The National Law Forum

Why October 1, 2014 Is An Important Date For Management Persons Of Nevada Entities

Two years ago, the Nevada Supreme Court in an en band decision held that a state district court may exercise jurisdiction over the nonresident officers and directors of a Nevada corporation with its principal place of business in Spain. Consipio Holding, BV v. Carlberg, 282 P.3d 751 (Nev. 2012). The Supreme Court reasoned

When officers or directors directly harm a Nevada corporation, they are harming a Nevada citizen. By purposefully directing harm towards a Nevada citizen, officers and directors establish contacts with Nevada and “affirmatively direct [] conduct” toward Nevada.

At the time, Nevada, unlike Delaware, had no implied consent statute. Thus, the Nevada Supreme Court’s holding was based on Nevada’s long-arm statute, NRS 14.065(1).

In the ensuing session, the Nevada legislature decided to address the issue as well by enacting an implied consent statute:

Every nonresident of this State who, on or after October 1, 2013, accepts election or appointment, including reelection or reappointment, as a management person of an entity, or who, on or after October 1, 2014, serves in such capacity, and every resident of this State who accepts election or appointment or serves in such capacity and thereafter removes residence from this State shall be deemed, by the acceptance or by the service, to have consented to the appointment of the registered agent of the entity as an agent upon whom service of process may be made in all civil actions or proceedings brought in this State by, on behalf of or against the entity in which the management person is a necessary or proper party, or in any action or proceeding against the management person for a violation of a duty in such capacity, whether or not the person continues to serve as the management person at the time the action or proceeding is commenced. The acceptance or the service by the management person shall be deemed to be signification of the consent of the management person that any process so served has the same legal force and validity as if served upon the management person within this State.

NRS 75.160(1). Under the statute, an “entity” means a corporation, whether or not for profit; limited-liability company; limited partnership; or a business trust. NRS 78.160(10)(b). A “management person” means a director, officer, manager, managing member, general partner or trustee of an entity. NRS 75.160(10)(c).

Apparently, the Nevada legislature did not consult with Professor Eric Chiappinelli who last year published an article arguing that Delaware’s implied consent statute was unconstitutional. The Myth of Director Consent: After Shaffer, Beyond Nicastro, 37 Del. J. Corp. L. 783 (2013).

Why does the statute refer to October 1? Pursuant to NRS 218D.330(1), each law and joint resolution passed by the Legislature becomes effective on October 1 following its passage, unless the law or joint resolution specifically prescribes a different effective date.

Article By:

Keith Paul Bishop

Allen Matkins Leck Gamble Mallory & Natsis LLP

Social Media Marketing – New FTC (Federal Trade Commission) Guidance On Generating “Buzz”

For the first time since it issued its Guides Concerning the Use of Endorsements and Testimonials in Advertising in 2009, the FTC has provided new guidance on the use of social media to generate consumer interest (or “buzz”) in a brand.

Shoe manufacturer Cole Haan had a great social media marketing idea. They would run a contest through Pinterest. The winner would get a $1,000 shopping spree courtesy of Cole Haan. To enter, Pinterest users had to “pin” images of Cole Haan shoes on Pinterest. They even came up with a great slogan for the campaign: “Wandering Sole.” Finally, so that people could find the images easily, contestants were required to include the hash tag “#wanderingsole” in their pin descriptions.

This was a great marketing idea. Lots of Pinterest users would post pictures of Cole Haan’s product on Pinterest and generate buzz about Cole Haan shoes. Here is what one Pinterest page currently looks like:

There was only one problem; the Federal Trade Commission.

The FTC considered the posting of images of Cole Haan shoes by Pinterest users to be endorsements of the product. To be clear, the issue was not whether the Pinterest users actually intended to endorse the brand. Rather, the concern was whether viewers of the image might perceive the posting of the images to be endorsements. As such, the FTC investigated the marketing practice and issued a closing letter to Cole Haan regarding their investigation.

