There are many federal and state posting obligations.  You can now add another poster to the list.  As of April 30, 2012, most private sector employers will be required to post an 11 x 17 inch notice from the National Labor Relations Board that advises employees of their rights under the National Labor Relations Act.  The Board originally set a deadline of January 31, 2012, but that was extended to April 30.  A copy of the poster is available at no cost from the Board through its website, www.NLRB.gov.  The National Association of Manufacturers and others brought suit and challenged that Board’s posting requirement.  On March 2, 2012, Judge Amy Berman Jackson of the United States District Court for the District of Columbia issued a ruling upholding the Board’s rule requiring the poster, but she struck down a portion of the rule regarding enforcement.  Several of the plaintiffs submitted notices that they intend to appeal the decision and have moved to stay enforcement of the rule during the appeal.  Stay tuned.

 

 

The United States Department of Health and Human Services, Offices for Civil Rights (“OCR”) and BlueCross Blue Shield of Tennessee (“BCBST”) announced a settlement this week for $1.5 million for a breach of protected health information under the Health Information Portability and Privacy Act (“HIPAA”). In November 2009, BCBST submitted a Health Information Technology for Economic and Clinical Health Act (“HITECH”) Breach Report to OCR regarding the theft of 57 hard drives containing encoded electronic data including member names, member ID numbers, diagnosis codes, dates of birth, and social security numbers of 1,023,209 individuals. The hard drives were taken from a data storage closet at a former call center. According to BCBST, there was no indication of any misuse of personal data on the stolen hard drives and the company spent approximately $17 million on the investigation, notification, and protection efforts.

In addition to the $1.5 million payment, BCBST agreed to a Corrective Action Plan wherein BCBST is required to:

  • Submit a biannual report;
  • Comply with the document retention requirements;
  • Demonstrate distribution and implementation of policies and procedures to its workforce with access to ePHI;
  • Conduct a risk assessment of potential risks and vulnerabilities to the confidentiality, integrity and availability of ePHI;
  • Prepare a risk management plan that implements security measures sufficient to reduce risks and vulnerabilities;
  • Prepare a facility security plan to limit access to electronic information systems and facilities where they are housed and to safeguard equipment containing ePHI from unauthorized physical access, tampering, and/or theft;
  • Implement physical safeguards governing the storage of electronic storage media containing ePHI;
  • Conduct random samples of BCBST workforce’s familiarity and compliance with the policies and procedures; and
  • Conduct random samples of electronic storage media and devices.

The enforcement action by OCR against BCBST was the first resulting from a breach report required by the HITECH breach notification rule. This resolution agreement was the sixth to be entered into by OCR for HIPAA breaches with one entity receiving civil monetary penalties as well. Civil penalties for HIPAA violations range from $100 to $50,000 per violation with a maximum of $1.5 million for all violations of an identical provision in a calendar year.

The Louisiana Supreme Court recently issued a major decision in favor of industry by reversing the rulings of a trial court and an appellate court that found plaintiffs in a toxic tort case were entitled to an award of punitive damages based on the application of another state’s law.

Kean Miller submitted an amicus brief in Craig Steve Arabie v. CITGO Petroleum Corporation, 2010-C-2608 (La. 3/13/12) on behalf of the Louisiana Chemical Association, the American Chemistry Council, and the Chamber of Commerce of the United States of America in support of CITGO’s successful appeal of the punitive damages award.

On March 13, 2012, the Louisiana Supreme Court in a 5-2 decision, held that under Louisiana’s choice of law principles, the punitive damages laws of Texas could not be applied to a claim for personal injuries that occurred in Louisiana, even though the defendant was a Delaware corporation with its corporate headquarters in Texas.

In overturning the lower courts’ decisions awarding punitive damages (while upholding the compensatory damages awards), the Court provided some much-needed guidance about how the Louisiana Civil Code articles governing choice of law should be interpreted when punitive damages are sought under another state’s law against a corporate defendant domiciled outside Louisiana but with a significant Louisiana presence. Following an accidental release from a wastewater treatment system, fourteen plaintiffs filed suit alleging that they were injured as a result of exposure to fumes from the release. The plaintiffs sought punitive damages under Texas law. (In 1996, Louisiana repealed a law that allowed punitive damages for injuries caused by the wanton or reckless disregard of public safety in the storage, handling, or transportation of hazardous or toxic) Plaintiffs alleged that decisions made at the corporate level in Texas justified the imposition of Texas law. The trial and appellate courts agreed with plaintiffs’ position on punitive damages.

