By Lana D. Crump and Amanda Collura-Day

In Louisiana, the collateral source rule mandates that a tort plaintiff be awarded the full value of his medical expenses against the tortfeasor, including any amounts written off by the provider, when that plaintiff paid some “consideration” (money) for the benefit of the written-off amount.  In other words, even though a person may have health insurance and, therefore, received the benefit of discounted medical charges, the collateral source payment is not credited to the tortfeasor, and the tortfeasor has to pay the full amount charged for the services.

However, in Rabun v. St. Francis Med. Ctr., Inc., 50,849 (La. App. 2 Cir. 8/10/16), 206 So.3d 323, a hospital was attempting to recover on its medical lien against the patient for the full amount of medical services charged (without accounting for the patient’s health insurance discount). The Second Circuit capped the patient’s medical expenses incurred at the negotiated rates between the hospital and the patient’s health insurer.  The Second Circuit found that the contracted rate is deemed the amount “incurred” by the patient.  Rabun did not deal directly with a tort plaintiff against a tortfeasor, and was limited to the hospital’s lien on the patient’s tort recovery. La. R.S. 9:4752.  Regardless, the court left lawyers with language to make a strong argument that a tortfeasor can only be held liable to an insured plaintiff for the contracted rate – the amount actually incurred.

Hoffman v. Travelers Indem. Co. of America, 13-1575 (La. 5/7/14), 144 So.3d 993 is another example.  There, an automobile insured sought to recover the entire amount charged for medical services following an accident, pursuant to the medical pay provision of her auto policy that allowed her to claim all reasonable expenses for necessary medical services incurred.  The provider was paid less than list rates pursuant to an agreement between the provider and the insured’s health insurer.  The Louisiana Supreme Court held that, as a matter of first impression, the insured did not incur the full list cost of the medical services.  The court found that because the plaintiff’s health insurer had contractually pre-negotiated rates with the provider, the plaintiff was only legally obligated to pay the discounted amount.  Since she had no liability for any amount over that discounted amount she did not “incur” the full list rates and, therefore, she could only claim the discounted amount from her auto insurer.

Rabun and Hoffman show that Louisiana courts are taking a close look at quantifying medical expenses, and there is an argument to be made that a tort plaintiff’s recovery for medical expenses (past and future) is limited to the insurance negotiated rates for insured plaintiffs because that is the actual amount incurred by the plaintiff.  Louisiana courts are catching up to the reality of managed care costs in this country as it relates to recovery of medical expenses.

By Tod J. Everage

The US Fifth Circuit recently published an opinion in Feld Motor Sports, Inc. v. Traxxas, LP, recognizing that it had jurisdiction to review a district court’s denial of a motion for summary judgment on a legal issue. This ruling was the first of its kind in the 5th Circuit, who now joins the 1st, 4th and 8th Circuits to acknowledge this exception to the general rule.

The case involved a fight over allegedly unpaid royalties in a licensing agreement between a monster truck show promoter and an RC car maker. During the case, both parties filed motions for summary judgment advancing their own interpretations of the subject licensing agreement. The district court denied both motions, concluding that the contract was ambiguous and the case proceeded to trial. After a seven-day trial, the jury found Traxxis owed FMS the unpaid royalties. Traxxas then filed a combined renewed motion for summary judgment as a matter of law under Rule 50(b), motion for new trial under Rule 59, or alternative motion to modify the judgment. The district court denied the motions and Traxxas appealed. FMS argued that the 5th Circuit did not have jurisdiction to hear Traxxas’s appeal, among other things.

The 5th Circuit analyzed its recent jurisprudence on the issue of jurisdiction and Rule 50 motions. In 2014, the Court recognized the long-standing general rule that “an interlocutory order denying summary judgment is not to be reviewed when final judgment adverse to the movant is rendered on the basis of a full trial on the merits.” See Blessey Marine Services, Inc. v. Jeffboat, LLC, 771 F.3d 894, 897 (5th Cir. 2014) (quoting Black v. J.I. Case Co., 22 F.3d 568, 570 (5th Cir. 1994)). Before now, the 5th Circuit had recognized only one exception to that rule. In Becker v. Tidewater, Inc., the Court held that it could review “the district court’s legal conclusions in denying summary judgment,” but only when “the case was a bench trial.” 586 F.3d 358, 365 n.4 (5th Cir. 2009). The Court reasoned in Becker that “because Rule 50 motions are not required to be made following a bench trial, it is appropriate to review the court’s denial of summary judgment in this context.” In Blessey, the 5th Circuit noted (in dicta) that it may have jurisdiction to hear an appeal of the district court’s legal conclusions following a jury trial, but only if the party restated its objection in a Rule 50 motion.

