Recent Developments ADMINISTRATIVE LAW to Taxation

the requestor 65 days later that the records reports are exempt from disclosure, again would not be produced because they were noting that the custodian relied on jurispru- statutorily exempt. Suit was filed and the dence which did not support that contention; Administrative trial judge ordered that (1) the records be i.e., such records are subject to disclosure if Law produced, (2) the defendant pay attorneys’ the conviction of the person named in them fees and costs, and (3) the custodian pay is final. Finally, the court noted that the penalties of $5,000 ($100 per day) as custodian is personally liable for payment provided by law. The custodian appealed. of the civil penalty (in this case pegged at Read the Cases Upon In Innocence Project New Orleans v. $5,000), which amount was affirmed. Which You Rely New Orleans Police Dept., 13-0921 (La. The court went on to deny the Innocence App. 4 Cir. 11/6/13), the appeals court held Project’s claim for damages for frivolous The Innocence Project New Orleans that the trial court judgment be affirmed appeal because it did not answer the appeal submitted a public records request to the in all respects. as required by La. C.C.P. art. 2133. New Orleans Police Department through The court noted that the custodian’s its records custodian, Superintendent argument that he was in “good faith” was —Brian M. Bégué Ronal W. Serpas. The request sought not supported by the jurisprudence he cited. Chair, LSBA Administrative Law Section records relative to the 1991 conviction of In fact, he relied on a case which supported 2127 Dauphine St. Mr. Brown, which was a final judgment as the opposite contention. The court went on New Orleans, LA 70116 of 1993. Serpas, through counsel, notified to reject the custodian’s argument that police

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130 August / September 2014 it needs to move Detroit’s bankruptcy case NEWS01/305070141/detroit-bankruptcy- along. Tresa Baldas, Matt Helms and Alisa expenses-cost. Alternative Priddle, “How mediation has put Detroit The Jones Day Law Firm submitted Dispute bankruptcy on the road to resolution” (Feb. more than $16.6 million in fees and nearly 2, 2014), www.freep.com/article/20140202/ $734,000 in other expenses as of Decem- Resolution NEWS01/302020063/Orr-Snyder-Rosen- ber 2013. Id. The Dentons Law Firm, Detroit-bankruptcy. hired to represent the official committee While Detroit’s use of mediation is ex- for Detroit’s retirees, billed $4.4 million Mediation is Making a pediting the bankruptcy process overall, the in fees and $185,550 in expenses. Id. The process is considerably more confidential city’s restructuring consultant, Conway Difference in Detroit than the average municipal bankruptcy. All MacKenzie, billed $5.3 million in fees and mediation proceedings are confidential and almost $17,000 in expenses. Id. These costs Municipal bankruptcy proceedings only the terms of the settlement are presented are high even though many of the law firms can be contentious, lasting several years to the bankruptcy court for approval. Mi- and consultants have agreed to discount their and involving intense courtroom battles. chael Bathon, “Detroit Judge Rosen Named hourly rates. For example, court-appointed However, the use of mediation in Detroit’s Mediator in City’s Bankruptcy” (Aug. 13, fee examiner Robert Fishman has agreed municipal bankruptcy has put the city on a 2013), Bloomberg Business Week, retrieved to reduce his typical hourly rate of $675 to faster road to recovery. Confidential me- Aug. 13, 2013. $600 an hour. Id. Overall, experts expect diation sessions convened by Chief U.S. Patton Hahn noted that the mediation final legal costs to exceed $100 million. District Judge Gerald Rosen have produced process could rub some taxpayers the wrong While the price tag may be high, the use positive results. Judge Rosen was appointed way because “Detroit is a public entity. Its of mediation may be restraining even higher by U.S. Bankruptcy Judge Steven Rhodes true stakeholders are its citizens, and there’s costs. Many people questioned Detroit’s to lead mediations between Detroit and a clash between the goals of mediation — ability to modify any of its pension obliga- its creditors. Breakthroughs in Detroit’s which is to simply get to a result — and the tions in a bankruptcy process. There were bankruptcy process include an agreement public interest, which is to know the content 109 filed objections to Detroit’s eligibility to set aside $800 million of private and state of [negotiations].” Tresa Baldas, Matt Helms for Chapter 9 bankruptcy protection. “Order money to rescue the city’s pension fund. and Alisa Priddle. Additionally, the high legal Regarding Eligibility Objections Notices of Mediation agreements also have helped to fees for attorneys representing parties in the Hearings and Certifications Pursuant to 28 significantly reduce the city’s debt and long- bankruptcy process could cause citizens to U.S.C. § 2403(a) & (b),” U.S. Bankruptcy term liabilities and assisted in restructuring ask exactly what they are paying for, which Court for the Eastern District of Michigan, the city’s government. Legal experts credit could intensify the demand for disclosure in Aug. 26, 2013, retrieved Sept. 4, 2013. The much of the progress in Detroit’s bankruptcy the mediation process. use of mediation brought Detroit past those proceedings to the use of quick rulings and Detroit’s emergency manager, Kevyn concerns and also brought about substantive aggressive mediation. Some legal experts Orr, allocated $62.5 million to pay the fees progress. For example, on May 2, 2014, the project, based on the timetable set by Judge and expenses of Detroit’s consultants and board of directors of the Detroit Retired Rhodes, that Detroit could resolve its bank- lawyers. Law firms and consultants could City Employees Association (DRCEA) ruptcy approximately one year after it filed earn up to $36 million in legal fees for supported a 4.5 percent cut in pension for protection from creditors, which would just the last quarter of 2013. Matt Helms, benefits for retired city workers as well as a be a significant accomplishment. In com- “Detroit bankruptcy costs hit $36M in reduction of their Cost of Living Allowance parison, it took Orange County, California, 2013, expected to soar in 2014” (May 7, (COLA). DRCEA’s loss of COLA can be one year and six months to emerge from its 2014), www.freep.com/article/20140507/ restored depending upon the performance 1996 declaration, which at the time was the largest municipal bankruptcy in U.S. history. Municipal bankruptcies rarely involve mediation. However, the estimated $18 billion to $20 billion of debt at issue in A Fresh Perspective Detroit’s bankruptcy called for a unique On Your Case solution. Detroit’s bankruptcy is now the highest valued municipal bankruptcy in U.S. history. Detroit’s problems were not created by a single debt issue, but rather by extensive infrastructure issues, insolvent pension plans and many other difficulties. Patton Hahn, an attorney who worked on the municipal bankruptcy of Jefferson County, Alabama, Mock Trials | Jury Focus Groups believes that the use of mediation has given www.tomfoutzadr.com the bankruptcy court in Detroit the resources 14056.FTZ_lsba-4.75x2.375_.indd 1 6/11/14 2:52 PM

Louisiana Bar Journal Vol. 62, No. 2 131 of the General Retirement System under of BIA assets to EBIA. The trustee filed a the Plan of Adjustment that must be pre- motion for summary judgment against EBIA sented to the bankruptcy court. Associated and the bankruptcy court granted the motion Press, “Detroit Retired City Employees Bankruptcy for the trustee on all claims, including the Association supports bankruptcy plan,” Law fraudulent conveyance claims. On appeal, www.myfoxdetroit.com/story/25415548/ the district court conducted de novo review detroit-retired-city-employees-association- and affirmed. supports-bankruptcy-plan#ixzz333EzYnbb. During the pendency of EBIA’s appeal This type of successful mediation result may Proper Procedural to the 9th Circuit, the U.S. Supreme Court encourage remaining parties to re-double decided Stern v. Marshall, 131 S.Ct. 2594 their efforts to reach agreements on other Treatment of “Stern (2011), which held that “Article III of the issues that can be incorporated into a fair, Claims” Constitution did not permit a bankruptcy balanced and fully agreed-upon Plan of Ad- court to enter final judgment on a counter- justment to be presented to the bankruptcy Executive Benefits Ins. Agency v. Arkison, claim for tortious interference, even though court for confirmation. 12-1200, 2014 WL 2560461 (U.S. June final adjudication of that claim by the bank- 9, 2014). ruptcy court was authorized by [28 U.S.C. § —William Wratee Nicolas Paleveda and his wife owned 157(b)].” In light of Stern, EBIA moved to Graduate, LSU Paul M. Hebert and operated Bellingham Insurance Agency, dismiss its appeal for lack of jurisdiction ar- Law Center, and Inc. (BIA). In 2006, BIA became insolvent guing that the bankruptcy court did not have Student Mediator, LSU Civil and Paleveda used BIA funds to incorporate the authority to finally decide the trustee’s Mediation Clinic Executive Benefits Insurance Agency, Inc. fraudulent conveyance claims. The 9th Under the Supervision of (EBIA) and “initiated a scheme to transfer Circuit rejected EBIA’s motion and affirmed Paul W. Breaux, LSU Adjunct assets from BIA to EBIA.” Later in 2006, the district court, finding that because EBIA Clinical Professor, and BIA filed for Chapter 7 bankruptcy and Pete had impliedly consented to the bankruptcy Chair, LSBA Alternative Dispute Arkison was appointed as the trustee. The court’s jurisdiction, the bankruptcy court’s Resolution Section trustee subsequently filed a complaint in the adjudication of the fraudulent conveyance 16643 S. Fulwar Skipwith Rd. Bankruptcy Court for the Western District of claims was permissible. The U.S. Supreme Baton Rouge, LA 70810 Washington alleging fraudulent conveyance Court granted certiorari.

