By Anjali Gillette

On August 29, 2018, the U.S. Court of Appeals for the Fifth Circuit dismissed an appeal for lack of appellate jurisdiction involving the issue of whether a vessel’s primary and excess insurers may limit their liabilities to the same extent available to the vessel. See SCF Waxler Marine, L.L.C. v. ARIS T M/V, No. 17-30805 (5th Cir. August 29, 2018). SCF Waxler addressed the interplay between the Louisiana Direct Action Statute, La. R.S. § 22:1269, that allows third party claimants to bring claims directly against a tortfeasor’s insurer and the U.S. Shipowner’s Limitation of Liability Act, 46 U.S.C. § 30501, a federal statute that permits a vessel owner (and some vessel charterers) to limit their liability to the post-casualty value of the vessel and the pending freight.

SCF Waxler involved an accident in which the M/V ARIS T collided with multiple vessels and facilities along the Mississippi River, allegedly resulting in damages expected to exceed $60 million. The M/V ARIS T blamed the accident on unsafe maneuvering by two tugs.  The owner and operator of one of the tugs, Cenac Marine Services (“Cenac”), filed a Limitation action in defense of the claims against it seeking to limit its liability to the value of the vessels involved. Claims were filed against Cenac’s primary and excess insurers directly pursuant to the Louisiana Direct Action Statute. Cenac’s insurers filed defenses arguing that their liability, if any, was derived solely from their policies’ terms and conditions and that they were entitled to limit their liability to the extent Cenac was entitled to limit its liability to the subject vessels and pending freight.

In a motion for partial summary judgment, Claimants asked Judge Zainey to resolve whether the excess insurers could limit their liability to the value of Cenac’s insured vessel. They argued that Cenac’s insurance policies did not contain the requisite language allowing them to limit their liability vis-à-vis an injured third party (the primary insurers advised that they had no interest in the outcome of motion because their primary $1 million limits of coverage were less than the $14.6 million limitation fund posted by Cenac). Judge Zainey rejected their arguments holding that the policies in question were excess follow-form policies, and accordingly the legal question turned on the language of the primary P&I cover to which they followed form. Judge Zainey noted controlling U.S. Fifth Circuit precedent, which provides that a P&I insurer “may limit its liability to that of the vessel owner’s liability when the terms of the policy allow it to do so.”

Claimants appealed, asserting that the Fifth Circuit had jurisdiction to hear an appeal of that interlocutory order under 28 U.S.C. §1292(a)(3), which provides that appellate courts may entertain appeals from district courts’ interlocutory orders that determine the rights and liabilities of the parties to admiralty cases. The Fifth Circuit stated that “the heartland of this court’s jurisdiction over an interlocutory appeal under § 1292(a)(3) is a conclusive determination of the rights and liabilities as to the claim on appeal.” Claimants argued that because the district court, in denying their motion for partial summary judgment, granted the excess insurers rights to limit their liability, then that determination was the final order on the extent of the excess insurers’ liability in this case. Because the district court’s order determined “the rights and liability of the parties” in an admiralty case, Claimants contend that section 1292(a)(3) applied and the Fifth Circuit was afforded jurisdiction over the case.

The Fifth Circuit disagreed with their contentions. Instead, the Court focused on whether Claimants were legally permitted to recover anything from the excess insurers and if so, the amount of that liability. The Circuit Court determined that the limitation of liability question was ancillary to the main question regarding the extent of the insurer’s liability. Further, the Court found no compelling reason to distinguish between a district court’s determination of a contractual entitlement rather than statutory entitlement to limit liability. The Court joined the Eleventh Circuit in holding that neither decision was reviewable on appeal under section 1292(a)(3).

Conversely, the Court stated that if the district court had decided that the excess insurers were not entitled to limitation of liability, jurisdiction would be appropriate. A denial of exoneration or limitation of liability would require a district court to conclude that a party was negligent and not entitled to limitation.