For clarification, Rule 50 governs motions for a judgment as a matter of law in a jury trial. Rule 50(a) allows a party (usually the defendant) to move for a judgment as a matter of law in a jury trial against the other party if the other party has been fully heard on an issue, arguing that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue. If the Court denies the Rule 50(a) motion, a defendant has 28 days after entry of judgment to renew its motion under Rule 50(b).

Here, the 5th Circuit held that “following a jury trial on the merits, this court has jurisdiction to hear an appeal of the district court’s legal conclusions in denying summary judgment, but only if it is sufficiently preserved in a Rule 50 motion.” In doing so, the Court joined the 1st, 4th, and 8th Circuits.

While technically plowing new ground, the 5th Circuit very directly reminded practitioners to make sure to renew their Rule 50(b) motion for judgment as matter of law after an adverse jury verdict or risk waiving their right to appeal the Court’s adverse legal finding. This issue is much more prevalent in contractual interpretation disputes, but can arise in casualty litigation should a defendant be unsuccessful asserting a legal defense on a dispositive motion or Rule 50(a) motion at the close of Plaintiff’s case.

By Claire E. Juneau

The United States Supreme Court recently issued an opinion which significantly limits the ability of a state court to assert personal jurisdiction over non-resident defendants. This ruling is hardly a surprise and is consistent with the Court’s recent decisions in BNSF Railway Co. v. Tyrrell, 137 S. Ct. 1549 (2017) which reaffirmed the court’s commitment to the limitations on state-court jurisdiction set forth a few years ago in Daimler AG v. Bauman, 134 S. Ct. 746, 187 L.Ed. 2d 624 (2014)(Due process did not permit exercise of general jurisdiction over German corporation in California based on services performed there by its United States subsidiary that were “important” to it).

In Bristol-Myers Squibb Company v. Superior Court of California, San Francisco County, et al., 137 S. Ct. 1773 (2017), the Supreme Court held that the due process clause of the United States Constitution did not permit exercise of specific personal jurisdiction by a California Court over non-resident consumer claims. The plaintiffs in Bristol were a group of 600 consumers, most of whom were not California residents. The plaintiffs had filed suit in California state court against Bristol-Myers Squibb (“BMS”) asserting a variety of state law claims, all based on injuries purportedly caused by a BMS drug, Plavix. The facts relied upon by the courts to analyze jurisdiction were as follows:

  • BMS is a large pharmaceutical company incorporated in Delaware with its principal place of business in New York.
  • BMS’s business activities in California are comprised of five research and laboratory facilities, 160 employees, 250 sales representatives, and a small state governmental advocacy office.
  • Plavix was not developed, manufactured, labeled, or packaged in California. BMS did not create a marketing strategy or work on regulatory approval in California. All of these activities occurred in New York or New Jersey.
  • Plavix is sold in California – approximately 187 million pills which amount to more than $900 million in revenue, a little over one percent of the company’s nationwide revenue.

After suit was filed in California, BMS moved to quash summons on the non-resident plaintiffs’ claims asserting that California did not have personal jurisdiction over those claims. The case made its way to the California Supreme Court who agreed with BMS that its contacts with California were insufficient for general personal jurisdiction under the United States Supreme Court’s decision in Daimler AG. However, in adoptiong a “sliding scale” test, the court found that specific personal jurisdiction could be established. The California court held that “[a] claim need not arise directly from the defendant’s forum contacts in order to be sufficiently related to the contact to warrant the exercise of specific jurisdiction.” The court found that BMS, through its national advertising and distribution scheme and business conducted in California, had sufficient contacts with the forum for California to exercise specific personal jurisdiction over all Plavix claims. Therefore, California courts could hear the claim of every Plavix plaintiff nationwide, even those non-California plaintiffs whose injuries were not caused by conduct within California.

