By Daniel Stanton

Among the various duties that Jones Act employers are charged with is the duty to provide its seamen with reasonable medical care.  In a recent decision from the U.S. Fifth Circuit Court of Appeals, Randle v. Crosby Tugs, L.L.C., the Court considered the extent of this duty and how it may be satisfied.  The plaintiff was employed by Crosby aboard its vessel, the M/V DELTA FORCE.  While the plaintiff was loading aboard the vessel, he began to feel lightheaded and fatigued.  He retired to his cabin to rest and was later discovered incapacitated on the cabin by another crewmember.  The crewmember immediately notified the captain who called 911.

An ambulance raced to the scene and then transported plaintiff to Teche Regional Medical Center.  At Teche Regional, plaintiff’s attending physicians failed to diagnose plaintiff’s condition as a stroke as a result of failing to perform the proper diagnostic testing.  Having failed to diagnose plaintiff’s condition as a stroke, the physicians of Teche Regional failed to administer medications that would have improved plaintiff’s port-stroke recovery in time.  As a result of his stroke, plaintiff is permanently disabled and requires constant care.  Plaintiff sued Crosby and alleged, among other things, that Crosby failed to provide him with prompt and adequate medical care.  The district court granted Crosby’s motion for summary judgment on this claim, dismissing it, and the plaintiff appealed.  Plaintiff argued on appeal that his fellow seaman owed him more than merely calling 911 and that Crosby was vicariously liable for the acts of the physicians at Teche Regional.

Evaluating plaintiff’s first argument, the Court noted that the extent of a ship owner’s duty to provide prompt and adequate care depends on the circumstances of each case, the nature of the injury, and the relative availability of medical facilities.  This duty can be breached when a vessel owner fails to get a crewman to a doctor when it is reasonably necessary and the vessel can reasonably do so or if the vessel owner takes the seaman to a doctor it knows is not qualified to provide the necessary care.  With these obligations in mind, the Court considered the actions of Crosby after plaintiff was discovered.  Plaintiff was suffering from an unknown but clearly urgent medical condition, and the act of calling 911 was reasonably calculated to get plaintiff to a facility that could treat him.  Plaintiff did not dispute that, absent the misdiagnosis, Teche Regional would have been capable of treating his condition, and the plaintiff testified himself that his “instinct” would have been to call 911 as well under the circumstances.  The Court found that Crosby acted reasonably under the circumstances, when presented with an unknown but emergency medical condition, and therefore, no liability could attach.

Plaintiff also argued that Crosby should be vicariously liable for the alleged malpractice of the Teche Regional physicians.  Shipowners may be held liable for injuries negligently inflicted upon its employees.  This responsibility includes injuries suffered at the hands of a shipowner’s agents, including shipboard physicians or on-shore physicians that it chooses for the treatment of its employees.  But, a shipowner shall bear no responsibility for the treatment an injured employee receives from a physician of his own choosing.  Here, plaintiff argued that Crosby’s non-delegable duty to provide adequate medical care also included vicarious liability for the acts of the Teche Regional physicians even though Crosby neither employed, nor chose to send plaintiff to Teche Regional.  The Court found that this argument stretched beyond the limits of the law of agency, and while a principle may become liable for the failure of its agent to perform a non-delegable duty to a third party, there must first be an agent to whom such a duty was entrusted.  In the instant case, no such agency relationship exists.  Crosby did nothing to initiate any agency relationship with Teche Regional.  Crosby did not contract with Teche Regional for the plaintiff’s care; it did not direct the ambulance to take plaintiff to Teche Regional; and it likely did not even know why plaintiff was taken to Teche Regional instead of another facility.  In short, plaintiff produced no evidence that Crosby intended for Teche Regional to act as its agent by simply dialing 911.

Having considered and dismissed both of plaintiff’s arguments, the Court affirmed the summary judgment granted in favor of Crosby by the district court.

