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Joint Trusts: A Useful Tool for Some Married Couples

Though not a silver bullet for every situation, in appropriate circumstances, a Joint Revocable Living Trust (“Joint Trust”) can provide a married couple with significant benefits and simplify the administration of assets upon death or incapacity.

The Probate and Estate Administration Process

In order to illustrate the benefits that can be achieved with a Joint Trust, it’s helpful to first understand the typical probate and estate administration process that occurs when a person dies.

When a person dies with a Will, the designated Executor in the Will typically submits the original Will for probate in the Estates Division of the Clerk of Superior Court in the county where the decedent resided at the time of death.  “Probate” is the legal process by which the court validates the submitted document as the legal Will of the decedent.  When offering the Will for probate, the designated Executor typically also files an application with the court to be appointed as Executor of the estate and granted Letters Testamentary, which is the legal document confirming the Executor’s authority to act for the decedent’s estate.

If a person dies without a Will, the decedent’s spouse or nearest relative typically files an application with the court in the county where the decedent resided at the time of death seeking to be appointed as Administrator of the estate and granted Letters of Administration which is the legal document confirming the Administrator’s authority to act for the decedent’s estate.

Once the court appoints an Executor or Administrator of the estate, as the case may be, that person is referred to as the “Personal Representative” of the estate and is charged with several duties and obligations.  Actions required of the Personal Representative include:

  • Taking control of the decedent’s assets;
  • Filing an inventory with the court identifying the value of all of the decedent’s assets to the penny;
  • Publishing a notice to creditors giving them three months to file claims with the estate;
  • Satisfying any creditors’ claims;
  • Distributing all remaining assets to the decedent’s beneficiaries; and,
  • Filing an accounting with the court to report to the penny what occurred with all of the assets.

The court supervises the process at every step along the way and must ultimately approve all actions taken in the course of the estate administration before the Personal Representative will be relieved of their appointment.

Movement Away from Probate

Over the last few decades, a trend has developed in the estate planning community to attempt to structure a person’s affairs so that no assets will pass through a probate estate supervised by the court.  That trend has developed in response to a public perception that the court supervised process is not only unnecessary but also yields additional costs.  For instance, additional fees must be paid to attorneys and other advisors to prepare the inventory, accountings, and other documentation necessary to satisfy a court that the estate was properly administered.  Also, in North Carolina, the court charges a fee of $4 per $1,000 of value that passes through the estate, excluding the value of any real estate.  Currently, there is a cap on this fee in the amount of $6,000, which is reached when the value of the estate assets equals $1,500,000.

Additionally, all reporting made to the court about the administration of an estate is public record, meaning that anyone can access the information.  The public nature of the process is why news organizations often are able to publish articles soon after a celebrity’s death detailing what assets the celebrity-owned and who received them.  Such publicity causes concern for many people because they fear that their heirs will become targets for gold-diggers.  This has further strengthened the trend away from court supervised estate administration.

Several techniques are available to avoid the court supervised estate administration process.  These include:

  • Registering financial accounts as joint with rights of survivorship;
  • Adding beneficiary designations to life insurance or retirement accounts; and,
  • Adding pay-on-death or transfer-on-death designations on financial accounts.

However, because it is rarely possible to utilize those techniques to fully exempt a person’s assets from the court supervised estate administration process, the most commonly used avoidance device is the Revocable Living Trust.

The Revocable Living Trust

A Revocable Living Trust is essentially a substitute for a Will.  To create a Revocable Living Trust, a person typically transfers the person’s assets to himself or herself as trustee and signs a written trust document that contains instructions as to what the trustee is to do with those assets while the person is alive as well as upon death.  The trust document also identifies who should take over as successor trustee when the person is no longer able to serve due to death or incapacity.

During life, the person’s assets in the trust may be used in any way the person, as trustee, directs, and the person may change the instructions in the trust document in a similar manner as one can change a Will.  If the person becomes incapacitated, the successor trustee is instructed to use the trust assets for the person’s care.

At death, the successor trustee wraps up the person’s affairs by utilizing the trust assets to satisfy all of the person’s liabilities and distributes the remaining assets to the beneficiaries identified in the trust document.  No court supervises the process, so no court fees are incurred.  Moreover, advisors’ fees related to preparing court filings are avoided.  Also, the administration of the trust is a private matter with nothing becoming public record.  This process often results in a much better outcome for the person’s beneficiaries as compared to having the assets pass through the court supervised estate administration process.

The Joint Trust

Typically, when a married couple utilizes a Revocable Living Trust-based estate plan, each spouse creates and funds his or her own separate Revocable Living Trust.  This results in two trusts.  However, in the right circumstances, a married couple may be better served by creating a single Joint Trust.

A Joint Trust tends to work best when a couple has the following characteristics:

  • The couple has a long, stable relationship;
  • Divorce is not a concern for either spouse;
  • The couple is willing to identify all assets as being owned one-half by each of them;
  • No creditors’ claims exist, whether current or contingent, for which the creditor could seek to collect from only one spouse and not the other;
  • Neither spouse has children from a prior relationship;
  • Each spouse is comfortable with the surviving spouse having full control over all of the assets after the death of one of the spouses; and,
  • The value of the couple’s assets is less than the federal estate tax exemption amount.  For deaths occurring in 2022, this amount is $12.06 million (or $24.12 million per couple) reduced by any taxable gifts made during life.

A couple who meets these criteria could establish a Joint Trust by transferring their assets to themselves as co-trustees and signing a trust document to provide instructions as to what the co-trustees are to do with the assets.  Typically, while both spouses are alive and competent, they retain full control over the trust assets and can change the trust document at any time.  If one of the spouses becomes incapacitated, the other spouse continues to control the trust and can use the trust assets for the couple’s care.