In a near unanimous decision, with Justice Sotomayor as the lone dissenting voice, the United States Supreme Court reversed California’s decision holding that the due process clause of the Fourteenth Amendment precluded California’s sliding-scale test. The Court re-affirmed prior precedent: to invoke specific personal jurisdiction, a claim must “arise out of” defendant’s conduct within the state. Quoting directly from World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980), the Court reasoned that the “primary concern” in determining personal jurisdiction is “the burden on the defendant.” Thus, a State can only invoke specific personal jurisdiction over claims that arise from the defendant’s activities within the forum state. This jurisdiction does not extend to claims arising from defendants’ identical activities in other states. California’s “sliding scale approach,” the Court wrote, “resembles a loose and spurious form of general jurisdiction” that does not comport with the Due Process Clause of the Fourteenth Amendment.

The Court further found that the Due Process Clause protects interstate federalism by divesting the state court’s power to hear claims that do not “arise out of or relate to” the defendant’s forum contacts. While the burden placed on the defendant remains the primary focus, a related concern is the “territorial limitations on the power of the respective States.” The “sovereignty of each state … implies a limitation on the sovereignty of other states.” Therefore, the facts that the defendant suffers no additional burden by litigating in the forum and that the forum state has a strong interest in applying its law to the controversy or is the most convenient forum does not circumvent the protections of the Due Process Clause.

A tow is pushing a barge up the Mississippi River. This single barge will be connected with others for a longer haul.

By McClain R. Schonekas

The M/V HANNAH C. SETTOON, owned and operated by Settoon Towing, L.L.C. (“Settoon”), was towing two crude oil tank barges on the Mississippi River when an attempted passage around the M/V LINDSAY ANN ERICKSON and its tow went badly resulting in a spill of 750 barrels of crude oil. The spill closed a 70-mile stretch of the river to vessels for 48 hours for cleanup and recovery. The United States Coast Guard named Settoon the strictly liable Responsible Party under the Oil Pollution Act of 1990 (“OPA 90”) (codified at 33 U.S.C. §§ 2701–2762), requiring it to carry out the cleanup and remediation. Settoon subsequently filed a Limitation of Liability proceeding seeking to limit its civil liability to the total value of the vessel and its freight. Marquette Transportation Company, L.L.C. (“Marquette”), owner of the M/V LINDSAY ANN ERICKSON, filed a claim. Settoon filed a counterclaim against Marquette seeking contribution under the OPA, general maritime law, or both.

Following a four-day bench trial on liability, the district court found both parties at fault for the collision, apportioning 35% of fault to Settoon and 65% to Marquette. The district court also found that Settoon, the Responsible Party, was entitled to contribution for purely economic damages from Marquette, in proportion to its liability. Marquette appealed, arguing that OPA 90 does not allow a Responsible Party to obtain contribution from a partially-liable third party, and even if it does, the district court clearly erred in its allocation of fault. A unanimous panel anchored by an experienced admiralty jurist affirmed the district court.

Judge Southwick, writing for the panel, methodically analyzed the applicable provisions of OPA 90 and dissected Marquette’s statutory argument, ultimately disposing of it. Simply stated, Marquette argued that the right to contribution from a jointly negligent party did not arise under OPA 90. Instead, Marquette contended that any contribution it owed was based on general maritime law and therefore limited by the Robins Dry Dock bar to purely economic damages.[1]

Highlighting the relevant section of OPA 90, at 33 U.S.C. §§ 2709,[2] the panel held “that contribution is available under the OPA.” Despite its clever argument, the panel rebuffed Marquette’s invitation to apply general maritime law and the Robins Dry Dock bar to purely economic damages. The Court stated,

We conclude that the most reasonable interpretation of the language of the OPA, as confirmed by the Act’s legislative history, grants to an OPA Responsible Party the right to receive contribution from other entities who were partially at fault for a discharge of oil. Specifically, a Responsible Party may recover from a jointly liable third party any damages it paid to claimants, including those arising out of purely economic losses.[3]

Unsurprisingly, the panel also quickly disposed of Marquette’s argument that the district court clearly erred in its allocation of fault. AFFIRMED.

