#LMA17: Twitter Recap of the Rise of the Legal Marketing Technologist

LMA17 Twitter recapThis year’s Legal Marketing Association Annual conference featured a new pre-conference program: Rise of the Legal Marketing Technologist.

The session is designed for looking at a lot of the big picture issues legal marketers face such as artificial intelligence, as well as provide practical advice and tools to help navigate today’s ever changing marketing technology landscape. Here is the National Law Review’s a recap of the Twitter commentary for the day:

The Future is Now: Scaling Expertise with Cognitive Computing

The Ethics of Data-Driven Legal Marketing

Marketing Automation: How to Build a Platform that Nurture Prospects and Clients

Design Thinking Workshop

Re-architecting Law Firms’ Data Sources

Stay tuned for more Twitter coverage from the 2017 LMA Annual Conference!

U.S. Supreme Court Holds That Patent Act Does Not Provide Laches Remedy for Limiting Damages

supreme court patent act lachesThe U.S. Supreme Court took on the analysis of laches in a March 2017 decision in SCA Hygiene Products Aktiebolag, et al., v. First Quality Baby Products, LLC, et. al. The Supreme Court held that the equitable doctrine of laches cannot be invoked as a defense against a claim for damages brought within the six-year limitations period of 35 U.S.C. § 286 – and further held that such a remedy is not codified in 35 U.S.C. § 282.

Effectively, this holding eliminates the potential for a defendant to argue under the doctrine of laches that a plaintiff in a patent infringement action unreasonably delayed bringing the patent infringement action and allows the plaintiff to recover damages over the previous six-year period, regardless of when the plaintiff became aware of the infringement or the length of time the infringement has occurred.

Before SCA, the analysis of the remedy of laches in limiting patent damages was controlled by the holding in A.C. Auckerman Co. v. R.L. Chaides Constr. Co., 990 F.2d 1020, 1030 (Fed.Cir. 1992). In Auckerman, the Federal Circuit held that § 282 recognized a laches defense in harmony with § 286 as the laches defense “invokes the discretionary power of the court to limit the defendant’s liability for infringement by reason of the equities between the particular parties.” In this recent case, First Quality argued that Congress had implicitly ratified the proposition that § 282 includes a laches defense by leaving the language of § 282 untouched after this interpretation of § 282 had been applied by lower courts. The Supreme Court rejected the premise that the remedy of laches was codified by § 282, holding that the period of limitation codified in § 286 by Congress “reflects a congressional decision that the timeliness of covered claims is better judged on the basis of a generally hard and fast rule rather than the sort of case-specific judicial determination that occurs when a laches defense is asserted.” The Supreme Court found that Congress’ clear establishment of the period of reasonableness for bringing a patent infringement claim is reflected in the language of § 286, which reads, in part:

Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.

The Supreme Court’s holding was not unexpected and the reasoning followed the court’s holding in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), which addressed similar language in the Copyright Act and confirmed that laches was not available as a defense during the codified limitation period of three years. In SCA, the Supreme Court found no reason to disregard the general rule that laches does not apply to damages suffered within the period of a statute of limitations in the specific context of a patent infringement suit.

The ruling in SCA will now allow a patent owner to wait to bring an infringement suit without concern for it being found that it waited an unreasonably long. For example, a patent owner may wait until the accumulated damages by a putative infringer have grown to an amount that makes filing a suit more attractive financially. It should be noted that the § 286 period of limitation is on the recovery of damages and does not bar bringing suit at any time during the period of enforceability of the patent. The patent owner, absent some other limitation on damages available to the putative infringer, may wait for any amount of time during the period of enforceability of the patent and bring suit.

Notably, this decision does not address the equitable principle of estoppel, which was also at issue in the case, but not part of the appeal. The ruling also does not change the effect of the various limitations on damages codified in 35 U.S.C. § 287.

“Knock-Offs” Beware: SCOTUS Makes a Fashion-Forward Decision

SCOTUS knock-offs copyrightThe U.S. Supreme Court has settled the closely watched Varsity Brands Inc. et al. v. Star Athletica LLC copyright dispute, holding that cheerleading outfits contain distinct design elements that allow for copyright ownership. The ruling has wide implications for both the fashion apparel and home furnishings industry, both of which rely on distinctive, eye-catching designs to sell products.

On Wednesday, the Supreme Court sided with Varsity Brands in a 6-2 vote. Varsity Brands Inc., the world’s largest maker of cheerleading apparel, alleged copyright infringement claims against rival manufacturer Star Athletica LLC. In particular, Varsity Brands claimed that the stripes, chevrons and other visual design elements on their uniforms are eligible for copyright protection.

Uniforms

Writing for the majority, Justice Clarence Thomas agreed with that contention if such designs “can be perceived as a two- or three-dimensional work of art separate from the useful article” and “would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.” The Varsity Brands uniform designs satisfied that test and, thus, are eligible for copyright protection, he wrote.

