By Jennifer Jones Thomas

On September 10, 2019, the Centers for Medicare and Medicaid Services (“CMS”) published a Final Rule in the Federal Register which will require Medicare, Medicaid, and Children’s Health Insurance Program (“CHIP”) providers and suppliers to disclose current and previous affiliations with other providers and suppliers who CMS identifies as posing an undue risk of fraud, waste, or abuse.  The effective date of the Final Rule is November 4, 2019.  The Final Rule will require providers and suppliers to disclose any current or previous direct or indirect affiliation with a provider or supplier that: 1) Has uncollected debt; 2) Has been or is subject to a payment suspension under a federal healthcare program; 3) Has been or is excluded by the Office of Inspector General (“OIG”) for Medicare, Medicaid, or CHIP or; 4) Has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked.  “Affiliation” is defined as:

  • A five percent (5%) or greater direct or indirect ownership interest that an individual or entity has in another organization.
  • A general or limited partnership interest (regardless of the percentage) that an individual or entity has in another organization.
  • An interest in which an individual or entity exercises operation of managerial control over, or directly or indirectly conducts, the day-to-day operations of another organization either under contract or other arrangement, regardless of whether or not the managing individual or entity is a W-2 employee of the organization.
  • An interest in which an individual is acting as an officer or director of a corporation.
  • Any reassignment relationship.

The Secretary will have the authority to deny provider enrollment based on an affiliation the Secretary determines poses an undue risk of fraud waste or abuse.  CMS believes that this rule will help “make certain that entities and individuals who pose risks to the Medicare and Medicaid programs and CHIP are removed from and kept out of these programs.”  Specifically, the Final Rule will allow the Secretary:

  • To revoke or deny a provider’s or supplier’s Medicare if they are currently revoked under a different name, numerical identifier, or business identity.
  • To revoke a provider’s or supplier’s Medicare enrollment, including all practice locations, regardless of whether they are part of the same enrollment, if the provider or supplier billed for services performed at, or items furnished from, a location that it knew or should reasonably have known did not comply with the Medicare enrollment requirements.
  • To revoke a physician’s or other eligible professional’s Medicare enrollment if he or she has a pattern of practice of ordering, certifying, referring, or prescribing Medicare services, items or drugs that is abusive, represents a threat to the health and safety of Medicare beneficiaries, or otherwise fails to meet Medicare requirements.
  • To revoke a provider’s Medicare enrollment if he or she has an existing debt that CMS refers to the U.S. Department of Treasury.
  • To deny a provider’s Medicare enrollment application if the provider is currently terminated or suspended from participation in a state Medicaid program or any other federal healthcare program or the provider’s license is currently revoked or suspended in a state other than that in which the provider is enrolling.

The Final Rule also increases the maximum re-enrollment bar from the current three years to ten years.  If a provider submits false or misleading information on the enrollment application, the Secretary can bar enrollment for three years.

CMS reports that the new revocation authority will lead to approximately 2,600 new revocations per year with a projected savings over a ten year period at $4.16 billion.  The new reenrollment and reapplication bar provisions will apply to 400 of CMS’ revocations resulting in an additional savings of $1.79 billion over 10 years.

By Eric Lockridge and Wade Iverstine

Lenders who finance farm operations, including those who provide equipment, seed, fertilizer, and other farming-related products on credit, should be aware that the Family Farmer Relief Act of 2019 has been signed into law. This new law allows a “family farmer” with up to $10,000,000.00 in debt to restructure and to reduce debts under Chapter 12 of the Bankruptcy Code.  The provisions in Chapter 12 are more farmer friendly than the alternatives the law available under Chapter 7 (liquidation) or Chapter 11 (debt reorganization or asset sale).  When Congress first established Chapter 12 of the Bankruptcy Code in 1986, it was available only to family farmers whose debt was $1,500,000.00 or less.  In 2019, farming is a much more high-tech and capital-intensive endeavor than it was 30+ years ago.  Even part-time farmers are likely to have more than $1.5 million in debt today once one adds up the often-financed cost of acquiring land, necessary equipment, seed, fertilizer, and other necessities.

