Recently, we have noticed an increase in the number of construction contracts that either identify (1) an incorrect entity or (2) a non-existent entity as a party to the contract. No big deal, right…..maybe not.

It should be easy enough for the persons signing the contract to confirm their respective names. It is not as easy for a downstream contractor or material supplier to confirm the correct legal name of upstream contractors or the owner.

Here are a few real life examples of the potential pitfalls you may find if your contract incorrectly identifies either a signatory or a key third party (typically the Owner):

Example 1: Commercial subcontracts commonly require the general contractor and owner be named as additional insured on the subcontractor’s commercial general liability insurance. If the subcontract does not accurately identify the owner, it could be problematic if and when a claim is made on the policy.

Example 2: If the contract and/or subcontract incorrectly identify the Owner, a potential lien holder may have a hard time properly notifying the Owner as required under the private works act.

Example 3: Enforcement of dispute resolution agreements may also be affected if the identity of parties is unclear. Assume the following facts:

1. “Commercial Developer Baton Rouge, LLC” is incorrectly identified on the contract as “CDBR;”

2. The contract contains standard AIA mandatory arbitration provisions; and

3. The contractor incurs substantial delay damages all caused by the Owner.

It can be a costly uphill battle to proceed against a non-existent entity in arbitration. The authority of the arbitrator is jurisdictionally limited to the agreement of the parties, so if the identity in the contract is incorrect, is there an agreement with the missing entity to arbitrate? If there is, will a judge confirm a default arbitration award against an entity whose legal name does not even appear in the underlying contract?

Example 4: A subcontract incorrectly identifies the legal name of one of the parties? If the name identified in the contract is not the name in which the license is held, the Louisiana Licensing Board for Contractors can and has taken the position that it is a violation of the licensing laws and subjects both parties to the contract to administrative penalties, ranging from fines, license probation, license suspensions, or even an order to cease and desist work on the project. In our situation, the contractor’s name was similar to GC of Louisiana, LLC, but the subcontract GC, LLC (omitting the “of Louisiana”). The Licensing Board sent violation notices to both GC of Louisiana, LLC and the subcontractor.

Here is the point: We understand contractors and subcontractors are reluctant to press owners for technicalities such as the legal name, but the importance of minding the details in the beginning should not be undervalued.

The Louisiana Department of Health and Hospitals (“DHH”) adopted provisions to establish the Recovery Audit Contractor (“RAC”) Program, effective November 20, 2014, as required by the Affordable Care Act. The new RAC program provides yet another mechanism by which DHH, through its contractors, can conduct post-payment audits of claims submitted by providers enrolled in Medicaid. For purposes of the rule, a provider is defined to be any healthcare entity enrolled with DHH as a provider in the Medicaid program. The provisions apply only to Medicaid RACs that begin on or after November 20, 2014, regardless of the dates of the claims reviewed. The provisions do not prohibit or restrict other audit functions that DHH or its contractors may perform.

The RAC program’s scope of review excludes: 1) claims processed or paid within 30 days of implementation of any Medicaid managed care program that relates to the claims; 2) claims processed and paid through a capitated Medicaid managed care program (but does not exclude audits of per member per month payments from DHH to any capitated Medicaid managed care plan utilizing such claims); and 3) medical necessity reviews in with the provider obtained prior authorization for the service.

The RAC may request records from providers but must limit records requests to not more than 1% of the number of claims filed by the provider for the specific service being reviewed in the previous state fiscal year during a 90 day period, but in any event, the request is limited to not more than 200 records. Each specific service identified for review within the requested time period is considered to be a separate and distinct audit. The RAC will review claims within three years of date of the initial payment, with the three year look back period commencing from the beginning date of the audit.

The provider has 45 calendar days from the date of receipt of a records request to comply with a records request, unless there is a mutually agreed extension of time allowed. If the RAC requires the provider to produce records in a non-electronic format, the RAC must make reasonable efforts to reimburse the provider for the reasonable cost of reproducing the records, based on the current federal rate for reproduction costs, but not more than the rate applicable under Louisiana law for public records requests. The cost for records reproduction may be applied by the RAC as a credit against any overpayment.

If the RAC identifies a significant provider error rate in the audit (defined to be 25%), the RAC may request DHH to initiate an additional records request relative to the issue being reviewed. Upon receipt of a request for additional records, the provider may submit written objections to the Secretary of DHH (or designee), but the decision by the Secretary (or designee) is final and not subject to appeal and will not constitute an adverse determination. The RAC must refer claims suspected to be fraudulent to DHH for investigation.

The RAC must send a determination letter to the provider within 60 days of the receipt of all requested materials from the provider. The RAC must provide a detailed written explanation to the provider of any adverse determination (defined to be a decision by the RAC that results in a payment to a provider for a claim or service being reduced either partially or completely.)

