The National Law Forum

Washington D.C. Living Wage Increased to $13.40, Retroactive to January 2013

In the first change since 2010, the wage rate required by the Washington D.C. Living Wage Act has been increased to $13.40 per hour. The increase is retroactive to January 2013.

The Act, which went into effect June 8, 2006, requires recipients of D.C. contracts or government assistance (e.g., grant, loan or tax increment financing) to pay affiliated employees and subcontractors who perform services under the contracts no less than a specified living wage. Limited exemptions apply to services performed under collective bargaining agreements and prevailing wage law wage determinations with higher rates, among others.

Certain home health workers (e.g., those working at home care agencies, community residential facilities, or group homes for individuals with developmental disabilities) now are considered covered by the Act, as well. Home health workers providing services as part of a managed care organization, however, remain exempt.

Because the rate increase is retroactive to January 2013, affected workers are entitled to back pay. However, contractors can request a waiver if they can prove “significant financial hardship.” It is unclear whether the retroactive-pay provision will be enforceable and, if so, whether contractors and government assistance recipients will be successful in charging retroactive pay to the D.C. contracting agency or funding authority with which they worked.

Finally, another rate increase is likely (“likely” as opposed to “certain,” since the law requires annual updates, but the District missed them for three years in a row) as the District has announced the 2014 calculation will be published no later than March 1st.

The Living Wage Act has a posting requirement and employee’s rights are enforced under the D.C. Wage Payment and Collection Law.

Article by:

Leslie A. Stout-Tabackman

Of:

Jackson Lewis P.C.

Wisconsin Supreme Court Upholds Broad Asbestos Exclusion

In Phillips v. Parmelee, 2013 WI 105 (Dec. 27, 2013), the Wisconsin Supreme Court upheld the validity of a broad asbestos exclusion.

In 2006, Daniel Parmelee and Aquila Group (“Sellers”) sold an apartment building to Michael Phillips, Perry Petta and Walkers Point Marble Arcade, Inc. (“Buyers”) covered by an American Family business owners policy. Prior to selling the building to Buyers, Sellers received a property inspection report noting the probable presence of asbestos. However, Buyers claimed Sellers never put them on notice that the property probably contained asbestos and eventually filed suit.

The trial court granted American Family’s motion for declaratory judgment due to the policy’s broadly worded asbestos exclusion. The court of appeals upheld the trial court’s decision.

The asbestos exclusion at issue stated as follows:

This language does not apply to … “property damage” … with respect to:

a. Any loss arising out of, resulting from, caused by, or contributed to in whole or in part by asbestos, exposure to asbestos, or the use of asbestos. “Property damage” also includes any claim for reduction in value of real estate or personal property due to its contamination with asbestos in any form at any time.

b. Any loss, cost, or expense arising out of or in any way related to any request, demand, order, or statutory or regulatory requirement that any insured or others identify, sample, test for, detect, monitor, clean up, remove, contain, treat, detoxify, neutralize, abate, dispose of, mitigate, destroy, or any way respond to or assess the presence of, or the effects of, asbestos.

….

f. Any supervision, instructions, recommendations, warnings or advice given or which should have been given in connection with any of the paragraphs above.

The only issue presented to the Wisconsin Supreme Court was whether the asbestos exclusion in the American Family policy precluded coverage for the losses claimed by Buyers.

First, Buyers argued the term “asbestos” is ambiguous because it is undefined in the American Family policy and there are various forms and meanings of “asbestos.” The court was unpersuaded and found a reasonable person reading the policy would understand the word “asbestos” to mean any form of asbestos.

Buyers then argued the broad language of the asbestos exclusion invites multiple reasonable interpretations and it should be narrowly construed against American Family. The court found the case law cited by Buyers in support of their position to be factually distinguishable because the exclusion language in that policy was materially different from the broad, comprehensive language in the American Family policy, which included a wider range of asbestos-related losses than the case law cited by Buyers.