Thus, the Fifth Circuit would not exercise jurisdiction when a district court determines whether a party may, under a contractual provision, limit his liability should the liability question be determined in that party’s favor. The Fifth Circuit’s decision to not exercise jurisdiction in cases where a final adjudication of the liability has not been made is not surprising considering their history in narrowly construing section 1292(a)(3). However, it assists in guiding vessel owners and insurers on the costs involved in doing business in the maritime arena.

By Stephen C. Hanemann

“A big day for trade!” was President Donald Trump’s enthusiastic announcement concerning the bilateral negotiations recently reached between the United States and Mexico on August 27, 2018, merely three months away from the North American Free Trade Agreement’s 25th birthday.

While ratified by the Legislatures of Canada, Mexico, and the United States in 1993, and signed into law by President Bill Clinton on December 8, 1993, NAFTA, which became effective on January 1, 1994, traces its direct origins to 1980 when the three North American nations first sought an accord to establish mutual trading, cost reduction, increased business investment, and heightened competition in the global market place. Shortly thereafter, President Ronald Reagan – whose campaign platform included provisions advancing a North American common market – supported the 1984 Congressional passage of the Trade and Tariff Act, which gave the U.S. President unilateral authority to negotiate free trade agreements. The Act facilitated the U.S. Chief Executive’s ability to expedite trade negotiations. Since its passage, Congress retains only the ability to approve or reject the complete agreement as negotiated, but not to alter it or suggest revisions. President Reagan and Canadian Prime Minister Brian Mulroney negotiated a Canada-U.S. Free Trade Agreement in 1998, which was signed in that year, and went into effect in 1999. Reagan’s successor, President George H. W. Bush, negotiated with Mexican President Carlos Salinas de Gortari to reduce Mexican tariffs on U.S. imports, which before NAFTA were 250% higher than U.S. tariffs on Mexican imports. In conjunction with the Bush-Salinas negotiations, in 1991, Canadian Prime Minister Mulroney requested a trilateral agreement, from which NAFTA was born.

Citing a compelling need to revitalize and modernize the aging NAFTA content, the United States and Mexico recently commenced and completed preliminary negotiations in support of a mutually-beneficial trade agreement to promote vibrant economic growth, balanced trade, and less-restricted markets to help North America keep pace with the 21st century-global economy. The recent discussions, which excluded Canada, have seemingly created more of a path to replace NAFTA than to revise it. In fact, President Trump has been quite vocal about the name of the new agreement, which he says will not be NAFTA.

The negotiations seek to modernize NAFTA to conform with recent technological, digital, and environmental innovations, as well as address the arenas of intellectual property, copyright, digital trade, and financial services. Other developments focus on eliminating customs duties on low-valued goods, levying prohibitions on local data storage requirements for information accessible to financial regulators, and establishing new trade rules of origin, vastly improving the North American labor force benefits and upping local content requirements in the automotive industry. Bolstering their commitment to technological and ever-changing labor market advancements, the United States-Mexico negotiations also brought to bear a heavy import on environmental concerns and obligations pertaining to wildlife, timber, fish, and air quality.

Despite the newly-developed and comprehensive enforcement provisions pertaining to intellectual property and trade secret protections, the key points of negotiations also involved added benefits for innovators and stronger disciplines on digital trade; all of which tend to provide a firm foundation for the expansion of trade and investment in products and services where the United States has a competitive advantage.

An additional noteworthy development involves the increased de minimis shipment value of cross-border goods, which will facilitate greater trade between the United States and Mexico by reducing or eliminating customs duties and taxes on shipments valued up to $100. Increasing the de minimis value will significantly lower costs to small and medium-size enterprises, which do not have the resources to pay shipping costs on small shipments. The cost savings will also trickle down to the new traders entering Mexico’s market, and of course, the consumers.

On the labor front, the new trade rules of origin in the automotive manufacturing industry will require at least 75% of a car’s value to be manufactured in North America (compared to 62.5% previously). And at least 40% of each vehicle manufactured in North America must be made by workers earning at least $16 per hour. These and other labor revisions seek to create more U.S. jobs carrying competitive wages, as well as stimulate the domestic automotive industry’s overall production and global competitiveness.

