Tag: Regulatory

Your Facebook “Like” May Be Constitutionally-Protected Speech

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According to a recent decision by the United States Court of Appeals for the Fourth Circuit, pressing the “like” button on your Facebook page constitutes substantive speech that may be protected by the First Amendment.

Six employees of the Hampton, Virginia Sheriff’s Office were dismissed because they showed support for Sheriff B.J. Roberts’ electoral opponent. They filed suit against Sheriff Roberts, claiming in part that their terminations violated the First Amendment. The United States District Court for the Eastern District of Virginia granted summary judgment to Sheriff Roberts, in part because the court found that the employees failed to allege that they had engaged in protected speech.

The plaintiff of significance in this matter, Roy Carter, Jr., claimed his protected speech in support for Sheriff Roberts’ opponent came in the form of a Facebook “like” for the opponent’s page. The Eastern District of Virginia held that the thumbs-up button by itself did not constitute sufficient speech to merit First Amendment protection. Not so, ruled the Fourth Circuit – when Carter pressed “like,” he caused to be published on his Facebook profile and on his friends’ news feeds that he liked Sheriff Roberts’ opponent’s campaign, which is a substantive statement.

“That a user may use a single mouse click to produce the message that he likes the page instead of typing the same message with several individual key strokes is of no constitutional significance,” held the court. Further, the Court stated that hitting the “like” button is the internet equivalent of displaying a political sign in one’s front yard, which the Supreme Court has held constitutes substantive speech.

The district court’s ruling was reversed for Carter and two other plaintiffs and the matter was remanded. Although the three remaining plaintiffs may not recover monetary damages because of the sheriff’s Eleventh Amendment immunity, they may have an opportunity to be reinstated.

The full text of Bland v. Roberts may be found here.

Diagnostic Laboratories Settles for $17.5 Million After Healthcare Whistleblowers’ Allegations of Medicare Fraud

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The Department of Justice announced yesterday that Diagnostic Laboratories and Radiology, the West Coast’s largest supplier of laboratory and X-ray services to nursing homes, will pay $17.5 million to settle whistleblower allegations that the California-based company violated the False Claims Act by giving kickbacks for referral of mobile lab and radiology services, which were subsequently billed to Medicare and Medi-Cal (California’s Medicaid program).  Diagnostic Labs allegedly took advantage of Medicare’s and Medi-Cal’s reimbursement systems by billing them at standard rates while secretly giving discounted fees to the participating nursing homes. According to the lawsuit, those fees were as much as 80 percent below the lab’s normal rates.

For inpatients, Medicare pays a fixed rate based on the patient’s diagnosis, regardless of specific services provided.  For outpatients, Medicare pays for each service separately.  Diagnostic Labs’ scheme supposedly enabled the nursing homes to maximize their profits for providing inpatient services by decreasing the cost of them.  It also allegedly allowed Diagnostic Labs to obtain a steady stream of lucrative, outpatient referrals that it could directly bill to Medicare and Medi-Cal.  This provision of inducements, including giving discounted rates to generate referrals, is prohibited by both federal and state law. By law, the discounts should have been passed along to the government programs.

The Medicare whistleblowers in this case were two former Diagnostic Lab employees, Jon Pasqua and Jeff Hauser, who said they were fired after reporting the secret discounts and kickbacks to the authorities. Hauser and Pasqua worked in the company’s sales office and said they tried to report the questionable discount practices to supervisors first, but were ignored. They then provided information to state and federal officials, and were subsequently fired from their jobs shortly before filing the healthcare fraud case in February 2010, according to their lawyers.

This settlement will resolve Hauser and Pasqua’s lawsuit, which was filed under the qui tam, or whistleblower, provisions of the federal and state False Claims Act. This act allows private citizens with knowledge of fraud to bring qui tam lawsuits on behalf of the US government. The individual filing the lawsuit is known as the relator, or whistleblower.  Healthcare whistleblowers, such as Hauser and Pasqua, serve an important role in exposing and eliminating healthcare fraud.

While it is true that whistleblowers take on a personal risk in these cases, it is still worthwhile for them to come forward with their information. Because qui tam whistleblowers help to eliminate government fraud, they receive a significant proportion of the lawsuit’s settlement for their efforts.

Together, Pasqua and Hauser will receive a total $3,755,500 as their share of the federal government’s recovery.

