By Tyler Moore Kostal

CMS has released a Proposed Rule specifying how and when it must impose penalties on responsible reporting entities (RREs) that fail to meet their Section 111 reporting obligations.  Here are the highlights:

  • The Proposed Rule indicates that the maximum penalty of $1,000.00 per day per claimant would be adjusted annually for inflation.  So for 2020, the maximum potential penalty would be $1,232.00 per day per claimant.
  • The Proposed Rule outlines various situations in which penalties would and would not be imposed against Non-Group Health Plan (NGHP) RREs.  It calls for penalties to be imposed when the RRE “fails to report any beneficiary record within 1 year from the date of the settlement, judgment, award, or other payment.”

The Proposed Rule is scheduled to be published in the Federal Register on February 18, 2020.  It is available here.

By Stephen C. Hanemann

Although the riverboat casino Grand Palais was originally designed to transport people over water, and did so until 2001, and is theoretically capable of navigation, the Louisiana Supreme Court has determined that it is no longer a vessel in navigation. Don Caldwell v. St. Charles Gaming Co., 2019-1238 (La. 1/29/20),             So.3d _____. The Court’s ruling emphasized changes in the riverboat’s physical characteristics, purpose, and function – the craft having been moored for nearly 15 years. Accordingly, the injured riverboat technician employed by the Grand Palais was not entitled to seaman status as he was not employed on a vessel in navigation.

Plaintiff claimed to have sustained injury on April 9, 2015 when the gangway attached to the Grand Palais riverboat casino collapsed. He filed a petition for damages alleging that the riverboat was a vessel under General Maritime Law and that he was a seaman under the Jones Act. The 14th Judicial District Court for the Parish of Calcasieu denied plaintiff’s Motion for Summary Judgment on the issue of seaman status finding that the Grand Palais casino was not a vessel at time of his incident. The Louisiana Third Circuit Court of Appeals reversed,finding the riverboat was a vessel at the time of the incident and conferred seaman status upon plaintiff. Prior to its decision in this case, the Third Circuit had uniformly held that riverboat casinos permanently moored were not vessels. See Breaux v. St. Charles Gaming Co., Inc., 10-1349, 11-128 (La. App. 3 Cir. 6/22/2011), 68 So.3d 684; Lemelle v. St. Charles Gaming Co., 11-255 (La. App. 3 Cir. 1/4/12), 118 So. 3d 1, writ denied, 12-339 (La. 4/27/12); and Benoit v. St. Charles Gaming, Co., LLC, 17-101 (La. App. 3 Cir 11/8/17), 230 So. 3d 997, writ denied, 17-2501 (La. 2/2/18), 233 So.3d 615, cert denied, ___ U.S. , 139 S.Ct. 104, 202 L. Ed 2d 29 (2018). Not only did the appellate court’s decision conflict with three of its prior decisions, but it also contrasted with the U.S. Fifth Circuit’s holding that a moored riverboat casino is not a vessel in navigation under Federal maritime Law. See De La Rosa v. St. Charles Gaming Co., 474 F.3d 185 (5th Cir. 2006).

The Grand Palais was built as a riverboat casino and designed to sail on inland waterways of the United States and the state of Louisiana. At the time of plaintiff’s incident the riverboat was safely afloat, had not been disabled, removed from the water, sunk to the bottom of a waterway, or enclosed in a coffer dam. In fact, the owners of the riverboat casino worked diligently to maintain it in a fully operational condition as required by applicable law. Id. See also, La. R.S. § 27:44. The riverboat casino maintained a valid Certificate of Inspection issued by the United States Coast Guard, which permitted it to carry passengers on designated waterways within the State of Louisiana. Despite this, the Grand Palais had been moored at the same location for over 14 years, and had not navigated since March 24, 2001. The riverboat’s shore-side-utility lines, electrical supply, water, sewerage, cable television, telephone, and internet services had not been disconnected since its last navigation. Plaintiff had worked on the riverboat since 2004, but had never sailed aboard it. His onboard duties included chipping, grinding, and painting. Other responsibilities included fire team and rescue-boat.

Owners of the riverboat argued that its status as a vessel does not determine plaintiff’s status as a seaman for admiralty jurisdiction. Defendants insisted that plaintiff must also prove the vessel is in navigation and that his employment has a substantial connection to navigation, thereby regularly exposing him to the perils of the sea. Plaintiff contended that the riverboat remained capable of navigation and was, therefore, a vessel.

