On March 11, 2020, during the height of the COVID-19 global pandemic, Governor John Bel Edwards declared a public health emergency for the State of Louisiana pursuant to the Louisiana Health Emergency Powers Act, La. R.S. 29:760 et seq. This is not the first time the Governor has declared a public health emergency for the State of Louisiana, as Louisiana is familiar with hurricanes and other natural disasters.

The Louisiana Health Emergency Powers Act provides, in relevant part, that, “[d]uring a state of public health emergency, any health care providers shall not be civilly liable for causing the death of, or injury to, any person or damage to any property except in the event of gross negligence […].”[1] Accordingly, the Louisiana Health Emergency Powers Act applies in favor of any healthcare provider, regarding any personal injury or property damage claim, that arises during a public health emergency.

The Louisiana Second Circuit Court of Appeals further elaborated on the specifics of the Louisiana Health Emergency Powers Act, as it pertains to healthcare providers and the COVID-19 global pandemic. In Lathon v. Leslie Lakes Retirement Center, 54,479 (La.App. 2 Cir. 9/21/22), the plaintiff brought a premises liability action against the owner of nursing home, alleging that the plaintiff slipped and fell when she stepped in liquid that was spilled by the owner’s employee. The Second Circuit held that the provision of the Louisiana Health Emergency Powers Act[2], which governs healthcare provider immunity, applied to the owner, and thus the owner was not liable for the plaintiff’s alleged injuries in the absence of evidence of gross negligence.

Lathon’s significance is that this is the first premises liability case that involved a healthcare provider’s facility during a public health emergency, and the healthcare provider’s facility was entitled to the protections of the Louisiana Health Emergency Powers Act. Furthermore, not only does Lathon create a defense for premises liability cases arising out of the COVID-19 pandemic, but it also creates a defense for premises liability cases that arise out of future public health emergencies in the State of Louisiana.

[1] La. R.S. 29:771(B)(2)(c).

[2] La. R.S. 29:771(B)(2)(c).

On September 2, 2022, the U.S. Customs and Border Protection of the Department of Homeland Security (“CBP”) issued a CBP ruling, HQ H32233, determining that most offshore Wind Energy installation projects, including the laying of transmission cables, generally requires the use of Jones Act (Coastwise) compliant vessels. Jones Act qualified and compliant vessels are those vessels that are, among other things, (a) wholly owned by a U.S. Citizen; and (b) have been issued a Certificate of Documentation with a valid coastwise endorsement.

Importantly, any offshore installation projects must ensure that plans incorporate and adhere to the Jones Act. Failure to comply with these demanding laws may result in severe penalties, fines, and even forfeiture of assets/vessels.

In this case, CBP was specifically asked to consider five (5) questions concerning the following topics:

(1) whether jet action emulsification for cable laying constitutes dredging;

(2) laying cable with a non-coastwise qualified vessel violated the Jones Act;

(3) whether excess cable returned to a U.S. port by a non-coastwise qualified vessel violated the Jones Act;

(4) whether the transportation and/or placement of concrete mats on a non-coastwise qualified vessel violates the Jones Act; and

(5) whether the transportation of the marine and project crew violates the Passenger Vessel Services Act.

First Issue: Dredging

Generally, dredging operations on the Outer Continental Shelf (“OCS”) require the use of Jones Act qualified vessels. However, CBP has consistently held that the use by cable-laying vessels of cable-burial devices employing a jetting action resulting in the emulsification of the seabed surrounding the cable does not constitute an engagement in dredging. Furthermore, CBP has also determined that the use of “a share or plow and cutting disc” that creates a ‘very narrow’ slice of the seabed under which the cable is buried is not an engagement in dredging. Thus, based upon these specific facts presented, the use of a water-jet cable-burial device does not violate the Jones Act if used by a non-coastwise qualified vessel on the OCS.

Second Issue: Cable Laying Vessel

In 2021, the Outer Continental Shelf Lands Act of 1953 (“OCSLA”) was specifically amended to include “installations and other devices… attached to the seabed which may be erected thereon for the purpose of exploring for, developing, or producing resources, including non-mineral energy resources…” Thus, OCSLA, as amended, extends U.S. jurisdiction to the OSC seabed for the purpose of producing wind energy. See, The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. § 9503 (2021). Therefore, coastwise laws apply to such wind energy installation projects on the OCS.

Generally, a Jones Act qualified vessel is required to transport merchandise between two “U.S. points.” However, since 2001, for cable laying operations, the CBP has consistently determined that cable placement operations do not constitute coastwise trade under the Jones Act. Previous determinations have permitted non-coastwise qualified (e.g., foreign flagged vessels) to pay-out cable within U.S. territorial waters and on to the OCS.

Additionally, the process of connecting a previously laid cable with a new reel of cable (on board the vessel) by picking up the cable on the seafloor and connecting it to the new extension does not violate the Jones Act if the operation is completed by non-coastwise qualified vessel. Such is an important determination that could accelerate transmission capabilities on the OCS.

Third Issue: Returning Excess Cable to U.S. Port Post-Operation

The Jones Act declares that only coastwise qualified vessels may transport merchandise or passengers between two U.S. points. Historically, CBP has liberally construed the term “merchandise” to include even “valueless” items. Here, CBP was asked whether the Jones Act would be violated if a non-coastwise qualified vessel transported excess cable (not paid out) to a U.S. port (the end of the unused reel of cable) following the conclusion of the project.

While CBP did not provide a precise answer, the general parameters were set: there is no violation of the Jones Act if the non-coastwise qualified vessel returns excess cable to the exact coastwise point at which it was loaded onto the vessel if such was ladened at a U.S. port. In fact, the “same point” requires the loading/unloading to take place in the same berth within the same harbor; otherwise, a violation of the Jones Act may occur given that “points within a harbor” are considered two U.S. points for purposes of transporting merchandise like this transmission cable.