Finally, Buyers asserted that the Sellers negligently failed to disclose defective conditions or any other toxic or hazardous substances contained on the property. However, the court found nothing in the record to demonstrate the Buyers sustained any loss related to electrical or plumbing issues. Rather, the loss arose from asbestos.

For the aforementioned reasons, the Wisconsin Supreme Court upheld the court of appeals’ decision giving force to American Family’s broadly worded asbestos exclusion.

Article by:

Heidi L. Vogt

Nathan S. Fronk

Of:

von Briesen & Roper, S.C.

The EEOC (Equal Employment Opportunity Commission) Made Employers Pay in 2013

After several years of record charge filings, the Equal Employment Opportunity Commission (EEOC) finally saw a decrease in the number of charges filed by employees during the fiscal year beginning on October 1, 2012 and ending September 30, 2013 (FY2013). During FY2013, the EEOC received 93,727 charges of discrimination. Although charge filings decreased by approximately 6,000 charges from the previous year, the EEOC still managed to obtain record monetary recoveries for charging parties.

The EEOC recently announced that, during FY2013, it obtained over $372 million in monetary awards for employees alleging unlawful workplace discrimination. This record amount of recoveries includes awards obtained though litigation, mediation, voluntary settlements and conciliations. The EEOC recovered the bulk of this money through its voluntary mediation program. Specifically, the EEOC obtained over $160 million for employees through this method. In comparison, the EEOC only recovered $39 million through its litigation efforts

money till

Employers, however, should not let these numbers lead them to believe that they can get a more favorable resolution through litigation than through mediation or informal settlements. The $39 million recovered through litigation is based on the resolution of 209 lawsuits (not all of these lawsuits resulted in verdicts in favor of the EEOC). The $160 million recovered through mediation, on the other hand, represents the successful resolution of 8,890 charges (another 2,623 mediations did not result in resolutions).

Further, litigating an employment discrimination claim is a costly proposition, whereas a successful mediation helps to avoid most of the costs of litigating such claims, especially if the parties agree to mediate early on in the process. More importantly, a successful mediation leads to the dismissal of the charge, which is an added benefit that is not guaranteed with informal settlements reached by the parties outside of mediation.

For these (372 million) reasons, employers should carefully consider all resolution options the next time they receive a charge of discrimination filed with the EEOC.

Article by:

Rufino Gaytán

Of:

Godfrey & Kahn S.C.

Is a U.S. Revocable Trust Okay for Canadians?

Revocable trusts are a common estate planning tool in the U.S. Also referred to as living trusts and grantor trusts, they provide a method of avoiding costly probate and incapacity proceedings. A well written revocable trust will also include tax and creditor protection planning for future generations. In addition to all of these benefits, the individual setting up the trust remains in control of the trust and trust property during his or her lifetime.

A revocable trust does not provide creditor protection to the grantor, nor does it shield the grantor from U.S. estate tax liability. Rather, it is a powerful and popular tool for U.S. citizens and residents who are below the U.S. estate tax exemption amount to hold their personal residences. The revocable trust is popular among Americans, and rightly so.

Unfortunately, the benefits a Canadian may receive by using a U.S. revocable trust to avoid the issues of probate and incapacity proceedings will likely be negated by the numerous tax disadvantages a U.S. revocable trust faces in Canada.

How a U.S. Revocable Trust Works

As with any trust, a revocable trust must have a grantor (also known as a settlor), a trustee, and a beneficiary. The grantor creates and settles the trust, meaning he or she chooses the parameters of the trust agreement and donates the initial capital to the trust. The trustee is the individual or company named to manage the trust property for the benefit the beneficiary. Finally, the beneficiary is the individual who enjoys the beneficial use of the trust property, which may include income or other payments from the trust.

In the U.S., a revocable trust allows the same individual to act as grantor, trustee, and beneficiary, as long as future beneficiaries (also known as remainder beneficiaries) are named. This allows the individual to maintain complete control of the trust and trust property, and streamline the management of the trust property during his or her lifetime. Often, married couples will go a step further and create a joint revocable trust for jointly owned properties.