The Louisiana Supreme Court recognized that while the vessel was theoretically capable of navigation, it had been indefinitely moored for a period of over 14 years and was not being used for the purpose of maritime transportation. Focusing on the practical and not theoretical capabilities of navigating, in observance of the U.S. Supreme Court’s decisions in Stewart v. Dutra Const. Co., 543 U.S. 481 (2005) and Lozman v. City of Riviera Beach, Fla., 568 U.S. 115 (2013), the Louisiana Supreme Court agreed that the statutory definition of a vessel may not apply when the craft has some other primary purpose, and found that the riverboat’s primary purpose was dockside gambling. It also found that a side of the riverboat had been integrated into the adjacent land-based pavilion and hotel, and would require some modifications to return to service as a navigable vessel. Consequently, even though the Supreme Court acknowledged that the riverboat was designed to transport people over water and was theoretically capable of navigation, due to its changes in physical characteristics and primary purpose, coupled with the fact that it had been moored for a decade and a half, it determined that the Grand Palais was no longer a vessel used in marine transportation.

In denying plaintiff’s Motion for Summary Judgment and dismissing his claims for seaman status under General Maritime Law, the Louisiana Supreme Court did not precisely say that the riverboat casino, Grand Palais, was not a vessel (statutorily or otherwise), merely that it was no longer a vessel used in maritime transportation.

By A. Edward Hardin, Jr.

“OK Boomer” is a common catchphrase, often used in the context of a younger person being dismissive of an older person.  The person on the receiving end of the quip may not be a “Boomer” per se (i.e., a member Baby Boomer generation), and should the recipient of the quip point that fact out, that correction would most certainly be met with the related response – “whatever Boomer” (perhaps punctuated with an optional eye roll).  Semantics aside, does the phrase create issues under the age discrimination statutes?  This was the very issue raised by Chief Justice John Roberts in a recent oral argument before the U.S. Supreme Court.  In his questioning, in a case involving federal employees, Chief Justice Roberts asked if the phrase “OK Boomer” was actionable.  Comments, including so called “stray remarks,” are often put forward as proof of discriminatory animus.  It will be interesting to see what, if any, guidance the Supreme Court provides regarding the use of, and impact of, comments like “OK Boomer” in various discrimination cases.  For a story about Chief Justice Roberts question click here.

By Chelsea Caswell

On January 12, 2020, the United States Department of Labor (“DOL”) released a final rule updating and revising the DOL’s interpretation of joint employer status under the Fair Labor Standards Act (“FLSA”). The rule is scheduled to be published in the Federal Register on January 16, 2020, and its effective date will be March 16, 2020. Links to the final rule, a related fact sheet, frequently asked questions, and the DOL press release may be found here.

In sum, the final rule addresses joint employer status in two factual scenarios. The first scenario is when an employee performs work for his/her employer that simultaneously benefits another person or entity, that person or entity will be considered a joint employer under certain circumstances. The rule provides a four-factor balancing test to determine FLSA joint employer status in this scenario. Specifically, the analysis considers whether the potential joint employer: (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.

The rule also clarifies that certain circumstances/factors do not make joint employer status more or less likely under the FLSA, including: an employee’s “economic dependence” on a potential joint employer; an employer’s franchisor, brand and supply, or similar business model and similar contractual agreements or business practices; and the potential joint employer’s contractual agreements with the direct employer requiring the direct employer to comply with the potential joint employer’s legal obligations or to meet certain standards to protect the health or safety of its employees or the public.

The second scenario is when one employer employs a worker for one set of hours in a workweek, and another employer employs the same worker for a separate set of hours in the same workweek. Although the jobs and hours worked for each employer are separate, if the employers are joint employers (or are “sufficiently associated”), the hours are aggregated and both employers will be jointly and severally liable for all of the hours worked for them in the workweek. The rule provides that employers will generally be sufficiently associated if: (1) there is an arrangement between them to share the employee’s services; (2) one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or (3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

The rule also clarifies that certain business relationships—such as sharing a vendor or being franchisees of the same franchisor—are alone insufficient to establish that two employers are sufficiently associated to be joint employers under the second scenario. The rule also provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual scenarios.

The DOL may not be the only federal agency to revise/clarify its interpretation of the joint employer standard this year. In November 2019, the Office of Information and Regulatory Affairs, Office of Management and Budget released a “Fall 2019 Unified Agenda of Regulatory and Deregulatory Actions.” In their agenda items, both the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations Board (“NLRB”) also indicated that they would be taking regulatory action related to the joint employer standards under federal EEO laws and the National Labor Relations Act, respectively. Employers will want to be on the lookout for EEOC and NLRB action in the New Year.

Only time will tell if these agencies’ recent and coming regulatory actions will create some consistency in determining joint employer status among the various federal labor and employment laws that the DOL, EEOC, and NLRB enforce.

