Litigation After Devastation: The Legal Storm Surge

Bridges crumbling in Texas. Houses turned to toothpicks in the USVIs. Newly-formed rivers ravaging the streets in South Florida. The devastating destruction from the recent hurricanes that have pummeled the U.S. has uprooted many peoples’ homes and lives, but we have only begun to feel the impact of the surge.

Massive relief efforts have begun, national fundraising, news coverage, responsive legislation, and building codes to name a few. A litigation surge is swelling as well. We have seen several types of cases and class actions churn from a hurricane’s aftermath. Here are some of the types of cases, coverage issues, and expert needs you may see after the storm.

Property Damage and Meteorological Causation

Insurance companies insuring the Southern United States are bracing for the waves of claims that will soon be flooding in. Just as it was following Hurricanes Katrina, Ivan, and Sandy, the hotly-debated issue of whether the damage was caused by wind or water will be the likely focus. While most homeowner insurance policies will cover water damage that was caused by a roof or window that was compromised by wind and allowed water intrusion, most do not cover water that rises from the ground level and enters the home. Experts will be relied upon to determine how water got into a structure, even when it is entirely obliterated.

Insurance companies and attorneys will be looking for experts in meteorology, often with advanced degrees and testifying experience, who can opine on the types of weather conditions that might have existed at a given time in a given place (i.e., Key West when Hurricane Irma struck). The experts could come from academia or environmental institutes and societies. They will be asked to review various data points and speak on weather conditions at a particular time and place to support causation for insurance coverage. Structural engineers will also be needed, preferably with experience in standard insurance practices, procedures, and protocols in evaluating damage caused by hurricanes. They will need to have an understanding of insurance claims handling and will be asked to review various reports and data, some from other engineers, discussing damage caused to structures by the hurricane and opine as to whether or not the reports and data are accurate.

Structural Failures and Faulty Design/Construction

While many large, concrete commercial buildings and bridges are designed to withstand 150+ mph winds and flooding,  they can still be left severely damaged after a storm blows through. Structural failure of buildings, roofs, bridges, and roadways that were expected to withstand hurricane winds will lead to litigation over damage caused by the failure. Structural engineers with expertise in the types of structures at issue, likely licensed engineers, will be needed to examine damage patterns through photos, video, or via a post-storm on-scene inspection. They will also need to use meteorological wind information to determine the cause of the failure and the quality of the design or construction.

Class Actions for Coverage Determinations

Often, the core issues in insurance-related storm damage cases are similar across a wide span of policyholders. These cases will vary depending on the coverage matter at issue, but the most sought-after experts will be familiar with insurance claims standards, protocols, and policy interpretation. Construction experts may also be needed to opine on the necessity and extent of certain repairs required after a storm. Also, standard practices and interactions between contractors and insurance companies during the re-build process will come into question. Class actions may be filed as well, simply as placeholders to toll certain claims-filing deadlines or allow broader bad faith discovery against insurance companies who refuse to pay mass claims.

Litigation Over Price-Gouging

One of the worst scenarios to follow a storm is wide-scale price-gouging and scamming by companies trying to capitalize on the desperation and vulnerability of storm victims. Before the storm, many people preparing for power outages or evacuation will see unfair spikes in essentials such as water and gas. After the storm, shady contractors and tree-removers often flood in, lie about their licensing and credentials, and charge exorbitant fees while performing shoddy, haphazard work, or no work at all. Many states, including Florida, have made it a crime for any service provider to offer or sell essential commodities for an amount that “grossly exceeds the average price” during the thirty days following a declaration of emergency. In the days before Hurricane Irma’s approach, many reported price-gouging for essentials such as water, ice, batteries, and gas when thousands of Floridians were stocking up or evacuating. Class actions alleging price-gouging will likely occur following the storm. Experts in standard industry pricing, manufacture costs, and storm clean-up and repair may be called in to opine on the “average price” of certain essential commodities and post-storm services.

