On June 10, the United States Supreme Court issued an opinion holding that California’s wage-and-hour laws do not apply to workers on oil and gas platforms located in open water on the Outer Continental Shelf. In Parker Drilling Management Services, Ltd. v. Newton, offshore rig workers filed a class action asserting that their employer violated California’s minimum wage and overtime laws by failing to pay them for stand-by time while they were on the drilling platform. Both parties agreed that the platforms were governed by the Outer Continental Shelf Lands Act (“OCSLA”), but they disagreed regarding whether the California’s wage-and-hour laws were incorporated into OCSLA and therefore applicable to workers on the platform.
The June 5 Releases
Today we focus on the new SEC interpretative release on the fiduciary duties of investment advisers and provide a brief summary of its contents (“The Fiduciary Duty Release”). This Release is part of a package of new rules and interpretations adopted by the SEC on June 5, 2019. In total, there are four new rules and interpretations:
- Regulation Best Interest (“BI”);
- Form CRS, a new form for advisers and brokers;
- the Fiduciary Duty Release; and
- the Release on the “solely incidental” investment adviser exclusion.
Together these four Releases total a mammoth 1336 pages and define and differentiate the duties owed by brokers and investment advisers.
In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013), the Delaware Court of Chancery clarified that under Delaware law the privilege for pre-merger communications passes to the surviving company after a merger is consummated. The privilege transfer would include the privilege for pre-closing communications regarding the merger itself. The communications at issue in Great Hill were the sellers’ pre-closing communications with the target company’s outside counsel that were in buyer’s possession post-close. The Court urged merger parties to consider the need for contractual provisions that would protect against a privilege transfer should a different result be desired, the so-called privilege claw-back provision, which was absent from the Great Hill merger agreement.
On May 28, 2019, United States District Judge Martin Feldman issued a sixty-four page Order and Reasons which granted motions to remand filed by Plaquemines Parish and the State of Louisiana in The Parish of Plaquemines v. Riverwood Production Co., et al. That case is one of forty-two Coastal Zone Management Act (“CZMA”) cases that were removed to Federal court in May 2018. Those cases generally allege that more than 200 oil and gas companies violated Louisiana’s State and Local Coastal Resources Management Act of 1978 (“SLCRMA”) by either failing to obtain or violating state coastal use permits. The cases were removed to Federal court by Defendants pursuant to 28 U.S.C. § 1442 (the federal officer removal statute) and 28 U.S.C. § 1331 (the federal question statute) on the basis that Plaintiffs’ claims (1) implicate wartime and national emergency activities undertaken at the direction of federal officers, and (2) necessarily require resolution of substantial, disputed questions of federal law. In response, Plaintiffs filed motions to remand. In those motions, Plaintiffs argued that (1) the removal was not timely because Defendants had notice of the grounds alleged in the removal notice more than thirty days before the cases were removed, (2) the Defendants could not satisfy the elements of the jurisdictional test for “federal officer” removal jurisdiction, and (3) Defendants could not satisfy the test for substantial federal question jurisdiction set forth by the United States Supreme Court.
After years of inconsistent rulings, the Fifth Circuit is poised to address a removal issue with significant ramifications for Louisiana tort cases. The previous version of 28 U.S.C. § 1442 authorized removal to federal court of a suit against a federal officer “only when the state suit was ‘for any act under color of such office.’” The Fifth Circuit, interpreting this language, held that the removing party must show a causal connection between its actions and the plaintiff’s claims. The causal connection requirement demands more than “mere federal involvement[;] instead, the defendant must show that its actions taken pursuant to the government’s direction or control caused the plaintiff’s specific injuries.”
On May 9, 2019, the Louisiana Supreme Court issued an important opinion restricting application of the collateral source rule in personal injury lawsuits. In Simmons v. Cornerstone Investments, LLC, et al., 2018-CC-0735 (La. 5/8/19), the Court held the collateral source rule inapplicable to medical expenses charged above the amount actually paid by a workers’ compensation insurer pursuant to the workers’ compensation medical fee schedule.
