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Louisiana Bar Journal Vol. 57, No. 2 115

Appearing Pro Se

is Dangerous

Melanie Cranford, a licensed practical nurse, had her license revoked by the Louisiana State Board of Practical Nurse Examiners due to her verbal and emotional abuse of nursing home residents. She filed a petition for judicial review in Orleans Parish Civil District Court, resulting in affirmation of the agency decision. She appealed, claiming, inter alia, that the agency’s decision was arbitrary and capricious because it failed to properly judge the credibility of the witnesses who testified at the hearing, particularly her own testimony, and that she was denied due process of law.

In Cranford v. Louisiana State Board of Practical Nurse Examiners, 08-0209 (La. App. 4 Cir. 10/1/08), 996 So.2d 590, the court of appeal, affirming the decision of the trial court, stated that an

agency decision is arbitrary when it has disregarded or given inappropriate weight to evidence, and is capricious when the agency’s conclusion has no substantial basis or is contrary to substantiated competent evidence. The trier of fact in an agency proceeding has the right to make credibility determinations, and reasonable credibility determinations can virtually never be manifestly erroneous. The court found that the hearing officer’s rejection of Cranford’s testimony was a reasonable credibility call, noting that the hearing officer stated Cranford was “argumentative, evasive in her answers

and continually tried to divert the subject at hand.” The hearing officer also found Cranford’s hand-written and signed nar-rative accounts of the incidents contained “multiple inconsistencies and sarcastic innuendos.” The court held that Cranford, who received notice of the charges and a full evidentiary hearing at which she represented herself, was not denied due process of law.

—Brian M. BéguéChair, LSBA Administrative Law Section

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116 August / September 2009

Alternative Dispute Resolution

Public Adjuster Engaged in Unauthorized

Practice of Law

La. State Bar Ass’n v. Carr & Assoc., Inc., 08-2004 (La. App. 1 Cir. 5/8/09), ____ So.2d ____.

Earl T. Carr, Jr. and Carr & Associates, Inc. (hereafter collectively referred to as Carr) are engaged in the business of public adjusting. Carr’s business included contracting with individuals in a repre-sentative capacity in order to negotiate a settlement of the individual’s first-party property insurance claims with insur-ance companies. No employee of Carr is licensed to practice law in Louisiana or elsewhere. Some of the settlements occurred during mediations wherein Carr appeared as an “attorney in fact” for clients at mediations without the presence of the client. At the request of the Louisiana State Bar Association and after a trial on the merits, the trial court issued a permanent injunction without bond against Carr, prohibiting it from

engaging in myriad activities that the court determined to be the unauthorized practice of law (UPL). The trial court issued the injunction because Carr:

(1) advised and counseled its clients regarding the terms of their insur-ance policy coverage and their respective rights; (2) had direct contact and negotiated with its clients’ insurers regarding aspects of the clients’ insurance coverage, the monetary value of its clients’ claims, and settlement of its cli-ents’ claims; (3) improperly used a contingency fee/percentage-based contract for its public adjusting ser-vices; and (4) instructed its clients’ insurers to send checks directly to Carr and made payable to Carr along with Carr’s clients.

These activities were determined to be in direct violation of prohibitory language in the Louisiana Public Adjuster Act, La. R.S. 22:1691, et seq. (formerly cited as La. R.S. 22:1210.91, et seq.), and consti-tuted the unauthorized practice of law in violation of La. R.S. 37:212-213. After Carr appealed to the 1st Circuit Court of Appeal, the court affirmed the judgment of the trial court, granting a permanent injunction in favor of the LSBA and en-joining Carr from engaging in the UPL as outlined in the trial court’s judgment.

Offer to Mediate Not Evidence of Validity of Claim

Brooks v. La. Citizens Fair Plan, 08-0908 (La. App. 4 Cir. 1/28/09), 4 So.3d 899, writ not considered, 09-0526 (La. 4/17/09), 6 So.3d 781.

Brooks brought a pro se suit against defendant’s property insurance company alleging that the company insured her home for the losses she sustained from Hurricane Katrina. Brooks filed a motion for summary judgment on the ground that the defendant had admitted in its answer that it provided coverage. The defendant moved for summary judg-ment on the grounds that the policy had been properly cancelled before the loss event. The trial court denied Brooks’s motion for summary judgment, granted the defendant’s motion for summary judgment, and dismissed Brooks’s suit with prejudice. Among other arguments on appeal, Brooks alleged that the defen-dant’s invitation to Brooks to mediate her claim prior to the filing of its motion for summary judgment amounted to evidence of the validity of her claim. The court of appeal disagreed and affirmed the trial court’s judgment granting the motion for summary judgment, finding that under La. C.E. art. 408(A), an offer to compromise a disputed claim is not evidence of the validity of the claim.

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Fraud in the Inducement Claim Must Be Determined

by Arbitrator, Not the Judge

Saavedra v. Dealmaker Devs., LLC, 08-1239 (La. App. 4 Cir. 3/18/09), 8 So.3d 758, writ denied, 09-0875 (La. 6/5/09), 9 So.3d 871.

After Saavedra, the purchaser, brought suit against the seller and seven other defendants alleging, among other things, breach of contract, fraud and intentional misrepresentation, the defendants filed exceptions of prematurity and lack of subject matter jurisdiction based on an arbitration provision contained in the purchase agreement. The trial court denied the exceptions, effectively preventing the defendants from arbitrating the claims. Because the trial court’s ruling did not determine the merits but only preliminary matters in the course of the action, under La. C.C.P. art. 1841, the judgment of the trial court was an interlocutory judgment whose appeal was governed by La. C.C.P. art. 2083.

The defendants appealed the trial court’s judgment denying the exceptions. Relying on Louisiana state jurisprudence on arbitration, the court of appeal found that, although the Federal Arbitration Act (FAA) governed the case, the FAA does not preclude Louisiana procedural law regarding the right to appeal an interlocutory judgment denying arbitra-tion. As the FAA provisions governing the timing of appeals are procedural, state courts are free to follow their own procedural rules regarding the timing of appeals unless those rules undermine the goals and principles of the FAA. The court found that the Louisiana procedural rule limiting the review of an interlocu-tory judgment denying arbitration to a discretionary supervisory writ does not undermine the goals and principles of the FAA and thus dismissed the defendants’ appeal. It then exercised its supervisory jurisdiction, converted the appeal to an application for supervisory writs, and granted the writ.

Citing jurisprudence from the United States Supreme Court interpreting the

FAA, including Prima Paint Corp. v. Flood & Conklin Mfg. Co, 87 S.Ct. 1801 (1967), the court of appeal found that the arbitration provision was a broad one, that the plaintiff’s claims involving fraud and misrepresentation were severable from the remainder of the contract, and that unless the challenge is to the arbitration clause itself, the issue of the validity of the contract is to be determined by the arbitrator, not the court. As the plaintiff’s fraud claim was directed to the purchase agreement as a whole, and not to the arbi-tration provision itself, the court found that his claims, including the claim of fraud in the inducement, must be determined by the arbitrator, not the trial judge.

