-thirds vote of the House of Representatives.  A viable legal argument exists that because the law amends definitions in a manner that makes previously non-taxable transactions taxable, it constitutes either a “new tax” or an “increase in an existing tax,” thus requiring a two-thirds vote of both houses of the Legislature. [16]  Unless and until this issue is resolved in the courts, a taxpayer would be wise to seek legal counsel and consider its options before voluntarily paying tax on materials purchased for further processing into a byproduct.


[1] La. R.S. 47:301(10)(c)(i)(aa), before amendment effective June 23, 2016; see La. Act No. 3 (2nd Extra. Sess. 2016) (“Act 3 of 2016”).

[2] Act 3 of 2016, supra.

[3] NISCO, pp. 8-9, 190 So.3d at 282.

[4] Id. at pp. 7-8, 190 So.3d at 281, quoting International Paper, Inc. v. Bridges, 2007-1151, p. 19 (La. 1/16/08), 972 So.2d 1121, 1134.

[5] Id. at pp. 5-6, 190 So.3d at 280-281.

[6] Id. at pp. 7-9, 190 So.3d at 281-282.

[7] Id. at pp. 9-10, 190 So.3d at 282-283.

[8] Id. at pp. 4, 10-13, 190 So.3d at 279, 283-285/

[9] Id. at pp. 13-15, 190 So.3d at 285-286.

[10] Act 3 of 2016, supra (emphasis added)

[11] Borel v. Young, 2007-0419, pp. 8-9 (La. 11/2/07), 989 So.2d 42, 48 (emphasis added).

[12] State v. Campbell, 2003-3035, pp. 8-9 (La. 7/6/04), 877 So.2d 112, 118.

[13] Merriam-Webster’s Collegiate Dictionary (11th ed. 2012) (emphasis added).

[14] See e.g. Mallard Bay Drilling, Inc. v. Kennedy, 2004-1089 (La. 6/29/05), 914 So.2d 533); Unwired Telecom Corp. v. Parish of Calcasieu, 2003-0732 (La. 1/19/05), 903 So.2d 392; and Bourgeois v. A.P. Green Indus., Inc., 2000-1528 (La. 4/3/01), 783 So.2d 1251; La. Const. Art. II, §§1-2; La. Const. art. I, §2; U.S. Const. Amend. XIV, §1.

[15] La. Const. Art. VII, §2.

[16] See e.g. Dow Hydrocarbons & Resources v. Kennedy, 1996-2471 (La. 5/20/97), 694 So.2d 215.




By the Kean Miller Medicare Compliance Team

Historically, the Benefits Coordination and Recovery Center (“BCRC”) arm of the Centers for Medicare & Medicaid Services (“CMS”) collected Medicare’s conditional payments.  While the BCRC continues to address Medicare’s reimbursement rights with Medicare beneficiaries, in late 2015 the CMS’s Commercial Repayment Center (“CRC”) took over responsibility for seeking reimbursement directly from Applicable Plans.  Applicable Plans include liability insurers, self-insured entities, no-fault insurers, and workers’ compensation entities.  If you receive correspondence from the CRC, you must act quickly.

The CRC issues three types of correspondence:

  1. Conditional Payment Letter (“CPL”)
    • A CPL is issued if a beneficiary reports a pending case where an Applicable Plan may have primary payment responsibility, before the Applicable Plan submits a Section 111 report.  There is no time frame for a response, but the Applicable Plan is encouraged to respond expeditiously in certain situations.
  2. Conditional Payment Notice (“CPN”)
    • A CPN is issued when the Applicable Plan notifies CMS that it has primary payment responsibility (or submits a Section 111 report) and Medicare has made conditional payments.  An Applicable Plan has 30 days from the date on the CPN to challenge the claims in the CPN.  If not disputed within 30 days, a demand letter will be issued requiring payment, and interest will be assessed.
  3. Demand Letter
    • Demand letters seek payment within 60 days.  Applicable Plans have 120 days from receipt of a demand to file an appeal.  Receipt is presumed to be five (5) calendar days from the date of the demand letter absent evidence to the contrary.

To date, the CRC has focused the majority of its collection efforts on Group Health Plans.  However, CMS’s annual year-end fiscal report indicates that in 2016, the CRC workload will expand to include the recovery of certain Non-Group Health Plan conditional payments where an Applicable Plan had or has primary payment responsibility.

Additional information on the CRC and the recovery and appeals process is provided on the CMS website:


Industrial Bolt & Rusted Metal

By Michael J. O’Brien

Multimillion dollar offshore drilling rigs and subsea drilling equipment can be rendered worthless if their most basic components, the nuts and bolts that hold them together, fail. Since 2013, investigators with the Bureau of Safety and Environmental Enforcement (“BSEE”) have been investigating why bolts used in subsea oil equipment have suddenly, and without warning, failed. These bolt failures have caused shut-downs and increased safety concerns for possible catastrophic well events. At least one subsea equipment provider has issued a global recall for faulty bolts on its blowout preventers (“BOP”). Flaws have also been found in BOP’s manufactured by other companies.