In the wake of Hurricanes Harvey and Irma, we are gearing up for the incumbent waves of litigation and expert requests we anticipate will follow. What types of cases, class actions, and expert needs are you expecting?

This post was written by Annie Dike of IMS ExpertServices, All Rights Reserved. © Copyright 2002-2017
For more legal analysis go to The National Law Review

EPA Ready to Support FEMA, State Efforts on Hurricane Harvey

EPA has an organized emergency response program for responding to man-made and natural disasters and is positioned to support the Federal Emergency Management Agency (FEMA), state, local, and tribal partners in response to Hurricane Harvey.

“I am in regular contact with EPA Region 6 and want to commend them for their leadership and preparation,” said EPA Administrator Scott Pruitt. “EPA is closely coordinating with state and regional partners, and we have teams standing by to support FEMA.  EPA is ready to respond to anything that may occur due to Hurricane Harvey.”

EPA headquarters emergency operations center is monitoring the storm closely and making preparations to activate in order to support states and regions affected by the storm.

EPA’s Region 6 office in Dallas is taking action to ensure that Superfund sites are secured in advance of the storm, to assist approximately 300 public drinking water system rapid assessments, and to seamlessly integrate emergency response activities with Texas, Louisiana, and other federal response agencies.

EPA supports hurricane preparedness and response in a number of ways, including:
•    Addressing Fuel Shortages: The Clear Air Act allows EPA Administrator Pruitt, in consultation with Energy Secretary Perry, to waive certain fuel requirements to address shortages that occur as a result of the storm. If Administrator Pruitt determines that extreme and unusual fuel supply circumstances exist in a state or region as a result of the hurricane, a temporary waiver can help ensure an adequate supply of gasoline is available in the affected area, particularly for emergency vehicles. EPA has an experienced team standing by to expedite handling of any fuel waiver requests by the states.

•    Monitoring Public Water Systems: Water systems can be severely impacted during hurricanes due to storm surge, flooding, or loss of power. EPA Region 6 has developed a tracking system for us to identify systems in the storm’s pathway. About 300 public drinking water systems are in the path (red zone) of hurricane Harvey in Texas. Both Texas Commission on Environmental Quality and Louisiana Department of Hospitals have uploaded their potentially impacted systems into Response Manager, which enables planning for rapid assessments to restore water systems after the storm passes and flood waters recede. Following the storm, and if the state requests federal assistance, EPA conducts damage assessments of both drinking water and wastewater systems to identify impacts to critical assets and assist in the recovery.

•    Securing Superfund Sites: EPA assesses conditions at the NPL Superfund sites in the storm’s pathway and tasks each Superfund National Priorities List (NPL) remedial site manager to assess conditions and make on-site preparations for high winds and heavy rainfall.  Following the storm and receding floodwaters, EPA conducts rapid assessments to identify damage at sites and initiate cleanup plans if necessary. Any on-site activities at sites located in the storm’s path are ceased until the all clear is given and on-site equipment is secured.  In addition, freeboard for lagoons or ponds is increased to accommodate forecasted rainfall if possible. After a hurricane makes landfall and any flooding recedes, the EPA remedial managers will conduct assessments of each Superfund NPL site to ensure no damage has occurred.

•    Assessing Conditions at Major Industrial Facilities: EPA assesses conditions at the major industrial facilities in the storm’s pathway to identify potential impacts and countermeasures. Following the storm and receding floodwaters, spills and releases are reported to the National Response Center. NRC notifies US Coast Guard or EPA based on preapproved jurisdiction boundaries. EPA conducts follow up inspections and damage assessments in response to reports within EPA jurisdiction.

As EPA prepares to support FEMA and its local and state partners, it continues to focus its message on the importance of public safety. For information and updates from EPA, please visit EPA’s emergency response website, www.response.epa.gov/Hurricaneharvey2017.