The proposed content of the environmental chapter marks the first ever articles of a Free Trade Agreement to directly improve air quality, prevent and reduce marine litter, support sustainable forest management, and to create and implement procedures for environmental impact studies and assessments, and modernize mechanisms for public participation and environmental cooperation.  Other enforceable-environmental obligations seek to combat unlawful trafficking in wildlife, timber, and fish, and address pertinent environmental issues related to air quality and marine dumping.

Indeed, Canada’s absence during the NAFTA re-negotiations likely bodes well in favor of a NAFTA replacement rather than revision. While Mexico’s administration has contacted Canada requesting a return to the negotiating table, in hopes of a trilateral NAFTA deal, the Trump administration has unequivocally expressed its concerns about multi-lateral agreements and voiced a strong preference for bilateral ones.

By Michael J. O’Brien

A “no claims bonus” is an attractive carrot that insurers can write into a policy to attract more customers. Indeed, the recovery of a “no claims bonus” can result in a substantial payoff for an insured. Given the maxim: “accidents happen”, the question arises, can the “no claims bonus” be recovered as an element of damages if a third party causes you to forfeit the bonus through their fault. Currently, this exact issue is making its way through the Eastern District of Louisiana in Cox Operation, LLC v. Settoon Towing, LLC et al., Civil Action No. 17-1933 c/w 17-2087.

Cox Operation concerns a September 13, 2016, accident where a Settoon vessel allided with a well owned by Cox. In addition to its property damage claims, Cox seeks to recover the loss of its “no claims bonus”, allegedly due to Settoon’s neglect.

Specifically, Cox had insured the well with a policy that provided a “10% no claims bonus payable at expiry subject to a total gross earned premium exceeding USD 2,000,000 hereon.” Accordingly, if Cox submitted no claims under the applicable policy, then the insurer would refund Cox 10% of the total premium amount for the policy period, assuming that total premium amount exceeded two million dollars (which it did). If Cox submitted a claim during the policy period, then no refund would issue. Interestingly, Cox also insured the potential loss of its “no claims bonus” through a separate policy.

As a result of the subject allision, Cox was forced to submit a claim under the policy. It then became obligated to repay the “no claims bonus” which the insurer had prepaid to Cox. Critically, the claim associated with the allision was the only claim Cox filed during the applicable policy period. Thus, it was Cox’s contention that Settoon’s negligence caused a loss/damage to Cox in the amount of the loss “no claims bonus.” Settoon challenged Cox’s entitlement to the “no claims bonus” and moved for summary judgment arguing that Cox was precluded as a matter of law from pursuing recovery of the “no claims bonus.” Settoon also put at issue the policy insuring Cox’s loss of the bonus, which Cox argued should be excluded as a collateral source.

Settoon argued that Cox could not recovery the no claims bonus under either the General Maritime Law or the Oil Pollution Act (OPA). Cox did not address Settoon’s arguments that the no claims bonus was not recoverable under the OPA. Instead, Cox focused on the recoverability of the “no claims bonus” under the General Maritime Law.

In analyzing this issue, the EDLA cited the U.S. Fifth Circuit’s opinion in Louisiana ex rel., Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir. 1985) (en banc), which holds that “physical injury to a proprietary interest is a pre-requisite to recovery of economic damages in cases of unintentional maritime tort.” Next, the District Court reviewed Corpus Christi Oil & Gas Co. v. Zapata Gulf Marine Corp., 71 F.3d 198, 203. (5th Cir. 1995) where the Fifth Circuit interpreted the TESTBANK rule and held that simply meeting the requirement of showing physical damage of a proprietary interest does not automatically open the door to all foreseeable economic consequences.” Rather, “economic consequences” must be “attendant” to the physical damage to a Plaintiff’s own property to be recoverable economic damages under TESTBANK.