Fourth Issue: Transporting Concrete Mats or Bags of Rock to Protect Cables

As previously discussed, merchandise has a broad definition, which includes even valueless items. The term merchandise includes concrete mats and bags of rock. Such items are not excluded from this broad definition even with the “vessel equipment” exception given that mats and rock are not “necessary and appropriate for the navigation of, operation or maintenance of the vessel.” In fact, in April 2022, CBP determined that cable-protection material transported and discharged by a cable installation vessel did not constitute “vessel equipment” because such items are not utilized to aid the cable installation itself, and are thus “dissimilar from things used as tools for installation operations.” Such materials are intended to perform functions separate from that of the vessel’s operations. Therefore, the mats and rock are “merchandise” and must be transported between two U.S. points (U.S. Port and the point discharged on to the OCS) by Jones Act qualified vessels. Here, the electrical transmission cable locations are coastwise points; and if the port of lading is also a U.S. port, then transporting the merchandise (rock and mats) between the U.S. port and the seabed must be conducted by a Jones Act qualified vessel.

Fifth Issue: Transporting Marine and Project Crew Violates the Passenger Vessel Services Act

Generally, a non-coastwise qualified vessel cannot transport “passengers” between two U.S. points either directly or indirectly via a foreign port. The marine crew is responsible for the navigation and operation of the vessel. Project crew members are those on board to oversee the cable installation, which include executive company representatives.

CBP determined that to the extent that the individuals will be engaged in any shipboard activities while traveling on the non-coastwise qualified vessels between two or more coastwise points that would be “directly and substantially” related to the operation, navigation, or business of the vessel itself, as would be the case under the facts herein submitted, such individuals would not be considered “passengers.” CBP determined project members are ‘directly and substantially’ related the operation and “business of the vessel,” which was to lay submarine electrical transmission cables on the OCS. Therefore, for the purposes of this factual scenario, the “project” members on board the vessel would not be considered “passengers” for purposes of the Passenger Vessel Services Act.

Conclusion:

Overall, CBP appears to appreciate the complexity of constructing offshore wind installations on the OCS. Such includes the need to bury transmission cables and to transport company personnel on board vessels while such operations are underway.

While this ruling is in no way binding as precedent (as with any CBP ruling), such does offer guidance as to how CBP may approach and address future scenarios. However, should you have any specific questions or concerns, it is paramount to consult with counsel before undertaking offshore activities that may violate the Jones Act; violations may result in hefty fines, penalties, and forfeiture of vessels and assets.

In trip and fall litigation, the validity of a plaintiff’s claim often turns on whether the condition allegedly causing the fall is a so-called “open and obvious” risk of harm. That is, a risk of harm that is so obvious and discoverable that a reasonable person would have avoided the hazard, and ultimately, the injury.[1]

Knowing what Louisiana courts traditionally deem “open and obvious” can inform a property owner on the likelihood of liability if an injury arises from a fall on their property. Practically, this can prepare property owners for what to watch out for and may lead to quicker resolution of pending litigation should it occur.

“Unreasonably Dangerous” Conditions

If a risk of harm is open and obvious to all who may encounter it, the likelihood that it will cause harm is decreased, and it will not be considered unreasonably dangerous under Louisiana law.[2] This is critical because a defendant does not generally have a duty to protect against an open and obvious hazard.[3] If a plaintiff cannot prove that the defendant owed a duty to protect against the risk of harm, the plaintiff’s claim will necessarily fail.

A Recent Case

Earlier this year, the Louisiana Fifth Circuit Court of Appeal affirmed the trial court’s determination that risk of harm presented by the concrete base of a 20-foot light pole 18 inches wide and 4 inches high was not open and obvious and thus, was unreasonably dangerous.[4]

The trial court’s determination hinged on the fact that, because the base was covered with black mold and dirt and often partially obstructed by shadows, it blended in with the sidewalk and was not open and obvious.[5] In shooting down the property owner’s open and obvious argument, the court emphasized that the mold and dirt on the base combined with shadows from a nearby ramp and the light pole rendered the base virtually indistinguishable from the walkway.[6] Therefore, despite the considerable size of the base of the light pole, the court determined that the base was not open and obvious.[7]

So, what could the property owner have done differently? In its decision the court did offer some guidance that may be instructive to concerned property owners.

The court indicated that its decision was partially based on the light pole base not being marked as a trip hazard when other trip hazards in the walkway were marked as such.[8] Further, the court indicated that, had the base been painted a color that distinguished it from the walkway, it may have been more obvious to those traversing the area.[9]

Visible Markings Help Prevent Injuries

The suggestion to use visible markings is in line with other Louisiana jurisprudence on the issue instructing that visibly marked warning signs and an unobstructed view of the risk of harm cut against a plaintiff’s showing of an unreasonably dangerous condition.[10]

For instance, in another case, the Louisiana Second Circuit Court of Appeal determined that a product display that a plaintiff tripped over did not pose an unreasonably dangerous condition due to its open and obvious nature because the corners of the display were visibly marked with warning signs and the path alongside the display was not obstructed.[11]

Similarly, the Louisiana First Circuit Court of Appeal held that any risk of harm created by a curb was open and obvious because the curb created no optical illusion, nothing prevented the plaintiff from seeing the curb, and the edge of the curb was painted yellow making it readily apparent to all who may encounter it.[12] In that case, the plaintiff, who tripped over the curb outside of a hotel, could not recover because of the failure to show that the curb was an unreasonably dangerous condition.

In summary, the open and obviousness of an alleged risk of harm is an important factor that courts consider when determining whether the risk of harm constitutes an unreasonably dangerous condition.

If a court determines that a risk of harm is open and obvious to all who may encounter it, the plaintiff will likely be unable to carry the burden of proving that there was an unreasonably dangerous condition and the claim will fail.

[1] Pitre v. Louisiana Tech Univ., 95-1466 (La. 5/10/96), 673 So. 2d 585, 589.

[2] See Broussard v. State ex rel. Off. of State Bldgs., 2012-1238 (La. 4/5/13), 113 So. 3d 175, 184.

[3] Id.

[4] Tromatore v. Jefferson Par. Hosp. Serv. Dist., 21-551 (La. App. 5th Cir. 5/26/22), 341 So.3d 1269.

