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Dismissal on Prescription Grounds Upheld by Louisiana’s Fifth Circuit in Toxic Tort case

Dismissal on Prescription Grounds Upheld by Louisiana’s Fifth Circuit in Toxic Tort case

By:  Michele DeShazo & Mark Best

On June 27, 2018, the Louisiana Fifth Circuit Court of Appeal affirmed the dismissal of survival and wrongful death claims on the grounds of prescription (akin to common law’s statute of limitations) in favor of oil company defendants in a toxic tort case in which Kuchler Polk Weiner, LLC (“KPW”) partners, Michele DeShazo and Mark Best, co-tried the Exception for Shell Oil Company, Shell Offshore Inc., SWEPI LP, and ConocoPhillips Company, along with counsel for Chevron.  Our team took the lead on the subsequent appellate briefing, with key assistance provided by KPW associate attorney, Joshua Doguet.  Ms. DeShazo handled oral argument before the Fifth Circuit for Defendants on October 11, 2017.

In Patricia Lennie, et al., v. Exxon Mobil Corporation, et al., No. 17-CA-204, Fifth Circuit Court of Appeal, State of Louisiana, Julius Lennie worked cleaning oilfield pipe from 1961 to 1994 in Harvey, Louisiana.  He retired in 1994 and was diagnosed with lung cancer on January 28, 2010, passing away less than one month later.  His heirs failed to file suit for wrongful death and survival damages until 2014, when they sued multiple oil companies and service providers in Jefferson Parish claiming that decedent’s cancer and death were caused by exposure to naturally occurring radioactive materials (“NORM”).

In asserting the Peremptory Exception of Prescription, Defendants argued that decedent’s diagnosis and death constituted constructive notice of Plaintiffs’ claims sufficient to trigger the start of the one-year prescriptive period, which elapsed in 2011 after Mr. Lennie’s death, rendering the 2014 suit untimely.  In an effort to avoid dismissal, Plaintiffs claimed that the doctrine of contra non valentem prevented the running of the prescriptive period, specifically arguing that (1) the oil companies purposefully concealed information the Plaintiffs would have needed to learn of the existence of their causes of action and (2) Plaintiffs could not reasonably have known of their causes of action until 2013, when one heir came across a news article on the internet about NORM.

After a two-day trial on the prescription exception on May 11-12, 2016 before District Judge Michael Mentz of the Twenty-Fourth Judicial District Court, which saw the introduction of live testimony from eight witnesses, written testimony submitted by designation for an additional fifteen witnesses, and voluminous exhibits, Judge Mentz granted the exception and dismissed Plaintiffs’ case with prejudice.  Following an appeal by Plaintiffs, Fifth Circuit Judge Robert Chaisson authored the unanimous opinion which affirmed the district court’s dismissal of the case.

As to alleged concealment by the oil companies, the Court found:

 

[T]he actions of defendants in forming the industry trade group, developing screening methods for NORM, and participating in adoption of regulations by the State of Louisiana, directly contradict any suggestion that defendants were downplaying the significance of NORM in the workplace or were otherwise engaging in concealment of Mr. Lennie’s or his family’s causes of action from them.[1]

 

The opinion then cites to another NORM case defended by Michele DeShazo and Mark Best, which was also won on grounds of prescription, Tenorio v. Exxon Mobil Corp., 14-814 (La. App. 5 Cir. 4/15/15), 170 So.3d 269.  There, the Fifth Circuit affirmed dismissal by holding that a disease diagnosis is sufficient to trigger the running of prescription because it constitutes constructive notice of a claim, i.e., the diagnosis should excite a plaintiff’s attention to inquire into the cause of his disease.  In Lennie, the same court now holds that a diagnosis and death are similarly sufficient to constitute constructive notice to decedent’s heirs of their wrongful death and survival causes of action.  Plaintiffs’ failure to reasonably investigate following decedent’s diagnosis and death was unreasonable such that they could not employ contra non valentem to suspend prescription.

The Lennie Court rejected “any contention that the mere availability of information on the internet, in and of itself, can serve as sufficient constructive knowledge of a plaintiff’s cause of action.”  However, the Fifth Circuit conducted a de novo review of the facts and still arrived at the same conclusion as the trial court—that Plaintiffs’ “failure to make even a rudimentary inquiry into the causes of Mr. Lennie’s illness and death appears unreasonable.”

 

[1] Lennie at 8.

Defending Energy Infrastructure: the Defense Production Act of 1950

Defending Energy Infrastructure: the Defense Production Act of 1950[1]

By: Sarah C. Thompson

On May 29, 2018, one day before a National Security Council meeting on the subject of energy resiliency, a draft White House memorandum was published which outlines plans for the utilization of the Defense Production Act of 1950 (“DPA”), in concert with the Federal Power Act (“FPA”)[2], as a means of reversing what the White House describes as the rapid depletion of our nation’s critical energy infrastructure.[3] This memorandum suggests that the Department of Energy may be able use its powers under the aforementioned Acts to stem the ongoing tide of “premature retirements” occurring among domestic coal and nuclear plants.[4]

So what is the DPA?

Based on the War Powers Acts of WWII and initially authorized during the Korean War, the DPA authorizes the President to control and direct certain aspects of domestic industry in the interest of national defense. Facing a series of post-war labor strikes resulting from widespread industrial and economic turmoil and in the face of growing Cold War tensions, the Truman administration enacted the DPA on September 8, 1950.[5]  By design, the DPA is a temporary law requiring periodic reauthorization. The most recent reauthorization occurred on December 1, 2005, and will expire on September 30, 2019.[6] The provisional nature of this law enabled the evolution of its terms, with amendments modifying and updating the Act’s authorities continuously.

In its original form the DPA granted to the President a number of authorities, such as the authority to demand that manufacturers give priority to defense production, to requisition materials and property, to expand government and private defense production capacity, to ration consumer goods, to fix wage and price ceilings, to force settlement of some labor disputes, to control consumer credit and regulate real estate construction credit and loans, to provide certain antitrust protections to industry, and to establish a voluntary reserve of private sector executives who would be available for emergency federal employment.[7] Currently, only a portion of these original authorities granted by the Act remain.