Based on the facts that had been established to date, the District Court held that TESTBANK’s pre-requisites were satisfied. Thus, the door to the recoverability of the “no claims bonus” was opened.  The alleged damage to Cox’s well constituted physical damages to Cox’s own property. Cox’s loss of the “no claims bonus” was tied to the physical damage to Cox’s well. Bottom line: if Cox suffered physical damage to its property and suffered an economic loss that was attendant to that damage, then “all of the TESTBANK rules boxes have been checked.” As such, Cox could pursue recovery of the “no claims bonus.”

After concluding that recovery of the “no claims bonus” was an allowable element of damages, the District Judge next addressed whether the Collateral Source Rule barred Settoon from introducing evidence of the separate insurance policy that insured Cox against the loss of the bonus. It is longstanding jurisprudence that the Collateral Source Rule bars a tortfeasor from reducing the quantum of damages owed to a Plaintiff by the amount of recovery the Plaintiff receives from other sources of compensation that are independent of (or collateral to) the tortfeasor. Davis v. Odeco, Inc., 18 F.3d 1237, 1243 (5th Cir. 1994). The underlying rationale of the Collateral Source Rule is that Plaintiffs should not be penalized because they have the foresight and prudence (or good fortune) to establish and maintain collateral sources of compensation, such as insurance. Insurance policies, such as the one purchased by Cox, clearly fall within the definition of a collateral source. As such, the District Court concluded that Settoon could not introduce – and the Court could not consider – evidence that Cox was, in fact, insured against the loss of the “no claims bonus.”

Ultimately, Cox was not legally precluded from seeking recovery of the no claims bonus. However, at trial Cox must still prove the value of its loss related to the “no claims bonus” in order to recover that loss. Be on the lookout for future updates as this matter proceeds to a final resolution.

By Jill A. Gautreaux

Some exciting news for liquor license holders in the City of New Orleans! Effective August 27, 2018, the City of New Orleans (“City”) has transferred the administration of liquor licenses from the Department of Revenue to the Department of Safety and Permits in an effort to streamline the permitting process.  Years ago, the City created the “One Stop Shop”, which consolidated the permit application process to a single outlet.  Prior to the creation of the “One Stop Shop”, applicants for building or business permits would be required to coordinate between several departments within the City, and often within the Department of Safety and Permits itself, in order to obtain necessary approvals for certain building, zoning, or business applications.  The One Stop Shop created a more user-friendly department wherein applications were submitted for intake, and the City undertook the task of routing the application to the various departments required approval the application.  The creation of the One Stop Shop alleviated some of the frustrations expressed by prospective licensees.  Nevertheless, the Department of Revenue maintained control of the liquor licensing process, requiring applicants to obtain building permits, zoning actions, occupational and other licenses from the Department of Safety and Permits, but work with the Department of Revenue for its liquor licenses.

Last spring, the New Orleans City Council ordered that the liquor licenses be administered by the Department of Safety and Permits instead of the Department of Revenue.  Several City Council members cited complaints from constituents regarding the inefficiencies in the licensing process as the reason for the change.

The Department of Safety and Permits has already revised the liquor license application to provide for an alternative “short form” application that eliminates most information duplicative of the State Alcohol and Tobacco Control application.  The Department of Safety and Permits also plans to promulgate regulations to clarify and document some of the policies previously unwritten yet practiced by the Department of Revenue.  We will provide an update when new regulations are promulgated.

In the meantime, if you have any questions regarding the new licensing process, please do not hesitate to contact me.

By Sarah W. Anderson

Companies using Apache Struts 2.0 should be aware of a possible security breach risk that could give rise to breach notification duties.  On August 22, 2018, the Apache Software Foundation posted updates regarding the correction of a vulnerability recently found in its web application platform called Apache Struts.

Apache Struts is an open source web application framework that uses model-view-controller architecture. A security bulletin was placed on https:\\cwiki.apache.org by Man Yue Mo from the Semmle Security Research team, which noted a flaw in the Struts 2 application that would allow a hacker to perform a remote code executive “attack when namespace value isn’t set for a result defined in underlying configurations and in same time, its upper action(s) configurations have no or wildcard namespace[.]”[1] There is a similar possible attack “when using [an] url tag which doesn’t have value and action set and in same time, its upper action(s) configurations have no or wildcard namespace.”[2]  This web application and vulnerability may affect any entity using Apache Struts, from small businesses to Fortune 100 companies.