[5] Id. at 1276.

[6] Id. at 1278.

[7] Id.

[8] Id.

[9] Id.

[10] See, e.g., Upton v. Rouse’s Enter., LLC, 15-484 (La. App. 5th Cir. 2/24/16), 186 So. 3d 1195, writ denied, 2016-0580 (La. 5/13/16), 191 So. 3d 1057; Jones v. Mkt. Basket Stores, Inc., 2021-354 (La. App. 3d Cir. 3/30/22), reh’g denied (Apr. 27, 2022).

[11] Primrose v. Wal-Mart Stores, Inc., 48,370 (La. App. 2 Cir. 10/2/13), 127 So. 3d 13.

[12] Primeaux v. Best W. Plus Houma Inn, 2018-0841 (La. App. 1st Cir. 2/28/19), 274 So. 3d 20, 33.

Louisiana Department of Revenue income tax auditors are increasingly proposing large assessments by misapplying a formula in a Department regulation (La. Admin. Code 61:I.1130(B); the “Regulation”). The Regulation is based on a statute designed to prevent deductions related to allocable and nontaxable income and contains a formula that purports to determine a percentage of a taxpayer’s assets that produce income not taxable by the state. Under this blanket approach, which doesn’t take into account whether the assets plugged into the formula are held to produce allocable or apportionable income (or whether they produce income at all), audit assessments result from a proportionate denial of expenses otherwise deductible by the taxpayer. In particular, in these audits, the Department incorrectly denies a taxpayer’s interest expense deductions by attributing, for example, the interest expense on acquisition loans or other expenses designed to produce apportionable income, to nontaxable income or to allocable income not taxable by the state. This approach ultimately distorts the taxpayer’s Louisiana taxable income. By incorrectly over-attributing a taxpayer’s interest expense to its allocable and non-taxable income through routine application of the inapplicable Regulation the Department is forcing taxpayers with multi-state operations into expensive and time-consuming audits.

Under Louisiana law, the state can tax its share of a taxpayer’s apportionable income as well as any income allocable to the state.[1] Louisiana cannot tax income that is allocated elsewhere or tax-exempt income, including interest and dividend income which were previously allocable income but are now no longer subject to tax after 2005 changes to Louisiana corporation income tax law.[2] As will be explained, the Department’s revisions to the Regulation to address the 2005 revisions to the taxation of interest and dividend income created many of the issues that now arise regularly on audit and are frequently the subject of litigation.

Before a taxpayer can determine its net allocable and net apportionable income (which ultimately compose the taxpayer’s Louisiana net income) it must determine its allowable deductions.[3] But “in computing Louisiana net income or Louisiana taxable income no deduction shall in any case be allowed in respect of any amount otherwise allowable as a deduction which is attributable to income which, for any reason whatsoever, will not bear the tax imposed by [Louisiana corporation income tax law].”[4] Louisiana’s law is analogous to Internal Revenue Code sec. 265 but, with respect to interest income, the Department, in its regulations, adopts the approach in the federal regulations under IRC sec. 861. IRC sec. 265 adopts the direct tracing approach for purposes of determining the amount of a taxpayer’s interest expense from indebtedness related to tax-exempt interest income, for which no deduction is allowed, and, only when direct tracing is not possible, turns to a formulary approach.[5] The Department’s regulatory mechanism, however, for attributing deductible income expense to allocable income is similar to the asset-based apportionment method in the IRC sec. 861 regulations. Under Louisiana law, before a taxpayer can determine the amount of its deductions to be netted with its gross allocable and gross apportionable income, the taxpayer must attribute a portion of its otherwise deductible expenses to its nontaxable income because no deduction for those expenses is permitted.

The Department, however, skips the direct tracing method entirely. Specifically, the Department’s Regulation adopts a broad asset-based apportionment method to apportion a taxpayer’s interest expense deductions to allocable and apportionable income, regardless of why the expense was actually incurred. In contrast, under IRC sec. 265, the use of an asset-based apportionment method to allocate interest expense to tax-exempt income is only permitted if the proceeds of indebtedness are not directly traceable to the holding of an instrument that produces tax-exempt income.[6]

The Department’s regulatory approach is based on the premise that money is fungible and as a result, unless an exception applies, a taxpayer’s deductible interest expense must be apportioned to all activities and property of the taxpayer regardless of the purpose of the borrowing.[7] For that reason, the Regulation provides that the interest expense attributable to total assets producing or held for the production of allocable income “shall be determined by multiplying the total amount of interest expense by a ratio, the numerator of which is the average value of assets that produce or that are held for the production of allocable income, and the denominator of which is the average value of all assets of the taxpayer.”[8] This approach has the unfortunate effect of over-stating Louisiana taxable income.

In addition to being inconsistent with the way the comparable federal legislation IRC sec. 265 is administered, the Regulation is not consistent with Louisiana law. The Louisiana statutory definitions of net apportionable and net allocable income mandate use of the direct tracing method, as recognized by the Louisiana Board of Tax Appeals in Ampacet Corporation. In Ampacet, the Board held that the statutory definitions for determining net apportionable and net allocable income, which rely on direct tracing similar to Code Section 265, must be applied before the Department’s Interest Expense Attribution Regulation can be considered. Other states with comparable state statutes patterned after IRC sec. 265 have also relied on direct tracing because it is appropriate under the rationale of these laws. See e.g., Appeal of Zenith National Insurance Corp. and Apple, Inc. v. Franchise Tax Bd. Nevertheless, the Department has continued to assert that the formulary approach in the Regulation applies to the exclusion of direct tracing methods even where the result is nonsensical. This is the crux of the problem and the approach, unfortunately, has resulted in a significant increase in litigation.

The Regulation states that the Department is decoupling from IRC sec. 265 and the statutory definitions of net allocable and apportionable income as necessary for the “convenience of computation” – but that is not for a compelling policy reason.[9] Certainly, the Department has no authority to discard the direct tracing method absent an amendment by the legislature that forbids the use of such a method for purposes of determining a taxpayer’s deductible interest expense.