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Health Care Exchange Notices Required by October 1, 2013; However No Penalty for Not Providing

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The Affordable Care Act requires that employers provide employees with notice (Notice) about the health care exchanges (the federal government also refers to these as “marketplaces”). Nevertheless, some confusion prevails about what is actually required.

Employers Subject to the Notice Requirement

The Notice must be provided by all employers to which the Fair Labor Standards Act (FLSA) applies. In general, the FLSA applies to employers that have one or more employees who are engaged in, or produce goods for, interstate commerce. For most companies, a test of not less than $500,000 in annual dollar volume of business applies. However, the FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary, and secondary schools and institutions of higher education; and federal, state and local government agencies. In addition, the FLSA will apply where an employee is engaged in interstate commerce, even if the activities do not rise to the requisite volume of business. Consequently, nearly all employers will be subject to the FLSA and, therefore, the Notice requirement.

Those who must receive the Notice are all employees of the employer, regardless of whether the employee is even eligible for the employer’s health plan.

When Must the Notice Be Provided?

The Notice must be given to all current employees by October 1, 2013. Individuals who begin employment after October 1, 2013 must be given the Notice within 14 days of their hire date. The Notice can be distributed to employees by first class mail or electronically, provided that the employer can meet Employee Retirement Income Security Act’s (ERISA) requirement for distribution of electronic notices (generally, this means that the employee has either consented to the electronic notice or utilizes a company computer as an essential function of their job).

What the Notice Must Include

Pursuant to the statute, the Notice must inform the employee of the existence of the health care exchange, describe the services the exchange provides, and how the employee can contact the exchange. In addition, the Notice must advise the employee that he or she may be eligible for a premium tax credit if the total allowed costs of benefits provided under the employer’s plan is less than 60 percent of such costs, that an employee who purchases exchange coverage may lose the employer’s contribution toward the cost of coverage and that the employee’s payment for exchange coverage will be on an after-tax basis.

The Department of Labor (DOL) has provided a model Notice for employers who offer health insurance and one for employers who do not offer health insurance to employees. The model Notices can be found here. Both model Notices go beyond the scope of the information an employer is required to disclose pursuant to the Affordable Care Act.

Employees Seeking Exchange Coverage Will Need Employer Information

Starting in early October when the insurance exchanges are supposed to “turn on,” employees seeking information about exchange coverage will need information about any coverage the employer offers. Employers are obligated by law to engage in that discussion and provide information. For example, a low income employee who is offered coverage by his employer may still be interested in seeing if alternative coverage is available from the insurance exchange that, when subsidized by tax credits, may be a better choice for the employee.

The model Notice for employers that offer coverage contains a Part B with boxes for the employer to check and lines to complete in which information about the employer’s plan is provided. Still further information can be provided on an optional page. Depending upon the employer’s circumstances, we have recommended edits to ease the administrative burden, to limit confusion by employees, to increase accuracy based on the employer’s own circumstances, and other changes.

No Fine for Failing to Provide Exchange Notices

On September 11, 2013, the DOL announced it will not impose a penalty on employers who do not distribute the Notice. Nevertheless, we recommend that Notice be given. The media has publicized this obligation such that employees who expect to receive the Notice but do not, may inquire or complain. Furthermore, while no penalty is currently imposed, the Notice is “required” and future guidance is likely to presume it has been given. It is also possible that future guidance will be issued that does impose the penalty for future failures to provide it. We believe the better approach in most situations is to provide the Notice, modifying it if necessary based on the employer’s own circumstances.

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US Taxpayers with Canadian Registered Retirement Savings Accounts (RRSPs)? File now to avoid penalties!

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This blog post focuses on the rules around US citizens or tax residents who have Canadian Registered Retirement Savings Accounts (RRSPs). RRSPs are a government sanctioned savings program in which contributions are deducted from taxable income, and any investment growth is deferred from taxation until the owner of the account makes withdrawals. This is a fantastic program for Canadian residents, as it provides significant tax savings in the short term, while allowing pre-tax retirement accounts to grow for use in a later year when income (and thus marginal tax rates) are expected to be lower.

However, there is a complication for US citizens resident in Canada, who are subject to both Canadian and US tax rules. Many assume that because the growth in an RRSP account is sheltered from tax in Canada, it need not be reported and taxed in a US tax return either. Unfortunately, this is not necessarily the case. In fact, the default treatment of RRSP accounts under US tax law is no different than a non-registered investment account – interest, dividends or gains on invested funds are reportable in the Form 1040 tax return, with no deduction for contributions in a given year.