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132 August / September 2014 The Supreme Court began its analysis enter findings of fact and conclusions The Bankruptcy Court for the Western by noting an unanswered question left of law to the district court for de novo District of Wisconsin denied the exemp- in the wake of Stern. Specifically, while review. As the district court in the present tion, reasoning that because an inherited Stern held that “Article III prohibits Con- case had already conducted such de novo IRA does not make distributions to a gress from vesting a bankruptcy court review, any procedural or consensual errors person’s retirement, it is not a retirement with the authority to finally adjudicate were cured as the parties were afforded to fund within the meaning of section 522(b) certain claims,” Stern did not address proper judicial review regardless of any (3)(C). The district court reversed, finding how courts should proceed when faced improper final judgments entered by the that the retirement funds exemption covers with such “Stern claims,” where a claim bankruptcy court. any account containing funds “originally is designated for final adjudication in the Importantly, the Supreme Court pro- accumulated for retirement purposes.” bankruptcy court as a statutory matter, but vided clarity as to this issue, but refused The 7th Circuit reversed the judgment of the court is simultaneously prohibited from to decide “whether Article III permits a the district court, finding that “inherited proceeding in that way as a constitutional bankruptcy court, with the consent of the IRAs represent an opportunity for current matter. The Supreme Court reviewed the parties, to enter final judgment on aStern consumption, not a fund of retirement history of modern bankruptcy legislation, claim.” Id. at *4 n. 4. The Supreme Court savings.” recognizing that federal district courts have expressly “reserve[d] that question for The U.S. Supreme Court granted cer- original jurisdiction in bankruptcy cases another day.” tiorari to resolve the 7th Circuit ruling with and may refer to “core” and “non-core” a conflicting case from the 5th Circuit,In proceedings to bankruptcy judges. In those Inherited IRAs Not re Chilton, 674 F.3d 486 (2012), 571 U.S. core proceedings, the bankruptcy judges ____ (2013). The Supreme Court began its may hear and determine the claims and Exempt in Bankruptcy analysis by establishing that “retirement enter orders and judgments. As to those Proceedings funds” are properly understood to mean non-core proceedings which are “other- “sums of money set aside for the day an wise related to” the bankruptcy case, the Clark v. Rameker, 13-299, 2014 WL individual stops working” and that any bankruptcy judges may enter findings of 2608860 (U.S. June 12, 2014). inquiry into whether funds are “retirement fact and conclusions of law for the district Heidi Heffron-Clark and her husband, funds” must be an objective review of the court’s de novo review, unless the parties Brandon C. Clark (collectively, the debt- legal characteristics of the account. The consent to the bankruptcy judge’s entry of a ors), filed for Chapter 7 bankruptcy. Prior Supreme Court reviewed the three legal final judgment. However, in light ofStern , to the bankruptcy, Mrs. Heffron-Clark in- characteristics of an inherited IRA as bankruptcy courts were prohibited from herited her mother’s individual retirement compared to a traditional IRA. First, the entering final judgments regarding certain account (IRA) and the account transformed holder of an inherited IRA is not permitted “core” claims of tortious interference. into an “inherited IRA account.” Once the to make any contributions to the account, Addressing how bankruptcy courts bankruptcy was filed, the debtors sought to whereas the purpose of a traditional IRA are to proceed when faced with Stern have the inherited IRA excluded from their is to create a tax incentive for regular claims, the Supreme Court reviewed the bankruptcy estate using the “retirement contributions to a person’s retirement ac- severability provision of 28 U.S.C. § 157 funds” exemption of 11 U.S.C. § 522(b)(3) count. Second, while a traditional IRA is which allows those provisions deemed (C). The trustee and the unsecured creditors designed for distribution upon retirement, invalid under Article III to be severed of the estate challenged the exemption on an inherited IRA from a non-spouse is without affecting the remainder of the the grounds that an inherited IRA is not required to be distributed within five years statute. Therefore, where a claim otherwise “retirement funds” within the meaning of of the original owner’s death or through an satisfies section 157(c) governing non-core the Bankruptcy Code. annual distribution. This causes the inher- provisions, a bankruptcy court is to “treat the Stern claim as non-core.” Assuming that the fraudulent convey- ance claims at issue are Stern claims, the Supreme Court determined them to be non- core, “related to” claims as they assert “that property that should have been a part of the bankruptcy estate and therefore available for distribution to creditors pursuant to Title 11 was improperly removed.” Find- ing that the fraudulent conveyance Stern claims fit comfortably within those claims governed by section 157(c), the Supreme Court held that the same procedure should apply, i.e., the bankruptcy court should

Louisiana Bar Journal Vol. 62, No. 2 133 ited IRA to diminish over time regardless that because section 522(b)(3)(C) imposes of proximity to the holder’s retirement age. two conditions for exemption, namely that Lastly, the holder of an inherited IRA is the funds must be “retirement funds” and Civil Law permitted to withdraw the entire balance of they must be held in a covered account, and the account for any purpose at any time. A the debtors’ interpretation would render Litigation traditional IRA prohibits such withdrawals the first condition superfluous as the funds without penalty, encouraging traditional of an inherited IRA could be used for any IRA holders to leave the funds untouched purpose. Reasoning that the statute should until retirement. not be construed so as to render any portion Supreme Court Holds The Supreme Court next reviewed superfluous, the Supreme Court affirmed the purpose of the Bankruptcy Code ex- the decision of the 7th Circuit, finding that Survival Actions emptions, namely to effectuate a balance because inherited IRAs do not bear the Are Prescriptive Not between the interest of the creditors and defining legal characteristics of retirement Peremptive the debtors. When debtors are permitted to funds, they are not entitled to exemption exempt their traditional IRAs, it is to ensure pursuant to section 522(b)(3)(C). Patricia Watkins v. Exxon Mobil Corp., the debtors’ needs will be met during their 13-1545 (La. 5/7/14). retirement. On the other hand, an inherited —Tristan E. Manthey Plaintiff brought a survival action pur- IRA could be received as a windfall to the Chair, LSBA Bankruptcy Law Section suant to La. Civ.C. art. 2315.1 as a result debtors, giving them the entire balance of and of the death of her father in 1986. In the the account for any frivolous use, to the Alida C. Wientjes petition, filed on June 17, 2011, plaintiff detriment of the creditors. Member, LSBA Bankruptcy claimed that on June 22, 2010, she was Lastly, the Supreme Court reviewed the Law Section first made aware of the defendants’ use of debtors’ argument that because the funds Heller, Draper, Patrick, “naturally occurring radioactive material” were originally placed into an account Horn & Dabney, L.L.C. (NORM), which she believed led to her bearing the legal characteristics of a retire- Ste. 2500, 650 Poydras St. father’s death. ment fund, the current status of the account New Orleans, LA 70130 Because the suit was filed 25 years is immaterial. The Supreme Court found after decedent’s death, defendants as-

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134 August / September 2014 serted the claim should be perempted The second amendment to this article is and, therefore, dismissed. La. Civ.C. specific to the objection of the submitted art. 2315.1(A) sets out the action evidence. The article previously allowed “shall survive for a period of one year for the opponent to object via a written Corporate and from the death of the deceased . . . .” motion to strike, wherein the reasons for Business Law However, La. Civ.C. art. 2315.1(C) states, objection were stated; the current amend- “[T]he right of action granted under this ment retains this procedure but clarifies Article is heritable, but the inheritance the policy for service thereof. The article of it neither interrupts nor prolongs the now provides that these objections must Governor Signs New prescriptive period defined in this article.” be served pursuant to La. C.C.P. art. 1313. The court discussed the established Corporation Law principles for legislative interpretation, —Shayna Lynn Beevers On May 30, 2014, Gov. Jindal signed ultimately holding the Legislature is well Reporter, LSBA Civil Law and the Business Corporation Act (BCA) (Act acquainted with the distinction between Litigation Section No. 328), the first comprehensive revision prescriptive and preemptive and, by Beevers & Beevers, L.L.P. of Louisiana’s business corporation law choosing to define the time limitation 210 Huey P. Long Ave. since the current statute was originally as prescriptive, gave a clear and un- Gretna, LA 70053 adopted in 1968. Drafted by the reporter ambiguous intent for interpretation and and of the Louisiana State Law Institute’s application. J. Robert Ates Corporations Committee, the BCA was Chair Emeritus, LSBA Civil Law and submitted to the Legislature on the Law Legislative Changes Litigation Section Institute’s recommendation. The BCA Ates Law Firm, A.P.L.C. will take effect on Jan. 1, 2015, and will The 2014 regular legislative session Ste. A, 13726 River Rd. be codified at La. R.S. 12:1-101et seq. concluded on June 2. During the session, Destrehan, LA 70047-5012 The BCA is based on the Model more than two dozen bills were filed to Business Corporation Act, written and address the way civil lawsuits are handled 20219-Cardone-VirtualOfficeAd_20219-Cardone-VirtualOfficeAdcontinuously 10/23/13revised by9:44 the AM Committee Page 1 in Louisiana.