Justice Thomas also was careful to note that the ruling only limits competitors from copying Varsity Brands’ “surface designs” and not the underlying clothing shape. “Respondents have no right to prevent anyone from manufacturing a cheerleading uniform that is identical in shape, cut, or dimensions to the uniforms at issue here,” he wrote.

The dispute began in 2010. Star Athletica’s attorneys contended that clothing, as a “useful item,” is not eligible for copyright protection. Furthermore, Star Athletica claimed that the asserted design elements were simply a component of the cheerleading uniforms, and without them, each garment no longer would be a cheerleading outfit. A federal district court initially sided with defendant Star Athletica in 2014, but a Sixth Circuit panel reversed that decision the following year.

This decision confirms long-standing principles of copyright protection which have been found to include three-dimensional sculptural works and ornamentation applied to other “useful items” such as furniture pieces. A 2010 Court of Appeals decision from the Fourth Circuit set forth this principle in Universal Furniture Int’l, Inc. v. Collezione Europa USA, Inc., 618 F. 3d 417, and copyright remains an important tool in the furniture and home furnishings industry.

With yesterday’s Supreme Court decision, manufacturers of other fashion-guided products, including specifically apparel and clothing accessories, can take advantage of this new standard of copyright protection to combat increasing threats of counterfeits and other “knock-offs.” In particular, fashion brands should review their product lines to ensure that copyright-eligible products are protected under this new standard, as well through more traditional trademark mechanisms.

Click here to read our previous article on this case.

Copyright © 2017 Womble Carlyle Sandridge & Rice, PLLC. All Rights Reserved.

Climate Change Policy Developments in Washington State

climate changeSeveral climate policy initiatives are underway in the Washington State legislature, agencies, and courts.  This alert summarizes these key developments—future alerts will provide greater detail and topical analysis.

1.  Legislative and Ballot Initiatives.

In November of 2016, voters rejected a state carbon tax.  Initiative 732, the Washington Carbon Emission Tax and Sales Tax Reduction, would have established a tax that started at $15/metric ton of carbon dioxide and increased over time.  Following the defeat of I-732, Governor Inslee introduced his 2017-2019 budget, which includes a $25/ton carbon tax that would take effect May 1, 2018.  In addition to the Governor’s budget proposal, the legislature is considering a carbon tax bill and a bill that would substantially tighten the state’s GHG reduction targets.  Depending on the outcomes of this legislative session, environmental groups and climate policy experts may consider a future ballot initiative.

2.  Science Assessments.  

Responses to climate change are informed by science that assists decision-makers on the progression of climate change and its impacts.  The Fourth National Climate Assessment is underway with public meetings in support of the Northwest Region chapter’s drafting.   In addition, based on recent studies on existing climate change and its impacts and costs, the Washington State Department of Ecology (Ecology) recommended a substantial tightening of the state’s GHG reduction targets. This recommendation is noteworthy because the current GHG reduction targets were relied upon to support Ecology’s proposed Clean Air Rule.     

3.  Rule-making and Implementation.

On January 1, 2017, Ecology’s Clean Air Rule (CAR) went into effect. The CAR initially imposes emission limits on “covered parties” that Ecology deems responsible for at least 100,000 metric tons of carbon dioxide annually—including not only owners of stationary sources such as power plants and factories—but also entities that sell, distribute, or import petroleum and natural gas.  Covered parties in these categories must reduce their emissions by 1.7%/year (until 2036) from an organization-specific baseline determined by Ecology.

The CAR provides special treatment to covered parties that are in sectors for which higher energy costs could result in competitive disadvantages.  These “energy-intensive, trade-exposed industries” are not subject to program until 2020, and have emission reduction pathways set by a different methodology.

A covered party can comply with its emission limit by directly reducing its emissions or by purchasing and using credits (termed “ERUs”) available from in-state mitigation projects, renewable energy credits, or allowances from certain out-of-state climate programs.  Ecology is currently developing policies for developers of emission mitigation projects that want to generate ERUs.

4.  Litigation.

a.  Rule challenges:  The new CAR was challenged through suits filed in state and federal court. The state court cases (Ass’n of Wash. Bus. v. Dep’t of Ecology and Avista Corp. v. Dep’t of Ecology) have been consolidated in Thurston County Superior Court, and the federal case (Avista Corp. v. Dep’t of Ecology) is stayed pending final adjudication of the state court matter. The state case includes allegations that the CAR exceeds Ecology’s authority under the Washington Clean Air Act because it regulates natural gas and petroleum distributors that are not “sources” of emissions in the meaning of the statute.

b.  Citizen Suits and Children’s Lawsuit:  A group of eight Washington children brought suit against Ecology for the agency’s failure to regulate carbon dioxide emissions and for failing to protect the children from climate change impacts.  In 2015, the trial court held that climate change affects public trust resources in the state, but that the state was fulfilling its public trust obligations by engaging in the rulemaking. This rulemaking ultimately resulted in adoption of the CAR and the case is now on appeal regarding whether Ecology’s finalization of the CAR resolves all claims. However, the parties continue to make arguments to the trial court regarding whether the children should be permitted to amend their complaint so that they “can show evidence and argue that their government has failed and continues to fail to protect them from global warming.” (Foster v. Dep’t of Ecology, No. 14-2-25295-1 SEA and COA 75374-6-I.)