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Astoria Entertainment Case

On May 22, the Louisiana Supreme Court rendered its opinion in Astoria Entertainment, Inc. v. DeBartolo, 08-1690 (La. 5/22/09), ____ So.3d ____, wherein the court reversed the 4th Circuit’s affirmance of summary judgment in favor of the defendants. In the first Louisiana state court case to consider application of the Noerr-Pennington doctrine, which generally immunizes conduct aimed at influencing government action, the court ruled that the doctrine was not applicable to civil damage claims based upon allegations that defendants received undue governmental advantage through

bribery and corruption. At least arguably, this holding is at odds with United States Supreme Court precedent that only “sham” activity, that is, “situations in which persons use the governmental process — as opposed to the outcome of that process — as an anticompetitive weapon,” is subject to attack as unfair competition. City of Columbia v. Omni Outdoor Advertising, Inc., 111 S.Ct. 1344, 1354 (1991). In finding Noerr-Pennington inapplicable to corruption charges, Astoria Entertainment joins Louisiana Power & Light Co. v. United Gas Pipe Line Co., 493 So.2d 1149, 1160 (La. 1986) (rejecting a strict interpretation of Copperweld Corp. v. Independence Tube Corp., 104 S.Ct. 2731 (1984) concerning intra-corporate conspiracy liability), in declining to closely follow the United States Supreme Court’s lead in the trade regulation arena.

In Astoria Entertainment, a potential candidate for one or two of the original 15 riverboat casino licenses alleged that defendants conspired to and did corrupt

the licensing process, costing plaintiff a lucrative opportunity to obtain a license and run a riverboat casino in Kenner and/or Gretna, La. Plaintiff sued in federal court, asserting (eventually) federal antitrust, RICO and state law claims. Astoria Entm’t, Inc. v. Edwards, 159 F.Supp.2d 303, 308-09 (E.D. La. 2001). The court ruled that the antitrust and RICO claims were barred by the statute of limitations, and that the Noerr-Pennington doctrine precluded liability for the antitrust claims. The state claims were thereafter dismissed for lack of federal jurisdiction. Id. at 320, 325, 328 and 329.

Plaintiff refiled its suit in state court, alleging intentional interference with economic advantage, unjust enrichment, civil conspiracy, fraud under California law (allowing for recovery of punitive damages), and violations of both California and Louisiana unfair-trade-practices laws. After one trip to the Louisiana Supreme Court, where the suit was returned to the district court in a

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non-merits ruling, the trial court granted defendants’ motions for summary judgment. The 4th Circuit Court of Appeal, relying exclusively on the Noerr-Pennington doctrine, affirmed. The Louisiana Supreme Court granted Astoria Entertainment’s writ application and reversed.

In the opinion, the court first discussed the origins of the Noerr-Pennington doctrine, quoting Eastern R.R. Presidents Conf. v. Noerr Motor Freight, 81 S.Ct. 523, 531 (1961), and stating:

[T]he Noerr-Pennington doctrine stems not only from the right to petition governments granted by the First Amendment, but is also based on the recognition that antitrust laws, “tailored as they are for the business world, are not at all appropriate for application in the political arena.”

Reasoning that the United States Supreme Court has considered Noerr-Pennington only in the context of antitrust litigation, the court concluded because no antitrust claims were at issue, the only question was whether maintaining the suit would abridge First Amendment rights to petition the government. Notably, by distinguishing the suit before it from antitrust Noerr-Pennington cases, the court was able to avoid the U.S. Supreme Court’s language in Omni rather strenuously implying that even bribery or corruption could not be attacked as unfair trade practices; rather, such conduct is better policed by more particular criminal laws. Omni, 111 S.Ct. 1353.

The court acknowledged that a number of federal circuits and other state supreme courts have applied Noerr-Pennington to a variety of claims beyond the antitrust realm. (The United States Supreme Court has also seemingly applied Noerr-Pennington in at least National Labor Relations Act cases, see, e.g., BE&K Constr. Co. v. NLRB, 536 U.S. 516 (2002)). The court agreed that “there is no reason that the constitutional protection of the right to petition should be less compelling in the

context of claims that arise outside the scope of the antitrust laws.” However, the court, relying on the observation that laws regulating business are not necessarily applicable in the political world, found the case before it to be sufficiently distinct from antitrust cases that Noerr-Pennington did not control, and First Amendment precedent alone was the binding authority. (There is, perhaps, a distinction between unfair trade practice and antitrust laws in terms of business regulation, although any such distinction is perhaps blurred by the Supreme Court’s rejection of the

South Carolina Unfair Trade Practices Act claim in Omni.)

Applying First Amendment law, the court noted that the right to petition is not absolute. See, e.g., McDonald v. Smith, 105 S.Ct. 2787, 2790 (1985). Because of this, the court wrote, “We find no reason to give the defendants’ illegal actions First Amendment constitutional protection.” The court further found:

that the alleged bribery and corruption in this case are not petitioning activities that should be constitutionally protected. To

Pro Bono Heroes: Providing Justice for All

I was always told pro bono work is the rent we pay for the space we,

as lawyers, occupy. Of course, pro bono work is the right thing to do. At the fi rm, we tell our lawyers that pro bono work is also the smart thing to do. Pro bono cases present a great opportunity to gain valuable experience and self-confi dence. As pro bono coordinator, I have seen many young lawyers obtain great training by handling Social Security appeals, landlord-tenant disputes, and wage claims for very grateful clients. Those are some of the most rewarding experiences.

– Christopher K. RalstonPro Bono Coordinator, Phelps Dunbar

Providing Justice For AllAccess to Justice

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I was always told pro bono work is the rent we pay for the space we, as lawyers, occupy. Of course, pro bono work is the right thing to do. At the fi rm, we tell our lawyers that pro bono work is also the smart thing to do. Pro bono cases present a great opportunity to gain valuable experience and self-confi dence. As pro bono coordinator, I have seen many young lawyers obtain great training by handling social security ap-peals, landlord-tenant disputes, and wage claims for very grateful clients. Those are some of the most re-warding experiences.


Entertainment Bills Update: 2009 Regular Session

Several entertainment-related bills were filed during the 2009 Regular Legislative Session. Although the session was still underway as of the writing of this article, the major bills and status (as of June) are summarized.

House BillsHouse Bill 457 removes the sunset

provisions for the Louisiana Digital Media Tax Credits. This bill was reported favorably by the House Ways & Means Committee (W&M), passed the House, moved to the Senate and was referred to the Senate Revenue & Fiscal Affairs Committee (R&FA).

House Bill 458 removes the sunset provisions for the Louisiana Sound Recording Tax Credits. This bill was reported favorably by W&M, passed the House, then moved to the Senate and was referred to R&FA.

House Bill 614 reduces the Louisiana Motion Picture Infrastructure Tax Credit

to 7.5 percent from the 40 percent for certain non-grandfathered infrastructure projects. This bill was reported favorably by both W&M and by the Committee on House and Governmental Affairs and was referred to House Appropriations due to the related fiscal note.

House Bill 693 allows new infrastructure project applications to be filed by Dec. 31, 2009, and sets a deadline for certain infrastructure projects to earn 40 percent tax credits by meeting a specific spending threshold by June 30, 2010. This bill was reported favorably by W&M, passed the House and was referred to R&FA.

