A Federal District Judge in Texas struck down an Obama administration Department of Labor Wage and Hour Division rule that would have nearly doubled the salary basis requirement for some exempt employees.  Had the rule remained in place, for certain exempt employees, employers would have had to roughly double the exempt employees’ salaries to maintain the employees’ exempt status, or treat the employees as eligible for the overtime premium.  In November, the court issued a nationwide injunction stopping the rule from going into effect.  This ruling likely moots the pending appeal of the injunction, and it seems unlikely that the Trump administration will appeal this latest ruling given that the administration has already begun laying the groundwork for a possible revision of the prior rule.  Stay tuned.

Read the article here.

On August 30, 2017 the D.C. Circuit denied environmental and labor groups’ request to stay the Tump EPA’s final rule delaying the Obama-era amendments to the EPA’s Risk Management Program (“RMP”) rule. The RMP rule implements Section 112(r) of the Clean Air Act and requires facilities that use extremely hazardous substances to develop and update a Risk Management Plan.

In June, the EPA Administrator Scott Pruitt signed a final rule to further delay the effective date of the RMP rule amendments until February 19, 2019 (“the Delay Rule”).  The delay allows EPA to conduct a reconsideration proceeding to review objections raised by petitioners to the final RMP amendments rule.[1]

Environmental and labor groups challenged the Delay Rule in the D.C. Circuit and then moved to stay the Delay Rule until the court takes full review of it. The groups’ motion requests a stay of the stay of the RMP rule until the court can review the merits of the Delay Rule—which stays the RMP rule. Try to say that five time fast. In any event, the D.C Circuit denied the groups’ motion to stay the Delay Rule. In denying the request for a stay, the D.C. circuit held that the environmental and labor groups had not “satisfied the stringent standards for a stay pending court review.”[2] Thus the Delay Rule will remain in effect while the D.C. Circuit reviews the merits of the groups’ challenge.

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[1] 82 Fed. Reg. 27133 (June 14, 2017).

[2] The Court also denied EPA’s motion for additional briefing time on the merits of the groups’ challenge.

Unprecedented flooding has severely impacted the City of Houston and Southeast Texas due to Hurricane Harvey.  In August 2016, South Louisiana and the Capital Region were affected by a major rain and flood event.  In response, Kean Miller created the South Louisiana Flood section of our Louisiana Law Blog as a legal resource for those impacted by the Louisiana flood.  Today, we have launched the Hurricane Harvey section of our blog to provide additional legal resources to our friends, contacts, and clients in Texas and those affected in Southwest Louisiana.

The August 2016 flood taught us many things, and Kean Miller has a unique familiarity with flood relief efforts.  From organizing work teams equipped to rebuild homes, to collecting and distributing relief supplies, we have information and ideas that may help.  Our Director of Human Resources, Mary Coghlan, led our internal relief efforts and is available to consult with any of the law firms or clients affected by the Texas flood.  She can be reached at 225-382-3488 or mary.coghlan@keanmiller.com

Although there is still much work to do, we know the strength of the people in Texas will see them through this historic event.  Our continued thoughts and prayers are with our friends, clients and contacts in Houston and anyone affected by this unprecedented event.

Earlier this week, the Texas Supreme Court and the Texas Court of Criminal Appeals issued an emergency order to allow the courts affected by the disaster to suspend regular court procedures and deadlines. The order is effective for one month and states in part:

Pursuant to Section 22.0035(b) of the Texas Government Code, all courts in Texas should consider disaster-caused delays as good cause for modifying or suspending all deadlines and procedures – whether prescribed by statute, rule, or order – in any case, civil or criminal.

Misc. Doc. No.17- 9098.

Yesterday, the Court added a formal judicial suspension of all deadlines to the otherwise applicable statute of limitations which states in part:

Inasmuch as statutes of limitations are not subject to a good-cause exception, the Supreme Court now further orders, again pursuant to Section 22.0035(b), that any applicable statute of limitations is suspended for any civil claim if the claimant shows that the disastrous conditions resulting from Hurricane Harvey prevented the timely filing of the claim despite the party’s and counsel’s diligent efforts.  Any such suspension extends only to the date on which it becomes reasonably possible to file the claim despite the disastrous conditions, taking into account the circumstances.

Misc. Doc. No. 17- 9091

Unlike the Louisiana Executive Order JBE 16-66, issued last year following the catastrophic flooding in Baton Rouge and similar orders issued in previous years (by previous Governors) which suspended the applicable prescriptive period, the Texas Order still requires some showing of  that the claimant attempted to timely file its claim.

