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By Zoe W. Vermeulen

In November 2016, the Eastern District of Louisiana again confronted the “marshland” involved in categorizing a contract as maritime or non-maritime. In In re: Crescent Energy Services, LLC, No. 15-819 (E.D. La. Nov. 7, 2016), the court held that a contract to plug and abandon a well in Louisiana waters was maritime in nature.

Crescent Energy Services, LLC brought a limitation action as owner of the spud barge S/B OB 808 after its employee, a crewmember of the OB 808, was severely injured in a well blowout. Crescent had been hired by Carrizo Oil & Gas, Inc. to plug and abandon one of Carrizo’s offshore wells, located in Louisiana state waters. The contract between the parties included a standard contractual indemnity provision that, if enforceable, required Crescent to indemnify Carrizo for the crewmember’s injuries.

Crescent and Carrizo brought cross motions for summary judgment asking the court to decide whether the contract between them was maritime or non-maritime. If the contract was maritime, the indemnity provisions therein would be valid and enforceable. But, if the contract was non-maritime and instead subject to Louisiana law, the Louisiana Oilfield Anti-Indemnity Act would void the indemnity obligations.

Crescent and Carrizo were parties to a Master Service Agreement governing all dealings between them. Additionally, the plug and abandon work being performed at the time of the injury was done pursuant to a Turnkey Bid. The Turnkey Bid discussed the specifics of the plug and abandon work and listed the equipment to be used in the job, which included a quarter barge, tug, and cargo barge. To determine whether a contract is maritime, the U.S. Fifth Circuit in Davis & Sons v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990) instructed courts to look to the historical jurisprudential treatment of similar contracts and conduct a fact-specific inquiry. That inquiry considers six factors: (1) what does the specific work order in effect at the time of the injury provide?; (2) what work did the crew assigned under the work order actually do?; (3) was the crew assigned to work aboard a vessel in navigable waters?; (4) to what extent did the work being done relate to the mission of the vessel?; (5) what was the principal work of the injured worker?; and (6) what work was the injured worker actually doing at the time of injury?

In deciding that the contract was maritime, the court focused on the historical jurisprudence of similar contracts. It acknowledged that both parties had authority in their favor, but ultimately determined that because the plug and abandon work required the use of a vessel and was performed at all times on a vessel, the case law favored a maritime finding. The court distinguished a Fifth Circuit case holding that a contract for wireline services (which were also part of the plug and abandon operations here) was non-maritime by noting that the wireline services contract “did not address in any way the use of a ship.”

Conversely and importantly, here, the contract called for three vessels, including a vessel specifically designed for plug and abandon work to “perform the function for which that vessel was designed,” and it would not have been possible to plug and abandon the well without the use of a vessel. In doing so, the Court reiterated that the inquiry will turn more on the necessity of vessel for the work than the type of work being performed. In other words, even though plug and abandon work is not itself maritime by nature, the fact that Crescent had to do its work from a vessel made the contract maritime. Accordingly, the court found that the work done by the crew of the OB 808 was inextricably intertwined with maritime activities and the contractual indemnification of Carrizo was enforceable

The court’s reasoning was clearly heavily influenced by the contracted for, and actual use and necessity of vessels to perform the plug and abandon work. This result is consistent with existing case law and provides future litigants further guidance that contracts requiring the use of a vessel will most likely be considered maritime. See also Davis & Sons, Inc., supra; Clay v. ENSCO Offshore Co., No. 14-2508, 2015 WL 7296787 (E.D. La. Nov. 18, 2015). However, given the long and sometime brackish history in this area of law and the valuable nature of indemnity coverage, we do not expect this to be the last fight over the maritime nature of an oilfield contract.

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

On November 18, 2016, the Occupational Safety and Health Administration (“OSHA”) issued a final rule “revising and updating its general industry standards on walking-working surfaces to prevent and reduce workplace slips, trips, and falls, as well as other injuries and fatalities associated with walking-working surface hazards.” 81 Fed. Reg. 82494 (Nov. 18, 2016) .  Regulations related to Walking-Working Surfaces are located at 29 C.F.R. 1010 Subpart D. Included in the rule are requirement relating to floors, ladders, stairways, runways, dockboards, roofs, scaffolds, and elevated work surfaces and walkways. The new rule incudes:

  • new design, performance, and use requirements for fall protection system to reflect advances in technology and industry best practices;
  • added flexibility to utilize personal protection systems (e.g., fall arrest, travel restraints, and work positioning systems) in lieu of guardrails;
  • harmonization of general industry and construction system and equipment requirements;
  • incorporation of provisions from recently adopted standards, included but not limited to requirements from Appendix C (Mandatory) of the Powered Platforms for Building Maintenance; and
  • incorporation of requirements from national consensus standards (e.g., Workplace Walking/Working Surfaces and Their Access, ANSI/ASEE A1264.1-2007, Personal Fall Systems, ANSI/ASSE Z359.1-2007, and Window Cleaning, ANSI/IWCA 1-14.1-2001.