However, there is relief available under Article XVIII(7) of the Canada-US Tax Treaty. Since 2002, US income tax residents have been able to make an election to defer US tax on the growth within an RRSP. The election is made by filing Form 8891 with a timely filed income tax return. Of course, the IRS will not permit a deduction for RRSP contributions; even so, Canada’s generally higher income tax rates usually mean that no US income tax is payable on the difference in taxable income, after foreign tax credits are applied. And, it is important to recall that RRSP accounts must be disclosed on FBAR returns annually.

This Treaty election is certainly helpful, but what should be done for those just hearing about their US tax obligations? The difficulty is that Form 8891 must be filed with a Form 1040 income tax return, so coming into compliance after the fact will not necessarily be effective. However, a trio of recent Private Letter Rulings (PLRs) from the IRS does provide some comfort regarding the IRS’ view on this issue.

As background, PLRs are written memoranda released by the IRS in response to specific enquiries by taxpayers regarding their tax situations (all personal information is redacted prior to public release on the IRS website). While these rulings are completely fact-specific, and cannot be used as legal precedents in any future cases, the IRS reasoning and interpretation of the rules can be instructive.

On September 12, 2013, three PLRs were released in which the IRS granted an extension to taxpayers in order to file appropriate Form 8891 Treaty Elections without penalty or interest accruing. In each case, the taxpayer was seeking discretionary relief from the IRS to permit late filings of Form 8891 in respect of their RRSP accounts in Canada. In each case, the extension was granted.

While each case was ostensibly decided on its own facts, a few common elements from all three cases are worth noting. First, in each case the taxpayer was otherwise tax compliant. This may be a relevant factor in terms of how the IRS would view late-filed Form 8891 – if the tax returns were timely filed at first instance, amended returns attaching the Treaty election form may be less likely to attract attention.

More significantly, however, in each case the IRS made a point of noting that the taxpayers promptly took action upon learning about the need to file Form 8891. The taxpayers did not wait until the IRS sent letters or notices of deficiency regarding the RRSP income.

The regulation that permits the IRS to grant extensions (i.e. Treasury Regulation § 301.9100-3(a)) requires that the taxpayer must satisfy the Commissioner that she acted reasonably and in good faith, and that the grant of relief will not prejudice the interests of the US government.

This factor should serve as fair warning to anyone in this position who is still trying to decide how to deal with their US tax compliance issues. While it may be the simplest and cheapest option, leaving your head in the sand is unlikely to earn any sympathy from the IRS if and when your delinquency does come to their attention. Instead, acknowledging an honest mistake and taking action to come into compliance will help to build a set of facts that will permit the IRS to grant some leniency toward your situation.

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Office of Federal Contract Compliance Programs (OFCCP) New Rules Target Veterans and Individuals with Disabilities

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Familiar with this?  It’s time to update your affirmative action plans.  For the women and minorities plan, you gather your applicant data, prepare spreadsheets and update your written materials to reflect new goals and changes in your recruiting sources.  For the veterans and individuals with disabilities plan, you update a bit and you’re done.  Starting early next year, however, the rules will change making updates more onerous for employers.  On August 27, 2013, the Office of Federal Contract Compliance Programs announced final rules for federal contractors regarding hiring and employment of disabled individuals and protected veterans and imposing new data retention and affirmative action obligations on contractors.  The rules are expected to be published in the Federal Register shortly and will become effective 180 days later.

The key changes include:

  • Benchmarks.  Contractors must establish benchmarks, using one of two methods approved by the OFCCP, to measure progress in hiring veterans.  Likewise, contractors must strive to hire individuals with disabilities to comprise at least seven percent of employees in each job group.  The OFCCP says these are meant to be aspirational, and are not designed to be quotas.
  • Data Analysis and Retention.  Contractors must document and update annually several quantitative comparisons for the number of veterans who apply for jobs and the number of veterans that they hire.  Likewise, for individuals with disabilities, contractors are required to conduct analyses of disabled applicants and those hired.  Such data must be retained for three years.
  • Invitation to Self-Identify.  Contractors must invite applicants to self-identify as protected veterans and as an individual with a disability at both the pre-offer and post-offer phases of the application process, using language to be provided by the OFCCP.  This particular requirement worries employers who know that the less demographic information they have about applicants, the better – especially when the application is denied.  Contractors must also invite their employees to self-identify as individuals with a disability every five years, using language to be provided by the OFCCP.

