Defense and Indemnity in Environmental Contamination Action

Litigation arose out of a demand for defense and indemnity for claims arising out of polychlorinated biphenyls (“PCBs”) contamination. From 1965 to 2006, Ward Transformer Company, Inc. and Ward Transformer Sales and Service, Inc. (collectively “Ward”) built, repaired, reconditioned, and sold transformers in North Carolina. Between 1978 and 2002, PCS Phosphate Company, Inc. (“PCS”) sent transformers to Ward for repair and refurbishment. During the repairs, PCBs were released, causing environmental contamination at the Ward facility. After conducting a remedial investigation of the Ward site, in September 2005, the EPA entered into an agreement with third party contractors to remove the contamination at the Ward site.

Subsequently, PCS notified its insurer, American Home, that it had been identified as a potential responsible party for the contamination, and demanded that American Home defend and indemnify it from any resulting lawsuits. Once suit was filed against PCS, it again demanded defense and indemnification.

Federal Insurance Company (“Federal”) issued a commercial general liability policy to PCS, providing insurance coverage from April 1985 to June 1986. The policy states that Federal agreed to pay “damages the insured becomes legally obligated to pay by reason of liability imposed by law . . . because of . . . property damage caused by an occurrence” and to “defend any suit against the insured seeking such damages.” Therefore, American Home sought a declaratory judgment ruling that the Federal policy obligates Federal to defend and indemnify PCS in the recently filed lawsuits for “liability through clean up associated with the Ward site.”

In response, Federal moved for summary judgment on the pleadings arguing that the pollution exclusion clause in the Federal policy precludes any duty to defend or indemnity PCS in the underlying actions. Specifically, the Federal policy states that it does not cover “bodily injury or property damage arising out of the discharge, dispersal, release or escape of . . . smoke, vapers, soot, fumes, acids, alkalis, toxic chemicals or liquids; or . . . gases, waste materials or other irritants, contaminants or pollutants . . . into or upon land, the atmosphere or any water course or body of water.” However, this exclusion contains an exception which states that the policy provides coverage where “discharge, dispersal, release or escape [of pollutants] is sudden and accidental.” Federal’s position was that the underlying action against PCS fell within the pollution exclusion, but not into the “sudden and accidental discharge” exception.

United States District Court for the Eastern District of North Carolina concluded that the underlying actions do not allege a “sudden and accidental release” of PCBs at the Ward site. Therefore, the court held that Federal had no duty to defend or indemnify PCS and the underlying actions.

PCS Phosphate Company, Inc. v. American Home Assurance, Company

Juan C. Obregon

Philippines Wins Territorial Dispute with China in International Tribunal

In 2013, the Philippines brought a case against China to dispute China’s territorial claims in the South China Sea. Territorial disputes over the South China Sea have been an ongoing source of tension between China and its neighboring countries, which not only includes the Philippines, but also Vietnam, Malaysia, Bruni, and Taiwan. In 2012,The Philippines and China were involved in a two month standoff around the Scarborough Shoal, (a small cluster of uninhabited islands 220 kilometers off the coast of the Philippines), which according to International Maritime Law, falls within the Philippines’ economic zone. The Chinese vessels blocked the Philippine Navy from arresting Chinese fisherman for alleged illegal fishing activities within the Philippine’s exclusive economic zones.

The Permanent Court of Arbitration (PCA) ruled in favor of the Philippines, concluding that China does not have the right to resources within its “9-dash line.” China has long disputed the PCA’s jurisdiction over the matter and has rejected this ruling.

Juan Obregon

Carmack Amendment is Exclusive Cause of Action for Damages to Goods Arising from Transportation by Common Carrier (Except When It’s Not)

In 1988, the United States Supreme Court declined to hear an appeal from the U.S. Seventh Circuit which held that the Carmack Amendment to the Interstate Commerce Act bars a shipper from pursuing state and common law remedies against a carrier for damages to goods shipped in interstate commerce. In Justice White’s dissent, he noted that this view, based on 1913 precedent, was shared by the U.S. Fifth, Sixth, and Eighth Circuits but not by the Tenth, which had held that the Carmack Amendment “did not oust all other remedial rights of shippers” against interstate carriers.

