Category: Uncategorized

A Year-End Estate and Financial Planning Checklist: Make Your List and Check it Twice

During the holidays, it can be hard to find the time (or desire) to review your finances and estate plan. To help with that effort, here is a short list of things that you can easily accomplish before the ball drops on New Years’ Eve.

1. Review required minimum distributions (“RMDs”). If you’re 70½ or older, you must take RMDs from certain retirement accounts by December 31 or face a penalty equal to 50% of the sum you failed to withdraw. If you turned 70½ this year, you have until April 1, 2019, to take your first RMD without penalty. (However, note that deferring your first RMD to 2019 will mean taking two RMDs in the same tax year, which could bump you into a higher income tax bracket). These rules also apply in the case of an inherited or “stretch” IRA. Generally, you must begin taking RMDs for inherited IRA assets by December 31 of the year after the year of the original owner’s death, but certain exceptions may apply. The IRS provides some helpful worksheets here.

2. Reduce taxable income and rebalance investments. Work with your financial advisors to sell losing positions in taxable investment accounts as necessary to offset gains. Then review your asset allocation and, if necessary, rebalance your investment portfolio.

3. Max out company retirement plan contributions. In 2018, you can contribute up to $18,500 in your employer-sponsored retirement plan (i.e., 401(k), 403(b), most 457 plans, and the Federal government’s Thrift Savings Plan). Employees aged 50 or older who participate in such plans can contribute an additional $6,000 in “catch-up” contributions. If you are not able to contribute the maximum, try to contribute enough to qualify for any matching contributions by your employer.

4. Review insurance coverage. Make sure you have adequate policies in place insuring your life, health, disability, business, and assets (home and auto), which can help protect you and your family from unforeseen liabilities and expenses.

5. Review estate plans and beneficiary designations. Estate planning should be reviewed holistically and periodically to be sure that the plan you have in place accomplishes your goals. See “So You Think You’re Done With Your Estate Plan” for a more in-depth discussion.

6. Make gifts. The 2018 annual gift tax exclusion is $15,000. This exclusion is the amount of money you can give away per person per year, tax-free. In addition, married couples can elect to “split gifts”. By utilizing this strategy, married taxpayers can gift up to $30,000 to an individual in 2018 before a gift tax return is required. On top of annual exclusion gifts, an unlimited gift tax exclusion is available for amounts paid on behalf of a person directly to an educational organization, but only for amounts constituting tuition payments. Amounts paid to health care providers for medical services on behalf of a person also qualify for an unlimited gift tax exclusion. Annual gifting is an excellent way to reduce the value of your gross estate over time, thereby lowering the amount subject to estate tax upon your date of death. Charitable and philanthropic gifts (whether outright, in trust, or through a donor advised fund or similar vehicle) should also be considered.

7. Fund your Health Savings Account (“HSA”). In 2018, those in high-deductible health-insurance plans can save as much as $3,450 in pre-tax dollars in a health savings account. For families, the figure is $6,900, and those aged 55 and older can contribute an additional $1,000. Unlike a Flexible Spending Account, your HSA balance rolls over from year to year, so you never have to worry about losing your savings. If you are over age 65 and enrolled in Medicare, you can no longer contribute to an HSA, but you can still use the money for eligible out-of-pocket medical expenses.

8. Use your flexible spending dollars. Unused funds in a Flexible Spending Account (“FSA”) are typically forfeited at year’s end, so make sure to spend them for eligible health and medical expenses by December 31. Some plans offer a “grace period” of up to 2 ½ months to use FSA money. Other plans may allow you to carry over up to $500 per year to use in the following year. Bottom line, check with your employer to confirm your plan’s deadlines.

9. Check your credit and identity. Under the Fair Credit Reporting Act, each of the national credit-reporting agencies is required to provide you with a completely free copy of your credit report, upon request, once every 12 months. Get yours at www.annualcreditreport.com.

10. Organize your records for 2019. Now is the time to gather and organize the documents and 2018 records that will be needed to prepare your tax returns in 2019. As part of that process, shred documents that no longer need to be retained.

© Copyright 2018 Murtha Cullina

ARTICLE BY

Lisa P. Staron
Murtha Cullina

New Medicare Advantage and Part D Drug Pricing Proposed Rule

On November 26, 2018 the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses.This proposed rule is the Trump Administration’s latest action to curb prescription drug prices. The proposed rule outlines a number of provisions to for lowering drug prices and reducing out-of-pocket costs in the Part D program that build off the Administration’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. Below details the major provisions within the proposed rule.

Six Protected Classes

One of the most significant changes the proposed rule details involves increasing flexibility for Part D sponsors in their coverage of drugs in the six protected classes. As background, current Part D policy requires Part D plans to include on their formularies all drugs in the following six classes: (1) antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics. Together these drugs are commonly referred as the six protected classes.

This rule does not change or remove any of the six protected classes. Instead, it proposes three exceptions that would allow Part D sponsors to not cover a protected class drug. Specifically, it would allow Part D sponsors to: (1) implement broader use of prior authorization and step therapy for protected class drugs; (2) exclude a protected class drug from a formulary if the drug represents only a new formulation of an existing single-source drug or biological product, regardless of whether the older formulation remains on the market; and (3) exclude a protected class drug from a formulary if the price of the drug increased beyond a certain threshold over a specified look-back period.

In 2014, the Obama Administration proposed removing three of the protected classes (antidepressants, antipsychotics, and immunosuppressants). This rule was never finalized due to criticism by Congress as well as drugmakers and beneficiary advocates. We can expect similar criticism of this new proposal. CMS is seeking comment on considerations that would be necessary to minimize (1) interruptions in exiting therapy, and (2) increases in overall Medicare spending from increased utilization of service due to interruptions in therapy.

