Regulation focuses on financial ties between physicians and industry

Phillips Murrah healthcare attorney, Mary Holloway Richard published an article about the Sunshine Act in the May/June 2015 issue of the Oklahoma County Medical Society publication, The Bulletin.


CMS seeks to mitigate potential impact on prescribing and treatment practices

Sunshine-Act-MHRThe Physicians Payments Sunshine Act (i) (“Sunshine Act”), despite its name, currently places no direct reporting requirements on physicians. Rather, the Sunshine Act requires that certain manufacturers of prescription drugs, biologic agents, medical devices and medical supplies (“Manufacturers”) and group purchasing organizations (“GPOs”) report to Centers for Medicare and Medicaid Services (“CMS”) payments in specified amounts (ii) and other transfers of value to physicians (iii) and to teaching hospitals (iv). In addition, ownership and investment interests in applicable Manufacturers and GPOs held by physicians (and immediate family members) must be reported annually by applicable Manufacturers and GPOs. Covered payments include cash (or cash equivalent, in-kind items or services), stock (including stock options or ownership interest dividend profit or other return on investment), and other forms of payment to be determined in the future by CMS. While it is not the physician’s duty to report, the reporting requirement directly impacts physicians who receive such payments as their names appear on a list on the CMS website accessible by patients and other consumers (v).

The purpose of the Sunshine Act is to identify potential biases in physician prescribing and treatment practices, to reveal conflicts of interest for clinical researchers and educators, and to identify transactions in which payments involving potential referrals by physicians exceed fair market value. The Sunshine Act creates the Open Payments Program for the actual reporting of the financial payments and transfers of value to physicians. Currently the burden is on the Manufacturers to report payments for consulting fees, contracted services, honoraria, gifts, entertainment, food, travel, education, research, charitable contributions, royalty or license, current or prospective ownership or investment interest, grants, direct compensation for serving as faculty or speaking at a medical education program, and any other nature of payment or transfer of value as defined by the Secretary of the Department of Health and Human Services (“HHS.”) The form of the payment and the nature of the payment must be reported. See Table 1 below. Data has been collected since August, 2013, and is due to CMS by March 31 of each year. The first report was available to the public on September 30, 2014, and the 2014 report is predicted to be available on June 30, 2015 (vi).

The regulations provide for a formal dispute resolution process whereby physicians can seek to correct inaccurate information. In September, 2014, representatives of pharmaceutical and biotechnology companies and organized medicine expressed concerns about the database and its presentation of data to the public in a potentially misleading manner. CMS shut down the Open Payments system for a period of time to address these issues. On October 30, 2014, CMS announced a procedure for Manufacturers and GPOs to report information not previously accepted by the system because of data errors, and CMS extended the reporting time accordingly. CMS has provided guides for Manufacturers to use to correct records and for covered recipients to correct information submitted in compliance with the regulations (vii).

Registration with CMS to receive notifications and information submitted by Manufacturers and GPOs is voluntary. This information is now available on the CMS website, to public and regulators alike, but the website itself continues to present issues of accuracy and ease of on-line accessibility. Physicians and teaching hospital representatives have the opportunity to review and, if appropriate, dispute information reported about them in the Open Payments System (viii).

open payments graph

Source: ttps://www.cms.gov/OpenPayments/About/How-Open-Payments-Works.html

It has been necessary to resolve a number of procedural and substantive issues with the reporting requirements including initial confusion about the information that had to be reported and by whom. Example of substantive issues to be resolved may be helpful is understanding the regulatory climate. Some confusion has surrounded the CMS treatment of payments related to continuing medical education. “Direct payments” have always been included in the Sunshine Act’s reporting requirements. “Indirect payments” refers to payments by a manufacturer to a continuing education organization where the Manufacturer directs that the third party provide the payment or transfer to a covered recipient. In the October, 2014, final regulations, CMS responded to widespread criticism of its treatment of the CME by requiring reporting in 2017 payments (direct and indirect) made to continuing education organizations in 2016 as long as the speaker can be identified (ix). Further, payments to physicians for speaking at CME programs need not be reported if the following conditions are met:

  • The CME program meets accreditation/certification standards of one of the following: (1) the Accreditation Council for Continuing Medical Education; (2) the American Academy of Family Physicians ; (3) the American Dental Association’s Continuing Education Recognition Program; (4) the American Medical Association; (5) the American Osteopathic Association; and
  • The Manufacturer or GPO does not pay the speaker directly; and
  • The Manufacturer or GPO does not select the speaker or provide the third party, such as the CME vendor, with a distinct, identifiable set of individuals to be considered as speakers for the CME program (x).

Other frequent questions concern Manufacturers providing meals and other event support and sponsorships to physicians. In this context the Open Payments program is very specific–e.g., where a Manufacturer’s sales representative brings a meal to a staff meeting or a community education event for a number of persons, the cost of the meal is divided by the number of persons who actually eat the meal and this benefit is reported only if it exceeds $10.00 per person. This does not include meals eaten by support staff. Financial support of buffet meals at large-scale medical conferences is not reportable. The “User Guide” for Open Payments published by CMS is over 350 pages long and provides additional guidance to those reporting and those reviewing reports. It is accessible on-line (xi).

The Open Payments System is expected to significantly impact historic financial support of provider, patient and community education by industry. Importantly, these regulations and reporting requirements echo federal policy designed to avoid improper payments and incentives and market influence. These are the same concerns that spawned the expansion of federal antitrust, Stark and Anti-kickback law within health care.

Ms. Richard is a health care lawyer at Phillips Murrah, P.C. in Oklahoma City and was formerly in house counsel with INTEGRIS Health, Inc.


The Natures of Payment that are of Interest to CMS

Nature of payment Definition Examples
Consulting fee Payments made to physicians for advice and expertise on a particular medical product or treatment, typically provided under a written agreement and in response to a particular business need. These payments often vary depending on the experience of the physician being consulted. Example 1: Company A has developed a drug to treat patients with a particular disease and wants advice from physicians on how to design a large study to test the drug on patients. Dr. J has a large number of patients with this disease and has experience doing research on how well medicines work for this condition. Company A asks Dr. J if he would spend about 10 hours per month to work with other physicians to create a new research study. Dr. J agrees and is paid for his time.Example 2: Company C has designed a new tool for surgeons to use when they are doing heart surgery. The company pays some physicians to give the new tool a “test drive” on a computer-simulated patient at the company headquarters. The physicians are paid an hourly fee for their time testing the tool and giving advice on how to make it work better. They are also paid for flights, hotel rooms and meals.
Compensation for services other than consulting, including serving as faculty or as a speaker at an event other than a continuing education program. Payments made to physicians for speaking, training, and education engagements that are not for continuing education. A physician who frequently prescribes a particular drug is invited by the company that makes that drug to talk about the medicine to other physicians at a local restaurant.  The physician is paid for preparation time as well as the time spent giving the talk.
Honoraria Similar to consulting fees, but generally reserved for a one-time, short duration activity. Also distinguishable in that they are generally provided for services which custom prohibits a price from being set. A medical device manufacturer representative goes to a medical meeting and asks some physicians there for an hour of their time to talk about features they would like to see to improve a particular device. This representative pays each physician a one-time honorarium.

Footnotes:

(i) The Physician Payment Sunshine Act is Section 6002 of the Patient Protection and Affordable Care Act, 42 U.S.C.§18001. The regulations can be found at: http://www.cms.gov/OpenPayments/Downloads/Affordable-Care-Act-Section-6002-Final-Rule.pdf.