In light of the Court’s opinion, Jones Act employers should carefully consider their procedures for handling shipboard medical treatment needs for both emergency and non-emergency situations.  Jones Act employers must ensure that their policies and procedures satisfy their obligations to their employees but avoid incurring unexpected liability for the actions of medical professionals.

By Kyle P. Polozola

The Louisiana Risk Fee Act (La. R.S. 30:10) continues to be a big headache for operators.  The Louisiana Legislature revised the Act significantly in 2012, adding alternate and cross unit wells to the category of wells to which the statute applies, but also imposed new obligations on drilling owners during the recovery period.  These new obligations include making drilling owners responsible for paying the burdens owed by non-consenting owners to the parties they contract with.  La. R.S. 30:10A(2)(b)(ii)(aa).  Now, during the recovery period, a drilling owner must pay a nonparticipating owner certain royalties due the nonparticipating owner’s lessor.  During the recovery period, the drilling owner also must now pay a nonparticipating owner certain amounts for the benefit of overriding interest owners.  These payments must not only be made by the drilling owner, they must be made in conformity with the “check stub” statute.

The oil and gas industry reacted harshly to the Louisiana Legislature’s action.  The 2012 amendment was seen as controverting the central rationale for the Risk Fee Act – incentivizing risk taking and investment in Louisiana’s oil patch.  The industry’s response resulted in the Louisiana Senate passing Senate Resolution No. 31 in 2016, requesting that the Louisiana Law Institute study the implications of the 2012 amendments on the Louisiana Risk Fee Act.  The central focus of the Senate’s resolution was the manner in which the 2012 amendments frustrated the original policy and purpose of the Act, which was meant to incentivize parties to share the risk and expense of drilling wells, by rewarding a nonparticipating owner for its failure to share in such risk.  The Law Institute’s committee issued an Interim Report to the Senate outlining several issues that remain under the committee’s consideration, including the following that pertain to the payment of proceeds:

  1. Addressing the responsibility of a nonparticipating owner to demonstrate to an operator charged with responsibility to pay royalties the sufficiency of such owner’s title to its leases as well as the lease terms pertaining to royalties.
  2. Clarifying that any costs incurred by an operator to conduct title work with respect to a tract under lease to a nonparticipating owner is subject to recoupment as well as any applicable risk charge.
  3. Clarifying R.S. 30:10 with respect to the determination of the revenue stream to be applied against payout of any recoverable expenses and risk charge as it relates to the deduction or exclusion of royalties paid by the operator on behalf of the nonparticipating owner.

While the Law Institute committee’s work continues, addressing the foregoing aspects of the Act would be a welcomed development due to, at once, the legal and administrative burden the Act imposed on drilling owners in 2012.  Another report from the Law Institute committee is anticipated this year, and a legislative fix to the statute will likely be sought in the next non-fiscal legislative session in 2020.  In the meantime, operators should apply vigilance in navigating the Louisiana Risk Fee Act’s maze.  Stay tuned.

By: Matthew C. Meiners

The Louisiana Construction Anti-Indemnity Act (La. R.S. 9:2780.1) generally renders null, void and unenforceable any provision in a construction contract (defined broadly to include design, construction, alteration, renovation, repair, and maintenance) which either:

(1) purports to indemnify, defend, or hold harmless, or has the effect of indemnifying, defending, or holding harmless, the indemnitee against the negligence or intentional acts or omissions of the indemnitee, an agent or employee of the indemnitee, or a third party over which the indemnitor has no control; or

(2) purports to require an indemnitor to procure liability insurance covering the acts or omissions or both of the indemnitee, its employees or agents, or the acts or omissions of a third party over whom the indemnitor has no control.

However, the Construction Anti-Indemnity Act does not apply to any construction contract entered into prior to January 1, 2011.

In Moore v. Home Depot USA, Inc., 352 F.Supp.3d 640 (M.D. La. 10/15/2018), the United States District Court for the Middle District of Louisiana held that the indemnity and insurance-procurement obligations created by a Maintenance Services Agreement (which required the contractor to provide materials, equipment, tools, and labor to perform services described in future work orders) entered into in August, 2010 (the “MSA”) are not subject to the Construction Anti-Indemnity Act even though the claims at issue were regarding performance of a work order (governed by the MSA) confected by the parties in 2015.