As stated in the closing letter, the FTC thought that the since the Pinterest “pins” constituted an endorsement, there should have been a “clear and conspicuous” disclosure concerning the fact that the “endorsers” (i.e., the Pinterest users entering the contest) were being compensated for their endorsement, namely, the chance to win the $1,000 shopping spree. The FTC did not believe that the “#Wanderingsole” hash tag was sufficient to provide this required disclosure. Fortunately, the FTC did not take enforcement action against Cole Haan, recognizing that the FTC had not squarely addressed this issue before.

So finally, we get to the point of this post. While I understand the FTC’s point (I really do), I think social media marketers will need more specific bright line guidance as to what type of disclosure is required. The reason is that in the social media context, the amount of text that may be capable of devoting to such disclosure can be very limited. It is noteworthy that the 2009 guidance issued by the FTC provided numerous examples to help us identify when endorsement disclosure s would be required. Not one of those examples, however, indicated what would constitute a sufficient disclosure.

In fact, one of the comments submitted (by Heath-McLeod) in connection with the 2009 guidelines requested that the FTC provide “minimum standards for the size and clarity of disclosures.” The FTC expressly rejected this request saying that:

“advertisers flexibility to meet the specific needs of their particular message is often preferable to attempting to mandate specific language, font, and other requirements applicable across-the-board to all ads. Advertisers thus have always been free under the Guides to make their disclaimers as large and clear as they deemed appropriate to convey the necessary information to consumers”

That’s good, I suppose. Advertisers need some freedom to do what they think is appropriate in the context of their marketing. But how, as a practical matter, are advertisers supposed to get comfortable that the disclosure they give is sufficient? For example, would it have been sufficient for the Pinterest users to have included the word “sponsored” in their pin description? How about just the word “ad?” Would that have been sufficient? It’s not clear.

Consider, for example, the fact that a similar disclosure having to be made through Twitter or using SMS (i.e., texting) might be very difficult given the 140 character limit. Now, consider further that the FTC guidelines for endorsements also require an additional disclosure when the person depicted in the endorsement is not a real consumer of the product. Perhaps Cole Haan’s hash tag should have read:

“#These pins are part of a contest. Contestants may win prize for posting pins of Cole Haan products. Persons in such pins may not be actual consumers of the pinned product”

Darn, that’s 141 characters. Maybe if I get rid of the “#” ….

Article By:

Kurt E. Anderson

Giordano, Halleran & Ciesla, P.C.

Unpaid Employer Contributions as Plan Assets: Expansion Of Liability Under ERISA (Employee Retirement Income Security Act)

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), requires trustees of multiemployer pension and benefit funds to collect contributions required to be made by contributing employers under their collective bargaining agreements (“CBAs”) with the labor union sponsoring the plans. This is not always an easy task—often, an employer is an incorporated entity with limited assets or financial resources to satisfy its contractual obligations. In some instances, an employer will resort to filing for bankruptcy to obtain a discharge of its debts to the pension or benefit funds.

In a distinct trend, federal courts have found that, depending on the text of the underlying plan documents, unpaid employer contributions due under a CBA may be viewed as plan assets, such that the representatives of an employer who exercise fiduciary control over those plan assets can be held individually liable for the unpaid amounts (together with interest and penalties) under ERISA. These cases will no doubt help plan trustees and administrators collect monies owed to the plan. They also should serve as cautionary warnings to contributing employers to ensure that they fully understand the obligations that they are undertaking when they agree to contribute to ERISA funds pursuant to CBAs.

Background

In the typical scenario, an employer will agree under one or more of its CBAs to make specified contributions to fund the pension and health and welfare benefits promised to plan participants under the trust fund’s plan of benefits. If an employer fails to timely remit those payments in violation of the CBA and the plan’s rules, the trustees of the fund have a legal duty to attempt to recover the unpaid contributions unless, after fully examining the facts and circumstances, the trustees conclude that the likelihood of recovery is outweighed by its costs. What happens if the trustees expend the fund’s resources to seek to collect the unpaid obligations and obtain a judgment against the employer, only to find the company’s coffers empty? Or what if the company files for bankruptcy?