(ii) There are specific reporting thresholds for applicable manufacturers and GPOs. The Open Payments reporting thresholds are adjusted based on the consumer price index. This means that for 2015 (January 1 – December 31), if a payment or other transfer of value is less than $10.21 ($10.00 for 2013, $10.18 for 2014), unless the aggregate amount transferred to, requested by, or designated on behalf of a physician or teaching hospital exceeds $102.07 in a calendar year ($100.00 for 2013, $101.75 for 2014), it is excluded from the reporting requirements under Open Payments. http://www.cms.gov/OpenPayments/Program-Participants/Applicable-Manufacturers-and-GPOs/Data-Collection.html.

(iii) This law applies to physicians and other providers, but, for the purposes of this article, we will only reference physicians. The other providers as defined in Section 1861(r) of the Social Security Act to whom this law applies include medical and osteopathic physicians, dentists, podiatrists, optometrists and chiropractors. Providers exempted include medical and osteopathic residents, physician assistants, nurse practitioners and allied health practitioners. However, in some circumstances, payments to these types of providers may be imputed to physicians, thereby triggering the Manufacturers’ obligations to report payments.

(iv) Manufacturers and GPOs may also be referred to in this paper as “covered recipients.”

(v) https://openpaymentsdata.cms.gov/.

(vi) http://www.cms.gov/OpenPayments/About/Resources.html

(vii) The American Medical Association offers a toolkit for physicians to use in reviewing and dispute reports at: http://www.ama-assn.org/ama/pub/advocacy/topics/sunshine-act-and-physician-financial-transparency-reports/sunshine-act-toolkit.page?

(viii) See Flow Chart 1 in content.

(ix) 42 C.F.R. §403.902.

(x) 42 C.F.R. §403.904(g).

(xi) www.cms.gov/Regulations-and-Guidance/Legislation/National-Physician-Payment-Transparenct-Program/Download/Open-Payments-User-Guide-%5BJuly-2014%5D.pdf.

An Overview of Oklahoma Product Liability Law

This scholarly article contains updated material concerning Oklahoma Product Liability Law. Phillips Murrah President and Director, Tom Wolfe co-authored the original article with former colleague, Chris Pearson, who is now a partner at the Law Firm of Germer, Beaman & Brown in Austin.

The first update, which garnered a 2003 Maurice Merrill Golden Quill Award from the Oklahoma Bar Association, featured Phillips Murrah Litigation Practice Group Leader and Director, Lyndon Whitmire and Ruth Anderson Gates, who is now senior in-house counsel at Nissan North America Inc.

The article, now in its second update, includes contributions from Phillips Murrah Associate Attorney, Cody Cooper.

This article was originally published in the Oklahoma Bar Journal.

By Chris Pearson, Thomas G. Wolfe, Lyndon Whitmire and Cody J. Cooper


shutterstock_liability sign web

Any discussion of Oklahoma product liability law must start where Oklahoma product liability law started, with the Oklahoma Supreme Court’s 1974 opinion in Kirkland v. General Motors Corp. 1 In Kirkland, the plaintiff was driving her friend’s new Buick Opel on Interstate 44 in Tulsa County.2 It was alleged that the driver’s seat back suddenly collapsed, leaving her unable to control the car. As a result, her vehicle hit the highway median and then struck an oncoming vehicle head-on.3 Approximately one month after the accident, General Motors (GM) issued a recall letter to all owners of Buick Opels concerning the “seat back adjustment mechanism.”4

The plaintiff’s pleadings alleged that her injuries were proximately caused by a defective seat and GM’s breach of the implied warranty of fitness.5 During the trial, GM contended that the seat was not defective and that the accident was caused by the plaintiff driving while intoxicated and at excessive speeds, which GM claimed constituted a misuse of the product. Plaintiff appealed after the jury returned a verdict for GM.6

As Justice Doolin predicted in Kirkland, that case “set the pattern” in Oklahoma for product liability litigation. Some 40 years later, most Oklahoma federal and state court product liability opinions cite Kirkland at least once and it remains the leading case on various product liability issues. This article (an update on two previous iterations) discusses the developments in Oklahoma product liability law since the issuance of the Kirkland opinion.

WHO MAY BE A PLAINTIFF?

In Moss v. Polyco Inc.,7 an opinion rendered on the same day as Kirkland, the court dis cussed the reach of the product liability cause of action. In Moss, the plaintiff, a customer in a restaurant, was injured when a plastic container of drain cleaner fell from a bathroom shelf, causing the contents to come in contact with the plaintiff’s body.8 The court noted there was no adequate rationale or theoretical explanation why nonusers and nonconsumers should be denied recovery against the manufacturer of a defective product, and thus expressly included bystanders in the class of potential plaintiffs.9 In so doing, the court agreed that the manufacturer who places into commerce a product rendered dangerous to life or limb by reason of some defect is strictly liable in tort to the one who sustains injury because of the defective condition.10 More than two decades later, Oklahoma extended the right of recovery to bystanders who: 1) are directly physically involved in an incident; 2) are injured from viewing the injury to another as opposed to learning of it later; and 3) had a familial relationship to the injured party.11

In a product liability cause of action involving death, the determination as to who may be a plaintiff is governed by statute.12

A significant restriction on the ability of an injured party to pursue a product liability cause of action may arise in “failure to warn” cases.13 The duty to warn extends to an ordinary consumer or user, which has been defined as “one who would foreseeably be expected to purchase the product involved.”14 In Rohrbaugh v. OwensCorning Fiberglass Inc., 15 the court found that the wife of an insulator, whose only exposure to the asbestos insulation was her exposure to her husband’s clothes, was not a foreseeable purchaser or user of the product. Thus, the court reasoned, the manufacturer had no duty to warn the wife of the danger of exposure to its products.16

WHO MAY BE A DEFENDANT?

Expanding on its use of the term “manufacturers’ product liability,” the Kirkland court included, within the meaning of “manufacturers,” all “processors, assemblers, and all other persons who are similarly situated in processing and distribution.”17 Later opinions have recognized that product liability causes of action may be brought against a product retailer18 as well as a commercial lessor,19 and, in the proper situation, a product liability action may be available against the supplier of a component part.20 In short, Oklahoma courts have recognized that a product liability cause of action may properly be stated against those engaged in the business of buying and selling products who inject a defective product into the stream of commerce, whether through sale or other means.21 However, all defendants in the chain of distribution are not automatically liable for a defective product. Responsibility for the defect must be traced to the proper defendants.22 Additionally, a bailor may not be held liable under a product liability theory where the bailor maintains control of the product, and thus, does not inject it into the stream of commerce.23

Notwithstanding the breadth of Kirkland and its progeny, it is incumbent upon the plaintiff, even in a strict liability case, to establish a causal link between the defendant’s acts and/or omissions and the plaintiff’s injuries and damages. As the Oklahoma Supreme Court noted in Case v. Fiberboard Corp.,24 the public policy favoring recovery by an innocent plaintiff does not justify the abrogation of the defendant’s right to have “a causative link proven between the defendant’s specific tortious acts and the plaintiff’s injuries where there is a lack of circumstances, which would insure there was a significant probability that those acts were related to the injury.”25 In Case, the court refused to apply the market share liability, alternative liability, concert of action and enterprise liability theories that allow a plaintiff to circumvent the “significant probability” standard.26