Jury Threshold A hot topic this session was the reduc- tion of the jury threshold. There were propositions to allow for a trial by jury in a tort case regardless of the amount of the claim, or, in the alternative, to allow for a reduction in the threshold for a jury trial. These bills failed early on in the ses- sion. The jury threshold for tort claims in VIRTUAL OFFICE Louisiana remains $50,000.

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Louisiana Bar Journal Vol. 62, No. 2 135 on Corporate Laws of the American Bar such events. of shares in exchange for promissory Association’s Business Law Section. ► The law will, by default, exculpate consideration. Approximately 30 states have adopted all the corporation’s directors and officers ► The BCA generally makes it easier or substantially all of the Model Act, and from liability to the corporation and its for shareholders to exercise dissenters’ many other states have adopted selected shareholders for money damages for any rights. Where dissenters’ rights apply, provisions. The Model Act and the BCA act or failure to act as a director or officer, the BCA entitles dissenters to the arms’ are substantially longer than the current except for breaches of the duty of loyalty, length fair value of their shares, without Louisiana Business Corporation Law, but the intentional infliction of harm on the discounts for minority status or lack of it is hoped that the additional detail con- corporation or shareholders, the payment marketability. In limited circumstances, tained in the BCA will address questions of unlawful dividends or an intentional appraisal rights are a shareholder’s ex- that have arisen under current law. The law violation of criminal law. A corporation clusive remedy and foreclose the share- contains comments explaining the areas wishing to reject this limitation of liability holder’s ability to bring a fiduciary duty where it departs from the Model Act to must affirmatively “opt out” through a suit challenging a transaction. preserve existing law or for other reasons. statement in the articles of incorporation. ► The BCA contains a withdrawal A complete analysis of the new law ► The law eliminates the concept of remedy not available under current law is beyond the scope of this article, but legal capital, the requirement of stated for an oppressed shareholder if the cor- some of the noteworthy changes in the capital and capital surplus, and the con- poration’s practices over a period of time BCA from existing law are highlighted. cept of treasury shares. However, the are “plainly incompatible” with a genuine ► The BCA’s default shareholder law retains a “dual insolvency” standard, effort by the corporation to deal fairly and vote for the approval of extraordinary now requiring that dividends cannot be in good faith with the shareholder. If the corporate transactions such as business paid if the corporation would not be able remedy applies, the corporation must pay combinations or amendments to the ar- to pay its debts as they become due or the shareholder fair value for his shares ticles of incorporation is a majority of the if its total assets would be less than its or may instead elect to seek a judicial corporation’s outstanding voting power, total liabilities plus any amount needed dissolution of the corporation. The law unless the articles specify a greater vote. to satisfy the liquidation preference of provides that this is the exclusive remedy Current law requires a vote of two-thirds preferred stockholders. for a claim of oppression. of the voting power present for most ► The BCA permits the issuance ► Current Louisiana law provides a

136 August / September 2014 mechanism for the approval of transac- them. The 6th Circuit rejected this recent tions between the corporation and its interpretation in Summit Petroleum Corp. directors or officers, so-called “self-deal- v. EPA, 690 F.3d 733, 735 (6 Cir. 2012), ing” transactions. However, current law Environmental holding that “EPA’s determination that does not validate self-dealing transactions Law the physical requirement of adjacency can if the required approvals are obtained, but be established through mere functional rather merely provides they are not auto- relatedness is . . . contrary to the plain matically voidable. By contrast, the BCA meaning of the term ‘adjacent.’” The affirmatively validates such transactions Circuit Strikes Down court vacated EPA’s determination that a if the required procedures are followed. natural gas sweetening plant and sour gas ► The BCA permits written unani- EPA’s Attempt to production wells, which were dispersed mous governance agreements among Restrict Applicability of over 43 square miles, constituted a single shareholders, which can contain provi- Judicial Decision source. In response, EPA issued the sions that deviate from the governance Summit Directive stating that, although provisions of the BCA, including the total In National Environmental the agency may no longer consider elimination of the board of directors or Development Association’s Clean Air interrelatedness in determining adjacency the limitation of its powers. Project v. EPA, 13-1035, 2014 U.S. App. in the 6th Circuit, “[o]utside the 6th Circuit ► The BCA eliminates the limita- LEXIS 10047 (D.C. Cir. May 30, 2014) . . . EPA does not intend to change its . . . tion under current law on the term of a (NEDACAP), the U.S. Court of Appeals practice of considering interrelatedness.” voting trust. for the District of Columbia Circuit Industry challenged the Summit ► The law rejects the demand futility vacated an Environmental Protection Directive, and the D.C. Circuit held that doctrine for derivative suits under current Agency (EPA) directive instructing EPA the directive violated EPA’s “regional law and implements the Model Act’s uni- regions to disregard the 6th Circuit’s consistency” regulations in 40 C.F.R. Part versal demand rule. A board composed of source aggregation decision outside 56, which “strongly articulate EPA’s firm a majority of disinterested directors (or a the 6th Circuit. The court held that the commitment to national uniformity in the committee of such directors) can obtain directive violated EPA’s regulations, application of its [air] permitting rules,” a dismissal of the suit if the directors which require EPA to maintain national with no exemption for variance created determine in good faith after reasonable uniformity when implementing the Clean by a judicial decision. NEDACAP, 2014 inquiry that it is not in the best interests Air Act. U.S. App. LEXIS 10047 at *23-24. EPA of the corporation. EPA regulations provide that multiple argued that the Clean Air Act contemplates ► Section 1-120 of the BCA contains pollutant-emitting activities may be divergence between circuit courts and a set of unified filing rules specifying the aggregated and considered a single thus permits the agency to apply varied signing, notarization and filing procedures source under the Clean Air Act Title standards in different circuits. The court to be followed for any document to be V and New Source Review permitting never reached this statutory issue because filed under the BCA with the Secretary programs if the activities are, inter alia, it concluded that EPA’s regulations of State. Documents filed electronically “adjacent.” While EPA’s interpretation precluded the Summit Directive by need not be notarized. of “adjacent” has fluctuated over time, requiring uniformity. Similarly, the ► The BCA reduces the “grace pe- EPA has recently interpreted “adjacent” court reasoned that the “intercircuit riod” for failure to file an annual report to include consideration of the functional nonaquiescence” doctrine (providing that from three years to 90 days. If the report interrelatedness of emission units, in an agency may maintain its independent is not filed timely after notice from the addition to the physical distance between assessment of the statutes and regulations Secretary of State, the corporation’s exis- tence terminates, but the law permits the corporation’s existence to be reinstated during a period of three years after the termination.

—Maureen Brennan Gershanik Chair, LSBA Corporate and Business Law Section Fishman Haygood Phelps Walmsley Willis & Swanson, L.L.P. 201 St. Charles Ave., 46th Flr. Special Masters New Orleans, LA 70170 THOMAS KEASLER FOUTZ | HON. CAROLYN GILL-JEFFERSON (RET.)

14056.FJ_lsba-4.75x2.375_.indd 1 6/17/14 2:27 PM

Louisiana Bar Journal Vol. 62, No. 2 137 it administers after one circuit disagrees action that state and local governmental contractual claims and the pursuit of with the agency’s position, in the hope entities have related to certain coastal certain administrative remedies. Act that other circuits, the Supreme Court or activities is under the Louisiana State and 544 is a response to the 2013 lawsuit Congress will later uphold the agency’s Local Coastal Resources Management brought by the Southeast Louisiana position) does not allow EPA to ignore its Act (SLCRMA). Specifically, the act Flood Protection Authority-East against own regulations. states that: numerous energy companies related to In the wake of NEDACAP, EPA coastal oil and gas activities. The Act 544 could amend its regional consistency [e]xcept as provided in [the amendments apply “to all claims existing regulations to account for regional SLCRMA], no state or local or actions pending on the Act’s effective variances created by a judicial decision or governmental entity shall have, date . . . .” modify its source aggregation regulations nor may pursue, any right or cause to include consideration of functional of action arising from any activity Act 400 interrelatedness. In the meantime, the subject to permitting under [the Act 400 amends Louisiana’s oilfield decision will likely curtail EPA’s use of SLCRMA], 33 U.S.C. 1344 [Clean cleanup law, La. R.S. 30:29 (commonly the functional interrelatedness test to Water Act wetlands permitting] or known as “Act 312”). Under Act 312, determine adjacency and its reliance on 33 U.S.C. 408 [Rivers and Harbors a defendant may request a preliminary intercircuit nonaquiescence in the air Act permitting] in the coastal area hearing to determine whether good cause permitting context. as defined by [the SLCRMA], or exists for maintaining the defendant as a arising from or related to any use party. Act 400 provides that if a defendant Amendments from 2014 as defined by [the SLCRMA], is dismissed under this preliminary regardless of the date such use or procedure, the defendant may recover Regular Session of the activity occurred. reasonable attorneys’ fees and costs from Louisiana Legislature the party who asserted the claim. Act Act 544 sets forth certain limited 400 reiterates that a defendant can make Act 544 exceptions to the prohibition on non- an admission of liability that is limited Act 544 provides that the sole cause of SLCRMA-based claims, including to responsibility for implementing the most feasible plan for remediation of the property but adds that, if a party makes such a limited admission, there shall be a rebuttable presumption that the plan ultimately approved by the Department of Natural Resources is the most feasible plan. Further, the court shall instruct the jury regarding this presumption if the party so requests. Act 400 also lists the specific types of damages that may be awarded in Act 312 cases. Finally, Act 400 provides that it “shall not apply to any case in which the court, on or before May 15, 2014, has issued or signed an order setting the case for trial, regardless of whether such trial setting is continued.”

