Louisiana State Capital

By Matthew C. Meiners

Under Louisiana law, workers’ compensation is the exclusive remedy that an employee may assert against his employer or fellow employees for work-related injury, unless he was the victim of an intentional act. That exclusive remedy also extends to statutory employers.

Workers’ compensation legislation was enacted to provide social insurance to compensate victims of industrial accidents, and it reflects a compromise between the competing interests of employers and employees: the employer gives up the defense it would otherwise enjoy in cases where it is not at fault, while the employee surrenders his or her right to full damages, accepting instead a more modest claim for essentials, payable regardless of fault and with a minimum of delay. However, due to the fear that employers would attempt to circumvent that liability by interjecting between themselves and their workers intermediary entities which would fail to meet workers’ compensation obligations, the law provides that some principals are by statute deemed, for purposes of liability for workers’ compensation benefits, the employers of employees of other entities. This is what is known as statutory employment, and it is intended to provide greater assurance of a compensation remedy to injured workers.

Under Louisiana law, there are two bases for finding statutory employment:

First Basis: The existence of a written contract recognizing the principal as the statutory employer. A “principal” is any person who undertakes to execute any work which is a part of his trade, business, or occupation in which he was engaged at the time of the injury, or which he had contracted to perform and contracts with any person for the execution thereof. Such a contractual provision creates a rebuttable presumption of a statutory employer relationship between the principal and the contractor’s employees, whether direct or statutory employees. This presumption may be overcome only by showing that the work is not an integral part of or essential to the ability of the principal to generate that individual principal’s goods, products, or services.

Second Basis: Being a principal in the middle of two contracts, referred to as the “two contract theory.” The two contract theory applies when: (1) the principal enters into a contract with a third party; (2) pursuant to that contract, work must be performed; and (3) in order for the principal to fulfill its contractual obligation to perform the work, the principal enters into a subcontract for all or part of the work performed. The two contract statutory employer status contemplates relationships among at least three entities: a general contractor who has been hired by a third party to perform a specific task, a subcontractor hired by that general contractor, and an employee of the subcontractor.

A statutory employer is liable to pay to any employee employed in the execution of the work or to his dependent, any compensation under the Louisiana Worker’s Compensation Act which the statutory employer would have been liable to pay if the employee had been immediately employed by the statutory employer. In exchange, the statutory employer enjoys the same immunity from tort claims by these employees as is enjoyed by their direct employer. Additionally, when a statutory employer is liable to pay workers’ compensation to its statutory employees, the statutory employer is entitled to indemnity from the direct employer and has a cause of action therefor.

Statutory employer status can provide very valuable protection to companies who contract for work to be performed in Louisiana; however, you should consult your attorney to make sure you meet the legal requirements, and to properly draft the necessary contractual provisions.

 

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By Mallory McKnight Fuller

When two parties agree to arbitrate, the obvious hope of the prevailing party is that the losing party will voluntarily comply with the arbitrator’s decision. This article is directed towards the situation in which the losing party refuses to so comply, and the prevailing party must petition the appropriate court system to “enforce” the arbitrator’s award.

Until confirmation, modification, or correction by a court of competent jurisdiction, an arbitration award is unenforceable under the law. The process for enforcing an arbitration award in Louisiana depends on whether the Federal Arbitration Act (“FAA”) or the Louisiana Binding Arbitration Law (“BAL”) applies.[1]

CONFIRMING ARBITRATION AWARDS

Whichever law applies, a party wishing to confirm an arbitration award must file a proceeding requesting confirmation of the award in a court of competent jurisdiction within one year of the award’s issuance.[2] While this one-year period is mandatory under the BAL, the federal courts of appeals are split on whether the same period is mandatory under the FAA. However, the U.S. Court of Appeals for the Fifth Circuit, which is the appellate court of federal jurisdiction over Louisiana, has implied that the one year limitations period is mandatory.[3]

In federal court, the FAA requires a party to begin the process of confirming an arbitration award by filing (and serving) either a petition or motion to confirm in the appropriate federal district court.[4]  Unlike the BAL, however, the FAA does not create independent subject matter jurisdiction, so the applicant must show that the federal district court has original subject matter jurisdiction over the dispute.[5]  The federal court has personal jurisdiction over the necessary parties once a party serves notice of the confirmation application on all parties.[6]