At this juncture, it is premature to speculate on what level of proof will be required for a claimant to take advantage of the suspended deadlines, but it is clear some standard of proof will be required

The link to determine whether a particular court is closed can be found here.

On August 28, 2017, the Environmental Protection Agency (“EPA”) approved an emergency fuel waiver for areas for Louisiana affected by Hurricane Harvey. The waiver is an effort to minimize or prevent problems with the supply of gasoline. Sixteen parishes in the state are required to sell low Reid vapor pressure (“RVP”) gasoline,[i] having a maximum RVP of 7.8 pounds per square inch (“psi”), during the summer ozone season. The waiver temporarily lifts this requirement and allows higher RVP gasoline of 9.0 psi to be sold in these parishes through September 15, 2017. The sixteen parishes impacted by the emergency waiver are Ascension, East Baton Rouge, Iberville, Livingston, West Baton Rouge, Beauregard, Calcasieu, Jefferson, Lafayette, Lafourche, Orleans, Point Coupee, St. Bernard, St. Charles, St. James, and St. Mary.

EPA has also waived the requirement of 40 C.F.R. §80.27(d) for gasoline sold in these parishes. Under the waiver, gasoline with less than 9% ethanol by volume will qualify for the “special provisions for alcohol blends” requirement and the provisions that prohibit any person from blending gasoline unless certain conditions are met are temporarily lifted.

Authority for the waiver was exercised under the Section 211(c)(4)(C)(ii) of the Clean Air Act (“CAA”), 42 U.S.C. § 7545(c)(4)(C)(ii). EPA Administrator, Scott Pruitt, determined Hurricane Harvey to be an unforeseen “extreme and unusual fuel [ ] supply circumstance” that will prevent the distribution of an adequate supply of gasoline to consumers in the designated parishes. Administrator Pruitt further determined that the waiver is in the public interest.

As required by law, the EPA and the Department of Energy (“DOE”) are continuing to actively monitor the fuel supply situation in the midst of Hurricane Harvey. The EPA and DOE have the authority to act expeditiously if extreme and unusual circumstances exist in other areas of the state.

For more information, click here.

If you need more information, please contact a member of our Environmental Team: Dwayne Johnson and Lauren J. Rucinski.

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[i] Reid Vapor Pressure (“RVP”) is a measure of gas volatility. EPA regulates the vapor pressure of gasoline sold at retail stations during the summer ozone season (June 1 to September 15) to reduce evaporative emissions from gasoline that contribute to ground-level ozone and diminish the effects of ozone-related health problems. Note that, on August 9, 2017, EPA proposed to relax the low RVP requirements for 11 of the 16 parishes covered under this emergency waiver. See 82 Fed. Reg. 37,184. However, this is just a proposal, not a final rule. Further, only 11 of the 16 parishes covered in the emergency waiver are covered under the August 9, 2017, proposal. As such, the emergency waiver is still needed.

Effective August 25, 2017, the Secretary of the Department of Natural Resources authorized the performance of activities within the Louisiana Coastal Zone necessary to prevent or to mitigate damages associated with Hurricane Harvey.  In the event that new construction is needed for such purposes, an after-the-fact Coastal Use Permit application might be required.  The Secretary’s message can be found here.

The Secretary noted that the emergency use provisions of the Coastal Use Permit Rules and Procedures (LAC 43:I.723.B.3) are activated by his determination that potential damage to energy and other infrastructure in the Louisiana Coastal Zone by Hurricane Harvey may result in an emergency situation and that damage resulting in a threat to life, property, or the environment.  (The Coastal Use Permit rules are available under Louisiana Administrative Code Title 43, Part I here.)  Further, the Secretary has determined that due to the potential threat that Hurricane Harvey may cause impacts of statewide significance, all emergency uses under the jurisdiction of the Louisiana Coastal Resources Program which are necessitated for preparation, response to, and the aftermath of Hurricane Harvey shall be considered uses of state concern (as distinguished from uses of local concern).

The LDNR stated: “Because of the potential for widespread damage associated with Hurricane Harvey, the Department of Natural Resources is temporarily modifying its usual emergency authorization procedures for storm related repair/restoration projects located in the Coastal Zone.  This modification applies ONLY to those activities needed to restore infrastructure.  Unless this notice is renewed, it shall expire on September 15, 2017.”