Unlike employee contributions, which under U.S. Department of Labor regulations are explicitly deemed to be plan assets, employer contributions are typically found to be contractual obligations that do not become plan assets until such amounts are paid by the employer to the trust fund. Hence, while an employer’s failure to remit an employee contribution relegates the employer to the status of an ERISA plan fiduciary because it is has authority and control over plan assets, employer contributions have generally been held not to constitute plan assets. As a result, an employer who fails to make its contributions due under the CBA may have committed a contractual violation but has not breached an ERISA fiduciary duty.

The Potential for Individual Fiduciary Liability

Recently, courts have regularly carved out an exception to the general rule that unpaid contributions are not plan assets by finding that employer contributions are plan assets where the CBA explicitly defines them as such. In such cases, these courts will then proceed to consider the next question of whether the officers, directors or other representatives of such employer exercised a level of control over corporate assets sufficient to make them an ERISA plan fiduciary and thus individually liable for the contributions—effectively stripping them of the protections of the corporate form. Furthermore, if elevated to the status of a fiduciary breach, the debt may not be dischargeable in a bankruptcy proceeding. Thus, the plan could proceed to collect the unpaid contributions against the principals of the debtor personally.

For over a decade, some federal district courts in the Second Circuit have applied a two-part test in delinquent employer contribution cases to find that: (i) such contributions are plan assets when so specified by the CBA; and (ii) the principals of the employer are an ERISA plan fiduciary. More recently, the Second Circuit concluded that delinquent contributions were not plan assets where there were no provisions in the relevant plan documents that stated that unpaid contributions are assets of the plan. See In re Halpin, 566 F.3d 286 (2d Cir. 2009). The Court expressly stated, however, that “the trustees were free to contractually provide for some other result.” It further noted that merely finding that delinquent contributions constitute plan assets does not end the inquiry. A court must also determine whether an individual defendant has exercised sufficient fiduciary conduct over the unpaid contributions to be found to be a plan fiduciary under ERISA.

While the Court’s statements were extraneous to the holding of the case, some district courts within the Second Circuit have seized upon this language and have cited In re Halpin for the proposition that employer contributions can be plan assets where the plan documents so provide. See, e.g., Trustees of Sheet Metalworkers Int’l Assoc. v. Hopwood, 09-cv-5088, 2012 WL 4462048 (S.D.N.Y. Sept. 27, 2012); Sullivan v. Marble Unique Corp., 10-cv-3582, 2011 WL 5401987, at *27 (E.D.N.Y. Aug. 30, 2011).

Similarly, the Eleventh Circuit, in ITPE Pension Fund v. Hall, 334 F.3d 1011 (11th Cir. 2003), held that delinquent contributions can constitute plan assets when explicitly provided for in the plan documents and corporate officers are plan fiduciaries with respect to those assets. The Court demanded a high level of clarity in the plan documents, however, regarding the delinquent contribution’s status as plan assets. It explained that when a corporation is delinquent in its contributions, the fund “has a sufficient priority on the corporation’s available resources that individuals controlling corporate resources are controlling fund assets. This in effect places heavy responsibilities on employers, but only to the extent that . . . an employer freely accepts those responsibilities in collective bargaining.”