In both federal and state court, the confirmation of an arbitration award is a summary proceeding.[7]  The appropriate court will confirm the arbitration award (by granting the applicant’s motion) if no party challenges the enforcement of the award, and the court finds no grounds for vacating, modifying, or correcting the award.[8]  The court enters judgment on the award, which has the same force and effect as an ordinary judgment.[9]

VACATING, MODIFYING, OR CORRECTING AN ARBITRATION AWARD

Both the FAA and the BAL permit a party to challenge or request vacation, modification, or correction of an arbitration award.[10]  A notice of a motion to vacate, modify, or correct an arbitration award must be served upon the adverse party within three months after the award is issued.[11]  The grounds upon which an arbitration award can be changed or overturned are narrow and well-defined. Practically, this makes it very rare and difficult to alter an arbitration award.

Because arbitration is favored, both federal and state courts presume that an arbitration award is valid. Under the FAA and BAL, a court has authority to vacate an award only upon the following grounds:

  1. where the award was procured by corruption, fraud, or undue means;
  2. where there was evident partiality or corruption in the arbitrators, or either of them;
  3. where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
  4. where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.[12]

The FAA and BAL also limit a court’s authority to modify or correct an arbitration award. An award can be modified or corrected only:

  1. Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.
  2. Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.
  3. Where the award is imperfect in matter of form not affecting the merits of the controversy.[13]

If one of these two grounds apply, the courts will modify or correct arbitration awards “so as to effect the intent thereof and promote justice between the parties.”[14]

AWARDS AND ORDERS SUBJECT TO APPEAL

Both the FAA and the BAL permit the appeal of certain arbitration orders, including any order confirming, modifying, correcting, or vacating an award.[15]  Under the BAL, a party appeals from an arbitration order or judgment entered on an award in the same manner as a party appeals from an ordinary order or judgment.[16]  The federal courts and Louisiana appellate courts review a trial court’s confirmation of an arbitration award de novo.[17]

**********

[1] Chapter 1 of the FAA governs domestic arbitrations and applies to maritime disputes and contracts “involving commerce.” 9 U.S.C. §§ 1-16. The BAL governs arbitration in Louisiana, unless preempted by the FAA. La. R.S. §§ 9:4201-9:4271.

[2] 9 U.S.C. § 9; La. R.S. 9:4209.

[3] Bernstein Seawell & Kove v. Bosarge, 813 F.2d 726, 731 (5th Cir. 1987) (noting the complaint to enforce the arbitration award was filed within one year “As required by 9 U.S.C. § 9”).

[4] If the arbitration agreement does not specify the particular court, the party applying for confirmation of the award may file in any court in the district where the award was issued. 9 U.S.C. § 9.

[5] Vaden v. Discover Bank, 556 U.S. 49 (2009).

[6] 9 U.S.C. § 9.

[7] Id.; La. R.S. § 9:4209; see also Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 22-23 (1983).

[8] 9 U.S.C. §§ 10-11; La. R.S. §§ 9:4205 and 9:4209.

[9] 9 U.S.C. § 13; La. R.S. § 9:4214.

[10] 9 U.S.C. § 11; La. R.S. § 9:4211.

[11] 9 U.S.C. § 12; La. R.S. § 9:4213.

[12] 9 U.S.C. § 10; La. R.S. § 9:4210.

[13] 9 U.S.C. § 11; La. R.S. § 9:4211.

[14] Id.; Gilbert v. Robert Angel Builder, Inc., 45,184 (La. App. 2 Cir. 4/14/10); 24 So. 3d 1109, 1113.

[15] La. R.S. § 9:4215; 9 U.S.C. § 16.

[16] La. R.S. § 9:4215.

[17] NCO Portfolio Mgmt., Inc. v. Walker, 08-1011 (La. App. 3 Cir. 2/4/09); 3 So. 3d 628, 632; Sarofim v. Trust Company of the West, 440 F.3d 213 (5th Cir. 2006)

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By Beau Bourgeois

Arbitration clauses are extremely common in construction contracts and subcontracts. In the event of a dispute, these clauses typically reflect the parties’ mutual agreement that any disputes arising from the project shall be arbitrated. Arbitration is similar to traditional litigation in many respects, but takes place out of court and is designed to be more efficient and cheaper. Both federal and Louisiana law strongly favor arbitration, and save a few exceptions, written pre-dispute arbitration agreements “shall be valid, irrevocable, and enforceable.”[1]

Whether a party is required to arbitrate rather than litigate first depends on two issues: 1) whether the agreement to arbitrate is valid, and 2) whether the agreement—by its terms—applies to the type of controversy at issue between the parties.[2]  Additionally, a party’s actions within a court proceeding can be deemed a “waiver” of the right to compel the same dispute into arbitration. In the typical dispute, the analysis will be straightforward, and the clause will be enforced, forcing the parties to resolve their dispute through binding arbitration rather than using the court system.