House Bill 798 relating to Music and Theater Tax Credits was reported favorably by W&M and by House Appropriations and was pending House passage.

House Bill 898 removes the sunset provision on the production tax credits and deletes the legislation relative to infrastructure from La. R.S. 47:6007. House Bill 898 was substituted for HB 142 in the House after the latter bill was reported favorably by W&M. After passing the House, HB 898 was referred to R&FA.

Senate BillsSenate Bill 159 relates to infrastructure

projects and provides that a transaction executed prior to Dec. 31, 2008, in which the obligation is secured by the subject

hold otherwise would give Noerr-Pennington a sweeping effect far beyond the original purpose of the doctrine.

In Astoria Entertainment, the Louisiana Supreme Court again proves its willingness to depart from strict adherence to federal court interpretation in the trade regulation area. In Louisiana Power & Light, the court had state court precedent upon which to rely in straying from the spirit of Copperweld; in Astoria Entertainment, the court distinguished its way around the spirit of the Noerr-Pennington doctrine, at least as it has been interpreted by the United States Supreme Court in Omni Outdoor Advertising. Antitrust and trade regulation practitioners are well cautioned not to assume that what they have long known to be the law in federal court will translate exactly in a Louisiana state forum.

—Alexander M. McIntyre, Jr. Chair, LSBA Antitrust and

Trade Regulation Law SectionBaker, Donelson, Bearman, Caldwell & Berkowitz, P.C.

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Art, Entertainment and Sports Law


of the transaction and the maturity date for the obligation occurs after Dec. 31, 2008, qualifies for the requirement that 50 percent of the “total base investment” of a movie-infrastructure project must be expended before that date. The bill as originally filed provided that tax credits are earned when “certified” by the relevant state agency, rather than when “spent,” which is current law. That substantive language was deleted by R&FA when the committee adopted amendments proposed after hearing testimony from a New Orleans company that their owner-financed building purchase before Dec. 31, 2008, was not qualified to earn tax credits as it did not meet the 50 percent base-investment-expenditure threshold. The bill as amended was reported favorably by R&FA and was pending Senate passage.

Senate Bill 245 removes the sunset provisions for production-tax credits and for any productions certified on or after July 1, 2009. The tax credits increase from 25 percent to 30 percent of in-state expen-ditures, which credits may be transferred to the state for 85 percent of face value

rather than the existing 74 percent. A new provision in Senate Bill 245 also requires producers, inter alia, to provide a notarized statement that they have paid their undis-puted legal obligations in Louisiana and to file public notice for three consecutive weeks of the need to file creditor claims against the production by a certain date and that such claims will not be waived by a creditor’s failure to file. The bill was reported favorably by R&FA, passed the Senate and was referred to W&M.

Senate Bill 342 is the first infrastructure-tax-credit bill that creates accountability by establishing deadlines for the Office of Entertainment Industry Development and Division of Administration to issue approvals and certifications for infrastructure projects. Senate Bill 342 also provides an appeals process. This bill further requires that certain grandfathered infrastructure projects spend 20 percent of their budget or $10 million before June 30, 2010, to earn 40 percent tax credits. This bill was reported favorably by R&FA and referred to the Senate Committee on Finance.

Senate Bill 277 clarifies the Digital

Media Tax Credit law, provides additional definitions and removes the sunset provisions for these tax credits. Senate Bill 277 was reported favorably by Revenue and Fiscal Affairs, passed the Senate and was referred to W&M.

Senate Bill 343 is considered a “family friendly” production-tax-credit bill, which offers additional tax credits for those productions that are in accord with certain definitions. The bill was reported favorably by R&FA, passed the Senate and was referred to W&M.

At the time of this article, other entertainment-related bills had been introduced but had not advanced from the committee(s) to which they had been assigned.

—LSBA Art, Entertainment and Sports Law Section Officers and

Governing Council members Michèle M. LeBlanc, William A. Pigg, John

C. Roa and W. Thomas AngersP.O. Box 3153

Baton Rouge, LA 70821

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Bankruptcy Law

Does the Hanging Paragraph Prevent Deficiency Claims?

In In re Miller, ____ F.3d ____ (5

Cir. 2009), the 5th Circuit reversed and remanded the bankruptcy court’s confir-mation of a Chapter 13 plan of reorganiza-tion that allowed the debtor to surrender his vehicle to the secured lender for the secured portion of the lender’s claim but failed to provide for payment of the unsecured deficiency claim.

The issue presented to the 5th Circuit was whether the hanging paragraph set forth in 11 U.S.C. § 1325(a)(5)(C) pre-vents a creditor with a purchase-money security interest in a “910 vehicle” (a vehicle purchased within 910 days of the

bankruptcy filing) from obtaining a state law deficiency judgment against a debtor for the portion not covered by the sale of the vehicle. Section 506(a)(1) of the Bank-ruptcy Code provides that a creditor has a secured claim to the extent of the value of its collateral and an unsecured claim for any deficiency. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) changed this analysis when it added the hanging paragraph, which provides that Section 506 does not apply to Section 1325(a)(5) if:

the creditor has a [PMSI] securing the debt that is the subject of the claim, the debt was incurred within the 910-day [sic] preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle . . . acquired for the personal use of the debtor . . . .

11 U.S.C. § 1325(a). In determining whether the amendment to Section 1325 deprived a creditor from pursuing the

remaining debt on a 910 vehicle, the 5th Circuit analyzed two viewpoints: (1) the full-satisfaction position, which holds that a debtor can surrender a 910 vehicle in full satisfaction of his debt regardless of whether the car is worth less than the total debt; and (2) the deficiency position, which holds that a creditor can still pur-sue the remaining debt on a 910 vehicle, despite the amendment to § 1325.

The 5th Circuit refused to follow the full-satisfaction position and, instead, followed the deficiency position. Under the deficiency position, the 5th Circuit noted other courts have used two other ap-proaches: (1) the “equity-of-the-statute” approach; and (2) the state-law approach. The 5th Circuit rejected the “equity-of-the-statute” approach, which recognized that there was a “gap” in the statute and that reading the statute literally would “produce a nonsensical result not intended by the drafters” of BAPCPA. In re Long, 519 F.3d 288, 295 (6 Cir. 2008). The 5th Circuit held that “[b]y relying on the ‘equity-of-the-statute’ theory, the [6th


Circuit] in Long deviated from the proper reading of the Code,” failing to read the plain language of the statute.

The 5th Circuit followed the 7th Circuit’s state-law approach, quoting In re Wright, 492 F.3d 829, 832 (7 Cir. 2007):

The Wright . . . court recognized that the hanging paragraph does prevent § 506 from affecting surrendered 910 vehicles under § 1325(a)(5)(C) . . . then properly explained that § 506 is “[not] the only source of authority for a deficiency judg-ment.”

The 5th Circuit held that it will look not only to federal law but also to state law; thus, the secured lender still held an unsecured debt against the debtor pursuant to Louisiana state law. In following the deficiency position, the 5th Circuit joined the 4th, 7th, 8th, 10th and 11th Circuits.