The Court acknowledged that because the MSA failed to state the time, place, or nature of the contractor’s required performance, the MSA is not itself a binding contract, but instead, the MSA and the 2015 work order combine to form the contract.  However, the Court stated that this does not mean that the date of the work order controls, reasoning that if the Louisiana legislature wanted work orders issued after a master service agreement to dictate whether indemnity and insurance-procurement obligations created by the master service agreement are subject to the Construction Anti-Indemnity Act, it would have included such language in the statute.  By comparison, the Court noted that while the Louisiana Oilfield Anti-Indemnity Act (La. R.S. 9:2780) contains a sub-section stating that it applies to master service agreements creating indemnity obligations incorporated into future work orders, the Construction Anti-Indemnity Act does not contain such language.

Accordingly, the Court concluded that the MSA contracting date – 2010 – controls. By the terms of the contract documents, the 2015 work order was both incorporated in and subject to the MSA, and although the 2015 work order created the contractor’s obligation to perform the work at issue, the 2010 MSA governed that performance and created the contractor’s indemnity and insurance-procurement obligations.  Because the parties confected the MSA in 2010, and the Construction Anti-Indemnity Act does not apply to prohibited clauses in construction contracts confected before January 1, 2011, the Construction Anti-Indemnity Act does not apply to the indemnity and insurance-procurement provisions in the MSA.

By A. Edward Hardin, Jr.

Most private employers with 100 or more employees are required to submit an annual EEO-1 report to the Equal Employment Opportunity Commission regarding the number of workers employed in different categories, broken down by race, sex, and ethnicity.  The Obama administration proposed adding pay data to the required report, as a means of quantifying pay disparities.  The collection of pay data was initially approved by the Office of Management and Budget in September 2016, and the new requirement was set to take effect in 2018.  Businesses argued that the new requirements were too burdensome.  Following the election of President Trump, the OMB stayed implementation of the new requirement based on the Paperwork Reduction Act and alleged formatting issues.  However, earlier this month, a Federal District Judge in Washington D.C. rejected the OMB’s argument and ordered the OMB to lift its stay on the collection of the pay data.  Should the rule go into effect, employers who are required to submit the annual EEO-1 report will also have to submit pay data broken down by race, sex, and ethnicity.  The EEOC’s portal for the submission of EEO-1 reports is now open, but the EEOC is apparently not asking for pay data at this time.  What happens next is still to be determined, but additional legal challenges are possible.  Stay tuned.

By Blake Crohan

In In the Matter of 4-K Marine, No. 18-30348 (5th Cir. Jan. 30, 2019) the U.S. Fifth Circuit held that the owner of a stationary, “innocent” vessel is not entitled to reimbursement of the medical expenses of an employee who fraudulently claimed his preexisting injuries resulted from an allision. In June 2015, the M/V TOMMY, owned and operated by Enterprise Marine, was pushing a flotilla of barges on the Mississippi River when it allided with the MISS ELIZABETH, a stationary tug with barges owned and operated by CBR. Individuals aboard the MISS ELIZABETH, including Prince McKinley, alleged they were injured in the allision. CBR promptly commenced maintenance and cure payments to McKinley.

After suit was filed, CBR filed a counter-claim against Enterprise Marine for reimbursement of the amounts it paid to McKinley for medical expenses, because generally, an at-fault third party must reimburse a Jones Act employer for maintenance and cure paid to its Jones Act employee. CBR paid, and Enterprise Marine reimbursed, $23,000 in maintenance and $5,000 in cure to McKinley. CBR also agreed to pay for McKinley’s back surgery, but Enterprise Marine reviewed McKinley’s medical history and refused to reimburse those expenses, arguing the condition was not a result of the allision.