This article focuses on the admittedly rare situations in which a court may have proper grounds not to enforce an arbitration provision contained in the parties’ contract.

1.                  Contract Not Fully Executed by Both Parties

The threshold question in deciding whether parties must arbitrate is whether the parties actually agreed to arbitrate. In the typical scenario, both parties will have signed the contract containing the arbitration clause, and there will be no question that they agreed to arbitrate. Even if one of the parties does not know the contract contains the arbitration clause or does not understand its consequences, the party will still be required to arbitrate disputes. Louisiana courts have held that a signing party cannot avoid a contract’s terms by claiming that he did not read the contract, that he did not understand contract, or that the other party did not explain contract to him.[3]

Even when both parties to a contract do not sign, the parties may still be bound in certain scenarios. Louisiana law is clear that a party who prepares a contract and presents it to another for signature, but never personally signs, cannot later attempt to claim that he or she is not bound by the contract or its provisions.[4]  Thus, although many may think that they can escape the obligations of a contract that they did not sign, parties will often not be able to rely on such a technicality.

There is, however, an exception to this rule. A contract signed by only one party is not enforceable if the negotiations between the parties indicate that they have no intention of being bound until all of the terms of the agreement are incorporated into a written contract to be signed by both parties.[5]  A typical example is a situation where the parties orally negotiate the basic terms of an agreement but state that they want to have their managers or lawyers draft a formal, written document that both parties will sign. If there is never a written contract signed by both parties, there is never a contract or obligation to perform. It is important to note that a lack of contract does not necessarily mean that one party cannot be liable to the other. If one party begins performance or takes other action based on oral negotiations or promises, the other party may still be liable under theories of detrimental reliance or unjust enrichment.

Specifically as to arbitration agreements, despite a statute requiring them to be in writing, Louisiana law does not require the agreements to be signed to be enforceable.[6]  However, when an arbitration agreement—or contract containing an arbitration clause—lacks one or more parties’ signatures, the courts look to the conduct of the non-signing parties for evidence of intent to agree.[7]  Though no Louisiana court has yet addressed the issue, one could find that preparing and presenting a contract containing an arbitration provision is sufficient to show that party’s intent to agree to arbitrate. Otherwise the court will look to whether the non-signing party performed his obligations under the contract or otherwise acted as if the contract were enforceable. To avoid any uncertainty under this flexible inquiry, the party desiring the arbitration agreement should be sure to have both parties sign the contract for definitive proof of an agreement.

2.                  Unenforceable “Contracts of Adhesion”

Once a court determines that there was a mutual agreement to arbitrate, the clause will be enforced save some grounds for revocation of the contract such as fraud or error.[8]  Another relatively common ground upon which courts invalidate otherwise valid arbitration clauses is by finding that the agreement is a “contract of adhesion.” In general, a contract of adhesion is a printed contract—often in small font—prepared by one party with superior bargaining power presented to the other party in a “take-it-or-leave-it” manner. The nature of the contract is such that it raises questions as to whether the weaker party actually consented to its terms.

In these cases, the courts look beyond a party’s signature to determine if he or she truly consented to the arbitration clause. If an arbitration clause is adhesionary, the court will not enforce it and will allow the weaker party to proceed with a lawsuit despite their apparent agreement to arbitrate. In that sense, contracts of adhesion serve as an exception to the rule described above that a party is bound to contracts he or she signs regardless of knowledge or understanding of their terms. In the construction industry, these issues most often arise in the manufactured homes context where one party is a large corporation and the other is an individual buyer with little to no construction or business knowledge.[9]

Contracts of adhesion are typically standard form contracts; however, not all standard contracts are adhesionary and not all adhesionary contracts are in a standard form.[10]  The Louisiana Supreme Court has recently listed the factors to review in determining whether an agreement is an unenforceable contract of adhesion as follows: (1) whether the physical characteristics of the arbitration clause are deceiving (i.e., the font and size of the print), (2) whether the arbitration clause is distinguished from the rest of the agreement (i.e., whether the clause was concealed), (3) whether the clause requires both parties to pursue arbitration rather than a suit in court, and (4) whether one party has superior bargaining strength.[11]