The U.S. Internal Revenue Service (“IRS”) disregards the existence of the U.S. revocable trust for tax purposes due to the control and reversionary rights retained by the grantor of the revocable trust. This means any income or capital gains earned on trust property is taxable in the hands of the grantor during his or her lifetime. This is normally not an issue, since the grantor of a revocable trust is almost always the initial beneficiary. It also means that property with accrued gains can be transferred to a U.S. revocable trust without triggering a tax on this capital gain.

U.S. revocable trusts do not provide protection from U.S. estate tax to the grantor, but certain planning can be included to reduce or defer this tax where a surviving spouse is inheriting the trust property.

There is no creditor protection for a property held in a U.S. revocable trust. Similar to the above-described tax treatment, the trust will be disregarded should creditors pursue the grantor.

Canadians and U.S. Revocable Trusts

Canadians who seek tax and estate planning advice from U.S. attorneys are often counseled to take title to their U.S. vacation residences through a U.S. revocable trust. These attorneys are trying to help their clients avoid the expensive and time-consuming issues of probate and incapacity, and take advantage of other tax and estate planning opportunities within the trust document. Unfortunately, a U.S. revocable trust is often not the ideal structure for a Canadian resident.

In Canada, trusts are considered separate taxpayers, meaning trusts are not normally disregarded like the U.S. revocable trust is in the U.S. There are limited exceptions to this rule, such as the Alter Ego trust available to Canadian residents over age 65.

Tax on income or capital gains earned by trust property could result in a double taxation scenario where tax is paid personally by the grantor in the U.S., but the income or gains are not attributed or distributed to the same individual as a beneficiary in Canada, therefore triggering income or capital gains tax at the trust level in Canada.

Such double taxation may be avoided by function of section 75(2) of the Canadian Income Tax Act (“ITA”). This section says that where an individual contributes property to a Canadian resident trust in which he or she is a controlling trustee and potential capital beneficiary, and he or she has the power to decide who will receive the property, then all income, capital gains, and capital losses associated with the donated property will be attributed back to that person during his or her lifetime.

Example 1:

Let’s say Mr. Smith, a Canadian citizen and resident, agrees with his U.S. attorney’s advice on how to avoid U.S. probate and incapacity proceedings, and has a U.S. revocable trust drawn up in which he is the grantor, trustee, and sole beneficiary during his lifetime. Section 75(2) of the ITA will cause all income, capital gains, and capital losses related to any property contributed by Mr. Smith to the trust to be attributed back to him individually. The trust will therefore essentially be disregarded for income and capital gains tax purposes on both sides of the border.

Result: During Mr. Smith’s lifetime, there should be no double taxation on income and capital gains earned on property he contributed to the trust.

The application of section 75(2) of the ITA does not protect against tax on the rollover of a property with accrued gain by a Canadian resident into a U.S. revocable trust. While not recognized for tax purposes in the U.S., such a rollover would cause an immediate disposition on the gain in Canada.

Example 2:

Let’s take Mr. Smith as an example again, but look at a slightly different situation. He has a condominium in Naples, Florida that he purchased 15 years ago for $150,000. His US attorney has informed him that he needs proper planning to avoid probate and incapacity issues for his family. If he continues to own the property in his name personally they could face lengthy court proceedings and high fees should he ever become incapacitated, and certainly upon his eventual death.

Mr. Smith would therefore like to put his condominium, which now has a fair market value of $250,000 into the U.S. revocable trust prepared by his U.S. attorney, since the trust would allow him to avoid these two issues. There is no tax on this rollover in the U.S. Such a rollover would trigger tax in Canada though, on the existing $100,000 in capital gain. To make matters worse, since no corresponding gain would be triggered in the U.S., if Mr. Smith then sells the same property five years later he would potentially be faced with taxation in the U.S. on the same $100,000 in gain for which he has already paid tax in Canada.

Result: Capital gains tax on the rollover of property in the U.S. revocable trust by a Canadian resident. Potential double taxation on an eventual sale of the U.S. property.