—Lesley F. Pietras Member, LSBA Environmental Law Section and Stephen W. Wiegand Member, LSBA Environmental Law Section Liskow & Lewis, A.P.L.C. Ste. 5000, 701 Poydras St. New Orleans, LA 70139

138 August / September 2014 one was not needed, the court of appeal because, despite the existence of a consent named the mother as domiciliary parent. It judgment granting the mother sole custody, vacated the award of the child tax depen- terminating the biological father’s custodial Family dency deductions to the father as premature rights, and enjoining him from contacting Law because no child support order had yet been the mother and children, he failed to show entered. Although attorneys’ fees were not “just cause” for not attempting to contact recoverable under La. R.S. 9:355.6 for her the children, and because the adoption was relocation without providing notice, her in their best interest. Custody failure to provide notice did increase the costs of the litigation, so the trial court’s M.P.W. v. L.P.W., 13-0366 (La. App. 1 Cir. Bagwell v. Bagwell, 48,913 (La. App. 2 award of $500 attorneys’ fees to him was 11/1/13), 136 So.3d 37. Cir. 1/15/14), 132 So.3d 426. affirmed under La. R.S. 9:355.19. M.P.W.’s petition to annul a stipulated The parties’ stipulation that Bergeron judgment in which he agreed to terminate would not apply to a modification of custody Procedure/Evidence his custodial rights and awarded sole was enforced as not being against public custody to the mother was appropriately policy (although it appears that the previ- Parents of Minor Child v. Charlet, 13- dismissed on summary judgment because ous judgment was by consent, so Bergeron 0316 (La. App. 1 Cir. 10/12/13), 135 the stipulation was proper as to form, would not have applied anyway, although So.3d 724. having been dictated into the record in open some testimony seems to have been taken Because communication shared with a court, under oath. The mother’s waiving of before the prior agreement was reached). priest during confession is a confidential her rights to child support was not contra communication made to a clergyman, the bones mores, nor was his agreeing to sign Barber v. Green, 49,049 (La. App. 2 Cir. priest is not a mandatory reporter even when a voluntary act of surrender. Because the 2/19/14), 134 So.3d 1223. the confession is by a minor regarding her waiver of child support was tied to the act The trial court changed the parties’ al- being sexually abused by another member of surrender so as to allow the children to ternating weekly physical custody schedule of the church. There is no private or civil be adopted by the mother’s new husband, to less time for the father because of his cause of action against such a clergyman the biological father’s obligations of rotating work schedule as a fireman, which support and custody would have been since there is no mandatory duty to report. LA Bar Journal Ad 9/21/11 3:44 PM Page it found caused too much “shifting” in the There is no cause of action for negligent giv- terminated anyway and assumed by the schedule. The court of appeal reversed and ing of advice given during the confession. restored the original schedule, finding that the father provided more continuity and Parents of Minor Child v. Charlet, 13- CHAFER ROUP LTD stability and that the old schedule had less S G 2879 (La. 4/4/14), 135 So.3d 1177. Certified Public Accountants “shifting” than the one imposed by the The Supreme Court granted writs, re- When you need a forensic accountant, trial court. The court of appeal also stated versed the court of appeal and reinstated call on a professional. that his mother, who helped him with the the trial court’s judgment, holding that the children while he was working, was more child could waive the privilege regarding than a mere “third party” and that there was her confession to the priest, and that the “Knowledge of business, finance value in the children having time with their priest had no independent right to claim a and accounting may be needed grandmother. privilege because he could only raise the at any stage of the litigation privilege “on behalf of the person” who process. Therefore, we can be Custody/Relocation made the confession. Further, whether the an important member of any priest had a mandatory duty to report the successful litigation team. Randazzo v. Prosperie, 13-0704 (La. App. child’s claims of abuse was a question to be From contemplation of action to 1 Cir. 9/13/13), 135 So.3d 22. determined by the fact finder at trial, includ- expert testimony, we can complement attorneys in In determining both custody and reloca- ing whether the communications between ways that increase the likelihood of a desired outcome. tion as initial judgments, the court had to the child and priest were actually confes- We can support your litigation efforts to save you time apply both the La. Civ.C. art. 134 and La. sions, and whether the priest had knowledge and strengthen your case.” R.S. 9:355.14 factors. The trial court’s award outside of the confessional that would lead of alternating weeks between the father in to a duty to report the child’s claims. —Kernion T. Schafer, CPA Louisiana and the mother in Texas of this not-yet-school-aged child was not an abuse Adoption S OUTH S HORE AND N ORTH S HORE O FFICES of discretion and fostered the relationship METAIRIE MANDEVILLE 701 Aurora Avenue • Suite A 435 Girod Street • Suite B between the child and his extended families In Re B.L.M., 13-0448 (La. App. 1 Cir. Metairie, Louisiana 70005 Mandeville, LA 70448 in both states. Because the trial court did not 504.837.6573 985.626.4066 11/1/13), 136 So.3d 5. Forensic Accounting • Emerging Issues • Financial Services name a domiciliary parent, or explain why This intrafamily adoption was affirmed Litigation Services • Legal Services • Emerging Business

Louisiana Bar Journal Vol. 62, No. 2 139 adopting parent. The transcript of the inconsistent to impute her income for stipulation showed no ill practices, duress child support purposes since it found that or deprivation of legal rights. His change of she was entitled to rehabilitative support. Insurance, Tort, heart or bad bargain made did not provide The trial court did not err in ordering Mr. Workers’ grounds for relief. Fontana to pay 100 percent of the children’s Compensation & tuition because he had been paying it under Admiralty Law Final Spousal Support a temporary agreement and she had little income, especially compared to his. Mr. Fontana v. Fontana, 13-0916 (La. App. Fontana’s contempt for late payment of Medical Expenses 4 Cir. 2/12/14), 136 So.3d 173. child support was reversed because the Incurred Although Ms. Fontana had some income parties had deviated by custom from the terms of the judgment, and his untimely and inherited assets, she was still entitled Ashley Hoffman, et al. v. Travelers payment was not in willful disobedience; to final spousal support as a rehabilitative Indemnity Company of America, 13- further, amounts due for certain expenses award for three years to obtain a degree. 1575 (La. 5/7/14), ____ So.3d ____. were uncertain and were due on an However, the court of appeal reduced the Ms. Hoffman, injured in an auto uncertain date. award by deleting support for entertaining, accident, was treated at Baton Rouge charities, salon, health club, pet, other and General Medical Center (BRMC) under —David M. Prados miscellaneous cash. Her attorneys’ fees an agreement by which she assumed Member, LSBA Family Law Section were allowed to remain as an expense responsibility for payment of all charges. Lowe, Stein, Hoffman, Allweiss category. Because the father’s income BRMC’s charges totaled $713.67. Under & Hauver, L.L.P. was greater than the highest guideline terms of a contract with AETNA, her Ste. 3600, 701 Poydras St. amount, the court could use its discretion parents’ insurer, the hospital billed her at a New Orleans, LA 70139-7735 to set the child support award based on the discounted rate of $485.29, which she paid. expense sheet provided by Ms. Fontana’s Travelers received an itemized bill from CPA expert. The court found it would be BRMC that did not reflect the discount and issued payment to Ms. Hoffman in the full amount. After learning of the contractual discount, Travelers sought reimbursement from Ms. Hoffman for the difference. Her suit alleged Travelers’ non-compliance is pleased to announce the addition of the following mediators: with its policy for failing to pay the full amount of the bill. Travelers moved Steven C. Judice for summary judgment, arguing it had Partner at Keogh, Cox and Wilson, LLC complied with the policy because it paid Ms. Hoffman for “expenses incurred,” i.e., $485.29. The trial court denied the motion and the 1st Circuit Court of Appeal denied David C. Clement Travelers’ writ for supervisory review. The Founding Member with Supreme Court granted Travelers’ writ and Clement Gates & May remanded to the court of appeal for briefing, argument and full opinion. On remand, the court of appeal G. Trippe Hawthorne considered the issue: Partner at Kean Miller, LLP [W]hether “expenses incurred,” as stated in the medical payment provision of plaintiff’s automobile I. René DeRojas liability policy, means the full amount of the medical expenses charged by Attorney with McCranie, Sistrunk, a treating hospital in connection Anzelmo, Hardy, McDaniel & Welch with plaintiff’s automobile accident,

or the reduced amount of medical Phone 225-389-9899 for Scheduling expenses accepted by the hospital 721 Government Street, Suite 102 Baton Rouge, LA 70802 due to a contractual agreement with www. perrydampf.com plaintiff’s health insurer.