In addition, district courts in the Third, Fourth, and Ninth Circuits have found that employer contributions constitute plan assets when the plan documents so provide. See, e.g., Trustees of Construction Industry and Laborers Health & Welfare Trust v. Archie, No. 2:12-cv-00225 (D. Nev. Mar. 3, 2014) (holding that unpaid contributions were plan assets based upon the CBA’s language and finding that the company principals’ acts and responsibilities demonstrated sufficient control and authority over the company’s operations and financials to qualify as ERISA fiduciaries); Galgay v. Gangloff, 677 F. Supp. 295, 301 (M.D. Penn. 1987) (refusing to dismiss fiduciary breach claims for alleged failure to pay delinquent contributions based upon the “clear and undisputed language [of the agreement] stating that title to all monies ‘due and owing’ the plaintiff fund is ‘vested’ in the fund,” rendering “any delinquent employer contributions vested assets of the plaintiff fund.”; Connors v. Paybra Mining Co., 807 F. Supp. 1242, 1246 (S.D.W.V. 1992) (finding company officers personally liable for delinquent contributions that were plan assets based upon CBA’s language since they breached their fiduciary duty by exercising authority over those assets by favoring other creditors over the fund); see also Secretary of Labor v. Doyle, 675 F.3d 187 (3d Cir. 2012) (holding that district court erred in failing to determine whether payments collected from various employers were plan assets subject to ERISA).

District courts in the Sixth Circuit have even signaled support for finding that contributions are plan assets as soon as they become due, “regardless of the language of the benefit plan.” See, e.g., Plumbers Local 98 Defined Benefit Funds v. M&P Master Plumbers of Michigan, Inc., 608 F. Supp. 2d 873, 879 (E.D. Mich. 2009) (holding company principal personally liable for delinquent contributions since “the CBA and trust agreements . . . treat these unpaid contributions as inalienable plan assets” and signaling support for holding delinquent contributions plan assets “regardless of the language of the benefit plan.”).

In a related context, a federal bankruptcy court recently refused to discharge a debtor’s debt for delinquent contributions based upon the Bankruptcy Code’s “defalcation in the performance of fiduciary duty” exception. See In re Fahey, 494 B.R. 16 (Bankr. D. Mass. 2013). Although the court initially found that the debtor lacked the necessary discretion for fiduciary status under ERISA because the “option to breach a contract does not constitute discretion in the performance of one’s duty,” the United States Bankruptcy Appellate Panel for the First Circuit reversed. The Panel ruled that “even if an ERISA fiduciary does not per se satisfy the § 523(a)(4) requirement for ‘fiduciary capacity,’ an analysis of [the Debtor’s] control and authority over the plan in functional terms nonetheless yields the conclusion that he acted as a fiduciary of a technical trust imposed by common law.” On remand, the bankruptcy court found that the debtor prioritized payments that were personally beneficial over his obligations to the ERISA funds and, consequently, committed defalcation as contemplated by the Bankruptcy Code.

View from Proskauer

Although the general rule that employer contributions do not constitute plan assets until actually received by the trust fund continues, recent decisions indicate an increased willingness by courts to carve out an exception to this rule. Funds looking to protect their ability to collect contributions should explicitly define in the plan documents and agreements with employers that plan assets also include all unpaid contributions in the hands of the employer. Employers should be fully cognizant of these provisions; otherwise its officers, directors and other representatives who choose to pay other creditors rather than the trust fund might be held personally liable for the unpaid amounts and interest and penalties, and possibly be unable to escape this liability through bankruptcy.

Article By:

Neal S Schelberg

Aaron Feuer

Of:

Proskauer Rose LLP.

Target Becomes a Target: Proposed California Bill Aims to Make Retailers Liable for Data Breach Incidents

Following a string of high-profile data breaches and new data suggesting that approximately 21.3 million customer accounts have been exposed by data breach incidents over the past two years, the California legislature has introduced legislation aimed at making retailers responsible for certain costs in connection with data breach incidents. If passed in its current form, Assembly Bill 1710, titled the Consumer Data Breach Protection Act, would have a substantial impact on retailers operating in California.