The description of the vulnerability has been posted online, and this “blueprint” is suspected to provide an easy “how-to” guide for attackers. Attackers may exploit websites running the Struts 2.0 program by sending requests to hosted sites, to which the web servers will respond by running code commands of the attacker’s choosing. This would allow cyber attackers to undertake malicious acts such as copying and/or deleting consumer data or initiating other malware. Indeed, Equifax was forced to disclose a similar vulnerability in its Apache Struts software in 2017 after 143 million people had their sensitive information compromised in a July 29, 2017 security breach.

If you suspect that your company uses Apache Struts 2.0 and security has been breached in Louisiana, please review and consider your potential obligations under the recent changes to Louisiana’s Database Security Breach Notification Law and contact your data security attorney.

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[1] https://cwiki.apache.org/confluence/display/WW/S2-057.

[2] https://cwiki.apache.org/confluence/display/WW/S2-057.

By Erin L. Kilgore

Last week, the Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit against United Airlines, Inc. and alleged that United violated Title VII of the Civil Rights Act of 1964 (which prohibits employment discrimination based on sex, including sexual harassment) by subjecting a female flight attendant to a hostile work environment.

According to the EEOC, a United pilot frequently posted sexually explicit images and personally identifying information of a United flight attendant (his ex-girlfriend) to various websites, and the posts, which were seen by co-workers, adversely affected her work environment.  The EEOC contends that United failed to prevent and correct the pilot’s behavior, even after the flight attendant made numerous complaints and provided substantial evidence to support her complaints.

As explained by a trial attorney in the EEOC’s San Antonio Field Office: “Employers have an obligation to take steps to stop sexual harassment in the workplace when they learn it is occurring through cyber-bullying via the internet and social media.” According to the EEOC, by failing to take action to stop the harassment in response to the flight attendant’s complaints, United enabled the harassment to continue and created a hostile work environment.  United has stated that it disagrees with the EEOC’s description of the situation.

Additional information about the lawsuit can be found in the EEOC’s press release, and summaries can be found here and here.

By Jaye A. Calhoun, Jason R. Brown and William J. Kolarik, II

On Friday, August 10, 2018, the Louisiana Department of Revenue (the “Department”) released Remote Sellers Information Bulletin No. 18-001 (the “RSIB”).  The RSIB states that the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”) “will not seek to enforce any sales or use tax collection obligation on remote sellers based on United States Supreme Court’s decision in South Dakota v. Wayfair or the provisions of Act 5 [2018 La. Sess. Law Serv. 2nd Ex. Sess. Act 5 (H.B. 17)] as it relates to the expanded definition of “dealer” for any taxable period beginning prior to January 1, 2019.  In addition, the RSIB notes that Uniform Local Sales Tax Board will issue guidance to local sales and use tax collectors advising them not to seek retroactive application of the Wayfair decision.

In Wayfair, the United States Supreme Court held that physical presence in a state is no longer required before a state (or local, by implication) taxing jurisdiction may impose a use tax collection obligation on an out-of-state vendor.  But the Court also noted that a use tax collection obligation could constitute an undue burden on interstate commerce.  In so holding, the Court listed the characteristics of the South Dakota law at issue in Wayfair that may indicate that South Dakota’s law does not impose an undue burden on interstate commerce.  Those factors included: (1) a safe harbor to protect small sellers; (2) the lack of retroactive enforcement; and (3) South Dakota’s adoption of the Streamlined Sales and Use Tax Agreement (which, among other things, requires centralized collection, uniform definitions, simplified rate structures, access to sales tax software paid for by the state, and audit immunity for a seller using the state’s tax software).  The Court remanded the case to the South Dakota Supreme Court for a determination of whether South Dakota’s law created an undue burden on interstate commerce.