Asset-based apportionment apportions an expense to classes of gross income by multiplying the expense by a ratio, the numerator of which is the value of assets that generate the relevant class of income of income and the denominator of which is the value of the taxpayer’s total assets.[10] As mentioned above, under the Department’s reasoning, interest on borrowed money is never susceptible of direct attribution to any specific income and must always be allocated with this formula. On audit, the Department routinely improperly includes assets that do not or cannot produce allocable income in the ratio’s numerator. Such assets include items like goodwill, technology (e.g., patents and proprietary technology), capitalized costs related to long-term customer contracts, licenses, advertising expenses, and covenants not to compete many of which generally do not produce allocable income except for example, where technology is licensed to third parties and produces royalty income. For example, taxpayer cannot sell a competitor the right to benefit from its advertising campaign or license its goodwill to another party.

Most of these assets exists solely because U.S. Generally Accepted Accounting Principles require a taxpayer to capitalize and amortize these expenses over time, as opposed to expensing these costs in the year they are incurred. Moreover, taxpayers incur these types of costs solely for the purpose of producing and selling goods or services, the sales of which generate apportionable income. These assets don’t belong in the numerator of the Louisiana interest expense attribution ratio. From a practical standpoint, inflating the numerator of the attribution ratio in this manner could, for example, result in the Department taking the nonsensical position that, in effect, a taxpayer incurs a large proportion of its debt to earn a miniscule amount of nontaxable and allocable income producing absurd and inequitable results.

Similarly, the Department, in light of the fact that dividend income is not taxable, will include investments in subsidiaries in the numerator of its regulatory expense attribution ratio. Investments are typically held for the purpose of ultimately producing net gains in the value of the investments, i.e., apportionable income. The Department has resisted determining whether investments such as these actually produce dividend income at all regardless of whether they actually do produce nontaxable or allocable income during the audit periods. Nevertheless, because dividend income is nontaxable, the portion of the interest expense to be disallowed must be determined based on the direct tracing approach required by the statutory definitions of net apportionable and net allocable income to determine whether the investments produce apportionable income for example, by selling products to customers.

In general, when a regulation imposes conditions not contained in the statute the regulation purports to interpret, resulting in audit assessments which are unsupported by substance or the rationale for the law at issue, the taxpayer should consider challenging the proposed adjustment. It is important to challenge, on a timely basis, an assessment based on rote application of the Regulation. One size does not fit all situations like this.

[1] La. R.S. 47:287.92(A) and La. R.S. 47:287.701(C) and (D).

[2] See prior law at La. R.S. 47:287.93(2005); La. R.S. 47:287.93(2005) and revised law at 2005 La. Sess. Law Serv. Act 401 (H.B. 679). See also La. R.S. 47:287.93 and La. R.S. 47:287.738(F). Note that from July 1, 2015 through June 30, 2018, 28% of dividend income was classified as apportionable income. (See La. R.S. 287.738(F); 2015 La. Sess. Law Serv. Act 123 (H.B. 624) Sec. 1 (effective July 1, 2015) and Sec. 3 (effective July 1, 2018)).

[3] La. R.S. 47:287.63.

[4] La. R.S. 47:287.81.

[5] I.R.C. Sec. 265(a)(2) and Revenue Procedure (“Rev. Proc”) 72-18 (1972-1 C.B. 740). Code Section 163(a) permits a taxpayer to deduct interest paid or accrued on indebtedness unless an exception applies. Section 265 contains an exception to the general rule in Section 163 and disallows a deduction for interest expense on indebtedness incurred or continued to purchase or carry obligations that produce tax-exempt interest income. For purposes of Code Section 265, Rev. Proc. 72-18 adopts the direct tracing method to determine whether the proceeds of indebtedness are directly related to a specific instrument that produces tax-exempt income. The revenue procedure provides an asset-based apportionment formula for use when direct tracing is not possible.

[6] Rev. Proc. 72-18 Sec. 7.02.

[7] La. Admin. Code 61:I.1130(B)(1)(a).

[8] La. Admin. Code 61:I.1130(B)(1)(d)(iii).

[9] La. Admin. Code 61:I.1130(B)(1)(d)(iv)(a).

[10] Treas. Reg. 1.861-9(g) and 1.861-9T(g). Code Section 861 and the related regulations contain complex and detailed rules for the asset-based apportionment of a taxpayer’s deductible interest expense to its foreign source income. The Department’s Interest Expense Attribution Regulation relies on a less sophisticated asset-based apportionment mechanism than Code Section 861.

In a decision holding that surety bonds are not executory contracts, the Fifth Circuit signaled that courts may in the future utilize the functional approach to determine if multiparty contracts are executory in nature. The case, filed in the United States Bankruptcy Court for the Middle District of Louisiana as In re Falcon V, L.L.C., concerned a $10.5 million surety agreement between the Debtor, Falcon V, L.L.C., and Argonaut Insurance Company (“Argonaut”).

The Debtor and its affiliates were involved in oil and gas exploration and development and the Debtor entered into an agreement for Argonaut to post four irrevocable performance bonds, which guaranteed the Debtor’s obligations to third parties related to plugging and abandonment and restoration of wells. If the Debtor failed to perform its obligations, Argonaut was obligated to pay the third-party obligee the amount of the obligation or to perform the obligation, up to the amount of the performance bond.

The bonds provided that regardless of whether the Debtor paid the premiums owed, Argonaut’s obligations continued and would not be discharged by the Debtor’s failure to pay such premiums. The Debtor agreed to make premium payments to Argonaut and to indemnify it for any payments made under the bonds. After filing its Chapter 11 case, the Debtor sought and received permission from the Bankruptcy Court to continue meeting its obligations to Argonaut under the bond program (referred to as the “Surety Bond Program”).

Argonaut filed a proof of claim in the bankruptcy case that included a statement that the Surety Bond Program could not be assumed and assigned because it was a “financial accommodation,” but reserved all rights in the event the Surety Bond Program was deemed an executory contract. The Debtor’s Plan, as approved, provided that all executory contracts not specifically rejected were assumed. The Surety Bond Program was not included on the list of rejected executory contracts.