It is clear that a product liability cause of action may not be brought against an ultimate consumer of the product in question. In Potter v. Paccar Co.,27 the court stated that the product liability theory was not “so expansive that it permits an injured party to require everyone to defend his or her relationship to the defective product.”28 The court thus granted a motion to dismiss filed by the owner of a battery that exploded and caused the plaintiff to lose sight in his right eye. In Allenberg v. Bentley Hedges Travel Serv. Inc., 29 the court held that product liability theory does not apply to the commercial seller of a used product if the alleged defect was not created by the seller, and if the product was sold in essentially the same condition as when it was obtained for resale.30 Likewise, a parent company that sold used equipment to a related entity whose employees were later injured using that same equipment was not considered a “seller” for purposes of product liability.31 The court defined a “commercial seller” as a seller who is in the business of selling used goods.32

Like courts in numerous other jurisdictions, the Oklahoma Supreme Court has held that a successor corporation may be liable on a product liability theory for injuries caused by the products manufactured or distributed by the acquired entity. In Pullis v. United States Electrical Tool Co.,33 the court stated that as a general rule, where one company sells or otherwise transfers all its assets to another company, the latter is not liable for the debts and liabilities of the transferor. However, exceptions to the rule exist where there is an agreement to assume such debts or liabilities, where the circumstances surrounding the transaction warrant a finding that there was a consolidation or merger of the corporations, and where the purchasing corporation was a mere continuation of the selling company.34

Similarly, the Oklahoma Supreme Court has held that a claimant, injured by a defective product after the dissolution of the manufacturing corporation, may, under the proper facts, seek recovery against the former shareholders of the corporation to the extent of the assets received by them.35

WHAT ARE THE BASIC ELEMENTS IN A PRODUCT LIABILITY ACTION?

In Kirkland, the court noted that the plaintiff must prove three elements to prevail in a product liability action:

Plaintiff must prove the product was the cause of the injury; the mere possibility that it might have caused the injury is not enough.

Plaintiff must prove that the defect existed in the product, if the action is against the manufacturer, at the time the product left the manufacturer’s possession and control. [Citation omitted.] If the action is against the retailer or supplier of the article, the plaintiff must prove the article was defective at the time of sale for public use or consumption or at the time it left the retailer’s possession and control.

Plaintiff must prove that the defect made the article unreasonably dangerous to him or his property as the term “unreasonably dangerous is … defined.”36

Early post Kirkland cases have, in reviewing the elements that the plaintiff must establish to prevail in a product liability case, either restated or rephrased the above quoted passage from the Kirkland decision.37 However, more recent decisions have essentially added a “fourth element” requiring the plaintiff to establish personal injury or damage to property other than the allegedly defective product.38

Causation. The causation requirement, the same requirement that has existed in traditional negligence actions, has frequently been cited as a necessary element in the product liability plaintiff’s case.39 At least one court has refused to apply the doctrine of res ipsa loquitur in an Oklahoma product liability case, but the plaintiff need not exclude all other possible conclusions.40 Additionally, at least one court has held that the “but for” theory of causation is illustrative of negligent conduct, but is inapplicable in proving products liability actions.41

The abnormal use or misuse of a product may serve as a complete defense to the product liability action to the extent that the abnormal use or misuse defeats the causation requirement.42 Where it is established that a subsequent modification of the product, rather than a manufacturing or design defect in the product, is the intervening and superseding cause of the injury (as opposed to the concurrent cause), no cause of action exists against the manufacturer.43 Similarly, the plaintiff’s recovery may be barred by a finding that the injuries and damages were caused solely by someone other than the named defendant.44

Under the current Oklahoma product liability causation standard, “[a] manufacturer’s products liability plaintiff need not exclude all other possible conclusions. However, the mere possibility that a defect caused the injury is not sufficient.”45 Additionally, Oklahoma courts have rejected the theories of “alternative liability,”46 “market share liability”47 and other “nonidentification theories.”48

The causation requirement does, however, become somewhat distorted in a situation where a distributor of a defective product is named as a defendant in a product liability action. In such a case, as the court noted in Braden v. Hendricks,49 “it is immaterial to the plaintiff’s case that the defect in the product was not caused by the distributor.”50 As noted previously, the liability of the manufacturer and distributor is coextensive even though the distributor was in no way responsible for the presence of the defect.51

Existence of a Defect. Central to the plaintiff’s case in a product liability action is proof that a defect existed in the product either at the time the product left the manufacturer’s control52 (where the defendant is the manufacturer) or at the time the product was sold for use to the general public.53 As the court noted in Mayberry v. Akron Rubber Mach. Co., 54 a product may be defective because of: 1) manufacturing defects;55 2) supplier flaws;56 3) design defects;57 or 4) a failure to supply proper warnings to the product’s dangers.58

It is generally recognized that in most product liability cases the existence of a defect must be proved by expert testimony.59 In 2004, the Oklahoma Supreme Court adopted the standards set forth in Daubert v. Merrell Dow Pharm. Inc. 60 and Kumho Tire Co. v. Carmichael61 for civil cases.62 Hence, when faced with a proffer of expert scientific or engineering testimony, an Oklahoma trial court, acting as the gatekeeper, will determine at the outset whether the reasoning or methodology underlying the testimony rests upon a reliable foundation.63 Moreover, the trial court must also determine whether an expert’s testimony is “relevant to the task at hand.” That is, the testimony must not only be relevant, but it must “fit” the facts of the case.64 It should be noted that the 10th Circuit held that a district court may reject as untimely a Daubert motion raised late in the trial process, stating: “counsel should not ‘sandbag’ Daubert concerns until the close of an opponent’s case, thereby placing opposing counsel and the trial court at a severe disadvantage.”65 Appellate review of a trial court’s decision, with respect to the admission of expert scientific testimony, is made under the abuse of discretion standard.66

Unreasonably Dangerous Defect. The mere proof of a defect does not, per se, when coupled with the causation element, establish a product liability cause of action. Rather, as the court noted in Kirkland, the defect alleged and proven must render the product “unreasonably dangerous.” The Kirkland court, adopting the standard set forth in Section 402A (comment G) of Restatement (Second) of Torts, defined “unreasonably dangerous” as follows: “the article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.”67 This definition of the term has been adopted in subsequent decisions.68 The analysis of whether a product is unreasonably dangerous focuses on the time of manufacture, not on the present day standards.69

The importance of properly stating the “unreasonably dangerous” element was emphasized in Lamke v. Futorian Corp. 70 In that case, the Oklahoma Supreme Court affirmed the trial court’s dismissal of the plaintiff’s product liability cause of action be-cause the plaintiff had not sufficiently alleged that the products involved were more likely than would be expected by the ordinary consumer to cause the damages alleged. The court emphasized that a manufacturer may not be held responsible merely because its product is not as safe as other similar products. Rather, it must be shown that the product is less safe than expected by the ordinary consumer.71

Harm to Something Other Than The Product. In Waggoner v. Town & Country Mobile Homes Inc.,72 the Oklahoma Supreme Court addressed the issue of whether a plaintiff can pursue a product liability cause of action when there is only economic loss. The court reasoned that there is no need to extend the product liability theory into an area occupied by the Uniform Commercial Code and held that “no action lies in product liability for injury only to the product itself resulting in purely economic loss.”73 If, however, there is personal injury or damage to other property that resulted from the product defect, the plaintiff may recover damages for the personal injury and/or the other property loss, as well as for the damage to the product.74

Limitation on Implied Warranty Claims. Oklahoma Courts uniformly recognize that Kirkland “renders it unnecessary in a products liability action to consider a recovery based on implied warranty.”75 After Kirkland, the only possible recovery based upon “implied warranty” is under a Uniform Commercial Code violation when the same has been properly pleaded.76

WHAT IS THE APPLICABLE STATUTE OF LIMITATIONS?