After a bench trial, the district court determined that McKinley injured his knee in the allision, but his back problems predated the accident and were unaffected by the allision. Further, the court held that McKinley fraudulently withheld material issues about his pre-existing medical conditions and medications before and after the incident. The district court held that CBR had no obligation to pay for McKinley’s back surgery, and Enterprise Marine had no obligation to reimburse CBR for the back surgery.

CBR appealed to the U.S. Fifth Circuit arguing that maritime principles compelled Enterprise Marine to reimburse CBR for McKinley’s back surgery regardless of McKinley’s fraud. The U.S. Fifth Circuit explained that a third-party must reimburse maintenance and cure payments only where its negligence caused or contributed to the need for maintenance and cure. Because McKinley’s back condition did not result from the allision, Enterprise Marine did cause or contribute to the need for maintenance and cure for that particular medical problem. Accordingly, Enterprise Marine did not owe reimbursement to CBR for McKinley’s back surgery.

The Fifth Circuit recognized the practical problems faced by CBR. It noted that the decision to cover McKinley’s back surgery had to be made early, and CBR was presented with what initially appeared to be a plausible claim for cure. Further, the denial of such claim could have exposed CBR to punitive damages. But the Court noted that CBR had options. An employer need not immediately commence maintenance and cure payments upon request. Further, an employer is only liable for compensatory damages if it “unreasonably rejects the claim” after an investigation, and punitive damages “only for behavior that is egregious”. Finally, CBR had the right to deny payment if, which was ultimately determined, McKinley intentionally misrepresented or concealed material facts, the disclosure of which was desired by CBR.

The U.S. Fifth Circuit’s opinion in In the Matter of 4-K Marine details the harsh realities facing Jones Act employers. Employers must quickly investigate maintenance and cure claims to determine their legal rights. Act too slowly, and the employer may face compensatory or punitive damages. Act too quickly, and an employer may pay for unnecessary medical expenses and not be able to recoup them.

By Brian R. Carnie

The Trump Administration has released the new proposed rule changes to the salary requirements to be exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).

Under the new proposed rule, the U.S. Department of Labor wants to increase the minimum salary threshold that must be paid in order for most executive, administrative or professional employees to qualify for exemption from $455 per week ($23,660 annually) to approximately $679 per week ($35,308 annually).  This salary level is expected to change before the rule becomes final (which most likely will happen sometime in 2020), and the final threshold will be based on the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (the South) and in the retail sector once data for 2018 is released and adjusted for inflation. The new salary threshold would not apply to teachers, doctors, lawyers, or certain other exempt professionals who are not currently subject to the salary basis or salary level tests.  While the proposed new salary threshold is more than $12,000 less per year than what was sought by the Obama Administration in 2016, it still represents a 50% increase from the current minimum salary threshold and will present headaches for many employers who have exempt employees who are paid well below this new salary level.  Contrary to what many expected, the proposed rule also does not seek to phase in the increase over time.

The proposed rule also raises the minimum required salary paid to an employee to qualify for the highly-compensated employee exemption, which under the proposal would go from $100,000/year to $147,414/year.  This is significantly higher than the increase sought by the Obama DOL in 2016 (which was $134,000/year).

The proposed rule does not establish mechanisms for automatic increases to the salary requirements on a yearly basis, but the DOL said it will review the minimum salary threshold every four years and will seek public comment before changes are made.  The proposed rule makes no changes to the duties requirements that these administrative, executive or professional employees must meet in order to qualify for exemption.

The DOL will accept public comment on the proposed rule for a period of 60 days, and a final rule can be expected over the next 12 months.  Of course, this rule is likely to be subject to court challenge.

Stay tuned for further updates.