Among the major changes proposed in the bill:

Stricter Notification Requirements. The proposed bill would create stricter time-frames and specific requirements for notification of affected consumers following a data breach incident. In addition to current requirements to notify consumers individually in the most expedient time possible, a retailer affected by a data breach will be required, within 15 days of the breach incident, to provide email notification to affected individuals, post a general notice on the retailer’s web page and notify statewide media.
Retailer Liability for Costs Associated with Data Breach Incidents. A.B. 1710 would amend California’s Civil Code to make retailers liable for reimbursement of expenses incurred in providing the notices described above, as well as the cost of replacing payment cards of affected individuals.
Mandatory Provision of Credit Monitoring Services. If the person or business required to provide notification under the Civil Code is the source of the breach incident, A.B. 1710 will require that person or business to offer to provide identity theft prevention and mitigation services at no cost to affected consumers for not less than 24 months.
Prohibitions Against Storing Payment-Related Data. Under a new section to be added to the Civil Code, persons or businesses who sell goods or services and accept credit or debit card payments would be prohibited from storing payment-related data unless that person or business stores and retains the data in accordance with a payment data retention and disposal policy that limits retention of the data to only the amount of time required for business, legal and regulatory purposes. In addition, A.B. 1710 imposes further restrictions on the retention and storage of certain sensitive authentication information, such as social security numbers, drivers’ license numbers and PIN numbers.
Authorization of Civil Penalties. As amended by A.B. 1710, the Civil Code would authorize a prosecutor to bring an action in response to a data breach incident to recover civil penalties of up to $500 per violation, or up to $3,000 for a willful or reckless violation.

Historically measures like A.B. 1710 have faced a difficult road. Similar bills passed by the California legislature were vetoed twice by Governor Schwarzenegger, and the proposal of A.B. 1710 has already caused the California Retailers Association to speak out against the bill. However, there may be a critical difference in the current climate because consumer awareness of the danger and reality of breach incidents has never been higher and, as shown by the recent Harris Poll, consumers overwhelmingly believe that merchants are to blame.

Article By:

Jake Romero

Of:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Only one week until the Trademark Infringement & Litigation Summit – April 28-29, San Francisco

The National Law Review is pleased to bring you information about the upcoming Trademark Infringement & Litigation Summit hosted by IQPC.

When

Monday April 28 & Tuesday April 29, 2014

Where

San Francisco, California, USA

Trademark law may not be changing, but its application certainly has and will continue to do so. Brands are increasingly global, which opens up new possibilities for companies… but also new trademark issues and potential pitfalls. The online experience adds to this global focus and changes the interaction between brands and consumers dramatically.

IQPC’s Trademark Infringement & Litigation Summit will address the topics that you grapple with on a daily basis, including:

How business and infringement concerns guide strategic registration and vigilance
Methods of enforcing your mark, including a “soft approach,” ICANN dispute resolution, cancellation and opposition
Litigation and enforcement management
Evolving company domain name strategy

Perhaps the biggest benefit of attending, however, is the practical, frank conversation about the legal and business choices involved in protecting and maintaining your brand. Attend the Trademark Infringement & Litigation Summit to work through these issues with your colleagues.

Do not miss your opportunity to network and engage with top in-house and outside counsel working in the area. Register today!

NOTE: IQPC plans on making CLE credits available for the state of California (number of credits pending). In addition, IQPC processes requests for CLE Credits in other states, subject to the rules, regulations and restrictions dictated by each individual state. For any questions pertaining to CLE Credits please contact: amanda.nasner@iqpc.com.

"Rails to Trails" or "Rails to Trespass": Supreme Court Speaks on the Abandonment of Certain Railroad Rights of Way

Last month, the Supreme Court of the United States (please, there is no such thing as the “United States Supreme Court”) decided a very interesting case about easements. “Easements?”, you ask. Yes, easements. We use them almost every day. Well, every weekend, perhaps. Greenways. Rails to trails. Beach access. You name it. Also, the case is interesting because it holds the Federal Government to a much older (1940-old, which is old) argument it made about easements, and which contradicts the Government’s argument in this recent case.

We’re talking today about Marvin M. Brandt Revocable Trust v. United States, No. 12-1173 (March 10, 2014).

Facts.