Today, under the DPA, the President may act to ensure that the U.S. possesses the military resources necessary to respond to an attack, and further enables the President to enhance and support domestic preparedness, including taking measures to ensure a prompt and thorough response to and recovery from natural hazards, terrorist attacks, and other national emergencies.[8] Subchapter II (formerly Title III) of the DPA deals with expansion of national defense “productive capacity and supply.” The various sections therein generally authorize the President to provide or guarantee loans to industry in order to expedite deliveries or expand discovery and production of , purchase industrial items or technologies for installation in government or private industrial facilities, and to encourage development of synthetic fuels.[9] It is apparently this authority, along with powers derived from the FPA that the memorandum proposes may be utilized to save ailing coal and nuclear facilities. Under section 202 of the FPA, the Secretary of Energy may “require by order temporary connections of facilities, and generation, delivery, interchange, or transmission of electricity as the Secretary determines will best meet the emergency and serve the public interest.”[10] However, this power may only be used “during the continuance of a war” or “when an emergency exists by reason of a sudden increase in the demand for electric energy, or a shortage of electric energy, or of facilities for the generation or transmission of electric energy.”[11]

This begs the question: Are we facing an emergency situation? The United States has not declared war since 1941, but that does not necessarily mean that exerting economic influence in the interest of national defense cannot still be accomplished through the use of its war powers. The constitutionality of the DPA was called into question not long after its enactment by Excel Packing Company when the company was found liable for damages under the Act, for selling meat in excess of maximum prices fixed by the regulation.

The United States appealed a judgment from the United States District Court for the District of Kansas dismissing its action against the meat packing company. On appeal, the Tenth Circuit Court of Appeals found in favor of the United States, holding that “the right of Congress to exercise its war power does not end with the cease fire order. Neither is Congress limited in its right to invoke such powers only upon a formal declaration of war or from the firing of the first gun.”[12] In Excel, the power of Congress to legislate for the national defense and security in time of war or during a national emergency was not challenged. Id. (emphasis added). The Tenth circuit cited to language of the DPA and explained,

“the policy of the United States [is] to oppose acts of aggression and to promote peace” and in doing so the United States “is determined to develop and maintain whatever military and economic strength is found to be necessary to carry out this purpose” which “task requires diversion of certain materials and facilities from civilian use to military and related purposes” and that it is intended “to provide the President with authority to accomplish these adjustments in the operation of the economy.” There can, therefore, be little question that the Act was primarily passed to promote the national defense.”

Given that the United States has been embroiled in “Extended Military Campaigns”[13] off and on for the better part of a century, it is not beyond the realm of possibility that a court would find the measures proposed in the memorandum to be justified and properly exercised under the war powers and authorities granted by the Act. Judging by various industry responses to the memorandum thus far, these measures could face some tough legal challenges.[14]

What exactly does the memorandum propose?

The rapid rate at which coal and nuclear energy generating facilities are being retired could be creating a shortage of energy generation diversity sufficient to justify action under the DPA/FPA. The memorandum suggests that too many “fuel-secure plants” have closed prematurely and many more have recently announced retirement. The term “fuel secure” refers to facilities which maintain their power source on site, such as coal and nuclear facilities, as opposed to those utilizing natural gas, which must be piped-in.[15] The memorandum acknowledges that currently the lost megawatts of coal/nuclear power are being replaced by new generation from natural gas and renewable energy sources, but warns that this transition comes at the expense of fuel security and resilience.[16]

What has the industry response been?

Administrations on both sides of the aisle have relied on DPA authorities to direct energy production (During January 2001, both Presidents William J. Clinton and George W. Bush invoked DPA powers, in conjunction with those granted in the Natural Gas Policy Act of 1978 (P.L. 95-621, 92 Stat. 3350), to ensure that emergency supplies of electrical power and natural gas continued flowing to California utilities, deflecting threatened electrical blackouts.[17]). However, its proposed use to safeguard, and some critics would say interfere with, the domestic energy market has sparked quite a bit of controversy.

An unlikely alliance of environmental groups and oil and gas industry interest groups have spoken out in opposition to the proposed measures.[18] Todd Snitchler of the American Petroleum Institute has called for less government intervention in energy markets and expressed concern that the proposed use of the DPA/FPA to support “high-cost generation” (referring to coal and nuclear) could result in consumers paying more for their electricity.[19] Amy Farrell, vice President of the American Wind Energy Association stated, “[o]rderly power plant retirements do not constitute an emergency for our electric grid”.[20] PJM[21], the east coast grid operator which serves 65 million customers, published an analysis of recently announced planned deactivations of certain nuclear plants and determined that there was no immediate threat to system reliability. “There is no need for any such drastic action,” said a PJM spokesperson referring to the memorandum’s proposals.[22]

How likely is implementation of the proposals in this memorandum?

The memorandum directs the DOE to protect the ailing coal and nuclear industries from further decline by requiring power market operators “to purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of Subject Generation Facilities (SFGs) sufficient to forestall any further actions towards retirement, decommissioning, or deactivation…”[23] The proposed use of the DPA is unique in this instance because the memorandum seems to say that at any moment an emergency could arise, and this risk is itself sufficient to invoke the DPA.[24] The memorandum warns that “[t]he vulnerability of U.S. critical infrastructure to cyber, physical, and electromagnetic attacks means that adversaries could disrupt military command and control, banking and financial operations, the electrical grid, and means of communication.”[25] It remains yet to be seen whether the looming threat of attack to critical infrastructure[26] would be considered an “emergency” sufficient to justify use of the authorities granted by the DPA and FPA.[27]

Further, the draft DOE directive lacks many details addressing how it would actually be implemented. For instance, the memorandum provides that systems operators would be instructed to purchase energy from a specified list of “Subject Generation Facilities.” However, statements made by Federal Energy Regulatory Commission Chairman Kevin McIntyre and DOE Undersecretary Mark Menezes suggest that details on who these “subject generation facilities” are, or how they will be chosen, are not only unclear, but do not yet exist.[28] The lack of specificity about how the DOE would actually implement this plan, as well as the fact that the memorandum was a draft subject to modification, makes it difficult to assess the feasibility of utilizing the DPA to assist the struggling coal and nuclear industries.

Keeping things in context.

Should the measures proposed in the May 29 draft memorandum be implemented, the oil and natural gas industries would inevitably feel the impacts. One commentator expressed concerns that a push to help one sector of energy production would inevitably cut in on the success of its competitor producers, and in this instance could introduce uncertainty and challenges into the oil and gas industry not previously present.[29] Additionally, the proposed assistance to the coal and nuclear industry comes on the heels of newly imposed steel tariffs, a measure that has already been speculated to negatively impact the oil and gas industry,[30] and follows ongoing discussions on modifying the North American Free Trade Agreement, which could also have an impact upon oil and gas exports.[31]

Until an official directive is released by the White House, it is impossible to assess the legality and feasibility of the proposed use of the DPA and FPA to bolster struggling nuclear and coal facilities. However, it is safe to say that the memorandum presents a novel approach to ensuring domestic energy resilience, and should an official directive be released, this discussion will certainly be revisited, and more thoroughly. At the very least, the memorandum’s release is a reminder that a free energy market is still subject to expansive federal oversight—especially where national security is concerned.

 

[1] 50 U.S.C.A. § 4501 (Formerly cited as 50 App. USCA § 2061).