The Kirkland court noted that an action based on product liability is an action for injury to personal property or for injury to the rights of another, and thus concluded the two-year statute of limitations generally applicable in Oklahoma for tortious conduct would also apply in product liability cases.77 The plaintiff may “extend” the limitations period by one year by filing, then dismissing, the action without prejudice.78 In Ross v. Kelsey Hayes Inc.,79 the court held that this applies so long as the initial action is filed before the limitation period expires. The defendant need not be served in order to activate the one year “extension.”80

Oklahoma courts have applied the discovery rule in those product liability actions in which particular hardships, or other circumstances, justify different accrual rules.81 In Daugherty v. Farmers Cooperative Ass’n, 82 the Oklahoma Supreme Court held that acquisition of sufficient information, which if pursued, would lead to the true condition of things, would start the running of the statute of limitations.83

In Huff v. Fiberboard Corp.,84 the 10th Circuit held that the statute allowing a personal representative two years from the date of the death of the injured party85 to bring an action does not serve to extend the time to sue if the deceased, on the date of his death, had no cause of action against the manufacturer for the injuries which caused his death. Thus, where the decedent knew, or reasonably should have known, more than two years prior to his death that he had the condition for which the action is ultimately brought, and the defendant caused it, the action is time barred.86

Recognition of the discovery rule in product liability actions has raised the question of whether Oklahoma’s statute of repose87 applies in product liability actions. Early indications from the Oklahoma Supreme Court were that it did apply to manufacturers.88 In Ball v. Harnischfeger Corp., 89 the Oklahoma Supreme Court held that the statute of repose might bar a product liability claim if the manufacturer was acting as a designer, planner, construction supervisor or observer, or constructor of an improvement to real property. Similarly, in O’Dell v. Lamb – Grays Harbor Co.,90 the court held that a product liability claim involving an allegedly defective conveyor was barred because the conveyor was an “improvement to real property” and the case was filed more than ten years after the conveyor was installed.91

WHAT DEFENSES ARE AVAILABLE?

The Kirkland court noted three defenses available to the product liability defendant: lack of causation, abnormal use and assumption of risk.92 Subsequent courts have continually reviewed the availability of these, as well as other defenses.93

Lack of Causation. If some act of the plaintiff caused the injury, rather than the product itself, the plaintiff may not recover. Thus, abnormal use,94 subsequent modification,95 or events, acts or omissions over which the defendant had no control may serve to defeat the causation requirement.

Abnormal Use or Misuse. The leading case on the issue of what constitutes an abnormal use or misuse of a product is Fields v. Volkswagen of America Inc. 96 In Fields, the Oklahoma Supreme Court significantly restricted the applicability of the abnormal use defense. The court noted that the defense of misuse or abnormal use of a product refers to cases where the method of using a product is not that which the maker intended or is a use that could not reasonably be anticipated by a manufacturer. As the court noted, a distinction must be made between use for an abnormal purpose and use for a proper purpose but in a careless manner (contributory negligence).97 The court, however, emphasized the latter element of foreseeability, stating that “to determine wheth er the use of a product is abnormal, we must ask whether it was reasonably foreseeable by the manufacturer. A manufacturer is not liable for injuries resulting from such use if it is not foreseeable.”98 Thus, the Fields court characterized the plaintiff’s alleged drinking and speeding as a “use for a proper purpose, but in a careless manner” and noted that such “contributory negligence” was not a defense unless it caused the accident.98

Subsequent cases have acknowledged the existence of the abnormal use or misuse defense in product liability cases under the proper factual circumstances.100 Oklahoma has expanded the scope of admissible evidence for product liability actions concerning motor vehicles and seat belts by requiring submission of evidence of the nonuse of a seat belt, unless the individual is under the age of 16.101

Comparative Negligence or Fault. In Kirkland, the court held that the Oklahoma comparative negligence statute102 did not apply in product liability actions, and therefore, the plaintiff’s contributory negligence or fault is a defense only where it reaches the point where it was the cause of the injury alleged.103 Despite a growing trend in other jurisdictions, subsequent Oklahoma decisions have consistently held that the plaintiff’s negligence is not used to reduce the plaintiff’s recovery in a product liability action.104

Assumption of Risk. Voluntary assumption of a risk is a complete defense to strict product liability under Oklahoma law.105 But, general knowledge of a risk is insufficient to bar recovery.106 Rather, the defendant must establish a “voluntary assumption of a known risk created by a defect which existed in a product at the time it left the manufacturer.”107 In Smith v. FMC Corp.,108 the 10th Circuit stated the parameters of this defense, finding error in giving an assumption of risk instruction “in the absence of direct or credible and sufficient circumstantial evidence that the [defendant was] aware of the danger and voluntarily assumed the risk.”109 It is not, however, necessary that the plaintiff have “specific, technical knowledge of the cause of the product’s dangerous, defective condition.”110 Rather, the plaintiff’s general knowledge of the defective condition is sufficient to create a jury question on assumption of risk.111

Lapse of Time/Extended Use. Although the existence of a significant lapse of time between the manufacture of the product and injury is not a defense that can conclusively refute contentions that a product was defective, Oklahoma courts have found such evidence to be persuasive. In Hawkins v. Larrance Tank Corp.,112 the court noted that while the existence of a significant lapse of time between the sale of the product and the accident was a “damaging fact — one which frequently prevents any inference that the product was defective when sold … it does not preclude a finding of defectiveness at the time of sale.”113 Similarly, the extensive use of the allegedly defective product between its manufacture and the date of the injury, though not an absolute defense, has been held to be persuasive evidence as to the existence or nonexistence of a defect at the time the product left the manufacturer’s control.114 Thus, the fact that an aircraft engine operated satisfactorily for 538 flying hours after its sale,115 that bolts were in use three years prior to the date of an injury,116 or that a vehicle was driven 19,500 miles before an accident,117 has been held admissible to refute allegations that the product was defective at the time it left the possession and control of the defendant.

State of the Art. “State of the art,” as used in product liability actions, is construed by Oklahoma courts to mean simply the custom and practice in an industry. Compliance with such standards does not constitute an absolute defense to product liability actions,118 nor does compliance with a federal safety standard, in and of itself, establish a product is not defectively designed.118 However, as the court noted in Bruce v. Martin-Marietta Corp.,120 state of the art evidence is helpful in determining the expectation of the ordinary consumer, and thus, is relevant in determining whether a particular product is defective.121 Furthermore, state of the art evidence may be considered relevant to whether the manufacturer is, or should be, aware of various dangers associated with the product.122

Substantial Change in the Product.123 Oklahoma cases have adopted the Restatement (Second) of Torts §402A(1)(b), which imposes liability only when the product “is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.”124 Most decisions have stated that the plaintiff must establish a defect existed in the product at the time it left the control of the manufacturer.125 In Saupitty v. Yazoo Mfg.,126 however, the court noted that while the general rule is that a manufacturer is not liable when an unforeseeable subsequent modification alone causes the plaintiff’s injury, the manufacturer may be held liable where the subsequent modification was foreseeable.127

Learned Intermediary. Oklahoma courts have recognized that the duty to warn may be abated or lessened in cases where the user is not an “ordinary consumer” but is someone who does, or reasonably should, possess special skills or knowledge regarding the safe use of the product.128 The Oklahoma Supreme Court held in Duane v. Oklahoma Gas & Electric Co.,129 where a product is used in an industrial setting by one supposedly skilled at his job, a manufacturer has “no duty to warn of dangers inherent in the task or which are created by the oversight or negligence of the contractor or fellow employees.”130 In Hutchins v. Silicone Specialties Inc.,131 the court distinguished between products marketed toward the ordinary consumer and those distributed to professionals and reasoned that a product that might be unreasonably dangerous in the hands of a home handyman may not be defective when used at a commercial work site by professionals.132