Under the new law, a family farmer, or the family farmer and spouse, can qualify to file for bankruptcy relief under Chapter 12 so long as their total debt is no more than $10,000,000.00 (non-contingent and liquidated), and at least fifty (50%) percent of the debt arises out of farming operations (e.g., not personal credit card spending), among a few other requirements.

Agricultural lenders and vendors should be aware of this change in the law. Many more farmers are eligible for a Chapter 12 bankruptcy today than were eligible a few weeks ago.

By Jennifer Jones Thomas

In December of 2018, the Louisiana State Board of Medical Examiners (“The Board”), approved adoption of an amendment to the rules governing the practice of telemedicine.  The Board published a Notice of Intent for the amendment in April of 2019 in the Louisiana register with the amended Rule becoming final on August 20, 2019.  Prior to the amendment, the Board’s Rule permitted physicians using telemedicine to be at any location at the time the services are provided; however the patient receiving the telemedicine services must be “in any location in this state at the time that the services are received.”   LAC 46:XLV.7505C.  The Board’s amendment to the rule deletes the words “in this state.”   The intent of the amendment is to “not inadvertently prevent physicians from prescribing medication or other health care services to their patients who may be vacationing or temporarily outside of Louisiana.”  This amendment answers a common question of what a physician can do to help an established patient who is temporarily out of state and becomes ill.  With this amendment, a Louisiana-licensed physician would not be prevented under Louisiana law from assisting the patient by prescribing medication.  However, the Board cautions that engaging in such activity may or may not be lawful or permitted by the medical licensing authority in the state in which the patient is located.  Therefore, before prescribing medication or providing other medical services to a patient on vacation in a state other than Louisiana, a physician would be wise to check the telemedicine rules established by the state where the patient is located.

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

Up-to-date Process Safety Information

When originally adopted in 1996, the Environmental Protection Agency (EPA) adopted

“the requirements of the OSHA PSM Standard, 29 CFR 1910.119(c) through (m) and (o), with minor changes to address statutory differences. This makes clear that one accident prevention program to protect workers, the general public, and the environment will satisfy both OSHA and EPA.” [1]

But do they?

On January 13, 2017, the EPA amended the Risk Management Program (RMP) requirements including changes to the incident investigation report requirement (located in §1910.119(m) of PSM) and other provisions previously aligned with OSHA PSM. Whereas the contents of the incident investigation report may be a minor change, one change was flatly contradicted by an Occupational Safety and Health Review Commission (OSHRC) decision in September of last year: whether documentation of process safety information (PSI) was a continuous obligation.

When revising the requirement for PSI (located in §1910.119(d) of PSM) the EPA said:

EPA is revising § 68.65(a) in order to remove irrelevant text regarding the timeframe for initial development of PSI and to more clearly demonstrate that PSI must be kept up-to-date. EPA is revising § 68.65(a) to remove the phrase “In accordance with the schedule set forth in § 68.67” and is adding the phrase: “and shall keep PSI up-to-date.” EPA expects that revising § 68.65(a) in this manner will help Program 3 facilities to better comply with PSI requirements and further clarifies the requirement that PSI must be completed prior to conducting a PHA.[2]

Apparent from this discussion, EPA intended merely to “clarify” that the obligation to update PSI was continuous. It is important that EPA did not discuss this change as a change in substance. It was EPA’s interpretation of an OSHA rule.

However, the OSHRC came to a different decision when it said

the obligation to document RAGAGEP compliance is not continual.” Paragraph (d)(3)(ii), using the verb form of “document,” directs the employer to take an action that naturally takes place at a particular point in time. That point in time is specified in paragraph (d), which contains the cited requirement as a subsidiary provision, specifically stating that written process safety information is to be completed “[i]n accordance with the schedule set forth in paragraph (e)(1)”— that is, every five years.17 29 C.F.R. § 1910.119(d), (e)(1), (e)(6). Therefore, on its face, the requirement to document compliance with RAGAGEP applies only every five years.[3]

Further, the OSHRC decision (which came after the EPA rule change), potentially has further implications. The OSHRC further opined, “because the duty imposed by the standard to discover non-RAGAGEP conditions is not continual, the duty to ensure RAGAGEP compliance must also not be continual.” Id. The OSHRC concluded that OSHA’s interpretation was unreasonable based on the regulatory history and would make another provision (§1910.119(j)(4)(iii)) superfluous.