[2] Under FPA section 202(c) during the continuance of a war in which the United States is engaged or when an emergency exists by reason of a sudden increase in the demand for electric energy, or a shortage of electric energy, or of facilities for the generation or transmission of electric energy, or of the fuel or water for generating facilities, or other causes, the Secretary of Energy may require by order temporary connections of facilities, and generation, delivery, interchange, or transmission of electricity as the Secretary determines will best meet the emergency and serve the public interest.  16 U.S.C. § 824a(c).

[3]Taken from a statement by Whitehouse spokeswoman Sarah Huckabee Sanders following the memorandum’s release. https://www.nbcnews.com/news/us-news/trump-energy-plan-would-prop-failing-coal-nuclear-plants-n879406.

[4] See “Addendum, Draft-5/29/18”, p. 1, https://www.documentcloud.org/documents/4491203-Grid-Memo.html.

[5] P.L. 81-774, 64 Stat. 798.

[6] 50 U.S.C.A. § 4564

[7] Brown & Else, Congressional Research Service report: The Defense Production Act of 1950: History, Authorities, and Reauthorization (July 28, 2014), available at www.crs.gov

[8] Defense Production Act, “Declaration of Policy”, 50 U.S.C.A. § 4502.

[9] Else, Congressional Research Service report: The Defense Production Act: Purpose and Scope (May 14, 2009), available at www.crs.gov.

[10] 16 U.S.C. § 824a(c).

[11] 16 U.S.C. § 824a(c).

[12] United States v. Excel Packing Co., 210 F.2d 596, 598 (10th Cir. 1954).

[13] The US Doesn’t Declare War Anymore, 9/18/2014, Times.com http://time.com/3399479/war-powers-bush-obama/

[14] Energy analysist Katie Bays stated in an interview with Reuters online that “While we believe DOE has broad privileges to identify threats to national security, we are skeptical that (the order) entitles DOE to direct power market operators (…) to pay generators more based upon that threat… Litigation would begin almost immediately.” https://www.reuters.com/article/us-usa-electricity/trump-throws-ailing-u-s-coal-nuke-plants-a-lifeline-triggers-backlash-idUSKCN1IX51Q.

[15] “Gas-fired power generators are more vulnerable to cyber attacks than coal plants and nukes because gas must be delivered from remote fields via pipelines, according a draft report by the department. Coal and nuclear plants, on the other hand, keep fuel stored on site, eliminating a potential weak point that could be targeted by malicious hackers.” https://www.bloomberg.com/news/articles/2018-06-01/trump-s-coal-nuke-push-pegged-to-security-threats-to-gas-pipes.

[16] See “Addendum, Draft-5/29/18”, p. 1, https://www.documentcloud.org/documents/4491203-Grid-Memo.html

[17] Unattributed, “Bush Administration Extends Emergency Orders Requiring Electricity and Natural Gas Shippers to Continue Supplying California Utilities,” Foster Electric Report 209, January 31, 2001, p. 6. The use of these authorities was criticized by some as improper. Bart Jansen, “Gramm Raps Cold War Law,” San Antonio ExpressNews, February 10, 2001, p. 19A.

[18] “The White House billed the effort as a way to shore up national energy security, but the announcement triggered swift backlash from an unusual alliance of drillers, renewable energy producers and environmentalists who called it an unfair attempt to prop up non-competitive industries.” https://www.reuters.com/article/us-usa-electricity/trump-throws-ailing-u-s-coal-nuke-plants-a-lifeline-triggers-backlash-idUSKCN1IX51Q.

[19] https://www.cnbc.com/2018/04/15/api-opposes-trump-administration-bailout-of-firstenergy.html; https://www.nytimes.com/aponline/2018/06/01/us/politics/ap-us-trump-coal-plants.html.

[20] Farrell called the draft plan “a misapplication of emergency powers” and said, “There’s certainly no credible justification to force American taxpayers to bailout uneconomic power plants.” https://www.nytimes.com/aponline/2018/06/01/us/politics/ap-us-trump-coal-plants.html.

[21]In 1997 the Federal Energy Regulatory Commission (FERC) approved PJM as the nation’s first fully functioning independent system operator (ISO). ISOs operate, but do not own, transmission systems in order to provide open access to the grid for non-utility users. http://www.pjm.com/about-pjm/who-we-are/pjm-history.aspx.

[22] https://www.reuters.com/article/us-usa-electricity/trump-throws-ailing-u-s-coal-nuke-plants-a-lifeline-triggers-backlash-idUSKCN1IX51Q

[23] See “Addendum, Draft-5/29/18”, p. 3, https://www.documentcloud.org/documents/4491203-Grid-Memo.html

[24] Previous uses of the FPA include responses to massive blackouts caused by incidents like hurricanes Rita and Katrina, https://www.energy.gov/oe/services/electricity-policy-coordination-and-implementation/other-regulatory-efforts/does-use.

[25] See “Addendum, Draft-5/29/18”, p. 7, https://www.documentcloud.org/documents/4491203-Grid-Memo.html, citing National Security Strategy of the United States of America, at 12 (Dec. 20 17), available at https://www.whitehouse.gov/wp-content/uploads/20 17112/NSS-Final-12-18-20 17-0905-2.pdf.

[26] The term “critical infrastructure” means any systems and assets, whether physical or cyber-based, so vital to the United States that the degradation or destruction of such systems and assets would have a debilitating impact on national security, including, but not limited to, national economic security and national public health or safety. 50 U.S.C.A. § 4552

[27] The DPA does not provide a statutory definition of what would constitute an “emergency”, however the holding in Excel suggests that neither a declaration of war, nor recognition of any national emergency is necessary, where the Act is used to promote national defense.

[28] Statement of Samantha Gross, a fellow in foreign policy focused on international energy and climate at the Brookings Institution, https://www.rtoinsider.com/ferc-doe-trump-rick-perry-kevin-mcintyre-coal-nuclear-93744/.

[29] https://www.usnews.com/national-issues/energy-environment/articles/2018-06-07/trump-backing-coal-and-nuclear-shuns-natural-gas

[30] For a more thorough discussion of this, see: Trump’s Steel Tariff Threatens His Goal Of Oil And Natural Gas Dominance, https://www.forbes.com/sites/judeclemente/2018/03/04/trumps-steel-tariff-is-bad-for-his-oil-and-natural-gas-dominance/#190380c82550.

[31] https://www.bloomberg.com/news/articles/2018-06-11/mexico-turns-attention-to-japan-as-nafta-trade-talks-at-risk; https://www.politico.com/story/2018/06/10/kudlow-trump-nafta-trudeau-041630.

When Fixing a Pleading, Make Sure Not to Break Your Case

When Fixing a Pleading, Make Sure Not to Break Your Case

By: Mark E. Best, Esq.