In 1875, to encourage settlement of the West and to entice railroads to develop, Congress passed the General Railroad Right-of-Way Act, which granted to “any railroad” a “right of way through the public lands of the United States” to the “extent of 100 feet on each side of the central line” provided the railroad either (1) actually constructed its railroad or (2) filed a proposed map of its rail corridor. From that day forward, after the right of way is obtained, “all such lands over which such right of way shall pass shall be disposed of subject to the right of way”.

In 1908, pursuant to the Act, the Laramie[,] Hahn’s Peak & Pacific Railway Company obtained a 66-mile, 200-foot wide right of way through southern Wyoming. By 1911, the Railway had completed construction of its railroad over the Act-granted right of way.

In 1976, the United States patented an 83-acre parcel to the Brandt family, conveying fee simple title but reserving and excepting certain rights-of-way and easements “to the United States”. For purposes of our discussion today, we’ll focus on the reservation and exception that the land was patented “subject to those rights for railroad purposes as have been granted to the Laramie[,] Hahn’s Peak & Pacific Railway Company.” That right of way stretched for nearly 1/2-mile across the Brandt parcel, covering 10 of the 83 acres. As noted by the Court, “[t]he patent did not specify what would occur if the railroad abandoned this right of way”.

The rail line owning the right of way changed hands a number of times, ending with the Wyoming and Colorado Railroad. In 1996, the Railroad notified the Surface Transportation Board of its intention to abandon the right of way.

The Lawsuit.

In 2006, the United States filed this lawsuit seeking a judicial declaration that the right of way had been abandoned and an order quieting title to the right of way in the United States. All property owners along the right of way settled or defaulted but for the Brandts, which took issue with the attempt to quiet title in the United States.

The Brandts contend that the “stretch of the right of way crossing [the Brandt] family’s land was a mere easement that was extinguished upon abandonment by the railroad, so that, under common law property rules, [the Brandts] enjoyed full title to the land without the burden of the easement”.

The United States “countered that it had all along retained a reversionary interest in the railroad right of way—that is, a future estate that would be restored to the United States if the railroad abandoned or forfeited its interest”. In this sense, the United States is arguing that the 1875 Act created something more than an easement, the latter working as the Brandts indicate. It is this “implied reversionary interest” in the United States that underlies the dispute.

The trial court granted summary judgment to the United States, and the appellate court affirmed. The Supreme Court granted certiorari, and reversed. In an 8-1 decision, the Court determined the Brandts held title to their 83 acres free and clear of the abandoned easement. The other landowners are SOL.

The Majority.

The Majority’s decision sits on two pillars: (1) the common law nature of easements and (2) an earlier argument from the United States’, on which the United States succeeded, that supports the Brandts’ position and contradicts the United States’ position in this lawsuit.

First, the common law nature of easements. Citing myriad secondary sources, the Court notes that an easement is a “nonpossessory right to enter and use land in the possession of another”, which “disappears” if the beneficiary “abandons” at which point “the landowner resumes his full and unencumbered interest in the land”. Thus, the railroad’s decision to abandon and ruling that it had abandoned “resume[d]” in the Brandts their patented interest in the property.

Second, the United States’ inconsistency. In what appears to be a point of order first raised before the Supreme Court — there is no mention of this at either the trial court or the appellate court level — the Court notes that the United States argued successfully in 1940, adopted by the Court “in full”, that the 1875 Act “clearly grants only an easement, and not a fee”. See Great Northern Railway Co. v. United States, 315 U.S. 262 (1942). Thus, the United States cannot now argue that the 1875 Act creates something more than an easement, with an implied reversionary interest in the United States after abandonment. Of course, if you’re the United States, there is likely nary an argument you haven’t made before.

The Dissent.