The Louisiana Supreme Court has recently found an arbitration provision in a general waiver of liability signed by a patron of a trampoline park to be adhesionary. The arbitration provision of the waiver was the same size print and font as the rest of the electronic document. However, the two sentences regarding arbitration were “camouflaged” within a paragraph containing nine other sentences that did not pertain to arbitration. In addition, the waiver’s “I agree” language indicated to the Court that the agreement to arbitrate did not apply equally to the trampoline park, and the clause contained a liquidated damages provision which also only applied to the patron. Although the paragraph containing the provision had a box next to it that the patron affirmatively checked, the Court found that the patron’s electronic signature did not represent actual consent to arbitrate due to the adhesionary nature of the contract. Thus, the Court invalidated the provision.[12]

It should be noted that it would be almost impossible for one business to assert this defense against another because they would almost certainly have similar bargaining strength. Additionally, the party who does not want to sign a contract with an arbitration provision could easily walk away from the deal and work with someone else instead.

3.                  Waiver of Right to Arbitration

The rights provided by an otherwise valid arbitration clause can also be unintentionally “waived” by one of the parties. Louisiana courts have limited the waiver of arbitration to two situations where a party insisting on arbitration either (1) resorted to judicial remedies, or (2) allowed a significant period of time to elapse before demanding arbitration.[13]

Courts in Louisiana have found waiver of arbitration only in extreme cases.[14]  Waiver of arbitration is not a favored finding and there is a presumption against it.[15]  A party asserting waiver bears a heavy burden of proof to show that the opponent has waived a right to arbitrate, and there is a strong policy in Louisiana favoring arbitration when it has been agreed to by the parties.[16]  To find a waiver, Louisiana courts require a showing that the party demanding arbitration has meaningfully participated in court litigation proceeding so as to indicate its intention to litigate the dispute within that forum. Courts have been hesitant to draw a line in the sand as to how much litigation activity rises to the level of waiver, but one court has observed that the mere answering of a lawsuit does not equate to waiver.[17]

Although findings of waiver here are rare, the cautious litigant should assert its rights to arbitrate clearly and early in any separate court litigation. Courts do seem willing to review the entire record, rather than to fault a party for a single step taken in court. Still, a party’s argument for arbitration weakens to the extent the party continues to litigate the arbitrable dispute within court proceedings.

*         *         *

As noted, this entire article is geared towards the rare scenarios in which a court will not enforce an arbitration provision. Although the issues described above do arise from time to time, typically, if the clause applies to the particular dispute, a court will force the parties to arbitrate rather than litigate.

***********

[1] 28 U.S.C. § 2 (2016); La. R.S. 9:4201 (2016).

[2] Dicorte v. Landrieu, 908 So. 2d 799, 801 (La. Ct. App. 4 Cir. 2008).

[3] Aguillard v. Auction Mgmt. Corp., 908 So. 2d 1, 17 (La. 2005).

[4] Rainey v. Entergy Gulf States, Inc., 35 So. 3d 215, 227 (La. 2010).

[5] Id. (citing Big ‘A’ Sand & Gravel Co. v. Bay Sand & Gravel Co., 282 So. 2d 837 (La. Ct. App. 1 Cir. 1963)).

[6] Hurley v. Fox, 520 So. 2d 467, 469 (La. Ct. App. 4 Cir. 1988) (“La. R.S. 9:4201 provides that if the agreement to arbitrate is in writing, it shall be valid, irrevocable and enforceable. The law does not provide that the agreement must be signed. We conclude, therefore, that if the agreement between the parties is written, the provisions of the statute are satisfied even though the writing is not signed by the parties.”).

[7] In re Succession of Taravella, 734 So. 2d 149, 151 (La. Ct. App. 5th Cir. 1999).

[8] Duhon v. Activelaf, LLC, 2016-0818 (La. 10/19/16), 2016 WL 6123820.

[9] See e.g., Easterling v. Royal Manufactured Housing, LLC, 963 So. 2d 399 (La. Ct. App. 3 Cir. 2007); Dufrene v. HBOS Mfg., LP, 872 So. 2d 1206 (La. Ct. App. 4 Cir. 2004).

[10] Duhon, 2016 WL 6123820.

[11] Id.

[12] Id.