By Katherine King, Randy Young, Carrie Tournillon, and Mallory McKnight Fuller

This report was last updated on February 22, 2019

The following is prepared by the Kean Miller LLP Utilities Regulation team on important topics affecting consumers of electrical power in Louisiana.  For more information, please contact us at client_services@keanmiller.com

(LPSC Rulemaking) New Generation Deactivation Transparency Rule:  In March 2017, the Louisiana Public Service Commission (“LPSC”) initiated a proceeding to consider (1) whether the LPSC should exercise its authority over future utility generation deactivation and retirement decisions and (2) the rules and procedures that could apply to the LPSC’s exercise of such authority.  In October 2018, the LPSC issued its final rule, which requires electric utilities to report generation unit deactivations and retirements 120 days prior to implementation, including support for the decisions and continuing reports on units that are placed in deactivation status for possible return in the future.  The final rule creates more transparency and accountability on the part of utilities.

Entergy Formula Rate Plan Extension:  In August 2017, Entergy Louisiana, LLC (“Entergy”) filed a request for an extension and modification of its Formula Rate Plan (“FRP”) for test years 2018, 2019, and 2020.  In May 2018, the LPSC approved an extension and modification of Entergy’s FRP subject to the settlement terms reached by Entergy, LPSC Staff, and intervenors.  The settlement terms included, among other things, the flow back to customers of all tax benefits created by the Tax Cuts and Jobs Act of 2017 (“TCJA”).

Entergy Integrated Resource Plan:  In October 2017, Entergy initiated proceedings at the LPSC to begin work on its Integrated Resource Plan (“IRP”) for the years 2018 through 2038.  The objective of the IRP process is generally to evaluate a set of potential resource options that offer the most economical and reliable approach to satisfy future load requirements of the utility.  Entergy’s draft IRP was filed at the LPSC in October 2018.  The final IRP is due in May 2019.  The IRP process does not result in the LPSC’s approval of a proposed resource plan or approval of construction or acquisition of any particular resources.

Louisiana Electric Rates, Industrial Customer Market Access / New Tariff Options:  In April 2017, the LPSC initiated a technical conference series entitled “Status of Electric Rates in Louisiana: Where Are We and Where Are We Going?”  Through this series, the LPSC hoped to achieve its goal of ensuring reliable electric service at the lowest reasonable cost.  The technical conference series invited stakeholders to provide input on the status of electric rates in Louisiana and recommendations of policies or other options the LPSC should consider for the future.  The technical conferences were held in 2017.  In December 2018, LPSC Staff issued a report and request for comments.  A final report from LPSC Staff is expected in early 2019, which will be presented to the Commissioners for a determination regarding steps forward.

(LPSC Rulemaking) MISO Demand Response/ Aggregators of Retail Customers:  In July 2018, the LPSC opened a rulemaking to study the implications of participation of Aggregators of Retail Customers (“ARC”) in the wholesale markets and to determine whether, and under what conditions, such activity should be allowed in the LPSC’s jurisdiction.  ARCs enter into agreements with, and combine the abilities of, multiple retail electric customers to participate in wholesale markets as a Demand Response or Load Modifying Resource.  In September 2018, Commissioner Skrmetta issued a directive that third-party ARCs are not allowed to register LPSC-jurisdictional customers or participate in wholesale markets with their loads pending the outcome of the rulemaking.  In November 2018, LPSC Staff issued a proposed rule and request for comments from stakeholders, the deadline for which was December 2018.  No final rule has been issued as yet.

Entergy Proposed Solar PPA and Experimental Renewal Option (“ERO”) Tariff:  In May 2018, Entergy filed an application with the LPSC seeking approval to enter into a Purchase Power Agreement (“PPA”) for 50 megawatts (“MW”) of unit-contingent, as-available capacity and energy from a solar facility to be constructed in Port Allen, Louisiana.  The PPA arises out of Entergy’s 2016 Request for Proposals (“RFP”) for 200 MW of renewable resources.  A settlement has been reached by participants in the proceeding and will be presented to the LPSC for approval.  In October 2018, in connection with the PPA, Entergy filed a related application with the LPSC seeking authorization to make available a new Experimental Renewable Option and Rate Schedule ERO (“Schedule ERO”).  Schedule ERO would allow Industrial and Commercial customers the opportunity to schedule a portion of the Solar PPA.  Entergy’s Schedule ERO application is currently pending at the LPSC.