After the death of one of the spouses, the Joint Trust will continue.  The surviving spouse would continue serving as trustee and have full control over the trust assets.  No transfers of assets are required at the first death because all assets are already in the Joint Trust.

Upon the death of the surviving spouse, the designated successor trustee wraps up the surviving spouse’s affairs by utilizing the Joint Trust assets to satisfy any liabilities and distributes the remaining assets as directed in the trust document.

The following are some of the benefits afforded by a Joint Trust:

  • Throughout this entire process, there is no court involvement.  This minimizes costs and promotes privacy.
  • The couple no longer has to worry about whether a particular asset is owned by one of the spouses or by one of the spouses’ separate Revocable Living Trusts.  All assets are simply owned by the Joint Trust.
  • Since only one trust is ever created, no transfers need to be made after the death of the first spouse to die.  This simplification in the administration process minimizes advisors’ fees and other costs and is a key advantage of using a Joint Trust.

A Joint Trust can possibly yield even more benefits in certain situations.  For instance, it may be possible to characterize some or all of the assets in a Joint Trust as community property.  The benefit of having assets characterized as community property is that such property will receive a full basis adjustment for income tax purposes (commonly referred to as a “step-up” in basis) at the death of the first spouse to die as opposed to only one-half of the property receiving such a basis step-up.

Additionally, it may be possible to include asset protection features in the Joint Trust so that any real property owned by the trust would be afforded the same protection as real property owned by a married couple as tenants by the entireties.  Such protection prevents a creditor of just one spouse from enforcing the liability against the real property owned by the couple.  Though the details of these benefits are beyond the scope of this article, they demonstrate that a Joint Trust potentially can provide additional advantages beyond those listed above.

Conclusion

In the right circumstances, utilizing an estate plan that involves a Joint Trust can simplify a married couple’s affairs and, as a result, make the administration process easier after death and ultimately lower costs.  Any couple interested in a Joint Trust should contact competent counsel to assist them in evaluating whether the technique is appropriate for them.

Article By Zachary F. Lamb of Ward and Smith, P.A.

For more family, estates and trusts legal news, click here to visit the National Law Review.

© 2022 Ward and Smith, P.A.. All Rights Reserved.

Key Takeaways from U.S. Supreme Court Decision in West Virginia v. EPA

On June 30, 2022, the U.S. Supreme Court issued its decision in West Virginia v. EPA, 597 U.S. __, 2022 WL 2347278 (June 30, 2022), a case involving the Obama Administration’s Clean Power Plan (CPP) and the Trump Administration’s Affordable Clean Energy (ACE) Rule. Applying the “major questions” doctrine, the Court held that EPA exceeded its statutory authority when promulgating the CPP. This decision has implications for the Biden Administration’s planned re-work and reissuance of the CPP and other options for reducing greenhouse gas (GHG) emissions from the electric power and other sectors. It also carries implications outside the environmental realm, providing litigants a powerful new administrative law precedent to challenge agency rules.

Key Takeaways and Issues to Watch

1. “Major questions” doctrine. The most significant takeaway of the opinion is the Court’s elaboration and application of the “major questions” doctrine, as a limit on federal agency regulatory authority. Chief Justice Roberts’ majority opinion held that in “certain extraordinary cases” where an agency asserts broad authority of “economic and political significance,” courts should look for a clear statement of congressional authorization before green-lighting the action. Based on the “major questions” doctrine, the Court rejected the CPP’s partial reliance on generation shifting (from coal-fired power plants to natural gas or renewable electricity generation) as a component of the “best system of emission reduction” (BSER) for reducing carbon dioxide from coal-fired power plants. The Court held that Clean Air Act Section 111(d), 42 U.S.C. § 7411(d), a rarely-used statutory provision, was not sufficient to support a rulemaking that “restructure[ed] the Nation’s overall mix of electricity generation….” Because the Court determined this result would carry consequences of economic and political significance, the Court found the rule triggered the “major questions” doctrine. The Court reiterated that although Section 111(d) authorizes EPA to establish emission guidelines for existing major sources of air pollution based on BSER, the Agency could not do so using such transformative measures.

This decision represents the Supreme Court’s first formal assertion of the “major questions” doctrine, applicable when an agency claims broad authority based on new interpretations of older statutes or statutes in which the grant of authority is not explicitly stated. Although this was not the first Supreme Court case employing this logic, this was the first case where the Court formally used the phrase “major questions” doctrine. Other cases the Court pointed to include a 2000 case rejecting the asserted authority of the Food and Drug Administration (FDA) to regulate tobacco products, like cigarettes, as drug-delivery “devices,” and more recent cases from this Supreme Court term concerning the authority of the Occupational Safety and Health Administration and the Centers for Disease Control and Prevention (CDC) to apply long-extant legal authorities in the context of COVID-19.

2. Chevron deference doctrine. The Court does not strike down Chevron as some parties had predicted or sought. That doctrine—requiring courts to defer to an agency’s reasonable construction of an ambiguous statute it is charged with administering—survives for now. Indeed, the majority opinion did not even cite Chevron deference.