The Louisiana Fifth Circuit Court of Appeal recently reaffirmed that a fax-filed version of a pleading must be absolutely identical to the hard-copy version later filed with the court pursuant to the 2016 amendments to La. R.S. § 13:850.  In Smith v. St. Charles Par. Pub. Sch., 17-475 (La. App. 5 Cir. 5/1/18) the Court held that even a one-character typographical difference is enough to render a fax-filing void and without effect.

Smith sued St. Charles Parish Public Schools for damages sustained as a result of an October 6, 2015 zip-line accident involving his minor child.  One day before the first anniversary of the accident, plaintiff fax-filed a petition that stated that the date of the accident was “October 6, 2005.”  The original hard-copy version of the pleading, which was timely filed within seven days of the fax in accordance with La. R.S. § 13:850(B), stated the date of the accident was “October 6, 2015.”  Plaintiff’s counsel admitted that the change was made to correct the typographical error.  Upon defendant’s prescription exception, the district court found that the hard copy violated La. R.S. § 13:850(B)(1) because it was not “identical to the facsimile filing.”  The faxed version was rendered without effect and the subsequent hard copy was untimely, as it had been filed more than one year after the date of the accident.  The Fifth Circuit Court of Appeal agreed and affirmed the dismissal of plaintiff’s suit.

The Louisiana Supreme Court has held that prescriptive statutes are “designed to protect a defendant against prejudice from lack of notification of a claim within the period of limitation, [but] are not designed to protect a defendant against non-prejudicial pleading mistakes that his opponent makes in filing the claim within the period.”  Findley v. City of Baton Rouge, 570 So.2d 1168, 1170 (La.1990) citing Giroir v. South Louisiana Medical Center, 475 So.2d 1040 (La.1985).  At first blush, it might sound like the Smith panel ran afoul of this precedent.  A close analysis instead reveals that the Smith panel impliedly held that plaintiff made the “non-prejudicial mistake” in a fax—not a “filing” within the limitations period—because the statute rendered the fax null, void, and without effect before it could become a “filing.”

In light of this ruling, practitioners should correct pleading errors via formal amendment only after a fax-filing has been perfected via delivery of an identical hard-copy document.

Learning from a Mentor is More Cost-Effective and Less Painful than Learning from Mistakes

Learning from a Mentor is More Cost-Effective and Less Painful than Learning from Mistakes

By: Mark E. Best, Esq.

My first mentor in private practice was the managing partner of the firm that hired me.  He was always happy to help, no matter how obvious the answers to my questions were to him.  He’d drop by my house on random weekends to talk shop over a beer.  He’d even answer my calls to his home phone late in the evening.  He attended meetings and depositions with me to monitor my progress and to give pointers along the way. He told me often that he was invested in my success, which is why he spent a good deal of unbillable time showing me the ropes.  This level of mentorship is atypical for young lawyers, and I’ve never forgotten just how fortunate I was to have been a true apprentice to a talented litigator at the very beginning of my career.  But hey, when you follow your father into the legal profession and he gives you a job, that’s what should happen, right?

As a newly minted partner in a law firm with several young, crafty, whip-smart lawyers, I know that if I can deliver the same level of mentorship that I received, the firm’s long-term probability of success will increase.  To the experienced attorneys reading this and thinking, “I just don’t have the time for that,” perhaps what you really mean is, “We just don’t have the firm culture for that.”  After all, you could spend a few hours each month mentoring instead of billable work, if your firm valued it (and compensated for it accordingly).  Kuchler Polk Weiner does just that.

When I eventually left my father’s firm just before his retirement, I came to work with Deb Kuchler.  Almost immediately, she took me to a joint defense group meeting consisting of some of the best lawyers in the city of New Orleans representing Fortune 100 clients in toxic exposure litigation.  In the hours that followed, I understood little about the enormous complexity of the cases, the players, or the issues—but I watched and I learned.  Afterwards, I was surprised when Deb told me to record my time as “non-billable” to ensure the hours would be included in my year-end assessment.  I learned that the reciprocal was also common practice—partners would “no charge” their time while attending depositions or conferences with young associates for mentoring purposes.

A short time later, after I’d completed a particularly complex maritime contractual indemnity analysis, Deb insisted that I accompany her and in-house counsel to a pre-suit mediation with eight figures on the line.  Again, I watched and I learned—until, without warning, Deb turned to me in the presence of the client and the mediator and said, “I’m sure Mark can tell us the answer to that…”  I don’t recall the issue or what I said.  The next thing I remember was riding in the car on the way back to the office after a favorable settlement was reached.  With the radio playing softly in the background, Deb casually informed the client that although she hadn’t intended to bill for my time at the mediation, she felt my performance warranted compensation.  The client agreed.  No one else noticed, but it felt like more than coincidence when “I Alone” by Live came on, and a couple of the lyrics seemingly encapsulated what Deb had done:

I’ll read to you here, save your eyes

You’ll need them, your boat is at sea

Your anchor is up, you’ve been swept away

And the greatest of teachers won’t hesitate

To leave you there, by yourself, chained to fate.

 

There is little I could have said in that separate mediation session that would have adversely affected the outcome.  But there was some limited risk to Deb’s relationship with the client if my words had revealed me as unprepared (or worse).  Deb decided that this was a safe spot to test me—to leave me alone, chained to fate.  And when I passed this test, she positively reinforced the experience by pointedly alerting the client to what I’d done.

I tend to agree with the old adage that law school teaches you how to think like a lawyer, not how to practice law.  I don’t recall any classes on how to estimate damages exposure, how to prepare a witness to testify, how to negotiate a settlement, or how to write a proper report to in-house counsel.  Out of necessity, young lawyers will inevitably learn to do these things.  But if you are not mentoring them, their mistakes will teach them for you, at your cost.  The most successful firms are those that do the best job of teaching and learning.

From the Mouths of Babes… to the Ears of the 9th Circuit

From the Mouths of Babes… to the Ears of the 9th Circuit

By: Sarah C. Thompson

Kelsey Cascadia Rose Juliana v. USA, the lawsuit brought by a group of children against the federal government seeking relief from environmental harms, has survived yet another motion to dismiss. The suit was initially filed in District Court in Eugene, Oregon, and has been elevated into the Ninth Circuit Court of Appeals. On Wednesday, March 7, 2018, the Ninth Circuit refused to grant the United States’ writ of mandamus seeking a dismissal.

The plaintiffs in Juliana are seeking a court order which would require the government to protect the “Public Trust” by, among other measures, adopting a plan to reduce carbon dioxide emissions. Plaintiffs’ claims assert that energy policies enacted by the US government and its agencies have enabled the continued “subsidization of fossil fuel extraction, development, consumption, and exportation- activities producing enormous quantities of [carbon dioxide] emissions that have substantially contributed to the increase in the atmospheric concentration of [carbon dioxide].” Juliana v. United States, 217 F. Supp. 3d 1224, 1251 (D. Or. 2016), motion to certify appeal denied, No. 6:15-CV-01517-TC, 2017 WL 2483705 (D. Or. June 8, 2017). These policies, plaintiffs argue, are in violation of the Constitution’s mandate that the government must provide for the “General Welfare” of its people.