This rule generally becomes effective and enforceable on January 17, 2017. Several of the requirements are not effective until a later date.

clock1

By Scott Huffstetler and Ed Hardin

In the wake of yesterday’s news that a Texas federal judge issued a nationwide injunction halting the FLSA overtime regulations, scheduled to become effective December 1, 2016, many employers are asking “what now.”  The answer will continue to develop.  For now, though, here are some initial things to keep in mind:

  1. Realize that the regulations scheduled to go into effect on December 1, 2016 are now halted nationwide.  This means that for the time being, the minimum salary threshold remains at $23,660 a year ($455 per week).
  2. Realize that this decision is not final and is subject to change.  The federal court only issued a preliminary injunction.  The next procedural step (if the parties choose to continue) is for discovery to be conducted, a trial on the merits, and a decision on whether a permanent injunction should be issued.  It is possible the judge could change his decision at the permanent injunction stage of the case.  Regardless of the outcome at that stage, appeals will be available to the U.S. Court of Appeals for the Fifth Circuit and the U.S. Supreme Court.  Although this scenario is less likely in the Fifth Circuit, with the passing of Justice Antonin Scalia, it is possible that the U.S. Supreme Court could ultimately rule in the U.S. Department of Labor’s favor.  Of course, that assumes the Department continues to pursue this matter and continues to pursue official enactment of the regulations.  Recall that the Department is an executive agency, which after January, will be under President-Elect Donald Trump.  Given the differences between President Barack Obama and President Trump’s labor initiatives, it is possible that President-Elect Trump will instruct the Department not to continue pursuing this case.  There are many variables and all of these scenarios will take months, or even years, to play out.  The point is the case needs to be monitored and employers need to be prepared for the different scenarios.
  3. Realize that not all the changes that may have been made in response to the new regulations related to the salary basis test.  Many employers used the change in the regulations to address other components of the FLSA that were not affected by the ruling, such as classifications.  To the extent changes like this were made, they were not altered by the ruling.

As is easily seen, the outcome of this saga remains to be seen.  For now, employers can be thankful this Thanksgiving for a reprieve from what was about to become a major change in the FLSA.

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By Erin Kilgore, Ed Hardin, and Brian Carnie

A federal district judge in Texas has entered a nationwide injunction which prevents the U.S. Department of Labor’s new FLSA minimum salary level rule from going into effect on December 1, 2016.  Prior to today, the DOL’s new rule would have nearly doubled the minimum weekly salary required in order to be exempt under the so-called white collar exemptions (the executive, administrative and professional employee exemptions).

The court found that the Department of Labor exceeded its authority when it issued the final rule in May 2016.   The court also found that the Department of Labor ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test.  The court’s preliminary injunction ruling will preserve the status quo until the court makes additional determinations related to the Department of Labor’s authority and the final rule’s validity.

Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week).  Stay tuned for further analysis.

cms

By the Kean Miller Medicare Compliance Team

CMS issued an Alert on November 15, 2016:  2017 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards or Other Payments.  This Alert changes the threshold for certain liability insurance (including self-insurance) settlements.  It contains 3 important takeaways:

  1. Beginning January 1, 2017, for Section 111 reporting purposes, the threshold for physical trauma-based liability insurance (including self-insurance) settlements will reduce to $750.  Thus, if a settlement is over $750.00, it must be Section 111 reported.
  2. This reduced threshold does not apply to settlements for alleged ingestion, implantation, or exposure cases.
  3. CMS is maintaining the current $750 threshold for no-fault insurance and workers’ compensation settlements, in cases where the entity does not have ongoing responsibility for medicals.

CMS also issued a related Alert relating to the methodology used to determine these thresholds.

aca

By Brian R. Carnie

On Friday, November 18, 2016, the IRS announced an automatic extension of the Affordable Care Act deadlines for distributing the 1094-B/1095-B and 1094-C/1095-C forms to employees. This relief gives applicable employers an additional 30 days (from January 31, 2017 to March 2, 2017) to deliver these forms to employees. This relief only applies for the 2016 reporting year.

The IRS did not change the deadlines for filing the Forms 1094 and 1095 with the agency. The deadline for filing these forms by mail is February 28, 2017. Employers filing electronically have until March 31, 2017.

Similar to 2015, the IRS also announced it would not penalize employers for incorrect or incomplete forms for 2016 as long as they make good faith efforts to comply. This relief is not available for covered employers who fail to timely file the forms. Although there is much talk about repealing and replacing the ACA once the new administration takes office, until Congress acts (which likely won’t happen until after the 2016 reporting deadlines have passed) we recommend that employers comply with the current requirements to avoid unnecessary penalties or fines.