Additional information, including with respect new requirements such as incorporating the equal opportunity clause into contracts, job listings, and records access, can be found here (http://www.dol.gov/ofccp/regs/compliance/vevraa.htm) and here (http://www.dol.gov/ofccp/regs/compliance/section503.htm).

Contractors with an Affirmative Action Plan already in place on the effective date of the regulations will have additional time, until they create their next plans, to bring their plan into compliance.  However, whether they have a current Affirmative Action Plan or not, federal contractors should begin looking at these new rules now and take steps to ensure they are in compliance.

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The IRS/Treasury Department Announcement & Estate Planning Ruling Re: Same-Sex Marriage

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On August 29, 2013, the Treasury Department and the Internal Revenue Service (“IRS“) issued Revenue Ruling 2013-17. The ruling establishes that the IRS will recognize same-sex marriages for all federal tax purposes regardless of where the couple lives, as long as the couple was married in a jurisdiction that recognizes such marriages. So, for example, if a couple was married in Connecticut (a recognizing state), but now live in Kentucky (a non-recognizing state), they will receive the same federal tax treatment as heterosexual couples residing in Kentucky. The ruling clarifies that a “state of celebration” approach will be used versus a “state of residence” rule. Treasury Secretary Jacob J. Lew says the decision “[a]ssures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.” It is important to note that, according to the ruling, “marriage” does not include a registered domestic partnership, civil union or other similar arrangement. The ruling applies to all federal tax provisions where marriage is a factor, including: filing status, estate tax exemptions, personal and dependency exemptions, the standard marriage deduction, IRA contributions, earned income tax credits and employee benefits.

The ruling came on the heels of the Supreme Court’s June 2013 decision in United States v. Windsor and is meant to address some of the confusion that Windsor left in its wake. As background, before Congress enacted the Defense of Marriage Act (“DOMA“), marital status for federal income tax purposes was defined by state law. Section 3 of DOMA banned same-sex couples from being recognized as “spouses” for all federal law purposes. Windsor ruled Section 3 of DOMA unconstitutional; however, the decision did not require states to recognize same-sex marriages. Thus, since June, state and federal agencies have been wondering how to deal with same-sex marriages in non-recognizing states. With the Revenue Ruling, much-needed guidance has arrived.

From the estate planning perspective, there are now several more options that same-sex couples can use to their advantage. First, same-sex spouses are now eligible for the marital deduction, which means that they may transfer as much as they want to their spouse (in life and in death) without incurring federal estate or gift tax, provided that the recipient spouse is a U.S. citizen.

Another benefit is the use of “gift-splitting.” Any individual can give up to $14,000 each year to as many people as they choose without incurring gift tax. Heterosexual spouses, and now same-sex spouses, can combine their $14,000 to jointly give $28,000 to individuals tax-free.

Same-sex spouses will also now get to take advantage of an estate planning tool known as “portability.” Portability allows a widow or widower to use any unused estate tax exclusions (capped at $5.25 million for 2013) of their spouse who died in addition to their own. The unused exclusion must be transferred to the surviving spouse and an estate tax return must be filed (by the executor) within nine months of the spouse’s death, even if no tax is due.

The ruling also has a myriad of other implications for taxes and employee benefits that should be carefully considered by same-sex couples. There are still lingering questions about how other agencies, such as the Social Security Administration, will address benefits post-Windsor.

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Indicted—Not Once, But Twice! Former GlaxoSmithKline In-House Counsel, Lauren Stevens, Tells Her Harrowing Story And Hard Lessons Learned From Being Indicted

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Imagine, one of the worst things that could happen to any person, especially an attorney—being indicted.  This not only happened to former GlaxoSmithKline (“GSK”) Vice President and Associate General Counsel, Lauren Stevens (“Stevens”) once—but twice!  On November 8, 2010, a federal grand jury in the District of Maryland returned an indictment charging Stevens with one count of obstructing an official proceeding  in violation of 18 U.S.C. §1512, one count of falsification and concealment of documents in violation of 18 U.S.C. §1519, and four counts of making false statements in violation of 15 U.S.C. §1001. On March 23, 2011, the District Court dismissed the indictment without prejudice due to erroneous and prejudicial legal advice that the prosecutors gave to the grand jury.  However, on April 13, 2011, Stevens was indicated again, based on the same charges in the earlier indictment.  For more than 18 months, Stevens lived this harrowing ordeal, and eventually was exonerated of any wrong doing.  Stevens will discuss the events leading up to the indictment, the grueling court proceedings, and the lessons she learned at the National Association of Women Lawyers’ Ninth Annual General Counsel Institute on November 8, 2013 at the Intercontinental Hotel in New York City.