[13] Lincoln Builders, Inc. v. Raintree Inv. Corp. Thirteen, 37,965 (La. Ct. App. 2 Cir. 1/28/04), 866 So. 2d 326, 331 (citing cases).

[14] Matthews-McCracken Rutland Corp. v. City of Plaquemine, 414 So.2d 756 (La. 1982).

[15] Lorusso v. Landrieu Enterprises, Inc., 02-2346 (La. App. 4 Cir. 5/21/03), 848 So.2d 656.

[16] Electrical & Instrumentation Unlimited, Inc. v. McDermott International, Inc., 627 So.2d 702 (La. Ct. App. 4 Cir.1993).

[17] Matthews-McCracken, 414 So.2d 756 (La. 1982).

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By Josh Coleman

Conventional wisdom holds that arbitration is a more preferable mechanism for dispute resolution than full-blown litigation in the court system. Knowing nothing else about the particulars of a particular dispute, if arbitration is available as an alternative to state or federal litigation, we generally advise our clients to arbitrate.

However, that does not mean that arbitration is preferable to traditional litigation in all respects, or that arbitration is always well-suited to resolve a particular dispute. We often are asked by clients to evaluate the benefits of arbitration versus litigation. The purpose of this brief article is to set forth the general framework within which we address that question.

Pros of Arbitration

The primary benefits of arbitration are well-documented:

  • Lower Cost: On average, seeing a case through arbitration costs less to the client than does seeing a case through litigation. The lower costs relate closely to more-streamlined discovery and the shorter length of the entire procedure.
  • Controlled & Compacted Schedule: Arbitration offers a high degree of predictability in the scheduling of deadlines, hearings, and awards. Most arbitrations resolve within one year of initiation.
  • Knowledgeable Arbitrator: Arbitration parties typically select an arbitrator from a pool of subject-matter experts. The American Arbitration Association maintains a listing of local arbitrators with specialty designations in a variety of fields (e.g., commercial construction). An arbitrator with industry experience requires less education on technical aspects of the case.
  • Privacy: Arbitration proceedings are not on the public record. This is a benefit where the subject matter of the arbitration is commercially sensitive. Parties can agree prior to the arbitration to effectively “seal” any evidence and perhaps even the outcome of the arbitration.
  • Finality: Arbitration parties have no rights to appeal the substance of the arbitrator’s decision. This means that arbitration awards are generally final, therefore a party can plan accordingly once the arbitrator issues its decision.

Cons & Quirks of Arbitration

However, the negatives of arbitration are less discussed:

  • Multi-Party Difficulties: To enter into arbitration, parties either voluntarily agree to so enter, or are compelled by a court to submit to arbitration based upon a prior and valid agreement to arbitrate. This makes complex multi-party disputes tough to arbitrate. For example, CGL insurers on construction projects usually cannot be compelled to participate as a party in a construction defect arbitration between a claimant and the respondent insured. The more parties a case involves, the less likely that arbitration will be a feasible option.
  • Higher Filing Fees: Clients are often surprised at the up-front filing fees required by arbitration service providers such as the American Arbitration Association (“AAA”). Those fees depend upon the claim amount. For example, an AAA claim of $150,000 requires payment of $3,000 in purely administrative fees. The amount of the fees increase along with the claim amount, and for larger claims, can approach $15,000. Also, these fees are in addition to arbitrator compensation, which must be covered by the parties and usually resembles typical hourly attorney billing.
  • Summary Judgment Unlikely: In traditional litigation, the summary judgment procedure is an effective tool to resolve certain claims before trial. For example, if the parties agreed on the relevant facts but disagreed on the interpretation of their contract, such an issue would be ideal for early resolution in court via summary judgment. However, arbitrators rarely grant summary judgment motions, so this tool is not effectively available in arbitration. Several experienced arbitrators have commented to us that, due to the finality of arbitration and lack of an appeal procedure, they are extremely hesitant to dispose of any part of a case prior to the hearing itself.
  • Adverse Ruling Is Final: The finality of arbitration certainly works against a party facing an adverse decision by the arbitrator. State and federal courts offer substantive appeal procedures which involve close scrutiny over the lower court’s decision; no such mechanism is available in arbitration. In almost all cases, the loser is stuck with the arbitrator’s initial decision.
  • Limited Subpoena Power: Parties often require testimony or information from a party who is not named in the proceeding. The subpoena process is available in arbitration, but can be limited in scope and time-consuming to properly enforce.