Entergy Generation Construction Projects:  In the past two years, the LPSC has approved Entergy proposals for large generation construction projects worth a combined estimated total greater than $2 billion.

Entergy 980 MW Power Plant in St. Charles Parish:  In November 2016, the LPSC approved Entergy’s proposal to construct a 980 MW CCGT unit located in Montz, Louisiana (near New Orleans), at a site adjacent to the existing Little Gypsy generation units.  The project was selected from among bidders in Entergy’s 2014 Request for Proposal (“RFP”) for resources in Amite South (southeast Louisiana area).  The project is estimated to cost $869 million and has a projected in-service date of June 2019.

Entergy 994 MW Power Station in Lake Charles, Louisiana:  In June 2017, the LPSC approved Entergy’s proposal to construct a 994 MW CCGT unit located in Westlake, Louisiana.  The project was selected from among bidders in Entergy’s 2015 RFP for Long-Term Development and Existing Capacity and Energy Resources.  The project is estimated to cost $872 million and has a projected substantial completion date of May 2020.

Entergy 361 MW Combustion Turbine in Washington Parish:  In May 2018, the LPSC approved Entergy’s acquisition of the Washington Parish Energy Center, a new 361 MW simple cycle combustion turbine (“CT”) to be constructed in Bogalusa, Louisiana by a subsidiary of Calpine Corporation (“Calpine”) for a purchase price of approximately $222 million.  Calpine had submitted an unsolicited offer to Entergy to construct the CT and sell it to Entergy for a turn-key price.  The acquisition and related assets is estimated to cost $261 million and has an estimated “turnover” date of April 2021 for delivery of a fully-permitted, fully operational facility.

Entergy Transmission Construction Projects:  The LPSC has also approved Entergy transmission construction projects worth an estimated combined total of more than $192 million, and Entergy recently submitted a new application for certification of an estimated $92 million transmission project.

Entergy Economic Transmission Project in Southeast Louisiana:  In December 2015, the LPSC approved Entergy’s proposal to build a portfolio of transmission projects in southeast Louisiana termed the Louisiana Economic Transmission Project (“LTEP”), which was identified in the MISO Transmission Expansion Plan (“MTEP”) 2015 as addressing congestion in southeast Louisiana at a cost below its estimated benefits.  Pursuant to Entergy’s January 2019 bi-annual report, the revised estimate for the total project cost is approximately $75 million.  The project is 100% complete and in-service.

Entergy Reliability Transmission Project in Lake Charles, Louisiana:  In December 2015, the LPSC approved Entergy’s proposal to build a portfolio of transmission projects termed the Lake Charles Transmission Project (“LCTP”) to meet reliability needs in the Lake Charles, Louisiana area.  The LCTP was submitted as an “out-of-cycle” project for the MTEP 2015 process and was approved by the MISO Board of Directors as a Baseline Reliability Project.  Pursuant to Entergy’s January 2019 bi-annual report, the revised estimate for the total project cost is greater than $187 million, and the estimated in-service date for the entire project is February 2019.

Entergy Economic Transmission Project in Downstream of Gypsy Area:  In November 2018, Entergy submitted an application to the LPSC for certification of a new transmission construction project located in the Downstream of Gypsy (“DSG”) area of southeast Louisiana.  As part of MTEP 2015, MISO identified the project as addressing congestion in southeast Louisiana at a cost below its estimated benefits.  The project is estimated to cost $92.3 million and has a projected in-service date of second quarter 2022.  The proceeding is in its early stages.

Cleco Power Application for Implementation of TCJA:  At the end of January 2019, in an ongoing proceeding, Cleco Power LLC (“Cleco Power”) filed an application with the LPSC seeking authorization to (1) implement rate reductions resulting from the TCJA, (2) modify certain tariffs in connection with the rate reductions, and (3) implement residential base revenue decoupling.  Cleco Power also requested expedited treatment so that its rate reductions can be implemented effective July 1, 2019.  The application is currently pending at the LPSC.