A provider has a right to an informal and formal appeal process of any adverse determination made by the RAC, if a written request is made within the deadlines set forth in the rule. The rule also sets forth the timelines in which an informal hearing must be held and the results of the informal hearing must be provided, as well as the deadline to request a formal appeal with the Division of Administrative Law. In conjunction with the appeal process, the provider may present information orally and/or in writing and may present documents. The provider may be represented by counsel for the informal and formal appeals process.

Neither DHH nor the RAC may recoup any overpayments until all informal and formal appeals processes have been completed. A final decision by the Division of Administrative Law marks the conclusion of the formal appeals process. The provider may seek judicial review of the final decision by the Division of Administrative Law.

The rule includes certain penalty provisions that should disincentive the RAC from denying claims without adequate support to do so. For example, if DHH or the Division of Administrative Law hearing officer finds that the RAC determination was unreasonable, frivolous or without merit, the RAC must reimburse the provider for its reasonable costs associated with the appeals process, including attorney’s fees and expenses incurred to appeal the RAC decision. Additionally, if DHH determines that the RAC inappropriately denied a claim, DHH may impose a penalty or sanction against the RAC. DHH considers the claim was inappropriately denied if the RAC’s adverse determination is not substantiated by applicable DHH policy or guidance, the RAC fails to utilize guidance provided by DHH, or the RAC fails to follow programmatic or statutory rules. If more than 25% of the RAC’s adverse determinations are overturned on informal or formal appeal, DHH may impose a monetary penalty of up to 10% of the cost of the claims to be awarded to the providers of the claims inappropriately determined, or a monetary penalty of up to 5% of the RAC’s total collections to DHH.

The RAC program provides DHH with another tool in its arsenal to review claims and potentially recoup monies paid to providers. Providers can expect to begin receiving notices of audits by the RACs in the near future.

A. Introduction to Punitive Damages

Pecuniary damages are awards designed to restore “material loss which is susceptible of pecuniary valuation.” Michigan Central Railroad. Co. v. Vreeland, 227 U.S. 59, 71, 33 S.Ct. 192, 57, L.Ed. 417 (1913). Punitive or exemplary damages do not compensate for a loss; instead, they are imposed to punish the wrongdoer and “deter by virtue of the gravity of the offense.” [1]  Molzof v. U.S., 502 U.S. 301, 112 S.Ct. 711, 116 L.Ed.2d 731 (1992). The availability of punitive damages as an avenue of potential recovery can drastically alter a Jones Act personal injury case.

For example, if punitive damages are “on the table,” one can expect that counsel for the injured seaman will insert a demand for punitive damages into the lawsuit and, thereafter, consistently beat the drum throughout the litigation that punitive damages are warranted. This, in turn, inquires defense counsel to change its evaluation of the case and recommend higher reserves to its clients to cover the potential for an award of punitive damages. The availability of punitive damages can also affect settlement negotiations when counsel for the injured seaman demands a higher settlement amount for even the most basic slip and fall by alleging liability for punitive damages.

The issue of whether punitive damages are available to the Jones Act seaman, was, until recently, a well settled question—they are not available. The calm waters of punitive damages were stirred with the 2009 decision in Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009),where the U.S. Supreme Court firmly established that punitive damages were available to an injured Jones Act seaman for the willful and wanton failure of the ship-owner to pay maintenance and cure.

Since Townsend, the Plaintiffs’ bar has been attempting to expand the availability of punitive damages to an injured seaman’s negligence and unseaworthiness claims. To this end, the Plaintiffs’ bar proclaimed a partial victory on October 2, 2013, when Judge Higginson, of the U.S. Fifth Circuit held that punitive damages were available to seaman as a remedy for the general maritime law claim of unseaworthiness. McBride v. Estis Well Service, 731 F.3d 505 (5th Cir. 2013). However, eleven months later, the Fifth Circuit, sitting en banc, reversed the original panel’s decision and held that punitive damages are not recoverable for either negligence or unseaworthiness. Let us now examine how we have arrived at this point.

B. The High Point—In re Merry Shipping

If the availability of punitive damages to an injured seaman can be imagined as a wave, the peak of that wave would be In re Merry Shipping, Inc., 650 F.2d 622 (5th Cir. Unit B 1981). In Merry Shipping, it was firmly established that punitive damages were recoverable under the General Maritime Law when the shipowner had violated the duty to furnish and maintain a seaworthy vessel. The Merry Shipping Court acknowledged that the shipowner’s duty stemmed from the recognition of “the hazards of marine service that unseaworthiness places on the men who perform it and their helplessness to ward off such perils.” As such, the theory was that punitive damages would serve to deter and punish owners whose reckless acts increased the hazards of marine service. It must also be noted at this juncture that punitive damages were also available at this time for the willful and wanton failure to pay maintenance and cure.