Similarly, a drug or medical device manufacturer may, in most cases, warn the physician, rather than the patient/consumer, of dangers associated with the product.133 This creates the ability, in the proper factual scenario, to argue that the duty to warn is abrogated, or at least delegated, to the knowledgeable purchaser.134 In a failure to warn case with a learned intermediary, the plaintiff is entitled to a rebuttable presumption that the learned intermediary will heed any warnings given.135 However, the assumption is that the intermediary will heed the warnings, not that the warnings will ultimately be passed on to the patient. The defendant can rebut this presumption by “establishing that although the prescribing physician would have read and heeded the warning . . . this would not have changed the prescribing physician’s course of treatment.”136 The learned intermediary standard is a subjective standard that looks at what that particular physician would determine, not what an objective physician would determine.137

Obvious Defect. In the context of a duty to warn case, whether in negligence or product liability, the duty to warn exists only when those to whom the warning is to be communicated can reasonably be perceived to be ignorant of the dangers disclosed in a warning. That is, if the dangers or potential dangers are known, or should reasonably be known to the user, no duty to warn exists.138

Unavoidably Unsafe Product.139 In Tansy v. Dacomed Corp.,140 the court recognized the principles of comment K of the Restatement (Second) of Torts, Section 402A. Under these principles, some products that otherwise create a significant risk, but have great utility, may be deemed “unavoidably unsafe.” Comment K serves as an affirmative defense where the product is incapable of being made safe under present technology, but the social need for the product warrants its production.141 The defense is available only when the product is properly manufactured and contains adequate warnings.142 With Oklahoma Tort Reform discussed below, this defense has since been codified into Oklahoma law.143

Government Contractor Defense. This defense, originally articulated by the United States Supreme Court in Boyle v. United Technologies Corp.,144 provides product manufacturers with insulation from tort liability under state law for injuries allegedly caused by equipment manufactured according to specifications dictated by the military. The elements of the government contractor defense are as follows: 1) the United States approved reasonably precise specifications; 2) the equipment conformed to those specifications; and 3) the supplier warned the United States about the dangers and the use of the equipment that were known to the supplier but not to the United States. In Andrew v. Unisys Corp.,145 Judge Russell, noting a split of authority concerning whether the government contractor defense applied to nonmilitary contracts, found that a manufacturer of a nonmilitary product is entitled to assert the government contractor defense so long as it meets the threshold test established in Boyle. 146

Preemption. Oklahoma product liability claims against products that are subject to federal regulations may be barred by preemption. In Riegel v. Medtronic, 147 the United States Supreme Court held that “state requirements are preempted under the MDA only to the extent that they are ‘different from, or in addition to’ the requirements imposed by federal law.”148 Each product will be subject to a case-by-case analysis that will consider whether the federal regulations applicable to the product simply set a minimum standard or are meant to govern the field of the product at issue.149 Where federal law is intended to govern the entire field of the product at issue, the claim will be preempted. However, where the federal statutes and regulations merely set a minimum standard for products (such as automobile standards), compliance with those statutes is not an absolute defense to liability.150 While claims against medical devices approved under the Medical Devices Act may be preempted, the Supreme Court has not taken the same stance for warnings on prescription pill containers.151 In reviewing the preemption arguments of the parties related to the adequacy of a warning placed on a pharmaceutical drug, the Supreme Court opined, “it has remained a central premise of federal drug regulation that the manufacturer bears responsibility for the content of its label at all times. It is charged both with crafting an adequate label and with ensuring that its warnings remain adequate as long as the drug is on the market.”152 The court held, “[w]e conclude that it is not impossible for Wyeth to comply with its state and federal law obligations and that [the] common law claims do not stand as an obstacle to the accomplishment of Congress’ purposes.”153 Ultimately, as demonstrated by the cited case law, preemption will be both on a product-by-product basis as well as a case-by-case basis.

On May 2, 2014, the Oklahoma Legislature enacted a law that creates a “rebuttable presumption that [a] product manufacturer or seller is not liable for any injury to a claimant” caused by a product that is subject to federal or agency safety standards or regulations so long as the product manufacturer can show that it “complied with or exceeded” those standards.154 This same rebuttable presumption applies where a manufacturer can show by a preponderance of the evidence that the product was subject to “premarket licensing or approval by the federal government, or an agency of the federal government.”155 The statute explicitly states that the protection does not extend to manufacturing defects regardless of compliance with federal standards or premarket approval.156 This statute essentially codifies the preemption rulings addressed above.

WHAT DAMAGES ARE RECOVERABLE?

The Kirkland decision was considered by the court as an appeal from a defendant’s verdict and it did not address the issue of what damages are recoverable in a product liability action.

Compensatory Damages. Oklahoma courts have generally, without discussion, followed the general tort principle that one injured by the wrongful act or omission of another is entitled to fair and just compensation commensurate with the loss or damage sustained.157 Damages may be recovered for personal injuries arising out of a product liability action by an adult,158 a minor child,159 the parent or guardian of a minor child,160 and a spouse of an injured plaintiff.161 Damages caused by a product failure are also recoverable in a wrongful death action.162 The proper plaintiffs to a wrongful death action are determined by Oklahoma wrongful death and probate statutes.163 A survival action may be brought by the personal representative of the decedent.164

Punitive Damages.165 In Thiry v. Armstrong World Industries, 166 the Oklahoma Supreme Court held that plaintiffs may allege and prove exemplary or punitive damages as an element of damage in a product liability action. The court, reasoning that such awards were authorized by Oklahoma statute,167 stated that “punitive damages may be assessed against the manufacturer of a product injuring the plaintiff if the injury is attributable to conduct that reflects a reckless disregard for the public safety.”168 “Reckless disregard” for public safety is shown when the evidence indicates: 1) the defendant was aware of the defect and the likelihood that the injury would result from it; 2) the defendant could either remedy the defect or prevent the injury caused by it; and 3) notwithstanding the above, the defendant deliberately failed to take action to remedy the defect or prevent the injury.169 Under the applicable Oklahoma statute,170 a jury in an action for the breach of an obligation not arising from contract may award punitive damages for the sake of example and by way of punishing the defendant. Under Oklahoma law, awarding punitive damages is a two-stage process.171 In order to award punitive damages, the jury must first make a determination that there is clear and convincing evidence that the defendant is guilty of conduct evincing reckless disregard for the rights of others or the defendant acted intentionally and with malice.172 In Moore v. Subaru of America, 173 the 10th Circuit held that absent presentation of such evidence, the court may properly refuse to instruct on the issue of punitive damages.

TORT REFORM, NEW OKLAHOMA PRODUCT LIABILITY LAWS AND THE EFFECT ON PRODUCT LIABILITY ACTIONS

In 2009, the Oklahoma Legislature passed “tort reform” legislation by enacting a number of laws vastly changing the landscape of tort law in Oklahoma. The original Oklahoma “Tort Reform Act” was passed in 2009, but was subsequently followed by a 2011 statute amending many parts of the 2009 act. Several of these provisions have a direct impact on Oklahoma product liability actions. These provisions include capping noneconomic damages in cases of bodily injury to $350,000 (this does not apply to wrongful death actions or Governmental Tort Claims and there are other limitations),174 doing away with joint and several liability,175 no longer allowing a separate tort action for breaching the UCC duty of good faith,176 providing immunity against product liability actions for manufacturers and distributors for products that are inherently unsafe and known to be unsafe by an ordinary consumer (creates an affirmative defense that must be pled like any other affirmative defense),177 and requiring plaintiffs claiming physical or mental injuries to provide the defendants with releases for medical records, employment records and scholastic records.178 These statutes were enforceable law until the Oklahoma Supreme Court addressed them in two separate opinions.