*******************************

[1] In Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927), a time-charterer of a steamship brought an action against the Dry Dock Company to recover for loss of use of the steamer whose delivery was delayed by the Dry Dock Company’s negligence. The Court found that the time-charter had no cause of action against the Dry Dock Company for the loss of use of the vessel because, among other reasons, the docking contract between the vessel owner and the Dry Dock Company was not for the time-charterer’s direct benefit.

[2] This Section states, “A person may bring a civil action for contribution against any other person who is liable or potentially liable under this Act or another law. The action shall be brought in accordance with section 2717 of this title.”

[3] In re Settoon Towing, L.L.C., No. 16-30459, 2017 WL 2486018, at *10 (5th Cir. June 9, 2017).

Offshore oil rig drilling platform in the gulf of Thailand 2015.

By Daniel B. Stanton

In the recent U.S. Fifth Circuit case of In re Larry Doiron, Inc., 849 F.3d 602 (5th Cir. 2017), the Court considered an often pivotal question in many offshore personal injury cases: is the contract governing the relationship of the parties a maritime contract?

While this issue is not new to the offshore oil and gas industry, it is often one that is hotly contested because of the impacts that follow the determination that a contract is maritime in nature or not. One of the most significant issues resting on this determination is the enforceability of the indemnity provisions which are often included in service contracts. Under general maritime law, indemnity provisions are generally enforceable; under Louisiana law, indemnity provisions are often unenforceable as a result of the Louisiana Oilfield Indemnity Act (“LOIA”). Thus the determination that a contract is maritime in nature, and therefore governed by general maritime law, can have a significant impact on the relationship between the parties to an offshore personal injury action.

In this case, Plaintiff Peter Savoie, an employee of Specialty Rental Tools & Supply (“STS”), was injured while performing flow-back services on an offshore natural-gas well owned by Apache. Savoie’s services were provided under a master services contract (“MSC”) between Apache and STS which contained a common indemnity provision that required STS to defend and indemnify Apache and its “Company Group” from all claims for bodily injury made by STS employees. Like most service contracts, the MSC operated as a broad blanket agreement that did not describe individual tasks, but contemplated their performance under subsequent oral and written work orders.

Prior to his injury, Savoie attempted several different methods to complete the flow-back process on Apache’s well. After these methods proved unsuccessful, Savoie determined that additional equipment would be needed to perform the operation, including a hydraulic choke manifold, a flow-back iron, and a hydraulic gate valve. Because these pieces of equipment were too heavy to manipulate by hand, a crane barge would be required to move them to and from the wellhead. Apache’s on-site representative made arrangements to procure the necessary equipment. The crane barge was supplied by Larry Doiron, Inc. (“LDI”). Savoie was injured during the process of rigging down the LDI crane. When Savoie made a claim against LDI for his injuries, LDI demanded defense and indemnity from STS under the Apache/STS MSC. STS countered that the MSC was governed by Louisiana law, and as a result of the LOIA, the indemnity provisions of the MSC were rendered ineffective. No party disputed that LDI was part of the Apache “Company Group” to which the indemnity obligation flowed, and ruling on cross-motions for summary judgment, the district court found that the contract was maritime in nature and therefore STS was bound to defend and indemnify LDI. STS appealed the district court’s ruling.

The issue before the Fifth Circuit Court of Appeals was simple: what law applied to the indemnity provision of the MSC, maritime law or Louisiana law? But to answer this question, the Court had to examine not only the MSC, but also the oral work order for the use of LDI’s crane barge. First, the Court looked to the MSC and asked the following question: how have contracts for flow-back services historically been treated by courts? Having not previously considered contracts for flow-back services, the Court compared the work to wireline and casing work. Under prior decisions of the Court, contracts for wireline work had traditionally been found to be non-maritime and contracts for casing had traditionally been found to be maritime. The distinction being that wireline services often do not require the use of a vessel, while casing work often does. The Court then considered the task at issue in the present case, flow-back work, and found that the work could be performed either exclusively from a well platform or could require a vessel. Thus based on historical precedent, it was unclear to the Court whether the contract for flow-back services was a maritime or non-maritime contract.

