It took one of the newly-minted judges on the Eastern District bench to finally adopt a working definition for the types of “perils of the sea” that Jones Act seaman are exposed to when analyzing the second prong of the Chandris, Inc. v. Latsis, 515 U.S. 346 (1995) test. That test requires the plaintiff, claiming to be a Jones Act seaman, to “demonstrate a connection to a vessel in navigation (or to an identifiable group of such vessels) that is substantial in terms of both its duration and its nature.” Id. at 368. The two prongs of Chandris are: (1) the plaintiff must show that his duties contribute to the function of the vessel or the accomplishment of its mission, and (2) the plaintiff must demonstrate a connection to a vessel (or an identifiable group of vessels) in navigation.

In Duet v. Am. Comm’l Lines, LLC, No. 12-3025, 2013 WL 1682988 (E.D. La. April 17, 2013), Judge Jane Triche Milazzo, in denying remand, found that a plaintiff who was injured while working aboard the defendant’s vessel was not a Jones Act seaman. Duet, a mechanic, was assigned by his employer to work at a barge repair facility owned and operated by ACL Transportation Services, LLC. The facility consisted of “a number of barges tied together and moored to the riverbank in order to create a stationary work platform (the “floating dock”),” that extended 1-2 miles along the river. The barges serviced by the facility remain in the river but are moored to the floating dock. ACL also owns and operates several smaller push boats to help move the barges in and out of the facility, as well as shift the barges within the floating dock itself. Duet was not assigned to any specific vessel, but performed his mechanic duties on barges and push boats alike. He only boarded the push boats as necessary to complete his work on those boats or to be transported to the more remote locations within the facility that required his work. However, when necessary to reposition barges at the floating dock to facilitate repairs, he would occasionally work as a deckhand, and on two occasions had left the facility by boat to assist in sea trials and help save a sinking vessel. Duet was injured while working aboard one of the vessels and sued several defendants and his employer, alleging to be a Jones Act seaman.

Continue Reading Eastern District of Louisiana Adopts Definition for “Perils of the Sea” for Seaman Status Analysis

On December 9, 2013, the Occupational Safety and Health Administration (“OSHA”) requested comments concerning potential changes to its Process Safety Management (“PSM”) program that could have a significant impact on oil field operations. See 78 Fed. Reg. 73756 (Dec. 9, 2013). Among the many “modernizations” of the PSM standard, OSHA is seeking comment on the elimination of exemptions that directly affect oil field operations. Current exemptions of concern include:

  • atmospheric storage tanks;
  • oil-and-gas production facilities; and
  • oil-and-gas well drilling and servicing.

PSM applies to “a process which involves a Category 1 flammable gas (as defined in 1910.1200(c)) or a flammable liquid with a flashpoint below 100 °F (37.8 °C) on site in one location, in a quantity of 10,000 pounds (4535.9 kg).” 29 CFR 1910.119(a)(ii). The addition of atmospheric storage tanks is significant as a tank as small as 35 Barrels of crude oil will cause the “process” to exceed the 10,000 pound threshold. As a consequence, other process equipment that contains less than 10,000 pounds of flammable materials that is connected to the tank (via piping) may also become subject to PSM requirements.

Continue Reading OSHA Considers Expanded Oversight in the Oil Patch

Pursuant to 28 U.S.C. § 1333, federal courts have original subject matter jurisdiction over general maritime law claims. However, 28 U.S.C. § 1333(1), commonly known as the “savings to suitors clause,” preserves a plaintiff’s right to instead file a general maritime law action in state court. Until recently, a defendant sued in state court for a general maritime law claim could not remove the case to federal court unless an independent basis of subject matter jurisdiction existed (such as diversity). See Tennessee Gas Pipeline v. Houston Cas. Ins. Co., 87 F. 3d 150 (5th Cir. 1996). As explained below, several district courts have concluded that recent revisions to the removal statute, 28 U.S.C. § 1441, have changed this rule and now allow general maritime law claims to be removed to federal court without an independent basis of subject matter jurisdiction.