C. The Wave Falls—Miles v. Apex Marine Corp.

Nine years later, the punitive damage wave began to fall with the Fifth Circuit’s opinion in Miles v. Apex Marine Corp., 498 U.S. 19, 111 S.Ct. 317, 112 L.Ed.2d 275 (1990). The Miles Court noted that in 1920, Congress enacted the Jones Act, 46 U.S.C. § 30104, and the Act extended to seamen the same negligence remedy for damages afforded to railroad workers under the Federal Employers’ Liability Act (“FELA”). FELA only allowed for the recovery of pecuniary damages. Accordingly, the Miles Court reasoned that Jones Act claimants’ remedies were limited to pecuniary losses alone. As discussed above, punitive damages are separate and apart from pecuniary damages. After Miles, punitive damages would be unavailable to the Jones Act seaman in a Jones Act negligence action and an unseaworthiness action. Merry Shipping had been effectively overruled. [2]

D. The Wave Bottoms Out—Guevera v. Maritime Overseas Corp.

The low point of the punitive damage wave was marked by the Fifth Circuit’s decision in Guevera v. Maritime Overseas Corp., 59 F.3d 1496 (5th Cir. 1995). Guevera was a maintenance and cure case that, for a time, eliminated the availability of punitive damages for the willful and wanton failure to pay maintenance and cure. Citing the reasoning of Miles, the Guevera court held that the punitive damages were not available for failure to pay maintenance and cure, even if willfulness was demonstrated. Guevera, 59 F.36 at 1504. Thus, as of Guevera, punitive damages were simply not an available avenue of recovery for the Jones Act Seaman in an action for either Jones Act negligence, unseaworthiness, or maintenance and cure. Punitive damages had effectively disappeared from maritime law. This was to be the case for the next 14 years.

E. The Wave Rises—Atlantic Sounding v. Townsend

The punitive damage wave began surging upward again with the U.S. Supreme Court’s decision in Atlantic Sounding Co. v. Townsend, 557 U.S. 404, 129 S.Ct. 2561, 174 L.Ed.2d 382 (2009). The Townsend Court revisited the issue of a seaman’s claim for punitive damages for the willful failure to pay maintenance and cure. In an opinion hailed by injured workers (and their counsel), everywhere, the Townsend Court abrogated Guevera and ruled that a seaman may seek punitive damages associated with a claim for maintenance and cure. In reaching its ultimate decision, the Townsend Court acknowledged that punitive damages had long been available at common law, that the common law tradition of punitive damages extended to claims arising out of maritime law, and that nothing in maritime law undermined the applicability of this general rule in the maintenance and cure context. Furthermore, nothing in the Jones Act eliminated pre-existing remedies, such as punitive damages for maintenance and cure available to seaman.

As is often the case after U.S. Supreme Court decisions, the impact of Townsend differed greatly depending on which side of the “v.” a party found itself. Injured workers read Townsend to either overrule or severely undermine Miles. Employers and ship owners read Townsend to carefully distinguish its facts from Miles, and more importantly, reaffirm that Miles remained “good law.” To be sure, Townsend began to “toss” the once peaceful waters of punitive damages. Smelling blood in the water, counsel for injured workers began routinely adding claims for punitive damages to their Jones Act negligence, unseaworthiness, and maintenance and cure claims. It did not matter if the case was the most basic unwitnessed slip and fall or the most serious case of loss of life and limb—each case came with a punitive damage claim. With the above context in mind, we now turn to McBride which, for a short time, brought punitive damages back to the high point of Merry Shipping.

F. Storm Tossing the Waters — McBride v. Estis Well Service, LLC

i. The Facts

On March 9, 2011, the barge Estis Rig 23 was operating in Bayou Sorrell, a navigable waterway in the State of Louisiana. The Estis 23 was a keyway barge containing a truck mounted drilling rig. There is no way to “sugarcoat” the fact that on March 9, the day of the tragedy, the vessel was in incredibly poor condition. The deck contained numerous holes covered with sheets of plywood. The hull contained several holes that allowed the influx of water causing the barge to list to the port side. The crew inserted rags and pieces of wood into the holes in the hull to slow the sinking. Each morning, when the crew arrived at the barge, they had to pump water out of the barge’s hull to level it before they could start working.

On top of the issues related to the daily sinking of the barge, the truck needed to be attached to the barge by at least 5 cables and the derrick should have been attached to the barge with a minimum of 4 cables. However, the truck was only connected to the barge by a single cable and no cables whatsoever attached the derrick to the barge.

On March 8, the Estis 23’s crew pulled and racked vertically approximately 12,000 feet of pipe weighing approximately 90,000 lbs. Overnight, the barge again flooded and listed to the port side. The racked pipe fell towards the port side of the barge causing the monkeycboard to twist. [3]  The pipe hung outside of the derrick with the twisted monkey board as the only thing preventing the pipe from toppling over.

When the Estis 23 crew returned on March 9 and saw the situation first hand, they conducted a safety meeting and decided that the safest possible method was to use a crane and additional barge to remove the pipe. Specifically, the crane would hold the top of the derrick to prevent it from falling over while the crew moved the pipe onto a second barge. A request was made for a crane and second barge. This request was denied by the home office due to time and cost concerns. Instead, the crew was ordered by the onsite supervisor to straighten the monkey board and pipe manually using ratchets and cables. However, the crew was only able to shift the pipe and monkey board a few inches.