140 August / September 2014 The court concluded that “‘expenses earlier. In Watkins v. Exxon Mobil Corp., the district court, finding that the 1986 incurred’ constitutes the full amount of 13-1545 (La. 5/7/14), ____ So.3d ____, the amendment to article 2315.1 made the medical expenses charged by the treating court clarified that survival actions under period prescriptive rather than peremptive, hospital and that the trial court properly Louisiana law are subject to prescriptive allowing for contra non valentem to denied [Travelers’] motion for summary rather than peremptive periods, opening suspend the running of the prescriptive judgment.” The opinion repeatedly the door for plaintiffs to file suit within one period. Watkins v. Exxon Mobil Corp., referred to the discount as a “windfall” to year of knowing of their cause of action, 12-0477 (La. App. 4 Cir. 5/29/13), 117 which Travelers was not entitled. Judge rather than one year from the date of death So.3d 548. Higginbotham, concurring, further stated, of the victim. The Louisiana Supreme Court, per “[T]he meaning of the term [‘expenses The plaintiff, Patricia Watkins, filed suit Justice Guidry, looked to the plain language incurred’] is subject to interpretation on June 17, 2011, setting forth claims under of article 2315.1, legislative intent and of the parties’ intent, and is, therefore, wrongful death and survival action relating policy considerations in affirming the 4th inappropriate for summary judgment.” The to the death of her father, who had died on Circuit’s ruling that the one-year time court cited two 3rd Circuit cases, Thomas Dec. 27, 1986. The plaintiff alleged that limitation is a period of prescription rather v. Universal Life Ins. Co., 201 So.2d 529 her father had been exposed to naturally than peremption, and remanded the case to (1967), and Niles v. American Bankers Ins. occurring radioactive material (NORM) the district court for further proceedings. Co., 229 So.2d 435 (1969). by the defendants and claimed that, under Watkins v. Exxon Mobil Corp., 13-1545, The Supreme Court found these rulings the principle of contra non valentem, she p. 12 (La. 5/7/14), ____ So.3d ____. By inapposite to the case at bar, citing instead, did not have notice of her causes of action allowing survival action claims to be with approval, Drearr v, Connecticut until June 22, 2010, making her filing of brought more than a year after the death General Life Ins. Co., 119 So.2d 149 (La. June 17, 2011, within one year of having of the victim, the court expanded the rights App. 4 Cir. 1960), and Brackens v. Allstate knowledge of her claim. of victims’ families to file survival action Ins. Co., 339 So.2d 486 (La. App. 2 Cir. The defendants filed exceptions of claims if prescription has been interrupted 1976). In both cases, plaintiffs received prescription, preemption and no cause or suspended. As the period is prescriptive treatment without charge, to which they of action, which were sustained by the rather than peremptive, survivors may were entitled, at Veterans Administration district court, finding the one-year time bring their claims even years after the hospitals. The appeals courts concluded period governing survival actions to be victim’s death, which could lead to a flurry that the plaintiffs “incurred” no expenses peremptive under La. Civ.C. art. 2315.1(A) of survival actions from claimants who, and, therefore, were not entitled to and, therefore, not capable of renunciation, for years, were unaware they could even payments under their insurance contracts. interruption or suspension, even under the bring such a claim. doctrine of contra non valentem. Thus, Because we find Travelers paid the the court dismissed the plaintiff’s suit as —Michael S. Finkelstein expenses incurred by Ms. Hoffman untimely since it had been filed more than Usry, Weeks & Matthews, A.P.L.C. in accordance with the terms of its a year after the death of her father. On 740 Emerald St. policy, we find that Travelers has appeal, however, the 4th Circuit reversed New Orleans, LA 70124 fully performed under the insurance contract and is entitled to summary judgment. —John Zachary Blanchard, Jr. National Past Chair, LSBA Insurance, Tort, Workers’ Compensation and Collision Admiralty Law Section Michael S. Gillen 90 Westerfield St. Technologies Bossier City, LA 71111 Accident Reconstruction Services (225) 924-7756 Inc. Survival Action Subject (225) 924-7762 Fax to Prescriptive Rather P.O. Box 14953, Baton Rouge, LA 70898-4953 Than Peremptive Period [email protected] • www.NCTIGroup.com

A decision by the Louisiana Supreme National Collision Technologies, Inc., (dba NCTI), is a private corporation Court could have far-reaching repercussions specializing in the technical investigation and reconstruction of traffic collisions. Our firm has been conducting accident reconstruction in the private sector in allowing individuals to bring claims for since 1993. We serve both plaintiff and defense firms and have provided survival action when the victim died years expert testimony in Federal, Military, State and local courts.

Louisiana Bar Journal Vol. 62, No. 2 141 or political independence of Ukraine;” and ongoing obligations to monitor and ► Whether Russian interference and report suspicious transactions relating to International intervention in Crimea violates three Black foreign senior political figures, including Law Sea Fleet agreements dividing up Soviet former Ukrainian President Victor military warships stationed in Crimea Yanukovych (U.S. Department of the and granting Russia leasehold interests Treasury Financial Crimes Enforcement in Crimean naval facilities through 2042. Network, Advisory, Updated Guidance The Black Sea Fleet agreements require to Financial Institutions on Recent Ukraine and Russia Russian military forces to “respect Events Related to the Departure of the sovereignty of Ukraine, honor its Victor Yanukovych and Other Ukrainian Political events in Ukraine beginning legislation and preclude interference in Officials). in November with pro-European protests the internal affairs of Ukraine.” ► The EU initiated sanctions against in Kiev and culminating in March with the A full discussion of the broad legal Russia at an extraordinary meeting of annexation of Crimea by Russia exposed questions is beyond the scope of the European Commission on March 6, a plethora of international legal issues, this article. Ukraine lodged formal 2014. The EU suspended bilateral talks including some matters of first impression. complaints at both the United Nations with Russia on visa and trade matters The broader international legal issues and the International Criminal Court, and preparations for the G8 Summit in include, inter alia: where most of the complex public and Sochi, Russia. The G8 summit was held in ► Whether the Russian minority private international legal issues will be Brussels on June 6, 2014, without Russian in Crimea and Eastern Ukraine validly addressed. Russia launched a complaint participation for the first time in 17 years. executed their jus cogens right of self- at the World Trade Organization regarding ► The United States and the EU determination to become part of Russia the U.S. sanctions regime, discussed infra. acted again on May 17, 2014, following or an autonomous region of Ukraine; the annexation referendum in Crimea. ► Whether Russian interference Economic Sanctions The United States imposed sanctions and intervention in Crimea and Eastern In addition to major legal questions blocking the assets and prohibiting Ukraine violates the Ukrainian right of of public and private international law, transactions with four Ukrainian territorial integrity codified in the 1975 the political events generated a myriad individuals and seven high-level Russian Helsinki Final Act of the Conference of economic sanctions that directly and officials (Office of Foreign Assets on Security and Cooperation in Europe, immediately impact international business Control, Changes to List of Specially which requires Russia to “refrain . . . transactions and investments. U.S. law on Designated Nationals and Blocked from the threat or use of force” against sanctions, export controls and financial Persons List since January 1, 2014 at Ukraine and requires that Russia “respect due diligence are difficult to comply with 7-8). The EU imposed an asset freeze the territorial integrity of” Ukraine; under ordinary circumstances. The broad and travel ban on 21 persons (Council ► Whether Russian interference sanctions issued by the United States, Regulation No. 269/2014, March 17, and intervention in Crimea and Eastern Canada, the European Union (EU) and 2014). The EU list was expanded to add Ukraine violates the 1994 Budapest Australia increase the pressure on counsel an additional 12 individuals on March Memorandum whereby Ukraine with client interests in the region. 21, 2014 (Council Regulation No. transferred its nuclear arsenal to Russia The following is a brief overview and 284/2014). in exchange for Russia’s reaffirmation of summary of major sanctions. ► The broadest sanction regime was its “obligation to refrain from the threat or ► On March 6, 2014, President imposed by the United States on March use of force against the territorial integrity Obama entered Executive Order No. 20, 2014. The United States expanded 13660 (Blocking Property of Certain the list of sanctioned individuals by 20 Persons Contributing to the Situation and also specifically targeted Russian LOUISIANA Bar Today in Ukraine) authorizing the first set of financial institution Bank Rossiya. economic sanctions against Russia under Nine sectors of the Russian economy Get the latest Louisiana State the International Emergency Economic also were targeted, including financial Bar Association news in the Powers Act. The Executive Order did services, energy, metals and mining, free, bi-weekly emailed not name particular individuals or engineering, and defense and related institutions, but set forth the general material (Office of Foreign Assets update. It’s easy to subscribe. intention of the United States to target Control, Ukraine-Related Designations: persons or individuals engaged in illicit Specially Designated Nationals List Go to: financial activity or political activity Update). www.lsba.org/goto/LBT destabilizing Ukraine. ► Russia responded in March by ► On March 6, 2014, the U.S. issuing its own retaliatory sanctions Department of the Treasury issued an banning travel and freezing the assets of, advisory regarding financial institutions’ inter alia, Senators John McCain, Harry