3. Biden EPA. This decision immediately affects the scope of the Biden Administration’s approach to regulating power sector GHG emissions. The Administration has said that it wants to start these rules from a clean slate.

a. On-site measures. As noted in the decision, the Administration may be more likely to consider on-site measures as the BSER. Such options might include partial carbon capture and storage (CCS) or natural gas co-firing. The Obama EPA had declined to use those options for existing sources because it believed generation shifting was a less expensive way for industry to comply. But EPA had used partial carbon capture to set the limits for new sources, so it may review that issue now. Since the CPP’s issuance, the IRS Section 45Q tax credit for CCS and commercialization of CCS technologies that did not exist when the CPP was drafted may also affect the EPA’s approach now.

b. Generation shifting off the table. At least for setting the stringency of BSER, EPA will not be able to rely on generation-shifting measures. Advances in CCS technologies and the Section 45Q tax credit may also affect how EPA defines BSER for coal-fired plants in particular.

c. Seeking GHG reductions as “co-benefits” of other power sector rules. The Biden EPA may also consider other power plant emission rules under other CAA programs to achieve GHG reductions as “co-benefits.” Programs for regional haze, interstate air pollution, and hazardous air pollutants regulate other emissions, but often have the effect of reducing GHGs as well.

d. Other climate authorities will likely get a more intense look. The decision may also likely cause the Biden EPA to consider other, more clearly established GHG sources or authorities to seek additional GHG emissions reductions (e.g., mobile sources, HFCs).

4. Congressional action remains key. The Court’s decision underscores that certain rulemakings will need to rely on clear legislative authority to withstand legal challenges. Notably, the decision does not divest Congress from the ability to delegate “major questions” like this to federal agencies; it only requires that such delegations be clearly stated. Congress retains authority to act in any number of ways on climate change—including with economy-wide emissions programs (as it considered during the first Obama term), or by drafting clearer EPA authority—but with a narrowly-divided House and Senate, these actions seem unlikely.

5. Power sector practical effects. The practical outcome for the power sector is limited. That sector, in many respects, has already decarbonized at a rate faster than provided for by the CPP, largely for economic reasons.

6. States. This decision will likely encourage some states to use their authority to regulate GHG emissions, given the narrowed scope of EPA’s authority.

7. Future challenges. Expect litigants to rely heavily on the West Virginia decision in other rulemaking challenges going forward, whenever agencies act under existing authorities in a way that, in the Chief Justice’s words, “raises an eyebrow.” This may include not only EPA regulatory efforts to address modern environmental challenges, but actions of other federal agencies such as efforts by the Federal Communications Commission to regulate internet service providers to impose net neutrality, or efforts by the Securities and Exchange Commission to establish ESG disclosure requirements. Litigants will have a powerful tool to challenge those rules if they can persuasively phrase the question in “major question” terms.

Article By Eric L. Christensen, Brook J. Detterman, David M. Friedland, Jennifer J. Leech, and Zachary B. Pilchen of Beveridge & Diamond PC

For more environmental law legal news, click here to visit the National Law Review.

© 2022 Beveridge & Diamond PC

Looking into Our (Slightly Hazy) Crystal Ball: What Will the Mississippi Cannabis Market Look Like?

When you do what we do, you get a lot of calls and a lot of questions. Many of the calls and questions are not fruitful. Quite honestly, some of the calls are from folks whose interest in and experience with cannabis is, we suspect, on a purely personal and leisurely level. In the words of Hyman Roth, this is the business we’ve chosen.

But one legitimate question we’re often asked is what we think the cannabis market will look like in Mississippi. And, more specifically, whether Mississippi’s new medical cannabis regime will be similar to the one in Oklahoma.

It’s a loaded question, and one we suspect many questioners don’t fully appreciate. On the one hand, Oklahoma’s medical cannabis program has been compared to the Wild West. At last count, there were more medical cannabis dispensaries than liquor stores or supermarkets in the state. Many have concluded that this is a bad thing and/or that the program is a failure. Others have deemed the program a triumph of capitalism, a survival-of-the-fittest trial where only the “best” will survive.

As is often the case, we think the answer is probably somewhere in the middle.

On the one hand, the obvious and primary similarity between the programs is the absence of an expressed cap on the number of licenses available. While most states limit the number of licenses available, neither Oklahoma nor Mississippi does so. Many believe this feature will lead to Mississippi following the lead of Oklahoma in terms of the proliferation of dispensaries throughout the Magnolia State.

On the other hand, there are a number of differences between the two states and their statutes that indicate to us that Mississippi’s regime will differ in several important ways – ways we are seeing play out now. First, while the license fee for a dispensary in Oklahoma is $2,500, the fee in Mississippi is $25,000, 10 times the amount. And that amount is owed annually and is in addition to the initial $15,000 application fee. As a practical matter, and for better or worse, this feature alone should significantly cull the number of dispensaries because it provides a substantial barrier to entry into the industry.

Second, there may be significantly fewer locations available to open a dispensary in Mississippi than one would expect due to several geographic-limiting features of the law. Initially, localities have until May 3 to opt out of the medical cannabis regime, and several cities have already done so. Also, dispensaries cannot be located within 1,000 feet of any church, school, or daycare facility. For those unfamiliar with Mississippi, it may be tough to find anywhere in the state that isn’t within 1,000 feet of a church. Even more, the law forbids one dispensary from being within 1,500 feet from another dispensary, and dispensaries are only permissible in commercially zoned areas.

Third, the cannabis industry examining the Mississippi market will have the benefit of having lived through the Oklahoma experience. This is likely to minimize the “goldrush” mentality seen in Oklahoma’s early days. Instead, look for larger players to let the dust settle and come in looking to acquire operators who proved successful breaking out of the initial melee.

Conclusion

It seems possible that, at least in the early years, the Mississippi medical cannabis regime may more closely resemble Oklahoma than a state like Florida with strict limitations on the number of licenses. But our prediction is that certain aspects of Mississippi law and culture will lead to less of a free-for-all at the outset, hopefully leading to a more efficient and more orderly transition to a rational cannabis market in Mississippi.

Article By Whitt Steineker and Slates C. Veazey of Bradley Arant Boult Cummings LLP

For more cannabis legal news, click here to visit the National Law Review.