At this point, the crew again requested a crane and additional barge to perform this job. This second request was again denied by Estis’s president and owner. The onsite supervisor instructed his crew to find more cables. The Estis 23’s crew was sent to the nearby Estis Rig 68 to retrieve additional cables and additional man power in the form of Skye Sonnier – an Estis deckhand assigned to Rig 68.

The crew connected the additional cables to the monkey board and pipe. While using the ratchets, the crew heard several loud pops. The derrick and all of the pipes began falling. The crew ran for their lives in an attempt to evacuate the barge. Prior to the arrival of Mr. Sonnier, the Estis 23’s crew had discussed an evacuation plan to be implemented at the first sign of trouble. As the derrick and pipe began falling, the rig 23’s crew implemented the evacuation plan.

Unfortunately, Mr. Sonnier was never advised of the evacuation plan. Sonnier evacuated in the wrong direction. He became trapped between two tanks, and he was struck by the side of the truck. He was pinned between the truck and one of the tanks. Sadly, Mr. Sonnier died while pinned beneath the weight of the truck. His injuries were severe, and they included compressive blunt force injuries of the thorax, multiple rib fractures, punctured lungs due to rib chards, and a ruptured heart.

The facts of this matter are chilling. The accident was entirely preventable. As such, it is easy to see how the McBride case would become the battleground to revisit the prohibition on punitive damages in both Jones Act negligence and unseaworthiness cases.

 ii. Round 1 –  McBride v. Estis Well Service, L.L.C., 872 F. Supp. 2d 511 (W.D. La. 2012)

The McBride Plaintiffs asserted claims for punitive damages due to Estis’s alleged gross, willful, wanton, and/or reckless conduct that allegedly constituted the callous disregard of or indifference to, the safety of the Estis crewmembers. Estis filed a Motion for Summary Judgment to dismiss the punitive damages claims.

Estis claimed that the Jones Act only permitted recovery of pecuniary losses whether for personal injury or wrongful death. Since punitive damages are not pecuniary in nature, Estis argued that punitive damages could not be recovered on Jones Act claims. Further, under the reasoning of Miles v. Apex Marine Corp, the McBride Plaintiffs could not recover punitive damages because their unseaworthiness claims overlap their Jones Act claims. Hence, the punitive damage claims should be dismissed.

In opposition, the McBride Plaintiffs argued that Townsend left open the question whether punitive damages were available under the Jones Act. The Plaintiffs also contended that the U.S. Supreme Court’s ruling in Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008) suggested that they could recover punitive damages via their General Maritime Law claims. Finally, they contended that the Supreme Court’s ruling in Townsend, which abrogated Guevara v. Maritime Overseas Corp., 59 F.3d 1496 (5th Cir. 1995), reinstated the holding of Merry Shipping as the controlling precedent in the U.S. Fifth Circuit. As discussed above Merry Shipping stood for the proposition that punitive damages were in fact available to a Jones Act Seaman.

On May 16, 2012, Magistrate Judge Hanna of the United States District Court for the Western District of Louisiana – Lafayette Division – issued his memorandum ruling addressing whether punitive damages were available to a seaman under the Jones Act and/or General Maritime Law who was killed or injured in Louisiana territorial waters after Townsend. In his 22 page opinion, Magistrate Judge Hanna ultimately reasoned that nothing in Townsend made punitive damages available to the McBride Plaintiffs. He found that the reasoning of Miles was to promote uniformity between the statutes and the General Maritime Law. DOHSA did not allow for non-pecuniary damages. The Jones Act did not allow for non-pecuniary damages based on the jurisprudential interpretation of FELA. In promoting uniformity, the Supreme Court decided that the same rule would apply to the General Maritime Law that was applicable to a wrongful death/survival action under the Jones Act, and nothing in the holding of Townsend altered that result.

The McBride Plaintiffs moved to certify the Judgment for an immediate interlocutory appeal. Judge Hanna granted this motion as the issues presented were “the subject of national debate with no clear consensus.”

iii. Round 2 – McBride v. Estis Well Service, LLC 731 F.3d 505 (5th Cir. 2013)

The Fifth Circuit accepted Plaintiffs’ interlocutory appeal. Briefs were filed, and oral argument was heard. A decision was published on October 2, 2013. Judge Higginson, writing for the three person panel, addressed the “narrow issue” of whether a seaman may recover punitive damages for his employer’s willful and wanton breach of the General Maritime Law duty to provide a seaworthy vessel.

In reversing Judge Hanna, the three judge panel concluded that punitive damages indeed remained available to seaman as a remedy for the General Maritime Law claim of unseaworthiness. Judge Higginson relied heavily on Townsend and reaffirmed the Fifth Circuit’s holding in Merry Shipping.