The situation gets even more complicated. Under section 104 of the ITA all Canadian trusts are subject to a 21 year deemed disposition rule. This means that the trust is treated as having sold and reacquired its property on the 21 year anniversary of the trust. Any accrued gains are taxed, even if the property is not actually sold. It does not matter if the property has not been in the trust for the full 21 years. A trust is generally considered resident in Canada when central management and control of the trust is carried out in Canada.

Example 3:

To continue with Mr. Smith as an example, say he purchased a condominium in Fort Lauderdale, Florida, in his U.S. revocable trust ten years after the trust was created. The property is still in the trust on the 21st anniversary of the trust. This condominium was purchased by the trust for $200,000, but is currently worth $325,000. Mr. Smith has no intention of selling the property anytime soon. Unfortunately, on the 21st anniversary of his trust he must pay tax on the gain of $125,000 in Canada. Like the last example, if Mr. Smith later sells this property he will potentially face a double taxation on the gain in the U.S., because no corresponding gain was recognized in the U.S. on the 21 year anniversary.

Result: U.S. revocable trusts are subject to Canada’s 21 year deemed disposition rule, which may also result in double taxation upon an eventual sale of the U.S. property.

Finally, Canadians who own property through a U.S. revocable trust face potential double taxation on the assets when they die owning property in the trust. Since the assets in the U.S. revocable trust are included in an individual’s estate upon death in the U.S., they may be subject to U.S. estate tax upon death. Estate tax is on the fair market value of the property at the time of death, not on the accrued gain. No credit for taxes paid by the estate in the U.S. will be available to the trust in Canada. Even if no U.S. estate tax is due, the IRS considers the value, also known as the adjusted cost basis, of the asset to have increased to its fair market value when inherited by the grantor’s heirs.

No such increase in adjusted cost basis will take place on this asset in Canada, which means that there may be tax on the total accrued gain either on the 21 year anniversary of the trust or when the deceased’s heirs eventually dispose of the trust assets. This could turn into a double taxation scenario where the deceased’s estate had to pay U.S. estate tax on the property at the time of death, since no credit is available for the tax already paid in the U.S.

Example 4:

As a final example, let’s say Mr. Smith dies leaving a Miami condominium in his U.S. revocable trust worth $500,000 that he originally purchased for $400,000, and a worldwide estate of $10 Million. As a Canadian citizen and resident, US estate tax only applies to his US situs assets, which include, but are not limited to real property held in a revocable trust. Should Mr. Smith pass away in 2013, his U.S. estate tax would be about $53,510.

If Mr. Smith had owned the property in his name personally at time of death, Canada would have also assessed a deemed disposition on the $100,000 in capital gain. Mr. Smith’s estate should have been able to use the U.S. estate tax paid as a foreign tax credit against the capital gains tax owed on the property in Canada, eliminating the double taxation.

Since the property is held in a U.S. revocable trust though, tax is not due in Canada until the 21 year anniversary of the trust, the sale of the property, or, in certain situations the distribution of the property to the trust beneficiaries. No foreign tax credit will be given for the U.S. estate tax paid by Mr. Smith’s estate.

Result: Potential for double taxation where U.S. estate tax is due on property held in a U.S. revocable trust.

Conclusion

On the rare occasion a U.S. revocable trust may be used effectively by a Canadian resident. Due to the potential for double taxation scenarios though, U.S. revocable trusts are best avoided by Canadian residents, especially when not used under the watchful eye of an informed cross border tax and estate planning attorney.

Alternatives to the U.S. revocable trust that still allow you to avoid issues of U.S. probate and incapacity proceedings do exist. Due to the revocable nature of such a trust, steps may be taken even with an existing U.S. revocable trust to implement an appropriate alternative and bring the structure into line with Canadian tax rules. You can contact Altro Levy LLP to learn more about the various alternatives available to you as a Canadian resident owning property in the U.S.

Article by:

Melissa V. La Venia

Of:

Altro Levy LLP

Does Wireless Media Innovations Have a Lock on Tracking Shipping Containers in a Shipping Yard?