Stay tuned for future anticipated changes!

FLSA

By Erin Kilgore, Ed Hardin and Brian Carnie

Could a decision on the challenge to the U.S. Department of Labor’s new salary basis rule be coming soon? Employment Law360, a national, daily legal news service, reported this morning that a Texas Federal Judge would decide by Tuesday, November 22, whether to stop the new overtime rules from taking effect on December 1.

The Judge is hearing a suit by several states and business groups who are collectively trying to stop the new rule that raises the minimum salary to qualify for the exemption from the Federal minimum wage and overtime requirements. Stay tuned.

 

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By Ed Hardin and Brian Carnie

Record breaking voter turn out is expected on Tuesday.   Employers should be aware that neither federal nor Louisiana law requires an employer to give an employee time off to vote, but Louisiana law does forbid employers from discriminating against an employee based on his or her political beliefs.  It also prohibits all employers from attempting to control the votes of their employees.

Louisiana employers with 20 or more employees cannot  prevent their employees from “participating in politics.”  Thus, employers should treat requests for time off to vote the same as other requests for time off. With respect to exempt employees who are granted a couple of hours off to vote during the day, the federal Fair Labor Standards Act does not allow employers to dock their salary for such partial day absences even if they have exhausted their accrued available vacation or other paid time off.

Merger Dictionary Definition Word Combine Companies Businesses

By Linda Perez Clark

Recent cases have highlighted the importance of seller contractually protecting and retaining ownership over communications that, pre-closing, are subject to the attorney-client privilege.  The absence of such language in a merger or asset/stock purchase agreement can lead a court to conclude that such communications are owned by the buyer/surviving corporation.

Such was the result in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013), where more than a year post-closing, after the buyer sued the seller for allegedly fraudulently inducing buyer to enter into the merger, the seller asserted ownership over pre-merger privileged communications maintained on the surviving corporation’s computer system.

The court ruled in the buyer’s favor, and held that the surviving corporation owns and controls such communications, noting that the seller had not been proactive in either protecting the communications from seller’s access, or contractually preserving ownership.   The court specifically noted that under Delaware law, all property, rights, privileges, etc. become property of the surviving corporation (the same is true under Louisiana law, LSA-R.S. 12:1-1107);  a contrary result can only be achieved by contractual agreement.

Accordingly, a clause addressing ownership and control over such communications, and proactively protecting them from disclosure, is critical.

 

text

By Sam Lumpkin

The US District Court for the Western District of North Carolina recently held that even text messages are subject to the duty to preserve electronically stored information (ESI). In Shaffer v. Gaither, the plaintiff asserted claims against her former boss – a US District Attorney – for constructive dismissal based on sexual harassment and creation of a hostile work environment. The plaintiff also added a claim of defamation, based on an allegation that the former boss had falsely spread rumors plaintiff was fired for having a sexual relationship with a married member of the defense bar. Although the plaintiff admitted that the relationship existed, the defamation claim was based on what plaintiff argued was a false reason for her termination.

The defendant contended that plaintiff had sent her paramour text messages about the termination in which she admitted that she was fired because of the relationship. However, the text messages were lost when plaintiff purportedly dropped her cell phone in a bathroom. The court therefore had to address whether, in light of the claims pending at the time the text messages were lost, the plaintiff had failed to preserve relevant ESI.

Under the recent amendments to Federal Rule of Civil Procedure 37(e), the duty to preserve ESI arises when litigation is “reasonably anticipated,” and the loss of ESI is sanctionable if reasonable steps to preserve the ESI are not taken and the information cannot be restored or replaced through additional discovery. Dismissal is not an automatic remedy for spoliation, and some remedies are only available when the spoliating party acted with intent to deprive the opposing party of evidence.

The court in Shaffer found that before the messages were destroyed, plaintiff had threatened litigation and her attorney had discussed the messages with the defendant’s attorney. The messages were therefore clearly relevant to the defamation claim, and both plaintiff and her attorney knew they had a duty to preserve the messages at least five months before the messages were destroyed. The court did not immediately find that the destruction of the plaintiff’s phone was intentional, and because similar evidence might be available through the testimony of various parties who had viewed the texts before they were destroyed, the court did not order dismissal of the defamation claim.

However, the court did provide guidance to potential litigants: “Once it is clear that a litigant has ESI that is relevant to reasonably anticipated litigation, steps should be taken to preserve that material, such as printing out the texts, making an electronic copy of such texts, cloning the phone, or even taking possession of the phone and instructing the client to simply get another one.” Although the plaintiff in Shaffer did not face dismissal due to the circumstances of the case, other litigants may not be so fortunate.