Gag Clauses

In October, the President signed the Know the Lowest Price Act of 2018 (P.L. 115-262) into law. This law prohibits Part D sponsors from including in their contracts with their network pharmacies “gag clauses.” Gag clauses restrict the ability of pharmacies to discuss the availability of prescriptions at a cash price when it is less than the amount that would be charged when receiving the prescription through insurance. This measure will go into effect January 1, 2020. The proposed rule amends Part D regulations to be consistent with this statutory change.

Real-Time Benefit Tool

The proposed rule is also requiring that Part D sponsors implement an electronic Real Time Benefit Tools (RTBT) for providers beginning on or before January 1, 2020. The tool should have capability to inform prescribers when lower-cost alternative therapies are available under the beneficiary’s prescription drug benefit.

Part D Explanation of Benefits

The proposed rule also requires Part D plans to include the following information in each members’ Explanation of Benefits: (1) the inclusion of drug pricing information and (2) lower cost therapeutic alternatives.

Step Therapy

In August, CMS published a memo announcing that MA plans could use step therapy as a utilization management tool for Part B drugs. This proposed rule formally codifies that change. Step therapy can only be applied to new prescriptions or for enrollees who are not actively receiving the affected medication. MA plans would also be required to use a Pharmacy and Therapeutics committee to review and approve step therapy programs. Additionally, determination and appeals processes for Part B drugs will be subject to shorter adjudication times that mirror Part D timeframes.

Pharmacy Price Concession in the Negotiated Price

The final provision in the proposed rule would re-define “negotiated price.” Negotiated price is the price reported to CMS at point of sale. Under current law, Part D sponsors can generally choose whether to reflect in the negotiated price the various price concessions they or their intermediaries receive. Beneficiary cost-sharing is generally calculated as a percentage of the negotiated price. When pharmacy price concessions and other price concessions are not reflected in the negotiated price at the point of sale, beneficiary cost-sharing increases. The proposed rule is considering to revise the definition of the negotiated price to include all pharmacy price concessions and any dispensing fees, and exclude additional contingent amounts in the negotiated price. This would re-define negotiated price as the baseline, or lowest possible, payment to a pharmacy. Implementation of this change is not certain. However, CMS noted the policy could be implemented as early as 2020.

Next Steps

Comments to the proposed rule can be submitted until January 25, 2019. We can expect significant industry and stakeholder feedback on the proposed rule. Policy changes related to drug pricing are sure to be controversial.  What remains to be seen is which changes are so controversial as to lead to sufficient public outcry that it brings down parts of the proposed regulation or all of it.

©1994-2018 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY

Katie Weider
Rodney L. Whitlock
Mintz

Medical Products & FDA: What to Watch for in 2019

Major legislation impacting FDA often accompanies user fee reauthorizations every 5 years. However, Congress has acted to address public health issues between user fee cycles. FDA regulates 20¢ of every U.S. consumer dollar spent on products ranging from heart valves to insulin to breakfast cereal, so there’s always something Congress can do in the realm of FDA’s statutory authorities. Many FDA-related bills are often bipartisan, too, which suggests action despite different parties in power in the House and Senate. Here are a few key medical product issues we’ll be tracking in 2019.

Laboratory Developed Tests (LDTs)

An LDT is a type of in vitro diagnostic test that is designed, manufactured, and used within a single laboratory. In recent years, FDA has attempted to more actively regulate LDTs, claiming they are more complex now than when the agency was granted authority to regulate devices in the 1970s (FDA had, until recently, generally ignored LDTs using a policy known as enforcement discretion). A few years ago, the agency published a proposed approach that caused a stir in Congress and the lab industry and after years of debate Congress seems ready to act on LDTs, which some are now calling In Vitro Clinical Tests (IVCTs). However, New Jersey Democrat Frank Pallone, the likely incoming chairman of the House Energy & Commerce Committee has expressed concern with FDA’s proposed approach to IVCT regulation, especially its heavy reliance on review by accredited persons (i.e., third party review) and pre-certification. FDA’s position was outlined by Commissioner Scott Gottlieb, who in a September 2018 speech stated that FDA envisions reviewing only 10% of IVCTs, 40% would use the pre-certification model, and the remainder would not be subject to FDA premarket review.

Who blinks first? Based on my experience at FDA, the agency is likely to wait for Congress to make the first move largely because FDA went all in by submitting 59 pages of “technical assistance”—essentially a draft bill—to Congress in August 2018. A Democrat-controlled E&C may push for more oversight or a phased-in approach, which is something FDA has resisted. Sure to further complicate discussions is the role of user fees in funding an IVCT regulatory program. Among the questions that need to be answered: how much IVCT oversight will FDA have relative to third parties, how much will that cost, and who’s paying the bill? As a former user fee negotiator for FDA, I can tell you those conversations are not going to be easy.

Digital Health

FDA’s exploration of a new regulatory paradigm for digital health products hit a bump in the road on October 10 when Senators Warren, Murray, and Smith (all Democrats) sent a letter to FDA asking, among other things, what the legal basis is for the digital health pre-cert program. Because FDA does not have the staff capacity or expertise to review all digital health products (including software), part of its solution is to rely on certifications that a product developer has a culture of quality and organizational excellence. FDA also says the current review paradigm is not well-suited to software and similar products that have fast, iterative development cycles. This idea has merit but the details need to be hammered out—likely in statute. And while 2019 is too early to expect legislation, the October 10 letter foreshadows intense scrutiny from HELP Committee Democrats. The agency is still collecting comments on its proposed framework.