This post was written by the United States Environmental Protection Agency © Copyright 2017
For more Environmental Law analysis, go to The National Law Review

San Marcos, Texas Joins Growing Ranks of Cities Raising Minimum Wage to $15 Dollars

San Marcos Texas Minimum wageTaking its cue from other, larger cities, San Marcos, Texas, recently voted to raise the minimum wage to $15 dollars per hour for businesses applying for tax breaks and others incentives to build or expand in the city. In addition to the higher wage, businesses must also offer all employees and their dependents benefits equal to those offered to full-time employees. The San Marcos City Council saw requiring the higher pay rate as a way businesses could return the favor of receiving tax incentives to the local economy. This new law applies only to future businesses seeking economic development incentives, and not companies already doing business in San Marcos.  The city joins the ranks of cities such as Los Angeles, Seattle, San Francisco, and Washington, D.C. that require a “living wage.”

Key Takeaways for Businesses in San Marcos

Businesses seeking tax incentives to build or expand in San Marcos need to be prepared to pay a higher minimum wage and offer benefits to all of employees. This trend is likely to continue in other cities across the nation.

© 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

FLSA Salary Basis Increase Put On Hold For Entire Country – What Now?

salary basis“The Court finds the public interest is best served by an injunction.” With those words, a district court in Texas put on hold the implementation of the new rules applicable to the White Collar Exemptions under the Fair Labor Standards Act (FLSA). The rules, originally scheduled to go into effect on Dec. 1, 2016, have been indefinitely delayed for employers throughout the United States.

In granting the injunction, the court stated that the plaintiffs (various states and business groups) challenging the rule had shown a likelihood of success in their arguments that the Department of Labor (DOL) exceeded its statutory authority in issuing the rule. As a result, the court will now spend time reviewing the arguments of both parties in depth before making a final decision.

The next big date is Jan. 20, 2017, when President-elect Donald J. Trump is sworn in as president. It is not clear what a DOL under President Trump would do with the rule. Watch for hints about what could happen with the rule in the news media over the next few weeks, especially when President-elect Trump names a nominee for secretary of the DOL.

Will the judge lift the injunction and allow the rule to be implemented before Jan. 20, 2017?

The judge has already started the process for accepting arguments from both parties, and it is possible he could make a final decision before Jan. 20, 2017. That decision, however, could be appealed no matter who wins at the district court level. During an appeal, the injunction could remain in place.

Practically, what does this mean for employers?

It means you have options. In large part, an employer’s next steps depend on the message that has been delivered to employees already and systems you have in place to implement the new rule. Has the company informed those to-be-newly-non-exempt employees that they would start receiving overtime compensation as of Dec. 1? If so, then the company will need to decide whether to roll back that promise. (Note that, if you conducted an audit and determined that, based on the employee’s responsibilities they do not meet the duties test, you should nonetheless reclassify them as non-exempt to avoid potential claims in the future). Overtime for those newly non-exempt employees may not be required any longer as of Dec. 1, but a company must balance what is required by law with the human resources impact of taking that potential benefit away from employees.

Copyright © 2016 Godfrey & Kahn S.C.

Texas Judge Not Persuaded, Permanently Enjoins DOL’s New Reporting Rule

Stop, Rain, DOL Persuader ruleIn a major victory for the business community, Judge Sam R. Cummings of the U. S. District Court for the Northern District of Texas issued a permanent nationwide injunction blocking the Department of Labor (DOL) from enforcing its new “persuader” rule. National Federation of Independent Business, et al. v. Perez, et al., Case No. 5:16-cv-00066. The rule attempted to expand disclosure requirements by employers and their consultants (including attorneys) related to union-organizing campaigns.

The new rule, which Judge Cummings had preliminarily enjoined prior to its effective date of July 1 of this year, would have greatly increased the reporting requirements under Section 203 of the Labor Management and Reporting Disclosure Act. That section requires employers and their labor relations consultants to disclose the terms (including financial terms) of any arrangement by which the consultant provides services that are intended to directly or indirectly persuade employees concerning their rights to organize a union or to bargain collectively with their employer.