The basis for the U.S. Fifth Circuit’s prohibition against removal of a general maritime law claim unless an alternative basis of subject matter existed was the provision contained in the then-current version of 28 U.S.C. § 1441(b) which stated that “any civil action of which the district courts have original jurisdiction founded on a claim or right under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties.” The U.S. Fifth Circuit concluded that this portion of the then-current version of 28 U.S.C. § 1441(b) – combined with the U.S. Supreme Court’s holding in Romero v. International Terminal Operating Co., 358 U.S. 354 (1959), that general maritime law claims do not “arise under the Constitution, laws, or treaties of the United States” – precluded the removal of general maritime law claims unless an independent basis of subject matter jurisdiction existed.

Continue Reading Because of Revisions to 28 U.S.C. Section 1441, Several District Courts Have Concluded That General Maritime Law Claims Can Be Removed to Federal Court Without an Independent Basis of Subject Matter Jurisdiction

In its most recent decision regarding Longshore and Harbor Workers’ Compensation Act (LHWCA) coverage, namely New Orleans Depot Services, Inc. v. Director, Office of Workers’ Compensation Programs, 718 F.3d 384 (5th Cir. 2013) (en banc), the United States Fifth Circuit Court of Appeals defined “adjoining” as used in the LHWCA to mean “bordering on or contiguous with navigable waters.” In doing so, the Court expressly overruled its own precedent found in Texports Stevedore Co. v. Winchester, 632 F.2d 504 (5th Cir. 1980) (en banc), and the Court adopted the interpretation of the statutory language proffered by the Fourth Circuit Court of Appeals in Sidwell v. Express Container Services, Inc., 71 F.3d 1134 (4th Cir. 1995).

Continue Reading The Fifth Circuit’s Latest Longshore and Harbor Workers’ Compensation Ruling

In cases where punitive damages have been claimed and could potentially be awarded defendants should be aware of whether, and to what extent, their wealth and financial data is subject to discovery. Louisiana courts seem to be in agreement that when punitive or exemplary damages are claimed, a defendant’s financial status is discoverable since such information is relevant to the subject matter of the action. See Lacoste v. Crochet, 99-0602 (La. App. 4 Cir. 1/5/00), 751 So.2d 998, 1005. However, it is not clear as to the extent to which a party may conduct discovery into the wealth and financial matters of a defendant when dealing with a potentially viable punitive damages claim.

Continue Reading Limiting Discovery in the Punitive Damages Context

After considerable delay and much anticipation by the municipal finance community, the Securities and Exchange Commission (the “SEC”) recently approved a final rule defining municipal advisors for purposes of the Dodd-Frank Act (the “Act”). The SEC had previously noted that, in the wake of the last financial crisis, a number of municipalities suffered significant losses from complex derivatives and other financial transactions that had been entered into after receiving advice from municipal advisors who were largely unregulated and thus not required to comply with any particular standard of conduct or meet any particular training requirements or disclose potential conflicts of interest. To address this issue, the Act created a new regulatory regime that is intended to protect municipalities and investors in the municipal securities market. To that end, the Act requires that the Municipal Securities Rulemaking Board (the “MSRB”) regulate municipal advisors who advise state and local governments and other political subdivisions on financial products and services. A person is considered to be an advisor if that person provides advice “to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues; or undertakes a solicitation of a municipal entity or obligated person.” Importantly, certain persons who had initially been included in the proposed rule are now excluded from the final rule, including public officials and employees, underwriters not providing advice regarding investment of proceeds or derivatives, registered investment advisors, attorneys, engineers, banks, accountants, certain independent registered advisors, and certain swap dealers.