Medical Device Cybersecurity

FDA recently made a splash with its cybersecurity playbook and a recently updated premarket cybersecurity guidance. However, while I was at FDA we responded to a lot of requests for technical assistance from both sides of the aisle on legislative language that would: mandate convening stakeholders to recommend guidelines for improving cybersecurity of devices, mandate software bills of materials, or provide basic cybersecurity operational standards for Internet-connected devices, among other ideas. The jury is out on how much any of these ideas would meaningfully improve the nation’s cybersecurity infrastructure at least as it pertains to medical devices. Considering cybersecurity is a hot topic in other contexts (e.g., election security, personal computing), the 116th Congress will likely continue to look for legislative wins in this space and we’ll be watching closely to see what the impacts could be on medical products.

Device Servicing

FDA continues to look for a solution to problematic device servicing and will be holding another public meeting in December 2018. While we’re optimistic FDA will come out of that meeting with a draft policy (the agency said it plans to issue a draft guidance document before October 2019), we see challenges with some of the ideas mentioned in a discussion paper the agency released in October 2018. Even as FDA reviews public comments and publishes guidance, there could be a role for Congress, such as to ensure appropriate oversight of servicing through mandated inspections. We’re looking forward to seeing how interaction between OEMs, servicers, and FDA at the December workshop could influence the draft guidance.

OTC Monograph Reform

As noted in our Lame Duck Preview for health issues, OTC monograph reform legislation passed the House but awaits action in the Senate, where it’s stuck in committee. An OTC monograph is like a recipe for an over-the-counter drug that, once approved by FDA, can be used by any drug manufacturer without FDA pre-approval of the manufacturer’s specific drug. The bill would speed up the regulatory process for OTC monographs by allowing use of administrative orders rather than rulemaking. Both bills authorize FDA to grant exclusivity for the monograph developer, which would protect market access, though the amount of exclusivity differs (18 months in the House bill; 24 months in the Senate bill). Likely incoming House E&C Chairman Pallone is—again—who we’re looking to regarding action on this. Despite voting for the House version, it is well-known that Rep. Pallone has concerns about the exclusivity provision. The OTC monograph process has not changed since 1972 and reform efforts have been brewing for a while; if this does not move in the lame duck, this could be in play in 2019.

Opioids

Congress passed major opioids legislation in September 2018 so while Congress may shift its focus to other issues, we’ll be keeping an eye on how the administration is implementing its mandates. FDA in particular has as full plate with:

  • Holding a public meeting to address challenges of developing non-addictive medical products for acute or chronic pain;
  • Issuing new or updating existing guidance documents addressing, among other topics, how FDA considers pain, pain control, or pain management in assessing whether a disease or condition is serious or life-threatening and how FDA may require postmarket studies to assess reductions in effectiveness of a drug that change the drug’s benefit-risk profile;
  • Issuing prescribing guidelines for the indication-specific treatment of acute pain;
  • Developing a list of controlled substances to refer to Customs and Border Protection and other import controls; and
  • Implementing new authority to require unit dose packaging (aka blister packs).

This list is not exhaustive, yet it’s clear FDA will be busy. We’ll be keeping a close eye on administration and congressional actions related to these and other important public health issues in 2019.

©1994-2018 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY

Aaron L. Josephson

Four Themes from the National Climate Assessment that May Impact Your Business Strategy

As climate change is integrated more and more into the planning of corporate opportunities and risks, the Fourth National Climate Assessment released last week may be a valuable resource to assess how climate change may impact your business strategy on the horizon.

The assessment, which outlines potential region-by-region impacts from climate change, can be used as a tool to assist companies in understanding the range of possible climate impact. Drafted by experts within the federal government and led by the National Oceanic and Atmospheric Administration (NOAA), the report provides a summary of the science and modeling used to predict changes in the United States’ climate over the next century, including providing certain economic impact assessments and estimates.

Four modeled scenarios with varying ranges of temperature increases were used in the assessment and impacts were qualified by confidence ranges and likelihood of the suggested impacts. The report discusses population changes, economic changes, and geographic changes that may result from climate change.

Containing a massive amount of both elementary and highly sophisticated information and model results, the assessment may prove to be extremely useful to both public and private companies to plan business growth and opportunities and to identify risks to current business models. The data may be specific enough to identify potential mitigation and adaptation actions for specific facilities to consider implementing.

Four Highlighted Themes

The following themes are indicative of those found throughout the assessment.

  1. “Climate change creates new risks and exacerbates existing vulnerabilities in communities across the United States, presenting growing challenges to human health and safety, quality of life, and the rate of economic growth.” Summary Finding No. 1.

  2. “Without substantial and sustained global mitigation and regional adaptation efforts, climate change is expected to cause growing losses to American infrastructure and property and impede the rate of economic growth over this century.” Summary Finding No. 2.

  3. “Climate change affects the natural, built, and social systems we rely on individually and through their connection to one another. These interconnected systems are increasingly vulnerable to cascading impacts that are often difficult to predict, threatening essential services within and beyond the Nation’s borders.” Summary Finding No. 3.

  4. “Impacts from climate change on extreme weather and climate-related events, air quality, and the transmission of disease through insects and pests, food, and water increasingly threaten the health and well-being of the American people, particularly populations that are already vulnerable.” Summary Finding No. 6.

Midwest Adaptation and Mitigation

According to the report, while climate change might be easier to highlight on the coasts, the Midwest may also experience costs related to increased heat and precipitation events. The report indicates that the Midwest may experience a significant increase in the number of 100 degree days, with Chicago experiencing as many at 60 days per year by the end of this century. This extreme heat may increase mortality, affect transportation, or affect the ability of workers in outdoor jobs or spaces without temperature controls. With near-term planning and adaptation, however, the report notes that many of these impacts can be minimized.