This conclusion influenced another ORHRC opinion, that the “interim measures” provision of §1910.119(j)(5) effectively suspends the “comply with RAGAGEP” provisions of §1910.119(d)(3)(ii):

In sum, the only reasonable interpretation of (d)(3)(ii) is that (j)(5)’s interim measures option dictates the timing for when non-RAGAGEP equipment must be documented as RAGAGEP-compliant. In other words, if interim measures have been implemented and the deficiency is corrected “in a safe and timely manner,” an employer need not document that such equipment conforms to RAGAGEP until the deficiency has been corrected. Id.

It is highly possible, based on the statements made during the rulemaking process, that the OSHRC would have concluded anyway that “interim measures” would suspend the need to “document RAGAGEP.” But one thing is certain; OSHA’s opinion and EPA’s 2017 “clarification” of the OSHA rule (that PSI must be kept current) were rejected by the OSHRC in the BP Products/BP Husky case.

Now what?

________________________________

[1] 61 Fed. Reg. 31668, 31672 (June 20, 1996) [Emphasis Added].

[2] 82 Fed. Reg. 4594, 4675 (January 13, 2017) [Emphasis Added].

[3] Bp Prod. N. Am., Inc., 2018 O.S.H. Dec. (CCH) ¶ 33688 (04 National/Federal Sept. 27, 2018). [Emphasis Added.]

By the Kean Miller Tax Team

The 2019 Regular Session of the Louisiana Legislature ended on June 6, 2019. Important new tax provisions include several legislative acts signed into law by the Governor along with several proposed constitutional amendments that will appear on the ballot this October. In addition to substantive law changes, important remedial legislation was also passed that addressed the ability to appeal a state tax refund denial but left a possible trap for the unwary with respect to local refund claims.  The following are some notable legislative enactments that made it out of the 2019 Session.

Income and Franchise Tax Legislation

Act 442 (SB 223), enacted June 22, 2019.

New Pass-Through Rules Impacting the Federal SALT Deduction Cap

Act 442 allows an S corporation or any entity taxed as a partnership for federal income tax purposes to elect to be taxed as a C corporation for Louisiana income tax. The modification allows pass-through owners to pay state and local taxes at the entity level, bypassing the $10,000 SALT cap introduced in the Tax Cut and Jobs Act which only applies to individuals.

Reports emerged on July 23, 2019 that Treasury and the IRS have stepped up meetings with tax practitioners concerning this and similar SALT cap workarounds passed by state legislatures. The IRS included guidance on applying the SALT deduction cap to pass-through entities on its April 2019 Priority Guidance Plan update, and it is likely that new regulations are on the horizon that may limit the usefulness of this type of “workaround.”

Act 442 became effective on June 22, 2019.

Act 304 (HB 263), enacted June 11, 2019.

Net Operating Loss (“NOL”) Carryfowards Revert Back to First-In, First-Out

Act 304 amends R.S. 47:287.86(C)(2) to provide that the net operating loss carryforwards are applied starting with the earliest taxable year of NOLs when calculating taxable income for taxable periods beginning in 2020. This legislation reinstates the pre-2016 NOL carryforward rules (before the unpopular and problematic legislative changes creating the “last-in, first-out” ordering rules introduced during the 2016 budget crisis).  Louisiana NOL tracking has now become even more complicated (although this is a welcome change to the law).

Act 304 became effective on June 11, 2019.

Economic Development and Incentive Legislation

Act 203 (SB 237), enacted June 11, 2019.

Authorizes New Tax Increment Financing Projects in Economically Deprived Areas

 Act 203 authorizes the creation of new tax increment financing districts in areas with high unemployment. New public entities covering the districts will have the authority to borrow against future increases in sales and property tax collections in order to fund new economic development projects.

Act 203 became effective on June 11, 2019.

Act 251 (HB 585), enacted June 11, 2019.

 Property Located Within New Federal Opportunity Zones to Qualify for Restoration Tax Abatement Program

 Act 251 amends R.S. 47:4312(3) to add structures located in new federally designated Opportunity Zones to the property eligible to participate in the Restoration Tax Abatement Program. Qualifying property owners renovating or restoring buildings within Opportunity Zones are now eligible to contract with local governing authorities to temporarily freeze property tax assessments for 5 years at the pre-improvement level.