Equitable Mootness

In Premier Entertainment Biloxi, LLC v. Pacific Investment Management Co., 08-60349 (U.S. 5 Cir. 6/09/09) (unpub-lished), the 5th Circuit affirmed the deci-sion of the district court for the Southern District of Mississippi, holding that the appeal of the debtor’s confirmed plan of reorganization was equitably moot.

In determining whether the bankruptcy appeal was equitably moot, the 5th Circuit analyzed three factors: (1) whether a stay had been obtained; (2) whether the plan had been “substantially consummated;” and (3) whether the relief requested would affect either the rights of parties not before the court or the success of the plan. The 5th Circuit found that the first factor militated toward holding the appeal equitably moot because the appel-lants failed to obtain a stay. Next, the 5th Circuit found that the second factor also weighed in favor of holding the appeal equitably moot because the appellees were

operating as a reorganized entity and had done “at least most . . . of that required of them under the confirmed plan.” Finally, the 5th Circuit held that the third factor weighed in favor of holding the appeal equitably moot because overturning the plan at that point “would create an un-manageable situation for the Bankruptcy Court.” Moreover, “creditors and other third parties who relied on the confirmed plan would undoubtedly be affected.” The 5th Circuit held the appeal equitably moot and dismissed the appeal.

—Tristan E. MantheyChair, LSBA Bankruptcy Law Section

andCherie Dessauer Nobles

Member, LSBA Bankruptcy Law SectionHeller, Draper, Hayden, Patrick &

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Better Documentation for Decision-Making Process

Courts often defer to the technical expertise of a federal, state or local agency when reviewing rulemaking and permitting actions. Recent decisions from both federal and state courts reaffirm that such deference will not be extended when the governing authority requires an agency to provide an adequate explanation of its decision-making process, and the agency fails to do so.

Future Attainment for PM2.5 Up in the Air

American Farm Bureau Fed’n v. EPA, 559 F.3d 512 (D.C. Cir. 2009).

The U.S. Court of Appeals, District of Columbia Circuit, remanded the National Ambient Air Quality Standards (NAAQS) for fine particulate matter (PM2.5) to the Environmental Protection Agency (EPA) for the agency to provide

a better explanation of its decision-making process.

The Clean Air Act (CAA) requires that the EPA establish NAAQS for air pollutants determined to endanger public health or welfare, such as PM2.5. The first NAAQS for PM2.5 was set in 1997 with a daily standard of 65 micrograms per cubic meter (µg/m3) and an annual standard of 15 µg/m3. On Oct. 17, 2006, the EPA fulfilled a statutory obligation under the CAA to review the NAAQS and reset the standards as it deemed necessary.

EPA lowered the daily standard from 65 to 35 µg/m3, but the annual standard was left at 15 µg/m3. EPA’s decision not to lower the annual standard was contrary to the recommendations and suggestions of the scientific advisors typically relied upon when reviewing and revising NAAQS. Various medical and public health groups also provided comments urging EPA to lower the annual standard. While EPA is not required to follow the recommendations of these organizations, the CAA does require that such information be examined and that EPA respond with a reasoned explanation of its ultimate decision.

Environmental groups and multiple states challenged EPA’s decision to keep the annual standard at 15 µg/m3, rather than lower it to a limit within the 12-14 µg/m3 range recommended by the

scientific and health organizations. The D.C. Circuit Court of Appeals remanded the PM2.5 annual standard to the EPA, finding that it failed to adequately explain why, in light of conflicting information from its scientific advisors, it determined that 15 µg/m3 is sufficient to protect the public health.

By remanding but not vacating the PM2.5 standard, the court explained that EPA could cure the defect by providing the requisite justification for its actions. A more likely scenario, however, is that EPA will respond to the remand by reducing the annual standard, rather than justifying the 15 µg/m3 standard. Not only has EPA experienced an administration change since the standards were promulgated in 2006, but the recent publication of a long-awaited health study by the Health Effects Institute (HEI) may provide EPA with the necessary justification to lower the annual NAAQS for PM2.5.

A decision by EPA to lower the annual standard for PM2.5 will likely have a significant impact on Louisiana. Although currently in attainment status for PM2.5, Louisiana’s ability to demonstrate continued compliance with this NAAQS will depend on how low EPA takes the standard. According to the Louisiana Department of Environmental Quality’s (LDEQ) 2007 Louisiana Ambient Air Monitoring Network Annual

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Report, three PM2.5 monitoring stations located in the Baton Rouge Metropolitan Statistical Area reveal a potential for noncompliance if the standard is set at or below 13.5 µg/m3. LDEQ’s 2007 report is available at: www.deq.louisiana.gov/portal/Portals/0/AirQualityAssessment/Analysis/2007Annualreport_final.pdf.

Coastal Use Permit for Landfill Expansion Revoked

Oakville Cmty. Action Group v. Plaquemines Parish Council, 08-1286 (La. App. 4 Cir. 2/18/09), 7 So.3d 25, writ denied, 09-0621 (La. 5/1/09), 6 So.3d 813.

The 4th Circuit revoked a Coastal Use Permit (CUP) issued by the Plaquemines Parish Council (council) on the grounds that the council failed to prepare a statement explaining the basis of its decision to issue the permit.

The council’s Local Coastal Zone Management Program is approved by the Louisiana Department of Natural

Resources (LDNR) and, therefore, the council is the permitting authority for coastal uses that are of local concern. In that capacity, the council conditionally approved a CUP for Industrial Pipe, Inc. to expand its landfill located in Plaquemines Parish. The Oakville Community Action Group (Oakville) filed suit against the council on the grounds that the council approved the CUP without complying with the requirements of the Louisiana Administrative Code. Specifically, Oakville complained that the council failed to prepare and include in the record a statement explaining the basis of its decision to conditionally approve the CUP.

The council argued that because the LDNR approved its local permitting program, its obligation is to comply with the provisions of that program, which do not require that a written decision document be prepared. The trial court, agreeing with the council, found that as the CUP was issued in accordance with the council’s approved local-permitting program, the decision document was not

a required element of the CUP.The 4th Circuit disagreed. The court,

quoting Louisiana Administrative Code 43:1:723(8), found that all permitting bodies, including those operating under an LDNR-approved local program, are required to “prepare a short and clear statement explaining the basis for its decision on all applications.” The council’s failure to prepare the requisite written decision document resulted in the revocation of the CUP issued to Industrial Pipe, Inc.

—Karen J. BlakemoreMember, LSBA Environmental

Law SectionPhelps Dunbar, L.L.P.

P.O. Box 4412 Baton Rouge, LA 70821-4412


Custody

Bernberg v. Strauss, 08-0488 (La. App. 4 Cir. 12/3/08), 999 So.2d 1184.

Dr. Strauss’s expert testimony in a cus-tody trial allegedly led the court to award domiciliary custody to Mrs. Bernberg. Mr. Bernberg, individually and on behalf of his minor daughter, then sued Strauss, contending he provided “uninformative, unsupported and/or false expert testimony” at trial that caused the child physical and emotional damages. Strauss’s exception of no cause of action was granted because no malpractice was committed and there was no privity of contract between plaintiffs and the doctor. Moreover, Strauss was entitled to absolute immunity as an adverse expert witness in a civil suit.