The report highlights that higher heat and precipitation may affect farming and yields, but that adaptation and mitigation can help. For example, the assessment notes that adding buffer zones at agricultural farm fields in the Midwest can minimize damage and soil loss caused by extreme precipitation events.

Other actionable insights from the report directed to the Midwest include:

  • Promoting biodiversity can minimize the impacts of an increasing insect population and diseases that strike a particular species of plants or humans.

  • Planned development growth can decrease habitat and biodiversity loss as well as control storm-related damage.

  • Planned development and agricultural land use can impede the further degradation of the Great Lakes, which is experiencing higher temperatures, lower amounts of winter ice and earlier temperature stratification. These temperature changes may also impact manufacturing facilities that use water from the Great Lakes.

Overall, the assessment recommends adoption of mitigation and adaptation plans in the near future to avoid the most deleterious effects of climate change.

© 2018 Schiff Hardin LLP

ARTICLE BY

Jane E. Montgomery
Schiff Hardin LLP

BOLI Issues Final Rules on Oregon’s Equal Pay Law

On November 19, 2018, the Oregon Bureau of Labor and Industries (BOLI) issued its final administrative rules relating to the state’s Equal Pay Law, which prohibits pay discrimination on the basis of protected class, as well as screening job applicants based on current or past compensation.

The rules establish definitions for several key words in the law, provide more concrete guidance on how to meet the law’s posting requirements, and seek to clarify certain provisions of the law related to screening job applicants based on salary history, determining whether employees perform work of comparable character, establishing bona fide factors that may justify paying employees performing work of comparable character at different compensation levels, explaining benefits as a component of compensation, and “red-circling” or freezing employee compensation in order to bring the pay of employees performing work of comparable character into alignment. Finally, the rules establish that an employer commits an unlawful compensation practice each time an employee is paid in violation of the Equal Pay Law.

Key Takeaways

  • Oregon Administrative Rule (OAR) 839-008-0005 provides that the Equal Pay Law’s prohibition on screening job applicants based on current or past compensation includes a prohibition on using anyinformation about an applicant’s past compensation, regardless of how the information was obtained, to determine a job applicant’s suitability or eligibility for employment. However, unsolicited disclosure of a job applicant’s past compensation (whether by the applicant or former employer) does not constitute a violation of the law, so long as the information is not considered by the employer making the hiring decision.

  • OAR 839-008-0010 expands upon the Equal Pay Law’s criteria for evaluating whether employees perform “work of comparable character” and thus should be paid the same absent the existence of one or more bona fide factors justifying any disparity. The rule provides that “work of comparable character” means work requiring substantially similar knowledge, skill, effort, responsibility, and working conditions in the performance of work, regardless of job description or title. BOLI’s new rule provides non-exhaustive lists of factors that may be considered in determining whether employees have substantially similar knowledge, skill, effort, responsibility, or working conditions. For example, the rule provides that “skill” considerations “may include, but are not limited to, ability, agility, coordination, creativity, efficiency, experience, or precision.”

  • OAR 839-008-0015 establishes criteria that may be used to evaluate whether bona fide factors explain pay differentials that would otherwise violate the Equal Pay Law. The law already broadly delineates what constitutes a “bona fide factor” (i.e., a seniority system; a merit system; a system measuring earnings by quantity or quality of production; differing workplace locations, travel, education, training, experience, or any combination of those factors). While the rule seeks to further explain and provide examples of those factors. For example, the rule provides that education considerations “may include, but are not limited to, substantive knowledge acquired through relevant coursework, as well as any completed certificate or degree program.” Training considerations “may include, but are not limited to, on-the-job training acquired in current or past positions as well as training acquired through a formal training program.”

  • OAR 839-008-0020 seeks to clarify benefits as a component of compensation under the Equal Pay Law. Specifically, the rule provides that (1) employees performing work of comparable character may be provided different benefits so long as the same benefit options are offered to all employees performing work of comparable character; and (2) if an employee declines a benefit, the full cost of the benefit offered to the employee may be used to calculate the total amount of compensation paid to the employee under the Equal Pay Law.

  • OAR 839-008-0025 clarifies that “red circling,” freezing, or otherwise holding an employee’s pay constant as other employees performing work of comparable character are brought into alignment is not considered a reduction in pay for the employee whose pay is frozen.

Questions Remain Unanswered

While the rules clarify some aspects of the Equal Pay Law, many questions remain unanswered for employers. This is particularly true when it comes to performing an equal pay analysis to (1) determine and rectify any pay disparities among comparable employees and (2) take advantage of the law’s affirmative defense to compensatory and punitive damages. No guidance is given, for example, as to how to account for the protected classes that are not self-evident or self-reported. And, while the rules provide some information as to what amounts to a “bona fide factor” justifying a pay disparity, the list remains exclusive and vaguely defined at best.

Next Steps for Employers

Oregon employers that have not yet done so may want to perform equal pay analyses of their workforces as soon as possible. While the Equal Pay Law has been in effect since October 2017, employees will be able to bring claims beginning January 1, 2019, which carry the possibility of economic, compensatory, and punitive damages, as well as attorneys’ fees.

 

© 2018, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

U.S. Court of Appeals for the Fourth Circuit’s Decision to Vacate Mountain Valley Pipeline Nationwide Permit

On November 27, 2018, the U.S. Court of Appeals for the Fourth Circuit issued the most recent in a series of decisions from various courts affecting the federal permitting and construction of interstate pipelines. Sierra Club v. U.S. Army Corps of Engineers, No. 18-1173 (4th Cir. Nov. 27, 2018). In this instance, the Circuit held that the U.S. Army Corps of Engineers violated the Clean Water Act when it verified that construction of the Mountain Valley Pipeline project could proceed pursuant to Nationwide Permit 12 in the State of West Virginia.[1] This decision will have an impact on the flexibility of federal and state agencies when it comes to permitting projects under the Clean Water Act Nationwide Permit program.