LDNR requires that those using this emergency authority are to provide the Department with notification via letter, email or fax as soon as possible for documentation purposes.  The notification should include:  the name of the entity undertaking the activity; a description of the work performed; a vicinity map showing the location of the emergency work; and project coordinates (lat/long) if available.  Notifications to LDNR should be directed to:  Karl Morgan, P.O. Box 44487, Baton Rouge, LA 70804-4487 (Fax: 225-342-9439) (E-mail: karl.morgan@la.gov).

Just a quick reminder that in 2007, the Louisiana State Police (“LSP”) adopted regulations requiring special reporting requirements for persons “engaged in the transportation of hazardous materials by railcars, vessels, or barges, or the temporary storage of hazardous materials in any storage vessel not permanently attached to the ground” if that activity is within “a parish affected, or projected to be affected, by a Category 3 or higher hurricane for which a mandatory evacuation order has been issued.”  LAC 33:V.11103.  Hazardous materials are those materials listed in 40 C.F.R. Part 355, Appendix A.  Temporary storage is defined as storage in a portable container, and excludes any storage in pipelines or any other storage vessel permanently attached to the ground.

At the present time (11 a.m, CST, August 25, 2017),  Hurricane Harvey is a Category 2 storm with maximum sustained winds of 110 mph; but, it is projected that Harvey will strengthen to a Category 3 Hurricane by the time of landfall, which is projected to occur between Corpus Christi and Houston, Texas, late evening on August 25, 2017.  It is also projected that the hurricane will affect southwest and south central Louisiana parishes.  In fact, the Governor of Louisiana has issued an executive order that puts the entire State of Louisiana under a declaration of emergency.  Yesterday evening, Cameron Parish entered a mandatory evacuation order for all areas of the parish south of the Intracoastal Waterway, effective at 6 a.m., CST, August 25, 2017.   We are not aware of any mandatory evacuation orders for any other Louisiana parishes at this time.  The following is a link to all parish emergency response offices which will provide contact information to inquire about any orders issued: http://gohsep.la.gov/about/parishpa.

If a mandatory evacuation order is issued for any Louisiana parishes due to a Class 3 or higher category hurricane, the rules (LAC 33:V.11105) require the following:

  • Notification shall be given to the DPS, via electronic submittal, to the 24-hour Louisiana Emergency Hazardous Materials Hotline email address at emergency@la.gov within 12 hours of a mandatory evacuation order issued by the proper parish authorities.
  • For persons engaged in the transportation activities noted above, the report must include the following information:
    • the exact nature of, and the type, location, and relative fullness of the container (i.e., full, half-full, or empty) of all hazardous materials that are located within a parish subject to the evacuation order;
    • the primary and secondary contact person’s phone, e-mail, and fax number; and
    • whether the facility will be sufficiently manned such that post-event assessments will be performed by company personnel (as soon as safely practicable) and that any releases and/or hazardous situations will be reported in accordance with existing Louisiana Department of Environmental Quality (LDEQ) and State Police reporting requirements.
  • For those materials that are stored, it shall be necessary to only report those hazardous materials that were not reported in the annual SARA inventory report (40 CFR Parts 312/313) and those that are in excess of what is typically stored at the facility.

In addition to the notification to the LSP, “within a reasonable period of time” persons subject to the rule “shall perform a post-event assessment of those hazardous materials that were actually present in the affected area and to what degree, if any, those materials were compromised by said event and their current condition.”  Such information must be available for review by both the LSP and the LDEQ shall have access to this information.

Construction Work in Progress (“CWIP”) is generally recognized as property that is in the process of changing from one state to another, such as the conversion of personal property from inventory to asset or fixture by installation, assembly, or construction.  See Valuation of Machinery and Equipment Construction in Progress (CIP), Pollack and Meier, Institute for Professionals in Taxation Property Tax Symposium.  Determining how a state treats partially-completed properties for purposes of ad valorem tax is an important question for any taxpayer, but it is particularly critical for an industrial taxpayer during the site location process.

There is no clear consensus among taxing jurisdictions as to whether or how CWIP is to be valued by a tax assessor on the applicable assessment date.   Many states, including Alabama, Missouri, and North Carolina, value CWIP based on the value or percentage of completion on the assessment date.  Kansas values incomplete construction based on the cost incurred as of the assessment date.  Florida, Maryland, Virginia, and West Virginia assess CWIP when the work has progressed to a degree that it is useful for its eventual purpose.  And in South Carolina, improvements are only assessed upon completion.