© 2022 Bradley Arant Boult Cummings LLP

Italian Garante Bans Google Analytics

On June 23, 2022, Italy’s data protection authority (the “Garante”) determined that a website’s use of the audience measurement tool Google Analytics is not compliant with the EU General Data Protection Regulation (“GDPR”), as the tool transfers personal data to the United States, which does not offer an adequate level of data protection. In making this determination, the Garante joins other EU data protection authorities, including the French and Austrian regulators, that also have found use of the tool to be unlawful.

The Garante determined that websites using Google Analytics collected via cookies personal data including user interactions with the website, pages visited, browser information, operating system, screen resolution, selected language, date and time of page views and user device IP address. This information was transferred to the United States without the additional safeguards for personal data required under the GDPR following the Schrems II determination, and therefore faced the possibility of governmental access. In the Garante’s ruling, website operator Caffeina Media S.r.l. was ordered to bring its processing into compliance with the GDPR within 90 days, but the ruling has wider implications as the Garante commented that it had received many “alerts and queries” relating to Google Analytics. It also stated that it called upon “all controllers to verify that the use of cookies and other tracking tools on their websites is compliant with data protection law; this applies in particular to Google Analytics and similar services.”

Article By the Privacy and Cybersecurity Practice Group at Hunton Andrews Kurth

For more data privacy and cybersecurity legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

US Supreme Court Holds That Airline Cargo Loaders Are Exempt From Arbitration

The US Supreme Court has held that airline cargo loaders who load and unload cargo from planes that travel across state lines are exempt from the Federal Arbitration Act (FAA) because they belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. Southwest Airlines Co. v. Saxon (June 6, 2020).

Background

Latrice Saxon worked for Southwest Airlines and was responsible for training and supervising teams of ramp agents who load and unload airplane cargo on Southwest planes that travel across state lines. Saxon brought a collective action alleging failure to pay proper overtime wages FLSA in the Northern District of Illinois. However, Saxon had signed an arbitration agreement requiring her to arbitrate her wage disputes, and Southwest moved to dismiss the lawsuit and to compel arbitration under the FAA.

Saxon opposed the motion, invoking § 1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” She argued that ramp supervisors, like seamen and railroad employees, were an exempt “class of workers engaged in foreign or interstate commerce,” but the district court agreed with Southwest and found that only employees involved in “actual transportation,” not those who merely handle goods, fell within § 1 of the FAA. On appeal, the Seventh Circuit Court of Appeals disagreed with the District Court’s decision, holding that “[t]he act of loading cargo onto a vehicle to be transported interstate is itself commerce.” The Seventh Circuit’s decision conflicted with an earlier decision of the Fifth Circuit, Eastus v. ISS Facility Services, Inc., 960 F. 3d 207 (2020), and the Supreme Court granted certiorari to resolve the conflict between the two circuits.

The Supreme Court’s Decision

In a unanimous decision, the Supreme Court held that loaders who load and unload airplane cargo that travels intrastate play a direct role in the interstate transportation of goods and therefore belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. The Court engaged in a two-step analysis. First, it considered how to define the relevant “class of workers.” The Court rejected Saxon’s argument that the “class of workers” should be defined as virtually all airline employees, which would include shift schedulers or those who design Southwest’s website. Rather, the Court held that the inquiry must focus on the job duties of the employees themselves, rather than the employer’s business and that Saxon “belongs to a class of workers who physically load and unload cargo on and off airplanes on a frequent basis.”

Next, the Court considered whether that class of airplane cargo loaders “engaged in foreign or interstate commerce.” It determined that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce of that cargo” and that workers like Saxon who load and unload airplane cargo that travels in interstate commerce are exempt from the FAA.

Takeaway for Employers

Though the Court did find a class of workers exempt from the Federal Arbitration Act, it expressly rejected the assertion that this exemption should apply to all employees of an employer engaged in foreign or interstate transportation. It went on to provide examples of positions that would not satisfy the exemption, such as workers engaged in the sale of interstate asphalt or workers who supply janitorial services to a corporation engaged in interstate commerce.

Employers engaged in interstate or foreign transportation commercial should consult legal counsel if they plan to utilize arbitration agreements as part of their dispute resolution process.

Article By John P. Zaimes and Natalie C. Kreeger of ArentFox Schiff LLP

For more arbitration legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Supreme Court Expands State Criminal Jurisdiction in Indian Country

In a 5-4 opinion issued Wednesday in Oklahoma v. Castro Huerta, No. 21-429, the Supreme Court expanded the authority of States to exercise criminal jurisdiction over non-Natives in Indian country without tribal consent or congressional authorization, upending a long-standing basic principle of Federal Indian Law and striking a blow to tribal sovereignty. Under federal law, “Indian country” has been interpreted as including Indian reservations, dependent Indian communities, Indian allotments, In Lieu sites (land outside reservation boundaries meant to replace lost Indian lands), and tribal trust lands. The majority opinion in Castro-Huerta, written by Justice Brett Kavanaugh, held that States presumptively have “inherent” jurisdiction over crimes committed in Indian country and “do not need a permission slip from Congress to exercise their sovereign authority,” dismissing the Court’s prior statements to the contrary as non-binding dicta. After concluding States presumptively have criminal jurisdiction in Indian country, the majority found that the General Crimes Act, 18 U.S.C. 1152, did not preempt that jurisdiction for crimes committed by non-Natives against Natives in Indian country. As a result, States now have concurrent criminal jurisdiction with the federal government to prosecute crimes committed by non-Natives against Natives in Indian country.