142 August / September 2014 Reid and Mary Landrieu. joint venture partners and others where Russia,” April 28, 2014, available at: ► The United States, the EU, Canada the designated company or individual www.bis.doc.gov/index.php/about- and Australia have continued to add has a 50 percent or greater interest. bis/newsroom/press-releases/107- further designations to the sanction list Violations of these sanctions can result about-bis/newsroom/press-releases/ since March. Currently 100 individuals in civil penalties up to $250,000 or twice press-release-2014/665-commerce- and 21 entities are subject to sanction in the value of the transaction, whichever dept-announces-expansion-of-export- one or more of the countries listed above. is greater. Criminal penalties of 20 restrictions-on-russia). years’ imprisonment are available for BIS primarily governs “dual use” Effect on International Business intentional or willful violations of the items that have both a commercial and What does the sanction regime mean sanctions. military application. For now, the BIS for U.S. or other international business? Every attorney representing compa- ban appears to apply prospectively only, First, any designated individuals or nies doing business overseas must con- with no impact on existing licenses. entities are subject to a visa ban and duct significant due diligence to confirm However, BIS always has the authority asset freeze, including all assets located they are not conducting business either to modify or revoke prior licenses. Any in the United States or in the possession with a specifically designated individual business exporting goods to Russia or the of a U.S. citizen. Guidance provided by or entity, or an entity that is controlled region that are subject to export licenses the Office of Foreign Asset Controls by a designated individual or entity. should double check the license status governs the scope of assets that may Second, the sanctions imposed and reconfirm with its consignees that be blocked, which can include future an indefinite hold on export licenses goods sent to neighboring countries are contingent interests (Ukraine-Related for certain U.S. goods, services or not being re-exported to Russia. Sanctions Regulations, 31 C.F.R. Part technologies to Russia. The U.S. 589, May 8, 2014). U.S. individuals and Department of Commerce’s Bureau of —Edward T. Hayes entities are prohibited from engaging in Industry and Security (BIS) announced Member, LSBA International transactions with designated individuals the suspension of export control licenses Law Section or entities, including any entities to Russia in its area of jurisdiction Leake & Andersson, L.L.P. that are owned or controlled by the (“Commerce Department Announces Ste. 1700, 1100 Poydras St. designated entities. This could include Expansion of Export Restrictions on New Orleans, LA 70163 THESE EYES HAVE IT

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Louisiana Bar Journal Vol. 62, No. 2 143 provision.) According to Villanueva, he 5th Circuit’s Decision raised concerns that his employer, acting After having his SOX whistleblower Labor and at the direction of Core Labs executives complaint dismissed at three different ad- Employment in Houston, engaged in improper transac- ministrative levels of review, Villanueva Law tions designed to underreport revenue for appealed his claim to the 5th Circuit. In a the purpose of reducing its tax burden in unanimous decision, the Villanueva court violation of Colombian law. After making affirmed the decision to dismiss Villan- these complaints, Villanueva was passed ueva’s charge but on narrower grounds 5th Circuit Limits over for a pay raise and eventually termi- than the Administrative Review Board. Whistleblower nated from his position. While agreeing that Villanueva’s claim Villanueva subsequently filed a charge failed because SOX’s protections are Protections, But Leaves with the Occupational Safety and Health limited to the reporting of violations of Open Extraterritorial Administration (OSHA), the agency certain United States laws, the 5th Circuit charged with investigating alleged viola- explicitly declined to address the question Application tions of SOX. Villanueva’s administra- of whether SOX applies extraterritorially, tive charge alleged that the withholding despite an amicus brief from the DOL urg- Villanueva v. U.S. Dep’t of Labor, 743 of his pay raise and the termination of ing the court to do so. Had the 5th Circuit F.3d 103 (5 Cir. 2014). his employment were in retaliation for accepted the government’s invitation, it The U.S. 5th Circuit Court of Appeals his previous complaints and, therefore, would have been the first federal appellate held that the whistleblower protections violated SOX’s whistleblower provision. court to address whether SOX’s whistle- of the Sarbanes-Oxley Act (SOX) do However, OSHA found that it did not blower provisions apply to complaints not apply to individuals who make com- have jurisdiction over Villanueva’s charge made outside the United States. plaints regarding violations of foreign because the complained-of acts (i.e., the Perhaps recognizing that the 5th Cir- law as opposed to U.S. law. Although the denial of the pay raise and subsequent cuit would limit the application of SOX Villanueva decision narrowed the scope termination) took place outside of the to complaints regarding U.S. laws, Vil- of SOX’s whistleblower protections, the United States in Colombia. lanueva argued in the alternative that his three-judge panel specifically declined After receiving the adverse determi- complaint implicated U.S. law because to address the question of whether SOX nation from OSHA, Villanueva sought his charge included an allegation that tax has extraterritorial application. Thus, it further review of that decision before an fraud “was being perpetrated in Colombia remains an open question in the 5th Circuit administrative law judge (ALJ). The ALJ at the express direction of Core Lab[s]’s as to whether SOX’s whistleblower provi- agreed with OSHA’s determination to dis- executives in Houston using mail, email sion applies to complaints originating in miss Villanueva’s charge, reasoning that and telephones to accomplish the fraud.” foreign countries but involving alleged Villanueva’s complaints would require The 5th Circuit, however, found this single violations of U.S. law. extraterritorial application of SOX and reference insufficient to demonstrate that Given the procedural posture of the that such application was impermissible Villanueva had a reasonable belief that case, Villanueva also highlights the because the statute does not apply extra- U.S. mail and wire fraud statutes had been importance of the standard of review territorially. The ALJ likewise held that violated. Although the 5th Circuit agreed employed by a reviewing court. Because he lacked jurisdiction over Villanueva’s that an employee need not cite a specific the Villanueva court was analyzing the whistleblower complaint. code section to come within the scope of order of an administrative court, it applied Villanueva then appealed the ALJ’s SOX’s whistleblower protections, it held a deferential standard of review when decision to the Department of Labor’s that the thrust of Villanueva’s complaint conducting its examination. Villanueva, (DOL) Administrative Review Board, was the alleged underreporting of taxes therefore, provides an excellent illustra- which, in a 3-2 en banc decision, held that in violation of Colombian law rather than tion of the difficulties associated with it had jurisdiction over the complaint but U.S. law and, therefore, was insufficient challenging an administrative decision nonetheless affirmed the ALJ’s dismissal to constitute protected activity under the at the appellate level. of the case. In particular, the board held statute. that SOX’s whistleblower provision did One notable, but perhaps overlooked, Procedural History not apply extraterritorially and the facts aspect of the 5th Circuit’s decision is the The plaintiff, William Villanueva, underlying Villanueva’s complaint, i.e., impact of the standards of review it applied was a Colombian national formerly em- a non-U.S. citizen residing in Colombia to the Administrative Review Board’s ployed with a Colombian subsidiary of alleging violations of foreign laws, would determination that Villanueva’s OSHA Core Labs. (Core Labs is a Netherlands require extraterritorial application. For charge fails to raise violations of U.S. company whose stock is publicly traded these reasons, the board concluded that law. Because the board’s order dismissing in the United States and, therefore, is an Villanueva’s complaints did not constitute Villanueva’s claim was governed by the entity covered by SOX’s whistleblower protected activity under SOX. Administrative Procedure Act, the 5th

144 August / September 2014 Circuit reviewed that decision under abuse donation “as part of an economic devel- of discretion and substantial evidence opment project pursuant to a cooperative standards. Given these deferential stan- endeavor agreement between the acquir- dards, the 5th Circuit affirmed the board’s Mineral ing authority and the state through the De- finding that Villanueva’s charge did not Law partment of Economic Development . . ., allege violations of U.S. law “because a the prescription of nonuse shall be for a reasonable person could have reached period of twenty years from the date of the same conclusion as the [board].” Had acquisition whether the title to the land the board reached a different conclusion Mineral Code remains in the acquiring authority or is regarding the scope of Villanueva’s al- subsequently transferred.” legations and found them to implicate Article 149 U.S. law, the 5th Circuit may well have Mineral Code Article 149 provides reached the same determination given the Legacy Litigation that, when land is acquired by certain limited scope of judicial review. types of “acquiring authorities” (primarily La. R.S. 30:29(B)(6) allows a defen- government agencies or other entities with dant in a legacy litigation case to request —Christopher L. Williams expropriation authority, and nonprofit a preliminary hearing early in the litiga- Member, LSBA Labor and Employment land conservancy groups), and the person tion to determine whether there is good Law Section from whom the land is acquired reserves a cause for maintaining the defendant in Proskauer Rose, L.L.P. mineral right that is subject to prescription the litigation. The provision provides Ste. 1800, 650 Poydras St. of nonuse, prescription will remain inter- for a dismissal without prejudice if no New Orleans, LA 70130 rupted as long as the acquiring authority evidence is introduced at the hearing to or any successor-in-interest that is an show that the moving party caused or acquiring authority owns the land. Acts is otherwise legally responsible for the 2014, No. 473, adds a new provision to contamination alleged. If such a defen- Mineral Code Article 149. It states that, if dant is dismissed without prejudice, the LaPorte LSJB Ad'13D_Layout 1 11/4/13 11:02 AM“an Page acquiring 1 authority or other person” defendant can be rejoined in the litigation acquires land by contract, exchange or later if new evidence is discovered. If the