The Mountain Valley Pipeline project is a 304-mile natural gas pipeline proposed to run through West Virginia and Virginia. Earlier this year, the Corps had reinstated its verification that the project met the requirements of Nationwide Permit 12 – a general permit that provides authorization for certain discharges associated with the construction of linear energy infrastructure. The Circuit vacated the Corps’ verification in its entirety, leaving the project with no authorization under the Clean Water Act.

Unlike many decisions where the issue is the Corps’ own process in promulgating the Nationwide Permit in the first instance or the Corps’ assessment of whether a specific project falls within the federal parameters of the Nationwide Permit, this matter turned on whether the Corps properly incorporated the State’s conditions into its verification and whether the State itself followed the required Clean Water Act process.

In order to use a Nationwide Permit promulgated by the Corps, a project proponent must provide the Federal permitting agency a Section 401 water quality certification from the State (or other permitting agency with jurisdiction over the water) in which the regulated discharge originates, unless the Federal permitting agency determines that the certification requirement has been waived. The State certification and its conditions then become part of the federal Nationwide Permit. With respect to Nationwide Permit 12, the State of West Virginia had issued a general certification that imposed, after public notice and comment, certain special conditions on projects seeking authorization under Nationwide Permit 12 beyond what the Corps required. Two of these special conditions were at issue in this case:

  • Special Condition A, which requires an individual state water quality certification for certain projects including those involving construction of pipelines equal to or greater than 36 inches in diameter or if crossing waters regulated under Section 10 of the Rivers and Harbors Act; and

  • Special Condition C, which requires that individual stream crossings be completed in a continuous manner within 72 hours in certain conditions.

Pursuant to these Special Conditions, in order to seek authorization under Nationwide Permit 12, Mountain Valley Pipeline was expected to obtain an individual water quality certification and to complete stream crossings within 72 hours. However, West Virginia purported to “waive” its requirement that the pipeline obtain an individual water quality certification following a series of challenges to West Virginia’s individual water quality certification, and the Corps replaced Special Condition C with an alternate condition that the Corps found to be more protective of water quality with the apparent concurrence of the State.

The Fourth Circuit held: (1) the Corps’ verification violated Section 401 of the Clean Water Act because Section 401 unambiguously requires the Corps to incorporate the State’s certification with its special conditions in the federal verification without modification; and (2) Section 401 does not allow a state to waive its special conditions without public notice and comment, meaning that the project proponent remained subject to the condition requiring that it apply for an individual state water quality certification and, therefore, the Corps’ own verification was invalid.

In reaching these conclusions, the Circuit noted that “the Corps’ interpretation would radically empower it to unilaterally set aside state certification conditions as well as undermine the system of cooperative federalism upon which the Clean Water Act is premised.” Sierra Club, No. 18-1173 at *22. With respect to the State’s action purporting to waive its special condition, the Circuit explained that “[a]llowing West Virginia to revoke, on a case-specific basis, conditions imposed in its certification of a nationwide permit would impermissibly allow the state to circumvent [the CWA’s] explicit requirement that state permit certifications satisfy notice requirements.” Id. at *31.

Assuming this decision stands, the upshot is that both the Corps and the States (at least within the Fourth Circuit) will have less flexibility in how projects are permitted when a State has issued a general water quality certification with specific conditions. The Corps will need to require that the terms of such certifications are strictly followed in order to make decisions that comply with the Clean Water Act.

[1] The Circuit’s November 27, 2018 decision supports and expands upon the Circuit’s October 2, 2018 decision to vacate the Corps’ verification on more limited grounds.  Sierra Club v. U.S. Army Corps of Engineers, No. 18-1173 (4th Cir. Oct. 2, 2018).

© 2018 Bracewell LLP
This post was written by Ann D. Navaro and Christine G. Wyman of Bracewell LLP.

As Electric Scooters Barrel Their Way into the Sharing Economy, Manufacturers and Their Insurers Should Prepare for an Influx of New Claims

Electric scooters and the shared economy

If you have spent any time in Los Angeles or New York City recently, you may have noticed adults riding two-wheeled electric scooters − the type we are more accustomed to seeing kids ride. These scooters are the latest transportation tools in the ever-evolving sharing economy.

The sharing economy, a term used to describe the growth of an economy based on sharing goods and services, just witnessed the newest heavyweight enter the ring – motorized electric scooter companies. All you have to do is download an app on your smartphone, enter your credit card information, find an electric scooter using the app, and scan a barcode. Typically, rental scooters cost $1 to start and 15 cents a minute thereafter. When you reach your destination, simply leave the scooter in a public space and tap your screen to end the ride.

The scooters can reach speeds of up to 15 miles per hour, and there are almost no regulations in place to ensure their safe use. Additionally, it is not always clear whether the scooters should be driven on sidewalks, in bike lanes, or on roadways. In fact, some cities do not require riders to wear helmets. Finally, few riders are clear on whether they are subject to traffic laws (they are in most, if not all, cities).

Recently, scooter-sharing companies have drawn the ire of plaintiffs’ lawyers across the country. Both riders and pedestrians injured on or by scooters are making waves in courthouses and the media, calling for increased regulation or, in some cases, prohibition of the scooters altogether. Complaints have been filed against scooter-sharing companies based on allegations of gross negligence, aiding and abetting assault, and creating a public nuisance. These companies are not alone, however, in facing potential liability for injured riders and pedestrians. Scooter manufacturers also have been named for any number of alleged defects with the scooters.