Martin v. Martin, 44,020 (La. App. 2 Cir. 12/3/08), 3 So.3d 512.

The court of appeal affirmed the trial court’s judgment allowing the father to relocate with the child to Virginia because the mother had, over a period of five years, refused to comply with court orders regard-ing mental health exams, and because the father had good reasons — family, better career possibilities and an enhanced quality of life for the child in Virginia.

Perry v. Monistere, 08-1629 (La. App. 1 Cir. 12/23/08), 4 So.3d 850.

The first judgment of custody was a considered decree. A second consent judgment addressed a change in the visitation schedule only. Thus, Mr. Perry’s motion to change custody was subject to Bergeron, and he failed to show a change of circumstances.

Howard v. Oden, 44,191 (La. App. 2 Cir. 2/25/09), 5 So.3d 989.

The court of appeal affirmed the trial court’s sentence of 90 days in jail, suspend-ed, to the mother for violating a custody

order not to allow any contact between her boyfriend and her children, particularly in view of her “blatant disobedience” to the court’s order by marrying the boyfriend and allowing him to move into her home. Her continued disobedience of court orders was a sufficient change in circumstances under Bergeron to change custody from her to the paternal grandfather.

Child Support

Miller v. Miller, 44,163 (La. App. 2 Cir. 1/14/09), 1 So.3d 815.

The parties’ agreement that Mr. Miller was “to begin setting funds aside for the minor children to attend post-secondary education” was vague and ambiguous. The court asked, “When? How much? Where are the funds to be placed or invested?” and how much of the cost was he to be responsible for? Thus, the agreement was unenforceable.

Heflin v. Heflin, 44,155 (La. App. 2 Cir. 1/14/09), 1 So.3d 820.

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allows parents to modify a court-ordered award of child support, the court of appeal reversed the trial court and determined that Mr. Heflin was not responsible for five years of back child support as the child had been living with him for 10 years with the consent of the mother, who had made no demand or taken any legal action for support or to have the child returned to her, and she had exercised a fixed visitation schedule with the child.

Paternity

J.M.Y. v. R.R., 08-0805 (La. App. 3 Cir. 12/11/08), 1 So.3d 725.

The legal father had no right and no cause of action for reimbursement from the alleged biological father or from the mother for child support paid to the mother because, as the presumed father, he had not filed to disavow the child and had an obliga-tion of support, even if the alleged natural father, if proven to be the father, may also have had an obligation of support.

Spousal Support

Hall v. Hall, 08-0706 (La. App. 5 Cir. 2/10/09), 4 So.3d 254, writ denied, 09-0812 (La. 5/29/09), 9 So.3d 166.

A waiver of interim spousal support in a pre-nuptial agreement is void as against public policy, as is a stipulation in the marriage contract as to the amount of the interim support if a divorce ensues, if the amount fixed is insufficient based on the codal factors. However, even though the waiver of final spousal support after the divorce was upheld, the wife was entitled to interim spousal support for 180 days after the divorce because her request for final support was pending at the time of the divorce and was not denied until more than 180 days after the divorce. The court found that her claim for final spousal support, even though waived, was not frivolous. As to child support, Mr. Hall argued that the amount should have been reduced once they began sharing equal custody; however, because his income so exceeded hers, and because they were off the guidelines, the trial court did not err in not reducing the award, as it was not in the child’s best interest to do so.

Property

Cannon v. Bertrand, 08-1073 (La. 1/21/09), 2 So.3d 393.

One of three members of an LLC, Can-non, notified the other two that he desired to withdraw, and subsequently filed suit to have the value of his one-third share de-termined. The plaintiff’s expert suggested no minority discount; defendants’ expert suggested 75 percent; the trial court ap-plied 35 percent, which the court of appeal affirmed. On writs to the Supreme Court, it held that no discount should have been applied because:

[t]hese two partners will not be sub-ject to a lack of control as would a third party, as each has an equal say in the control of the partnership, and, because the partners have already determined to purchase the partner-ship share themselves by opting to continue the partnership and avoid liquidation, neither is lack of market-ability an issue.

Further, a minority discount would penalize the withdrawing party for doing something the law allows him to do.

Nichols v. Nichols, 08-0207 (La. App. 4 Cir. 1/14/09), 4 So.3d 134.

After reaching a consent judgment to settle issues regarding the former matrimo-nial domicile, Ms. Nichols filed a motion to amend the judgment. She claimed that, after the judgment, Mr. Nichols received money from the Road Home program and insurance money to rebuild the home and that she was owed a share of the money. Her motion was properly denied as an attempt

to substantively modify a prior judgment. She had drafted the judgment, and it was not ambiguous as to the settlement, which was to settle all claims.

Procedure

Lee v. Smith, 08-0455 (La. App. 5 Cir. 12/16/08), 4 So.3d 100.

Although the court of appeal agreed with the trial court that Ms. Lee failed to show by a preponderance of the evidence that she was entitled to a protective order under the Domestic Abuse Assistance Statute, it found that the trial court erred in nevertheless issuing mutual restraining orders against both of them. No request for an order had been filed against her, so no such relief could be granted against her. He filed no appeal or reply, so the restraining order against him continued in effect.

Domestic Partners

Ralph v. City of New Orleans, 08-0767 (La. App. 4 Cir. 1/15/09), 4 So.3d 146.

Citizens and taxpayers in the city of New Orleans sued the city and city council to declare null the registry of “Domestic Partners,” and the extension of health-insurance benefits to unmarried domestic partners of city employees. The trial court granted summary judgment in favor of the city. Because the ordinance did not violate the Louisiana Constitution, the city had the authority to create it.

—David M. PradosMember, LSBA Family Law Section

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international Law

NAFTA: Cross-Border Trucking

The North American Free Trade Agreement (NAFTA) entered into force on Jan. 1, 1994. NAFTA Annex I requires the gradual phase-out of certain reserva-tions to non-discriminatory treatment in various sectors, including cross-border trucking. Specifically, Annex I required the United States to allow Mexican nationals to seek operating authority to provide cross-border trucking services in border states in December 1995 and throughout the United States in Janu-ary 2000.

The United States failed to withdraw its cross-border trucking reservations and, in 1998, Mexico filed a NAFTA Chapter 20-dispute-settlement case against the United States. In February 2001, a NAFTA dispute-settlement panel found the United States in violation of its obligations under the agreement and al-lowed Mexico to impose countervailing duties (penalties) equivalent to the value of the lost trade in cross-border trucking.

The panel’s ruling estimated the duties between $1 billion and $2 billion for every year the United States remained in noncompliance. Mexico did not impose retaliatory duties and, in 2007, the United States and Mexico implemented a pilot program allowing limited Mexican ac-cess to the U.S. states. Despite the fact that the program was widely viewed as successful, in March 2009, the U.S. Con-gress passed the 2009 Omnibus spending bill that ended funding for the program. Mexico responded to the legislation by retaliating with increased tariffs on U.S. goods valued at $2.4 billion, including 36 agricultural and 53 industrial goods imported from more than 40 U.S. states. To the extent the United States does not honor its NAFTA commitments, Mexico will likely carousel the tariffs to target additional U.S. goods.