For years, the DOL took the position that no reporting was required unless the consultant had direct contact with employees by way of in-person meetings, telephone calls, letters, or emails. Similarly, no reporting was required if the consultant’s activities were limited to providing sample materials such as speeches, postings, letters to employees, and the like that the employer was free to accept, reject, or modify.

However, the new persuader rule expanded the disclosure requirements to include indirect contact with employees by the consultant, including:

  • Directing, planning, or coordinating the efforts of managers to persuade employees

  • Providing materials such as speeches, letters, or postings that are intended to persuade employees

  • Conducting union avoidance seminars if the consultant assists the employer in developing anti-union strategies

  • Developing personnel policies intended to persuade employees in the exercise of their organizational or collective bargaining rights.

The attorneys general for 10 states as well as various business groups challenged the new rule as infringing on employers’ First Amendment rights and conflicting with the attorney-client privilege. Judge Cummings agreed that the rule is unlawful and should be set aside. Presently, it is unknown if DOL intends to appeal Judge Cummings’ order.

ARTICLE BY Henry W. Sledz Jr. of Schiff Hardin LLP

New Texas Open Carry Law Has Significant Implications for Employers

On June 13, 2015, Texas Governor Greg Abbott signed into law HB 910, the Texas Open Carry Bill for Concealed Handgun Holders (“Open Carry Law”). The Open Carry Law becomes effective on January 1, 2016. The Open Carry Law expands the scope of a concealed handgun license and authorizes an individual carrying such a license to carry a handgun in plain view in a public place as long as the handgun is carried in a shoulder or belt holster.

The Open Carry Law also adds Penal Code Section 30.07 to establish a new offense for trespassing with an openly carried handgun if a license holder enters another’s property without effective consent and: (a) had notice that entry was forbidden, or (b) received notice that remaining on the property was forbidden and failed to depart. A license holder receives notice if an owner or someone with apparent authority to act on the owner’s behalf provides notice by verbal or written communication. However, the compliance requirements for a sufficient “written communication” are strict and detailed. The “written communication” may be a card, document or sign posted on the owner’s premises. Such a sign would be required to: (a) include Penal Code Section 30.07 language in English and Spanish, (b) have contrasting colors with block letters at least one inch in height, and (c) be conspicuously displayed and clearly visible at each entrance to the property.

The Open Carry Law additionally permits individuals with concealed handgun licenses to carry handguns in plain view in a motor vehicle or watercraft owned by the person as long as the gun is carried in a shoulder or belt holster.

Implications for Texas Employers

This new legislation raises several implications for Texas employers, as it expands individuals’ rights from parking lots to company property. Currently, employers may not prohibit employees from storing lawfully possessed firearms and ammunition in vehicles parked in the employer’s parking lot (or garage or other lot provided by the employer). Specifically, the 2011 Texas concealed handgun law permits the possessor of a firearm or ammunition to store those items in a locked, privately owned car, as long as the possessor holds a concealed handgun license.

The Open Carry Law, while permitting concealed handgun licensees to openly carry a holstered firearm, also allows public and private employers to prohibit licensees from carrying their firearms onto the “premises” of the business. Under the definition set forth in the Texas Penal Code, “premises” includes “the building or a portion of the building.” The term, however, “does not include any public or private driveway, street, sidewalk or walkway, parking lot, parking garage, or other parking area.”

One significant omission from the Open Carry Law is that it does not grant employers immunity from civil actions resulting from an occurrence involving the employee and his or her openly carried firearm. The 2011 Texas concealed handgun law expressly included a provision providing employers with such immunity, except in cases of gross negligence. That immunity, however, applied only to firearms and ammunition stored or transported in an employee’s vehicle and does not address an occurrence involving an employee who is openly carrying a firearm.

The Open Carry Law, similar to the 2011 legislation, does not create a private cause of action for employees against their employer if the employee contends that his or her right to openly carry has been infringed. Thus, it seems that an employee’s only remedy would be to report the employer’s alleged violation (e.g., a policy banning firearms from being openly carried) to the Attorney General’s office.