Specifically, the Ninth Circuit panel found the United States’ motion to be premature, holding that “mandamus relief was inappropriate where the district court had not issued a single discovery order, nor had the plaintiffs filed a single motion seeking to compel discovery. The panel also held that any merits errors were correctable through the ordinary course of litigation. The panel further held that there was no controlling Ninth Circuit authority on any of the theories asserted by plaintiffs, and this weighed strongly against a finding of clear error for mandamus purposes. Finally, the panel held that district court’s order denying a motion to dismiss on the pleadings did not present the possibility that the issue of first impression raised by the case would evade appellate review. The panel concluded that the issues that the defendants raised on mandamus were better addressed through the ordinary course of litigation.” In re United States of America, No. 17-71692, (9th Cir. Mar. 7, 2018).

This case is one among a number of recent “Atmospheric Trust Litigation” lawsuits, and is part of a legal movement whose proponents are attempting to hold the government responsible for reducing carbon pollution. Nature’s Trust, Wood, 2013. The decisions which have enabled Juliana to climb into federal court have, thus far, supported this proposition. Judge Aiken’s opinion in the United States District Court for the District of Oregon posited that “The sovereign’s public trust obligations prevent it from “depriving a future legislature of the natural resources necessary to provide for the well-being and survival of its citizens.” The court expanded that there exists a “natural resources trust” which operates according to basic trust principles, and imposes upon the trustee a fiduciary duty to “protect the trust property against damage or destruction.” Juliana, 217 F. Supp. 3d at 1254.

This lawsuit departs from traditional public trust suits, in that it seeks to position the federal government as trustee. There is considerable debate as to whether the state or the federal government is the holder of a duty to protect resources falling within the public trust, as well as debate as to whether the atmosphere falls within that trust. The Juliana decisions appear to suggest that such a trust duty does indeed belong to the federal government. After a lengthy discussion, wherein Justinian concepts of property, Jefferson’s Social Contract theory, and the seminal Illinois Central case are invoked, Judge Aiken states, “This action is of a different order than the typical environmental case. It alleges that defendants’ actions and inactions—whether or not they violate any specific statutory duty—have so profoundly damaged our home planet that they threaten plaintiffs’ fundamental constitutional rights to life and liberty… I can think of no reason why the public trust doctrine… would apply to the states but not to the federal government.” Juliana, 217 F. Supp. 3d at 1259.

In light of the ever evolving legal climate surrounding energy development, as well as the growing popularity of “Atmospheric Trust Litigation”, those monitoring energy and environmental litigation matters would be wise to monitor Juliana, and be mindful of the impacts such litigation has on developments in energy legislation and regulation.

Confidentiality in the Digital Age

Confidentiality in the Digital Age

By: Mark E. Best, Esq.

It seems like every day there is a new story about hackers stealing and publishing confidential personal information.  Even the largest, most tech-savvy telecommunications companies in the world have been proven vulnerable.  It’s one thing to have your name and date of birth exposed; it’s quite another to have your corporation’s trade secrets and litigation-sensitive information fall into the wrong hands.  Good thing your attorney is keeping it safe, right?  After all, “a lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.” La. State Bar Art. 16, RPC Rule 1.6(c). So what exactly are the “reasonable efforts” attorneys must make?

In the 1980s, reasonable efforts might have included placing paper documents in a folder marked “confidential” in a file cabinet in a locked office.  With the advent of electronic documents in the 1990s, it was probably reasonable to “burn” CD-ROMs stored under lock and key, or to save client documents to individual computers protected by passwords.  Nowadays, attorneys have 24/7 worldwide access to their clients’ confidential information—and hackers can invade those data streams from the privacy of their own homes. As technology advances, attorneys’ data protection efforts must keep pace. 

The American Bar Association suggests a multi-factor test to determine whether an individual lawyer or firm is keeping up.  Factors include, but are not limited to, the sensitivity of the information, the likelihood of disclosure if additional safeguards are not employed, the cost of employing additional safeguards, the difficulty of implementing the safeguards, and the extent to which the safeguards adversely affect the lawyer’s ability to represent clients.[1]

As with all of our client services, Kuchler Polk Weiner, LLC has found that the best way to ensure compliance with our information protection obligations is to “Lead the Pack” and stay ahead of the curve.  Rather than doing the bare minimum to pass muster under the ABA’s balancing test, we sought guidance from our Fortune 100 clients who are at the forefront of information security.  Several of them employ the best practices recommended by the International Organization for Standardization (ISO) and others hold ISO/IEC 27001 information security certifications.

ISO/IEC 27001 is the best-known worldwide standard for an information security management system (ISMS).  An ISMS is a systematic approach to managing sensitive company information so that it remains secure. It includes people, processes and IT systems by applying a risk management process.[2] Our firm ISMS ensures that our client data is secure and always available to our staff.  Our customized processes are regularly monitored to ensure all systems are working effectively, so modifications can be implemented to strengthen any weakness. An annual audit is performed by a certified ISO Auditor to measure and verify the effectiveness of our system.

Kuchler Polk Weiner, LLC is one of only a handful of law firms in the United States with an ISO/IEC 27001 Certification and, to our knowledge, the only one in Louisiana at this time.[3]  The certification process is time-consuming, expensive, and not required by law.  So why did we do it?  Our clients go to great lengths to protect their sensitive information.  When they hand it over to us, we want to protect it at least as well, if not better, than they do.

[1]https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_6_confidentiality_of_information/comment_on_rule_1_6.html.

[2] https://www.iso.org/isoiec-27001-information-security.html.

[3] For complete ISO survey data, see http://isotc.iso.org/livelink/livelink?func=ll&objId=18808772&objAction=browse&viewType=1.

Louisiana’s Act 312 & Legacy Landowner Litigation

Louisiana’s Act 312 & Legacy Landowner Litigation

By: Sarah C. Thompson

A “legacy” lawsuit is instituted by a landowner who claims that oil and gas operations caused his property to become contaminated.  These suits often name every operator who ever worked at the site as defendants, usually going back decades.  Below is a snapshot graphic of legacy litigation in Louisiana:

Clarifying Minimum Contacts: Personal Jurisdiction over Corporations

Clarifying Minimum Contacts: Personal Jurisdiction over Corporations

By: Etheldreda C. Smith

 

In 2014, following the United States Supreme Court’s decisions in Daimler AG v. Bauman,[1] we provided an update on the shift in policy away from the landmark International Shoe[2] decision regarding states’ exercise of general personal jurisdiction over corporations.  Notably, International Shoe’s “minimum contacts” test for general personal jurisdiction was murky and resulted in judicial expansion of personal jurisdiction as globalization evolved over the last seventy years. Since Daimler, the Court has continued its shift away from International Shoe in the general jurisdiction analysis and also taken aim at exercises of specific jurisdiction that could undermine Daimler. The cases discussed here illustrate the Supreme Court’s desire to realign the states’ exercise of personal jurisdiction over corporations with the constitutional guarantees of due process and the burden placed on the defendant.