Recognizing the impact of Townsend, Judge Higginson advised that momentum in the direction towards the disappearance of punitive damages from maritime law had been “sea-tossed” with the abrogation of Guevara and the restored availability of punitive damages for maintenance and cure claims under General Maritime Law. Effectively, the panel claimed that Townsend established a straight-forward rule: if a General Maritime Law cause of action and remedy were established before the passage of the Jones Act, and the Jones Act did not address that cause of action or remedy, then that remedy remains available under the cause of action unless and until Congress intercedes. It cannot be disputed that the cause of action for unseaworthiness and remedy of punitive damages were both established long before the passage of the Jones Act. Further, the Jones Act did not address either unseaworthiness or its remedies. Thus, using Townsend’s “straight forward rule,” punitive damages are available for unseaworthiness. The Court itself acknowledged that it was “less clear” whether punitive damages were awarded for unseaworthiness prior to the passage of the Jones Act. Yet, the point is essentially moot as the panel held that its decision would be unchanged.

iv. Round 3 – McBride v. Estis Well Service, LLC 768 F.3d 382 (5th Cir. 2014)

Estis filed a Petition for Rehearing En Banc. On February 24, 2014, the Fifth Circuit granted the requested en banc rehearing based on the majority vote of the active judges. Keeping in mind that the granting of an en banc rehearing is appropriate only in “extraordinary” circumstances, it is obvious that the majority of the active Fifth Circuit judges felt the issue of punitive damages in maritime law was an issue of great importance. In addition to the requisite briefs of the parties, industry groups, including the Offshore Marine Service Association, the American Waterways Operations and the International Association of Drilling Contractors, filed amicus briefs to reverse the decision of the three judge panel.

Oral argument was conducted on May 14, 2014, and the Court issued its opinion on September 25, 2014. In a close 9-6 vote, the Fifth Circuit held that seamen cannot recover punitive damages for unseaworthiness. The reasoning of the majority opinion was simple yet effective. Writing for the majority, Judge Davis confirmed that Townsend did not alter the holding in Miles. Indeed, the majority opinion specifically noted that the Supreme Court in Townsend reaffirmed the holding in Miles. Miles, which “remains sound,” limited Jones Act seamen to pecuniary damages in negligence and unseaworthiness claims. Punitive damages are non-pecuniary; as such, they are not available. Thus, at present, the only punitive damages available to a seaman are for the willful and wanton non-payment of maintenance and cure.

v.  Final Round – McBride v. Estis Well Service, LLC

The “final round” in any lawsuit is whether the case will be heard and ultimately decided by the United States Supreme Court. The “word on the street” is that the McBride Plaintiffs will petition the U.S. Supreme Court for a Writ of Certiorari. Thus, the bell signaling the final round in McBride is about to be rung.

CONCLUSION

The wave of punitive damages has risen and fallen over the years. Since the peak of Merry Shipping, the availability of punitive damages to the Jones Act seaman had fallen so far that punitive damages were simply not available to the injured seaman after Guavera. Townsend signaled a surge in the wave. Yet, the wave has now crested, at least in the Fifth Circuit, with the decision in McBride. It will be interesting to monitor the other circuits and see if they will fall in line with the McBride decision. Only time, and perhaps a few crafty arguments advanced by counsel for injured seamen, will determine whether the punitive damage wave will rise again.

___________________________

[1]  There is no discernable difference between punitive and exemplary damages.

[2]  Anderson v. Texaco, Inc., 797 F. Supp. 531319 (E.D. La. 1993) (Miles compels the conclusion that a plaintiff who is statutorily barred from receiving a punitive award cannot recover punitive damages by couching his claim in the judge-made general maritime law of negligence and unseaworthiness.)

[3]  A monkey board is the platform on which the derrick man works when tripping pipe. It is mounted above the drill platform in the derrick.

Act 759 of 2014 updated and amended a number of aspects of Louisiana’s Public Bid Law, set out at La. R.S. 38:2212, et seq. The 2014 Amendments included the following:

  • A Public bid opening is no longer required. La. R.S. 38:2212.A.(3)(g)(iii), which previously provided, “[a]ll construction contracts on public works shall be opened in a public meeting” was deleted;
  • The requirement to provide “10 Day documents” (attestation affidavits; E-verify, etc…) only applies to the apparent low bidder (with the exception of East Baton Rouge Parish, which requires some documents to be filed prior to bidding) La. R.S. 38:2212.B(3)(a) and (b);
  • Written words expressly govern in the event of a conflict between words and numbers for the base bid total and alternate bids. La. R.S. 38:2212.B(6)(b);
  • Unit prices govern if there is a discrepancy between the base bid total and extended unit pricing. La. R.S. 38:2212.B.(6)(c);
  • The Contract Limit is no longer a static $150,000. It will be adjusted to CPI after February 15, 2015. La. R.S. 38:2212.C(1);
  • Submitted bid documents will be made available for public inspection no sooner than the earlier of (i) 14 days after the bid opening or (ii) the recommendation of award by the public entity or design professional. La. R.S. 38:2212.H;
  • Projects cannot be advertised if the public entity does not have sufficient funds budgeted to meet the “Probable construction costs” which will be announced at the bid opening or posted electronically. La. R.S. 38:2212.H;
  • Bidders must attend (and stay at) any mandatory pre-bid meeting. La. R.S. 38:2212.I;
  • Additional details as to the procedures for the due process hearing required to declare a bidder non-responsible are filled in. La.R.S. 38:2212.X; and
  • The deadline for awarding or rejecting all bids has been unified at 45 days (the State of Louisiana had previously been under a 30 day deadline); the 45 day deadline can be extended by agreement between the awarding authority and the apparent low bidder. La. R.S. 38:2215.