In other news, the Internal Revenue Service (the “IRS”) has issued two proposed regulations relating to tax exempt bond arbitrage restrictions. Major changes in the first proposed regulation include revisions to the definition and standards for determining the issue price of a bond issue, simplified rules relating to interest rate swaps and qualified hedges, and the creation of a safe harbor for long-term working capital financing. The second proposed regulation addresses recovery of overpayment of arbitrage rebate. The IRS is accepting comments on the proposed new regulations through December 13, 2013.

The Louisiana State Board of Medical Examiners (the “Board”) published proposed rules and regulations governing the practice of polysomnography and the licensure of polysomnography technologists and technicians.  The Board will accept comments on the proposed rules until 4 p.m. on October 21, 2013.

An individual who does not hold a current license as a polysomnograhic technologist or a permit as a polysomnographic technician is prohibited from engaging in the practice of polysomnographic technology in Louisiana.  However, the prohibition does not apply to anyone who is: acting under a license issued by any licensing agency of the state of Louisiana whose scope of practice includes polysomnography; employed as a polysomnograhic technologist by the U.S. Government when acting exclusively within the course and scope of employment; licensed by the Board to practice respiratory therapy; or pursing a course of study in a CAAHEP accredited polysomnograhic technology education program while acting within the course of study.

Polysomnographic technology is the allied health specialty practiced under the direction and supervision of a physician involving the attended monitoring and testing of individuals suffering from any sleep disorder as classified in the International Classification of Sleep Disorders.  Procedures are conducted only upon written prescription or verbal order of a physician, which is based on the physician’s clinical evaluation of the patient, and under his direction and supervision.  A polysomnographic technologist is an allied health professional who possesses a current license issued by the Board to practice polysomnographic technology to perform both diagnostic and therapeutic polysomnograms under the direction and supervision of a physician.  A polysomnographic technician is an allied health professional who possesses a current permit issued by the Board to practice polysomnographic technology under the direct supervision of a physician or qualified allied health professional currently licensed by the Board whose scope of practice includes polysomnography.  A supervising physician is a qualified physician who provides direction and supervision to an individual who is licensed or direct supervision to an individual who holds a permit, to practice polysomnographic technology in Louisiana.

Continue Reading Louisiana State Board of Medical Examiners Releases Proposed Rules Governing the Practice of Polysomnography

The Office of Inspector General (“OIG”) of the United States Department of Health and Human Services (“HHS”) has issued a report criticizing the Centers for Medicare and Medicaid (“CMS”) and its Recovery Audit Contractor (“RAC”) Program. In a report issued on September 4, 2013, the OIG determined that CMS need to take corrective action on reimbursement program vulnerabilities, had not addressed fraud referrals form its RAC auditors, and had not provided sufficient oversight of RAC performance.

In Report OIE-04-11-00680, the OIG reported that although CMS took corrective action in 2010 and 2011 in response to program vulnerabilities, deficiencies nevertheless continue. For example, CMS apparently did not take action to address six RAC referrals for potential fraud.  The OIG also reported that when comparing performance evaluation metrics with RAC contract performance requirements, CMS oversight of the RAC’s performance is not as effective as it should be.

According to the OIG, RAC auditors identified half of all claims they reviewed in 2010 and 2011 as having been improperly paid.  CMS defines any specific issue associated with more than $500,000 in improper payments as a “vulnerability”.  CMS is supposed to develop corrective action plans to address vulnerabilities and is to keep an action plan open until each vulnerability is corrected.    One example of corrective action is provider education.

As of June 2012, CMS had not taken action on 18 of 46 vulnerabilities.  As of this same time, CMS had not evaluated the effectiveness of its correction actions on 28 of 46 vulnerabilities.   Additionally, as of November 2012, CMS has not taken action to address the six fraud referrals that had been made by RAC auditors in 2010 and 2011.

Although most of the RAC-identified overpayments were made to hospitals, all health care providers should be vigilant in ensuring adequate documentation, proper code selection, and the ability to defend the medical necessity of items and services provided to Medicare beneficiaries.