Castro-Huerta involved the prosecution of Defendant Victor Manuel Castro-Huerta, who was convicted in an Oklahoma State court of a crime against a Native child. Following the Supreme Court’s landmark decision in McGirt v. Oklahoma, 140 S. Ct. 2452 (2020), in which the Court concluded much of Oklahoma is Indian country, Castro-Huerta successfully argued that the State lacked jurisdiction to prosecute him because he committed his crime in Indian country. The State appellate court’s decision in Castro-Huerta’s favor followed the interpretation of the General Crimes Act that has prevailed since the statute’s 1948 reenactment. Under that interpretation, only the federal government has authority to prosecute non-Native individuals who commit crimes against Native individuals in Indian country.

Arguing before the Supreme Court, Oklahoma claimed that the prevailing interpretation is incorrect, and the majority agreed. The Court began its analysis by describing the details of Castro-Huerta’s crime and noting that of the 2 million people who live in Oklahoma, “the vast majority are not Indians.” Op. at 2. The Court also noted that Castro-Huerta had accepted a plea agreement with the federal government for a 7-year sentence followed by removal from the United States (he was in the United States unlawfully), receiving, in effect, a 28-year reduction in his sentence. Op. at 3. The majority stated that his case “exemplifies a now-familiar pattern in Oklahoma in the wake of McGirt” in which non-Indian criminals have received “lighter sentences in plea deals negotiated with the Federal Government” or have “simply gone free.” Op. at 3-4.

Citing the United States Constitution and prior Supreme Court decisions for the proposition that Indian reservations are “part of the surrounding State” and subject to State jurisdiction except as forbidden by federal law, the majority concluded that an “overarching jurisdictional principle dating back to the 1800s” is that “States have jurisdiction to prosecute crimes committed in Indian country unless preempted.” Op. at 5-6.

The majority then considered whether the State’s authority to prosecute non-Native v. Native crimes in Indian country had been preempted under the “ordinary principles of federal preemption” or because “the exercise of state jurisdiction would unlawfully infringe on tribal self-government.” Op. at 7. The majority found that the plain text of the General Crimes Act did not expressly provide for exclusive federal jurisdiction. Op. at 7-14. It then rejected Castro-Huerta’s argument that Public-Law 83-280 and similar statutes through which Congress authorized certain States to exercise jurisdiction in Indian country demonstrated Congress’s understanding that States presumptively lack such authority. The majority reasoned that, despite what Congress might have assumed, the question had not yet been decided and the statutes in question lacked language preempting State jurisdiction. Op. at 16-18. The statutes also provided for civil jurisdiction and State jurisdiction over Natives, in addition to criminal jurisdiction over non-Natives, so they were not entirely redundant.

Turning next to whether the exercise of State jurisdiction under the General Crimes Act would unlawfully infringe on tribal self-government, the majority applied the “Bracker balancing test,” which weighs tribal, federal, and state interests, and is generally used to determine whether a state tax is preempted when assessed against a non-Native on tribal land. The majority concluded that the Bracker factors supported State jurisdiction, dismissing any tribal preference for federal jurisdiction as irrelevant to the Court’s analysis, Op. 19 n.6, Op. 20 n. 7. Concluding the State’s inherent jurisdiction had not been preempted, the majority noted in its holding that, “Unless preempted, States may exercise jurisdiction to prosecute crimes committed by non-Indians against Indians in Indian country,” and this “applies throughout the United States,” including on Indian allotments. Op. 24 n.9.

In a scathing dissent, Justice Gorsuch, joined by Justices Breyer, Sotomayor, and Kagan, pushed back against the majority’s opinion, suggesting any future analysis would need to consider the specific context of each tribe, its treaties, and relevant laws. Dissent at 40-41 n.10. The dissent, appealing for a legislative fix, accused the majority of ignoring history, congressional action, precedent, and tribal sovereignty, and usurping “congressional decisions about the appropriate balance between federal, tribal, and state interests.” Dissent at 38.

Article By Charlene Koski of Van Ness Feldman LLP

For more tribal law legal news, click here to visit the National Law Review.

© 2022 Van Ness Feldman LLP

5 Questions You Should Be Asking About Succession Planning for Your Family Office

Succession planning for family offices is often a difficult process. It is emotional. It takes longer than it should. But succession planning that is deliberate, collaborative, and strategic can offer so much opportunity.

Katten recently hosted a conversation with Jane Flanagan, Director of Family Office Consulting at Northern Trust, who discussed a survey conducted with former family office CEOs to capture their experience with succession and succession planning. The results were illuminating, and the survey participants spoke loud and clear about two major points: 1.) they wished they had begun the process sooner, and 2.) they wished they’d known what questions to ask along the way.

We’ve pulled together a series of basic questions about succession planning to help you consider your own approach.

Why should I create a succession plan?

Like it or not, a succession will take place eventually. The last thing you or your family office want is the chaos, acrimony, and setbacks an unexpected succession can cause.

Putting a plan in place can give your current leadership peace of mind, ensure buy-in and collaboration throughout the family, and prepare potential internal successors or identify key attributes for external candidates.

When should I start?

Now! It’s never too early to begin planning, and there are some easy steps you can take right away to set you on the right path.

If you aren’t sure where to begin or what a planning process looks like, you’re in good company. According to Northern Trust’s recent survey, 64 percent of family office CEOs expect a succession event in the next three to five years.

What is included in a succession planning process?

The planning process will differ from family to family, but Northern Trust created a checklist to help you think through your own approach.

Taking on the entire process at once can be daunting. To build momentum (and buy-in), consider starting small by documenting the responsibilities of the current leadership.

Once you have a good sense of the current role’s responsibilities, think about the knowledge and relationships critical to the role’s success.

These should be top considerations throughout the succession planning process.

Where should I begin?