Act 251 became effective on June 11, 2019.

Sales and Use Tax Developments

Act 360 (HB 547), enacted June 17, 2019.

Reenactment of Remote Seller Law

Act 360 amends and reenacts Louisiana’s remote vendor law to more effectively implement a post-Wayfair “remote seller” sales tax registration system through the creation and establishment of the Louisiana Sales and Use Tax Commission for Remote Sellers. A loophole in the drafting of last year’s legislation made its application (including the Commission’s service as the central collector for sales/use taxes on remote sales) contingent on a ruling of the Supreme Court of the United States that the South Dakota sales tax law at issue in Wayfair was constitutional. However, the Supreme Court never technically ruled on the constitutionality of the South Dakota sales tax law, holding only that physical presence was no longer a requirement for “substantial nexus” (under Complete Auto Transit) and remanding to the South Dakota Supreme Court to determine whether the rest of the law was constitutional.

The new legislation sets a hard deadline of July 1, 2020 for the new Commission to start collecting tax. Out-of state sellers with more than $100,000 in sales or 200 transactions in Louisiana are required to file Direct Marketer Returns under R.S. 47:302(K) until the new system is ready.

The Act contains several drafting issues Louisiana courts will undoubtedly be called upon to address, and as a result, its practical scope may be much more limited than anticipated. For example, the definition of “remote seller” under Act 360 is limited to sellers that both lack physical presence in Louisiana and which are not considered “dealers” under R.S. 47:301(4)(a)-(l), greatly restricting the impact of the law. In addition, the Act does not address whether online marketplace facilitators qualify as dealers, an issue currently pending before the Louisiana Supreme Court under Normand v. Wal-Mart.com USA, LLC, 2019-0263 (La. 5/6/19).

Act 360 becomes effective on August 1, 2019.

Act 359 (HB 494), enacted June 17, 2019.

Specifies Sales and Use Taxes for Asphalt

Act 359 provides sourcing rules for sales and use tax on raw materials to be converted into road asphalt.

Act 359 became effective on June 11, 2019.

Property Tax Relief

Act 432 (HB 301), enacted June 22, 2019.  

Proposed Constitutional Amendment to Exempt Goods Destined for Outer Continental Shelf From Property Tax

Act 432 would amend R.S. 47:1951.2 and 1951.3 to exempts raw materials, goods, commodities and other property stored in Louisiana and destined for the Outer Continental Shelf from ad valorem tax.

The exemption will take effect subject to approval by the voters of a constitutional amendment on the ballot this October.

Act 385 (HB 493), enacted June 20, 2019.

Authorization for a Homestead Exemption Audit Program in New Orleans

Act 385 allows the city of New Orleans to establish a homestead exemption audit program for Orleans Parish property. The city is authorized to impose a fee up to ten percent on the total amount of taxes, penalties, and interest owed by a taxpayer.

Act 385 becomes effective on August 1, 2019.

Board of Tax Appeals

Act 365 (HB 583), enacted June 19, 2019.

Proposed Constitutional Amendment to Expand Board Jurisdiction 

Act 365 would expand the jurisdiction of the Board of Tax Appeals to include challenges to taxes under Federal law or the Constitution of Louisiana.   

The change will take effect subject to approval of a constitutional amendment to be set before voters on the ballot this October.

Act 367 (SB 198), enacted June 18, 2019.

Allows State (but not Local) Refund Claims for Illegal Tax Overpayments Without Payment Under Protest

Act 367 legislatively overrules last year’s Louisiana First Circuit Court of Appeal decision in Bannister Properties which held that R.S. 47:1621(F) prohibits refunds arising from the Department of Revenue’s misinterpretation of a law or regulation without a payment under protest. Bannister Properties concerned several taxpayers who had voluntarily paid franchise tax under a Department regulation later ruled invalid. The new legislation repeals R.S. 47:1621(F) in its entirety and allows refund claims for all overpayments due to any unconstitutional law, illegal regulation, or misinterpretation of a law or regulation by the Department of Revenue.  The new legislation does not appear, however, to address the appeal of a denial of a local refund tax claim.  This means there may be no effective remedy for taxpayers to recover local taxes not paid under protest even if the tax is later determined to be illegal.       

