On March 29, 2019, Alaska Federal District Court Judge Sharon Gleason granted summary judgment in favor of plaintiff environmental groups in League of Conservation Voters v. Trump, 3:17-00101. The case stems from Executive Orders issued under the Obama Administration in 2015 and 2016 which withdrew certain areas in the Arctic and Atlantic regions from exploration and development under the offshore oil and gas leasing program. President Trump issued an Executive Order in 2017 which revoked the Obama withdrawals. The Court’s summary judgment ruling vacated certain portions of the 2017 Trump Executive Order and concluded that the prior Obama Orders would remain in place. In effect, the ruling removes the areas in the Arctic and the Atlantic covered in the Obama Orders from the five-year leasing program proposed by the Trump Administration. Continue Reading
On Friday, March 29, 2019, the City of New Orleans filed a lawsuit in Civil District Court against eleven oil and gas companies seeking damages for alleged harm to Louisiana’s coastal wetlands. Introducing its lawsuit with statements that “New Orleans is imperiled” and its “people are in danger,” the City contends that the defendants’ failure to maintain access canals, spoil banks, and earthen pits created in the course of exploration and production has destroyed the coastal zone. The City’s allegations mirror those levied in recent years by the parishes of Plaquemines, Jefferson, and St. Bernard, among others: that the defendants’ activities constitute coastal “uses” under the Louisiana State and Local Coastal Resources Management Act (“SLCRMA”) and that they violate coastal use permits issued pursuant to that statute. The City has requested a trial by jury, from which it seeks damages, “restoration costs,” restoration of “disturbed areas,” sanctions, costs, attorneys’ fees, and/or declaratory and injunctive relief. Continue Reading
Liskow & Lewis celebrated Black History Month with Ruby Bridges, the first African-American child to integrate an elementary school in the South, and Judge Brian Jackson of the United States District Court for the Middle District of Louisiana (and a former Shareholder at Liskow & Lewis). While practicing at Liskow, Judge Jackson initiated the firm’s first formal celebration of Black History Month, a tradition which is now in its 15th year.
Judge Jackson first learned of Ruby Bridges’ story through Norman Rockwell’s historic painting “The Problem We All Live With.” The painting captures the bravery of the six-year-old girl who was advised by U.S. marshals to “walk straight ahead, and don’t look back” as she integrated William Frantz, an all-white elementary school in New Orleans. Judge Jackson met Ruby when he reconnected her with one of the U.S. marshals depicted in the painting.
On March 21, 2019, the U.S. District Court for the Western District of Louisiana held that a unit operator may not recover post-production costs from an unleased mineral owner’s share of production proceeds in Allen Johnson, et al. v. Chesapeake Louisiana, LP. The dispute in Johnson involved a group of unleased mineral owners (“UMOs”) who filed suit against a unit operator for deducting a litany of post-production costs against their share of production proceeds from an oil and gas unit in the Haynesville Shale.
The UMOs argued that La. R.S. 30:10 governed whether a unit operator may deduct post-production costs against UMO’s share of production proceeds. The argument, however, was one of exclusion. The UMOs argued that La. R.S. 30:10 contains the exclusive list of any costs that could be properly charged against a UMO’s share of production proceeds. Therefore, because post-production costs were not expressly listed in La. R.S. 30:10(A)(3), the UMOs argued that such expenses were not recoverable from a UMO’s share of production. In opposition, the unit operator contended that La. R.S. 30:10 was inapplicable to the case because the costs outlined in the statute comprised only pre-production and production costs. The operator argued the statute was never intended to address post-production costs. As a result, the unit operator claimed that the statute did not forbid deductions for post-production costs against a UMO, but instead those costs were properly authorized under the general principles of unjust enrichment and co-ownership.
This morning I attended oral argument at the United States Supreme Court in the maritime case of Dutra Group v. Batterton. The question in the case is whether a Jones Act seaman may recover punitive damages on an unseaworthiness claim. Former Solicitor General Seth Waxman argued for Petitioner Dutra Group and David Frederick argued for Respondent Christopher Batterton.
Waxman began his argument by explaining that Miles v. Apex set boundaries constraining what common law admiralty courts can do when Congress has legislated as it has in the Jones Act. He was quickly interrupted by Justice Sotomayor who noted that the Jones Act was enacted to supplement, not restrict, remedies available to a seaman. Justices Ginsberg and Kagan also pressed Waxman, with Kagan questioning why unseaworthiness doctrine has evolved over the past few decades, becoming more favorable to the seaman, if the Jones Act in 1920 constrained the common law admiralty courts?