The dissent takes the position that railroad rights of way have always been treated differently than ordinary easements, and rightfully so, as sui generis property rights not governed by the common law regime. In the context of railroad rights of way, the dissent points out, “traditional property terms like ‘fee’ and ‘easement’ do not neatly track common-law definitions” as the rights of way have characteristics of both easements and fee. The dissent insists that precedent, including the decision in Great Northern Railway, is clear that railroad rights of way were granted by the 1875 Act “with an implied possibility of reverter in the United States”.

And then the dissent gets real, which is our jam: “By changing course today [from prior precedent regarding railroad rights of way and implied reversionary interests in the United States], the Court undermines the legality of thousands of miles of former rights of way that the public now enjoys as means of transportation and recreation.” Yep, those trails, which had been rails, could likely fail.

rails to trails
“Trespass your way around Town by bike, jog, or stroll.”

Article By:

Michael C. Thelen

Of:

Womble Carlyle Sandridge & Rice, PLLC

Blowing The Whistle On Fraud In The Banking Industry [VIDEO]

The Department of Justice very actively pursues cases involving fraud in the banking industry, and through a law known as the Financial Institutions Anti-Fraud Enforcement Act, is authorized to pay very substantial rewards to whistleblowers that provide the Department of Justice with information about such fraud.

The law covers both fraud on banks, but also fraud by banks. It also covers other types of unlawful conduct effecting banking, such as embezzlement of bank funds, or the payment of kickbacks to bank loan officers.

Under this banking whistleblower program, the Department of Justice can pay whistleblower awards of up to 30% of the amounts recovered by the government in banking fraud cases.

The law has a number of very unique procedures that govern how information has to be presented to the Department of Justice, which must be followed by a whistleblower who wishes to preserve his or her right to receive a reward. The whistleblower must also file a sworn statement with the Department of Justice, here in Washington, D.C. at its main headquarters, pursuant to those procedures. It is also recommended that a qui tam whistleblower under this banking fraud program submit a legal memorandum to the Department of Justice, explaining the legal theories behind the case.

If you have information concerning a potential case involving banking fraud, do not hesitate to take action. It is possible that you might be able to bring your own lawsuit under the Financial Institutions Anti-Fraud Enforcement Act, acting as a whistleblower on behalf of the US government. Before filing your lawsuit, be sure to consult with an attorney familiar with the intricacies of this law, as these attorneys are best equipped to help protect your rights and help you gain your share of any monetary reward from a potential settlement.

Article By:

Whistleblower Practice Group

Of:

Tycko & Zavareei LLP

Employer Used As Means to Commit Crime not a Victim under Restitution Act, Fourth Circuit Court Rules

The Mandatory Victims Restitution Act of 1996 (“MVRA”) provides that a victim of a federal crime may be entitled to an order of restitution for certain losses suffered as a direct result of the commission of the crime for which the defendant was convicted. A question that courts sometimes face is whether a company can be considered a “victim” under the MVRA if an employee uses that company as an instrument to defraud the federal government.

Looking at this issue, the U.S. Court of Appeals for the Fourth Circuit on April 4, 2014, declined to allow a company’s bankruptcy estate to receive restitution for a large debt caused by an owner/employee’s fraud because that company was used as an instrument for that fraud. In re Bankruptcy Estate of AGS, Inc., No. 12-cr-113 (4th Cir., April 4, 2014).

Dr. Allen G. Saoud was convicted after a June 2013 jury trial of five counts of health care fraud. Dr. Saoud, who is a dermatologist, in 2005 was excluded from participating in Medicare and Medicaid for 10 years. He then plotted to maintain ownership and control of his dermatology practice, AGS, Inc. in violation of the exclusion. He founded a new dermatology practice and transferred all of his patients to this new practice. After selling his new practice to Dr. Fred Scott for $1.8 million, Dr. Saoud then sold AGS, which had lost its value, for $1 million to nurse practitioner Georgia Daniel. Despite these sales, he continued to control and profit from both entities, partly by collecting Medicare and Medicaid reimbursement funds.