*         *         *

It is true that arbitration is generally more preferable to court litigation as a dispute resolution mechanism. However, in cases in which a party has a choice over whether to arbitrate or litigate a particular dispute, the party should pay careful attention to the nature of the dispute in light of the pros, cons and quirks of the arbitration proceeding.

anonymous

By Jessica Engler

Continuing the trend from 2015, 2016 has seen a significant number of large, public data breaches. Many of these breaches involved high-profile companies such as the Democratic National Convention, Internal Revenue Service, MySpace, Yahoo!, and Anthem. Since large corporate and government breaches typically get the most attention, many smaller, local businesses can be lulled into a false sense of security, believing that those who do hack and steal data are not interested in their business. However, in 2016, hacker targeting of small businesses increased from 34 percent to 43 percent.[1] Small businesses, including the construction industry, are at risk.

The construction industry is becoming increasingly more connected. In addition to storage of confidential data on computers, many design and construction software systems—like BIM, Revit, Procore, and Aconex—have remote access controls or Internet-connected capabilities. As a company grows more technologically-savvy, the risk of breaches becomes more inherent. This memorandum will answer some basic questions for construction companies regarding data privacy issues. For specific advice regarding individual, company-specific questions, inquirers should seek the assistance of an attorney experienced in data privacy.

I am not MySpace or the IRS—why would a hacker be interested in my business?

Construction companies are often just as reliant on IT and computers as any other business. Construction companies—especially smaller ones—often do not think they are a target, so any protective measures currently in place may be easier to permeate. Several reasons why a hacker may be interested in you include:

Valuable Personally Identifiable Information Data: The vast majority of hacks are made for financial gain. If you use computers at all in your businesses, it is likely that you have confidential data stored on that computer that would be valuable to a hacker. Though you may not have as much personally identifiable information as a financial institution, you likely still have employee information (e.g., Social Security numbers, bank accounts for payroll, healthcare information, etc.) that could be worth money.

  1. Valuable Non-Personal Data: A construction companies often have access to certain proprietary client documents including project bid data, architectural designs, trade secrets, and other intellectual property. A hacker may also target general information about the company’s banking, accounting data, and policies in order to orchestrate social engineering or phishing schemes to have an employee send the hacker valuable data or unwittingly transfer corporate funds/assets.
  2. Access to Private Client Information: At times, the hacker is interested in accessing a client of the company, rather than the company itself. In 2013, approximately 70 million customers’ data was released by retail giant Target through malware installed on credit card machines. The hackers’ access to Target’s network was obtained indirectly through Fazio Mechanical Services, Target’s HVAC vendor, which had Target network credentials.[2] Through Fazio’s credentials, the hackers were able to cross into Target’s network to install the malware.
  3. Extortion: Ransomware is a type of malware designed to block off access to data stored in a computer system until money is paid (typically in bitcoin) to the hacker. When access is blocked—typically through encryption—the data may be lost if the victim does not pay the ransom and the victim does not have the data backed-up.

I don’t buy it. Name a construction company who has had a breach.

In early 2016, Turner Construction was targeted by a spear-phishing[3] scam wherein an employee emailed tax information on current and former employees to a fraudulent email account.[4] The tax information included full names, Social Security numbers, states of employment and residence, and tax withholding data for 2015. Hackers had manipulated, or “spoofed”, the “From” field in the email to the employee to make the email look like it was from a legitimate sender. This scam was a common scam during the 2016 tax season in order to obtain information used to file fraudulent tax returns.

Whiting-Turner Contracting (Baltimore), Central Concrete Supply Company (California), Century Fence (Wisconsin), Trinity Solar, and Foss Manufacturing were also recent victims of this scam.[5]

Are breaches really that big of a deal?

Data breaches can be very costly for a business. Depending on the type of data breached, a breach can cause loss of business and clients, reputation damages, loss of goodwill, decline in share value, increased legal and technological costs, and potential fines. Some businesses are never able to recover from a breach.

Additionally, even when a company can recover, it will often still have incurred significant costs due to business interruption. Depending on when the data incident occurred, a construction company may also be facing the risk of delay damages.

Yikes, that sounds expensive. What can I do to guarantee I will never be breached?