After the Debtor was discharged, Argonaut requested that the Debtor provide an additional $7.3 million in collateral to secure the performance bonds. The Debtor refused. The Debtor argued that Argonaut’s claim had been discharged through the bankruptcy process. Argonaut claimed that the Surety Bond Program was an executory contract that was assumed, or alternatively, the Surety Bond Program “rode through” the bankruptcy case.

The Bankruptcy Court (Dodd, J.) determined that the Surety Bond Program was not an executory contract assumed by the approved Plan because Argonaut owed no continuing performance to the Debtor. Even if it was an executory contract, the Bankruptcy Court ruled that it was a non-assumable financial accommodation. The District Court (Jackson, J.) affirmed the Bankruptcy Court’s ruling. Argonaut subsequently appealed to the Fifth Circuit, arguing that the Surety Bond Program was assumed as an executory contract, or alternatively that it rode through the bankruptcy case.

In determining whether the Surety Bond Program was an executory contract, the Fifth Circuit first looked to the Countryman Test, which looks at whether each side to a contract has at least one material unperformed obligations as of the date the bankruptcy petition is filed and if a party’s failure to perform a material obligation would excuse compliance by the counterparty. The Bankruptcy Court and District Court both found there were not material obligations remaining on both sides on the petition date; the Debtor owed obligations to Argonaut, but Argonaut owed no obligations to the Debtor.

Argonaut pointed out that it still owed obligations to the third-party obligees under the Surety Bond Program, and argued that this multiparty contractual relationship justified a departure from the Countryman Test. The Fifth Circuit rejected this proposed approach, stating that it “seems designed simply to elevate the rights of sureties above those of other creditors.”

However, the Fifth Circuit agreed that the Countryman Test should be applied flexibly to account for obligations owed to all parties in multiparty agreements. Nonetheless, the Court found that even if the obligations owed by Argonaut to the third-party obligees would meet the material obligations portion of the Countryman Test, it failed the second requirement, as the performance bonds were irrevocable and the Debtor’s failure to perform its obligations would not excuse Argonaut from its obligations under the agreements.

In an important footnote, the Court noted that in future cases courts may be called upon to modify the Countryman Test and apply and adopt a more “functional approach” for multiparty contracts. The functional approach looks at the benefits that assuming or rejecting a contract would produce for the bankruptcy estate to determine if the contract at issue is executory in nature. This opens the door for a more flexible approach in determining whether multiparty contracts are executory and will have implications beyond the realm of surety contracts.

The 19th Judicial District Court in Baton Rouge, Louisiana issued a decision on September 14, 2022, vacating a proposed industrial facility’s permit issued by the Louisiana Department of Environmental Quality (“LDEQ”) and finding that LDEQ violated the federal Clean Air Act and its duty under the Public Trust Doctrine.[1] Although the decision concerns permitting for a specific facility in St. James Parish, FG LA’s planned ethylene and propylene complex, the decision has far-reaching effects for air permitting in Louisiana under the Prevention of Significant Deterioration (“PSD”) program. In the nearly 40-page decision, the Court holds on several issues including disapproval of the use of Significant Impact Levels (“SIL”) in the PSD analysis, requirements for Environmental Justice reviews and implementation of the U.S. Environmental Protection Agency’s EJSCREEN tool,[2] review of air modeling conclusions, and analysis under Louisiana’s so called “IT Factors.”[3] The opinion also states that the LDEQ failed to perform a cumulative impact analysis for potential air toxics emissions from the planned facility such as ethylene oxide and benzene.[4]

The Court notes that environmental justice issues are “at the heart of” this case. Environmental justice issues have been elevated by the Biden administration’s efforts to highlight and advance policies to address and support underserved communities. In January of 2021 President Biden signed Executive Orders (“E.O.”) 13985 and 14008, which concern environmental justice issues. In connection with these E.O.s, EPA published a guidance document entitled “EPA Legal Tools to Advance Environmental Justice” in May of 2022. The document includes lengthy discussions on cumulative impacts of air toxics and analyzes the current EPA regulatory frameworks and statutory authority to implement cumulative impacts analysis as it relates to overburdened communities. Still, programs at both the federal and state level designed to control and mitigate toxic air pollutants often address cumulative impacts only indirectly and leave open practical questions about applying a cumulative impact analysis to review of a stationary source air permit or permit modification.[5]

For instance, EPA regulates over 150 hazardous air pollutants and provides control technology standards (National Emission Standards for Hazardous Air Pollutants, “NESHAP”) for individual industries. But other than vague “other impact analysis” requirements in the PSD program (which the Court did not reference here), there is no regulatory framework or specific guidance for considering the cumulative impact of emissions of multiple hazardous or toxic pollutants. The difficulty grows exponentially upon consideration of the cumulative impacts from multiple commercial and industrial facilities. Although some states (like Louisiana) have regulated beyond EPA’s list of hazardous air pollutants through the development of state-only toxic air pollutant ambient standards, these also generally consider a single pollutant’s environmental and health effects rather than aggregate impacts.[6]

As acknowledged by the EPA, there are significant research gaps and deficient data areas that need to be addressed to inform a proper cumulative impact assessment.[7] Even more so, a cumulative risk assessment will require more refined biological and chemical data and methods that are not currently developed.

The Court here did not address these issues with performing a cumulative impacts analysis and rejected LDEQ’s more qualitative analysis of potential air toxics emissions at the proposed facility. The Court found instead that:

…LDEQ cannot determine [the community’s] full risk for cancer from exposure to toxic air pollutants if the agency does not consider FG LA’s ethylene oxide and benzene emissions in combination with such emissions from other facilities that the agency itself says drives EPA’s cancer risk data for the area [referencing the EPA EJSCREEN].

Thus, the Court held that LDEQ’s conclusion about air toxics was arbitrary and capricious and not supported by a preponderance of the evidence in the record. And because LDEQ relied on this conclusion in its Public Trust Doctrine analysis, the agency failed to meet that duty as well.