The indictments against Stevens arose out of a letter from the Food and Drug Administration (“FDA”) to GSK stating that it had information that GSK possibly promoted the use of Wellbutrin (a drug approved by the FDA to treat depression) for an unapproved use (namely, weight loss).  The FDA requested that GSK voluntarily provide numerous materials and information related to the promotion of Wellbutrin.

GSK assembled a team, led by Stevens, which included in-houseattorneys, a former FDA reviewer, and employees from GSK’s marketing, compliance, regulatory affairs and medical divisions, to respond to the FDA’s request.  GSK also retained an outside law firm to conduct an internal review and advise GSK how to respond to the inquiry.  Ultimately, GSK submitted six substantive letters, all signed by Stevens, in which she denied that GSK promoted Wellbutrin for an unapproved use and/or paid doctors to give promotional talks that included information on the unapproved use.  On December 17, 2010, the government filed a motion to bar Stevens from relying on the defense of advice of counsel on the basis that it was not a defense to a charge of violating 18 U.S.C. §1519 because, the government argued, the statute is not a specific intent crime.  That same day, Stevens filed a motion to disclose the government’s presentation to the Grand Jury relating to the advice of counsel defense.  She also filed two motions to dismiss Count II of the indictment.  In the first motion, Stevens sought dismissal for unconstitutional multiplicity and for failure to state an offense, arguing that Counts I and II violated her due process rights because they sought to impose multiple punishments for the same offense.  She also argued that the government’s case was legally flawed because the government did not allege that she altered or falsified any pre-existing documents.  In her second motion, Stevens sought dismissal of Count II on the basis that the charges were unconstitutionally vague.

On February 25, 2011, Stevens filed her opposition to the motion to exclude, arguing that where a defendant relies in good faith on the advice of counsel, she lacks the intent necessary to be found guilty of making false statements and obstructing justice, which required proof that she “knowingly” submitted false information.  She also argued that she met the prerequisites for asserting the defense because outside counsel was aware of all material facts as evidenced by over 350 drafts of the six response letters to the FDA and 1,300 pages of notes regarding the matter.

On March 23, 2011, the Court denied the government’s motion to prohibit Stevens from asserting the advice of counsel defense.  The Court then dismissed the indictment without prejudice due to erroneous and prejudicial legal advice the prosecutors gave to the grand jury.

On April 13, 2011, a federal grand jury re-indicted Stevens.  The trial commenced thirteen days later, and proceeded through May 6, 2011, at which time the government rested its case.  Stevens filed a Rule 29 Motion for Acquittal on the basis that the government failed to present evidence sufficient to prove beyond a reasonable doubt any of the six counts.  On May 10, 2011, the Court granted Stevens’ Motion and dismissed the indictment.  The Court determined that the government was given access to attorney-client privileged communications, which formed the basis of the government’s case, as the result of an erroneous decision by a Massachusetts magistrate judge that the communications were evidence of a scheme to perpetrate a crime of fraud.  However, the documents revealed a “studied, thoughtful analysis of an extremely broad request from the [FDA] and an enormous effort to assemble information and respond on behalf of the client.”  Although GSK’s responses may not have satisfied the FDA, they were sent to the FDA in the course of Stevens’ bona fide representation of a client and in good faith reliance on both external and internal lawyers for GSK.  The Court concluded: “the defendant sought and obtained the advice of counsel of numerous lawyers.  She made full disclosure to them.  Every decision that she made and every letter she wrote was done by consensus.”  Further, although some statements were not literally true, they were made in good faith which would negate the requisite element of intent required for the charged crimes.

Stevens learned many lessons from this ordeal including: (1) when hiring outside legal counsel, make sure they know all of the facts; (2) make sure other parties know you have hired outside counsel; (3) take clear, accurate notes, knowing they could end up in Court; and (4) be careful in correspondence with adverse parties.