In light of this new legislation, employers must decide: (1) whether to allow employees with concealed handgun licenses to openly carry handguns on company premises, and (2) whether to permit visitors, vendors, guests and other third parties to openly carry handguns on company premises. Implementing and enforcing these decisions will require considerable planning, including a determination as to whether any existing company policies need to be updated to comply with the new law.

© 2015 Andrews Kurth LLP

Texas Supreme Court Clarifies Royalty Calculations For Enhanced Oil Recovery

steptoe-johnsonlogo

In French v. Occidental Permian, Ltd., the Texas Supreme Court clarified royalty calculations for enhanced oil recovery.  The Court:

  1. Rejected a royalty owners’ claim that royalties on casinghead gas should be determined as if the injected carbon dioxide (CO2) was not present
  2. Held that, under the applicable leases and Unitization Agreement, the costs of removing CO2 from the gas were post-production expenses that royalty owners must share with the working interest owner

In the opinion, the Court emphasized the importance of efficient production of oil and gas and the prevention of waste.

Background

The Plaintiffs-Appellants, Marcia Fuller French and others (“French”), were lessors on two different oil and gas leases.  Both lease royalty provisions provided that the casinghead gas royalty was net of post-production expenses, but not production expenses.  The Defendant-Appellee, Occidental Permian Ltd. (“Oxy”) owned a working interest.  The parties had entered into a Unitization Agreement to allow secondary recovery operations.

Oxy began injecting wells on these leases with CO2 in 2001 in order boost oil production when waterflooding became less effective.  As a result, the wells produced natural gas that was about 85% CO2.  Although Oxy could reinject the entire casinghead gas stream, Oxy had the gas treated off site to remove the CO2.   It sold the resulting gas and had the extracted CO2 sent back to the well to be reinjected.  Oxy paid royalties on the gas after it was treated and deducted the treatment costs from French’s royalties.

French sued arguing that, except for the removal of contaminants and the extraction of NGL, the costs of processing the casinghead gas (including transportation costs) were production costs that should be borne solely by Oxy.  Conversely, Oxy argued the CO2 removal was necessary to render the gas stream marketable.  At trial, the Court agreed with French and awarded her $10,074,262.33 in underpaid royalties and entered a declaratory judgment defining Oxy’s ongoing royalty obligations.  The court of appeals reversed with a focus on the damages calculations, but did not reach a decision on whether the cost of separating the CO2 from the casinghead gas was a production expense.

Supreme Court’s Decision

The Court examined the parties’ agreements noting that French consented to the injection of extraneous substances into the oil reservoir and gave Oxy the right and discretion to decide whether to reinject or process the casinghead gas.  The Court further pointed out the Agreement provided that the royalty owners agreed to forego royalties on any unitized substances used in the recovery process.  The Court found that French benefited from that decision and therefore must share in the cost of the CO2 removal.  The question then became whether the CO2 processing was a production or post-production cost.

French argued that the CO2 separation was akin to the removal of water from oil, which Oxy treated as a production cost.  The Court, however, found that oil and water are “immiscible” and separation of the two is a relatively simple process, unlike CO2 and gas separation, which requires special technology.  Water separation is necessary for reinjection into the reservoir and to make the oil marketable.  Conversely, CO2 separation is not necessary for continued production of oil.  The Court then noted that Oxy was not required to reinject the casinghead gas.  Therefore, based on the parties’ agreements, “French, having given Oxy the right and discretion to decide whether to reinject or process the casinghead gas, and having benefited from that decision, must share in the cost of the CO2removal.”  Id. at 7.

Conclusion

The Court indirectly emphasized efficient production of oil and gas and prevention of waste.  The gas processing was economically beneficial to both French and Oxy.  The CO2 separation increased the value of the stream to both Oxy and French by allowing sale of the extracted NGLs and allowing reinjection of more than 10% of the gas produced directly back into the field.  Because French received the benefit of Oxy’s decision, it had to share in the cost.

This opinion is an important reminder to carefully negotiate and agree to terms in all agreements.  It is a further reminder to proceed in an efficient and economic manner.