By: Jaye A. Calhoun, Jason R. Brown, William J. Kolarik, II, and Sanders W. Colbert

In Smith International v. Robinson, No. 10498, (La. App. 1 Cir. January 9, 2020), the Louisiana First Circuit Court of Appeal held that the Louisiana Department of Revenue (the “Department”) may not impose a late payment penalty when a taxpayer has paid the amount reported to be due on its tax return. The Court’s holding limits the ability of both the Department and local tax collectors to “stack” both late payment and understatement penalties, resulting in the taxpayer being subjected to penalties that equal or exceed 35% of additional tax assessed after an audit.  While this result is contrary to an earlier Fourth Circuit decision,[1] discussed below, most appeals filed by non-Louisiana taxpayers lie to the First Circuit so this is a welcome development for many.  Further, the result in Smith International parallels the interpretation of the comparable federal tax penalties on which Louisiana penalty provisions are based.  That is, the federal tax code imposes different penalties for delinquent payment and negligent understatement of the tax shown due on a return.[2]  In addition, the First Circuit affirmed the jurisdiction of the Board of Tax Appeals to consider the propriety of the imposition of penalties in certain circumstances, affording an important remedy to taxpayers in situations in which penalties are improperly imposed.

The dispute in Smith International involved a corporation income and franchise tax audit for the 2008 through 2010 tax periods.  After paying the assessment of additional corporation franchise tax and interest, Smith International (“Smith” or “the taxpayer”) appealed the Department’s assessment of late payment and negligence (i.e., understatement) penalties to the Louisiana Board of Tax Appeals (the “Board”).  The taxpayer challenged the imposition of the late payment penalty under La. R.S. 47:1602(A) as not applying when the amount shown due on the return has been timely paid.  The taxpayer also challenged the imposition of the negligence penalty under La. R.S. 47:1604.1, because, for the tax periods at issue (prior to July 1, 2015), the negligence penalty applied only in the event of “willful negligence or intentional disregard of rules and regulations.”[3]  The Department disagreed and also filed an exception alleging that the Board lacked jurisdiction to redetermine the imposition of penalties where the Department itself had declined to waive them.

The Board of Tax Appeals Decision

In Smith International v. Secretary, Department of Revenue, 2018 WL 4608117 (La. Bd. Tax. App. April 10, 2018), the Board quickly dispatched the Department’s exception of lack of subject matter jurisdiction by explaining that the Taxpayer’s petition did not request a waiver of penalties, but rather asserted that the penalties were not owed in the first instance. The Board then noted that La. R.S. 47:1407 grants it jurisdiction over all matters related to appeals for redetermination of an assessment, including the assessment of penalties.  This holding is important because the Department routinely disputes the Board’s ability to review penalty assessments, and a contrary holding would leave taxpayers without this important remedy in appropriate circumstances.

The Board then addressed the issue of the late payment penalty, finding the imposition to be improper because, under the plain language of the statute, the penalty only applied when the “taxpayer fails to timely remit to the secretary of the Department of Revenue the total amount of tax that is due on a return which [the taxpayer] has filed.”[4]

Finally, the Board held that the Department was prohibited from applying Act 128 retroactively to tax periods before July 1, 2015, its effective date. In so holding, the Board noted that, under Louisiana law, and in the absence of contrary legislative expression, a substantive law – i.e., a law which establishes new rules, rights, and duties, or changes existing duties – may only be applied prospectively.  Because Act 128 increased the amount of the understatement penalty for negligence and removed the willfulness requirement, the Board concluded that Act 128 was a substantive law that could not be applied retroactively.

The First Circuit’s Holdings

On appeal, the Department challenged the Board’s rulings on its exception for lack of subject matter jurisdiction and the application of the late payment penalty to the Louisiana First Circuit Court of Appeal. The Department did not, however, appeal the Board’s ruling that Act 128 could not be applied retroactively.

In its opinion, the First Circuit affirmed that the Louisiana Board of Tax Appeals has jurisdiction to redetermine the assessment of penalties by the Department. The court agreed with lower tribunal that the taxpayer was not requesting a review of the Department’s denial of a request for waiver of penalties, but in fact, was challenging the imposition of penalties in the first instance as not supported by applicable law.  With respect to the substantive dispute, the assessment of the late payment penalty, the court considered the proper interpretation of the delinquent payment penalty in La. R.S. 47:1602(A), specifically, whether a penalty is due when a taxpayer (i) makes a timely return and remits payment as shown on the return, but (ii) fails to timely remit payment of any higher amount ultimately determined to be due by the Secretary.  After reviewing the statute, the Court concluded that the Legislature’s intent in creating the late payment penalty was to address a taxpayer’s failure to timely file a return and remit payment with that return, not to penalize a taxpayer’s failure to file a correct return.  Because Smith paid the amount identified as due on the face of its franchise tax returns when it remitted them, the Court concluded that Smith was not subject to the late payment penalty.