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It’s Time to Register for the 2015 Diversity Immigrant Visa Lottery!

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On October 1, 2013, the U.S. Department of State will begin accepting requests to register for the 2015 Diversity Immigrant Visa Program (DV-2015), also known as the Green Card Lottery. The Diversity Lottery Program provides a path for foreign nationals to become permanent residents of the United States regardless of whether they have a family member or an employer willing to sponsor them. This program is a success, facilitating the immigration of people from across the globe. If you meet the eligibility requirements and wish to secure permanent residence status in the United States, you should consider registration in the lottery.

Registration begins October 1, 2013

The State Department will open online registration for the DV 2015 Program on Tuesday, October 1, 2013 at 12:00 noon, Eastern Daylight Time (EDT) (GMT-4), and conclude on Saturday, November 2, 2013 at 12:00 noon, Eastern Daylight Time (EDT) (GMT-4). Individuals who meet the eligibility requirements and submit an application during the appointed time will be entered into a lottery from which 55‚000 green card entries will be selected. Applications must be submitted electronically by 12:00 noon EST on Saturday‚ November 2‚ 2013. Detailed instructions are athttp://travel.state.gov/pdf/DV_2015_Instructions.pdf. There is no fee to register for consideration in the lottery. Entries may not be submitted through the U.S. Postal Service.

Am I eligible for a green card if I am selected in the lottery?

Selection in the lottery does not guarantee the applicant a green card; applicants must still meet all standards for admissibility and be able to process their green cards within the allotted time. Immediate family members of successful lottery applicants are eligible for green cards as well, provided they meet the same admissibility standards. Individuals who are selected and eligible for one of the 55,000 visa numbers may either secure an immigrant visa at a U.S. Embassy or Consulate or, if they are in the United States and qualified to do so, adjust their status by filing an application and supporting documentation with United States Citizenship and Immigration Services (USCIS).

What countries are eligible?

Lottery visas are apportioned to foreign nationals hailing from the following six geographic regions: Africa; Asia; Europe; North America; Oceania; and South America‚ Central America, and the Caribbean. To qualify‚ a foreign national must claim nativity or country of birth in an eligible country and meet certain education or work experience requirements. The purpose of the program is to diversify and encourage immigration from countries that send lower numbers of immigrants to the United States.

Not all countries in the six eligible regions fall within the Green Card Lottery program. Because each of the following countries has sent more than 50‚000 immigrants to the United States in the past five years, natives of these countries will not be eligible for the DV 2015 Lottery: Bangladesh, Brazil, Canada, China (mainland-born), Colombia, Dominican Republic, Ecuador, El Salvador, Haiti, India, Jamaica, Mexico, Nigeria, Pakistan, Peru, Philippines, South Korea, United Kingdom (except Northern Ireland) and its dependent territories, and Vietnam.

For the coming year, Nigeria was added to this list of countries ineligible for the lottery.

How do I know if I was selected in the lottery?

Official notifications of selection will be made through Entrant Status Check, available starting May 1, 2014, through at least June 30, 2015, on the E-DV website: www.dvlottery.state.gov. Please note that the Department of State does not send selectee notifications or letters by regular postal mail or by e-mail. Any e-mail notification or mailed letter stating that you have been selected to receive a DV does not come from the Department of State and is not legitimate. Any e-mail communication you receive from the Department of State will direct you to review Entrant Status Check for new information about your application.

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Watt's New? Michigan Energy News – September 2013

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Still Getting Ready to Make Good Energy Decisions

After reviewing and analyzing the submissions from seven public forums and from the 114 questions posted on the web for feedback, Energy Office Director Steve Bakkal and MPSC Chairman John Quackenbush will be issuing four reports on the following schedule:

■ Renewable Energy: Draft report release for comments – 9/20/13

Due date for public comments – 10/11/13

Release final report – 11/4/13

■ Additional Areas: Draft report release for comments – 10/1/13

Due date for public comments – 10/22/13

Release final report – 11/15/13

■ Electric Choice: Draft report release for comments – 10/15/13

Due date for public comments – 11/1/13

Release final report – 11/20/13

■ Energy Efficiency: Draft report release for comments – 10/22/13

Due date for public comments – 11/6/13

Release final report – 11/26/13

All this material will be posted at: www.michigan.gov/energy

Net Metering Participation Increases

The Michigan Public Service Commission issues an annual report on electric customers participating in the statewide net metering program required under the Clean, Renewable, and Efficient Energy Act of 2008. [Under net metering, when a customer produces electric energy in excess of its needs, energy is provided back to the serving utility and the customer receives a credit.] In 2012 the size of the net metering program increased 55 percent to 9,583 kW. The number of net metering customers has gone from 53 in 2008 to 1,330 in 2012. While most of the recent increase was due to new solar installations, a 535 kW methane digester in Great Lakes Energy Cooperative’s service territory is Michigan’s first Category 3 (methane digester up to 550 kW) modified net metering project.

Methane-to-Methanol Plant Operational

Oil wells also produce natural gas. When there is no way to get the natural gas to market it is usually “flared”. Now Gas Technologies LLC of Walloon Lake has demonstrated its 25-foot, portable, singlestep, gas-to-liquids plant in a Kalkaska County oil field. This first in the industry process can monetize stranded natural gas, biogas, coal mine methane, and landfill gas. www.gastechno.com

Adopt-A-Watt Helps Library

Dearborn’s Henry Ford Centennial Library has installed 25 energy efficient street lights and an electric vehicle charging station under the national Adopt-A-Watt program. Modeled on the AdoptA-Highway program, sponsorships are sold to fund new, energy-efficient equipment, alternative fuel vehicles and other green technologies for financially challenged public agencies. The agencies then realize the cost savings into the future.

Restrictive Wind Zoning Struck Down by Michigan Court

Forest Hill Energy recently won a court order striking down alleged “police power” ordinances passed by townships attempting to regulate the construction and operation of wind turbines. The Clinton County Zoning Ordinance already had extensive wind energy provisions. Nonetheless, three townships passed ordinances that were more restrictive to wind energy development than the county zoning. The additional restrictions related to height, noise, setbacks, and shadow flicker. Forest Hill Energy brought suit seeking a declaration that the townships’ “police power” actions were really zoning ordinances in disguise. The Clinton County Circuit Court ruled that since the townships were subject to the county’s zoning, the township ordinances were invalid because they were inconsistent with the county’s zoning plan—the townships could not get a “second bite at the zoning apple.” Forest Hill Energy had already obtained a special use permit for the construction of a 39 turbine project in January of 2012, and now expects to move forward with construction in late 2013.

More Wind Farms to Commence Construction in 2013

NextEra’s 150 MW Pheasant Run Wind projects are commencing construction this fall, with the energy to be sold to DTE Electric Company. The two projects will be located in Brookfield, Fairhaven, Grant, Oliver, Sebewaing and Winsor townships, all in Huron County. The Michigan Public Service Commission approved a 20 MW power purchase agreement (PPA) for DTE Electric Company with Big Turtle Wind Farm, LLC. The twenty year PPA has estimated pricing of up to 5.3 cents per kilowatt-hour. The project will have more than 50 percent Michigan-sourced content, and brings the DTE renewable energy portfolio to 9.8 percent. Consumers Energy will begin construction on its 105 MW Cross Winds Energy Park in Akron and Columbia townships in Tuscola County before the end of the year.

Michigan Shorts

ΩΩ Bay City Electric, Light & Power has signed a 20-year contract to purchase 4.8 MW of energy from the Beebe Community Wind Farm at a price starting at 4.5¢/kWh and increasing to 7.2¢/kWh Ω Revolution Lighting Technologies has acquired Relume Technologies, a Michigan manufacturer of LED lighting products and control systems Ω The City of Ypsilanti has set a goal to have 1000 solar roofs within the city limits by 2020 Ω DTE Energy is offering its customers the opportunity to buy BioGreenGas derived from the Sauk Trail Hills Landfill in Canton Ω Lansing Board of Water & Light has announced it will purchase energy from eight wind turbines in Gratiot County under a power purchase agreement with Exelon Wind ΩΩ

Virtual Solar Engineering Center Meeting with Success

GreenLancer.com, a Detroit-based solar energy technology company, has announced its initial $500,000 in funding. The company, launched in 2011, combines state-of-the-art cloud computing with a national network of green energy engineering freelancers (“greenlancers”). Their goal is to reduce the soft costs associated with solar energy projects. Initial investors include Bizdom (Detroit), Start Garden (Grand Rapids), Blue Water Angels (Midland), Northern Michigan Angels (Traverse City), and a private investor. The company has projects in 33 states and six foreign countries.