These bolts failure are now on BSEE’s radar. Indeed, BSEE has issued Safety Alert 318 warning of “the recurring problem of connector and bolt failures in various components used in risers and subsea BOP’s used in offshore operations.” BSEE’s regulators are currently working with drilling companies, manufacturers, and the American Petroleum Institute (“API”) to create new standards for minimum hardness and coating of subsea equipment bolts, as well as guidelines for assembly and installation of the bolts. The API has proposed replacing “critical bolts” that do not meet the proposed hardness standard by 2017. It is estimated that this issue could affect more than 2,400 platforms and oil rigs in the Gulf of Mexico.

The reason for the bolt failures has yet to be determined. It is likely that the alloys used in heavy steel bolts are not hard enough to survive in the waters of the Gulf of Mexico. Alternatively, excessive tightening or “over-torqueing” could be causing the failures.

New BSEE regulations require greater reporting of breakdowns and failures, including bolt failures. Thus, offshore drillers and support companies would be wise to heed BSEE’s Safety Alert and inspect the bolts in their equipment for failures. Preventative maintenance and replacement of bolts that are not up to specifications can prevent catastrophic and costly failures in the future as well as significant regulatory penalties.

For information concerning BSEE’s Safety Alert No. 318, please see

crew boat

By R. Chauvin Kean

On August 10, 2016, the Eastern District of Louisiana reaffirmed that a maritime lien may attach to a vessel at the moment the necessaries are provided, but that the lien may not yet be enforceable until payment is due (i.e., the debt had matured). Thus, in the typical case, the amount of security necessary to release an arrested vessel is calculated only using the value of the matured maritime lien. However, in Odyssea Marine, Inc. v. Siem Spearfish M/V, the court held that given the specific circumstances of the case the security to be posted by the vessel owner to release the arrested vessel may encompass all maritime liens asserted by plaintiff Delta Subsea, LLC (“Delta”) including those that were not enforceable. 2016 WL 4259083 (Aug. 10, 2016) (J., Barbier).

As previously discussed in earlier blog articles, maritime liens arise as a matter of law for those who provide “necessaries” to a vessel such as: repairs; supplies; towage; and the use of a dry dock or marine railway. 46 U.S.C. § 31301(4). The Fifth Circuit has held “that a maritime lien for vessel repairs attached [to the vessel] the moment the vessel left the repair yard with the bill unpaid….” See Pan American Bank of Miami v. Oil Screw Denise, 613 F. 2d 599, 602 (5th Cir. 1980). The Fifth Circuit subsequently refined its previous holding by stating that “the point at which a maritime lien attaches and the point at which it becomes enforceable are not necessarily the same.” See Bank One, Louisiana v. MR. DEAN, 293 F. 3d 830, 834 (5th Cir. 2002). Typically, in order for the lien to be enforceable, the debt must mature per the terms of the agreement between the shipowner and the shipyard. This general rationale is central to the purpose of necessary liens such that they are designed to create security for a claim while still permitting a vessel to continue on her way to earn freight or hire to cover the unpaid debts not presently due.

In Odyssea, Delta arrested the SPEARFISH on account of five allegedly unpaid invoices for ROV support services. Siem, the owner of the SIEM SPEARFISH (“SPEARFISH”), petitioned the court to set an appropriate amount of security so that the SPEARFISH could be released from the U.S. Marshal’s custody. Delta sought to require Siem to post security in the total amount of all outstanding invoices. Siem argued that at the time of arrest, only one invoice was due; therefore the amount of security should be set at the matured debt value, only. Though a maritime lien is not typically enforceable until the debt has matured, the court acknowledged that certain exceptions exist. The Odyssea court held that the owner of the vessel must post security for the aggregate value of all outstanding invoices even though not all presently due.

The court’s reasoning was based on a variety of factors. Most importantly, the court determined that at least one invoice was due at the time of arrest, thus the arrest was proper. Further, in the past four months, the SPEARFISH had been arrested by five different plaintiffs, and Delta was expressly told by Siem that it intended to move the vessel out of the district to prevent Delta from arresting the SPEARFISH. Lastly, the remaining invoices were due within weeks of the date of arrest.

In dicta, the court went one step further by stating that because“arrest is the first step to judicial sale of the vessel, which would wash the vessel [clean] of all maritime liens, it appears sensible to permit a lien holder to enforce a lien that has attached but not fully ripened once other parties have placed the vessel under arrest.” The court went on to justify its ruling by declaring that no Fifth Circuit case governed the present suit, therefore the court determined that this ruling was in line with the Eleventh Circuit’s similar holding in Dresdner Bank Ag v. M/V OLYMPIA VOYAGE, 465 F.3d 1267 (11th Cir. 2006).

From Odyssea, providers of necessaries should take note that they may seek security for all of their maritime liens not yet ripened, but one of the liens must be enforceable at the moment of arrest. Further, vessel owners should take note that terms of credit allow a vessel to proceed on her way to earn freight or hire in order to satisfy any attached liens not presently due. Thus, vessel owners should negotiate reasonable and attainable terms of credit to insure the vessel can continue to generate revenue even with encumbrances attached.