The First Circuit in Smith International took pains to explain its disagreement with a pre-amendment case, City of New Orleans’ Dept. of Finance v. Touro Infirmary, in which the Louisiana Fourth Circuit Court of Appeal took a different view of the statutory delinquency penalty.  The Touro Infirmary court had interpreted the penalty statute’s language “due on a return [the taxpayer] has filed” to mean “the total amount of tax owed by the taxpayer for the period that is supposed to be covered by the tax return.”[5]  The court in Touro Infirmary expressed its concern that a literal reading of the statute could allow a taxpayer to intentionally understate the amount of tax due on its return and still not be subject to the penalty.  While this is arguably a policy decision by the court which disagreed with the import of the language chosen by the legislature, it should be noted that the court was interpreting the law at a time when the Department had no true negligent understatement penalty in its arsenal. In its decision in Smith International, the First Circuit Court of Appeal explained that it disagreed with the Touro Infirmary court’s reasoning and noted the presence of separate penalty provisions that apply when a taxpayer makes an incorrect (that is, negligently understated) or even a fraudulent return. The First Circuit nonetheless read the relevant statutes and correctly distinguished between a situation in which a taxpayer incorrectly reports tax and one in which a taxpayer simply doesn’t pay tax that is due, understanding that different penalties apply in those fundamentally different situations.[6]

Implications

As a result of the First Circuit’s holding in Smith International, it now appears there is a split in the circuits in Louisiana regarding the assessment of the late payment penalty when a return is timely filed and the amount shown due thereon is paid.  Nevertheless, because the First Circuit Court of Appeal has exclusive jurisdiction to review appeals from the Board for disputes between the state and non-Louisiana taxpayers, this decision has the potential to benefit a significant number of taxpayers.  Still, the Smith International ruling regarding the interpretation of the late payment penalty statute is binding only in the First Circuit.  Also of note, because the Department did not appeal the Board’s decision regarding the retroactive application of Act 128, the Board’s decision on that matter is technically not binding.

The Smith International decision is nonetheless a significant taxpayer victory.  As a matter of routine, the Department assesses both late payment and negligence (i.e., understatement) penalties when additional tax is determined to be due after audit.  Those “stacked” penalties often amount to a significant amount of the additional tax due.  It should be noted that the late payment penalty statute applicable to local sales and use tax, La. R.S. 47:337.70(A)(1), contains language identical to the state statue at issue in Smith International.  Thus, the Court’s holding in Smith International appears to apply to both state and locally assessed late payment penalties.[7]

Application of the penalty for delinquency to the same negligent understatement (or, in effect, treating the delinquency provision as another understatement/negligence provision), is improperly cumulative and misunderstands the nature of the delinquency penalty under Louisiana law. Any taxpayer currently subject to audit by the Department or a local tax collector should review the audit results and determine whether the Department or the tax collector are improperly attempting to assess late payment or negligence penalties. In addition, any taxpayer currently appealing an assessment to the Board or a district court should review its petition to determine whether it properly pleaded that assessed late payment or negligence penalties are not owed.

For additional information, please contact: Jaye Calhoun at (504) 293-5936, Jason Brown at (504) 293-5769, Willie Kolarik at (225) 382-3441, or Sanders Colbert at (504) 585-3021.

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[1] City of New Orleans’ Dept. of Finance v. Touro Infirmary, 905 So. 2d 314, 328 (La. App. 4 Cir. April 27, 2005).

[2] The Internal Revenue Code provides, in §6651, that a delinquency penalty applies to a failure “to pay the amount shown as tax on any return” while IRC §6662 applies an understatement or negligence penalty to the amount which was “required to be shown on the return.”

[3] La. R.S. 47:1604.1 (Effective to June 30, 2015).

[4] La. R.S. 47:1602(A) (emphasis added).

[5] City of New Orleans’ Dept. of Finance v. Touro Infirmary, 905 So. 2d 314, 328 (La. App. 4 Cir. April 27, 2005).

[6] It should be noted that, in its decision in Smith International, the First Circuit also considered another pre-amendment decision, specifically, Enterprise Leasing Co. of New Orleans v. Curtis, wherein the Court found a taxpayer liable for late payment penalties even though the taxpayer paid the amount of tax shown as due on the face of its returns.  In Enterprise Leasing, however, the First Circuit was considering only whether a good faith exception applied to the delinquency penalty. Enterprise Leasing Co. of New Orleans v. Curtis, 977 S02d 975 (La. App. 1 Cir. November 2, 2007)

[7] In addition, the local negligence penalty statute, La. R.S. 47:337.73, requires a finding of willfulness and was not amended by Act 128.