The Daimler decision provided clarity to corporations regarding the jurisdictions in which they might be subject to suit under a general jurisdiction analysis. Following Daimler, corporations could be subject to suit only in jurisdictions in which their “affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.”  Simply put, general personal jurisdiction over corporations can properly be exercised in their state of incorporation or where their principal place of business or corporate headquarters are located. In a footnote, the Supreme Court left open the possibility that in an “exceptional case” a defendant could be subject to general jurisdiction in another state, but did little to elaborate on what factors would create such an “exceptional case;” and subsequent cases have yet to find one.

Walden v. Fiore[3] was decided that same year.  In Walden, the Supreme Court provided further insight into personal jurisdiction—this time focusing on specific personal jurisdiction over foreign defendants.   The Court underscored that the focus of the inquiry is “the relationship among the defendant, the forum, and the litigation” rather than the defendant’s relationship with persons who reside in the forum.  Rather than focusing on the situs of the injury as was done in many prior decisions examining the existence of specific personal jurisdiction, Walden held that the defendant’s suit-related conduct must connect him to the forum state in a meaningful way. Injury might be relevant to that inquiry, but it would no longer be controlling.

Last year, the Supreme Court again granted certiorari for two cases presenting issues of personal jurisdiction: BNSF Railway Co. v. Tyrrell, et al. and Bristol-Myers Squibb Company v. Superior Court of California, et al.

In BNSF, railroad employees filed suit under the Federal Employers’ Liability Act, which makes railroads financially liable for job related injuries sustained by their employees.  In two consolidated cases, the Montana Supreme Court held that Montana could properly exercise general personal jurisdiction[4] over the railroad because it “did business” within the state under Section 65 of FELA and was “found within” the State under Montana Rule of Civil Procedure 4(b)(1).  The Montana Supreme Court further stated that the due process limits articulated in the Daimler decision did not apply to FELA claims or railroad defendants. Writing for eight of the nine members of the Court and reversing the Montana Supreme Court’s holding, Justice Ginsburg explained that the constraints of Daimler apply to “all state-court assertions of general jurisdiction over nonresident defendants; the constraint does not vary with the type of claim asserted or business enterprise sued.”[5]

Bristol-Myers Squibb and BNSF were argued the same day. There, the California Court of Appeal applied Daimler to determine that California lacked general personal jurisdiction over the Plavix manufacturer, but affirmed the lower court’s decision that it had specific jurisdiction over claims asserted by out-of-state plaintiffs by applying a “sliding scale” approach to specific jurisdiction.  Bristol-Meyers Squibb involved claims by both non-resident and domestic plaintiffs, and specific jurisdiction over the non-residents’ claims were at issue.  A divided California Supreme Court found that Bristol-Myers’ “extensive” contacts with California permitted the exercise of a modified version of specific personal jurisdiction over claims by the non-resident plaintiffs; and that the requisite connection between the forum state and the suit-related conduct was “relaxed” where the foreign defendant has wide ranging general contacts with the forum state unrelated to the underlying controversy.  Specific jurisdiction attached to the non-residents’ claims, the court held, in part because the non-residents’ claims were similar in many ways to the California residents’ claims.  Fairness and judicial economy permitted joinder of the residents’ claims (to which specific jurisdiction inarguably applied) and the non-residents’ claims (which had no direct nexus with California).

The Supreme Court reversed and remanded.  Relying on Walden, the same eight justices as in BNSF[6] rejected California’s exercise of specific personal jurisdiction over the non-residents’ claims because there was no nexus between their claims and California. All of the non-residents’ alleged harm in Bristol-Myers was suffered outside of the forum state.  The fact that the California plaintiffs were prescribed, obtained, and ingested the drug in California and sustained the same injuries as the non-residents was insufficient to exercise specific jurisdiction over the non-residents’ claims. According to the Court, specific jurisdiction requires a connection between the forum and the specific claims at issue. The Court further explained that Bristol-Myers’ contractual relationship with a resident co-defendant for distribution of Plavix was insufficient, standing alone,[7] to confer specific personal jurisdiction over the company.

Despite repeated references to the “settled” nature of the law, the Court explicitly left open the question of whether the Fifth Amendment imposes the same due process requirements on federal courts’ exercise of personal jurisdiction as the Fourteenth Amendment does on the states’.[8]  The implication being that these cases signal a marked shift in the jurisprudence dealing with personal jurisdiction over defendant corporations in state courts.

With these cases in mind, new state court matters should be evaluated with a close eye to determine whether the forum’s exercise of general or specific personal jurisdiction over your corporate client is proper.

[1] 134 S.Ct. 746 (2014).

[2] International Shoe Co. v. Washington, 326 U.S. 310 (1945).

[3] 134 S.Ct. 1115 (2014).

[4] Because the workers were not injured in the forum state, an evaluation of specific jurisdiction was not at issue in BNSF.

[5] Justice Sotomayor wrote a partial dissent.  While she concurred with majority’s conclusion that the nature of the claim has no bearing on the personal jurisdictional analysis, she expressed her disapproval of “the path the Court struck in Daimler AG v. Bauman,” and urged for a return to the International Shoe standard.

[6] Justice Sotomayor again dissented.

[7] There were no allegations that the contractual relationship was related to the alleged harm in this case, therefore, the contractual relationship alone would not create specific personal jurisdiction over Bristol-Myers Squibb.

[8] Since Bristol-Meyers Squibb concerned the exercise of personal jurisdiction by a state court, the Court’s analysis focused on due process as applied to the states under the Fourteenth Amendment.  In contrast, the Fifth Amendment provides due process restrictions on federal courts’ exercise of personal jurisdiction; and the Court expressly reserved for another day whether the Fifth Amendment analysis is different.

Kuchler Polk Weiner, LLC congratulates Freightliner on 75 years of innovation.

Kuchler Polk Weiner, LLC congratulates Freightliner on 75 years of innovation.

 

Janika Polk, Lee Ziffer and Deb Kuchler recently ran into Dale Earnhardt, Jr. at Hendrick Motorsports where Freightliner is prominent. We’re reminded of how important it is as outside counsel to learn the client’s business.

What’s important to each client?

What keeps a client awake at night?

How does the business run?