Wireless Media Innovations, LLC (“Wireless”) asserts patent infringement of two patents against Flowers Foods, Inc. (“Flowers”) in a complaint filed in the Middle District of Georgia on November 19, 2013. The patents cover monitoring methods and systems for containers.

Wireless claims United States Patent No. 6,148, 291 (the ‘291 Patent) and United States Patent No. 5,712,789 (the ‘789 Patent) have been directly infringed by Flowers by its use of “yard management systems and operative methods associated therewith to monitor the locations, movement, and load statuses of containers in at least one of [Flowers’] facilities.” Literal infringement as well as infringement under the doctrine of equivalents is alleged. Wireless asserts that the infringement has been willful (as Flowers has had knowledge of the patents of Wireless “at least as of the filing date of this Complaint.”

The complaint is fairly described as a “notice pleading” that does not delve into the nuances of the Flowers monitoring systems or the Wireless patent claims. The ‘291 Patent is a combination of detailed specifics in the specifications and broadly written claims. Pictured below is a composition of selected figures from the patent:

Wireless Media Innovations, patent infringement, litigation, intellectual property

Contrasting with the complexity of the drawings and the 948 lines describing the preferred and alternate embodiments within the 47 page patent is the relatively simple first and twenty-first claims – reprinted below:

Claim 1

A computerized system for monitoring and recording location and load status of shipping containers relative to a facility with an associated yard defined by a boundary within which containers are to be monitored by the system, and a controlled entry point to the boundary, the system comprising:

means for recording identification codes of containers which enter the boundary,

means for communicating and recording information on movements, location and load status of containers within the boundary in response to movement and changes in location and load status of containers made according to instructions received from the facility,

means for generating reports of recorded information on locations and load status of containers within the boundary, and

means for generating reports on container locations and load status relative to designated docks associated with a facility.

Claim 21

A method for using a computer to monitor usage of one or more docks associated with a facility, wherein the usage involves the presence or absence of a container at a dock, the method comprising the steps of:

(a)    recording the presence of an identified container at a particular identified dock,

(b)   recording the absence of an identified container at a particular identified dock,

(c)    producing a report which identifies monitored docks and identifies containers present at identified docks, and also identifies docks at which a container is absent.

The ‘789 Patent is similar in scope, but it does not require the use of a computer.

The case is Wireless Media Innovations, LLC v. Flower Foods, Inc.., No. 7:13-cv-00155-HL, filed 11/19/13 in the U.S. District Court for the Middle District of Georgia, Valdosta Division, assigned to U.S. District Judge Hugh Lawson.

Article by:

Kirk W. Watkins

Of:

Womble Carlyle Sandridge & Rice, PLLC

Prospective Waivers of the Fair Market Value Defense Held Invalid in Arizona Court

In an opinion issued last week, the Arizona Court of Appeals held that commercial borrowers and guarantors ‎cannot prospectively waive their right to limit their damages in a deficiency action on the basis of the fair market value of property ‎sold through a trustee’s sale, potentially impacting any loan agreements that provide for such ‎waivers.‎ The holding does not affect most residential loans, for which lenders are generally precluded from recovering deficiencies.

Background

A.R.S. § 33-814(A) provides that borrowers, and by extension guarantors, are entitled to a credit ‎on the underlying debt for the greater of the trustee’s sale price or the fair market value of the ‎trust property at the time of the sale, as determined by the court at a priority hearing. The ‎purpose of these provisions is to protect borrowers from inequities that may result if the property ‎is sold below market value. In an effort to avoid litigation, lenders sometimes include language ‎in loan documents stating that borrowers and guarantors waive the ability to seek a determination ‎of market value.‎

The Arizona Court of Appeals Abolishes Prospective Waivers of the Fair Market Value Defense

A prospective waiver of a fair market defense hearing was at issue in CSA 13-101 Loop, LLC v. ‎Loop 101, LLC., No. 1 CA-CV 12-0167, 2013 WL 4824461 (Ariz. App. Sept. 10, 2013). In that ‎case, a lender made a $15.6 million loan, which was secured by a deed of trust. In the note and ‎guaranty, the borrower and guarantors waived “the benefits of any statutory provision limiting ‎the right of [lender] to recover a deficiency,” including the benefits of A.R.S. § 33-814. Even ‎more specific, the deed of trust stated that the sales price at the trustee’s sale would conclusively ‎establish the fair market value of the property and that the borrower and guarantors waived their ‎ability to seek a fair market value determination.‎