Converting Corn Stalks into Biofuel

Using a fungus and E. coli bacteria, University of Michigan researchers have turned inedible waste plant material into isobutanol. The waste used in the initial work was corn stalks and leaves. Isobutanol has 82 percent of the energy in gasoline, whereas ethanol has only 67 percent. It also has the added advantage over ethanol of not mixing easily (or absorbing) water. So it is a viable candidate to replace ethanol as a gasoline additive. The fungi turns the plant roughage into sugars that are then converted by escherichia coli to isobutanol. Through bioengineering the researchers believe they can produce a variety of petroleum-based chemicals through this same process.

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Federal Court Rules That Patent Infringement Can Violate Antitrust Laws

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Patent infringement can be considered anticompetitive conduct under federal antitrust law, according to a recent ruling issued by the U.S. District Court for the Eastern District of Texas.

This ruling arose out of a dispute between Retractable Technologies, Inc. (Retractable) and Becton, Dickinson and Company (BD),1 in which Retractable alleges, among other claims, that BD’s infringement of Retractable’s patents foreclosed competition and maintained BD’s monopoly power in the hypodermic syringe market, thereby violating Section 2 of the Sherman Act.2

Retractable manufactures patented safety syringes and IV catheters, which protect against needlestick injuries by automatically retracting the needle after injection.  According to Retractable’s complaint, BD is the leading U.S. manufacturer of hypodermic syringes and holds a very large share of the relevant market.  Retractable claims that BD took steps to protect its dominant position after Retractable’s entry into the market, including by introducing an inferior line of safety syringes that infringe on Retractable’s patents.  Retractable contends that these actions, together with other exclusionary conduct including unlawful bundling and loyalty discounts, impeded the adoption of new and novel safety syringes, including those of smaller rivals such as Retractable, substantially lessening competition and maintaining BD’s dominance.  Retractable also alleges false advertising and other unfair competition claims.

To prove a violation of Section 2 of the Sherman Act, a plaintiff must demonstrate that the defendant (1) possesses monopoly power, and (2) acquired, enhanced, or maintained that power by exclusionary or anticompetitive conduct.3 In one of several motions to dismiss, BD asked the court to find that, as a matter of law, patent infringement can never be considered “exclusionary or anticompetitive conduct,” and therefore cannot be the basis of a Section 2 monopolization claim.  BD argued that no court has ever found patent infringement to be an “anticompetitive” act under Section 2 and that Retractable’s claim makes no economic sense, because patent infringement actually increases competition by making more products available to consumers.

On September 9, 2013, U.S. District Court Judge Leonard Davis adopted the recommendations of U.S. Magistrate Judge Roy S. Payne’s August 5 Report and Recommendation and issued an order denying BD’s motion.  Judge Davis agreed with Judge Payne that the only binding precedent offered by BD in support of its arguments held that patent infringement is not an injury recognized under the Sherman Act,4 but this has nothing to do with patent infringement as anticompetitive conduct.  Both judges noted the U.S. Supreme Court’s statement in U.S. v. American Tobacco Co. that the Sherman Act covers “every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed.”5 Judge Payne further explained in his Report that while patent infringement often increases competition and benefits the end consumer despite harming a specific competitor, in this case Retractable alleges that the effect of BD’s patent infringement was to decrease competition by keeping BD’s inferior products on the market and preventing the sale of other, better quality safety syringes.

The complex interactions between intellectual property rights and the antitrust laws have received significant attention recently in various contexts, such as pay-for-delay settlements in pharmaceutical patent cases and abusive enforcement of standard essential patents.  The decision in this case adds an arrow to the quiver of companies with patented technology that are trying to compete in a market with a large and established player.  Companies with high market shares should take note that this ruling may expose them to additional antitrust risks, and should carefully consider whether any of their business practices would support a Section 2 monopolization claim against them.

1 Retractable Technologies, Inc., et al. v. Becton, Dickinson and Co., Case No. 2:08-CV-00016 (E.D. Tex.).

2 15 U.S.C. § 2.

3 United States v. Grinnell Corp., 384 U.S. 563 (1966).

4 A plaintiff must prove antitrust injury in order to recover damages.

5 221 U.S. 106, 181 (1911).

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