That’s why, on our own time and on our own nickel, we:

  • Visit the client’s operation;

  • Climb on and drive a tractor;

  • Pick up a power tool and disassemble a brake drum;

  • Swing on a personnel basket onto an oil rig;

  • Don a Tyvek suit, hard hat, goggles, ear protectors and steel-toed boots for an inspection of a chemical plant or refinery;

  • Dive into the science underlying a product liability case;

  • Learn the lingo of deepwater drilling;

  • Know how to get to the port side from starboard on a client’s vessel; and

  • Understand the sensitivities involved in the client’s environmental stewardship issues.

We are 100% in it with our clients.  When they have skin in the game, so do we.

Cleaning Up the Clean Water Act

Cleaning Up the Clean Water Act

By: Kristyn L. Lambert

On July 27, 2017, the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (the Corps) proposed the first of two rules designed to replace the controversial 2015 “Clean Water Rule” (the 2015 Rule),[1] which some argue broadened federal jurisdiction under the Clean Water Act (CWA).  This regulation is particularly important because it determines which areas are subject to the Corps’ permitting authority under the CWA.  This news comes after Louisiana state administrators asked the Trump administration to grant funding and ease the federal permitting requirements related to Louisiana’s coastal lands.

The Corps’ Clean Water Rule of 2015 purportedly sought to clarify the question of which wetlands fall under the jurisdiction of the CWA, and interpreted “waters of the United States” to include “all waters that require protection in order to restore and maintain the chemical, physical, or biological integrity of traditional navigable waters,” without requiring a continuous surface connection.[2]  After its adoption, critics of the 2015 Rule argued that this construction significantly expanded federal jurisdiction.

Pursuant to its terms, the CWA applies to “navigable” waters, defined by Section 1362(7) of the Act as “waters of the United States.”[3]  This definition caused confusion regarding which areas are subject to the CWA regulations.  Wetlands have been particularly difficult to classify under the CWA because the boundaries between navigable waterbodies and adjacent wetlands are often unclear.[4]  Enforcing agencies and the courts have struggled to determine where the navigable waters – and the jurisdiction of the CWA – ends, and where terra firma land begins.

The Corps, responsible for enforcing certain of the CWA’s permitting requirements, interpreted “waters of the United States” expansively.  This resulted in a number of legal challenges from multiple parties and states, including Louisiana.

For instance, in U.S. v. Riverside Bayview Homes, Inc., the United States Supreme Court upheld the Corps’ authority to interpret the CWA as applicable to wetlands adjacent to other covered water bodies, even though the Corps had historically construed the CWA to cover only waters navigable in fact.[5]

In Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, (SWANCC), the U.S. Supreme Court held that the Corps exceeded its authority under the CWA when it adopted a rule extending the definition of “navigable waters” to include intrastate waters used as habitat by migratory birds.[6]  That case did not involve wetlands specifically, but it discussed that the deciding factor in Riverside, supra, was the “significant nexus” between the wetlands and navigable waters at issue.[7]  While the opinion did not precisely address what constitutes a significant nexus, it did indicate that physical proximity and location are important considerations.[8]

More recently in Rapanos v. United States, the Supreme Court agreed that the “significant nexus test” should be applied to determine which wetlands fall within the CWA’s jurisdiction, but failed to reach a majority holding regarding how the test is applied.  According to the plurality opinion authored by late Justice Scalia, a significant nexus requires that the wetlands be adjacent to “a relatively permanent body of water connected to traditional interstate navigable waters; and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the water ends and the wetland begins.”[9]  According to the opinion, the scope of the definition of “waters of the United States” was determined by a wetland’s physical proximity to covered waters, “not ecological relationship thereto.”[10]  According to Justice Kennedy’s concurring opinion, the significant nexus is established if the wetlands “affect the chemical, physical, and biological integrity of other covered waters.”[11]  In Justice Kennedy’s view – if the wetlands have a substantial ecological impact on navigable waters, the significant nexus test is satisfied regardless of the wetlands’ physical proximity to the navigable waters.

In October 2015, the U. S. Court of Appeals for the Sixth Circuit stayed the Rule on the grounds that the 2015 Rule was “at odds with the Supreme Court’s ruling in Rapanos” and because the rulemaking process by which the 2015 Rule was adopted was “facially suspect.”[12]

In February 2017, President Trump issued an Executive Order instructing the EPA and Corps to issue new regulations that reflect Judge Scalia’s majority opinion in Rapanos to narrow CWA jurisdiction and reduce the area subject to federal permitting.  The rule proposed on July 27, 2017 essentially seeks to repeal the 2015 Rule and “re-codify” the prior regulations temporarily.  This will essentially maintain the status quo, as the prior regulations have been applied since the Sixth Circuit enjoined the 2015 Rule.  In a “second step,” the agencies intend to “conduct a substantive re-evaluation of the definition” to draft replacement regulations.

[1] Corps of Engineers’ regulatory definition of waters of the United States 33 C.F.R. § 328.3.

[2] Clean Water Rule: Definition of “Waters of the United States,” 80 FR 37054-01 (2015).

[3] 33 U.S.C.A. § 1362(7) (2014).

[4] See U.S. v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985); and Rapanos v. United States, 547 U.S. 715 (2006).

[5] U.S. v. Riverside Bayview Homes, Inc., 474 U.S. 121, 123 (1985).

[6] Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001).

[7] Id. at 167.

[8] Id. at 168.

[9] Rapanos v. United States, 547 U.S. 715, 742 (2006)(internal quotations omitted).

[10] Id. at 747.

[11] Id. at 780.

[12] In Re E.P.A., 803 F.3d 804, 807 (6th Cir. 2015).

The Enemy of Efficiency: Diminishing Marginal Returns

The Enemy of Efficiency: Diminishing Marginal Returns

By: Mark E. Best, Esq.

Clients want, expect, and are entitled to efficient handling of their cases.  The block-billing model of the past, which allowed for full-day time entries on “research” or “document review,” gave way to standard tenth-of-an-hour billing increments with verbose time entries designed to help clients determine whether they were getting their money’s worth.  And even this model is now showing its age, having to compete with fixed and alternative fee agreements designed to give more certainty to future litigation costs.  No matter the billing method, when the client is writing out that check, she wants to know she isn’t paying for unnecessary work.

Most defense firms create efficiencies using common methods like new technology (e.g., paperless work flow; video conferencing; electronic document review software), appropriately tiered staffing (e.g., delegation of simple tasks to clerks, paralegals and secretaries), and assessment of cases for early resolution through motion practice or settlement.  At Kuchler Polk Weiner, LLC, we take efficiency efforts one step further—out of the physical office and into our collective mindset.  One way we do this is by focusing on the archenemy of efficiency—the law of diminishing marginal returns (“DMR”).