Following a default, the lender initiated a trustee’s sale, at which the lender’s assignee purchased ‎the property with a credit bid of $6.15 million. At the time, about $11.2 million remained due on ‎the note. The lender’s assignee then brought a deficiency action against the borrower and ‎guarantors for the difference. The borrower and guarantors counterclaimed, asserting that the ‎credit bid was unreasonably low. The court denied a motion to dismiss the counterclaims, ‎holding the borrower and guarantors were entitled to a fair market value hearing ‎notwithstanding the written agreements to the contrary. ‎

The Court of Appeals affirmed, holding that the deed of trust statutes impliedly prohibit ‎prospective waivers of fair market value hearings. The court relied on the purpose of the deed of ‎trust statutes, the comprehensiveness of the protections, and the legislative history, which the ‎court stated was to protect borrowers from the unfairness that results if a property is sold at a ‎trustee’s sale below its market value. According to the court, allowing parties to prospectively ‎waive the protection of a fair market value hearing would effectively undo the statutory scheme ‎and undermine an important purpose of the deed of trust statutes.‎

Conclusion

Arizona’s appellate courts have shown increased interest of late in foreclosure-related cases. ‎Earlier this summer, Division One of the Arizona Court of Appeals abolished prospective ‎waivers by borrowers of the residential anti-deficiency protections under A.R.S. § 33-814(G) based on public ‎policy grounds. Parkway Bank & Trust Co. v. Zivkovic, 232 Ariz. 286, 304 P.3d 1109 (App. ‎‎2013). In another decision out last week, Division Two of the Arizona Court of Appeals, citing ‎Parkway Bank, declined to consider whether a guarantor can waive same the protections of A.R.S. § ‎‎33-814. First Credit Union v. Courtney, No. 2 CA-CV 2013-0005, slip op. (Ariz. App. Sept. 12, ‎‎2013). Lewis Roca Rothgerber continues to monitor the developments in this evolving area.‎

Lenders, borrowers, and guarantors should consider how these recent decisions affect their ‎existing and prospective lending relationships.

Article by:

Jeffrey L. Sklar

Milton A. Wagner

Of:

Lewis Roca Rothgerber LLP

Design Patent Case Digest W.Y. Industries, Inc. v. Kari-Out Club LLC

Decision Dates: August 25, 2011 and November 12, 2013

Courts: D. NJ and United States Court of Appeals for the Federal Circuit

Patents: D469,689

Holding: The terms of the ‘689 Patent are construed; AFFIRMED by the Federal Circuit.

Opinion: Plaintiff W.Y. Industries, Inc. sued Kari-Out Club LLC for infringement of U.S. Design Patent D469,689, entitled Rectangular Stackable Container. W.Y. Industries sells rectangular plastic food containers. Kari-Out makes competing food containers. The Court adopted W.Y. Industries’ verbal claim construction and denied Kari-Out’s request to include additional language, which described the functional features of the patented design.

W.Y Industries’ design patent claims the “ornamental design of a rectangular stackable container as shown and described” in the drawings of the patent. According to the Court, construing a design claim as that which is shown in the patent drawings is typical of design patents since, in most cases, drawings better depict a design than a written description. However, when the drawings contain functional features, an enhanced verbal claim construction may help to clarify exactly which features are claimed and which are not. In this case, the parties agreed that certain elements of the patented design are functional. Therefore, the court concluded that a detailed verbal claim construction will be helpful to the jury.