United States Court of international Trade

Sioux Honey Assoc. v. Hartford Ins. Co., 09-00141 (Ct. Int’l Trade 4/7/09).

A class-action lawsuit was filed at the U.S. Court of International Trade on behalf of several domestic indus-tries, including domestic producers of crawfish, honey, garlic and mushrooms, against numerous insurance companies for negligent issuance of new shipper bonds on Chinese imports subject to anti-

dumping/countervailing duties between Jan. 1, 1995, and Aug. 18, 2006. New shipper bonds are issued by insurers or other sureties to allow entry of goods from companies that are undergoing a “new shipper review” by the Department of Commerce. The bonds are issued to secure ultimate payment of the final adjudicated duties assessed by Com-merce. Plaintiffs allege that Customs failed to collect $723 million in final duties over the past six years, the bulk of which is allegedly owed under bond by companies that were undergoing new shipper reviews. Plaintiffs allege third-party-beneficiary status as they would ultimately receive any money collected on the bonds under the now-repealed Continued Dumping Subsidy Offset Act (commonly referred to as the “Byrd amendment”). To the extent this case moves forward, either as a purported class or not, it could have a major impact on the perpetual under-collection of du-ties owed by Chinese companies.

110th Congress Treaty Priority List

The Obama Administration provided the Senate Committee on Foreign Rela-tions its list of priority treaties for con-sideration by the 110th Congress. The following is a brief overview of some of the priority treaties.

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► Arms Control: Comprehensive Nuclear-Test Ban Treaty (Treaty Doc. 105-28), submitted to Senate on Sept. 23, 1997.

► Human Rights: Convention on the Elimination of All Forms of Discrimina-tion Against Women (Treaty Doc. Ex. R, 96th Cong., 2d Sess.), submitted to Senate on Nov. 12, 1980.

► Labor: International Labor Or-ganization Convention No. 111 Con-cerning Discrimination in Respect of Employment and Occupation (Treaty Doc. 105-45), submitted to Senate on May 18, 1998.

► Law Enforcement: United Nations Convention on the Law of the Sea (Treaty Doc. 103-39), submitted to Senate on Oct. 7, 1994.

► Private International Law: Hague Convention on the International Recov-ery of Child Support and Other Forms of Family Maintenance (Treaty Doc. 110-21), submitted to Senate on Sept. 8, 2008.

The Obama Administration also sub-mitted a list of treaties for which it does not seek action by the 110th Congress. The following is a brief overview of some of these treaties.

► Vienna Convention on the Law of Treaties (Treaty Doc. Ex. L, 92d Cong., 1st Sess.), submitted to Senate on Nov. 22, 1971.

► International Covenant on Eco-nomic, Social and Cultural Rights (Treaty Doc. Ex. D, 95th Cong., 2d Sess.), sub-mitted to Senate on Feb. 23, 1978.

► Maritime Boundary Agreement between the United States of America and the Republic of Cuba (Treaty Doc. Ex. H, 96th Cong., 1st Sess.), submitted to Senate on Jan. 23, 1979.

—Edward T. HayesMember, LSBA International

Law SectionLeake & Andersson, L.L.P.Ste. 1700, 1100 Poydras St.


Labor and Employment Law

Forum May Matter When Determining Grounds for Vacating an Arbitration

Award

In Citigroup Global Markets Inc. v. Bacon, 562 F.3d 349 (5 Cir. 2009), the 5th Circuit removed “manifest disregard of the law” as a ground for vacating an arbitration award under the Federal Arbitration Act (FAA) in light of last year’s U.S. Supreme Court case Hall Street Assoc., L.L.C. v. Mattel, Inc., 128 S.Ct. 1396 (2008). The Hall Street decision involved the extent to which individuals could privately negoti-ate the standard of review for arbitration awards, post award. The court held that review could not be expanded to include “legal error” and must be confined to the statutory requirements of 9 U.S.C. § 10.

In Citigroup, Debra Bacon alleged her husband had withdrawn money from her Citigroup Individual Retirement Accounts without her permission by forging her signature. Bacon proceeded in arbitration against Citigroup seeking reimbursement for the unauthorized withdrawal. The ar-bitration panel awarded Bacon an amount equal to the amount she alleged her husband withdrew plus attorney’s fees. Citigroup filed a motion to vacate the arbitration award, alleging it was made in manifest

disregard of the law because:► the claims were time-barred;► claimant was not harmed by the

withdrawal because her husband used the money for her benefit and had promised to pay her back; and

► Texas law required apportionment among the liable parties (including Bacon’s husband), which was not done.

The district court granted the motion to vacate. The 5th Circuit reversed and remanded to determine if Citigroup’s motion fell within one of the “exclusive” statutory grounds of the FAA.

Under Section 10 of the FAA, courts are permitted to vacate an arbitration award for only four reasons:

► The award was procured by corrup-tion, fraud or undue means;

► There was evident partiality or cor-ruption by the arbitrators;

► The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced ; or

► The arbitrators exceeded their pow-ers or so imperfectly executed them that a mutual, final and definite award upon the subject matter was not made.

Because Citigroup concluded that Hall Street restricts the grounds for vacating an arbitration award to only those grounds set forth in Section 10 of the Act, the 5th Circuit regards manifest disregard “as a term of legal art, is no longer useful in actions to vacate arbitration awards.” Citigroup at 358.


The 5th Circuit’s decision differs from other circuit courts’ interpretation of Hall Street and is likewise distinct from how Louisiana state courts have construed La. R.S. 9:4210, which describes the grounds for vacating arbitration awards in a nearly identical manner to Section 10 of the FAA. See, e.g., Coffee Beanery, Ltd. v. WW, L.L.C., 300 Fed.Appx. 415, 419 (6 Cir. 11/14/08); Stolt-Nielsen SA v. Animal Feeds Int’l Corp., 548 F.3d 85, 93-95 (2 Cir. 11/4/08); and Comedy Club, Inc. v. Improv W. Assoc., 553 F.3d 1277 (9 Cir. 1/29/09). Likewise, Louisiana courts continue to specifically acknowledge and use the manifest disregard standard. See, e.g., Webb v. Massiha, 08-0226 (La. App. 5 Cir. 9/30/08), 993 So.2d 345, writs de-nied, 08-2834 (La. 2/6/09), 999 So.2d 780, 781; and Young v. Peaslee Capital Group, LLC, 08-12981 (La. App. 3 Cir. 4/1/09), 7 So.3d 1258.

The conflicts between the circuit courts should eventually be resolved by the U.S. Supreme Court. The Supreme Court has granted writs in Stolt-Nielsen, and writs have been applied for in Coffee Beanery and Comedy Club. Until the Supreme Court rules, contracting parties should be mindful of the differing interpretations of the standards of review under the FAA as compared to any applicable state law.

Nonetheless, because the duty to arbitrate is nearly always based on a con-tract, contracting parties should consider reforming arbitration clauses to specifi-cally be subject to state law in states like Louisiana where the standards of review may be broader than the FAA. If this is done, more motions to vacate will likely be brought in state courts pursuant to La. R.S. 9:4210.