It is noteworthy that these amendments to the Public Bid Law did not include any changes apparently intended to soften the current climate of “ultra-strict” construction of bid responsiveness required by Hamp’s Const., L.L.C. v. City of New Orleans, 2005-0489 (La. 2/22/06), 924 So. 2d 104, and illustrated in cases such as Roof Technologies, Inc. v. State, Div. of Admin., Office of Facility Planning & Control, 2009-0925 (La. App. 1 Cir. 10/28/09), 29 So. 3d 621, 621 (La. Ct. App. 2009).

The Louisiana Supreme Court recently heard oral argument in two cases, Oleszkowicz v. Exxon Mobil Oil Corporation, et al. and Chauvin v. Exxon Mobil Corporation, et al., both involving a plaintiff’s damages for potential exposure to naturally occurring radioactive material (NORM). This is the second lawsuit for both plaintiffs against the same defendant, for the same exposure to NORM as in the first suit. Both plaintiffs initially sued (in other matters) for fear/increased risk of cancer and then later sued for developing cancer due to the same potential NORM exposure. The fact that the plaintiffs can bring separate lawsuits for the same exposure is not in dispute. What is in dispute is whether the plaintiffs are entitled to punitive damages for each claim.

In the initial Oleszkowicz case, a jury awarded plaintiff compensatory damages for the increased risk of cancer but specifically denied punitive damages. The denial was based on the jury’s express finding that that the defendant had not engaged in wanton or reckless conduct. Soon after that suit, plaintiff actually developed cancer and filed suit again, claiming that his cancer was caused by the same exposure and conduct as the first suit. He sought compensatory damages and renewed his claim for punitive damages. Contrary to the verdict in the first suit, the jury awarded plaintiff $10 million in punitive damages. The defendant appealed. The court of appeal reduced the punitive damages award but failed to eliminate it entirely, rejecting defendant’s argument of res judicata. Instead, the court of appeal found that “the complexity of and convoluted circumstances” of the case constituted “exceptional circumstances,” thereby relieving plaintiff of the preclusive effect of the final judgment in his first suit. The Louisiana Supreme Court granted defendant’s writ of review, limiting the argument to the issue of res judicata.

The Chauvin case involves essentially the same issue except that, rather than a jury verdict in the first instance, the parties entered into a settlement agreement. The defendant settled plaintiff’s fear/increased risk claim and received a release from all future claims, except for future cancers. Plaintiff later developed cancer and filed another lawsuit, including a claim for punitive damages. The defendant sought dismissal of all claims barred by plaintiff’s prior settlement. The trial court agreed and granted defendant’s exception of res judicata as to all claims, including punitive damages, other than damages for future cancer. Plaintiff appealed, and the court of appeal reversed the trial court’s judgment as it pertained to punitive damages, finding an exception to res judicata. The Louisiana Supreme Court granted defendant’s supervisory writ.

Oral argument was heard in both cases on Monday, October 13, 2014.

On September 20, 2014, the Department of Health and Hospitals (“DHH”) published its notice of intent to promulgate a rule to continue the provisions of a March 20, 2014 Emergency Rule regarding the prohibition on provider steering of Medicaid recipients to select a particular health plan. DHH had previously promulgated an Emergency Rule on this issue in December, 2013 and then promulgated amendments to the Emergency Rule in March 2014 to clarify the provisions and sanctions and to incorporate provisions for provider appeals. No additional amendments to the March 2014 Emergency Rule are proposed in the notice of intent. The Emergency Rules, and the proposed Rule, were issued by DHH to avoid federal sanctions by the Centers for Medicare and Medicaid, by ensuring the integrity of Medicaid recipients’ freedom of choice in choosing a health care provider and ensuring compliance with federal regulations applicable to contract requirements.

Under the March 2014 Emergency Rule and the proposed Rule, a health plan is defined to include any managed care organization, prepaid inpatient health plan, prepaid ambulatory health plan, or primary care case management entity contracted with the Medicaid program. A provider is defined as any Medicaid service provider contracted with a health plan and/or enrolled in the Louisiana Medicaid Program. Provider steering is defined to mean “unsolicited advice or mass-marketing directed at Medicaid recipients by health plans, including any of the entity’s employees, affiliated providers, agents, or contractors, that is intended to influence or can reasonably be concluded to influence the Medicaid recipient to enroll in, not enroll in, or disenroll from a particular health plan(s).”