Cleco Cajun Acquisition of NRG South Central:  In April 2018, Cleco Power and its parent company, Cleco Corporate Holdings, LLC (“Cleco Corp”), filed an application at the LPSC requesting approval for Cleco Cajun, a wholesale subsidiary of Cleco Corp, to acquire NRG South Central Generating LLC, along with related generating units and wholesale sale contracts.  In January 2019, the LPSC approved the acquisition with the adoption of 59 Regulatory Commitments.

Cleco Natural Gas Hedging Proposals:  In August 2017, Cleco Power filed applications for natural gas hedging programs with the LPSC (a Long Term Derivative Hedging Program and a Physical Bilateral Hedging Program) pursuant to the LPSC’s General Order requiring each investor owned utility to bring forth three natural gas hedging programs for LPSC consideration.  In January 2019, Cleco Power filed a supplemental filing requesting that a hybrid of its two natural gas hedging programs be recognized as its third program under the LPSC General Order and that certain larger customers be allowed to opt-in to the long term hedging programs.  The supplemental filing is currently pending at the LPSC.

by G. Trippe Hawthorne

The Louisiana State Licensing Board for Contractors has updated and revised its rules, found in Title 46, Part XXIX of the Louisiana Administrative Code. The Board characterizes these revise rules as intended to simplify and streamline the application and examination process for licensed contractors and those seeking to become licensed contractors. A brief summary of the changes can be found in the Licensing Board’s Bulletin 19-01 here.

For commercial contractors, the new rules that may prove most helpful will be: (i) the rule dispensing with the need to submit pay stubs and other payroll documents to prove the full time employment status of a qualifying party; (ii) the change from an business and law exam to the taking of an online class, and (iii) the simplification of the required financial statement.

The new rules were promulgated in the December 2018 publication of the Louisiana Register, which is available here (pages 2143-2154).

By: R. Chauvin Kean

Generally, a contract is the law between parties, which has long been the position of the U.S. Supreme Court. However, as most well know, this principle is not without limitation. On January 15, 2019, in New Prime v. Oliveira, the Court unanimously held that disputes concerning contracts of employment involving transportation workers engaged in foreign or interstate commerce cannot be compelled to arbitrate. 586 U.S. —, 4, 2019 WL 189342, at * — (2019). Also, despite strong, express language in an agreement ordering the parties to arbitrate any of their disputes, a court – not the arbitrator – is the appropriate forum to review and decide the applicability of the Arbitration Act to any contract.

The Federal Arbitration Act declares that an express arbitration clause in a maritime transaction involving commerce shall be valid and enforceable provided the Act does not further limit its application. 9 U.S.C. §§ 1 – 2 (West 2019). However, §1 declares that “nothing contained [in this Act] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1 (West 2019). Specifically, the Court in New Prime resolved a longstanding issue of whether a “contract of employment” concerned any type of contract for work (such as one involving independent contractors) or only those contracts between an employee – employer. The Supreme Court affirmed the First Circuit’s ruling that in 1925, at the time of the Act’s inception, “contract of employment” was not a term of art; it was a phrase used to describe “agreements to perform work” and was not limited to agreements only between employees and employers as a modern jurist might first think.

New Prime provides two important lessons: first, no contract provision – however ironclad – is immune from court oversight and interpretation. Parties to a contract may attempt to limit their litigation exposure, but cannot be immune from all possibilities, especially when they try to contract around statutes. New Prime is a great example of limited application of a broad federal statute, which, even though is favored by the courts, is limited by Congress. Second, New Prime provides greater clarity in the realm of contracts for work relating to transportation workers. Any “contract for employment” concerning workers engaged in foreign or interstate commerce cannot be contractually compelled into arbitrations regardless of contractual provisions that state otherwise. New Prime, 586 U.S. at 15. It’s also worth noting that the type of workers engaged in foreign or interstate commerce has vastly expanded over time as our society grows further connected. Thus, companies should be mindful that even though contracts of employment might attempt to limit litigation through arbitration provisions, a court may not be inclined to order the parties into arbitration based on New Prime and the employee’s/independent contractor’s scope of work.