By Eric Lockridge and Katie Hollowell

The Supreme Court of the United States recently handed down a decision on the statute of limitations period under the Fair Debt Collection Practices Act (the “FDCPA”) to start off its term. The case provides a lesson to practitioners to draft carefully; the failure to do so may result in the loss of the cause of action.

The FDCPA is a federal statue that authorizes both private actions and public actions for violations of its provisions.[1] The applicable statute for the limitations period for private actions is 15 U.S.C. § 1692k(d), which states that any action must be brought “within one year from the date on which the violation occurs.”

In Rotkiske v. Klemm,[2] the Supreme Court expressly rejected application of the “discovery rule” to toll the running of one-year limitations period established by statute.  This decision resolved a circuit split between the Third Circuit (where Rotkiske originated and which rejected the discovery rule) and the Ninth Circuit (which endorsed the discovery rule) over the start of the limitations period. The Court upheld the Third Circuit’s decision, finding the language of § 1692k(d) is clear and unambiguous. Using traditional rules of statutory construction, the Court found the unambiguous language of the statute merited no further interpretation; to do so would be unnecessary and inappropriate.

Rotkiske presented a good equitable argument in favor of applying the discovery rule: he alleged he did not discover the basis of his FDCPA claim – faulty service leading to a default judgment against him – until more than one year after the (allegedly) faulty servicing occurred.

The Court rejected Rotkiske’s argument. Quoting Justice Scalia, the Court called the expansive approach to the discovery rule a “bad wine of recent vintage,” and found Congress made a conscious decision not to include a discovery rule in the FDCPA private cause of action provision. The Court narrowed the scope of its decision, however, stating that an equitable, fraud-specific rule may be applicable in a future case, if properly preserved and presented.

This caveat was necessary because Rotkiske argued an equitable, fraud-specific rule tolled the limitations period for his action. Nevertheless, the Court refused to consider the argument because it was not properly raised on appeal to the Third Circuit. So the Court preserved for a future date whether § 1692k(d) permits the applicable of an equitable doctrine to toll the statute of limitations.[3]

While a narrowly tailored decision, Rotkiske serves as a cautionary tale for practitioners: draft carefully. Failure to specifically allege and preserve claims could lead to dismissal, particularly in the context of the statute of limitations issues.

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[1] 15 U.S.C. §§ 1692k(d); 1692l.

[2] 589 U.S. ____ (2019).

[3] Justice Ginsberg alone dissented, stating that the fraud alleged in Rotkiske’s petition was sufficient to present the fraud-based discovery rule for review on appeal.

By Katherine King, Randy Young, and Carrie Tournillon

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 on Demand Response:  In February 2019, the LPSC opened a rulemaking to determine the need for and develop rate schedules and programs offering demand response products and allow for participation of retail customers in MISO programs, including to determine whether the programs should be mandatory for utilities and whether certain larger customers should be allowed to participate directly in wholesale demand response programs and under what conditions. A proposed rule has been issued, and comment procedures are ongoing to obtain input from stakeholders.

Entergy Proposed Experimental Interruptible Option (“EIO”) Tariff:  In October 2019, Entergy filed a proposed new interruptible tariff for industrial and commercial customers.  The tariff proposal contains various pricing levels, terms and restrictions, and is currently docketed for proceedings before the LPSC.

LPSC Rulemaking On Tariff and Site-Specific Contract Procedures: In July 2019, the LPSC issued a new rule that includes required procedures for consideration of tariff changes and site-specific contracts proposed by electric utilities.

Entergy Formula Rate Plan Extension: In May 2018, the LPSC approved an extension and modification of Entergy’s Formula Rate Plan (“FRP”) for annual filings and rate adjustments in 2018, 2019 and 2020, subject to 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 2019, the LPSC approved an acknowledgment that Entergy has completed the required process for its Integrated Resource Plan (“IRP”) for the years 2018 through 2038.  The objective of the IRP process is for the utility to provide its evaluation of a set of potential resource options that offers the most economical and reliable approach to satisfy future load requirements of the utility. However, the IRP process does not result in LPSC approval of the proposed resource plan or approval of construction or acquisition of any particular resources. Rather, LPSC consideration of resource approvals occurs in separate certification proceedings on individual proposals submitted by the utility on a case-by-case basis.

Louisiana Electric Rates, Industrial Customer Market Access: 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 comments were filed by stakeholders in February 2019.  A final report from LPSC Staff is anticipated, which will be presented to the Commissioners for a determination regarding steps forward.

Entergy Proposed Solar PPA and Experimental Renewal Option (“ERO”) Tariff:  In March 2019, the LPSC approved Entergy entering 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. Thereafter, Entergy separately sought approval  of a new Experimental Renewable Option (“ERO”) Tariff which would allow Industrial and Commercial customers the opportunity to schedule a portion of the Solar PPA. The proposed ERO Tariff was opposed by Industry and Commercial customer intevenors as being an inappropriate structure and model for Louisiana, and a contested settlement proposal was rejected by the LPSC in October 2019.