Despite the vast increase in trucking since 1988, the Court had still not addressed the preemptive scope of the Carmack Amendment when the Florida Supreme Court recently issued its two cents. In Milnar v. United Parcel Service, Inc., the Florida Supreme Court overturned two lower court decisions, which had dismissed plaintiff’s state law claims as preempted by the Carmack Amendment. By way of background, plaintiff was an artist who created two valuable oil paintings. Her husband took the paintings to a third party retailer to be shipped via UPS to New York. When the container arrived at its intended destination in New York, it was empty. The duct tape had been cut and the paintings had been removed. Plaintiff reported the loss to UPS and the third party retailer. Months later, the retailer offered plaintiff $100 for the missing package’s contents. At some point, UPS sold the paintings to Cargo Largo, UPS’s lost goods contractor. Cargo Largo later auctioned the paintings.

The Florida Supreme Court allowed plaintiff’s state law claims to proceed, finding that plaintiff’s allegations illustrated “a course of criminal conduct by UPS and its cohorts that bears, at best, only a tangential relationship to the interstate shipment process and, more specifically, a carrier’s contractual obligation to transport goods.” The court held that “to expand Carmack Amendment preemption to cases in which a plaintiff seeks to hold a carrier liable not for a negligent yet good-faith loss of goods, but instead for larcenous misconduct by the carrier that was intended to and in fact resulted in the separation of goods from their owner is repugnant to the purpose behind the statute’s enactment.” Thus, the court concluded that several of plaintiff’s state law claims arose from conduct or harm that was independent from the loss of goods during the interstate shipment process and could proceed, as could a claim for unauthorized publication of name or likeness. Moving forward, it could be argued that the Florida Supreme Court has adopted a nexus test for determining the preemptive scope of the Carmack Amendment.

Milnar v. United Parcel Service, Inc.

Eric Winder Sella

Expert Testimony Not Necessary to Establish Medical Malpractice Claim

Plaintiff filed a medical malpractice claim against defendant. Defendant moved for summary judgment that the district court denied. Defendant appealed and argued that plaintiff failed to produce expert testimony in support of her claim. The intermediate court agreed with the defendant and reversed the ruling.

On a supervisory writ, the Louisiana Supreme Court reversed, reinstating the denial of summary judgment, and remanded to the district court for further proceedings. The Court explained that expert testimony is not always necessary in order for a plaintiff to meet his or her burden in establishing a medical malpractice claim. Thus, the Court found that the district court had not erred in finding sufficient facts in dispute to preclude summary judgment.

Lindsey v. Hospital Service Dist. No. 1 of Tangipahoa Parish

Maro Petkovich, Jr.

But I Barely Hit Him!

The initial telephone call from defense counsel to commercial vehicle operator is commonly met with the surprised exclamation, “But I barely hit him!” The allure of this argument, that a minor accident cannot possibly have caused all of a plaintiff’s claimed injuries, is enticing enough, though it of course requires expert testimony to prove. Enter the biomechanical expert, a professional with training and qualification in both engineering and medical sciences presumably well-suited to opine on what injuries might be caused by what forces on the body.

In the recent case of Parker v. NGM Insurance Company, plaintiff sought to exclude defendants’ biomechanical expert by way of a Daubert challenge. The suit arose from a rear-end accident and made its way from state court to federal court based on diversity jurisdiction. In the course of discovery, defendants’ biomechanical expert opined that:

In summary, Mr. Parker was involved in a low speed rear-end impact followed by a very low speed frontal impact. His low back was subjected to forces that would not cause injury. Mr. Parker may have been startled by the event and experienced reflexive muscle strains. Any symptoms that he had would have abated within days without medical treatment. Any diagnoses, and subsequent investigations and treatments related to DDD [degenerative disc disease], are not causally related to the subject event.

In other words, he barely hit him! And what is often the first thing a commercial vehicle operator offers in defense of himself? Why, pictures, of course! Thus, it should come as no surprise that, in reaching his conclusion, the expert viewed still photographs of the plaintiff’s vehicle. However, the expert did not go to the accident scene, did not inspect the vehicles, and did not speak to anyone who repaired the vehicles. Neither did he view pictures of the defendants’ vehicles.