Act 385 became effective on June 18, 2019.

Local Taxes

Act 169 (HB 43), enacted June 7, 2019.

Authorizes Occupancy Tax on Short-Term Rentals in New Orleans

Act 169 authorizes the City of New Orleans to levy and collect a tax upon the paid occupancy of short-term rentals located within the city. The tax may not exceed six and three-quarters (6.75%) percent of the rent or fee charged for occupancy. The City Council may impose the occupancy tax by ordinance after voter approval.

Act 169 became effective on July 1, 2019.

If you have questions, please contact Kean Miller tax attorneys, Jaye Calhoun (504.293.5936), Jason Brown (225.389.3733), Angela Adolph (225.382.3437), Phyllis Sims (225.389.3717), Willie Kolarik (225.382.3441) or Sanders Colbert (504.585.3021).

By Jessica C. Engler & Michael deBarros[1]

Policyholders are often disappointed in the amount of time their insurers take to investigate and pay claims.  In 2003, the Texas Legislature enacted the Texas Prompt Payment of Claims Act (“TPPCA”) to facilitate the prompt investigation and payment of Texas insurance claims.[2] Codified at Section 542 of the Texas Insurance Code, the TPPCA imposes an affirmative duty on insurers to promptly pay claims as soon as it becomes “reasonably clear” that they are obligated to do so under the policy.

The TPPCA outlines requirements and deadlines that insurance carriers must meet to avoid paying penalties to an insured.[3] In short, the TPPCA generally requires insurers to accept or reject claims within 15 business days of receiving of the insured’s written notice of claim, or within 30 days for surplus line insurers. If the insurer rejects the claim, it must state its reasons for rejection. If an insurer accepts a claim, it must pay the claim within 5 business days. If the insurer fails to pay the claim within 60 days, the insured is entitled to payment of the claim, statutory damages of 18 percent interest per year, and attorney’s fees.

Texas courts have continuously held that to prevail under a claim for TPPCA damages under section 542.060, the insured must establish: (1) the insurer’s liability under the insurance policy, and (2) that the insurer failed to comply with one or more sections of the TPPCA in processing or paying the claim.[4] Although this test is easily applied to insureds who do not receive acceptance or rejection of their claim within the 15 day time period, or payment within 5 business days after acceptance of their claim, the procedure is less clear when the insured submits to the appraisal process after the insurer has rejected the claim.

Many property insurance policies have appraisal clauses. A typical appraisal clause provides that if the insured or the insurer disagrees on the valuation of property or the amount of loss, either party may make a written demand for appraisal of the loss. After the demand is made, the insured and insurer each select an appraiser and the two appraisers value the property and set the amount of the loss as to each item. If the appraisers fail to agree on a valuation or the amount of loss, the dispute is submitted to an “umpire” who determines a valuation and amount of loss that is binding on the parties.

In Barbara Technologies v. State Farm Lloyds[5]  and Ortiz v. State Farm Lloyds,[6] the Texas Supreme Court recently decided whether an insurer may be liable for damages and fees under the TPPCA after it pays an insured, in full, within five business days of an appraisal award. The cases are factually similar. In both cases, the insureds filed claims for wind and hail damage and State Farm denied the claims, alleging that the damages sustained were less than the policy deductibles. The insureds filed suit to recover damages for the underpayment, and State Farm invoked the appraisal clauses. The appraisers found State Farm had undervalued the loss, and State Farm issued payments to the policyholders within the five business days of the appraisal award. The trial court in both cases concluded that State Farm’s prompt payment of the appraised amount at the conclusion of the appraisals foreclosed all TPPCA claims against the insurers.

On appeal, the Texas Supreme Court held that the TPPCA’s requirements and deadlines—including the 60 day payment deadline—continue to apply, even during appraisal. Consequently, an insurer’s payment of an appraisal award within five business days of the award does not immunize it from TPPCA claims. The Court did note, however, that an appraisal award does not establish liability under an insurance policy as a matter of law.  Therefore, an insured must still prove that the loss is covered under the policy to succeed in its TPPCA claim.