Act 274 (H.B. 601) of the 2017 Regular Session of the Louisiana Legislature created a Commission within the Department of Revenue for the administration and collection of the sales and use tax imposed by the state and political subdivisions with respect to remote sales.  The Commission was created to: (1) promote uniformity and simplicity in sales and use tax compliance in Louisiana, (2) serve as the single entity in Louisiana to require remote sellers to collect from customers and remit to the Commission sales and use tax on remote sales sourced to Louisiana, and (3) provide the minimum tax administration, collection, and payment requirements required by federal law with respect to the collection and remittance of sales and use tax imposed on remote sales.[1]  But the Commission was prohibited from acting unless the U.S. Congress enacted a federal law authorizing states to require a remote seller to collect and remit state and local sales and use tax on sales made into the state, which has not occurred.

Act 5 was passed, in part, to fix the Congressional action requirement in Act 274 by amending the definition of “federal law” to include a “final ruling by the United States Supreme Court” (which did not occur in Wayfair).  Act 5 also amended the definition of “dealer” to create a South Dakota-style economic nexus law.  But Act 5’s effective date was contingent on a final ruling by the United States Supreme Court in Wayfair that South Dakota’s law was constitutional, which, as mentioned, did not occur.

Despite the uncertainty of its authority to act, the Commission held its first meeting on June 29, 2018 and has continued to meet monthly.  The RSIB represents the first substantive official guidance issued by the Commission since Wayfair.

As noted above, the RSIB adopts a January 1, 2019, prospective enforcement date and encourages Louisiana localities to refrain from applying Wayfair retroactively.  The Department also notes that any remote seller who is not currently registered with the Department or a local sales and use tax collector can voluntarily register with the Department to begin collecting and remitting sales and use tax in accordance with the direct marketer return provisions in La. R.S. Sec. 47:302(K).  Finally, the RSIB notes that Louisiana’s notice and reporting requirements remain in effect for any remote seller to which those rules apply.

Implications

Louisiana’s decentralized sales and use tax regime does not conform in any measurable way with the factors outlined in the Wayfair opinion as significant in evaluating whether South Dakota’s law imposes an undue burden on interstate commerce.  And numerous Louisiana officials have indicated that Louisiana will not adopt the Streamlined Sales and Use Tax Agreement.  As a result, if Louisiana’s sales and use tax regime were applied to remote sellers as it currently stands it going to be very hard for tax collectors to argue that it does not create an undue burden on interstate commerce.

During its meetings, the Commission has indicated that it views the factors listed in the Wayfair decision as a roadmap and the Commission appears to be attempting to adhere to that roadmap.  For example, the Commission is currently researching software vendors certified by the Streamlined Sales Tax Project (the SSTP”) and the SSPT registration process.  But, as mentioned above, because the Wayfair decision was not a final decision by the Supreme Court, the Commission’s authority to act is simply not clear.  However, it is clear that that the Commission has no direct authority to binds Louisiana local tax collectors.

Nevertheless, it appears the Commission will continue to work towards finding a path that conforms Louisiana’s sales and use tax regime as closely as possible to the factors listed by the Court in Wayfair.  But as the January 1, 2019 date approaches, it is possible that rifts between the localities and the state may be revealed and those rifts may jeopardize the Commission’s mission.

A remote seller that sells goods into Louisiana should be mindful that Louisiana’s notice and reporting requirements remain in effect.  As a result, a remote seller that sells into Louisiana should carefully balance the business concerns related to complying with those requirements with the costs and business concerns of complying with the direct marketer return provisions.

Kean Miller is also aware that some parishes may be sending out post-Wayfair voluntary compliance notices.  Those notices request that the vendor register with the Parish under the Parish’s registration system and begin collecting and remitting tax.  While some vendors may be voluntarily registering with Louisiana localities, it should be noted that there may be a downside to voluntarily registering at this point, before the Commission’s work is complete.  For example, the Commission contemplates a single point of registration and return but if a remote vendor registers voluntarily, it may be stuck with filing individual returns for the foreseeable future in every parish where it has sales (as opposed to filing through the contemplated forthcoming uniform system) and the vendor may not be able to take advantage of any uniform guidance issued by the Commission.  Any taxpayer that receives a voluntary registration notice, or that is considering voluntary registration, should speak with their tax advisor before doing so.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Jason Brown at (225) 389-3733, or Willie Kolarik at (225) 382-3441.