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Louisiana Bar Journal Vol. 62, No. 2 145 defendant is not rejoined prior to the end Cooperative Endeavor State and Local Coastal Resources Manage- of the lawsuit, the defendant is entitled ment Act of 1978); 33 U.S.C. 1344 (part of the to a dismissal with prejudice. Acts 2014, Agreements for Purchase Clean Water Act); or 33 U.S.C. 408 (part of No. 400, amends this provision to provide of Surface Water the Rivers and Harbors Appropriation Act of that, if such a defendant is never rejoined, 1899) — or that arises from “use” or activity the defendant is entitled to reasonable La. R.S. 30:961 authorizes the Depart- in the coastal zone, “regardless of the date such attorneys’ fees and costs. ment of Natural Resources to enter coopera- use or activity occurred.” The legislation states Act 400 also adds a new section which tive endeavor agreements that grant persons that nothing in the new section precludes any states that, if a defendant makes a limited the right to withdraw running surface government entity from enforcing contract admission of liability as allowed by R.S. waters in the state of Louisiana in return for claims or from pursuing any administrative 30:29, there will be a rebuttable presumption payment of fair market value. The statute remedies. Act 544 states that it applies to that the plan approved by the Department of previously prohibited the Department from pending actions, as well as claims asserted Natural Resources, after consultation with entering any new cooperative endeavor after the effective date of the legislation. An the Department of Environmental Quality, agreements after Dec. 31, 2014, though objective of the supporters of Act 544 is to stop is the most feasible plan for remediation. existing agreements could be extended to litigation in which the Southeast Louisiana In addition, Act 400 amends R.S. a date no later than Dec. 31, 2020. Acts Flood Protection Authority-East has sued 30:29 to state that money damages “may 2014, No. 285, changes the deadline for nearly 100 oil and gas companies, blaming be awarded only” for: (1) the costs of the Department to enter new cooperative the companies for coastal erosion and seeking funding the feasible plan; (2) the cost of endeavor agreements to Dec. 31, 2016. billions of dollars in compensation. additional remediation only if required by an express contractual provision providing Coastal Erosion Litigation City’s Annexation of for remediation to original condition or to some other specific remediation standard;” Acts 2014, No. 544, amends La. R.S. Parish Road 49:214.36 to add a section stating that “no (3) costs of evaluating or correcting dam- Chesapeake Operating, Inc. v. City of state or local governmental entity shall have, ages “caused by unreasonable or excessive Shreveport, 48,608 (La. App. 2 Cir. 2014), nor may pursue, any right or cause of action operations;” and (4) “nonremediation” 132 So.3d 537. arising from any activity” in the coastal area damages. The City of Shreveport and Caddo Parish that is “subject to permitting under” one of disputed which of them was entitled to the three statutes — La. R.S. 49:214.21 (part of the royalties attributable to the area occupied by certain roads located within units where J Chesapeake operated productive wells. The Pro Bono Heroes: Providing ustice for All beds of the roads had been owned by Caddo With being a lawyer, comes privilege. The justice Parish, but the City of Shreveport had an- nexed an area that included the roads. The system as a whole is extremely expensive. We City asserted that the annexation had the effect of transferring ownership of the roads have a moral and ethical duty to not only help to the City and that the City, therefore, had the right to the royalties attributable to the those less fortunate, but to provide access to our justice roadbeds. The Louisiana 2nd Circuit agreed, holding that the annexation had the effect system, especially to those who cannot afford it and do not of transferring ownership of the roads to the City. Therefore, the City was entitled have the knowledge to navigate through to the disputed royalties.

the complications. —Keith B. Hall Member, LSBA Mineral Law Section Louisiana State University – Michele M. Echols Paul M. Hebert Law Center Echols & Associates, L.L.C. 1 E. Campus Dr. and volunteer with North Shore Pro Bono Project Baton Rouge, LA 70803 Covington, LA and Colleen C. Jarrott ustice F Member, LSBA Mineral Law Section Pro ing J or A vid ll Slattery, Marino & Roberts, A.P.L.C. Access to Justice Ste. 1800, 1100 Poydras St. Louisiana State Bar Association www.lsba.org/ATJ New Orleans, LA 70163

146 August / September 2014 absent a claim against Schumpert for its the PCF and gave Dr. Foret no offsetting individual negligence, there is “effectively credit for the settlement. only one defendant in this case,” and, thus, Dr. Foret contended on appeal that the Professional all panelists must be physicians, under the trial court should first have reduced the Liability clear and unambiguous language of Section award to the statutory cap of $500,000 1299.47(C)(3)(j). and then again reduced that amount by the $600,000 paid by the PCF, which would Physician’s Liability mean he owed nothing. He asserted that Panel Composition the PCF settlement was “an advanced pay- After Settlement ment” under the LMMA, and, therefore, In Re Vankregten, 48,622 (La. App. 2 Cir. with PCF a payment for which he must be given 2/5/14), 134 So.3d 641. credit because: Mr. Vankregten’s survivors filed a re- Fruge v. Foret, 13-1071 (La. App. 3 Cir. quest for a medical review panel, naming 3/5/14), 134 So.3d 152. A plaintiff is not entitled to recover as respondents a hospital and two of its Following a split panel decision, damages from the [fund] before nurse-employees. They then nominated a and prior to trial, the plaintiff accepted an admission of liability has been nurse as a panelist. The hospital objected $600,000 from the PCF in full settlement made by the defendant [healthcare] because the nominee was not a physi- of all claims against it, while reserving provider, then recover again after a cian. The petitioners refused to nominate rights against Dr. Foret. Following Mr. judgment has been rendered against a physician, contending that the claimed Fruge’s trial against Dr. Foret, the court the defendant [healthcare]provider. negligence was by two nurses and that found Dr. Foret negligent and awarded the Louisiana Medical Malpractice Act Fruge $700,000 in general damages and Fruge countered that his settlement (LMMA) allows healthcare providers of approximately $66,000 in future medical with the PCF had no legal effect on Foret’s the same class and specialty to serve on expenses. The trial court reduced the award liability for his $100,000 (plus interest) panels. to $500,000, under La. R.S. 40:1299.42(B) exposure. The attorney chair notified the parties (1), and found Dr. Foret’s liability was In its reasons for judgment, the he did not have authority to decide the limited to $100,000 plus interest. The judg- trial court relied on two provisions of the question, following which the hospital ment said nothing about the settlement with LMMA. La. R.S. 40:1299.42(C) provides moved to compel petitioners to withdraw the nomination of the nurse and to substitute a physician in her place. Does La. R.S. 40:1299.47 allow a registered nurse to serve on a panel involv- Community Action Committee & ing only a hospital and two of its nurse- employees? All parties stipulated, and the ‘WEEN DREAM Partnering for court accepted, that there were no reported Halloween Costume Donations Louisiana cases addressing this issue. Eligibility for medical review panel ser- vice is set forth in La. R.S. 40:1299.47(C) The Louisiana State Bar Association/Louisiana Bar Foundation’s Community (3)(j). The controlling sentence reads: “If Action Committee is assisting the ‘WEEN DREAM program in the collection there is only one party defendant which is of new and/or slightly used Halloween costumes for children in need. a hospital, community blood center, tissue Law firms, attorneys and legal professionals wishing to donate should drop off bank, or ambulance service, all panelists costumes at the Louisiana Bar Center, 601 St. Charles Ave., New Orleans, on except the attorney shall be physicians.” Monday and Tuesday, Nov. 3-4, during business hours (8:30 a.m.-4:30 p.m.). Schumpert (the hospital) argued there Costumes may simply be placed in bags. There is no labeling or sorting process is only one party defendant, despite the required. ‘WEEN DREAM volunteers will handle the sorting process and match nurses also having been named as parties, the costumes to children for Halloween 2015. (Costumes that were donated after because those nurses were the hospital’s Halloween 2013 are being distributed to children for 2014.) employees, and they would not be sepa- For more information, contact Krystal Bellanger Rodriguez at (504)619-0131 or rately liable for any acts of negligence; email [email protected]. only Schumpert would be. All negligence allegations in the panel request were against the nursing staff, with no allegation of independent negligence by the hospital. The appellate court concluded, in affirming the trial court’s decision, that