First, consider putting an emergency succession plan in place as soon as possible while you develop a long-term succession plan.

You want to give this process the time, attention, and consideration it deserves. An emergency plan will help immensely if an unexpected succession is needed, so focus first on getting that in place before you set out on a long-term planning process.

How do I find the right successor?

This is why the planning process is so important. These decisions can have a big impact, so you want to have a plan in place well before you need it.

Consider what works and what could be improved about the current role. Are there creative approaches or changes to consider? (Such as shifting to a CIO/CEO hybrid role, refocusing the role’s priorities, or even expanding into a multi-family office.)

Northern Trust’s survey participants were evenly split on their choices to hire an external successor or grow a successor from within. There are pros and cons to each approach, but so many of the factors to consider will be specific to your situation.

Article By Adam M. Damerow, Abby Feinman, and Saul E. Rudo of Katten

For more family law legal news, click here to visit the National Law Review.

©2022 Katten Muchin Rosenman LLP

A Primer on Practice at the Trademark Trial & Appeal Board

In a precedential decision rendered in an opposition proceeding, the Trademark Trial & Appeal Board (Board) took the lawyers for each side to task for ignoring Board rules in presentation of their case, but ultimately decided the case on a likelihood of confusion analysis. The Board found that the parties’ marks and goods were “highly similar” and sustained the opposition. Made in Nature, LLC v. Pharmavite LLC, Opposition Nos. 91223352; 91223683; 91227387 (June 15, 2022, TTAB) (Wellington, Heasley and Hudis, ALJs) (precedential).

Pharmavite sought registration of the standard character mark NATURE MADE for various foods and beverages based on allegations of bone fide intent to use in commerce. Made in Nature (MIN) opposed on the ground that Pharmavite’s mark so resembled MIN’s registered and common law “Made In Nature” marks as to cause a likelihood of confusion when used on the goods for which registration was sought.

In its brief to the Board, Pharmavite raised, for the first time, the Morehouse (or prior registration) defense. MIN objected to the Morehouse defense as untimely. The Board agreed, noting that defense is “an equitable defense, to the effect that if the opposer cannot be further injured because there already exists an injurious registration, the opposer cannot object to an additional registration that does not add to the injury.” The party asserting a Morehouse defense must show that it “has an existing registration [or registrations] of the same mark[s] for the same goods” (emphasis in original).

Here, the Board found that this defense was not tried by the parties’ express consent and that implied consent “can be found only where the non-offering party (1) raised no objection to the introduction of evidence on the issue, and (2) was fairly apprised that the evidence was being offered in support of the issue.” In this case, Pharmavite did introduce into the record its prior NATURE MADE registrations but only for the purpose of supporting Pharmavite’s “[r]ight to exclude; use and strength of Applicant’s mark.” The Board found that this inclusion did not provide notice of reliance on the Morehouse or prior registration defense at trial.

In sustaining the opposition, the Board commented extensively on the record and how it was used, “[s]o that the parties, their counsel and perhaps other parties in future proceedings can benefit and possibly reduce their litigation costs.”

Over-Designation of the Record as Confidential

The Board criticized the parties for over-designating as confidential large portions of the record, warning that only the specific “exhibits, declaration passages or deposition transcript pages that truly disclosed confidential information should have been filed under seal under a protective order.” If a party over-designates material as confidential, “the Board will not be bound by the party’s designation.”

Duplicative Evidence

The Board criticized the parties for filing “duplicative evidence by different methods of introduction; for example, once by Notice of Reliance and again by way of an exhibit to a testimony declaration or testimony deposition.” The Board noted that such practice is viewed “with disfavor.”

Overuse of Deposition Designations

The Board criticized both parties for over-designating extensive excerpts of discovery deposition testimony of their own witnesses under Trademark Rule 2.120(k)(4), which provides:

If only part of a discovery deposition is submitted and made part of the record by a party, an adverse party may introduce under a notice of reliance any other part of the deposition which should in fairness be considered so as to make not misleading what was offered by the submitting party. A notice of reliance filed by an adverse party must be supported by a written statement explaining why the adverse party needs to rely upon each additional part listed in the adverse party’s notice, failing which the Board, in its discretion, may refuse to consider the additional parts.

As the Board explained, “[i]t is not an appropriate use of Trademark Rule 2.120(k)(4) to introduce unrelated testimony, rather than just the additional necessary portions of discovery deposition excerpts that clarify the passages originally submitted.” In this case, the Board stated that both parties “are equally guilty of abusing Trademark Rule 2.120(k)(4), and [we] trust that the parties and their counsel will not repeat this practice in future matters before the Board.”

Limiting the Record to Pertinent Evidence

The Board noted that “sizeable portions of each party’s evidentiary materials were not pertinent to the issues involved in this rather straightforward priority and likelihood of confusion opposition proceeding, such that the Board was forced to spend needless time sifting through an inappropriately large record in search of germane proofs.” The Board pointedly noted that “[t]his is not productive. ‘Judges are not like pigs, hunting for truffles buried in [the record].’”

Record Citations

The Board advised the parties to adhere to its Manual of Procedure at § 801.03. As to how evidence should be cited:

For each significant fact recited, the recitation of facts should include a citation to the portion of the evidentiary record where supporting evidence may be found. When referring to the record in an inter partes proceeding before the Board, parties should include a citation to the TTABVUE entry and page number (e.g., 1 TTABVUE 2) to allow the reader to easily locate the cited materials.

In this case, the Board criticized the parties for using their own exhibit numbering system rather than the TTABVUE docket number and, for testimony submitted by deposition transcripts, using the page and line numbers provided by the court reporters rather than the TTABVUE citations. As the Board noted, this encumbered the Board in its efforts “to provide evidentiary references for use in this opinion; lengthening the time for review of the record, drafting of the decision and ultimately for issuance of this opinion.”