The Supreme Court, however, disagreed. Under the facts presented, the Court held that under the Louisiana Civil Code articles on Choice of Laws, the defendant corporation had to be treated as a Louisiana domiciliary; and, as such, Louisiana law did not allow an award of punitive damages for injuries sustained in Louisiana by Louisiana residents allegedly resulting from an accident that also occurred in Louisiana. The Court analyzed a number of factors in reaching its conclusion, including that all plaintiffs were located in Louisiana, the defendant had a major presence in Louisiana, the events took place in Louisiana and the injuries occurred in Louisiana. In looking at these factors, the Court noted that unless management or corporate level decisions outweighed the allegedly tortious activity that occurred within Louisiana, those corporate-level decisions would not justify the application of another state’s laws. . Therefore, the Court overturned the punitive damages award.

Craig Steve Arabie v. CITGO Petroleum Corporation

Read the amicus brief.

Social networks like Facebook, YouTube and Twitter are transforming the way companies communicate with consumers. Facebook, YouTube and Twitter can be powerful business tools, but you must be mindful of certain legal limitations and guidelines.

The words “Facebook,” “YouTube,” and “Twitter” are proprietary to the companies that own them. “Facebook,” “YouTube,” and “Twitter” are all registered with the U.S. Patent & Trademark Office. A trademark is a distinctive word, logo or phrase that is used by an individual or business to identify a unique source of products or services.

Facebook, Inc., Twitter, Inc. and Google, Inc., the owner of YouTube, are entitled to prevent others from using their trademarks, which include logos, or something similar, in a way that is misleading, deceptive or could cause confusion in the marketplace. You must first obtain permission before using another’s trademark.

Both Facebook and Google authorize the use of the Facebook and YouTube trademarks in specified ways. For example, both Facebook and Google prohibit users from modifying their trademarks and from using their trademarks as a verb. These guidelines are set forth in full on each of their websites. Twitter, however, expressly prohibits the use of its trademarks. The Twitter basic terms state, “Nothing in the Terms gives you a right to use the Twitter name or any of the Twitter trademarks, logos, domain names, and other distinctive brand features.” Thus, Twitter users should be wary of using the Twitter trademark to promote their businesses in advertising without receiving specific permission.

Google allows commercial usage of certain YouTube badges by those who make use of YouTube API, which allows users to incorporate YouTube content into the user’s own website or software application. A user is not required to get preapproval to use the YouTube API or to promote API functionality on the user’s website using the “YouTube Ready,” “YouTube Videos” or “Powered by YouTube” badges, all of which are provided on the website for free download and use. But, by downloading the badges, the user agrees to be bound by certain guidelines, all of which are set forth in the Branding Guidelines on the Google website available here.  Google prohibits usage of any other form of the YouTube logo other than the badges provided on the website, as well as any variation of the YouTube trademark such as “YouTubers,” “Tubing,” “You-Tube,” or “YouTubed,” etc. Additionally, it is important to note that the YouTube license appears to only extend to use of a YouTube Badge to give attribution to a YouTube video on a website, blog, or other such means of electronic communication. The license does not specifically address print advertisements, such as billboards.

Facebook actually recommends promoting one’s Facebook page outside of Facebook, assuming very specific guidelines are followed. Facebook’s guidelines for both the use of its Brand Assets and for referencing Facebook are located in Facebook’s Brand Permissions Center located online here. For example, Facebook allows usage of its Like Button logo to be used in print advertisements and in connection with the Like Button social plugin that Facebook provides on its website. Facebook, however, prohibits usage of the Like Button logo in online advertisements. Facebook also requires users to get special permission to use the Facebook logo. Permission can be obtained directly from the Brand Permissions Center website by accessing the Permissions Request Form. Additionally, Facebook typically prohibits use of its trademarks in connection with merchandise such as clothing, hats, mugs, dolls, and toys. More examples of acceptable and unacceptable uses of Facebook’s trademarks and appropriate ways for users to reference Facebook are provided on the Brand Permission Center section of the Facebook website.

Before delving into the world of social networking advertising, take the time to read the permissions and guidelines of whatever social networking site you may be using. These guidelines are typically located on the social network’s website. If there are no guidelines, the default rule is that specific permission should be sought to use the social network’s trademark to promote your business by incorporating a social network’s trademark in commercial advertisements.