Louisiana Bar Journal Vol. 62, No. 2 147 that an advanced payment by a healthcare Sanders presented evidence that his provider to anyone for injuries or dam- orthopedic expert (Dr. Leitman) passed ages suffered by the plaintiff may not be the exams on his second attempt, pos- construed as admission of liability. Section sessed many impressive qualifications and Taxation 1299.42(D)(2) provides that advanced skills, had outstanding academic training, payments inure to the exclusive benefit of with military service after medical school, the defendant or his insurer who makes the had performed several hundred surgeries payments. The PCF is neither a defendant of the kind Sanders underwent, and had healthcare provider nor an insurer. The worked under the head team physician for Taxpayer Refund court reasoned that the PCF settled prior the Philadelphia Eagles and Philadelphia Requests Do Not to trial to “protect its own interests.” Sec- Flyers, as well as for several high school tion 42(D)(2) is unambiguous: Advanced and minor league baseball teams. Interrupt Prescription payments inure to the exclusive benefit Dr. Ballard countered that the failure in Favor of Collector of the defendant or his insurer. Dr. Foret of Dr. Leitman’s certification exam was paid nothing; therefore, he can receive no relevant and highly probative of his quali- Cajun Industries, L.L.C. v. Vermilion credit to apply to the judgment against him. fications and knowledge. Dr. Ballard also Parish School Board, 14-22 (La. App. In affirming the trial court’s ruling, the argued that Sanders’ attorney raised board 3 Cir. 5/14/14), ____ So.3d ____, 2014 appellate court found “clear” the LMMA’s certification in tendering Dr. Leitman as an WL 2107047. language that advanced payments inure expert witness and that “board certification The 3rd Circuit Court of Appeal re- only to the “defendant or insurer making was relevant to an expert’s knowledge of versed in part a trial court’s decision to the payment.” accepted standards of practice and the grant a motion to strike and an exception expert’s training and experience.” of prescription filed by Cajun Industries, Failure to Pass Board The appellate court noted that while Dr. L.L.C. (Cajun). The motion and exception Leitman was accepted as an expert, the were in response to the Vermilion Parish Certification Exams jury weighed the testimony of all of the School Board’s (the collector) reconven- experts and decided the case based on the tional demand for offset of additional taxes Sanders v. Ballard, 48,714 (La. App. 2 weight of the evidence. Given the “great due against Cajun’s suit for refund of sales Cir. 2/14/14), 134 So.3d 1205, writ denied, discretion” of trial judges in determining and use taxes. The 3rd Circuit held that 14-0565 (La. 4/25/14). relevancy and admissibility, the court’s the collector had the right to offset tax A jury found that Dr. Ballard breached determination concerning “relevancy and liabilities against any refund found to be the standard of care owed to Mr. Sanders but admissibility should not be overturned due to Cajun, but held that Cajun’s filing that the breach caused no injury to Sanders absent a clear abuse of discretion.” of a refund request did not interrupt pre- that would not have otherwise occurred. scription for taxes that were not assessed Sanders posed several arguments on —Robert J. David by the collector within the constitutionally appeal, one of which involved the denial Gainsburgh, Benjamin, David, Meunier prescribed period. of his motion in limine to prevent the & Warshauer, L.L.C. Cajun paid sales and use taxes on defendant from cross-examining Sander’s Ste. 2800, 1100 Poydras St. certain purchases it made from 2007-10. expert about his failing his board certifica- New Orleans, LA 70163-2800 Cajun later asserted that the purchases tion exams on his first attempt. were exempt from tax. In December 2010, “Can you see me now?” Easily join video calls without leaving the room - use your office computer, iPad, iPhone, Android device and connect with others who may be on a wide range of video systems. Attend a video conferencing meeting at the Louisiana bar center. Reserve a conference room today at www.lsba.org/goto/MeetingRooms Video Conference Video Coming soon to Lafayette, Baton Rouge and Shreveport Conference bar associations! Another benefit of membership from the Louisiana State Bar Assocation

148 August / September 2014 Cajun filed a claim for refund of the taxes. and 2011 years were not. and held title to the property. The De- In May 2011, Cajun filed a claim for an partment’s approach was in derogation additional refund for sales and use taxes —Antonio Charles Ferachi of Louisiana’s statutory protection for paid in 2010-11. The collector granted Member, LSBA Taxation Section LLCs, Louisiana’s obligation under the a partial refund and formally denied the Louisiana Department of Revenue U.S. Constitution to provide full faith remainder. Cajun filed a petition for refund 617 North Third St. and credit to the laws of Montana, and in the 15th Judicial District Court in May Baton Rouge, LA 70821-4064 the assessed individual’s constitutional 2013. The collector filed an answer and right to due process. The court suggested reconventional demand against Cajun for Department Erred that pursuing an assessment against the statutory offset, stating that it expected LLC first and then looking to Montana to find delinquent taxes, interest and in Issuing Assessment law in order to find personal liability on penalties owed by Cajun for the disputed to Member of the part of the individual member of the periods, 2007-11. Cajun filed a motion to LLC should have been the Department’s strike and an exception of prescription, Out-of-State LLC approach. which the trial court granted. The collec- Further, although personal liability tor appealed. In Thomas v. Bridges, 13-1855 (La. could have been imposed under Louisi- In reversing the matter, the 3rd Circuit 5/7/14), ____ So. 3d ____, the Louisiana ana law if the individual member of the addressed two questions: (1) whether Supreme Court held that the Department LLC had committed fraud, there was no the collector has the right to offset taxes of Revenue erred in assessing a mem- evidence offered that he had committed against any tax refund amount found due ber of an out-of-state limited liability fraud. Regarding the situation at hand, to a taxpayer; and (2) whether the filing of company for sales tax on the company’s the court stated “taking actions to avoid a refund request by a taxpayer interrupts purchase of a recreational vehicle. The sales tax does not constitute fraud” and prescription in favor of taxes that have not individual was a Louisiana resident who “[a] finding that the formation of an LLC been assessed within the constitutionally formed a Montana LLC admittedly to solely for tax avoidance and not for any prescribed period set forth by La. Const. avoid Louisiana sales tax on the pur- ‘legitimate’ purpose constitutes fraud art. 7, § 16? chase of a recreational vehicle since would have destabilizing implications In rejecting Cajun’s reliance on the Montana does not impose sales tax on for Louisiana law.” Additionally, the Louisiana Civil Code concept of compen- the purchase of vehicles by its residents, court declined to examine the Depart- sation, the 3rd Circuit relied on La. R.S. including resident LLCs. After the LLC ment’s arguments regarding the doctrines 47:337.78 and La. R.S. 47:337.81(C). Re- purchased the RV and did not pay sales of substance over form and economic lying on the aforesaid statutory provisions, tax to Louisiana, the Department of Rev- substance since the Department raised the 3rd Circuit found that the collector enue pursued the individual rather than those issues for the first time in its appeal. had the right to credit any overpayment the LLC and issued an assessment to the Although the court was sympathetic to against liability owed by a taxpayer and individual for taxes owed on the vehicle. the Department’s policy arguments, it assert any demand for tax due for the The court found that the Department found that the issues in this case involved period involved in the claim for refund. clearly erred in assessing the individual policy considerations that should be In addition, the 3rd Circuit found that rather than the LLC, essentially ignoring addressed by the Louisiana Legislature none of the instances in which prescrip- the separate existence of the LLC before rather than the court system. Finally, the tion can be interrupted and suspended establishing any valid basis for doing so. court rejected the Department’s assertion under La. R.S. 47:337.67 were applicable. After assessment and over the course of that the lower courts failed to dismiss the The collector asserted that Cajun’s first the proceedings, the Department’s at- suit on account of the plaintiff neglect- claim for refund filed on Dec. 10, 2010, torneys offered various theories for why ing to follow the procedure for posting prevented the running of prescription and the assessment against the individual was bond and determined that the statements opened up the entire disputed period for appropriate, but the court was dismissive made by the Board of Tax Appeals to the collector’s claims for taxes. The 3rd of these undeveloped theories in support the plaintiff effectively waived strict Circuit held that there was no statute or of the assessment and stated that the re- adherence to the bond provision in La. jurisprudence stating that a refund request cord did not contain any factual or legal R.S. § 47:1434. by the taxpayer interrupts prescription basis for assessing the individual directly. in favor of the collector. Considering With respect to one such theory, the court —Jaye A. Calhoun the foregoing, the 3rd Circuit ultimately held that the Department’s “after-the-fact and held that the collector’s reconventional appraisal the veil should be pierced” did Christie B. Rao demand to assess additional taxes for the not overcome the problems created by Members, LSBA Taxation Section 2007, 2008 and 2009 years were facially the Department’s approach of simply McGlinchey Stafford, P.L.L.C. prescribed but such demand for the 2010 ignoring the existence of the validly 601 Poydras, 12th Flr. formed Montana LLC, which acquired New Orleans, LA 70130

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