Both providers and health plans are subject to significant sanctions for steering Medicaid recipients. For a first offense of steering of Medicaid recipients, a provider may be subject to recoupment of all payments to the provider for services rendered to the Medicaid recipient for the time period the recipient’s care was coordinated by the managed care health plan to which the recipient was steered. If the recipient was steered to Medicaid fee-for-service, the provider may be subject to recoupment of payments for services rendered to the recipient for the time period the recipient’s care was paid for by Medicaid fee-for-service. A provider may also be subject to monetary sanctions of up to $1,000.00 for each recipient steered to join a particular Medicaid plan, up to a maximum of $10,000.00. Additionally, the provider may be required to send a letter to the particular Medicaid recipient notifying the patient of the sanctions imposed and the patient’s freedom of choice right to freely choose another participating managed care health plan or, if eligible, to participate in Medicaid fee-for-service. If the provider is found to have a second violation of patient steering, the provider may be subject to disenrollment from the Medicaid program.

A provider who receives a notice of sanction related to prohibited Medicaid recipient steering is entitled to appeal rights, including an informal hearing and/or an administrative appeal. The provider must make a written request for the informal hearing and administrative appeal within the deadlines provided in the notice.

If a health plan is found to violate the Medicaid recipient steering prohibition, DHH may impose the following sanctions: 1) disenrollment of the member(s) from the health plan; 2) recoupment of up to 100% of the monthly capitation payment or care management fee for the month(s) the member(s) was enrolled in the health plan; and 3) assessment of a monetary penalty of up to $5,000.00 per member. The health plan may also be required to submit a letter to each member providing notice of the sanctions imposed and the member’s right to choose another health plan.

To participate in the Louisiana Medicaid Program, providers have been required to ensure that their current and potential employees, contractors and other agents and affiliates were not excluded from participation in the Medicare or Medicaid Programs. Providers have been instructed to check the Department of Health and Human Services’ Office of Inspector General’s website for the list of excluded individuals and entities upon hire and monthly thereafter. These requirements have been included in the Provider Enrollment Agreements, the Medical Assistance Program Integrity Law, Louisiana Revised Statutes 46:437 et seq., referenced in the Louisiana Administrative Code Title 50, and the Code of Federal Regulations, 42 CFR §455.436.

The Louisiana Department of Health and Hospitals (“DHH”) has now implemented its own website to check for adverse actions taken against individuals and entities. The website is found at https://adverseactions.dhh.la.gov. Pursuant to guidance issued by DHH in September, 2014, effective immediately, providers are now directed to check the DHH website for all individuals and entities upon hire or contracting and monthly thereafter to determine whether they have had any adverse action imposed. Providers are required to maintain proof in their records that the checks were performed for employees and/or contractors, including subcontractors, by printing out the search results.

DHH directs that the search should include all current and previous names used (first, middle, last, maiden, married, and/or hyphenated names and aliases) for all owners, employees and contractors.

If the search conducted for potential employees or contractors reveals that the person or entity has been excluded from working with Medicare and/or the Louisiana Medicaid Program in any capacity, the provider should not employ or contract with the person or entity.

If the search reveals that an existing employee or contractor has been excluded from the Medicare and/or Louisiana Medicaid Programs, the provider must notify the DHH within ten (10) working days of discovering the exclusion and provide the following information: 1) the name of the excluded individual or entity; 2) the status of the individual or entity, whether an employee or contractor; 3) the beginning and ending dates of employment or contract; 4) documentation of the termination of employment or contract; and 5) the type of services provided to the provider by the excluded individual or entity. The findings should be reported to DHH.Medicaid.State.Exclusion@la.gov or to Department of Health and Hospitals, Program Integrity, P.O. Box 91030, Baton Rouge, LA 70821-9030. Providers who employ or contract with excluded individuals and entities may be subject to penalties, including monetary penalties.

DHH also made clear that using the new adverse actions web search tool does not replace the Nurse Aide Registry/Direct Service Worker Registry requirements. Providers that employ Certified Nursing Assistants (CNAs) and Direct Service Workers (DSWs) are still required to check those registries upon hire and every six (6) months thereafter.

The Louisiana Board of Pharmacy has revised the rules on access to patient information maintained by the Prescription Monitoring Program (“PMP”). Historically, only persons authorized to prescribe or dispense controlled substances or drugs of concerns could access the PMP. The Board recently revised the PMP rules to now allow a “delegate” of the prescriber or dispenser access to the PMP records. A delegate is defined as a person authorized by a prescriber/dispenser who is also an authorized user to access and retrieve program data for the purpose of assisting the prescriber/dispenser and for whose actions the authorizing prescriber and dispenser retains accountability. Each delegate must register for their own account which will be linked to the supervisor’s account. The prescribers and dispensers are responsible for supervising their delegate’s activities.

The goal of the PMP is to improve the State of Louisiana’s ability to identify and inhibit the diversion of controlled substances and drugs of concern. The information maintained on the PMP is used to report suspected violations of any law to State and Federal Law Enforcement agencies as well as to assist prescribers with the treatment of their patients. All dispensers of controlled dangerous substances and drugs of concern are required to submit information to the PMP, including both prescriber and patient information. Failure to report prescription information to the PMP will result in a referral to the prescriber or dispenser’s professional licensing board for administrative sanctions.