The Louisiana Supreme Court has, once again, affirmed the constitutionality of the statutory cap for damages in Medical Malpractice cases.  On March 13, 2012, the Court reiterated its prior holding that the cap is constitutional and applicable to all qualified healthcare providers under the Medical Malpractice Act, including nurse practitioners.  The statutory cap on damages is $500,000.00, which includes a $100,000.00 limit for any qualified health care provider.

Read the majority opinion.

 

 

Last week, Standard & Poor’s (“S&P”) proposed a new methodology for rating local governments’ general obligation debt. It would not apply to special purpose districts, such as school districts, or revenue bonds. The new methodology uses the same general factors currently used to rate local government debt, but provides increased transparency regarding how S&P’s ratings are derived.

Under the new methodology, ratings will be based on the assessment of the local government’s scores on the following criteria: institutional framework (10%), economy (30%), management (20%), budgetary flexibility (10%), budgetary performance (10%), liquidity (10%), and debt and contingent liability (10%). Scores under each of these criteria are brought together to give an indicative rating from 1 (strongest) to 5 (weakest). Then, certain positive or negative overriding factors are considered, including weak liquidity or management, high income levels, low real estate market value per capita, sustained high fund balances, lack of willingness to pay obligations, and large or chronic negative fund balances, to reach the final rating.

S&P estimates that, under the new methodology, 65% of its ratings would be unchanged, 32% would increase, and 3% would decrease. S&P requested comments on the new methodology through June 6th.

Non-profit organizations have the opportunity to finance the acquisition or renovation of property where they do their good works using qualified 501(c)(3) bonds, which often provide better financing terms and rates than those available from traditional lenders. The proceeds of qualified 501(c)(3) bonds may also be used by the non-profit organization for working capital or to acquire other kinds property, within certain limits.

To be eligible for qualified 501(c)(3) bond financing, the non-profit organization must be exempt from taxation under section 501(a) of the Internal Revenue Code. The organization also must qualify as an “exempt organization” under section 501(c)(3). The organization must maintain its exempt status as long as the bonds are outstanding.

A non-profit organization that shares a building with a for-profit entity may still be eligible for qualified 501(c)(3) bonds. Such a “mixed use” or “multipurpose” facility may be financed in part with qualified 501(c)(3) bonds. The portion that is bond financed must be used by the exempt organization for its exempt purposes or by a governmental unit. The portion used by the private entity must be financed with taxable financing or sources other than bond proceeds. The allocations between the different uses of the facility must be made in proportion to the benefits derived, directly or indirectly, by the various users of the facility. The allocations of the bond proceeds and other sources of funds, and the use of the facility by various parties, must be reasonable and consistently applied.

At least 95% of the net proceeds of the bonds must be used to finance facilities owned and used by the exempt organization or a governmental unit for its related activities. As with other types of qualified private activity bonds, qualified 501(c)(3) bonds have some inherent private use. Use by an exempt organization in its related activities counts as a “good use.”

What about the other 5% of net proceeds? No more than 5% of the net proceeds of the bond issue may be used for any private business use, known as “bad use.” If the exempt organization uses the bond proceeds or bond-financed facilities in an unrelated trade or business activity, it is considered bad use. Costs of issuing the bonds are included in the 5% permitted private business use.

Although exempt organizations cannot use the bond-financed facilities for an unrelated trade or business, or “bad use,” they may contract with a private party to provide services, which may result in private business use. The typical example would be a management contract with a private party to operate a portion of the facility. Fortunately, the IRS has provided safe harbors regarding management service contracts.

With respect to debt service on qualified 501(c)(3) bonds, no more than 5% of the payment of the debt service on the bonds may be directly or indirectly:

  • secured by an interest in property used or to be used for a private business use, or
  • secured by payments in respect of such property, or
  • to be derived from payments in respect of property, or borrowed money, to be used in a private business.

Of course, interest and principal payments made by the exempt organization are not included, because the exempt organization is treated as a governmental unit.

Qualified 501(c)(3) bonds are not subject to state volume limits, but the aggregate outstanding face amount of qualified 501(c)(3) bonds that may be allocated to an exempt organization is limited to $150 million. Capital expenditures incurred by a 501(c)(3) organization may be financed with proceeds of tax-exempt bonds without regard to the $150 million limitation. And, this limitation does not apply to qualified hospital bonds.

The general rules regarding private activity bond rules are applicable to qualified 501(c)(3) bonds, including limits on the average maturity of the bonds, limits on the types of facilities that can be financed, notice and approval requirements, limits on costs of issuance, change in use rules, arbitrage and rebate rules, and advance refunding rules.