—Wendy L. RoviraMember, LSBA Labor and Employ-

ment Law SectionLeake & Andersson, L.L.P.Ste. 1700, 1100 Poydras St.


Challenge to Lease in Haynseville Shale Area

Thomas v. Pride Oil & Gas, Inc., ____ F.Supp.2d ____ (W.D. La. 2009).

The plaintiff granted a mineral lease to the defendant in February 2007. The lease provided for a bonus of $100, a three-sixteenths royalty, an initial primary term of three years, and an option for the lessee to extend the primary term by two years.

The plaintiff filed suit to rescind the lease. The plaintiff asserted that his land was over the Haynseville Shale formation, and that the defendant had known this but had successfully taken steps to keep this information from the plaintiff and the public in general. The plaintiff asserted that the true value of a lease might be 100 times what he had been paid. He argued that he had a right to rescind the lease on any of three alternative grounds: fraud; mistake; and lesion beyond moiety.

The district court rejected plaintiff’s fraud claim. The plaintiff had not alleged fraud by misrepresentation, but fraud by suppression of information. Under Louisiana law, a plaintiff cannot state a claim for fraud by silence unless the defendant had a duty to disclose information. The court held the defendant had no such duty because the defendant did not have a fiduciary duty to plaintiff. Mineral Code article 122 provides that a lessor generally has no such duty. Further, a mere contractual relationship does not create fiduciary obligations, and no special relationship of confidence existed between plaintiff and defendant.

The court also rejected plaintiff’s other arguments. Louisiana law generally allows a sale of an immovable to be rescinded for lesion beyond moiety if the price paid is less than half the true value, and mineral rights are classified as immovables. However, Mineral Code article 17 codified prior jurisprudence holding that lesion beyond moiety does not apply to mineral rights.

Finally, the court held that plaintiff’s argument for rescinding the mineral lease on the basis of mistake was essentially an attempt to rescind for lesion beyond moiety and, therefore, the argument was meritless.

Collateral Attack Rule

EOG Resources, Inc. v. Chesapeake La., 07-1246 (W.D. La. 3/31/09) (unpublished).

EOG Resources held lease rights to 240 of 640 acres of a particular section of a township. Chesapeake held lease rights to the other 400 acres. There were three different production units — each for a different natural gas formation — whose boundaries coincided with the boundaries of the section. EOG and Chesapeake were parties (as successors to the original parties) to an operating agreement that covered the two shallower formations, but not the deepest of the three formations. Chesapeake was the operator.

The operating agreement required both parties to approve any new wells. Chesapeake proposed three additional wells pursuant to terms of the operating agreement, but EOG never consented to the three wells. Chesapeake withdrew the proposal and then proposed the three wells again pursuant to La. R.S. 30:10. Chesapeake also sought approval from the Louisiana Commissioner of Conservation to drill all three wells as additional unit wells, to the deepest formation, to complete each well at each of three formations, and then to produce from all three formations. After public hearings, the commissioner granted the requests. He found that the proposed wells would effectively and economically drain portions of the unit not being drained by any existing wells.

Chesapeake drilled all three wells, two of which were on EOG’s lease tract, and obtained production. Chesapeake withheld EOG’s share of revenue to offset EOG’s share of drilling costs (as was allowed by the parties’ practice under the operating agreement), plus a 100 percent risk charge (pursuant to La. R.S. 30:10) for completion costs at the deepest formation, a formation that was not covered by the operating agreement.

EOG filed suit, complaining that

Mineral Law


Notice of Dissolution of Panel

Thibodeaux v. Donnell, 08-2436 (La. 5/5/09), ____ So.3d ____.

The first report on this case appeared in the December 2008/January 2009 Louisiana Bar Journal. The 1st Circuit had held that an attorney chairperson is required to provide notice of a panel’s dissolution in order to trigger the running of the 90-day grace period terminating the suspension of the prescriptive period, when the medical review panel failed to render an opinion and no court-ordered extension had ever been obtained. Thus, the defendant’s exception of prescription was overruled.

The Supreme Court granted the de-fendant’s writ application to determine whether the court of appeal correctly interpreted La. R.S. 40:1299.47(B)(3). The difference between that statute and Section 1299.47(B)(1)(b), according to the Supreme Court, is that the former does not require notification by certified mail that the panel is dissolved, whereas the latter does.

In a 4-3 decision, with two dissenting opinions, the Supreme Court affirmed the decision of the court of appeal.

Jury Instruction on Locality Rule Results in Reversal

Pickering v. Paraguya, 07-1581 (La. App. 3 Cir. 4/15/09), ____ So.3d ____.

At the conclusion of a jury trial, the trial court instructed the jury that the plaintiff was required to establish by a prepon-derance of the evidence the standard of care “ordinarily exercised by physicians practicing in the same medical specialty as that in which the defendant practices.” During deliberations, the jury requested additional information about the standard of care as it applied to question No. 1 on the verdict form (whether the plaintiff proved the applicable standard of care). The trial court then gave a supplemental instruction:

The plaintiff must prove the degree of knowledge and skill possessed or degree of care ordinarily exercised by physicians licensed to practice in the State of Louisiana and actively practicing in similar community or locale and under similar circum-stances, and whether defendant practices in a particular specialty and whether last [sic] act of medical negligence raised issues particular to the medical specialty involved. Then the plaintiff has the burden of proving the degree of care ordinar-ily practiced by a physician who treats diabetic foot ulcers within the involved medical specialty.

... You can look at other evidence ... in trying to determine whether or not

Chesapeake breached the operating agreement by drilling without its consent. EOG also contended that the wells were unnecessary and drilled too close to existing wells. The court held that Chesapeake did not violate the operating agreement by drilling the wells without EOG’s consent because the purpose for drilling the three wells was to reach the deepest formation (which was not covered by the operating agreement), and the reason the wells also were completed at the two shallower formations (which were covered by the operating agreement) was because the commissioner found that such completions were necessary and in the interest of conservation. EOG’s breach of contract claim, therefore, was an impermissible collateral attack on the commissioner’s order that was prohibited by La. R.S. 30:12.

Finally, the court concluded that the commissioner’s issuance of permits for the two wells on EOG’s lease tract constituted sufficient authority for Chesapeake to enter and drill on that tract. The court stated that the Louisiana Supreme Court has noted that the Conservation Act modifies trespass rules for purposes of drilling units and that R.S. 30:204 does not specifically require a permit holder to obtain the landowner’s consent prior to entering the land to drill.

—Keith B. HallMember, LSBA Mineral Law Section

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the plaintiffs have proved that there is a standard of care for treating ulcers, diabetic foot ulcers in this locale and what that standard is.

The jury returned a verdict, finding that the plaintiff had established the applicable standard of care owed by the defendant but had not carried his burden in proving that the physician departed from the appropri-ate standard of care. One issue on appeal was whether the supplemental instruction concerning the locality rule was an error that warranted reversal. The defendant conceded that the trial court gave an erro-neous supplemental instruction but argued that this error did not affect the verdict because the jury found that the plaintiff did establish a standard of care and that he did not breach it.