Because the historical treatment of the contract as maritime or non-maritime was unclear, the Court went on to consider the specific facts surrounding the work that produced the Plaintiff’s injury. The Court evaluated the events in light of six factors that were developed by the Court in Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990):

1) [W]hat does the specific work order in effect at the time of injury provide? 2) [W]hat work did the crew assigned under the work order actually do? 3) [W]as the crew assigned to work aboard a vessel in navigable waters[?] 4) [T]o what extent did the work being done relate to the mission of that vessel? 5) [W]hat was the principal work of the injured worker? and 6) [W]hat work was the injured worker actually doing at the time of injury?

Under this framework, the Court found 4 of the 6 factors supported a conclusion that the contract at issue was maritime in nature.

Under the first factor, neither party could produce any documents describing the work order under which the LDI crane barge was procured, but the Court found that the MSC did have language that contemplated the use of vessels to perform work thereunder. Therefore, because the use of vessels during STS’s work for Apache was contemplated by the parties, imposing a maritime obligation on STS should come as no surprise. Under the second factor, the Court found that because the flow-back operation could not be completed without the use of a vessel; this factor favored maritime status. The fourth and sixth factors likewise counseled towards a maritime contract. The Court found that the mission of the vessel at issue was solely the performance of STS’s flow-back work. Plaintiff was also injured by equipment affixed to the vessel – the crane.

Only the third and fifth factors gravitated towards a finding that the contract was not maritime in nature according to the Court. Under these factors, the Plaintiff was neither assigned to work aboard a vessel in navigation nor employed to perform maritime-related work.

Having worked through the applicable analysis, the Court found that the contract at issue – the specific work order for the performance of back-flow services under the MSC – was a maritime contract. As a result, LDI’s demand for defense and indemnity was valid and enforceable, and the district court properly granted judgment in favor of LDI.

While the contractual issues at play in offshore personal injury cases are often less flavorful than the tort issues, they can have substantial impacts nonetheless. With litigation costs rising and the potential for substantial damage awards, contractual defense and indemnity provisions offer very valuable protections to the parties. And while elsewhere in the world, the distinction between a maritime contract and a non-maritime contract may be inconsequential, in the Louisiana oil patch the determination can result in the nullification of these important and valuable protections. Furthermore, this determination may not be as simple as reading the choice of law provision or evaluating the governing service agreement. Fortunately, the Fifth Circuit continues to provide guidance for navigating the sticky issues that arise on the Outer Continental Shelf where maritime law, state law, vessels, seamen, production platforms, and production personnel all interact.

Close-up close-up shots of the tracks

By Michael J. O’Brien

In the recent case of BNSF Railway Co. v. Tyrrell, the U.S. Supreme Court rejected a blatant forum shopping attempt by two railway employees and limited future lawsuits against out-of-state railroads. In BNSF Railway Co., Robert Nelson of North Dakota and Kelli Tyrrell of South Dakota filed separate suits against BNSF Railroad in a Montana State Court pursuant to the Federal Employer’s Liability Act (“FELA”) 45 U.S.C. §51 et sec. which makes railroads liable for on-the-job injuries to their employees. Nelson allegedly injured his knee while working for BNSF in the State of Washington. Tyrrell claimed that her husband died of cancer he contracted after being exposed to chemicals while working for BNSF in South Dakota, Minnesota, and Iowa. Despite the fact that neither Plaintiff resided in Montana, nor sustained any injuries in Montana, they filed their lawsuit against BNSF in that state based upon BNSF’s alleged contacts in Montana.

BNSF was incorporated in Delaware and it maintained its principle place of business in Texas. It operates railroad lines in 28 states, however, it maintained less than 5% of its workforce and approximately 6% of its total track mileage in Montana. Nelson and Tyrell claimed that these contacts with Montana were sufficient for them to sue the railroad in Montana. BNSF disagreed.