5.  State Hearings Boards and Local Hearing Examiners.

State and local agencies are exploring their authority to control GHG emissions and impose mitigation for climate impacts.  For example, the Washington Growth Management Act and the Shoreline Management Act contain provisions requiring agencies to consider the public interest and protection of the environment when implementing these statutes.

In furtherance of this general mandate, agencies and local governments might conduct their own analyses of GHG emissions and climate impacts, or require permit applicants to do so to satisfy these generalized permit criteria, and might claim authority to impose mitigation outside the specific scope of the state agency rules described above.

Appeals challenging agency decisions under those statutes are heard by the Growth Management Hearings Board, Shoreline Hearings Board, and Pollution Control Hearings Board, all housed in the state’s Environmental Hearings Office.  These boards are becoming a forum for arguments regarding authority to impose GHG limitations or mitigation, and the adequacy of the underlying analysis under the State Environmental Policy Act.

In addition, local government codes sometimes contain provisions requiring consideration of GHG emissions and provide guidelines for calculations of emissions and impacts. Local land use decisions applying those provisions are subject to review before local hearing examiners, potentially subjecting matters in those venues to similar climate change and GHG arguments and challenges.  This body of local decisions and appellate review is just beginning to take shape and has the potential to establish precedent for climate impact review and mitigation throughout the state.

6.  SEPA Guidance.

The State Environmental Policy Act (SEPA) directs local and state agencies to identify and evaluate the environmental impacts of their actions. Unless an action is “categorically exempt,” SEPA review is triggered when a proposal requires a governmental agency to make a decision or fund an action that may significantly affect the quality of the environment.

In 2011, Ecology, as the lead agency, issued agency guidance on consideration of climate change under SEPA. Other SEPA lead agencies have followed Ecology’s guidance.  In late 2016, Ecology removed the guidance from its website and indicated it (1) had begun planning its first periodic update of the guidance, and (2) is gathering information about new methods that local, state, and federal agencies are using to evaluate GHG emissions and climate change impacts.

In the meantime, agencies have been requiring such information from project proponents.  SEPA determinations and related documents have been subject to challenge and appeal.  There is growing Washington case law on the treatment of GHG emissions and the impact of climate change.

7.  Adaptation and Increasing Resilience to Climate Change Impacts.

Recognizing Washington’s vulnerability to climate impacts, the state published the Washington State Integrated Climate Change Response Strategy  to help prepare for climate change impacts and protect Washington’s communities, natural resources, and economy from the impacts of climate change.   Throughout Washington, city and county officials, Tribal leaders, and other stakeholders are planning for more climate-resilient communities.  For example, the City of Olympia is “developing a Sea Level Response Plan that will balance risks, uncertainty, and both private and public costs.”

Attorneys: A Common Interest Agreement May Not Be Worth the Paper It’s Written On

It is a very common practice for counsel to co-defendants or co-plaintiffs to enter into agreements that shield their communications. The agreements are expressions of intent that the communications will be protected by the “common interest doctrine” that extends the attorney-client privilege to discussions with parties that share a common interest. Under the doctrine, the attorney-client privilege is not waived when such communications are made between parties sharing a common legal interest.

In Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 NY3d 616 (2016), the New York Court of Appeals expressly limited the application of the common interest doctrine to “co-defendants, co-plaintiffs or persons who reasonably anticipate that they will become co-litigants.…” In doing so, the Court of Appeals clarified that the policy underpinning the doctrine was to enable two or more parties to coordinate a common claim or defense without fear that such efforts might later become the subject of disclosure.

Despite the frequent use of common interest agreements, there are limitations that may vitiate the privilege entirely and leave communications unprotected and discoverable to the other side. In applying the holding in Ambac, a New York County Supreme Court judge recently ruled that the common interest doctrine did not apply to communications between counsel where one party assigned claims to the other.

In 59 S. 4th LLC v A-Top Ins. Brokerage, Inc., 2017 N.Y. Slip. Op. 30050[U] (Sup. Ct., N.Y. County, Jan. 10, 2017), an owner of a residential development project initiated a lawsuit against an insurance broker, alleging that the broker had misrepresented the scope of work the general contractor could undertake with its current insurance. In addition, the owner obtained an unconditional assignment of any potential claims the general contractor may have possessed against the broker regarding the procurement of insurance. Subsequent to the assignment and during the litigation, the plaintiff owner and (non-party) general contractor entered into a “common interest agreement” before entering into a series of discussions. That agreement contemplated that certain communications between the owner and the general contractor would be privileged and confidential. When counsel for the broker sought production of those communications, the owner refused to produce them citing the common interest doctrine. The broker then moved to compel.