In 2013, the Oklahoma Supreme Court struck down the 2009 Oklahoma Tort Reform Bill, H.B. 2818, as being unconstitutional. See generally Douglas v. Cox Retirement Props., 2013 OK 37, 302 P.3d 789 (striking down H.B. 2818 for violating the “single subject” rule); see also Wall v. Marouk, 2013 OK 36, ¶27, 302 P.3d 775, 787 (finding that requiring an “affidavit of merit” for professional negligence cases “creates a monetary barrier to access the court system, and then applies that barrier only to a specific subclass of potential tort victims”). In response to Douglas v. Cox and Wall v. Marouk, the Oklahoma Legislature, through a September 2013 special session, revived essentially all of the laws struck down by the Oklahoma Supreme Court, including the notorious “affidavit of merit” in cases where “plaintiffs shall be required to present the testimony of an expert witness to establish breach of the relevant standard of care . . . .”179 The special session laws, coupled with the Oklahoma Supreme Court rulings, leave Oklahoma attorneys attempting to look at the tea leaves to determine the future of Oklahoma tort law.

In addition to Oklahoma’s tort reform statutes, the Oklahoma Legislature enacted legislation on May 2, 2014, providing greater protection to product sellers. The legislation expressly states that “[n]o product liability action may be asserted against a product seller other than a manufacturer unless . . .” the statute then sets forth six separate bases upon which a plaintiff can establish to bring a claim against a product seller.180 These include showing that the seller had “substantial control” over the product design, testing or manufacturing,181 demonstrating that the seller altered or modified the product and that alteration or modification was a “substantial factor” in causing harm to the plaintiff,182 bringing a claim against the seller where after a good faith exercise of due diligence, the plaintiff is unable to locate the manufacturer,183 asserting a claim against a seller is limited in its discovery to information related to these bases,184 and a seller is only liable to a plaintiff for negligence if the plaintiff can establish the following: the seller actually sold the product involved, the seller did not exercise reasonable care in assembling, maintaining, inspecting, and passing on the warnings and instructions, and the seller’s failure to exercise reasonable care was the proximate cause of the plaintiff’s injuries.185 Because this statute did not become effective until Nov. 1, 2014,186 Oklahoma courts have not yet applied it to product liability actions. Although this statute has not yet been applied, it is clear the statute will have a substantial impact on plaintiffs’ product liability claims against product sellers by affording sellers stronger defenses against product liability actions.