Entergy Generation Construction Projects:  In recent 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 December 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 as a self-build project in a Request-for-Proposals (“RFP”), was estimated to cost $869 million, and went into service in June 2019.

Entergy 994 MW Power Station in Lake Charles, Louisiana:  In July 2017, the LPSC approved Entergy’s proposal to construct a 994 MW CCGT unit located in Westlake, Louisiana.  The project was selected as a self-build project in a Request-for-Proposals (“RFP”), was 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 was estimated to cost $261 million, and recent indications are the in-service date is projected for 2020.

(LPSC Rulemaking) New Generation Deactivation Transparency Rule:  In October 2018, the LPSC issued a 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 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”). MISO identified and approved the project as addressing congestion in southeast Louisiana at a cost below its estimated benefits, as part of its MISO Transmission Expansion Plan (“MTEP”). The project construction was completed in 2018, at a cost of $75M.

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.  MISO identified and approved the project as addressing congestion in southeast Louisiana at a cost below its estimated benefits, as part of its MTEP process.  The project was estimated to cost $92M, and has a projected in-service date of second quarter 2022.  The proceeding is pending further evaluation by Entergy of the costs, and also pending consideration by the LPSC.

Cleco Power Application for Rate Change:  On June 28, 2019, Cleco Power LLC (“Cleco Power”) filed an application with the LPSC to change retail electric rates and to extend its FRP.  In the filing, Cleco is proposing to address implementation of prospective savings from the lower federal tax rate and the amortization of excess accumulated deferred income tax (“ADIT”) resulting from the federal Tax Cuts and Jobs Act (“TCJA”); residential revenue decoupling and other changes to the residential rate schedule; to increase its return on equity (“ROE”) from 10% to 11%; and to increase the equity percentage of its capital structure from 51% to 53%.  The hearing is scheduled for June 2020, with new rates expected to be implemented in July 2020.

Cleco Power Application for Implementation of TCJA:  In late January 2019, Cleco Power filed an application with the LPSC seeking authorization to implement rate reductions resulting from the TCJA, modify certain tariffs in connection with the rate reductions, and implement residential base revenue decoupling.  Cleco Power also requested expedited treatment so that its rate reductions can be implemented effective July 1, 2019.  A settlement agreement was approved by the LPSC in July 2019, authorizing the refund of accrued savings resulting from the TCJA’s reduction in the federal income tax rate and moving to Cleco Power’s rate case proceeding Cleco’s proposal for implementation of prospective savings relating to the TCJA and its request to implement residential base revenue decoupling.  The refund of accrued TCJA savings will be implemented through customer bill credits over a 12-month period, which began in August 2019.

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.

Entergy New Orleans Application for Rate Change:  In July 2018, Entergy New Orleans (“ENO”) filed an application with the City Council of New Orleans to change its retail electric and gas rates.  The rate application was withdrawn in August 2018, with a revised application filed in late September 2018, with a revised set of rates to mitigate rate impacts to ENO residential customers in Algiers, who had previously been customers of Entergy Louisiana, LLC.  ENO also proposed adoption of an ROE of 10.75% and new contemporaneous cost recovery riders and FRPs, including one for electric operations which incorporates a proposed decoupling mechanism as required by the Council and one for gas operations.  The proposed electric rates would result in an overall decrease in ENO’s revenues by approximately $20 million per year.  After discovery and several rounds of testimony filings, a hearing was held on the revised application in June 2018, followed by two rounds of briefing.  In November 2019, the Council adopted a Resolution and Oder that requires ENO to make a compliance filing pursuant to the terms of the Resolution and Order, with such compliance filing expected to further reduce ENO’s revenue requirements in excess of the $20 million reduction proposed by ENO, authorizes FRPs for ENO’s electric and gas operations, and sets ENO’s authorized ROE at 9.35%.  The compliance filing is expected to be filed by ENO in December 2019.

City of New Orleans Rulemaking on Renewable Portfolio Standard:  In March 2019, the City of New Orleans opened a rulemaking docket to establish a Renewable Portfolio Standard (“RPS”) for the City of New Orleans.  Following two rounds of comments on how the RPS should be structure, the Advisors to the City of New Orleans issued a Report that set forth three alternative RPS structures for consideration.  The alternative structures include (i) a 100% renewable RPS, (ii) a 100% renewable and clean standard (“RCPS”), and (iii) a 100% resilient RPS (“R-RPS”).  Two additional rounds of comments have been filed on the Advisors’ Report and proposed structure alternatives, and the docket is pending further action by the Council.