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[1] La. R.S. Sec. 47:339.

By Michael J. deBarros

Insurers in oilfield legacy lawsuits often argue they are not responsible for their insureds’ settlements with landowners because La. R.S. 30:29 (“Act 312”) requires the settlements to be deposited into the court’s registry for remediation.  On March 7, 2018, the Louisiana Third Circuit Court dealt a significant blow to the insurers’ argument.

In Britt v. Riceland Petroleum Co., 2017-941 (La. App. 3 Cir. 3/7/18), 240 So. 3d 986, writ denied, 2018-0551 (La. 5/25/18), the Plaintiffs sued the current and former operators of Plaintiffs’ property for damages to and remediation of their property.  The operators settled all of the Plaintiffs’ claims, and one of the operator’s insurers argued that Act 312 required the trial court to: (1) hold a contradictory hearing; (2) determine if remediation was required; and if so, (3) order the deposit of funds into the court’s registry.  The Third Circuit disagreed and held that no contradictory hearing is required when the settling parties: (1) provide notice of the settlement to the Department of Natural Resources (“LDNR”) and the Attorney General; (2) allow the LDNR thirty days to review the settlement and provide comments to the trial court; and (3) obtain the trial court’s approval of the settlement.

As a practical matter, a contradictory hearing will rarely be required under Britt since LDNR rarely objects to the settlements.  Thus, Britt makes it more difficult for insurers to refuse to pay for settlements.

If your insurer is refusing to cover your business in oilfield legacy lawsuits, Kean Miller’s Insurance Coverage and Recovery team can help.  We have recovered millions for policyholders in connection with environmental and toxic tort actions, legacy lawsuits, professional liability claims, products liability lawsuits, governmental investigations, intellectual property claims, directors’ and officers’ disputes, property losses, and business interruption losses.

By Brian R. Carnie

For those who think the chance of being assessed penalties for non-compliance with the Affordable Care Act are slim to none, think again.  The IRS’ efforts to enforce the ACA’s employer mandate are alive and kicking.  Since late November 2017, the IRS has been sending out proposed penalty notices to companies they believe were not compliant.  For now, the IRS is only assessing proposed penalties for the 2015 calendar year.  The notices are rolling out slowly, and the IRS has only mailed out a fraction of the total number of notices expected for 2015.  Moreover, the IRS has indicated they have enough information to start sending out similar notices for 2016.

Because of unfamiliarity with these notices, we are seeing a trend where companies fail to deal with the notice in a timely manner.  They don’t realize they generally only have 30 days from the date the notice was mailed to respond.  In addition, the notices may not even be addressed to the right person at the company.  Or the person receiving it may set it aside with the intention of figuring out how to deal with later.

This could be very costly for your company.

  • In every instance where Kean Miller has seen one of these notices, the estimated penalties have been grossly overestimated.   The reasons for this are varied.  The company may have filled out the informational forms incorrectly, which happens often because there is a lot of room for confusion and error in the IRS forms (e.g., incorrect or omitted indicator codes on the 1095 forms), or the employees themselves may have mistakenly provided incorrect information when applying for subsidized health care on the ACA marketplace website.
  • If your company receives one of these letters from the IRS and doesn’t dispute the penalty amount before the deadline you will have waived your rights to contest the amount.   There are no second chances.  Same can be said if you don’t timely exercise your appeal rights once you receive the IRS response to your protest.
  • If the company does not respond or appeal, the next thing they can expect from the IRS is a demand for payment letter.  The time to dispute the amount will be over, and the IRS will start collection proceedings for non-payment.

In short, the penalty notice letters are real, there is a deadline, and the IRS is (as always) serious.  Non-compliance with the ACA is a legal matter that demands prompt attention to ensure protection of your company’s rights.