This economic principle states that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.[1]  Put more simply, you can continually add more of a given resource to creation of a product but, at some point, it will become inefficient to do so.  The practice of law is not immune from the law of DMR.  There comes a point in every project or case when spending additional hours working on it yields an ever-decreasing return for the client—potentially even a negative return, which occurs when additional work input results only in increased costs to the client, without any benefit whatsoever.  So what does this look like in the real world?

In the first three hours an attorney spends constructing a brief, she may formulate an outline, read the latest case-on-point, and identify the key supporting exhibits.  That work is very productive and highly valuable to the client.  In the last hour of brief preparation, however, he may read and re-read the draft, ultimately deciding only to change the word “Firstly” to “First.”  Some would (rightly) argue that the last hour was quality-control work necessary to ensure top quality.  From an economic perspective, however, the last hour created “diminished” value for the client relative to the first three hours.  And yet, the client is charged for the last hour at full price.

We cannot fight the law of diminishing marginal returns, but we can maintain a higher level of efficiency by being mindful of it.  An efficient attorney should consider the following questions at each stage of work-product preparation:

 

  1. What is absolutely essential to this work product, and what is not?
  2. Have any essential parts of the work product already been created, such that I need not reinvent the wheel?
  3. Have I reached the point in the creative process where I am merely fine-tuning?
  4. Is the fine-tuning still creating good value for the client?

The goal of this mindfulness exercise is to create an automatic internal alarm system, pinpointing the moment when the return on investment of time begins to diminish.  Once the alarm bells go off, there should be a shift in mindset to “wrapping things up” and moving on to other, more productive tasks.  The benefit to the client’s bottom line does not go unnoticed and (bonus!) we tend to avoid those headaches that come from staring at the same words on the computer screen for hour after hour.

[1] https://www.britannica.com/topic/diminishing-returns

 

Louisiana Judicial Districts and Circuits

Louisiana Judicial Districts and Circuits Map

 

After growing tired of referencing bland maps of Louisiana’s judicial districts—none of which combined both federal and state courts—KPW Associate Joshua Dogget made his own. Feel free to download, print, and share.

Always be Closing, Even on Day One of a New Maritime Case

Always be Closing, Even on Day One of a New Maritime Case

By: Mark E. Best, Esq.

Nothing jump-starts a legal mind like a brand new case.  As you read the Complaint for the first time, the former law student in you begins issue-spotting automatically and fires off a barrage of questions:

What’s the jurisdictional basis?  Is it a vessel?  Seaman or Longshoreman?  Are punitive damages available?

Not to be outdone, the seasoned litigator in you adds to the growing pile:

When are responsive pleadings due?  Who is opposing counsel?  Who’s the judge?  Didn’t we just handle a similar case?

Sometimes it seems hard to know where to begin.  But the answer is pretty simple—begin at the end.  There is nothing more valuable to defense clients than a quick win, and attorneys should strive to develop a reputation for ending litigation or delivering file closure before it’s expected. With rare exception, contractual indemnity is the fastest and least expensive way to get a new maritime file off of a client’s desk.  Here are steps we strive to complete on Day 1 of a new maritime case.

Identify Plaintiff’s Employer

First, we want to identify our target—the contractor who is going to cover every dime of our client’s expense.  Contracts for offshore work commonly require an employer to defend and indemnify those who are sued by its employees, so plaintiff’s employer is usually the first and best option.  In Jones Act cases, the employer will always be a named defendant and the employment relationship will be clear from the allegations in the Complaint.  In the event the employer is not identified in the Complaint, we pick up the phone and ask plaintiff’s counsel.  Our client’s time is money, and it should not be wasted waiting for formal discovery on non-controversial matters.

Get the Contracts

Next, we get the signed documents.  On the day a new file is assigned, we request copies of the relevant contracts and work orders between the client and plaintiff’s employer.  Our efficiency-focused maritime clients understand our goals and provide these contracts with the new case assignment, before we even have to ask.

Master service agreements and vessel charters can be quite complex and the risk allocation, indemnity, and insurance provisions are thoroughly and carefully reviewed.  We confirm that the contract language identifies the client as an indemnitee and that it contains specific language allowing the indemnitee to be indemnified for its own negligence.[1]  If our client did not contract with plaintiff’s employer, we request and examine its agreements with other named defendants in the suit.  Oftentimes, contractual indemnity and defense obligations “pass through” other entities and provide coverage to our clients.  By maintaining familiarity with our clients’ contract language, we can expedite the analysis.

Determine Enforceability

Once we’ve confirmed that our client is owed defense and indemnity pursuant to the contract terms, we need to ensure that those terms are enforceable under applicable law. Our seasoned maritime attorneys are well-versed in choice-of-law analysis, state anti-indemnification statutes and, importantly, the exceptions thereto.[2]

Follow Client/Contract Procedures

Assuming the contract terms are enforceable, we check the contract for dispute resolution and claim notification procedures.  We strive to recommend next steps to our clients in every status report and, in this situation, those steps must conform to contract requirements.

Some agreements require notices to be sent to particular individuals or office addresses.  Others allow the indemnitor to recover attorneys’ fees and costs if the indemnitee fails to employ alternative dispute resolution before filing a cross-claim or separate lawsuit for defense and indemnity.  We avoid pitfalls by being accustomed to the terrain and our clients rest assured that we will take no action on this issue without specific authorization.

Finally, we consider our client’s internal procedures and preferences.  Some companies’ legal departments require approval from their business units before a formal tender letter can be issued to a contractor.  Some clients wish to issue tender letters directly, while others prefer to present them on our firm letterhead.  Some clients prefer lengthy demand letters that attach the Complaint and all contract documents, along with a full legal analysis.  Such letters project strength because they imply that formal legal action is a mere “cut-n-paste” away.  Other clients see lengthy demand letters as giving away too much information, preferring instead simple demands merely attaching the Complaint and referencing a contract number.  We seek out our clients’ individual preferences to deliver precisely what they want, when they want it.

Send the Demand

The best practice is to send copies of the demand letter by certified mail or other trackable means to (1) the entity’s registered agent for service of process; (2) the notification addressee identified in the contract; and, (3) the entity’s counsel of record in the underlying litigation (if applicable).  This increases the likelihood of a prompt response, which can save our client time and money.

Our clients may not always remember opening a new case file with multi-million dollar exposure and a litigation budget of hundreds of thousands of dollars.  We only want them to remember how Kuchler Polk Weiner, LLC closed it, at little or no cost to the company, in a matter of weeks.

 

[1] Indemnification for an indemnitee’s own negligence must be “clearly and unequivocally expressed.” An indemnification of “any and all claims” standing alone is not sufficient to indemnify the indemnitee for its own negligence.  Seal Offshore, Inc. v. Am. Standard, Inc., 736 F.2d 1078, 1081 (5th Cir.1984) (citations omitted).

[2] The number of potential fact patterns, legal issues, pitfalls and outcomes of this analysis are too numerous to discuss in this space, and may be the subject of future posts.

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