September 23, 2013 is the effective date of new HIPAA Regulations that address many changes, such as:

  • Changes to Business Associate Rules
  • Changes to Investigations, Compliance Reviews and Civil Monetary Penalties
  • Mandatory Restriction on Disclosure of Protected Health Information to Health Plans in Some Cases of Cash Payment for Items and / or Services
  • Risk Assessment and Break Notification
  • Changes to Provider’s Notice of Privacy Practices
  • Changes Regarding Marketing and Fundraising

On Wednesday, September 18 from 5:30 – 7:30 pm at Juban’s Restaurant, the Kean Miller Health Law Team will discuss these changes and how they may affect your practice, agency or company.

RSVP to rsvp@keanmiller.com or 225.389.3753.

View the invitation here.

* This article originally appeared in the July 8, 2013 edition of Around the Bar

Act No. 88 makes an important change to a creditor’s right to collect a debt from property that the debtor has transferred to someone else. Unlike alternative approaches to transfer avoidance, the right of action in Louisiana – the “Revocatory Action” – makes a transferor’s intent to defraud creditors irrelevant. The proof is simple. The creditor may seize and sell the transferred property if the transfer of that property caused or increased the debtor’s insolvency.

Act No. 88 does not change the elements of the Revocatory Action;[1] it changes the limitations period in “cases of fraud.” Here is the relevant language from Act No. 88:

Civil Code Article 2041 is hereby amended and reenacted . . . to read as follows:

Art. 2041. Action must be brought within one year

The action of the obligee must be brought within one year from the time he learned or should have learned of the act, or the result of the failure to act, of the obligor that the obligee seeks to annul, but never after three years from the date of that act or result.

The three year period provided in this Article shall not apply in cases of fraud.

2013 La. Legis. Acts, No. 88 (newly added language underlined).[2]

In these undefined “cases of fraud” the creditor may look back to transfers passed in the last ten years, compared to three years in normal cases. In the world of transfer avoidance laws, the look-back period is everything. By more than tripling that period based on the transferor’s intent, Act No. 88 invites every plaintiff to plead fraud generally and take discovery into the transferor’s mind.

The 1984 revisions to the Civil Code eliminated the debtor’s fraudulent intent as an element of proof for a Revocatory Action in favor of the objective insolvency test. If Act No. 88 means anything, it must mean that we have returned to the old search for the debtor’s bad thoughts.

Act No. 88 Changes a Key Feature of this State’s Transfer Avoidance Policy

Each jurisdiction in the U.S. provides a system for creditors to collect from property that a debtor transfers to someone else. The basic policy goal is to protect the value of unsecured debt from deceitful transactions while balancing the opposing need for security of title. As time passes from the transaction date, the particular transferee’s property rights overshadow the generalized concern for the value of debt instruments. To strike a balance, each available system, including our own, provides creditors with limitations periods proportionate to a suspected level of deceit. As a result, creditors have more time to intercept deceitful transactions and less time for honest ones.

Louisiana’s solution is the Revocatory Action, derived from the “Paulian Action” under Roman law. The present Revocatory Action makes a creditor’s proof simple: the transfer is annulled if it 1) occurred after the debt was incurred and 2) increased the transferor’s insolvency. The creditor is protected from the detrimental effects of deceit by starting the one-year prescription period from the date when the creditor knew or should have known of the transaction. Transferee is protected by a three-year peremptive period beginning on the date of the transaction, regardless of the debtor’s intent to deceive.

By comparison, the debtor’s deceitfulness is the main focus of common law “fraudulent conveyance” doctrines, which, for 43 states, have been codified in the Uniform Fraudulent Transfer Act (the “UFTA”).