Likelihood of Confusion

After its chapter and verse critique of the presentation by the parties, the Board embarked on an exhaustive Trademark Act § 2(d) analysis, considering and balancing each of the DuPont factors, and ultimately concluded that MIN had sustained its opposition.

Article By Paul Devinsky of McDermott Will & Emery

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© 2022 McDermott Will & Emery

Abortion-Related Travel Benefits Post-Dobbs

Immediately following the Supreme Court decision in Dobbs v. Jackson returning the power to regulate abortion to the states, a number of large employers announced that they would offer out-of-state travel benefits for employees living in states where abortion-related medical care is unavailable. Employers considering offering abortion-related travel benefits have several key considerations to keep in mind. The law currently allows health plans to provide reimbursement for travel primarily for and essential to medical care. Although this area of the law is evolving, employers with self-funded medical plans may amend their existing medical plans to provide abortion-related travel benefits while those with fully insured medical plans may face more obstacles in providing such benefits.

In Dobbs v. Jackson, an abortion clinic challenged a Mississippi law that would ban abortion after 15 weeks of pregnancy, with limited exceptions. In establishing the constitutional right to abortion in Roe v. Wade, the Supreme Court restricted states in their ability to limit or ban abortions before viability of the fetus, or 24 weeks from the time of conception. In upholding the Mississippi law, the Supreme Court overturned Roe and held that the protection or regulation of abortion is a decision for each state.

Alabama, Arkansas, Kentucky, Missouri, Oklahoma and South Dakota have already banned or made abortion illegal pursuant to trigger laws which went into effect as of the Supreme Court decision on June 24, 2022.  Also, a number of additional states are expected to soon have similar legislation in effect, either by virtue of expected legislative action or trigger laws with slightly delayed effective dates.  In response, a number of employers have announced that they will reimburse all or a portion of abortion-related travel expenses for employees in states where abortions are banned or otherwise not available.

Under Section 213(d) of the Internal Revenue Code, the definition of “medical care” includes transportation that is both “primarily for and essential to” the medical care sought by an individual. These types of travel benefits have historically been utilized in connection with certain specialized medical treatments, such as organ transplants.  However, Section 213(d) is not limited to particular types of procedures, and thus forms the framework for providing abortion-related travel benefits through existing medical plans.

Although Code Section 213(d) applies to both self-insured and insured medical plans, the substantive coverage provisions of insured medical plans will generally be governed by the state insurance code of the state in which the insurance policy is issued.  Coverage for abortion services or any related travel benefits may not be permitted under the insurance code of the state in which the policy is issued, or an insurer may not offer a travel benefit for such services even if permitted to do so.  Self-insured plans, by contrast, provide employers more flexibility in plan design, including control, consistent with existing federal requirements, over the types and levels of benefits covered under the plan. As noted above, existing plans may already cover travel-related benefits for certain types of medical procedures.

Employers with high-deductible health plans tied to health savings accounts (HSAs) will need to consider the impact of adding abortion-related travel benefits to such plans.  Travel-related benefits of any type would not appear to be eligible for first dollar coverage, and thus may be of minimal benefit to participants enrolled in high-deductible health plans.

Employers with fully insured medical plans that do not cover abortion-related travel benefits may be able to offer a medical travel reimbursement program through an integrated health reimbursement arrangement (HRA).  An integrated HRA is an employer-funded group health plan from which employees enrolled in the employer’s traditional group medical insurance plan are reimbursed for qualifying expenses not paid by the traditional plan.

Another potential option for employers with fully insured medical plans may be to offer a stipend entirely outside of any established group health plan. Such reimbursement programs may result in taxable compensation for employees who receive such reimbursements. Also, employers would need to be sensitive to privacy and confidentiality considerations of such a policy, which should generally be minimized if offered in accordance with the existing protections of HIPAA through a medical plan and under which claims are processed by an insurer or third-party administrator rather than by the employer itself.

Additionally, some state laws may attempt to criminalize or otherwise sanction so-called aiding and abetting actions related to the procurement of abortion services in another state.  This is an untested area of the law, and it is unclear whether any actions brought under such statutes would be legally viable.  In this regard, Justice Kavanaugh stated as follows in his concurring opinion in Dobbs:  “For example, may a State bar a resident of that State from traveling to another State to obtain an abortion? In my view, the answer is no based on the constitutional right to interstate travel.” (Kavanaugh Concurring Opinion, page 10.)  This is an area that will require continual monitoring by employers who offer abortion-related travel benefits.

Article By Thomas G. Hancuch, Philip L. Mowery, and Amal Rafiq of Vedder Price

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© 2022 Vedder Price

What the C-Suite and Board Should Know About the New CCO Certification Requirement from DOJ

U.S. Department of Justice (DOJ) Deputy Attorney General Lisa Monaco presented a new policy at a Securities Industry and Financial Markets Association event that requires chief compliance officers (CCO) to certify that compliance programs have been “reasonably designed to prevent anti-corruption violations.”1 The policy is an outgrowth of a settlement involving US$1 billion in criminal and civil penalties imposed on mining giant, Glencore International AG (Glencore), after it pleaded guilty to bribery and market manipulation charges.2 According to Monaco, this new policy is meant to ensure that CCOs stay in the loop on potential company violations and have the necessary resources to prevent financial crime.3 While the expressed intention of this new policy is to empower CCOs, it has raised concerns about potential liability for CCOs.