In granting the broker’s motion, the Court reaffirmed the limited applicability of the common interest doctrine as set forth by the Court of Appeals in Ambac. The Court reasoned that, because the assignment completely divested the general contractor of any interest it may have had in the outcome of the litigation, the general contractor could not – by definition – become a co-plaintiff in the action. As a result, the entirety of verbal and written communications between the owner and general contractor were deemed not privileged and subject to disclosure to the other side.

Following the holdings in Ambac and 59 S. 4th LLC, any lawyer considering entering into a common interest agreement should be mindful that these agreements are not automatically upheld. Instead, careful practitioners must confirm whether their situation meets the requirements set forth in Ambac above, or they, too, may see their private communications deemed unprotected.

© 2017 Wilson Elser

Payless Expected to File for Bankruptcy in Next Few Weeks

payless bankruptcyAs I mentioned in my article from January, “11 Retailers to Watch for Possible Bankruptcy Filings in 2017,” it looks like Payless is on the verge of a bankruptcy filing.

Bloomberg reports that Kansas-based Payless, Inc. may be filing for bankruptcy protection as early as next week. The retail discount shoe chain has more than 4,000 stores in 30 countries. Speculation is that they will close about 10 to 15% of the stores as it reorganizes.

The company has had difficulties in the increasingly competitive online market. Last year the company attempted to increase revenue with a new master plan for opening more Payless Super Stores with a larger footprint, more in-stock footwear, and heightened shopping experience, according to Footwear News.

The company has about $665 million in debt, according to Reuters. In February, Moody’s downgraded the company debt rating, stating the company shown “weaker than anticipated operating performance.”

With the number stores, a Payless bankruptcy can raise questions for many landlords. If you are a landlord with a Payless it is important to know your rights, now.

COPYRIGHT © 2017, STARK & STARK

Restrictions on Personal Electronic Devices, including Laptops, on Flights from 10 Airports

No personal electronic devices (PEDs) larger than a cellphone or smartphone, such as a laptop computer or e-reader, can be carried into the cabin of airplanes flying directly to the U.S. from 10 airports in the Middle East, North Africa, and Turkey, the DHS and TSA announced on March 21, 2017.

Following are the airports:

  • Abu Dhabi International Airport, Abu Dhabi

  • Dubai International Airport, Dubai

  • Cairo International Airport, Egypt

  • Queen Alia International Airport, Jordan

  • Kuwait International Airport, Kuwait

  • Mohammed V Airport, Casablanca, Morocco

  • Hamad International Airport, Qatar

  • King Abdul-Aziz International Airport, Jeddah, Saudi Arabia

  • King Khalid International Airport, Riyadh, Saudi Arabia

  • Ataturk International Airport, Istanbul, Turkey

The carriers involved will have 96 hours, until early in the morning of March 25, to comply with this directive.

No American carriers are affected because none have direct flights to the U.S. from the 10 airports. Based on itineraries, the following carriers have been notified and will be affected:

  • Egypt Air

  • Emirates Airways

  • Etihad Airways

  • Kuwait Airways

  • Qatar Airways

  • Royal Air Maroc

  • Royal Jordanian Airlines

  • Saudi Arabian Airlines

  • Turkish Airlines

All passengers will be subject to these restrictions, including U.S. citizens, regardless of Trusted Traveler Status. Approved medical devices will be allowed on board, but only after additional screening is conducted. TSA advises passengers with connections through one of the 10 airports to place large electronic devices into their checked baggage at their originating airport.

The DHS states that it has put these restrictions in place because “[the agency’s] information indicates that terrorist groups’ efforts to execute an attack against the aviation sector are intensifying . . . .” These restrictions will remain in effect indefinitely “until the threat changes.” TSA emphasizes that it “continually assesses and evaluates the current threat environment and adjusts security measures as necessary to ensure the highest levels of aviation security without unnecessary disruption to travelers.”

In addition to the new PEDs process, all travelers to the U.S. should be prepared for the possibility that their electronic devices might be “detained” for examination and inspection upon arrival in the U.S. Indeed, in February 2017, after the issuance of the first travel ban, Sidd Bikkannavar, a U.S.-born NASA scientist who works at NASA’s Jet Propulsion Laboratory returning from Patagonia was held at the George Bush Intercontinental Airport in Houston until he agreed to unlock his phone.

Following the DHS announcement, the U.K. announced a similar restriction on direct flights to the U.K. affecting airports in Egypt, Jordan, Lebanon, Tunisia, Turkey, and Saudi Arabia. This restriction will affect British carriers including British Airways as well as foreign carriers. Canada may soon announce such restriction as well.