Unfortunately, there really is no way to “guarantee” that you will never be a target of a hacker. “Most security experts believe that it is a matter of when, not if,” your company will be targeted by hackers.[6] However, there are some actions you can take today to reduce your risk:

  • Identify your company’s valuable, private, and/or confidential information and know where that information is located on your network. Block off access to anyone who does not need that information to perform their job duties;
  • Work with your IT provider to ensure the company and its employees have strong password controls, any necessary encryption, current firewalls, updated security patches, and other recommended protections;
  • Consider using a third-party IT consultant to evaluate your system and identify any holes or vulnerabilities that your in-house IT personnel may have missed;
  • If using a subcontractor or other third party service provider that will have access to your network, establish procedures to evaluate those contractors;
  • Train employees to be aware and vigilant of risks and their role in protecting company data and assets; and
  • Create a plan of action in the event of a data incident.

A number of these steps and further actions to help protect your data can be undertaken with the help of legal counsel.

I have CGL insurance. Wouldn’t this be covered under my insurance?

It depends on the terms of your policy. In 2014, the Insurance Services Office, Inc. (the insurance industry organization that develops standard policy forms adopted by many insurance companies) issued a new form for CGL policies that expressly excludes coverage for data incidents.[7] Consultation with legal counsel can help you determine whether your current insurance coverage will provide coverage during a data incident.

If your CGL policy or any other policy leaves you without coverage for a data incident, you may want to consider purchasing cyber liability insurance. This relatively new form of insurance can provide coverage for costs associated with a data breach, including (depending on the terms of your policy) business interruption expenses, cyber extortion demand payments, legal expenses, IT forensic team expenses, cost of notification, and/or credit monitoring for affected persons.

I have been breached. What do I do?

If you have been breached, immediately contact your incident response team assigned in your incident response plan. If you do not have an incident response plan in place, contact your IT professionals and legal counsel. Many notification laws require that notice be given to affected persons and other state and federal agencies within certain time-frames, so it is important to have counsel retained in order to respond quickly and appropriately.

_________________________________________

[1] Symantec, Internet Security Threat Report: Vol. 21 (Apr. 2016) (available at https://www.symantec.com/content/dam/symantec/docs/reports/istr-21-2016-en.pdf).

[2] Target Hackers Broke in Via HVAC Company, Krebs on Security (Feb. 5, 2014) (available at https://krebsonsecurity.com/2014/02/target-hackers-broke-in-via-hvac-company/).

[3] Phishing is a type of email scam wherein the victim receives an email from someone who is pretending to be another person or entity, believes that the email is legitimate, and typically sends assets or information to the scammer based upon that mistaken belief. A well-known phishing scam is the “Nigerian Prince” scam. Spear phishing is a more targeted version of phishing. In a spear-phishing email, the scammer pretends to be a friend, family member, or co-worker. Because the email appears to be from someone the recipient knows, the recipient is often less vigilant in evaluating the legitimacy of the email. 

[4] Turner Construction Data Breach Notification Letter, State of California Department of Justice, Office of the Attorney General (last accessed 12/14/16) (available at https://oag.ca.gov/system/files/Turner%20Construction%20Ad%20r4prf_1.pdf?)

[5] Data Breaches, Cyber Security, and the Construction Industry, iSqFt.com (May 2, 2016) (available at http://www.isqft.com/start/blog-data-breaches-cyber-security-and-the-construction-industry/).

[6] Data Breaches, Cyber Security, and the Construction Industry, iSqFt.com (May 2, 2016) (available at http://www.isqft.com/start/blog-data-breaches-cyber-security-and-the-construction-industry/).

[7] Marla Kanemitsu & Erin Webb, Reviewing Emerging Insurance Protection for Cyber Risks, Security Magazine (Apr. 1, 2014) (available at http://www.securitymagazine.com/articles/85358-reviewing-emerging-insurance-protection-for-cyber-risks).

 

LouisianaPaddleboatStamp

By G. Trippe Hawthorne and Mallory McKnight Fuller

Click here to review a Practice Note explaining how to enforce arbitral awards in the state and federal courts in Louisiana.  This Note explains the procedure for confirming an arbitration award in Louisiana, and the grounds on which a party may challenge enforcement under Louisiana and federal law, including the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the Federal Arbitration Act (FAA), and the Louisiana Binding Arbitration Law (BAL). This Note also briefly explains the procedure for vacating, modifying, or correcting an arbitral award in Louisiana.