With the exception of a few errant assessments in the early 1930’s, Louisiana has never assessed CWIP for ad valorem tax purposes.  Rather, the completed property is added to tax rolls and assessed as of January 1 of the year immediately following completion of construction. La. R.S. 47:1952.   This comports with and complements Louisiana’s industrial tax exemption program, which exempts certain manufacturing property from ad valorem taxation for a specified number of years.  LAC Title 13, Part 1, §53(D).   Unfortunately, property on which ad valorem taxes have been paid is not eligible for participation in the exemption program.  LAC Title 13, Part 1, §515.  Thus, if ad valorem taxes are paid on property as CWIP, the property would no longer eligible for the industrial tax exemption and would remain on the taxable rolls subject to assessment each year.  Obviously, assessing CWIP in this manner would significantly diminish the value of the program to taxpayers and undermine its usefulness as an incentive tool by economic development agencies.

In 2016, a local assessor broke with established practice and initiated an audit that included CWIP on a major industrial taxpayer.  This audit raised statewide and local uniformity concerns (assessment of CWIP of a single taxpayer in a single parish) and jeopardized the taxpayer’s existing industrial tax exemption.  The taxpayer immediately filed an injunction action in district court, and the Louisiana Legislature took note of the situation during its regular 2017 legislative session.  Recognizing the need to formalize the exemption, the Legislature referred a constitutional amendment to codify CWIP’s exemption from assessment. Louisiana is one of 16 states that require a two-thirds supermajority in each chamber of the legislature to refer a constitutional amendment to the ballot, so their vote underscores the strong support among lawmakers to codify the exemption.

Slated to appear on the Oct. 14 statewide ballot, Act 428 would add an additional subsection to Article VII, Section 21 of the Louisiana Constitution, which lists property that is exempt from ad valorem tax assessment. The new language would read as follows:

(N)(1) All property delivered to a construction project site for the purpose of incorporating the property into any tract of land, building, or other construction as a component part, including the type of property that may be deemed to be a component part once placed on an immovable for its service and improvement pursuant to the provisions of the Louisiana Civil Code of 1870, as amended. The exemption provided for in this Paragraph shall be applicable until the construction project for which the property has been delivered is complete. A construction project shall be deemed complete when construction is finished to the extent that the project can be used or occupied for its intended purpose. A construction project shall not be deemed complete during its inspection, testing, or commissioning stages, as defined by reasonable industry standards.

(2) Notwithstanding the provisions of Subparagraph (1) of this Paragraph, this exemption shall not apply to any of the following:

(a) Any portion of a construction project that is complete, available for its intended use, or operational on the date that property is assessed.

(b) For projects constructed in two or more distinct phases, any phase of the construction project that is complete, available for its intended use, or operational on the date the property is assessed.

(c) Any public service property, unless the public service property is otherwise eligible for an exemption provided by any other provision of this constitution.

If approved by voters, CWIP would be exempt from property taxes until construction is “completed.” The proposed amendment defines a completed construction as occurring when the property “can be used or occupied for its intended purpose.” The exemption would thus remain effective until the construction project (or a given distinct phase of the project) is ready to be used or occupied for its intended purpose or for occupancy.

In Louisiana, the collateral source rule mandates that a tort plaintiff be awarded the full value of his medical expenses against the tortfeasor, including any amounts written off by the provider, when that plaintiff paid some “consideration” (money) for the benefit of the written-off amount.  In other words, even though a person may have health insurance and, therefore, received the benefit of discounted medical charges, the collateral source payment is not credited to the tortfeasor, and the tortfeasor has to pay the full amount charged for the services.

However, in Rabun v. St. Francis Med. Ctr., Inc., 50,849 (La. App. 2 Cir. 8/10/16), 206 So.3d 323, a hospital was attempting to recover on its medical lien against the patient for the full amount of medical services charged (without accounting for the patient’s health insurance discount). The Second Circuit capped the patient’s medical expenses incurred at the negotiated rates between the hospital and the patient’s health insurer.  The Second Circuit found that the contracted rate is deemed the amount “incurred” by the patient.  Rabun did not deal directly with a tort plaintiff against a tortfeasor, and was limited to the hospital’s lien on the patient’s tort recovery. La. R.S. 9:4752.  Regardless, the court left lawyers with language to make a strong argument that a tortfeasor can only be held liable to an insured plaintiff for the contracted rate – the amount actually incurred.