The UFTA establishes three types of fraudulent transfers, subject to the following limitations periods. For the worst kind of deceit – where the transferor has the “actual intent” to defraud creditors – a UFTA cause of action extinguishes after the later of 4 years from the transfer date or 1 year from the date the creditor either learned or reasonably should have learned of the transfer.[3] For the second worst kind of deceit – where actual intent is missing but the debtor should have known what it was doing, given the value it received for the transfer and the amount of its debts – the cause of action extinguishes after 4 years from the transfer date, regardless of whether the creditor discovered or should have discovered the transfer.[4] For the lowest level transfers – where the transferor received less than “reasonably equivalent value” at a time of insolvency – the cause of action extinguishes after one year from the transfer date regardless of what the creditor was able to know.[5]

Louisiana’s concise approach to transfer avoidance law was a major innovation of the 1984 Obligations Revisions to the Louisiana Civil Code of 1870. The pre-1985 Revocatory Action required proof of 1) insolvency of the debtor, 2) injury to the creditor, 3) intent to defraud the creditors, and 4) pre-existing and accrued indebtedness.[6] The evidence that established the debtor’s intent to defraud under transfer avoidance law was difficult to target.

The modern Revocatory Action provides the most direct solution to the main problem by shifting the focus away from the debtor’s bad faith and, instead, upon the damage to creditors. A seizing creditor cares only about preserving the debtor’s collectible net worth, not what the debtor was thinking in attempting to avoid collection. Much deliberation and explanation was expended in retracing the origins of the Paulian Action to bring us to our State’s modern-day objective insolvency test. The objective approach appropriately focuses on the restitution owed to unsecured creditors while balancing the rights of transferees, without the needless complexity of proving the debtor’s intent.

The Revocatory Action has Always Targeted “Cases of Fraud”

Act No. 88 in search of a problem replaces the three-year peremptive period with a special ten-year prescriptive period[7] reserved for “cases of fraud.” In the context of the Revocatory Action, however, the term “cases of fraud” is redundant. Every Revocatory Action targets a case of fraud.

The purpose of the objective insolvency test – the hallmark of the modern Revocatory Action – is to target transactions made “in fraud of creditors” in the way that Roman Paulian Action applied that concept.[8] That is, to ensure that a creditor’s process of execution is not prejudiced by transactions that deplete the debtor’s net worth, regardless of the debtor’s intent.

The debtor’s intent to defraud creditors was the primary cause for a Revocatory Action before 1985. However, the focus on the debtor’s deceitful intent was the result of a confusion in the meaning of the Latin phrase “in fraudem creditorum,” (“in fraud of creditors”), found in the source articles.[9] In Latin, fraus means “prejudice” or “disadvantage”; it does not mean deceit in the modern sense of the word “fraud.”[10] By missing the distinction, over time, the jurisprudence focused on the deceitfulness of the transaction. As a result, a formula was created for distinguishing between “actual” and “constructive” fraud.[11] That formula led to inconsistent applications.

The objective insolvency test introduced by the 1984 Obligations Revisions, eliminated that inconsistency and confusion. By eliminating the debtor’s intent as an element of proof, the modern Revocatory Action focuses on the prejudice the transaction has upon the creditor’s collection process, as opposed to the deceitful qualities of the transaction. Nevertheless, “fraud” in the sense of the Paulian Action remains the target of the modern Louisiana Revocatory Action.

Legislative History Notwithstanding, Act No. 88 Creates an Intent-Based Revocatory Action

Unfortunately, the legislative history of the Revocatory Action and importance of the objective insolvency test was lost on this year’s Legislature. It is unfortunate because had the Legislature retained a memory of its work in 1984 it would have recognized the redundancy and thus confusion created by (again) interjecting the concept of “fraud” into the Revocatory Action.

Legislation trumps history (and logic) as a source of law. We are not allowed to interpret legislation in a way that renders the words meaningless or superfluous.[12] We must search for a meaning, even if the Legislature gave us a poor, however “solemn[,] expression of legislative will.”[13]

Bound by these rules, creditors obviously cannot argue that the ten-year prescriptive period always expires after the three-year preemptive period on the basis that all Revocatory Actions are “cases of fraud.” If all Revocatory Actions are “cases of fraud” (as in fact they are in the Paulian Action sense of the word), then either the ten-year or three–year limitations period applies, but not both. That interpretation renders Act No. 88 superfluous. Instead, the ten-year Revocatory Action must be interpreted to guard against a type of transaction or protect a type of creditor that is different than the type targeted by three-year version.