The American Jobs Creation Act of 2004 amended the New Markets Tax Credit program (“NMTC”) to provide that certain targeted populations may be treated as low-income communities. The Internal Revenue Service provided some guidance on the topic in Notice 2006-60 and in proposed regulations that were issued in 2008. Following a lengthy comment period, final regulations were released in December of 2011.

Under the final regulations, the term “targeted populations” means individuals, or an identifiable group of individuals, including an Indian tribe, who (a) are low-income persons; or (b) otherwise lack adequate access to loans or equity investments. An individual is considered to be low-income if the individual’s family income, adjusted for family size, is not more than (a) 80% of the metropolitan area median family income or (b) the greater of 80% of the non-metropolitan area median family income or 80% of the statewide non-metropolitan area median family income.

In order for an entity to be treated as a qualified active low-income community business for targeted populations, it must satisfy one of the following criteria: (1) at least 50% of the entity’s total gross income for any taxable year is derived from sales, rentals, services, or other transactions with individuals who are low-income persons (the gross income requirement); (2) at least 40% of the entity’s employees are individuals who are low-income persons (the employee requirement); or (3) at least 50% of the entity is owned by individuals who are low-income persons (the ownership requirement). The determination of whether an employee is a low-income person is made at the time of the hire and is effective throughout the time of employment, without regard to any increase in the employee’s income after the time of hire. The determination of whether an owner is a low-income person is made at the time the qualified low-income community investment is made, or at the time the ownership interest is acquired, whichever is later, and is effective throughout the time the ownership interest is held by that owner.

Unfortunately, the regulations only address the low-income aspect of targeted populations. With respect to individuals or groups that lack adequate access to loans or equity investments, the IRS invited taxpayers to submit additional comments identifying individuals or groups that may be considered to lack such access along with the reasons for the classification. The IRS further requested suggestions for ways to limit additional targeted population rules so that the purposes of the targeted populations provisions are not abused.

The final regulations became effective December 5, 2011 and can be found in Vol. 76, No. 233 of the Federal Register.

Alternative Dispute Resolutions (“ADR”), such as arbitration or mediation, have become popular methods for settling disputes among parties today. Entities and individuals are more frequently choosing to forego the process of the traditional court system for the resolution of disputes by entering into agreements containing arbitration provisions. Arbitration is a method of resolving disputes outside of court whereby an arbitrator employed by the parties will listen to the arguments of the parties, review the evidence and issue a decision that is generally final and binding on the parties. Considering the prevalence of arbitration clauses in contracts today, it is imperative that parties consider the advantages and disadvantages of arbitration proceedings and make an informed decision before entering into such an agreement.

Advantages

Cost. Generally, arbitration proceedings will result in quicker dispute resolution than in the court system. This, in turn, results in lower overall costs. In addition, only limited discovery is allowed in arbitration, which greatly helps to reduce the costs of reaching a resolution.

Informality. Arbitration proceedings are far less formal than a trial. Unlike trials, which must be held in a courtroom, parties can agree to have arbitrations in any convenient setting of their choosing. Also, the rules of procedure and evidence are greatly relaxed and simplified, making the overall process much less formal than a typical trial and giving the parties more control.

Privacy. Arbitration proceedings are generally held in private, and parties can agree to keep the final resolution confidential. This is especially appealing if the subject matter of the dispute involves private or embarrassing information.

Control. Parties have the ability to maintain greater control over the dispute resolution process through arbitration. The arbitrator is selected by the parties. Unlike in a trial, where the judge or jury may know very little about the subject matter of the dispute, the parties to arbitration have the ability to select an arbitrator with expertise in a certain area, which may lend to a more equitable and informed decision. Additionally, the parties can generally select and stipulate as to the legal and procedural rules that will govern the process.

Disadvantages

Inability to Appeal. As a general and practical rule, the arbitrator’s decision cannot be appealed. Only in certain limited situations, such as when the arbitrator exceeded his or her authority or upon proof of corruption, fraud or undue influence, will an arbitrator’s decision be reviewed by a district court. This can be especially troubling given that an arbitrator generally has more discretionary and decision-making power than a judge or jury. Therefore, the binding nature of the decision and the general lack of ability to seek recourse from an incorrect decision make the consequences of the arbitration more profound.