Scooter and parts defects

Scooter manufacturers may soon face a number of product defect claims. While not an exhaustive list, these claims could include the following:

  • Failed brakes – At 15 miles per hour, functioning brakes are essential to riders and pedestrians. And, the 15 mile-per-hour maximum speed does not account for scooters going downhill. The scooters can reach even higher speeds and, consequently, create a higher risk of serious injury or death.

  • Stuck throttles – Likewise, riders and pedestrians face an increased risk of injury when throttles get stuck, making the rider unable to slow down.

  • Exploding batteries

  • Flat tires

  • Inoperative lights

  • Broken tubes – If the tubes that transmit power within the vehicle suddenly break, riders risk being thrown off.

  • Defective handlebars

  • Failure to warn of hidden dangers associated with the use of this unique electric vehicle.

The potential of such claims should be enough to capture the attention of astute product liability insurers.

Why electric scooters?

An array of products are used as part of the sharing economy – cars, houses, bicycles, cameras, kitchenware, musical instruments, boats, construction equipment, outdoor gear, and more. So why should insurance companies pay particularly close attention to scooters?

The answer is because the popularity of electric scooters is growing at an unprecedented pace. Adoption rates in metro areas across the United States are accelerating faster than other players in the ride-sharing economy (i.e., cars). In addition to the incredible adoption rates, public support is high among people from anywhere on the socioeconomic spectrum, with the greatest support from low-income groups, presumably because scooters require much fewer infrastructure investments. And, scooter-sharing companies are not going away. On the contrary, major scooter-sharing companies such as Bird and Lime have begun expanding internationally. So, what should risk advisors expect with regard to claims and lawsuits?

What to expect

The leading electric scooter company, Bird Rides, Inc.’s robust liability waiver has so far limited the number of cases plaintiffs’ lawyers are willing to take. The waiver provides that all riders, in exchange for the use of “Bird Services, [v]ehicles, and other equipment… [,] agree[ ] to fully release, indemnify, and hold harmless Bird…from liability for all ‘Claims’ arising out of or in any way related to … use of the Bird Services, [v]ehicles, or related equipment…[,] except for [c]laims based on … gross negligence or willful misconduct.” Nonetheless, the class-action lawsuit filed in Los Angeles County Superior Court on October 19, 2018 – case number 18-STCV-01416 – has garnered enough attention from the public and media that an influx of claims should be expected.

The Los Angeles County lawsuit names, in addition to Bird, leading competitor Lime (formerly LimeBike), and manufacturers Xiaomi USA, Inc. and Segway, Inc. The plaintiffs’ claims include Strict Products Liability, Negligence, Negligence Per Se, Gross Negligence, Breach of Implied Warranty of Fitness for a Particular and/or Intended Purpose, and Breach of Implied Warranty of Merchantability. The blanket of negligence theories cast against the manufacturers is broad. They allege manufacturing defects, design defects, and a charge of inadequate user warnings. It is to be determined how much protection, if any, manufacturers will receive under Bird’s liability waiver. It is very likely, though, that the plaintiffs will be allowed to pursue lawsuits under a theory of, at least, gross negligence.

Another big question is whether and how many of these suits will get to a jury. The comprehensive waiver in Bird’s user agreement includes an administrative dispute resolution process, followed by a binding arbitration provision in the event the parties are unable to settle a claim. It also includes a class action waiver. However, the opt-out provision in the same section of the agreement provides: “You have the right to opt-out and not be bound by the arbitration and class action waiver provisions … by sending written notice of your decision to opt-out to the [Bird] address…. The notice must be sent within 30 days of the effective date or your first use of the Service, whichever is later….”

Whether claims are brought in court or moved into arbitration, a rigorous defense is called for on behalf of the manufacturers. Because scooters are often left at the scene of an incident wherein injuries were suffered, there may be no physical evidence of a defect in the scooter and/or parts. Even if there were some malfunction, mechanical or otherwise, plaintiffs must prove that any injuries were the direct and proximate result of the scooter, rather than user error. These factual hurdles also have served to limit the number of lawsuits brought thus far.

There is an array of issues, legal and factual, that must be scrutinized upon receiving notice of a claim or suit. And, it is not simply the electric scooter companies that need to brace for an influx of claims – scooter and parts manufacturers are being sued right along with them.

© 2018 Wilson Elser

ARTICLE BY

Michael P. Manfredi
Wilson Elser Moskowitz Edelman & Dicker LLP

2018 Recap: State Responses to the Repatriation Transition Tax in the Tax Cuts and Jobs Act

Since the Tax Cuts and Jobs Act (TCJA) passed in December 2017, over 100 bills were proposed by state legislatures responding to the federal legislation. Thus far in 2018, nearly half of states have passed legislation responding to the TCJA. With some exceptions, in this year’s legislative cycles the state legislatures were primarily focused on the treatment of foreign earnings deemed repatriated and included in federal income under IRC § 965 (965 Income).

The STAR Partnership has been very involved in helping the business community navigate the state legislative, executive and regulatory reaction to federal tax reform, and IRC § 965 in particular. The STAR Partnership’s message to states has been clear: decouple from IRC § 965 or provide a 100 percent deduction for 965 income. The STAR Partnership emphasized that excluding 965 Income from the state tax base is consistent with historic state tax policy of not taxing worldwide income and avoids significant apportionment complexity and constitutional issues.