By the Data Security & Privacy Team

Introduced by Senator Brian Schatz (D-HI), the ranking member of the Communications Technology Innovation and Internet Subcommittee of the United States Senate, the Data Care Act of 2018 (the “Act”) seeks to enact Federal privacy legislation that will incentivize “online service providers” to protect certain types of personal data or risk civil penalties brought by both Federal and State agencies.[1]

Introduced to the Senate on December 12, 2018, the Bill was succinctly designed to “establish duties for online service providers with respect to end user data that such providers collect and use.”  The bill defines “online service provider” as any entity that is both “engaged in interstate commerce over the internet…” and “in the course of its business, collects individual identifying data about end users…”  The term “end users” is further defined as any “individual who engages with the online service provider or logs into or uses services provided by the online service provider over the internet or any other digital network.” In other words, anyone that logs into any online network, is now an “end user.” And, almost any entity that affords the opportunity to log into a network becomes an “online service provider” who is now tasked, under threat of concurrent state and federal criminal penalties, with protecting certain types of data. [2]

The following types of information are protected from disclosure under the Act and referred to as “sensitive data:”

  • Social security numbers;
  • First and last names or first initial and last name accompanied by the following:
    • The individual’s year of birth;
    • Mother’s maiden name; or
    • Individual’s geolocation.
  • Biometric data (example: thumb print);
  • User name and password or email address and password;
  • Financial account numbers (example: credit or debit card number);
  • Personal information of minor children (as defined in section 1302 of the Children’s Online Privacy Protection Act of 1998);
  • Driver’s license number, military identification number, passport number or any number issued on a similar item of government identification;
  • Information relating to an individual’s mental or physical health; and
  • Nonpublic communications or user-created content by an individual. [3]

The Act imposes not only a duty of care to “reasonably secure individual identifying information from unauthorized access,” but also a duty of “loyalty,” that “will prevent the reasonably foreseeable material from physical or financial harm to the end user.” The duty of confidentiality further prohibits the “online service provider” from selling or disclosing any information that it keeps on its “end users” and imposes the duty to take reasonable steps to ensure a “duty of care” by entities to which the online service provider discloses or sells information.[4] In the event of the breach, the online service provider must inform the Federal Trade Commission in accordance with 5 U.S.C. § 553. Thus, the Act looks to “online service providers” to police each other.

Consistent with the growing pressure on businesses to institute cybersecurity measures, the Act codifies the ability of multiple states and multiple state agencies to bring civil actions against offenders.  Specifically, the Act permits both state Attorney General’s offices, as well as any other state consumer protection agency, to bring civil actions against any offender without much limiting language.  Accordingly, an online retail distributor qualifying as “online service provider” could face civil and criminal penalties from all 50 states, as well as simultaneous penalties from the Federal Government for the same offense.

If passed, this Act will go into effect within 180 days of its enactment.  With a Federal Government shutdown currently in place without an anticipated opening date, it is unknown when the Act will be signed into law.  However, the political blogs are not anticipating substantial opposition to the act if addressed this year.[5]  Therefore, the Act (along with six similar privacy-specific proposals) is essentially giving a 6 month warning to businesses with an online presence that their failure to stringently protect and adhere to a “duty of loyalty” to their customers could very well result in federal charges and penalties, as well as lawsuits in multiple (if not all 50) states.

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[1] https://www.congress.gov/bill/115th-congress/senate-bill/3744.

[2] https://www.congress.gov/bill/115th-congress/senate-bill/3744.

[3] https://www.congress.gov/bill/115th-congress/senate-bill/3744.

[4] https://www.congress.gov/bill/115th-congress/senate-bill/3744.

[5]https://www.fastcompany.com/90288030/inside-the-upcoming-fight-over-a-new-federal-privacy-law