The American Health Care Act – A Side-by-Side Comparison to Existing Law

As reported in our January 23, 2017 post entitled “Status of the Affordable Care Act Repeal Efforts,”1 on January 12 and 13, 2017, the Republican-controlled Congress took the first step toward repealing certain provisions of the Patient Protection and Affordable Care Act (“ACA”) (Public Law 111-148) by adopting a fiscal budget resolution containing a “reconciliation directive” to House and Senate committees to prepare ACA repeal legislation by January 27, 2017.2  In addition, one of President Donald Trump’s first actions upon taking office was to implement an Executive Order stating an intent to repeal the ACA and directing Congress “to minimize the unwarranted economic and regulatory burdens of the [ACA] and . . . to afford the States more flexibility and control to create a more free and open healthcare market.”3

On March 6, 2017, the House Committees on Ways and Means and Energy and Commerce proposed the American Health Care Act (“AHCA”) pursuant to the budget-resolution process.  As previously discussed, the budget-reconciliation process allows Congress to repeal provisions of the ACA that directly impact government taxes and revenue and only requires a simple majority vote.  A full repeal of the ACA, and any comprehensive replacement legislation involving provisions that extend beyond tax and revenue, would require 60 votes in the Senate, necessitating Democratic support.4  Set forth below under “Next Steps” is a discussion of the applicable procedural requirements for the AHCA to become law.

Summary of Key Changes

The following is a summary comparing the significant changes the AHCA would effect to current law:

MEDICAID & OTHER GOVERNMENT FUNDING PROGRAMS

Provision The ACA/Current Law Proposed Law
Medicaid Expansion & Safety Net Funding The ACA expanded Medicaid coverage to individuals under 65 with incomes up to 133% of the Federal poverty level who were previously ineligible for Medicaid and provided funding for such coverage.  Several states chose not to expand their Medicaid programs. Would allow States that elected to expand Medicaid to continue receiving Federal funding, which will be phased out by 2020.5  Would provide $10 billion over the 2018-2022 period to States that elect not to expand Medicaid.
Provision of Federal Funds to the States The Federal government matches State funds. Would provide block grants beginning in 2020 and impose a per capita-based cap.
Other Funding Sources Established Prevention and Public Health Fund6 to provide grants to the States to aid in prevention and public health, including community and clinical prevention initiatives, research, surveillance and tracking, public health infrastructure, immunizations, screenings, tobacco prevention and public health workforce and training. Would repeal Prevention and Public Health Fund in 2018.  Would establish Patient and State Stability Fund to provide funds to the States to assist high-risk individuals who do not have access to health insurance enroll in coverage, promote access to preventive services and reduce out-of-pocket costs.
Eligibility of Aliens Certain lawful immigrants are eligible to receive Medicaid. Would deny Medicaid benefits to individuals who lack proof of U.S. citizenship.
Frequency of Eligibility Determinations Eligibility re-determinations conducted annually. Would require the re-determinations every six months.
Retroactive Eligibility Allows for retroactive coverage after enrollment for up to 90 days Would limit this “grace period” to only the month in which application is made beginning October 1, 2017.
Allowable Home Equity Limits Grants States the option to expand the limit on the amount of home equity a Medicaid applicant can shield from reporting for disqualification from Medicaid eligibility for nursing home services. Would repeal this provision effective 180 days after enactment.
Other Restrictive Provisions Would allow States to disenroll certain lottery winners.

INDIVIDUALS[7]

Provision The ACA/Current Law Proposed Law
Individual Mandate The ACA requires individuals to pay penalties for failure to maintain health insurance. Would repeal the penalties effective immediately, but would increase the monthly premium rate by 30% for those who do not maintain continuous health-coverage beginning in 2019.
Health Savings Accounts For individuals with a high-deductible plan, the ACA caps contributions to a tax-free health savings account. Contributions are still capped, but the AHCA would increase the annual limit on health savings account contributions in 2018.  An individual could now choose to pay up to $6,550 in deductibles in 2018, up from $3,400 in 2017, and a family can pay $13,100 in 2018, up from $6,750 in 2017.
Medical Expense Deduction Medical expenses, to the extent that the expenses exceed 10% of the taxpayers’ adjusted gross income (“AGI”), are allowable itemized deductions. Would lower the medical expense deduction to 7.5% of taxpayers’ AGI.
Dependent Child Coverage until 26 Allows children under 26 years old to remain covered under their parents’ insurance. Would retain this provision.
Pre-Existing Condition Exclusion Prohibits insurers and group health plans from denying insurance to individuals with pre-existing health conditions. Would retain this provision.
Ban on Annual and Lifetime Coverage Caps Prohibits any health plan from establishing lifetime limits on the dollar value of benefits for any individual exceeding certain thresholds. Would retain this provision.
Premium Subsidies Provides subsidies for individuals meeting income threshold to buy insurance in the Marketplace. Would repeal the subsidies in 2020.
Tax Credits Provides tax credits to help people pay deductibles and make co-payments when purchasing Exchange plans in the Marketplace. Would repeal the tax credits starting 2020 and replace with income and age-based tax credits ranging from $2,000 for a person under 30 to $4,000 for a person over 60, which they can use when purchasing either Exchange plans in the Marketplace or private plans.
Repayment of Excess Health Insurance Coverage Credit Individuals who receive excess tax credits must repay the excess amounts subject to a cap for individuals with incomes under 400% of the Federal poverty level. Would remove the income-related caps applicable to excess credit repayments for 2018 and 2019.
Tax on Net Investment Imposes a tax on net investment income for persons earning over $200,000 or families earning over $250,000 beginning in 2013. Would repeal the tax starting 2018.
Use of Flexible Spending Accounts to Purchase Over-the-Counter Medications Cost of over-the-counter medications cannot be reimbursed on a pre-tax or tax-favored tax basis. Would repeal the prohibition in 2018.
Repeal of Medicare Tax Increase The ACA imposes a 0.9-percent increase in the Medicare payroll tax for individuals who meet certain income thresholds. Would repeal in 2018.
Coverage for Abortion Services Private insurance carriers may offer plans in the Marketplace that cover abortion services provided the plans comply with the requirement to segregate Federal funds.  At least one plan within a State Marketplace must not cover abortions beyond those permitted by Federal law (to save the life of the woman and in cases of rape and incest).  Abortion coverage cannot be required as part of the Federally-established essential health benefits package.  States can prohibit coverage for abortions by all plans in their State Marketplace. Would retain ACA provisions but limit the use of tax credits to purchase insurance that covers abortion services.  Any insurance plan, private or Exchange in the Marketplace, that covers abortion, will not be eligible for tax credits, unless the pregnancy is the result of rape or incest.