The Louisiana Board of Pharmacy has issued a PMP Delegate Registration and Request Guide with instructions for prescribers, dispensers and their delegates on how to register for a delegate account. More information can be found at the Louisiana Board of Pharmacy website www.labp.com

On August 29, 2014, the Centers for Medicare & Medicaid Services (CMS) and the Office of the National Coordinator for Health Information Technology (ONC) issued a final rule modifying the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs. While CMS is responsible for managing the EHR incentive programs and meaningful use, ONC is responsible for creating and maintaining an EHR certification program. The final rule includes the following significant changes: (1) the issuance of various options providers may use to meet the 2014 reporting requirements; (2) extension of the deadline for implementation of Stage 3 for certain providers; and (3) modification of the reporting requirements for Clinical Quality Measures (CQMs) to reflect a provider’s choice of certified electronic health record technology (CEHRT).

2014 Reporting Options:

Due to product availability delays, CMS and ONC recognized that many providers may have difficulty fully implementing the 2014 Edition CEHRT to meet meaningful use. As a result, CMS and ONC developed the following three options providers can utilize for their 2014 meaningful use attestations:

Option 1: Utilize 2011 Edition CEHRT. Eligible professional (“EPs”), eligible hospitals (“EHs”) and critical access hospitals (“CAHs”) may use the 2011 Edition CEHRT for the 2014 EHR reporting period and must meet the meaningful use objectives and measures for Stage 1 that were applicable during the 2013 payment year, regardless of the provider’s current stage of meaningful use.

Option 2: Utilize a Combination of 2011 and 2014 Edition CEHRT. The second option for EPs, EHs, and CAHs who were impacted by the delays is to utilize a combination of 2011 Edition CEHRT and 2014 Edition CEHRT for their 2014 reporting period. These providers may choose to meet (a) the 2013 Stage 1 objectives and measures; (b) 2014 Stage 1 objectives and measures, or (c) for those providers scheduled to begin Stage 2 in 2014, the Stage 2 objectives and associated measures.

Option 3: Utilize 2014 Edition CEHRT for 2014 Stage 1 Objectives and Measures Instead of Stage 2 Objectives and Measures. For some EPs, EHs, and CAHs, the 2014 Edition CEHRT availability delays resulted in the inability to fully implement all the necessary Stage 2 objectives and measures for the 2014 reporting period. Consequently, CMS and ONC are permitting providers scheduled to begin Stage 2 for the 2014 EHR reporting period to attest to the Stage 1 objectives and measures.

Under all three options, the EP, EH or CAH utilizing the alternative reporting measures for 2014 must attest that it was “not able to fully implement” 2014 Edition CEHRT due to “delays in 2014 Edition CEHRT availability.” CMS and ONC did not intend for the alternative reporting options to be broadly utilized by providers. Therefore, the final rule provides guidance on the terms “not able to fully implement” and “delays in 2014 Edition CEHRT availability,” which limit who can attest to meeting these requirement.

The final rule lists the following examples of situations that would not be permissible reasons to “not be able to fully implement” 2014 Edition CEHRT and, therefore, would not be grounds to use the optional reporting requirements: (a) failure to implement due to financial issues, such as the costs of implementing, upgrading, installing, or testing; (b) experiencing personnel problems, such as staff changes and turnover; and (c) inaction or delay by the provider, including waiting too long to engage a vendor or the provider’s inability or refusal to purchase requisite software updates. Regarding “delays in 2014 Edition CEHRT availability, CMS and ONC clarified that this term refers specifically to one or more delays related to the development, certification, testing and release of an EHR product by the EHR vendor or developer, not from merely whether the software is certified and then installed or not.

The above-mentioned attestation options are not available to providers who have fully implemented 2014 Edition CEHRT.

Stage 3 Implementation Extension:

Another significant change in the final rule was the finalization of the proposed delay in the deadline for implementation of Stage 3 meaningful use requirements for those providers who became meaningful users of EHR in 2011 or 2012. Originally set for January 1, 2016, the Stage 3 deadline has not been delayed until January 1, 2017. The delay is intended to provide CMS and ONC with the opportunity to focus on successful implementation of the Stage 2 requirements. The Stage 3 objectives and measures, as well as reporting criteria, will be defined in future rulemaking.

CQM Submissions for 2014:

In light of the 2014 reporting changes, CMS and ONC also adjusted the CQM submission requirements. For providers who choose to attest to the 2013 Stage 1 objectives and measures, they must also report the CQMs that were applicable for 2013. Similarly, those providers choosing to attest to the 2014 Stage 1 or Stage 2 objectives and measures must also report the 2014 CQMs in the manner required for 2014.

The reporting options set forth in the final rule only apply to the 2014 reporting period. No changes have been made to reporting requirements for 2015. Providers must use 2014 Edition CEHRT for the 2015 reporting period and for subsequent years.