Due to the Tax Cuts and Jobs Act (“TCJA”) passed by Congress in December 2017, starting in 2018 many 501(c)(3) Exempt Organizations (“EOs”) are required to treat the cost of employer-paid qualified transportation and parking benefits as unrelated business taxable income (“UBTI”) to the EO. Though EOs have until May 15, 2019 to file their 2018 returns and remit any taxes owed to the federal government, there is a time-limited opportunity for some EOs to change their parking policy prior to March 31, 2019 and minimize the amount of parking tax owed.
New Tax on Employee Parking
EOs pay federal income taxes on their UBTI at a 21% rate. Generally, UBTI is the income generated by an EO’s activity which is unrelated to the organization’s exempt purpose. The TCJA changed this definition so that certain amounts spent by an EO on qualified transportation fringe benefits (e.g. employee parking) are treated as UBTI. The IRS detailed their reasoning as to the types of taxable parking in IRS Notice 2018-99, which may be relied upon by EOs until the IRS issues regulations.
In Air & Liquid Systems Corp. v. Devries, No. 17-1104, — S. Ct. —, 2019 WL 1245520 (U.S. March 19, 2019), the U.S. Supreme Court resolved a circuit split regarding maritime law and the “bare metal” defense, namely whether manufacturers have a duty to warn when their bare metal product requires later incorporation of a dangerous part in order for the integrated product to function as intended. Justice Kavanaugh wrote the opinion for a 6-3 court, with Justices Gorsuch, Thomas, and Alito dissenting.
“Bare Metal” Products at Issue
In Air and Liquid Systems Corp v. Devries, the defendant manufacturers produced shipboard equipment such as pumps, blowers, and turbines for various Navy ships on which the plaintiffs, two Navy veterans, were employed. The equipment required asbestos insulation or asbestos parts to function as intended. However, the defendant manufacturers did not always incorporate the asbestos into their products; they delivered much of the equipment to the Navy without asbestos. The defendants’ equipment was delivered in a condition known as “bare metal,” and the Navy later added the asbestos to the equipment.
Commercial and employment agreements often include provisions requiring arbitration of disputes between the parties. Some of these agreements contain “delegation clauses” requiring the arbitrator (as opposed to a court) to decide whether the dispute is subject to arbitration. Despite such provisions, one party may sue the other because it perceives an advantage to proceeding in court or wants to test the outer limits of the arbitration provision. The first battle in these suits is over who—the court or an arbitrator—decides whether the dispute must be arbitrated. In unanimous decisions issued over the last week, the Supreme Court addressed two scenarios where the parties fought over this question, despite having delegated questions of “arbitrability” to an arbitrator. Read together, the Court’s decisions clarify that a court should first decide whether the Federal Arbitration Act (“FAA”) applies to the parties’ agreement. If so, the court must honor the delegation clause and refer the matter to arbitration.
Effective January 1, 2019, Louisiana Senate Bill 416 requires all investment adviser representative (“IAR”) applicants to submit fingerprints for a criminal background check to the Louisiana Commissioner of Securities. La. R.S. 51:703(D)(5). Investment adviser representatives registered before January 1, 2019 (unless they change advisers) and IAR’s already registered with FINRA do not need to submit fingerprints. Fingerprint cards can be obtained from local law enforcement offices and submitted along with a completed Louisiana State Police Bureau of Criminal Identification and Information Form, and a completed and notarized Authority to Obtain Information from Outside Sources form. The forms are available from the Commissioner of Securities office.
US Government Shutdown
Although the US government, and the SEC, is shutdown, advisers should continue to meet all statutory and regulatory deadlines as set forth in the SEC’s Operations Plan Under Government Shutdown (Dec. 2018). The IARD is still operating and accepting filings, although the SEC will not approve new or pending adviser registration applications.
Advisers must file their annual Form ADV Amendment by March 31, 2019. You should make sure that your IARD account is funded and password is current in advance of the deadline. There were no significant amendments to Form ADV this year (the SEC made a number of amendments in 2018 relating to separately managed accounts and standing letters of authority). Continue Reading
For many investment advisers, CPAs are a big source of referrals. Often these CPAs are compensated for the referrals. Most states now require registration of solicitors, including CPAs, as investment adviser representatives (“IAR”). This article provides some background on these requirements.
1. A Little Refresher
What is a solicitor? A solicitor is a person who, directly or indirectly, solicits or refers clients to an adviser. A solicitor relationship arises when an adviser pays an employee or third party for referring clients. The use of solicitors is regulated by the SEC under the Investment Advisers Act of 1940 and by the various states. Continue Reading