EMPLOYERS

Provision The ACA/Current Law Proposed Law
Employer Mandate The ACA requires employers to pay an assessable payment for failure to provide health insurance that is affordable and provides minimum value. Would repeal the penalties immediately.
Cadillac Tax The ACA imposes a 40 percent excise tax on employer plans exceeding $10,200 in premiums per year for individuals and $27,500 for families beginning in tax years after December 31, 2019.  The thresholds would have been updated when the tax went into effect in 2020, and adjusted for inflation in years thereafter. Would delay the effective date until 2025.
Reporting Requirements Requires employers to file IRS Forms 1094 and 1095 and to report the total cost of employer-sponsored coverage on each employee’s IRS Form W-2. Would retain the reporting requirements and add additional requirement to specify each month in which the employee was eligible for group coverage in a W-2.
Small Business Tax Credit Provides a credit to small businesses wishing to provide their employees insurance. Would repeal the tax credit in 2020.

INSURERS

Provision The ACA/Current Law Proposed Law
“Tiered” Classification of Plans Exchange plans in the Marketplace are classified by tiers (“Bronze, Silver, Gold, and Platinum”) according to health benefits, actuarial value and pricing. Would repeal the tiered designations and allow insurers participating in the Exchange Marketplace to offer a variety of different plans.
Essential Health Benefits Identified “essential health benefits” all Marketplace plans had to provide. The essential health benefits requirement would sunset in 2020 for all Exchange plans in the Marketplace.8 States could still decide to make certain health benefits a requirement under State law.
Variation of Health Insurance Premium Rates Insurers may charge people over 60 no more than 3 times what they charge people under 30 (a 3:1 ratio). Would change the permissible health insurance premium rate ratio to 5:1.
Limitation for officer and director health insurance Imposes a cap on tax deductions for health insurance providers that paid over $500,000 to an officer, director, or employee. Would repeal the cap in 2018.
Insurer Reporting Requirement Requires certain insurers to report the net premiums written for health insurance of United States health risks to the IRS on Form 8963. Would repeal penalties for non-reporting in 2018.

PROVIDERS

Provision The ACA/Current Law Proposed Law
Allotments for Disproportionate Share Hospitals The ACA would reduce Medicaid allotments to States for hospitals that disproportionately serve uninsured people from 2018-2025. Would eliminate those cuts for States that have not expanded Medicaid under the ACA in 2018 and all other States in 2020.
Hospital Acquired Conditions The ACA adjusted government payments to lowest performing hospitals with respect to risk-adjusted hospital acquired condition quality measures. Would retain this provision.
Planned Parenthood The charity currently receives more than $500 million annually from the Federal government. Would defund this organization for the 1-year period immediately after enactment.

MEDICAL DEVICE MANUFACTURERS

Provision The ACA/Current Law Proposed Law
Medical Device Excise Tax Imposes a 2.3 percent medical device excise tax on the sale of certain medical devices by the manufacturer or importer. Would repeal the tax in 2018.

Next Steps

On March 13, 2017, the Congressional Budget Office (“CBO”) and the staff of the Joint Committee on Taxation released an estimate of the budgetary effects of the AHCA.9  The CBO estimated that the AHCA will save $337 billion dollars over the 2017 to 2026 period and result in lower deficits, reduced Federal spending and tax cuts.  The report concluded that the health insurance market would remain stable because other provisions of the bill would lower premiums “enough to attract a sufficient number of relatively healthy people to stabilize the market.”  The report determined that average premiums would be initially higher by 15 to 20% but thereafter drop around 10% by 2026.  The report estimates that in 2020, 21 million more non-elderly people would be without health insurance and that this number will increase to 24 million people by 2026 to 52 million people.