The court of appeal cited La. R.S. 9:2794 A(1) and held:

It was a prejudicial error for the trial court to read the above statute to the jury and insert the physician’s name in the portion before the semicolon, the one that refers to the local stan-dard of care, where the defendant physician was a specialist, all of the plaintiff’s experts were from out-of-state, and all of Dr. Paraguya’s experts were from Louisiana.

This court also noted that any part of the plaintiff attorney’s closing argument:

as to which standard of care should apply — local or national — was futile, when the judge appropriately stated to the jury that he instructed the jury as to the law and that it was the

jury’s duty to follow that law.The court found that the jury instruction

on the locality rule was a sufficient basis, in itself, to disregard the jury’s verdict. It noted, however, that compounding the error was “the trial court’s direction to accord more weight to Dr. Paraguya’s testimony because he was Mr. Pickering’s treating physician,” an error that substantially magnified the impact of the erroneous instruction: “This kind of instruction is only appropriate in personal injury and workers’ compensation cases, where the treating physician is not a party.”

The court of appeal believed that it would be:

safe to assume that in a medical mal-practice suit, a defendant physician would give exculpatory testimony regarding his or her own actions. Thus, . . .the instruction to give more weight to the testimony of the treating physician . . . allows the defendant to establish the applicable standard of care and make him or her more credible than the plaintiff’s experts. That is improper.

These errors, and the circumstances of this case, allowed the court of appeal to disregard the factual findings of the jury and conduct a de novo review of the record, following which it reversed the jury verdict in favor of the defendant and rendered a verdict in favor of the plaintiff.

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Taxation

iRS Reverses Position: § 1031 Like-Kind

Exchange Treatment

In Chief Counsel Advisory Memoran-dum 200911006, the Internal Revenue Service has reversed its prior position and announced that the Supreme Court’s analysis in Newark Morning Ledger Co. v. U.S., 113 S.Ct. 1670 (1993), applies to determining whether certain intangibles qualify as like-kind exchange property under IRC § 1031. As it stands, Treasury Regulation section 1.1031(a)-2(c)(2) states that goodwill of a business is not like-kind to the goodwill of another business. Previously, the IRS took the position that intangibles such as trademarks, newspaper mastheads and advertiser accounts were part of a company’s goodwill and, there-fore, could not be like-kind to the similar property of another business. Accordingly, the gain on the exchange of these assets would not qualify for nonrecognition under section 1031. The IRS will now, consistent with the analysis in Newark Morning Ledger, consider such property to constitute like-kind property as long as it can be separately described and valued apart from goodwill. The Office of Chief Counsel notes that the property must still satisfy all of the requirements of section1031, including the nature and character rules of Treasury Regulation section 1.1031(a)-2(c)(1).

Amnesty Deadline Looming for Taxpayers with Income

from Undisclosed Offshore Accounts

In connection with increased Internal Revenue Service scrutiny and enforcement against United States taxpayers who have undisclosed assets overseas, the IRS is offering an amnesty program of sorts —


although the opportunity to “come clean” comes with a steep price. United States tax-payers with offshore accounts are required to report the income from such accounts annually and must also file Form TD F-90-22.1 (Report of Foreign Bank and Financial Accounts) disclosing the existence and details of all non-United States accounts if the total amount in overseas accounts exceed $10,000. The IRS has announced that taxpayers who have been failing to file the Form TD F-90-22.1 and to report income from offshore accounts have the opportunity to avoid criminal prosecution and some penalties by making voluntary disclosure to the IRS by Sept. 22, 2009. This opportunity will not be available to taxpay-ers who are contacted by the IRS first. Internal Revenue Service Commissioner Doug Shulman announced the program as a way “to get those taxpayers hiding assets offshore back into the system.”

Under the terms of the settlement offer, the taxpayer must pay all unpaid taxes, interest and either an accuracy or delin-quency penalty for six years. In addition, the taxpayer is liable for a penalty equal to 20 percent of the highest balance in the account during the six-year period. Al-though the price of compliance is high, the voluntary disclosure means the taxpayer is likely to avoid penalties for fraud, failure to file reports of foreign bank accounts and potential criminal prosecution — all of which may occur if the assets are dis-covered by the IRS before the taxpayer comes forward. In addition, the IRS may be able to go back further than six years for those taxpayers who do not come forward

prior to being contacted. More informa-tion is available from the IRS Voluntary Disclosure Hotline at (215)516-4777 or at www.irs.gov.

Split in the Circuits: FICA-Exempt Students

Under section 3121(b)(10), employ-ment subject to FICA taxes does not include services performed by a university-employed student who is enrolled and regularly attending classes. A hotly debated issue is whether the wages paid to medical residents qualify for this exemption. The IRS has argued that a medical resident can never be a student and, therefore, the wages do not qualify for the student FICA exemp-tion. The 6th Circuit Court of Appeals recently rejected this argument, remanding the case at issue for consideration of the relevant facts and circumstances of the residency program to determine whether the residents in question were students under section 3121(b)(10). United States v. Detroit Med. Ctr., 557 F.3d 412 (6 Cir. 2009). The 2nd Circuit in a recent opinion agreed with the 6th Circuit, holding that the student status of a resident is a factual determination and not a matter of law (as argued by the IRS). United States v. Mem’l Sloan-Kettering Cancer Ctr., 563 F.3d 19 (2 Cir. 2009). On the other hand, the 8th Circuit has refused to extend the student exception to residents working more than 40 hours per week on the grounds that they are full-time employees whose wages are not exempt under the regula-tions. In reaching its decision, the court

specifically noted that it was not making a determination of whether the residents could be considered “students” under sec-tion 3121(b)(10). Mayo Found. for Med. Educ. & Research v. United States, 568 F.3d 675 (8 Cir. 2009).

U.S. Supreme Court Strikes Down Local Property Tax

on Oil Tankers

In Polar Tankers v. City of Valdez, Alaska, 129 S.Ct. 2277 (U.S. 2009), the United States Supreme Court struck down a local apportioned property tax on oil tankers, finding it to be in violation of the Tonnage Clause of the U.S. Constitution. The federal Tonnage Clause prevents states from laying “tonnage duties” on vessels in their ports. The court analyzed the tax at issue, which the city argued was simply a permissible ad valorem or property tax and not a tonnage levy, and determined that the tax was crafted so as to apply only to large oil tankers. The tax was struck down because, as the court noted, unlike an ad valorem tax, the tax in question applied only to large vessels and not to any other form of personal property and was used to raise general municipal revenues and not to fund services for the vessels.

—Jaye A. CalhounMember, LSBA Taxation Section

McGlinchey Stafford, P.L.L.C.601 Poydras St., 12th Flr. New Orleans, LA 70130

is pleased to announce that Retired Louisiana Supreme Court Justice,

Justice Chet D. Traylor, has joined its mediation panel

Phone 225-389-9899 for Scheduling

721 Government Street, Suite 102 Baton Rouge, LA 70802

www. perrydampf.com

expert Witness,

Consultant or Legal Service

Provider? See page 79.

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