Entergy New Orleans Application for 90 MW Renewable Portfolio:  In July 2018, ENO filed an application with the City Council of New Orleans seeking approval of its 90 MW proposed renewable energy resources portfolio, consisting of a 20 MW self-build solar project located in New Orleans East (“New Orleans Solar Station” or “NOSS”), a 50 MW build-own-transfer (“BOT”) solar project located outside of Orleans Parish (“Iris BOT”), and a 20 MW PPA from a solar project that is also located outside of Orleans Parish (“St. James Solar PPA”).  In March 2019, after taking into consideration comments from the Council’s Advisors regarding whether the Iris Solar Facility’s costs could be reduced in any way, ENO filed a supplemental and amending application, proposing to substitute a proposed Iris purchased power agreement (“Iris Solar PPA”) in the place of the Iris BOT.  Then in May 2019, ENO filed additional testimony in support of ENO’s decision to provide an updated cost estimate and economic analysis for the NOSS project based on substantial reductions in the previously estimated project cost.  In July 2019, the City Council approved the amended 90 MW renewable portfolio pursuant to a settlement agreement among the parties.

This report was last updated on November 1, 2019

By: Louis M. Grossman

In September, the Department of Labor imposed significant fines against two Louisiana restaurants for violations of the Fair Labor Standards Act (“FLSA”). The iconic New Orleans Cajun-Creole restaurant Jacques-Imo’s paid more than $55,000 in fines for violating child labor laws under the FLSA; Superior Seafood paid out more than $230,000 in back wages and penalties.

Following an incident in which a 13 year old employee sustained third degree burns, the Department of Labor (“DOL”) audited Jacques-Imo’s restaurant and found it in violation of several Child Labor Law provisions.  First, the DOL found that the 13 year old employee sustained his injuries while cleaning a fryer when the oil temperature was in excess of 100 degrees.  Child Labor Laws prohibit minors from engaging in such dangerous work activities.  The DOL also found that the restaurant had allowed another minor to work hours beyond those permissible for children under the age of 16.

In the same month, news broke of another DOL audit of a local restaurant industry employer, Superior Seafood and Oyster Bar.  After an extensive audit of the company’s payroll practices and record-keeping, the DOL’s Wage and Hour Division concluded that the company had failed to pay overtime to more than 220 employees.  Specifically, DOL concluded that Superior Seafood had failed to combine hours worked by employees who held more than one position for purposes of determining overtime pay – i.e., that an employee who worked 40 hours as a bartender and 20 as a waiter was not paid overtime.  The DOL also found that the company had falsified records and failed to include incentive bonuses in calculating overtime payments.

These recent DOL audit findings serve as a stark reminder to Louisiana’s thriving hospitality industry of the importance of compliance with wage payment laws and maintaining appropriate payroll records. Proper training as well as back of the house postings can remind management not to assign minor employees to dangerous tasks and to ensure that the work schedules of minors comply with federal law.  Instructing restaurant management and payroll personnel/vendors  regarding the need to cumulate all hours worked by employees during a workweek for payroll purposes and including productivity compensation in employee overtime calculations is also essential for properly compensating employees for all time worked, including overtime.

Learn more about Kean Miller’s Labor and Employment Practice.

By: Michael J. deBarros

On October 22, 2019, the Louisiana Supreme Court issued its opinion in the Smith v. Citadel Insurance case.  Kean Miller’s Insurance Recovery Team assisted several amici in presenting arguments to the Court in the case.

In Smith, the Louisiana Supreme Court held that an insured’s bad faith claims against its insurer are governed by a ten-year prescriptive period, instead of a one-year prescriptive period.  In Louisiana, prescription (which is similar to the common law “statute of limitations”) is a mode of barring claims as a result of a failure to timely file a lawsuit on those claims.

The Smith decision is a big win for Louisiana insureds.  The ruling provides insureds sufficient time to discover their insurer’s bad faith acts or omissions and assert their rights, and it eliminates the often costly, complex, and fact-intensive litigation that previously ensued when some courts applied a one-year prescriptive period.

In ruling that an insured’s bad faith claims against its insurer are governed by a ten-year prescriptive period, the Smith Court relied heavily on Kelly v. State Farm (a case argued and briefed by Kean Miller’s Insurance Recovery Team) and reiterated that “in every case, the insurance company is held to a high fiduciary duty to discharge its policy obligations to its insured in good faith.”