Lack of Formal Discovery. Although the lack of a full fledge formal discovery process in arbitration proceedings may result in decreased costs, it can also mean that the parties (or one party in particular) may not have all of the information necessary to fully evaluate the case. Therefore, a party may present its case to an arbitrator without being privy to all of the pertinent facts that could have been revealed had more formal discovery, such as interrogatories, requests for production and depositions, been conducted.

Discretion of the Arbitrator. An arbitrator may make his or her decision without issuing any written opinion or explanatory statement. Furthermore, since arbitrations are private and so infrequently reviewed by courts, the lack of transparency in the decision-making process may leave room for bias in arbitration proceedings.

Rising Costs. Although arbitrations are typically going to be less expensive than litigation, the cost of arbitration is on the rise, making arbitration often more expensive than other ADR proceedings.

Arbitration, along with other methods of ADR, can provide an attractive alternative to the traditional legal system when resolving disagreements. However, the pros and cons of arbitration, the particular transaction and the needs of the parties should all be carefully considered before agreeing to arbitrate a dispute. Furthermore, since the arbitrator is greatly governed and guided by what the parties state in their ADR provision, any issues or concerns with the process can largely be addressed through a well-drafted agreement to ensure a more fair and efficient resolution for all parties involved.

A Kean Miller admiralty and maritime team recently represented AAA Holdings, LLC (AAA), the vessel buyer, against the vessel seller, Marine Worldwide Services, Inc. (MSW) in SPSL OPOBO Liberia, Inc. v. Marine Worldwide Services, Inc., 2011 WL 4509646 (5th Cir. 2011), the U.S. Fifth Circuit affirmed the district court’s ruling that a seller of a vessel who does not disclose pending litigation regarding ownership of the vessel to the buyer prior to the sale is liable for the buyer’s damages and attorneys’ fees pursuant to Louisiana Civil Code article 2545.

In June of 2008, MWS had possession and claimed ownership of a barge. MWS was involved in litigation with SPSL, a company that also claimed ownership of the barge. During the litigation, MWS sold the barge to AAA for $1,300,000. MWS did not disclose the existence of the litigation to AAA.

AAA paid $700,000 to MWS. MWS failed to produce title documentation for the barge. AAA refused to make further payments. Upon learning AAA’s purchase, SPSL filed an admiralty Rule D petitory action. AAA filed a third party claim against MWS for failing to disclose the existence of the litigation between it and SPSL.

SPSL’s claims against AAA and the barge were dismissed for SPSL’s failure to comply with the Court’s discovery orders, production of questionable documentation, and inconsistent representations.

Following SPSL’s dismissal, MWS sought summary judgment regarding ownership of the barge. MWS contended that it was the owner of the barge because AAA had allegedly breached the sale contract by refusing to pay the balance of the $1,300,000 purchase price.

AAA responded by contending that it was the owner of the barge because under Louisiana law, ownership of the barge transferred to AAA immediately upon the parties’ agreement on (1) thing and (2) price. AAA contended that MWS breached the sale contract by failing to provide merchantable title to the barge.

AAA further contended that the pending litigation between SPSL and MWS constituted a redhibitory defect that MWS knowingly did not disclose to AAA. AAA claimed that MWS was a “bad faith seller” pursuant to Louisiana article 2545 and liable for AAA’s damages and attorneys’ fees.

On December 17, 2010, the district court rejected MWS’s arguments and ruled in AAA’s favor, declaring that AAA owned the barge, that MWS was a “Bad Faith” seller, and that MWS was liable for AAA’s damages. SPSL OPOBO Liberia, Inc., et al v. Maritime Worldwide Services, Inc. et al, Civil Action No. 07-3355, Rec. Doc. No. 234, United States District Court for the Eastern District of Louisiana. MWS appealed.

The U.S. Fifth Circuit affirmed the district court’s ruling. SPSL OPOBO Liberia, Inc. v. Marine Worldwide Services, Inc., 2011 WL 4509646 (5th Cir. 2011). The U.S. Fifth Circuit rejected MWS’ ownership claim, finding that AAA was the owner of the barge because the parties had reach an agreement on thing and price.

The U.S. Fifth Circuit further found that since the pending litigation between SPSL and MWS constituted a redhibitory defect in the barge’s title, MWS was liable for AAA’s damages and attorneys’ fees for failing to disclose the litigation.

This decision highlights the reason sellers should fully disclose any pending litigation regarding the property being sold. The failure to do so – even if the seller views the pending litigation to be frivolous – can have dire consequences and expose the seller to significant liability.

Sean McLaughlin represented AAA Holdings, LLC.