The AHCA has been approved by the Ways and Means Committee and the House Energy and Commerce Committee.10  On March 16, 2017, the Budget Committee likewise voted to approve the AHCA after recommending some amendments for the Rules Committee to consider.11  The Rules Committee will consider amendments by the Budget Committee and other party leaders before a full House vote.12  President Trump has also proposed amending the AHCA before the House vote via a Manager’s Amendment.13  After House approval, the AHCA would need to be approved by a simple majority of the Senate, at least 51%, before it is presented to the President for signing.


1   http://www.cadwalader.com/resources/clients-friends-memos/status-of-the-affordable-care-act-repeal-efforts.

2   https://www.congress.gov/115/bills/sconres3/BILLS-115sconres3es.pdf.

3   https://www.whitehouse.gov/the-press-office/2017/01/2/executive-order-minimizing-economic-burden-patient-protection-and.

4   2 U.S.C. § 644.

5   See discussion in row entitled “Allotments for Disproportionate Share Hospitals” in “Providers” section below.

6   https://www.hhs.gov/open/prevention/.

7   This section does not address effects of proposed changes in Medicaid reimbursement and other payment changes on individuals, including the increase in rates insurers may charge individuals over 60 set forth under “Variation of Health Insurance Premium Rates” in the Insurers section below.

8   Although the requirement that private plans maintain essential health benefits would remain, as noted in the “Employers” section above, the AHCA would repeal penalties for failure to provide essential health benefits.

9   https://www.cbo.gov/publication/52486.

10  https://waysandmeans.house.gov/ways-means-republicans-take-historic-action-repeal-obamacare-ensure-americans-access-affordable-care/; https://energycommerce.house.gov/news-center/press-releases/energy-and-commerce-committee-advances-legislation-repeal-and-replace.

11  http://budget.house.gov/news/documentsingle.aspx?DocumentID=394574.

12  http://www.businessinsider.com/house-budget-committee-trumpcare-ahca-vote-2017-3; https://www.theguardian.com/us-news/2017/mar/09/republican-healthcare-plan-house-approvals-obamacare; http://www.ajmc.com/newsroom/hhs-secretary-tom-price-responds-to-ahca-questions-and-concerns-during-town-hall; https://www.washingtonpost.com/graphics/politics/obamacare-replacement-next-steps/.

13  http://www.reuters.com/article/us-usa-obamacare-amendment-idUSKBN16L2FS?il=0.

Religious Dress at UK Workplaces Revisited – is the fuss justified?

Religious Dress UK Workplace“Bosses can ban burkas, scarves, crosses” shouts the front page of last Tuesday’s Metro, followed by a commentary far too short to explain that this is almost always untrue.

This is the resurrection of an old debate concerning the extent of your right to manifest your religion at work through how you dress. When last seen, the European Court of Justice had decided in a Eweida v. British Airways that it would be religious discrimination to ban an employee from wearing a visible crucifix at work unless there was a good reason for it, for example health and safety. The two cases which led to yesterday’s headline (one of which – spoiler alert – said that bosses couldn’t ban religious dress) were considering slightly separate points. Bougnaoui v. ADDH considered whether it would be discriminatory for the employer to react to a customer complaint by banning the wearing of a Muslim head scarf, while Achbita v. G4S asked whether it would still be discriminatory if the employer banned all outward signs of religious or political belief.

In Bougnaoui the ECJ was clear – if you use the potentially discriminatory views of your customers as a ground for imposing dress restrictions on your employees, that will be unlawful.  Ms Bougnaoui wore a headscarf at work but was asked to remove it after a customer complained.  That was just visiting the customer’s views on the employer’s staff and so was unlawful.

However, in Achbita the employer maintained a written, comprehensive and consistent ban on the wearing of all religious and political symbols, regardless of the faith or political affiliation in question.  It did this because it wished to present a picture of overt neutrality among its workforce.  This was in turn a result of the nature of its business, supplying security and reception staff to a variety of Government and private sector clients, some in highly confidential and security-critical environments.  It did not want those customers to have any reason, real or (particularly) perceived, to doubt the commitment, loyalty or intentions of the people G4S supplied to them.

The ECJ had to find that there was no direct discrimination on religious grounds since all religions and beliefs were treated exactly the same. Ms Achbita’s headscarf was no more or less welcome than would have been Ms Eweida’s little crucifix.  It then asked whether G4S’s stance could constitute unlawful indirect discrimination, i.e. whether it was the imposition of a provision, criteria or practice (the ban on religious indicators in what you wear at work) which prejudiced more people with a particular characteristic than not (religion), affected the individual employee (Achbita’s headscarf) and wasn’t justifiable.

The question here therefore revolved around whether G4S’s ban was justifiable, i.e. a proportionate means of achieving a legitimate aim. The objective of overt neutrality was accepted as a legitimate aim given the very particular circumstances of the services G4S provided and to whom.  This will obviously be very much the exception as corporate objectives go, hence the misleading nature of the Metro’s headline.  But even given the legitimacy of the objective, was a blanket ban on religious or political wear a proportionate means of achieving it?