These cases are important because insurers can no longer avoid TPPCA liability by rejecting a claim, invoking appraisal, and delaying payment until the appraisal concludes. In his dissent, Justice Nathan Hecht cautioned that the holding could have a chilling effect on the appraisal process:

The result of today’s decision is this: If an appraisal is requested, either by the insurer or the insured, after a claim has been rejected in whole or in part, and the insurer immediately pays the award, it is nevertheless liable for 18 percent interest and attorney fees if the claim is later adjudicated to be covered by the policy. Unless the insured gives up, litigation is unavoidable, either over the rejection or over the penalty. If that does not make appraisal requests unlikely, it certainly makes them less likely. The Court renders the appraisal process it praises of little use.

Time will tell whether these opinions materially affect the way insurers handle claims in Texas.  For now, insurers are on notice that the appraisal process will not, by itself, suspend or eliminate TPPCA delay damages.

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

[1] Special thanks to Gabriella Leonovicz, Tulane University Law School Class of 2021, for her assistance with this article.

[2] See Mike Geeslin, Texas Dep’t of Insurance, Technical Advisory Committee on Claims Processing Report on Activities, Sept. 2010, at 2-4 (2010).

[3] See Tex. Ins. Code §§ 542.055(a)(1)-(3), .056(a), .057(a) .058(a), .060.

[4] Barbara Technologies Corp. v. State Farm Lloyds, No. 17-0640, p. 10, June 28, 2019 (https://www.txcourts.gov/media/1444300/170640.pdf)

[5] Id.

[6] Ortiz v. State Farm Lloyds, No. 17-1048, June 28, 2019 (https://www.txcourts.gov/media/1444305/171048.pdf)

 

By Ed Hardin

As reported by national and local media outlets, two Gretna, Louisiana, police officers were fired for social media activity that targeted Congresswoman Alexandria Ocasio-Cortez.  In the case of one of the officers, he posted a message on his personal Facebook page regarding the Congresswoman that allegedly included threatening remarks directed toward her.  The second officer then gave a “like” to the post.  Media outlets quickly picked up the story. The Gretna Police Department then fired both officers for violating the Department’s social media policy.  The situation is a vivid illustration of how social media activity can intersect with employment issues with serious consequences.  For employees, it shows that employees can be held responsible for their social media activities.  For employers, it shows the value of social media policies and how those policies can serve as reminders to employees to be mindful of their social media activities.  For more about the story see the recent articles from NOLA.com and CBS news.

 

 

 

By Max B. Kallenberger

A potential purchaser of a business and a corresponding seller often disagree on the value of the business, particularly in regard to sales projections.  The purchaser may attempt to entice the seller with what it believes is a fair compromise – accepting the perceived over-inflated price asked for by the seller, but paying only a portion at closing, with the balance payable a few years later if the projected sales forecast is in fact achieved.  The seller readily agrees, confident the business will absolutely grow and this so-called “earnout” will net the additional proceeds without fail.  Sounds like a win for both parties – but is it too good to be true?

Earnout provisions allow a purchaser to condition a portion of the purchase price on the future performance of the purchased business.  If the buyer does not have the cash available for full payment of the asking price, an earnout provision can be used to delay payment of the purchase price with certain conditions and parameters placed on paying the additional amount, such as meeting specified financial goals after the sale.  While earnout provisions sound fairly reasonable and easy to apply in theory, in practice these provisions often result in hardships for both the purchaser and seller, who may have very different objectives post-closing. Once the seller has sold its business, it no longer has control of operations and can no longer make important decisions. Because earnout provisions are typically contingent on the business performing well after the sale, the seller has a strong interest in ensuring the business operates in a progressive manner; however, the buyer often wants to implement new or different strategies that will be beneficial in the long term, but that could result in revenue declining over the earnout period.  Even though a seller may continue in a limited role after the sale, with the loss of control, the seller will be hard pressed to argue for strategies that would result in maximizing the earnout.

Earnout provisions can also be a problem for the buyer, who will need to be careful not to purposefully limit or minimize the earnout, which could result in litigation between the parties.  Buyers typically do not have any duty to ensure or maximize an earnout.  To counteract this potential problem, sellers may argue that an implied covenant of good faith and fair dealing exists on the part of purchaser which precludes the purchaser from engaging in conduct depriving the seller of the earnout benefit.  However, proving that a purchaser has in fact breached this covenant also presents its own problems.  Suits over a breach of earnout provisions can be expensive and can be difficult to prove on the part of a seller.  One solution is to state that the purchaser will use its “best efforts” to maximize the chances that the earnout is attained.  Again, however, this only provides minimal assurances to the seller as lawsuits can devolve into whose expert is more credible as to whether “best efforts” were in fact used by the purchaser.