There remains time to appeal this decision to the Louisiana First Circuit. But the opinion signals at least a shift towards cumulative impact analysis requirements in air permitting in Louisiana, considering that the 19th Judicial District is venue for all LDEQ permit challenges. Environmental justice issues, and especially air toxics issues, are becoming a battle ground for air permitting application challenges. In the meantime, stakeholders and permittees should consider performing at least a qualitative analysis of the effects of air toxics from the project and surrounding areas for the record.

[1] The Public Trust Doctrine is established under the Louisiana Constitution. It requires that the natural resources of the state and the quality of the environment must be protected and conserved consistent with the health, safety, and welfare of the people. See La. Const. art. IX §1.

[2] The EPA’s EJSCREEN tool has emerged as a standard for the environmental justice analysis in air permitting and otherwise. But the EJSCREEN does not analyze or produce cumulative impact information. Rather, the EJSCREEN produces a series of indices that combine demographic indicators with one single environmental factor.

[3] In Save Ourselves, Inc. v. La. Env’t Control Comm’n, 452 So. 2d 1152 (La. 1984), the Louisiana Supreme Court interpreted the Public Trust Doctrine to require LDEQ to address certain factors before issuing a permit. These are referred to as the “IT Factors” after the name of the permittee in the case.

[4] The case is Rise St. James, et. al. v. Louisiana Department of Environmental Quality, Docket No. 694,029, 19th Judicial District Court Parish of East Baton Rouge (Sept. 14, 2022).

[5] See Rucinski, Addressing Cumulative Impacts of Air Toxics in Air Permitting, Air & Waste Management Association’s 115th Annual Conference & Exhibition, held June 27-30, 2022 in San Francisco, CA (providing a full discussion of current EPA regulatory frameworks for addressing cumulative impacts and discussion of state and federal guidance on practicalities of implementing such reviews in air permitting).

[6] See e.g., Louisiana Administrative Code – LAC 33:III.Chapter 51, Tables 51.1 – 51.3; see also California Air Resources Board (CARB), Airborne Toxic Control Measures. In 1989 Louisiana enacted Louisiana Revised Statute 30:2060 which called for (among other mandates) the establishment of a toxic air pollutant (“TAP”) emissions control program, the development of a baseline for TAP emissions, and a 50% reduction of statewide TAP from that base line level within 20 years. The LDEQ promulgated regulations that, in addition to incorporating MACT standards, establishes reporting requirements for all major sources of TAPs and sets ambient air standards for each TAP. Louisiana’s list of TAPs includes all of the federal HAPs and adds others that are of particular concern in Louisiana, including ammonia and hydrogen sulfide.

[7] See Cumulative Impacts, Recommendations for ORD Research, EPA, January 2022 (available at: https://www.epa.gov/system/files/documents/2022-01/ord-cumulative-impacts-white-paper_externalreviewdraft-_508-tagged_0.pdf) (last accessed 05/13/2022).

We’ve all seen the commercials: “Call before you dig.” But how does calling 811 before you dig help, and what’s required for underground facility owners and contractors performing excavation work? Continue reading for a brief summary of the Louisiana Underground Utilities and Facilities Damage Prevention Law (La. R.S. 40:1749.11, et seq.) (“Dig Law”).

The stated purpose of the Dig Law is the “protection of property, workmen, and citizens in the immediate vicinity of an underground facility or utility from damage, death, or injury and to promote the health and well-being of the community by preventing the interruption of essential services which may result from the destruction of, or damage to, underground facilities or utilities.”[1] Interestingly, protection of the underground facility or utility itself is not expressly included as a stated purpose. Generally, the Dig Law makes it illegal for any person to perform any excavation or demolition without first ascertaining the location of all underground utilities and facilities by providing telephonic or electronic notice to the regional notification center (i.e., 811) at least 48 hours (excluding weekends and holidays) before starting any excavation or demolition.[2] The requirement to “call before you dig” does not apply to activities by operators or land owners excavating their own underground facilities or utilities on their own property.[3]

Conversely, each operator of underground facilities in the state must participate in and share the cost of the regional notification center, including providing the center with the general location of its underground facilities.[4] When the regional notification center receives a notice of intent to excavate, it notifies each member operator having utilities or facilities near the site of the proposed excavation. Once notified, the operator of the utility or facility must provide the excavator with the specific location and type of all its underground utilities or facilities. This information is most commonly provided via visible marks on the ground of various shapes and colors, commonly including paint and flags, which denote the location and type of facilities present in the area. The Dig Law requires that the location provided be within 18 inches of either side of the actual facility location.[5] Many utility owners and operators contract with locating companies to provide the required information.

Although the operator of the underground facility or utility must provide information concerning the location, an excavator must take additional precautions to prevent damage, including planning the excavation to avoid damage, maintaining a safe clearance from the facilities, providing support for the facilities, and digging test pits or “potholing” to determine the actual location of certain facilities or utilities.[6] In the event of any damage to an underground facility or utility, the excavator must immediately notify the owner or operator of the facility of the location and nature of the damage.[7] The excavator must provide additional notices and take further action if the damage permits the escape of any flammable, toxic, or corrosive fluids or gases, including alerting appropriate emergency response personnel.[8]

An excavator is liable for any damage to a utility or facility caused by its negligence, and in the event of a lawsuit between an owner or operator and an excavator involving damage to underground facilities or utilities, the prevailing party is entitled to recover its attorneys’ fees.[9] In addition to lawsuits between the parties, both excavators and utility owners may be subject to additional penalties for violations of the Dig Law.[10] The Dig Law may be enforced by the Department of Public Safety and Corrections or any local law enforcement agency via administrative proceedings.[11]

If you have any questions or need assistance with any Dig Law issues, please visit the Louisiana 811 website (https://www.louisiana811.com/) or reach out to our construction team for help (https://www.keanmiller.com/construction.html).

[1] La. R.S. 40:1749.11(B).

[2] La. R.S. 40:1749.13.

[3] Id.

[4] La. R.S. 40:1749.14.

[5] Id.

[6] La. R.S. 40:1749.16.