After Dr. Saoud was convicted, the estate of AGS, Inc., which had filed for bankruptcy, sought a $1 million restitution award to cover bankruptcy creditor claims that stemmed partly from the underlying fraud. The district court declined. The Estate of AGS, Inc. then filed a writ of mandamus with the Fourth Circuit.

The Fourth Circuit also refused to award restitution to the Estate. The Court held that Dr. Saoud used AGS, Inc. as an instrument in his scheme to illegally obtained Medicare and Medicaid funds, and as such, the Court declined to “also hold that AGS was one of the scheme’s victims.”

AGS, Inc. should be a source of concern to companies that have sustained losses as a result of employee fraud. If an employee, director, officer or owner uses a company to defraud the government and that company incurs tax or other debt liability as a result of that fraud, that company may not be able to receive restitution under the MVRA. Jackson Lewis attorneys are available to advise companies on the scope of the Mandatory Victims Restitution Act and their rights in collecting amounts lost to criminal acts.

Article By:

Ramsay C. McCullough

Of:

Jackson Lewis P.C.

The President’s Methane Reduction Strategy – Here’s What Energy Companies Need to Know

President Obama recently released a Strategy to Reduce Methane Emissions (Strategy) that sets forth a multi-pronged plan for reducing methane emissions both domestically and globally. Domestically, the plan is to focus on four sources of methane—the oil and gas sector, coal mines, agriculture and landfills—and to pursue a mix of regulatory actions with respect to those sources. Energy companies now have the opportunity to help influence exactly what those actions will be.

For the oil and gas sector, the Strategy indicates that the federal government will focus primarily on encouraging voluntary efforts to reduce methane emissions—such as bolstering the existing Natural Gas STAR Program and promoting new technologies. But the Strategy also identifies two areas of potential mandatory requirements. First, later this year, the Bureau of Land Management (BLM) will issue a draft rule on minimizing venting and flaring on public lands. Regulated parties will have the opportunity to submit comments after the proposed rule is released. Second, the Strategy confirms that the Environmental Protection Agency (EPA) will decide this fall whether to propose any mandatory methane control requirements on oil and gas production companies. Consistent with that announcement, on April 15, 2014, EPA released five technical whitepapers discussing methane emissions from the oil and gas production process. The agency is soliciting comments on those whitepapers—they are due by June 16, 2014.

For coal mines, the Strategy indicates that BLM will soon be seeking public input on developing a program to capture and sell methane from coal mines on public lands. The Strategy further indicates that EPA will continue promoting voluntary methane capture efforts.

For landfills, the Strategy calls for public input on whether EPA should update its regulations for existing solid waste landfills, indicates that EPA will be proposing new regulations for future landfills, and indicates that EPA will continue to support the development of voluntary landfill gas-to-energy projects.

For agriculture, the Strategy does not suggest any new regulatory requirements. Instead, it indicates that EPA and the Department of Energy will work to promote voluntary methane control efforts and that those agencies will place special emphasis on promoting biogas—starting with the release of a “Biogas Roadmap” in June 2014.

In addition to these sector-specific approaches, the Strategy emphasizes the need for improved methane measurement and modeling techniques, both domestically and globally. All of the topics covered by the Strategy are ones about which regulated parties may want to submit comments—to EPA, BLM and/or the Office of Management and Budget.

Article by:

Jacob Hollinger

Jessica Bayles

Of:

McDermott Will & Emery

Privacy, Behavioral Health and Hospital Regulations: Recent Developments in Wisconsin Law [VIDEO]

In recent months, the Wisconsin legislature has passed several bills relating to health information privacy, treatment of behavioral health patients, and regulation of hospitals. Please view this webcast that will provide a summary of the legislative action and tips for complying with the new law.

http://player.vimeo.com/video/90057974

Health Law Check-Up Webcast: Recent Developments in Wisconsin Law

Article By:

Meghan C. O’Connor

Ralph V. Topinka

Of:

von Briesen & Roper, S.C.

The National Law Forum