Both parties agreed to a claim construction from W.Y. Industries’ response to an interrogatory. The claim construction specified that the ornamental features of the container include the rectangular shape and radiused corners on the base and lid, certain raised and recessed portions, and particular dimensions; it also identified a number of other specific features. Kari-Out requested to include additional narrative describing the functional features of the design in the claim construction. The Court denied the request for two reasons. First, design patents protect only the aesthetic aspects of a design. Second, Kari-Out’s additional description of the claims was based on information uncovered during a deposition. Claim construction, however, must be rooted in the written record, including “the claims themselves, the written description, and the prosecution history.”

Kari-Out appealed to the Federal Circuit. On November 12, 2013, the Federal Circuit affirmed the District Court decision in a Rule 36 judgment.

Article by:

Tracy-Gene G. Durkin

David K.S. Cornwell

Of:

Sterne, Kessler, Goldstein & Fox P.L.L.C.

Reform Opens Door to Private Investment in Mexico’s Energy Sector

Mexican Senate presents comprehensive Energy Reform Bill to the House of Representatives with tremendous potential for domestic and foreign energy companies.

In an encouraging move toward energy reform, the Mexican Senate approved today and presented to the House of Representatives a bill—the combined effort of Partido Acción Nacional (PAN) and Partido Revolucionario Institucional (PRI)—with a constitutional reform proposal (the Energy Reform Bill) that paves the way to allow production and profit-sharing arrangements with, and the issuance of risk-sharing licenses to, private parties. The bill further advances the efforts of both parties, detailed in our August 15, 2013 LawFlash,^[1] to promote energy reform in Mexico.

If the bill is enacted, these production and profit-sharing arrangements could be entered either directly by private parties or in association withPetróleos Mexicanos (Pemex), the state oil company. It is expected that risk-sharing licenses will mimic a concession-based system that would allow the booking of reserves for accounting purposes. Mexico has struggled with the adoption of a “pure” concession-based system due to a deeply engrained social and political belief that Mexico’s oil and gas reserves are and should remain the exclusive property of the Mexican state.

In addition, the Energy Reform Bill proposes the creation of the Mexican Oil Fund, with Mexico’s central bank, Banco de México, acting as the trustee. The fund would manage, invest, and distribute hydrocarbon revenues.

In the power sector, the Energy Reform Bill reaffirms the state monopoly with respect to the operation of the national grid and transmission and distribution activities. However, if enacted, the bill would break horizontal processes by permitting private parties to participate and contract with the Comisión Nacional de Electricidad (CFE), the state-owned utility company, and by allowing competitive activities with respect to power generation and commercialization.

Details on the reform are expected to be addressed in subsequent legislation that would follow congressional approval of the Energy Reform Bill; however, the bill underlines the reality of the reform and its potential for domestic and foreign private investors. The Energy Reform Bill, if approved, would give Congress a 120-day period to establish the necessary legal framework and regulate the new contracting mechanisms.

In order to pass, the bill will have to be approved by the House of Representatives and by 17 of the 32 state legislatures. It will then be submitted back to Congress for presentment of the final bill to the president, who must sanction and sign the proposed Energy Reform Bill into law, at which point it will be published in the Mexican Federal Official Gazette. Although some adjustments are expected, both PRI and PAN have indicated their intent to complete the congressional approval of the constitutional amendments on or before December 15, 2013.

^{[1]. View our August 15, 2013 LawFlash, “Mexican Government to Consider Overhaul of Energy Sector,” available here.}

Article by:

Humbertyo Padilla Gonzalez

Rodrigo Dominguez Sotomayor

Carlos Treistman

David F. Asmus

Brian A. Bradshaw

Of:

Morgan, Lewis & Bockius LLP

Updates from the January 2014 Visa Bulletin

The Department of State (“DOS”) recently released the January 2014 Visa Bulletin, which contains some very interesting developments that affect foreign workers in the Employment-Based 2nd and 3rd categories, particularly those who are citizens of China. The Visa Bulletin is issued by the DOS on a monthly basis and informs applicants when they are eligible to apply for U.S. Permanent Residence (commonly referred to as “Green Card”). Each fiscal year, each country is issued an equal number of immigrant visa numbers. However, as there are more applicants seeking green cards from certain countries (i.e. India, China, Mexico and Philippines) than there are numbers available, the citizens of affected countries experience significant delays in getting their green cards. This is known as visa retrogression. Affected applicants cannot adjust their statuses to green card holders until the priority dates on their respective cases become current. Each month the DOS publishes the Visa Bulletin, which indicates what priority dates are current and who is eligible to apply for the final stage of the green card process. Wait times published in the Visa Bulletin range from a few months to 10 or more years.