[7] La. R.S. 40:1749.17.

[8] Id.

[9] La. R.S. 40:1749.14(F).

[10] La. R.S. 40:1749.20.

[11] La. R.S. 40:1749.27.

The property tax “open rolls” period is here for Louisiana taxpayers. This annual inspection period is important in any year, but this year early and appropriate action is critical in light of recent legislation that affects the process of appealing a valuation determination by a parish assessor.

The “open rolls” period in any Louisiana parish is the annual opportunity for taxpayers to check property tax assessments and determine whether they are correct. More importantly, it is a time to act quickly or lose your rights to contest property tax valuations. The property tax rolls are scheduled to be “open” for public inspection in selected Louisiana parishes as follows:

PARISH OPEN ROLLS DATES
Caddo 08/18-09/01/2022
Calcasieu 08/31-09/15/2022
East Baton Rouge 08/25-09/09/2022
Jefferson 08/22-09/06/2022
Lafayette 08/15-8/30/2022
Lafourche 08/31-09/15/2022
Orleans 07/15-08/17/2022
Plaquemines 08/15-08/30/2022
St Bernard 08/15-09/02/2022
St Charles 08/15-08/29/2022
St Mary 08/15-08/29/2022
St Tammany 08/15-08/29/2022
Terrebonne 08/29-09/13/2022
Washington 08/15-09/07/2022

Open rolls dates for other parishes can be found on the Louisiana Tax Commission website. The current property tax year for Orleans Parish is 2023. For all other Louisiana parishes, the current property tax year is 2022.

In evaluating a property tax assessment during “open rolls,” information for prior tax years can be useful in determining whether there has been a change, and this information may be included on a parish assessor’s website. However, note that some parishes may not have current or accurate information online, and in those cases it will be necessary to contact or meet with the assessor’s office for updated information. The compressed “open rolls” time window  requires diligence and quick work. In addition, the property tax assessments in some parishes can be viewed through the Louisiana Tax Commission website. The website for Orleans Parish is: www.nolaassessor.com.

The important thing to know is that, if you or your client wishes to challenge the correctness (i.e. dispute the value) of a property tax assessment and preserve rights to challenge it, the “open rolls” period is your only chance to do so. During this time (if not earlier), it’s important to review the assessor’s data and conclusions, discuss the assessor’s stance on valuation, and provide all available information to the assessor that supports the correct value. Under recent statutory changes (La. Acts 2021, No. 343, eff. January 1, 2022), a taxpayer must furnish the assessor with all information that supports the taxpayer’s valuation prior to the deadline for filing an appeal with the local Board of Review. That deadline date varies by parish but is typically just a few days after the “open rolls” period closes. Beware of this very short time frame! Under the new law that is applicable to property tax appeals filed on or after January 1, 2022, while the Tax Commission can allow additional evidence that was not provided to the assessor to be presented at the property tax hearing before the Commission, the recommended course is to provide the assessor all available evidence to support the correct value during, or prior to, the open rolls inspection period.

In short, August brings a different kind of heat to Louisiana property taxpayers. If you or your clients have questions or need assistance with these and other property tax matters, contact Kyle Polozola, Jaye Calhoun, or Phyllis Sims of the Kean Miller SALT group.

The Louisiana Public Works Act (“LPWA”), La. R.S. 38:2241, et seq., protects the rights of contractors and others relating to the construction of public works projects for the state, any of its boards, agencies, and political subdivisions. August 1, 2022 not only marks the beginning of the end of summer 2022, but also the effective date of several important changes to the LPWA from the most recent Louisiana Legislative Session. All contractors working on Louisiana public projects should take note of these key revisions concerning time periods under the LPWA detailed below:

Punchlists and Substantial Completion

Act No. 756 makes an important revision relative to punch lists for public works contracts. The amendment to La. R.S. 38:2248(B) provides if a public entity occupies or uses the public works, then the punch list must be provided to the contractor within ten (10) days of substantial completion (see La. R.S. 38:2248(B)(2)(a)) and the punch list may be amended by the design professional or the public entity within fourteen (14) days of providing it to the contractor (see La. R.S. 38:2248(B)(2)(b)). According to La. R.S. 38:2248(B)(3), these provisions are not subject to waiver and are inapplicable to the Department of Transportation and Development. See 2022 La. Sess. Law Serv. Act 756 (S.B. 429) (WEST).

No Response To A Submittal Of A Particular Product After Seven (7) Working Days Means Approval

Act No. 424 amends and reenacts La. R.S. 38:2295(C)(1) relating to plans and specifications for public works in order to clarify the requirements for prior approval and provide for an adjustment of time to respond to the submittal of a particular product other than a product specified in the contract documents. Under the revision to La. R.S. 38:2295(C)(1), if a potential supplier of a particular product other than a product specified in the contract documents submits a request for the approval of the product no later than seven (7) working days prior to the opening of bids, the prime design profession must furnish both the public entity and the potential supplier a written approval or denial of the project submitted. Failure by the prime design professional to respond in the seven (7) working days results in approval of the submitted product. See 2022 La. Sess. Law Serv. Act 424 (S.B. 423) (WEST).

Working Days Defined and Time Limits For Bidders’ Information

Act No. 774 amends and reenacts La. R.S. 38:2212(B)(2) and (H) and enacts La. R.S. 38:2211(A)(15) relating to certain public works projects bidding requirements. Revisions of interest include the definition of “working days” for purposes of the Section concerning the bid process to mean “the days Monday through Friday, excluding recognized holidays and declared emergencies.” La. R.S. 38:2211(A)(15).  Further, the revision to La. R.S. 38:2212(B)(2) provides if a public entity advertising for public work adds additional requirements for information beyond what the statute mandates, then those additional “requirements shall be void and not considered in the award of the contract.” La. R.S. 38:2212(B)(2) (Emphasis added). Finally, the revision to La. R.S. 38:2212(H) changes the time from fourteen (14) days to nine (9) working days for any and all of the bidders’ information to be available upon request following the bid opening or after the recommendation of the award by the public entity or design professional, whichever occurs first. See 2022 La. Sess. Law Serv. Act 774 (S.B. 271) (WEST).