Reluctantly the ECJ decided that it was, largely since there was no other means of achieving that objective. Nonetheless, to satisfy that test G4S had to show that the policy was enforced regardless of religion and no matter how mainstream (and so probably uncontroversial) the political belief.  That meant not just the items in the title but also what the employee manifested through badges worn and bags carried, etc.   It meant showing there was rigorous enforcement of the rule – obviously you could not claim it as necessary if breaches were ignored.  It meant also that G4S had to show that it had considered means by which the adverse impact of the rule had been minimised as far as practicable, for example by applying the rule only to those in sensitive public/client-facing roles and looking at the possibility of transferring affected staff out of those jobs where possible.

The ECJ’s decision has been greeted with predictable dismay by religious leaders. “It will lead to an increase in hate crime”, says one, and “shows that faith communities are no longer welcome”, says another, both equally without supporting evidence.  The issue here however is not supressing religious belief at all, but in allowing businesses where it really matters (a tiny minority only) to provide a service where its customers do not have grounds to push back against individuals on perceived political or religious grounds.  At one level, professional opportunity could thereby be said to be increased, not limited.

But I repeat – the businesses in which overt neutrality will be a legitimate aim will be very few in number indeed. These cases do not alter for a moment the basic rule that limiting religious manifestation in the workplace will be unlawful discrimination unless you have an exceptionally good reason to do so.  But then you are left with the headline: “Bosses Can’t Generally Ban Burkas”, etc. and that somehow lacks the same punch.

© Copyright 2017 Squire Patton Boggs (US) LLP

Washington Supreme Court Rejects Sovereign Immunity Defense in Quiet Title Action

sovereign immunityA decision by the Washington Supreme Court conflicts with decisions of other courts on the issue whether plaintiffs can avoid tribal sovereign immunity in suits involving real property by suing “in rem,” i.e., bringing a lawsuit focused on real property rather than its tribal owner. While the Washington decision relates to a lawsuit to quiet title, the Court’s rationale would also support a lawsuit by a state or county to foreclose on land owned by tribes for failure to pay property taxes.

In Lundgren v. Upper Skagit Tribe, 2017 WL 635649 (Wash. 2017), the Upper Skagit Tribe purchased certain fee simple land in 2014 adjoining land owned by the Lundgrens, who had owned the land since 1947. The Lundgrens had long treated a fence that had been on the property since at least 1947 as the boundary of their property. When the Tribe informed the Lundgrens that the fence actually encompassed land owned by the Tribe, the Lundgrens sued to quiet title, arguing they acquired title to the disputed property by adverse possession or by mutual recognition and acquiescence long before the Tribe bought the land. The Tribe moved to dismiss under CR 12(b)(1) for a lack of subject matter jurisdiction based on the Tribe’s sovereign immunity and the rule that requires joinder of a necessary and indispensable party, which the Lundgrens could not satisfy because of the Tribe’s immunity. The trial court denied the Tribe’s motion and the Washington Supreme Court affirmed, citing the U.S. Supreme Court’s 1992 decision in Yakima County upholding Washington’s right to impose a property tax on tribal land and principles of equity: “After the Lundgrens commenced the quiet title action, the Tribe claimed sovereign immunity and joinder under CR 19 to deny the Lundgrens a forum to acquire legal title to property they rightfully own. The Tribe has wielded sovereign immunity as a sword in disguise. While we do not minimize the importance of tribal sovereign immunity, allowing the Tribe to employ sovereign immunity in this way runs counter to the equitable purposes underlying compulsory joinder. … Finding otherwise, as correctly articulated by the trial court, is contrary to common sense, fairness, and due process for all involved.” (Internal quotations and citations omitted.

Whether in rem suits can be used to avoid sovereign immunity is an unresolved question. In County of Yakima v. Confederated Tribes and Band of Yakima Nation, 502 U.S. 251, 263 (1992), and Cass County v. Leech Lake Band of Chippewa Indians, 524 U.S. 103 (1998), the U.S. Supreme Court upheld the right of states to impose property taxes on land allotted under acts of Congress and later re-acquired by tribes in fee simple. In both cases, however, the court did not address whether tribal sovereign immunity might bar a state tax foreclosure action if the tribes refused to pay the taxes. In 2010, the court agreed to review a decision by the Second Circuit Court of Appeals in Oneida Nation v. Madison County, 605 F.3d 149 (2d. Cir. 2010), that the tribe’s sovereign immunity barred a tax foreclosure action by the county, but the court changed its mind, at the tribe’s request, after the tribe voluntarily waived “its sovereign immunity to enforcement of real property taxation through foreclosure by state, county and local governments within and throughout the United States.” In Cayuga Indian Nation of New York v. Seneca County, N.Y., 761 F.3d 218 (2d. Cir. 2014), however, the Second Circuit held that even though the county had the right to impose a property tax on the property owned by the tribe, it could not foreclose for non-payment because of the

Nation’s sovereign immunity. The court rejected the county’s argument that a foreclosure action was in rem (against the property) rather than against the Nation. These circumstances make the Washington decision a viable candidate for Supreme Court review in the event the Tribe should file a petition for review.

Copyright © 2017 Godfrey & Kahn S.C.