Because courts have generally refused to fill gaps or provide additional terms in earnout provisions, such provisions should be drafted with as much clarity as possible and contextualized to fit the specific type of business at issue.  An earnout provision should include which party is responsible for preparing relevant financial statements the earnout may be calculated from and what review and objection rights the remaining party has to such statements.  The provision should also specify the accounting principles and procedures to be used in preparing the statements, and if necessary, be business or industry specific.  A dispute resolution process should also be included to cover situations where the buyer and seller cannot resolve a disagreement over the earnout calculation.  Without covering these specifics in detail, a seller runs the risk of not receiving any earnout compensation.  Thus, it is important that earnout provisions and dispute resolution procedures be specified in detail in the purchase agreement – or, not used at all.  From the seller’s vantage point, the best solution is to receive as much  of the purchase price as possible at the time the purchase is closed.

By Jill A. Gautreaux

Effective June 6, 2019, Act 164 of the 2019 regular session of the Louisiana legislature legalized the use of Cannabidol (CBD) for certain applications.  The Act permits the use of industrial hemp, which was declassified from being a Schedule 1 controlled dangerous substance by the US Congress last year in the 2018 Farm Bill.  Industrial hemp is derived from the Cannabis Sativa L species of plant, exclusive of the plants of Genus Cannabis that meet the definition of marijuana, as defined by La. R.S. 40:961.

The Louisiana Legislature recognizes industrial hemp as an agricultural commodity and has authorized its cultivation.  Industrial hemp growers must be either a USDA-licensed hemp grower or licensed by the Louisiana Department of Agriculture and Forestry and registered with the Louisiana Department of Health and Human Services in accordance with Louisiana’s Food, Drug and Cosmetic law.  The rules and regulations governing the cultivation of industrial hemp will be promulgated once the USDA rules on the subject are promulgated. The CBD product cannot be used as an inhalant or in alcoholic beverages and food products (unless and until approved by the FDA), or claim to be a dietary supplement.  The CBD product is subject to specific labeling requirements, including having a disclaimer that the product has not been evaluated by the FDA and having a scannable bar code that links the product with its certificate of analysis.  CBD must have a concentration of not more than 0.3% of delta-9 tetrahydrocannabidol (THC) by dry weight basis.  Lab analysis of the CBD product must be performed to insure compliance with regulations and a certificate of analysis must be filed with the Louisiana Department of Health and Human Services.

The Louisiana Office of Alcohol and Tobacco Control (ATC) has been charged with the licensing of wholesalers and retailers of CBD products.  A list of the wholesalers’ and retailers’ registered products must be provided to the ATC.  The application to become a CBD wholesaler or retailer is now available from the ATC, but formal rules and regulations to govern such licensees are not yet promulgated.  The application/annual licensing fee is $175.00.

Sales of CBD products will be subject to a three (3%) percent tax rate, in addition to applicable State and local sales taxes.  The additional taxes have been earmarked for the Early Childhood Education Fund.

By Tod J. Everage

Today, the U.S. Supreme Court resolved a Circuit Split, holding that punitive damages are not recoverable to a seaman under an unseaworthiness claim. The Court, in a 6-3 ruling, sided with the U.S. Fifth Circuit’s analysis under McBride and reversed the U.S. Ninth Circuit’s decision in Dutra v. Batterton. The Court followed Townsend, in which the Court previously allowed punitive damages for failure to pay maintenance and cure under General Maritime Law, but recognized the distinction between such a claim and the historical prohibition of punitive damages for unseaworthiness claims. The Court reasoned that unseaworthiness in its current form was purely the Court’s own invention, which came after the passage of the Jones Act. In what is sure to be good news for vessel owners and Jones Act employers, the Supreme Court re-enforced the governance of the Miles uniformity principle between maritime statutory law and maritime common law.

The Court’s full decision can be read here.