On June 15, 2022, Governor John Bel Edwards signed into law Act No. 425, S.B. 426, named the “Allen Toussaint Legacy Act.”[1] The Act is named after the late Allen Toussaint, a famous New Orleans musician, songwriter, and producer. Toussaint was known for hits such as “Java,” “Fortune Teller,” “Southern Nights,” “Working in the Coal Mine” and “Mother-in-Law.”

After seeing drink koozies featuring Toussaint’s image sold by vendors outside of the Jazz Fest months after the artist died, Tim Kappel, an entertainment law professor at the Loyola University New Orleans, began pushing for a bill protecting the right to publicity in Louisiana.[2] Before the Act, despite the clear commercial benefit from products featuring Toussaint and other New Orleans legends like Fats Domino and Professor Longhair, the deceased musicians’ estates received no benefit from the sales nor had any power to stop the commercialization.

Act No. 425

The right of publicity is not a new concept in the United States. New York and California are leading examples of the right of publicity, particularly because those states are dense with famous individuals, who are more likely to be affected by right of publicity laws. For example, in the 1990s, the Ninth Circuit U.S. Court of Appeals found Vanna White could seek damages from Samsung for an advertisement involving a futuristic female robot turning the letters on a game show board.[3] Although the advertisement did not mention Vanna White by name, or use her actual image, the court held Samsung may have violated the law by “attempt[ing] to capitalize on White’s fame to enhance their fortune.”[4]

Act 425 creates a property right in the use of Louisiana residents’ identity for commercial purposes. The Act prohibits third party commercial use of an individual’s identity in Louisiana without written consent from the individual or the individual’s authorized representative or, if the individual is deceased, by more than 50% of the authorized representatives currently holding the right to commercialize. The Act defines an “individual” as “a living natural person domiciled in Louisiana or a deceased natural person who was domiciled in Louisiana at the time of the individual’s death.” “Identity” includes “an individual’s name, voice, signature, photograph, image, likeness, or digital replica.”

Violations can carry hefty penalties. Successful plaintiffs may recover the greater of $1,000 and the actual damages in compensatory damages, and (to the extent not duplicative of compensatory damages) payment of all profits earned from the violation. Similar to copyright infringement claims, plaintiffs must only prove the gross revenue attributable to the unauthorized use, and the defendant must prove any deductible expenses. A court may also award attorneys’ fees, costs, and expenses to the successful party, as well as equitable relief (e.g., injunctions or temporary restraining orders).

The Act carves out several exceptions, which include the “fair use” exceptions found in the Copyright Act, first amendment exceptions, and protections for works of creative expression. The Act also provides exceptions for advertisers, publishers, speakers, and others who passively transmit or distribute the commercialized material created by the third party.

The granted rights are not perpetual. Termination occurs either: (a) after 3 consecutive years of non-use by the authorized representative after the individual’s death; or (b) 50 years after the individual’s death. The Act is retroactive and will apply to individuals who died on or before the effective date of August 1, 2022. However, the Act will not apply to any alleged violations committed before August 1, 2022; also exempt are works created before this time, even if they are republished or distributed after that date. Any claim under the Act must be filed within 2 years of the alleged violation.

Future Considerations

Several interesting issues arise in response to this passage. Although Louisiana may not be dense with popstars and movie stars like New York, Louisiana does have its fair share of talented athletes. Considering the NCAA’s recent move toward permitting college athletes to profit off their name, image, and likeness, this Act will be instrumental in restricting commercialization of the Louisiana-domiciled athletes to only those authorized by the athlete themselves.

But the Act is not limited to persons in the public eye. It applies to any person domiciled in Louisiana or a deceased person that was domiciled in Louisiana at the time of death. Ordinary persons captured in videos that later go viral on social media often find their likeness plastered onto commercial products. The Act could provide some avenue to capture the monies made off of their “15 minutes of fame.” However, the Act does not provide for statutory damages and attorney fees are within the discretion of the court, which may complicate or discourage recovery by persons with limited means against unprofitable violations.

Legal scholars have expressed concern about defining identity as a property right that is “heritable, licensable, assignable, and transferrable.” Professor Jennifer Rothman at the University of Pennsylvania Carey Law School identified problematic potential for parents’ ability to transfer their children’s identity to third parties, as well as record labels, movie producers, sports leagues, and others who may pressure young, aspiring athletes and performers to assign rights to them in perpetuity.[5] Professor Rothman also questions whether identity being a property right could incur property-based liabilities. The Act specifically prohibits its property rights being subject to a security interest, material property distribution, or debt collection. However, other liabilities could compel commercialization against an individual or heir’s wishes.

Concluding Remarks

Commercialization of individual identities presents a compelling new right for Louisiana residents. How the Act operates in practice remains to be seen. The opportunity to “sign your name away” may be profitable in the short term, but could have long-standing implications if an exclusive license omits favorable termination or sunset clauses. Potential commercial licensees should further ensure that they actually have the right to make commercial use of an individual’s likeness—even if that person is an employee, a student, or has signed a general photograph release.

[1] https://legis.la.gov/legis/ViewDocument.aspx?d=1289308.

[2] James A. Smith, “An Allen Toussaint law? Attempting to ban koozies, unlicensed merchandise using likeness”, The Advocate (April 30, 2019) (available at https://www.theadvocate.com/baton_rouge/news/politics/legislature/article_5ec7233c-6bab-11e9-8279-fb05c40acaea.html).

[3] White v. Samsung Elecs. Am., Inc., 971 F.2d 1395 (9th Cir.1992), as amended (Aug. 19, 1992).

[4] Id. at 1396.

[5] Jennifer E. Rothman, “Louisiana’s Allen Toussaint Legacy Act Heads to Governor’s Desk”, Rothman’s Roadmap to the Right of Publicity (Jun. 6, 2022) (https://rightofpublicityroadmap.com/news_commentary/louisianas-allen-toussaint-legacy-act-heads-to-governors-desk/).