In a victory for the oil and gas industry, the Third Circuit rendered a decision rejecting attempts by the Louisiana Department of Revenue to impose severance taxes on crude oil production based on index pricing. The Third Circuit reaffirmed that severance taxes should be based on the “gross proceeds” obtained in an arm’s length sale at the lease. The Department had sought additional severance taxes from numerous Louisiana producers that sold crude oil in arm’s length sales at the lease. The contracts provided that the sales price of the crude oil was based on index pricing, less an amount sometimes designated as a “transportation differential” or simply as a deduction. The Department argued that this “differential” or deduction must be “disallowed” when computing severance taxes, effectively imposing severance taxes on the index pricing. The Louisiana Board of Tax Appeals, faced with numerous cases raising this same issue, heard a “test case” involving Avanti Exploration, LLC. The BTA held that the Department’s theories were invalid, and severance tax properly was based on the actual “gross receipts” received by the producer in an arm’s length sale. In a decision issued on April 17, 2019, the Louisiana Third Circuit Court of Appeal affirmed, holding that, pursuant to the Louisiana Constitution, the severance tax statutes, and the Department regulations, in the absence of any “posted field price,” severance taxes must be based on the actual “gross receipts” received by the producer in an arm’s length sale at the lease.
A Lender in a real estate financing transaction often requires borrower’s counsel to opine on certain aspects of the transaction as a condition to the closing. Often, the negotiations between borrower and lender counsel are as contentious and extended as are negotiations regarding the loan documents themselves. The respective attorney opinion committees of the American College of Real Estate Lawyers, the American College of Mortgage Attorneys, and the Real Property, Trust and Estate Law Section of the American Bar Association have worked for years to produce opinion reports that are fairly balanced between the needs of lenders and borrowers and that can reduce the negotiations over real estate finance opinions. The first opinion report specifically addressing financing opinions in real estate transactions was the Real Estate Opinion Letter Guidelines published in 38 Real Prop. Prob. & Tr. J. 241 (2003). The next report was the comprehensive The Real Estate Finance Opinion Report of 2012 published at 47 Real Prop. Tr. & Est. L. J. 213 (2012) and The ACREL Papers 121 (Spring 2013). The Local Counsel Opinion Letters – A Supplement to the Real Estate Finance Opinion Report of 2012, 51 Real Prop. Tr. & Est. L. J. 167 (2016) directly addresses the particular issues facing local counsel in real estate finance transactions. The latest report, just published at 53 Real Prop. Tr. & Est. L. J. 163 (Fall 2018/Winter 2019), is Uniform Commercial Code Opinions in Real Estate Finance Transactions (the “UCC Opinion Report”). In addition to accessing these reports in the Real Property Probate and Trust Journal, the Legal Opinion Resource Center of the ABA Business Law Section contains these and many other opinion reports and resources.
On March 29, 2019, the U.S. Environmental Protection Agency (EPA) announced it had finalized a voluntary disclosure program for new owners of upstream oil and natural gas exploration and production facilities. Under the program, EPA will not impose any civil penalties on new owners of these facilities (which include well sites and associated tanks and vapor control systems) who find, self-disclose, and correct Clean Air Act violations pursuant to an audit program agreement with EPA. EPA is offering the program to such new owners because EPA and states have seen significant excess emissions and Clean Air Act noncompliance from vapor control systems at these facilities.
On March 29, the UK House of Commons rejected, for the third time in three months, a draft withdrawal agreement for a negotiated exit of the UK from the European Union. The UK now has until April 12 to present the EU with a new exit proposal. The lack of a negotiated transition for the UK (a “no-deal Brexit”) could present uncertainty for participants in the global derivatives markets. In response to concerns over such potential uncertainty, regulators on both sides of the Atlantic are taking measures to reassure the markets that U.S.-UK derivatives activity will continue with minimal interruption. Continue Reading