The January 2014 Visa Bulletin is unusual because the EB-3 category is moving faster than the EB-2 category for Chinese citizens. (To qualify for the EB-2 category, the offered position must require a Master’s degree or Bachelor’s degree and five years of experience; EB-3 requires a Bachelor’s degree.) For example, a Chinese national whose EB-3 PERM application was filed on or before March 31, 2012 is now eligible to adjust status, whereas a Chinese national whose EB-2 PERM application was filed on the same date is not. Historically, China EB-2 has moved faster than China EB-3, which is why this month’s visa bulletin is unique. As a result, many employers may see an increase in requests from employees for an EB-3 green card process. If the employee already has an approved EB-2 I-140 (second phase of the employment based green card process), the company can consider filing an amended I-140 and request EB-3 classification while retaining the priority date. If the amended I-140 will make the applicant’s priority date current, the applicant is eligible to concurrently file an Adjustment of Status application (the final phase of the green card process). We’ll continue to monitor Chinese EB-3 movement on this blog. Unfortunately, for Indian nationals we saw no change from the December 2013 to January 2014 Visa Bulletin. The February Visa Bulletin is expected to be released in the next 12 -14 days, and we will report on any pertinent developments.

Employment-Based Visa Bulletin Predictions

The Department of State also issued predictions in Visa Bulletin movement for the next few months. For the EB-2 category, the Department of State predicted no forward movement for India EB-2, slight movement of 3-5 weeks for EB-2 China, and Worldwide will remain current.

For the EB-3 category, the Worldwide category has experienced rapid movement forward, which is expected to end in February 2014. China and Mexico will likely continue to match the Worldwide dates. No forward movement is estimated for India, and the Philippines is projected to have slight movement forward of 3-6 weeks.

EB-1 is expected to remain current.

EB-3 Worldwide, China, and Mexico applicants with a current priority date should consider filing their Adjustment of Status applicants now as EB-3 priority dates may retrogress in the next few months.

December Visa Bulletin (includes DOS projections for upcoming months): http://travel.state.gov/visa/bulletin/bulletin_6211.html

January Visa Bulletin: http://www.travel.state.gov/visa/bulletin/bulletin_6228.html

Article by:

Emily R. Liss

Of:

Greenberg Traurig, LLP

Inside Counsel 14th Annual Super Conference – May 12-14, 2014 Chicago, IL

The National Law Review is pleased to bring you information about the upcoming 14th Annual Super Conference hosted by Inside Counsel.

When

Monday, May 12 – Wednesday, May 14, 2014

Where

Chicago, IL

Early bird registration expires February 28th!

The annual InsideCounsel SuperConference, for the past 13 years, has offered the highest value for educational investment within a constructive learning and networking environment. Legal professionals will gain the opportunity to elevate the quality of their performance and learn ways to become a strategic partner within his/her organization. In two-and-half days attendees earn CLE credits, network with hundreds of peers and legal service providers and hear strategies to tackle corporate legal issues that are top of mind throughout this comprehensive program. SuperConference is presented by InsideCounsel magazine, published by Summit Professional Networks.

Now celebrating its 14th year, InsideCounsel’s SuperConference is an exclusive corporate legal conference attracting more than 500 senior level in-house counsels from Fortune-1000 and multi-national companies. The three-day event offers opportunities to showcase your firm’s industry knowledge and thought leadership while interacting with GC’s and other senior corporate counsel during exclusive networking and educational opportunities. The conference agenda offers the perfect blend of experts and national figure heads from some of the nation’s largest corporations, top law firms, government and regulatory leaders, and industry trailblazers. The conference agenda and educational program receives consistent high marks.

The National Law Forum

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