Rather, the expert obtained a complete front bumper system for a defendants’ vehicle model and an undamaged rear clip of for plaintiff’s vehicle model. He then mounted those components in a hydraulic bumper test machine and used the machine to push the components together in horizontal motion until the damage exceeded that of plaintiff’s vehicle. This test generated a bumper to bumper force profile which was then incorporated into a collision simulation model using an impact mechanics-based numerical algorithm. This algorithm generated the speed, acceleration, and delta-v figures that served as the basis of the expert’s opinion. In support of the reliability of this testing method, the expert offered four studies, each of which the court dissected and found issue with (and each of which were authored by employees of the expert’s company). Holding that some objective, independent validation of the expert’s methodology is required, the court found the expert’s opinion on force unreliable.

This, of course, led to his conclusions on causation also being found unreliable, with the additional finding that the expert had made too many assumptions in reaching his conclusion, including plaintiff’s posture in the driver’s seat, whether plaintiff’s seatbelt locked upon impact, the type and quality of seats in plaintiff’s vehicle, and the position of plaintiff’s headrest. Thus, although qualified, the biomechanical expert was precluded from offering expert opinion at trial.

Parker v. NGM Insurance Company

Eric Winder Sella

DOL’s New Overtime Rules Could Cause Big Changes in Employee Compensation

After months of speculation, on May 18, 2016, the United States Department of Labor (DOL) issued new overtime pay rules for administrative or professional employees as required by the Fair Labor Standards Act (FLSA). The new regulation takes effect on December 1, 2016. It has been estimated that the new regulation with affect at least 4.2 million American workers.

Under the new rule, an employer is exempt from having to pay an employee overtime if his or her salary exceeds $913.00 per week ($47,476.00) annually, which is more than double the prior exemption threshold of $455.00 per week ($23,660.00 annually). In addition, an employer is now permitted to use up to 10 percent of bonuses, commissions, and incentive payments to satisfy the exemption threshold. The new rule has also incorporated automatic mechanisms to increase the exemption threshold every three years. As with the prior rule, certain categories of employees are exempt from these new overtime pay requirements, including teachers, lawyers, and doctors.

Failure to comply with the new overtime requirements could subject an employer to potential legal liability for back overtime, liquidated damages, and attorney’s fees. Needless to say, employers will need to look long and hard at payroll records to determine if a salaried employee will need to be converted to an hourly wage. At a minimum, employers will need to begin tracking the hours of salaried employees who earn less than $47,476.00 annually and have a plan in place for each salaried employee who earns below the exemption threshold.

Jeremiah N. Johns

Virtual Bitcoins Subject to Federal Seizure

On May 21, 2016, a Magistrate Judge of the United States District Court for the District of Maryland recommended that the court certify that there was reasonable cause for the seizure of 50.44 Bitcoins. The seizure of Bitcoins followed the dismantling of the “Silk Road”, which was an online criminal marketplace. After the dismantling, federal authorities conducted an investigation to determine the identities of users of the site. They discovered that a user operating under the username “JumboMonkeyBiscuit” served as an illegal vendor of narcotics and as a Bitcoin exchanger. JumboMonkeyBiscuit completed 1,521 transactions, mostly to convert fiat currency into Bitcoins and vice-versa between April 2013 and October 2013. In October of 2014, the U.S. Postal Inspectors intercepted a parcel containing $10,000 in U.S. Currency. The inspectors determined that the package had been sent by an online package mailing service account registered with The registered customer of the account was Thomas Callahan whose account was connected to a physical address closely resembling the return address on the parcel.

Authorities executed a search warrant of a house in Maryland sharing an address connected to the account registered to Mr. Callahan. During the search Amanda Callahan agreed to speak to the investigators and admitted that she and Mr. Callahan were money exchangers on various internet sites, including some marketplaces like Silk Road. Mrs. Callahan showed the investigators a personal computer that contained Bitcoins stored at several Bitcoin addresses including a wallet with a name that matched the addressee of the intercepted parcel containing the $10,000. Mrs. Callahan voluntarily transferred the contents of the Bitcoin addresses to the agents and the agents executed a seizure of the 50.44 Bitcoins.

The federal court held that the Bitcoins were subject to forfeiture under 18 U.S.C. section 981, the federal statute governing civil seizures and also held that the United States authorities complied with federal procedural and notice regulations for seizing property. The courts have been faced with a new arena of issues with the inception of Bitcoins, which are a nebulous concept to the vast majority of the population. The internet currency is an unpredictable beast, raising unlimited questions surrounding its regulation.