FOOTNOTES

  1. 1974 OK 52, 521 P.2d 1353.
  2. Kirkland, 521 P.2d at 1356.
  3. Id.
  4. Id.
  5. Id. at 1357.
  6. Id.
  7. 1974 OK 53, 522 P.2d 622.
  8. Id. at 624.
  9. Id. at 626.
  10. Id.
  11. Kraszewski v. Baptist Medical Ctr. of Okla. Inc., 1996 OK 141, 916 P.2d 241.
  12. See Okla. Stat. Title 12, §§1051-55.
  13. See McKee v. Moore, 1982 OK 71, 648 P.2d 21, 23.
  14. Woods v. Fruehauf Trailer Corp., 1988 OK 105, 765 P.2d 770, 774.
  15. 965 F.2d 844 (10th Cir. 1992), aff’d following remand, 53 F.3d 1181 (10th Cir. 1995).
  16. Id. at 846.
  17. Kirkland, 521 P.2d at 1361. The same test was later restated by the court in Fields v. Volkswagen of America Inc., 1976 OK 106, 555 P.2d 48, 53.
  18. Robinson v. Volkswagen of America Inc., 803 F.2d 572, 574-75 (10th Cir. 1986); Braden v. Hendricks, 1985 OK 14, 695 P.2d 1343, 1350; Moss v. Polyco Inc., 1974 OK 53, 522 P.2d 622, 626. The liability of the manufacturer and distributor/retailer is coextensive, even though the latter is not responsible for the presence of the defect. Braden, 695 P.2d at 1350. Where the defect is attributable solely to the manufacturing process, the distributor/retailer may seek indemnification from the manufacturer. Shuman v. Lavern Farmers Cooperative, 1991 OK CIV APP 2, 809 P.2d 76, 77-78; Friend v. Eaton Corp., 1989 OK CIV APP 74, 787 P.2d 474, 476-77; Braden, 695 P.2d at 1349. Conversely, a verdict for the manufacturer in such a case absolves the distributor/retailer from liability on a product liability theory.
  19. Dewberry v. La Follette, 1979 OK 113, 598 P.2d 241, 242 (action available against commercial lessors of a mobile home that supplied allegedly defective steps); Coleman v. Hertz Corp., 1975 OK CIV APP 5, 534 P.2d 940, 945 (action available against company that leased truck to plaintiff).
  20. This is implicit in the decision of Mayberry v. Akron Rubber Mach. Corp., 483 F.Supp. 407 (N.D. Okla. 1979); c.f., Scott v. Thunderbird Indus. Inc., 1982 OK CIV APP 31, 651 P.2d 1346, 1349.
  21. Kating v. ONEOK Inc., 1997 OK CIV APP 88, 953 P.2d 66, 68; Dewberry v. La Follette, 1979 OK 113, 598 P.2d 241, 242. A hospital has been held to be primarily in the business of rendering health care, not selling implants, and thus was not a member of the manufacturer’s marketing chain. Van Downum v. Synthes, 908 F. Supp. 2d 1179 (N.D. Okla. 2012). For additional information, see infra “Tort Reform” discussion in Section 7 and accompanying endnotes.
  22. Edwards v. Pepsico Inc., 268 Fed. App’x 756 (10th Cir. 2008) (“There is no legal support, however, for Mr. Edwards’ attempt to extend this principle and make all defendants within the chain of distribution automatically liable for a defective product. Rather, responsibility for the defect must still be traced to the proper defendant. Thus, which defendant is responsible for an alleged defect [is] determined in the trial court.”) (quotations and citations omitted).
  23. Gosner v. Decker, 1991 OK CIV APP 64, 814 P.2d 1056, 1057-58. In Gosner, the defendant was neither a seller nor lessor, but merely used and allowed the use of its own equipment in providing a service.
  24. 1987 OK 79, 743 P.2d 1062.
  25. Case, 1987 OK 79, 743 P.2d at 1067; see also, Blair v. Eagle-Picher Industries Inc., 962 F2d 1492, 1496 (10th Cir. 1992); Dillon v. Fiberboard Corp., 919 F.2d 1488, 1491 (10th Cir. 1990).
  26. Case, 743 P.2d at 1067. The court’s opinion was in response to certified questions regarding an “asbestos related injury” case where the plaintiff is unable to identify specific tortfeasors. Id. A similar conclusion was reached by the court in Wood v. Eli Lilly & Co., 38 F.3d 510 (10th Cir. 1994), a case involving diethylslilbestrobol (DES). But see infra note 45.
  27. 519 F. Supp. 487 (W.D. Okla. 1981).
  28. Id. at 488. “The defendant neither manufactured the battery, nor did it process the battery…. Rather, [the defendant] stands in the shoes of an ultimate consumer….” Id. at 489.
  29. 2001 OK 22, 22 P.3d 223.
  30. Id. at 224-25.
  31. Spence v. Brown-Minneapolis Tank Co., 2008 OK CIV APP 90, 198 P.3d 395.
  32. Allenburg, 22 P.3d at 224.
  33. 1977 OK 36, 561 P.2d 68.
  34. Id. at 69.
  35. Green v. Oilwell, 1989 OK 7, 767 P.2d 1348. This is known as the “equitable trust fund doctrine.”
  36. Kirkland, 521 P.2d at 1363.
  37. See e.g., Wheeler v. HO Sports Inc., 232 F.3d 754, 756 (10th Cir. 2000); Gaines-Tabb v. ICI Explosives, USA Inc., 160 F.3d 613, 624 (10th Cir. 1998); Holt v. Deere & Co., 24 F.3d 1289, 1292 (10th Cir. 1994); McMurray v. Deere & Co., 858 F.2d 1436, 1439 (10th Cir. 1988); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 499 (10th Cir. 1984); Sterner Aero AB v. Page Airmotive Inc., 449 F.2d 709, 713 (10th Cir. 1974); Woulfe v. Eli Lilly & Co., 965 F. Supp. 178, 1482 (E.D. Okla. 1997); Dutsch v. Sea Ray Boats Inc., 1992 OK 155, 845 P.2d 187, 190; Lamke v. Futorian Corp., 1985 OK 47, 709 P.2d 684, 688 (Doolin, J. dissenting); Lee v. Volkswagen of America Inc., 1984 OK 48, 688 P.2d 1283, 1285; Stuckey v. Young Exploration Co., 1978 OK 128, 586 P.2d 726, 730; Bohnstedt v. Robscon Leasing L.L.C., 1999 OK CIV APP 115, 993 P.2d 135, 136; Attocknie v. Carpenter Mfg., 1995 OK CIV APP 54, 901 P.2d 221, 227; Tigert v. Admiral Corp., 1979 OK CIV APP 41, 612 P.2d 1381, 1383.
  38. Dutsch v. Sea Ray Boats Inc., 1992 OK 155, 845 P.2d 187; Waggoner v. Town & Country Mobile Homes Inc., 1990 OK 139, 808 P.2d 649.
  39. See e.g., Blair v. Eagle-Picher Industries Inc., 962 F.2d 1492, 1495 (10th Cir. 1992), cert denied, 506 U.S. 974, 113 S. Ct. 464 (1992) (“The mere possibility that the product caused the injury is not enough.”); Dillon v. Fiberboard Corp., 919 F.2d 1488, 1491 (10th Cir. 1990); McMurray v. Deere & Co., 858 F.2d 1436, 1439 (10th Cir. 1988); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 499 (10th Cir. 1984); Cunningham v. Charles Pfizer & Co., 1974 OK 146, 532 P.2d 1377, 1379; Messler v. Simmons Gun Specialities Inc., 1984 OK 35, 687 P.2d 121, 125; Kaye v. Ronson Consumer Products Corp., 1996 OK CIV APP 57, 921 P.2d 1300, 1302.
  40. Freeman Family Ranch, Ltd. v. Maupin Truck Sales Inc., 2010 WL 908665 (W.D. Okla. 2010); Dutsch v. Sea Ray Boats Inc., 1992 OK 155, 845 P.2d 187, 191.
  41. Minter v. Prime Equip. Co., 356 F. App’x 154, 159-61 (10th Cir. 2009).
  42. Kirkland, 521 P.2d at 1367 (plaintiff’s intoxication as misuse if the intoxication caused the injury); see also Black v. M&W Gear Co., 269 F.3d 1220, 1236 (10th Cir. 2001) (“in a product liability case in which contributory negligence is not a defense and misuse is not an issue, the only relevant causation issue is whether a defect in the defendant’s product was the cause of the injury.”); Saupitty v. Yazoo Mfg., 726 F.2d 657, 659 (10th Cir. 1984); Stuckey v. Young Exploration Inc., 1978 OK 128, 586 P.2d 726, 730; Fields v. Volkswagen of America Inc., 1976 OK 106, 555 P.2d 48, 56; Stewart v. Scott-Kitz Miller Co., 1981 OK CIV APP 3, 626 P.2d 329, 331.
  43. Messler v. Simmons Gun Specialties Inc., 1984 OK 35, 687 P.2d 121, 125; Prince v. B. F. Ascher Co., 2004 OK CIV APP 39, 90 P. 3d 1020 (Okla. Civ. App. 2004).
  44. See Hinds v. General Motors Corp., 988 F.2d 1039, 1049 (10th Cir. 1993).
  45. Dutsch v. Sea Ray Boats Inc.,1992 OK 155, 845 P.2d 187, 191 (Okla. 1992); see also Abercrombie & Fitch Stores Inc. v. Broan-Nutone LLC, 2012 U.S. Dist. LEXIS 166947, 3-4, 2012 WL 5906552 (W.D. Okla. Nov. 26, 2012). In asbestos related cases, however, the causation standard is heightened and Oklahoma courts require “[t]his causative link [] be established through ‘circumstances which would insure that there was a significant probability that [the defendant’s] acts were related to the [plaintiff’s] injury.’” Dillon v. Fibreboard Corp., 919 F.2d 1488, 1491 (10th Cir. 1990) (quoting Case v. Fibreboard Corp., 1987 OK 79, 743 P.2d 1062, 1067).