Act No. 88 provides no way to distinguish the ten- from the three-year right. Unlike the other intent-based approaches to transfer avoidance law that we have seen in Louisiana, Act No. 88 is an incomplete thought. Nothing in the Civil Code can be read in pari materia to define the kind[14] of fraud that distinguishes between intent-based and objective Revocatory Actions. Nothing allows us to define against whom the fraud must be committed, and what must be the object of the fraud. The pre-1985 Revocatory Action and the UFTA were clear on these points.

At least under the pre-1985 Revocatory Action, we had a complete system for determining when the right of action prescribed and what triggered the right of action. Unlike Act No. 88, we had a way to define what the Legislature meant by “in fraud of a creditor’s rights.” Even our Legislature’s flirtation with the UFTA back in the early 2000’s[15] was better than Act No. 88. It was at least a complete thought.

Conclusion

Act No. 88 is a move backward in the area of transfer avoidance law. The new ten-year right of action in “cases of fraud” uses outdated, redundant terminology to define the limitations period, which is one of the most important aspects of the Revocatory Action. The terminology resurrects needless uncertainty in an otherwise artfully crafted, objective, easy-to-use law. That uncertainty will require judges to “proceed according to equity”[16] far too quickly than the primary source of Louisiana law (i.e., legislation[17]) should allow.

The Legislature should either repeal Act No. 88 or complete its thought, in that order of preference.

_______________________________

[1] La. Civ. C. art. 2036 (“An oblige has a right to annul an act of the obligor, or the result of a failure to act of the obligor, made or effected after the right of the oblige arose, that causes or increases the obligor’s insolvency.”)

[2] The original bill was sponsored by the Louisiana State Law Institute and introduced by Representative Abramson. It only dealt with tolling agreements which had previously not worked in Louisiana. After passing the House (with a technical amendment), it was amended in the Senate by Senator Martiny to include the revisions to Article 2041.

[3] Uniform Fraudulent Transfer Act § 9(a).

[4] Uniform Fraudulent Transfer Act § 9(b).

[5] Uniform Fraudulent Transfer Act § 9(c).

[6] Thomassie v. Savoie, 581 So.2d 1031, 1035 (La. App. 1 Cir. 1991).

[7] Now that the three-year period “shall not apply in cases of fraud,” no limitations period is “otherwise provided by legislation[; therefore, the] personal action is subject to a liberative prescription of ten years.” La. Civ. C. art. 3499.

[8] See Murray v. Mae M. Stacy Trust, et al. (In re Goldberg), 277 B.R. 251, 270-285 (Bankr. M.D. La. 2002), for a concise summary of scholarship following the origins of the modern Revocatory Action.

[9] Id. at 273

[10] Id. at 279.

[11] E.g., Gast v. Gast, 19 So. 2d 138, 141 (La. 1944).

[12] Credit v. Richland Parish Sch. Bd., 2011-1003 (La. 3/13/12); 85 So. 3d 669, 678 (“It is a cardinal rule of statutory interpretation that it will not be presumed that the Legislature inserted idle, meaningless or superfluous language in the statute or that it intended for any part or provision of the statute to be meaningless, redundant or useless.”).

[13] La. Civ. C. arts. 9-13.

[14] “As used in [the] source articles, the word ‘fraud’ has a meaning which is difficult to determine but which appears different from its meaning in other contexts.” La. Civ. C. art. 2036, cmt. b.

[15] The Legislature passed the UFTA in 2003 and then repealed it in 2004.

[16] La. Civ. C. art. 4.

[17] La. Civ. C. art. 1.