Most of the states that enacted legislation in response to the TCJA ultimately conformed to the recommendation of the STAR Partnership and did not tax a material portion of 965 Income. Of the states that enacted legislation in response to the TCJA, only one state explicitly decided to tax more than 20 percent of 965 Income. Below is a map prepared by the STAR Partnership illustrating the states’ responses to IRC § 965.

2018 STAR Partnership Success Stories Related to IRC § 965

Connecticut: Connecticut provides a dividends-received deduction for deemed dividends that, based on guidance from the Connecticut Department of Revenue Services, applies to 965 Income. A bill proposed by the Connecticut legislature would have deemed 10 percent of the dividend income to be a non-deductible expense attributable to such income. Due, in part, to advocacy efforts of the STAR Partnership and its members, the legislation that was ultimately adopted contained an expense attribution percentage of only 5 percent.

Hawaii: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support Hawaii’s decoupling from IRC § 965. When legislation was passed, Hawaii did decouple from IRC § 965.

Indiana: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support Indiana’s exclusion of 965 Income from the tax base. Indiana did enact legislation providing a 100 percent deduction for 965 Income, provided the taxpayer owns at least 80 percent of the foreign subsidiary.

Iowa: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support Indiana’s decoupling from IRC § 965. Iowa did enact legislation effectively decoupling from IRC § 965.

Kentucky: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support Kentucky’s decoupling from IRC § 965. Kentucky did enact legislation effectively decoupling from IRC § 965, at least with respect to taxpayers with calendar year CFCs.

Missouri: The STAR Partnership requested guidance from the Missouri Department of Revenue providing that 965 Income will be treated as a dividend and excluded from the state tax base under Missouri’s law, regardless of whether the taxpayer uses a three-factor or single-factor apportionment formula. The Department of Revenue issued the guidance that the STAR Partnership requested and, thus, pursuant to that guidance 965 Income is excluded from the Missouri state tax base for corporate taxpayers.

New Jersey: The New Jersey legislature proposed a special dividends tax on 965 Income, which would have resulted in tax being imposed on approximately 3 percent of total 965 Income. The STAR Partnership prepared talking points in opposition to the “special dividends tax” and sent a letter to the New Jersey legislature explaining that such tax was unconstitutional. Due to these efforts and the efforts of the STAR Partnership members, the legislature did not adopt the “special dividends tax.”

North Carolina: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support North Carolina’s decoupling from IRC § 965. The legislature ultimately enacted legislation providing a 100 percent deduction for 965 Income.

Oklahoma: Due in part to the advocacy efforts of the STAR Partnership, the Oklahoma Tax Commission has stated that it will issue regulations that would effectively exclude 965 Income from the Oklahoma apportionable tax base for most taxpayers.

South Carolina: The STAR Partnership prepared policy and technical talking points and worked with local advocates to support South Carolina’s decoupling from IRC § 965. The legislature did pass a statute decoupling from IRC § 965.

© 2018 McDermott Will & Emery

EPA Proposes to Clarify Areas Excluded from Clean Air Act’s Definition of “Ambient Air”

The U.S. Environmental Protection Agency (EPA) recently proposed a revised policy to clarify what constitutes “ambient air” under the Clean Air Act, which will directly affect what areas stationary sources of air emissions must model to determine the effect of their facilities on air quality. The revised policy will most notably affect sources that have to model air quality around their facilities to demonstrate compliance with National Ambient Air Quality Standards (NAAQS), as well as sources applying for air construction permits under the EPA’s Prevention of Significant Deterioration (PSD) permitting program.

Under current EPA regulations, ambient air is broadly defined as the portion of the atmosphere (external to buildings), that the general public has access. Areas where access is not available are not “ambient.” Sources are often required under the NAAQS and the EPA’s PSD program to model facility impacts on ambient air. Thus, excluding areas from “ambient air” eliminates the need to model emissions impacts on those areas.

Through various guidance documents and letters, the EPA’s historic policy has been to only exclude those areas from the definition of ambient air that are (1) owned or under the control of the source and (2) not accessible by the public due to some physical barrier (like a fence). This policy was rooted in the EPA’s interpretation of the definition of ambient air under 40 CFR §50.1(e), rather than explicit regulatory language.

The EPA now believes that its prior characterization that “physical barriers” must exist to exclude an area as ambient air is unnecessarily limiting. Under the EPA’s revised draft policy, a source may use various “measures,” not limited to mere “physical barriers,” to preclude public access. As a result, non-ambient air can include areas subject to video surveillance, signage, security patrols, or other measures provided that the measures “provide reasonable assurance that the general public will not have access.”

What does the EPA’s revised policy mean for stationary sources if implemented as proposed?

  1. Sources will have additional flexibility to determine what areas must be modeled for air quality analyses;
  2. The EPA’s proposed interpretation is a change in policy rather than a change in regulation, meaning that sources should still consider how their respective state or local permitting authorities interpret the meaning of ambient air;
  3. The draft policy appears to address only measures that a source can implement to preclude public access (e.g. install signs or physically patrol the area), as opposed to other physical conditions beyond fences that might already exist to preclude public access, such as roadways – this may be addressed in the final version of the EPA’s policy.

The EPA is accepting comments on its “Draft Revised Policy on Exclusions from ‘Ambient Air’” through December 21, 2018.

 

© 2018 Schiff Hardin LLP
This post was written by David M. Loring of Schiff Hardin LLP.