GLENCORE SETTLEMENT

Glencore is among the largest companies that dominate global trading of oil, fuel, metals, minerals, and food.4 In 2018, Glencore was subject to a multi-year investigation by the DOJ for violations of the Foreign Corrupt Practices Act (FCPA) and a commodity price manipulation scheme.5 According to admissions and court documents filed in the Southern District of New York, Glencore, acting through its employees and agents, engaged in a scheme for over a decade to pay more than US$100 million to third-party intermediaries in order to secure improper advantages to obtain and retain business with state-owned and state-controlled entities. A significant portion of these payments were used to pay bribes to officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of the Congo.6 Glencore resolved the government’s investigations by entering into a plea agreement (Plea Agreement)7According to the Plea Agreement, Glencore admitted to one count of conspiracy to violate the FCPA.8 Shaun Teichner, the general counsel for the company, told a federal judge in New York that Glencore “knowingly and willingly entered into a conspiracy to violate the Foreign Corrupt Practices Act by making payments to corrupt government officials.”9

Glencore expects to pay about US$1 billion to U.S. authorities, after accounting for credits and offsets payable to other jurisdictions and agencies, and about US$40 million to Brazil.10 A related payment by Glencore to the United Kingdom will be finalized after a hearing next month.11

The Plea Agreement requires that Glencore, among other things: (1) implement two independent compliance monitors, one in the United States and one abroad, to prevent the reoccurrence of crimes; (2) retain a compliance monitor for three years; and (3) have its chief executive officer (CEO) and CCO submit a document certifying to the DOJ’s fraud section that the company has met its compliance obligations (the CCO Certification Requirement or the Certification).12

WHY THE CCO CERTIFICATION REQUIREMENT HAS RAISED CONCERNS

The CCO Certification Requirement has raised concerns in the compliance space over potential increases in CCO liability.13 Specifically, compliance officials worry that this policy transfers corporate liability into potential individual liability for the CCO. The Certification form asks the CEO and CCO to certify that the compliance program has been “reasonably designed” to prevent future anti-corruption violations.14 Critics worry that these new certifications may discourage CCOs from taking jobs at companies that are or may be parties to agreements with the DOJ.15

The DOJ stated that liability will depend on the facts and circumstances of the case but that the new policy is not aimed at going after CEOs or CCOs.16 Assistant Attorney General Kenneth A. Polite Jr. stated, “if there is a knowing misrepresentation on the part of the CEO or CCO, then that could certainly result in some form of personal liability.”17  Depending on the circumstances, the DOJ may consider it a breach of the corporation’s obligations under the Plea Agreement if there is either a misrepresentation in one of these certifications or a failure to provide the same.18 Polite added that “the certification memorializes the company’s commitment to take its compliance obligations seriously.”19

Critics question how realistic the CCO Certification Requirement is for large, multinational companies.20 They also question the due diligence required to actually ensure that compliance programs are “reasonably designed,” especially for companies operating in over 50 countries. Would it be realistic to expect a CCO or CEO to keep tabs on compliance across their company with that level of specificity?21

WHAT THE C SUITE AND BOARD SHOULD CONSIDER MOVING FORWARD

The questions to consider are: (1) where will the expressed policy lead? And (2) how do we best prepare for the Certification?

The DOJ has specifically stated its intention to “prosecute the individuals who commit and profit from corporate malfeasance.”22 Regardless of Monaco’s comments, the Certification appears to create potential for an extension of that policy.

The fact of the policy gives rise to a number of subsidiary questions. Is the Certification, which targets foreign corrupt practices, a harbinger for other such certifications in areas such as health care fraud, defense contractor fraud, money laundering, etc.? And is DOJ gearing toward providing its prosecutors with more tools for individual culpability at the highest corporate levels consistent with its expressed policy?

Moving forward, in-house counsel should work with the CEO and CCO to consider areas of corporate business practices that are specifically subject to compliance programs. They should develop practices including auditing, tracking, training, and reviewing to ensure the programs are “reasonably designed” to prevent future wrongdoing. Further, they should be sure to document their corporate business practices. Obviously, these programs become much more complex when operations include foreign jurisdictions and foreign laws with respect to matters such as privacy and employee rights.

Although this process may not be new to protect corporations from criminal charges, the newly-announced policy will certainly focus the spotlight on CEOs and CCOs in the FCPA context and arguably beyond.

FOOTNOTES

1 Al Barbarino, DOJ Defends New CCO Certifications Amid Industry Worry, LAW360 (May 26, 2022), https://www.law360.com/whitecollar/articles/1496108/doj-defends-new-cco-….

2 Id.

3 Id.

4 Chris Strohm, Chris Dolmetsch & Jack Farchy, Glencore Pleads Guilty to Decade of Bribery and Manipulation, BLOOMBERG (May 24, 2022), https://www.bloomberg.com/news/articles/2022-05-24/glencore-to-appear-in-us-uk-courts-over-resolutions-of-probes.

5 Id.

6 News Release, U.S. Dep’t of Just., Office of Pub. Affs., Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes, (May 24, 2022), https://www.justice.gov/opa/pr/glencore-entered-guilty-pleas-foreign-bribery-and-market-manipulation-schemes.

7 Id.

8 Id.

9 Strohm, supra note 4.

10 Id.

11 Id.

12 Id.

13 Barbarino, supra note 1.

14 Id.

15 Id.

16 Id.

17 Id.

18 Id.

19 Id.

20 Id.

21 Id.

22 News Release, U.S. Dep’t of Just., Attorney General Merrick B. Garland Delivers Remarks Announcing Glencore Guilty Pleas in Connection with Foreign Bribery and Market Manipulation Schemes (May 24, 2022), https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-announcing-glencore-guilty-pleas.

Article By Mark A. Rush and Nadia J. Brooks of K&L Gates

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Copyright 2022 K & L Gates