In 2013, the United States District Court for the Eastern District of Texas held that Bitcoin is a currency or form of money and that investments involving Bitcoin meet the definition of contract, and are therefore securities under federal statute 15 U.S.C. section 77(b). As the judiciary increasingly characterizes and categorizes Bitcoin under state, federal, and international law, we will gain a better idea of the law’s, as well as the world population’s, acceptance and rejection of the e-currency.

United States v. 50.44 Bitcoins and Securities and Exchange Commission v. Shavers

Philip D. Lorio, IV

New Limitations on Arbitration Agreements Could Have Big Impact on Financial Industry

Big changes may be on the way for dispute resolution agreements in the financial industry. Recently, the Consumer Financial Protection Bureau (CFPB) proposed two sets of limitations on the use of pre-dispute arbitration agreements by providers of consumer financial products and services. One proposed rule would prohibit the use of consumer arbitration agreements that bar a consumer from filing or participating in a class action involving a financial product or service. The second proposal would require a provider of financial products and services to submit certain records of arbitrations to the CFPB.

The proposed regulations could have a significant impact on dispute resolution in the financial industry and also expose certain businesses to increased risk of class action litigation. Additionally, the CFPB’s proposal to maintain records of arbitrations suggests that it intends to take more active role in monitoring dispute resolution. The public has until August 22, 2016 to comment on the proposed regulations. In the event the regulations are adopted, affected businesses should quickly develop a plan for compliance.

Jeremiah Johns

Red Light, Green Light…Ticket

Most Louisiana residents are familiar with the red light camera program, which has come under scrutiny here in New Orleans. The National Motorists Association (“NMA”) alleges what many local citizens suspect – that the city’s motivation behind the red light camera program is revenue, not safety. In fact, the NMA cites studies which indicate that the introduction of red light cameras actually results in an increase in accidents.

In the hopes of exposing the city’s motivation behind the red light cameras, and the corruption allegedly associated with the program, the NMA is filing suit. Defendants in the suit are the City of New Orleans, Mayor Mitch Landrieu, the city council, and the camera installation company. The plaintiffs allege that the cameras violate the United States Constitution and the New Orleans’ Home Rule Charter, linked below. In support of its contention, the NMA highlights that the cameras are unable to identify the driver when issuing the automatic tickets. Essentially, the ticket imposes a “guilty until proven innocent” charge, rather than “innocent until proven guilty” assumption upon which our justice system is supposed to be founded.

A similar suit was filed in Jefferson Parish, Louisiana, the outcome of which resulted in partial refunds to more than 180,000 drivers who had been fined. While the citizens filing suit against the New Orleans based program hope to receive monetary compensation, they ultimately want the program to be eliminated. Whether or not they get that outcome is yet to be determined.

For more information, please see:

New Orleans’ Home Rule Charter

Red light Camera Refund Checks Arriving in the Mail

Lawsuit Claims New Orleans Traffic Cameras Illegal, Suing to Stop Program and Reclaim Money

Caitlin R. Byars

Who’s Driving that Car?

As technology evolves, so does the law by which it is governed. One of the latest trends to arise from the tech community is autonomous vehicles, otherwise known as self-driving cars. This new area of law has been coined as incorporating “very traditional legal issues, but with a very new context.” (As described by Jennifer Dukarski from the Butzel Long firm.)

Many of the companies venturing into the realm of self-driving cars – Ford, Google, Lyft, Uber, and Volvo – are combining forces to form a lobbying group aimed at educating lawmakers on the nuances of self-driving cars. Manufacturers of the vehicles are aiming to have a singular set of federal guidelines in place to help streamline a national adoption of these vehicles, rather than have varying state regulations which would hamper compliance when traveling intrastate. For instance, California is proposing restrictions on the autonomous nature of the vehicle such as driver-centric steering wheels, brake and accelerator pedals, whereas Florida allows autonomous cars to travel unoccupied.

As can be expected, law firms are having to adapt and innovate, much like their clients. Legal teams are facing challenges from contract negotiation to regulatory compliance. As the product evolves, so will the law.

For additional information, please see:

Autonomous Cars Require a Self-Driven Legal Hybrid Teams

Self-Driving Tech’s Lobbying Supergroup to Play Many Dates in DC

Caitlin R. Byars