Federal Court Allows Challenge to Government Policy of Using Detained Immigrant Children as Bait to Arrest Families

A November 15th ruling in the District Court for the Eastern District of Virginia could have a major effect on the Trump Administration’s policy, which unnecessarily detains 1000’s of immigrant children for extended periods of time and which in effect traps certain sponsor’s of the detained immigrant children who try to claim them. The Government’s motion to dismiss a lawsuit brought on behalf of detained immigrant children was denied by the court on five of the six counts of the amended complaint allowing the lawsuit to move forward. Judge Leonie Brinkema’s decision also has implications for immigration battles to come, not only in Virginia but throughout the United States. (see J.E.C.M., a minor, by and through his next friend JOSE JIMENEZ SARAVIA, et al. v. SCOTT LLOYD, Director, Office of Refugee Resettlement, et al. Case No.1:18-CV-903-LMB ).

Legal Aid Justice Center (LAJC), together with the Washington, D.C. intellectual property law firm of Sterne, Kessler, Goldstein, and Fox(Sterne Kessler), brought this first-of-its-kind class action lawsuit on behalf of four minor immigrants challenging the Trump Administration’s recent policy of sharing the sponsor information of immigration children and information about the sponsors’ household members with U.S. Immigration and Customs Enforcement (ICE). This policy has resulted in the arrest of people who come forward to help undocumented migrant children including family and friends that came forward to bring their children home.

In April 2018, the Department of Health and Human Services (DHS) and the Department Health and Human Service (HHS) entered into an agreement, which went into effect May 13, 2018, for the Office of Refugee Resettlement (ORR), the branch of HHS that is in charge of housing immigrant children, to transfer fingerprints and other information on immigrant children’s sponsors and other adult members of the sponsor’s household to ICE.

As reported by the Guardian in September:  ICE’s acting deputy director, Matthew Albence, said at a Senate committee hearing:

We’ve arrested 41 individuals thus far.  Our data that we’ve received thus far indicates close to 80% of the individuals that are either sponsors or household members of sponsors are here in the country illegally, and a large chunk of those are criminal aliens. So we will continue to pursue those individuals.

The November 15th ruling stems from a case where four children were detained and held in custody for a five-month period by the ORR in Virginia, while their relatives attempted to bring them home.

The children involved in the lawsuit claimed they were fleeing violence and neglect in their home countries of Honduras and Guatemala. Honduras, El Salvador, and Guatemala, consistently rank among the most violent countries in the world. Together these countries form a region known as the Northern Triangle, whose extreme violence stems from civil wars in the 1980s, which left a legacy of violence and fragile governmental institutions. The region remains menaced by corruption, drug trafficking, and gang violence despite tough police and judicial reforms according to the Council on Foreign Relations.

In this case, three of the four detained children were reunited with their families weeks before the court’s ruling. One of the children was reunited only one week before the court’s decision. For the three children who were released from custody first, their cases were dismissed by the court. The court allowed the case to go forward for the fourth child, who remained in custody for a six-month period and was held apart from his sister for the duration of the proceedings.

Groups including the Center for Human Rights & Constitutional Law and the LAJC’s lead attorney on the case, Becky Wolozin, say the lawsuit highlights how:

The Trump administration has been carrying out a backdoor family separation agenda, keeping immigrant children apart from their families and using children as bait to break up the very families they have traveled so far and risked so much to join.

Working alongside Sterne Kessler, Wolozin and the LAJC challenged the ICE Policy for unaccompanied children entering the country and other related issues, which has resulted in arrests of families and friends trying to bring their children home. With more than 13,000 children being held by the ORR, this case’s outcome will possibly impact all families covered under the Administration’s current detainment policies. 

Wolozin goes onto highlight the importance of this decision as being “An important victory and decision for immigrant families and children who are being detained.” Per Wolosim, Judge Brinkema acknowledged Constitutional violations in this case and the violation of the Administrative Procedure Act (APA) in administering her decision.

Stern Kessler Director, Salvador Bezos, head of the firm’s immigration pro bono practice, says, “For years, ORR has neglected its obligations under the Administrative Procedure Act.” Bezos further noted, “The APA provides essential protections against this kind of agency overreach. I am proud of my colleagues’ and LAJC’s efforts to force the government to meet its obligations to the children in its custody.”

LAJC’s Legal Director of the Immigration Advocacy Program, Simon Sandoval-Moshenberg, also weighed in on the decision, saying “ORR is supposed to protect vulnerable immigrant children. Instead, it is placing them in harm’s way under the guise of child welfare.” “[These] policies and their enforcement undermine successfully placing children with their families and the vast surveillance actions are destabilizing immigrant communities.”

Wolozin, further details the importance of the decision. She states:

The exponential increase in the number of immigrant children in government custody has not been caused by more children crossing the border, but instead by ORR’s own policies dramatically increasing the amount of time ORR holds children in its custody. In denying the motion to dismiss, Judge Brinkema recognized the failure of due process for these children and their families, the disregard for the requirements of the Administrative Procedure Act, and importantly, the tantamount importance of protecting all people’s constitutional right to family unity, even when not between a parent and a child.

The Virginia case will move forward as LAJC works to certify the class and the parties work to complete discovery.

Monday another setback for the Trump Administration was issued by Judge Jon S. Tigar of the United States District Court in San Francisco, which may at least temporarily, stall the administration’s attempt to clamp down on the rights of immigrants seeking asylum in response to the wave of Central Americans crossing the border. Judge Tigar ordered the Trump administration to resume accepting asylum claims from migrants no matter where or how they entered the United States. “Whatever the scope of the president’s authority, he may not rewrite the immigration laws to impose a condition that Congress has expressly forbidden,” Judge Tigar wrote in his order and issued a temporary restraining order that blocks the government from carrying out a new rule issued this month that denies protections to people who enter the country illegally. The order, which suspends the rule until the case is decided by the court, applies nationally.

 

Copyright ©2018 National Law Forum, LLC
This post was written by Jennifer Schaller and Alessandra de Faria of the National Law Review.