By: Matt B. Smith and Maureen N. Harbourt

On September 30, 2019, the United States District Court for the Eastern District of Missouri, Eastern Division, issued an Opinion and Order setting forth the remedy required for Ameren Missouri’s violation of the Clean Air Act’s Prevention of Significant Deterioration (“PSD”) program. United States v. Ameren Missouri, No. 4:11-CV-77, Rec. Doc. 1122 (E.D. Mo. Sep. 30, 2019). Through the enforcement action, the EPA alleged that certain work done at Ameren’s Rush Island coal-fired power plant in 2007 and 2010 required a PSD permit and the installation of Best Available Control Technology (“BACT”) to control sulfur dioxide (“SO2”). The EPA further alleged that the failure of Ameren to apply for such a permit and install BACT resulted in substantial excess emissions from the Rush Island facility. The case had been bifurcated into separate liability and remedy phases, with the court finding that Ameren was liable for the alleged PSD violations on January 23, 2017. The most recent ruling focused on the remedy for such violations.

In addition to various ancillary factual, procedural, and legal determinations, the court focused on evaluating BACT for SO2 emissions. The court applied the traditional five-step analysis to determine BACT,[1] “the maximum degree of reduction of [SO2]…which the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for such facility.” Slip opinion, p. 28 (citing 42 U.S.C. § 7479(3)). Characterizing the BACT analysis as a “top-down” evaluation, the court determined that, if the option providing the highest level of control was “achievable” after considering the energy, environmental, and economic impacts related to that option, the analysis stops and that control is BACT. Id. at p. 30.

The court noted that there was no dispute concerning the first three steps of the analysis: identification of control options, elimination of technically infeasible options, and ranking of options by effectiveness.  The controversy concerned step 4 of the BACT process: evaluation of alternatives considering energy, environmental and economic factors. Ameren rejected wet Flue Gas Desulfurization (“FGD”) because it was not as cost effective as another control option. While the court noted that cost is a consideration in the process, the court’s interpretation of the process was that the BACT analysis “is not a search for the most cost-effective controls; nor is it a cost-benefit analysis.” Id. at p. 31. In reaching this interpretation, the court relied heavily on a statement in the EPA’s Draft NSR Workshop Manual that, for similar sources, it is presumed that cost and other impacts borne by one source may be borne by another. Id. Accordingly, the court found that an available technology is BACT unless it is rejected as being economically infeasible or is rejected due to adverse energy or environmental impacts. Id. at pp. 56-57, p.156,

Applying this approach, the court determined generally that some form of FGD scrubber (either wet or dry) is BACT for SO2 emissions based largely on the use of FGD scrubbers at other coal-fired power plants. Specific to the Rush Island facility, the court held that wet FGD scrubbers should have been installed as BACT for SO2 emissions. Id. at pp. 57 & 59-60. In so holding, the court rejected reliance on the incremental cost-effectiveness of two competing control technologies, a comparison of cost in dollars per ton of emission reductions of each technology, stating that incremental cost-effectiveness should only be considered when competing technologies have similar levels of effectiveness. Id. at pp. 41-42 & 44-45. Instead, the court focused on whether Ameren was capable of incurring the cost of the most effective control, wet FGD. Id. at pp. 55-56 & 62, ¶ 223 (“With respect to economic impacts, Ameren does not dispute that it can afford FGDs at Rush Island, and it presented no evidence that installing FGDs would otherwise impose an undue financial burden on the company.”) (see also pp. 109-13 analyzing Ameren’s financial resources and ability to obtain financing). Accordingly, the court ordered Ameren to apply for a PSD permit which proposes wet FGD as BACT for SO2 emissions.

The court further determined that Ameren’s failure to install scrubbers at Rush Island resulted in 162,000 tons of excess SO2 emissions through the end of 2016, continuing at a rate of approximately 16,000 tons per year until scrubbers are installed. Id. p. 58. To address these excess emissions, the court ordered Ameren to install a different control technology, dry sorbent injection (“DSI”), at a separate, nearby facility not subject to the lawsuit to reduce SO2 emissions from that facility. The court held that it had authority to reach beyond the Rush Island facility at issue because, under the CAA, it had the “authority to order a full and complete remedy for the harm caused by Ameren’s violations, and in doing so may go beyond what is necessary for compliance with the statute at Rush Island.” Id. at p. 149 (internal citations omitted). Because the installation of DSI at another facility in the same general area would benefit the impacted population by reducing SO2, the court found this remedy to be narrowly tailored to the harm suffered. Id. at p. 150. Further, the court found that this additional requirement was not an impermissible penalty because it required “emissions reductions up to, but not surpassing, the excess emissions from Rush Island.” Id. at p. 151.

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[1] The five steps applied by the court include (1) identifying all available control technologies for reducing the target pollutant; (2) eliminating those which are not technically feasible; (3) ranking the technically feasible technologies in order of effectiveness at reducing emissions; (4) evaluating the technologies based on energy, environmental, and economic impacts and other costs to determine the most effective technology that is achievable; and (5) selecting an emission limit based on how the technology has performed at other sources. Id. at pp. 29-30.