By David M. Whitaker

In May the United States Supreme Court issued a long-awaited decision in a trio of cases that concerned whether employers can lawfully use mandatory arbitration agreements containing provisions that preclude employees from pursuing employment claims on a class action basis – and instead require them to pursue their claims in an individual private arbitration proceeding against the employer.  In a 5-4 decision, the Supreme Court decided that such provisions are legal and do not violate the provisions of the National Labor Relations Act, which provide non-management employees with the right to take collective action (including, but not limited to the formation of a union) with respect the terms and conditions of their employment.  See Epic Systems Corp. v. Lewis, Docket No. 16-285 (decided May 21, 2018).

The Epic Systems decision has paved the way for employers to use of such agreements to bar employees from participating in collective action lawsuit under the federal Fair Labor Standards Act, in which a single employee can file suit on behalf of themselves and other similarly situated employees to recover unpaid overtime or to recover for violation of the law’s minimum wage payment requirements.  In these cases, one employee is often able to certify a collective action, and the employer is then required to provide the names and mailing addresses of all similarly situated current and former employees to facilitate the Plaintiff’s attorney solicitation for these employees to join (opt in) the collective action lawsuit.  FLSA collective actions involving relatively small amounts of unpaid wages can result in significant liability, including liquidated (double) damages and an award of attorney fees to the Plaintiff’s counsel.  FLSA collective actions have grown increasingly popular with the Plaintiff’s bar due to the relative ease of certification of a collective action and the availability of statutory attorney fees, which can often dwarf the amount of the wages actually owed.

With the benefit of the Epic decision, it is now clear that a well-drafted mandatory arbitration agreement can be used to prevent employees from pursuing collective action litigation in this manner.  As the dust settles on this important decision, employers should take the opportunity to revisit whether or not mandatory arbitration agreements are appropriate for use with their workforce.

There are certainly benefits that may result from the use of employment arbitration agreements, including:

  • Avoidance of collective and class action lawsuits brought by employees under the FLSA and other state and federal statutes.
  • The employment dispute will be decided by an arbitrator (likely an attorney) who is well-versed in the law and on the average less likely to render a volatile decision than a jury.
  • Arbitration proceedings are private.
  • Discovery (depositions and document requests) is typically more streamlined in arbitration.
  • Arbitration proceedings can be resolved more quickly than some judicial proceedings.

But employers should also consider certain drawbacks presented by the arbitration process:

  • Arbitration of employment disputes are subject to certain “due process” considerations to make the process fair to employees – including the requirement that the employer pay the arbitrator’s fee (in court litigation neither party pays the judge’s salary).
  • Arbitrators are less likely to consider prehearing motions for summary judgment to dismiss the employee’s claims prior to an arbitration hearing. Although the likelihood for success varies with the judicial forum, employers generally have a good success rate on pretrial motions.
  • Some arbitrators have a propensity to try to reach a “fair” result, rather than the correct legal result. In these cases, an arbitrator may decide to “split the baby” and award something to an employee who was treated “unfairly,” even though the claim has no legal merit.
  • As a general matter, there is no right to appeal a bad arbitration award, even when it is clear that the arbitrator’s decision is factually or legally incorrect.

Also, employers should be aware that arbitration agreements will not be effective in preventing government agencies, such as the Equal Employment Opportunity Commission or the Department of Labor, from pursuing enforcement actions on behalf of its employees on a class-wide basis, as the Supreme Court has previously held that government agencies are not bound by the terms of private arbitration agreements.

The Supreme Court’s recent decision certainly provides another reason (avoidance of employee class action lawsuits) for employer’s to reconsider the benefits of mandatory arbitration agreements.  But employers should carefully weigh the costs and benefits unique to their workforce, employment claims experience, the court system in which employment claims are typically brought against the company and other factors before deciding.  Employers who decide to establish an arbitration program for use with employees should also work closely with counsel to ensure that the agreement is tailored to meet the employer’s needs and to ensure that the agreement is drafted in a manner that will be enforceable.