After Tyrrell and Nelson filed suit, BNSF moved to dismiss both of their lawsuits for lack of personal jurisdiction. The Montana Supreme Court ultimately denied the motion allowed these cases to move forward holding that Montana Courts could exercise general personal jurisdiction over BNSF because §56 of FELA authorizes State Courts to exercise personal jurisdiction over railroads “doing business” in the state. The Montana Supreme Court further observed that Montana law provides for the exercise of general jurisdiction over “all persons found within the state.” Thus, because of BNSF’s many employees and miles of track in Montana, the Montana Supreme Court concluded that BNSF was both “doing business” and “found within” the state such that both FELA and Montana law authorized the exercise of personal jurisdiction.

The U.S. Supreme Court granted certiorari to resolve whether §56 of FELA authorizes State courts to exercise personal jurisdiction over railroads that do business in states but are neither incorporated, nor headquartered in that state. The Supreme Court also examined whether the Montana Court’s exercise of personal jurisdiction in these cases comported with constitutional due process.

A solid majority of the Court rejected the two theories upon which Nelson and Tyrrell had relied on to justify jurisdiction over BNSF in Montana. First, the Court held that FELA does not itself create a special rule authorizing jurisdiction over railroads simply because they happen to be doing business in a particular place. Next, the Court ordered that an exercise of jurisdiction over BNSF must still be consistent with due process. Thus, the Montana rule that allowed Courts in the state to exercise jurisdiction over “persons found” in Montana did not help the Plaintiffs as it violated due process.

The Supreme Court repeatedly mentioned that BNSF was not incorporated in Montana, and it did not maintain its principle place of business in that state. Further, BNSF was not so heavily engaged in activity in Montana “as to render it essentially at home” in that state. The Supreme Court noted that a corporation that operates in many places can “scarcely be deemed at home in all of them.” Thus, the business that BNSF did in Montana may be sufficient to subject the railroad to specific personal jurisdiction in maritime for claims related to the business activity in Montana. However, simply having in state business did not suffice to permit the assertion of general jurisdiction over claims like Nelson’s and Tyrrell’s that were completely unrelated to any activity occurring in Montana.

Last, it is important to note that this holding is also relevant in maritime cases. Indeed, since FELA case law is applicable to Jones Act cases, BNSF Railway Co.’s holding will, by extension, also limit forum shopping by Jones Act seaman under the same reasoning.

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.

 

structure

By Matthew C. Meiners

In targeting a company for purchase, many buyers prefer to purchase the assets of a company, as opposed to the stock (or other equity) of the company because, as a general rule, the buyer of assets in an asset acquisition does not automatically assume the liabilities of the seller.  Accordingly, an asset acquisition generally allows the buyer and seller to select which assets and liabilities will be transferred.  However, in certain circumstances, the buyer can be held responsible for liabilities of the seller if a court determines that certain exceptions are met.  Louisiana courts have been willing to impose liability on asset-sale successors on the following grounds:

  1. The buyer assumed the liabilities;
  2. The transaction was entered into to defraud the seller’s creditors;
  3. The buyer company is a “mere continuation” of the seller company; and
  4. The transaction was “in fact” a merger.

The “mere continuation” exception is probably the most likely to catch a buyer off guard.  Louisiana courts, in considering whether an asset-sale successor is a “mere continuation” of the seller company, have considered the extent to which the buyer company has retained the same employees, supervisory personnel, company name, and physical location as the seller company.  Further, prior business relationships may be considered, as well as the continuity of general business operations and the identity of the business in the eyes of the public.  A threshold requirement to trigger a determination of whether successor liability is applicable under the “mere continuation” exception is that one company must have purchased all or substantially all the assets of another.

If you plan to purchase all or substantially all of the assets of a company, especially if your goal in choosing an asset purchase over a stock purchase is to avoid or minimize your liability for the seller’s liabilities, you should carefully consider the ways in which you could be seen as merely continuing the seller’s business under the factors described above.  You may be signing on for more liability than you anticipate.

Industrial Strength Graphic Only

By Greg Anding

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

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

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

Norfolk Opinion.

 

compass

By David P. Hamm, Jr.

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

2013 SRS Study Sample

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

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

Breakdown of Claims in General

hamm pic

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

Breakdown of R&W Claims

hamm pic 2

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

Conclusion

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

__________

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