 

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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 steve.boutwell@keanmiller.com

 

 

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By Brittany Buckley Salup

Chief Judge Brian Jackson issued an “Omnibus Order Suspending All Deadlines” for cases pending or to be filed in the U.S. District Court for the Middle District of Louisiana.  The Order explains that the court has been inaccessible—a key term in the Federal Rules of Civil and Appellate Procedure—since August 12, 2016 due to historic flooding in the region.  Until further notice from the Middle District, all deadlines and delays in cases pending or to be filed in the Middle District are suspended.  This suspension expressly applies to prescriptive and peremptive periods.  In addition, all pending criminal cases in the Middle District are temporarily excluded from the time requirements of the Speedy Trial Act.

The Middle District’s Order follows similar Executive Orders from Governor Edwards, which suspended deadlines in Louisiana state courts due to flooding.  More information about the Governor’s Orders is available here.

A copy of the Middle District’s Order (M.D. La. General Order 2016-10) is available here.

 

 

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By Claire Juneau

On August 17, 2016, Governor Edwards amended Executive Order JBE 2016-57 which had suspended the running of prescription, peremption, and all legal delays from August 12, 2016 until September 9, 2016. The amendment to Executive Order JBE 2016-57 modifies the suspension of deadlines as follows:

  • Liberative prescription and peremptive periods continue to be suspended throughout Louisiana until Friday, September 9, 2016.
  • Deadlines in legal proceedings currently pending in state courts, administrative agencies, and boards in Acadia, Ascension, Assumption, Avoyelles, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Tammany, Tangipahoa, Vermilion, Washington, West Baton Rouge, and West Feliciana, Parishes, continue to be suspended until Friday September 9, 2016. This suspension includes all deadlines set forth in the Louisiana Civil Code, the Louisiana Code of Civil Procedure, Title 9 (Civil Code Ancillaries) Title 13 (Courts and Judicial Procedure), Chapter 11 of Title 18 (Election Campaign Financing); Chapter 10 of Title 23 (Worker’s Compensation); Chapter 5, Part XXI-A of Title 40 (Malpractice Liability for State Services); Chapter 5, Part XXIII, of Title 40 (Medical Malpractice), and Title 49, Chapter 13 (Administrative Procedure) of the Louisiana Revised Statutes. This is a modification from the original Exeuctive Order JBE 2016-57 which suspended deadlines statewide.
  • Except for the suspension of prescriptive and peremptive periods and the suspension of deadlines in the parishes listed above, the suspension provided for in original Executive Order JBE 2016-53 shall end Friday, August 19, 2016. If a party can show an inability to meet the deadlines caused the flooding, the court, administrative agency, or board shall suspend deadlines specific to that matter until September 9, 2016.

A copy of the amendment can be found here: JBE-16-57-Amended-Emergency-Suspension-of-Deadlines-in-Legal-Proceedings

A copy of the original executive order can be found here.

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By David K. Nelson

Louisiana law is clear – all claims against a contractor or design professional arising out of the planning, construction, design or building immovable or movable property must be brought within 5 years of the date of registry in the mortgage office of acceptance of the work by the owner.  If no such acceptance is recorded within six months of the date the owner occupied or took possession of the work, the claim must be brought within five years from the date of occupancy or possession. (La. R.S. 9:2772).  The five year period of time applies to all claims, including those claims made by one contractor against another.  The five year period cannot be interrupted, suspended or tolled.  If suit is not filed within five years, the right to file suit is lost.

Although enacted by the legislature to protect contractors, the statute creates a “trap for the unwary” for those involved in projects where partial certificates for substantial completion are issued.  For example, in the recent case Thrasher v. Gibbs Residential, LLC, 15-CA-607 (La. Ct. App. 4 Cir. 6/29/16) the court of appeal dismissed a general contractor’s claim against its subcontractor finding the claim was not timely.  The court found that the general contractor filed its claim more than 5 years from the date a partial certificate of substantial completion had been filed.  The general contractor unsuccessfully argued that it was improper to use a partial certificate of substantial completion because the project continued thereafter and additional certificates of substantial completion were ultimately filed.  In the ruling the court noted that the statute did not specify what must be filed to constitute acceptance by the owner.  The court also found that the parties were relying upon a recorded certificate of substantial completion as evidence of the owner’s acceptance.  The fact that the entire project had not reached substantial completion did not prevent the court from finding that a partial certificate of substantial completion was sufficient to start the clock.

To eliminate the uncertainty as to what will or will not start the five year period, the parties to a construction contract would be wise to include language in the contract establishing precisely what must be filed to constitute “registry in the mortgage office of acceptance”.