Hoffman v. Travelers Indem. Co. of America, 13-1575 (La. 5/7/14), 144 So.3d 993 is another example.  There, an automobile insured sought to recover the entire amount charged for medical services following an accident, pursuant to the medical pay provision of her auto policy that allowed her to claim all reasonable expenses for necessary medical services incurred.  The provider was paid less than list rates pursuant to an agreement between the provider and the insured’s health insurer.  The Louisiana Supreme Court held that, as a matter of first impression, the insured did not incur the full list cost of the medical services.  The court found that because the plaintiff’s health insurer had contractually pre-negotiated rates with the provider, the plaintiff was only legally obligated to pay the discounted amount.  Since she had no liability for any amount over that discounted amount she did not “incur” the full list rates and, therefore, she could only claim the discounted amount from her auto insurer.

Rabun and Hoffman show that Louisiana courts are taking a close look at quantifying medical expenses, and there is an argument to be made that a tort plaintiff’s recovery for medical expenses (past and future) is limited to the insurance negotiated rates for insured plaintiffs because that is the actual amount incurred by the plaintiff.  Louisiana courts are catching up to the reality of managed care costs in this country as it relates to recovery of medical expenses.

The substantial flexibility afforded by the limited liability company structure has made it an increasingly popular business entity choice.  Indeed, most of the default provisions in the Louisiana Limited Liability Company Law, La. R.S. 12:1301, et seq. (the “La LLC Law”) may be altered or superseded by the articles of organization or operating agreement of the limited liability company.  One such provision that is quite frequently altered or superseded in the operating agreements of many limited liability companies is that of the transfer or assignment of a membership interest in the limited liability company.

Unless the articles of organization or operating agreement of the limited liability company provide otherwise, a membership interest is freely assignable, in whole or in part, under the La LLC Law.[1]  This default provision is often unattractive to members of limited liability companies, especially ones that may be family-owned or formed for a particular joint venture project.  The desire to keep membership in the entity limited to either the current members or certain defined groups of persons drives many members of limited liability companies to include rules and restrictions to limit or prohibit the rights of a member to transfer or assign the membership interest in the limited liability company.  Most transfer restrictions included in a written operating agreement or the articles of organization are not problematic under Louisiana law.  However, members should be aware that restricting a member’s ability to pledge or encumber the membership interests in the limited liability company can be rendered ineffective by certain provisions of the Uniform Commercial Code – Secured Transactions, La. R.S. 10:9-101, et seq. (“UCC Chapter 9”).

Although there are some exceptions, in most cases, an interest in a limited liability company is considered a general intangible under UCC Chapter 9.  As a comparison, in most cases, shares of stock in a corporation are considered a security under UCC Chapter 9.  Under Louisiana law, this classification of general intangible versus security can affect, among other things, the available methods of perfecting the security interest, the determination of priority of competing security interests, and the effectiveness of anti-assignment provisions.

Pursuant to La. R.S. 10:9-408, certain contractual restrictions on the creation and perfection of a security interest of a general intangible are negated and rendered ineffective.  In the context of a limited liability company, Section 9-408 could be used to render ineffective a provision in an operating agreement or articles of incorporation (i) prohibiting a member from pledging or encumbering his or her membership interest or (ii) requiring the prior consent of the limited liability company or the other members thereof to the pledge or encumbrance of membership interests in the limited liability company.

Importantly, although the restrictions under Section 9-408 may permit a lender to take a perfected security interest in limited liability company interests despite contrary provisions in the organizational documents of the limited liability company, it does not necessarily mean that the secured creditor will have the right to enforce the security interest.  Further, it does not otherwise negate the default assignment provisions of the La LLC Law, or any similar provisions in the limited liability company organizational documents, that provide that any assignment of membership interests shall not grant to the assignee full membership rights absent the consent of the other members.  Consequently, absent contrary provisions in the organizational documents of the limited liability company or the unanimous consent in writing of the other members, in the event of a seizure of or foreclosure upon the membership interests, the creditor or any purchaser in a foreclosure sale is treated as an assignee of the membership interest, which only entitles the assigned to a right to receive distributions, share in the profits and losses, and receive allocations of income, gain, loss, deduction, credit or similar items to which the assignor member would otherwise have received.

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[1] It should be noted that even under the default provisions of the La LLC Law, an assignment of a membership interest does not entitle the assignee to become or exercise any rights or powers of a member, such as voting or participating in the management of the business, until such time as the assignee is admitted as a member, which requires the unanimous consent in writing of the other members of the limited liability company pursuant to the La LLC Law.  The assignment does, though, entitle the assignee to receive distributions, share in the profits and losses, and receive allocations of income, gain, loss, deduction, credit or similar items to which the assignor member would otherwise have received.