  46. 46.Wood v. Eli Lilly & Co., 38 F.3d 510, 512-13 (10th Cir. 1994).
  47. Id. at 513-14.
  48. Id. at 512-13; Case v. Fiberboard Corp., 1987 OK 79, 743 P.2d 1062, 1067.
  49. 1985 OK 14, 695 P.2d 1343.
  50. Id. at 1350.
  51. Id.; see Robinson v. Volkswagen of America Inc., 803 F.2d 572, 574-75 (10th Cir. 1986) (verdict in favor of manufacturer absolves distributor where alleged defect is attributable solely to manufacturing process). See supra note 18. For additional information, see infra “Tort Reform” discussion in Section 7 and accompanying endnotes.
  52. Holt v. Deere & Co., 24 F.3d 1289, 1292 (10th Cir. 1994); McMurray v. Deere & Co., 858 F.2d 1436, 1439 (10th Cir. 1988); Lamke v. Futorian Corp., 1985 OK 47, 709 P.2d 684, 688 (Doolin, J., dissenting); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 499 (10th Cir. 1984); Barber v. General Electric Co., 648 F.2d 1272, 1276 (10th Cir. 1981); Scott v. Thunderbird Indus., 1982 OK CIV APP 31, 651 P.2d 1346, 1348; Kirkland, 521 P.2d at 1363; Bohnstedt v. Robsco Leasing, L.L.C., 1999 OK CIV APP 115, 993 P.2d 135.
  53. Mayberry v. Akron Rubber Mach. Corp., 483 F. Supp. 407, 412 (N.D. Okla. 1979); Kirkland, 521 P.2d at 1363; Hawkins v. Larrance Tank Corp., 555 P.2d 91, 94 (Okla. Ct. App. 1976).
  54. 483 F. Supp. 407 (N.D. Okla. 1979).
  55. Id. at 412; see e.g., Wheeler v. HO Sports Inc., 232 F.3d 754, 757 (10th Cir. 2000); Messler v. Simmons Gun Specialties Inc., 1984 OK 35, 687 P.2d 121.
  56. Mayberry v. Akron Rubber Mach. Corp., 483 F. Supp. 407 (N.D. Okla. 1979).
  57. Id. at 412. See e.g., Wheeler v. HO Sports Inc., 232 F.3d 754, 757 (10th Cir. 2000); Rohrbaugh v. Owens-Corning Fiberglass Corp., 965 F.2d 844 (10th Cir. 1992); McMurray v. Deere & Co., 858 F.2d 1436 (10th Cir. 1988); Saupitty v. Yazoo Mfg., 726 F.2d 657 (10th Cir. 1984); Blood v. R&R Engineering Inc., 1989 OK 10, 769 P.2d 144; Messler v. Simmons Gun Specialties Inc., 1984 OK 35, 687 P.2d 121. In the automotive context, design defects may be alleged in the context of crashworthiness. See e.g., Hinds v. General Motors Corp., 988 F.2d 1039, 1049 (10th Cir. 1993); Lee v. Volkswagen of America Inc., 1984 OK 48, 688 P.2d 1283.
  58. See e.g., McPhail v. Deere & Co., 529 F. 3d 947 (10th Cir. 2008); Wheeler v. HO Sports Inc., 232 F.3d at 757 (10th Cir. 2000); Daniel v. Ben E. Keith Co., 97 F.3d 1329, 1332 (10th Cir. 1996); McMurray v. Deere & Co., 858 F.2d 1436 (10th Cir. 1988); Rohrbaugh v. Owens-Corning Fiberglass Corp., 965 F.2d 844 (10th Cir. 1992); Smith v. FMC Corp., 754 F.2d 873 (10th Cir. 1985); Woulfe v. Eli Lilly & Co., 965 F. Supp. 1478, 1482 (E.D. Okla. 1997); Mayberry v. Akron Rubber Mach. Corp., 483 F.Supp. 407 (N.D. Okla. 1979); Barber v. General Electric Co., 648 F.2d 1272 (10th Cir. 1981); Smith v. United States Gypsum Co., 1980 OK 33, 612 P.2d 251; Bohnstedt v. Robscon Leasing, L.L.C., 1999 OK CIV APP 115, 993 P.2d 135; Shuman v Lavern Farmers Cooperative, 1991 OK CIV APP 2, 809 P.2d 76; Spencer v. Nelson Sales Co. Inc., 1980 OK CIV APP 58, 620 P.2d 477. The court noted in Smith v. FMC Corp., 754 F.2d 873, 877 (10th Cir. 1985), “a manufacturer has a responsibility to warn of a defective product at any time after it is manufactured and sold if the manufacturer becomes aware of the defect.” The duty to warn arises only when the manufacturer “knows or should know that the use of the product is hazardous ….” Rohrbaugh v. Owens-Corning Fiberglass Corp., 965 F.2d 844, 847 (10th Cir. 1992). However, plaintiff has the burden of proving that the lack of adequate warnings caused his or her injuries. Black v. M&W Gear Co., 269 F.3d 1220, 1231 (10th Cir. 23001). A rebuttable presumption exists that an adequate warning would have been heeded. For a discussion of the inference and its rebuttal, see Eck v. Parke, Davis & Co., 256 F.3d 1013 (10th Cir. 2001); Daniel v. Ben E. Keith Co., 97 F.3d 1329, 1332-33 (10th Cir. 1996); Woulfe v. Eli Lilly & Co., 965 F. Supp. 1478, 1483-86 (E.D. Okla. 1997).
  59. Harrington v. Biomet Inc., 2008 WL 2329132 (W.D. Okla. 2008) (“[T] he Court will assume that the plaintiff herein can prove the existence of a defect without identifying what the defect is and exclusively by circumstantial evidence, even though the product – the prosthetic hip – was not destroyed and/or there are numerous prosthetic hips of the same type and size available. However, the court observes that there is obvious tension between the principle that a plaintiff may prove the existence of a defect, without identifying it, by circumstantial evidence and the principle recognized by the Oklahoma Supreme Court in Kirkland and its progeny, adhered to by the 10th Circuit, that ‘we do not infer that the injury is itself proof of the defect, or that proof of injury shifts the burden to the defendant.’”).
  60. 509 U.S. 579 (1993).
  61. 526 U.S. 137, 147 (1999).
  62. See generally 2003 OK 10, 65 P.3d 591.
  63. The following factors are among those to be considered to determine the reliability of scientific or engineering evidence: 1) whether the expert’s theory or technique has been subject to peer review; 2) whether there is a known or potential rate of error; 3) whether the scientific methodology has been generally accepted in its field; and 4) whether it can be tested. Christian, 2003 OK 10, ¶8, 65 P.3d at 597-98; Daubert, 509 U.S. at 592-593; Hollander v. Sandoz Pharm. Corp., 95 F. Supp. 1230, 1234 (W.D. Okla. 2000); see also, Tyler v. Sterling Drug Inc., 19 F. Supp.1239 (N.D. Okla. 1998).
  64. Christian, 2003 OK 10, ¶9, 65 P.3d at 598; Daubert, 509 U.S. at 592- 593.
  65. Alfred v. Caterpillar Inc., 262 F. 3d 1983 (10th Cir. 2001).
  66. Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997); Black v. M&W Gear Co., 269 F.3d 1220, 1227 (10th Cir. 2001).
  67. Kirkland, 521 P.2d at 1363.
  68. See e.g., Smith v. Cent. Mine Equip. Co., 876 F. Supp. 2d 1261 (W.D. Okla. 2012); McMurray v. Deere & Co., 858 F.2d 1436, 1439 (10th Cir. 1988); Brown v. McGraw-Edison Co., 736 F.2d 609, 613 (10th Cir. 1984); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 500 (10th Cir. 1984); Bruce v. Martin-Marietta Corp., 544 F.2d 442, 447 (10th Cir. 1976); Lamke v. Futorian Corp., 1985 OK 47, 709 P.2d 684, 686; Smith v. United States Gypsum Co., 1980 OK 33, 612 P.2d 251, 253; Attocknie v. Carpenter Mfg., 1995 OK CIV APP 54, 901 P.2d 221.
  69. Estate of Wicker v. Ford Motor Co., 393 F. Supp. 2d 1229 (W.D. Okla. 2005).
  70. 1985 OK 47, 709 P.2d 684.
  71. Id. at 686; see also Gaines-Tabb v. ICI Explosives, USA Inc., 160 F.3d 613, 624 (10th Cir. 1998).
  72. 1990 OK 139, 808 P.2d 649.
  73. Id. at 653; see also Okla. Gas & Electric Co. v. McGraw-Edison Co., 1992 OK 108, 834 P.2d 980, 982. See also United Golf LLC v. Westlake Chem. Corp., 05-CV-0495-CVE-PJC, 2006 WL 2807342 (N. D. Okla. August 15, 2006).
  74. Waggoner, 1990 OK 139, 808 P.2d at 652; Dutsch v. Sea Ray Boats Inc., 1992 OK 155, 845 P.2d 187, 193-94. See also Agape Flights Inc. v. Covington Aircraft Engines Inc., No. CIV-09-492-FHS, 2012 WL 2792452 (E.D. Okla. 2012).
  75. O’Neal v. Black & Decker Mgf. Co., 1974 OK 55, 523 P.2d 614, 615; Mittapalli v. Ford Motor Co., Inc., No. 06-CV-61-GKF-SAJ, 2007 WI. 2292697, at *2 (N.D. Okka, Aug. 7, 2007.
  76. Black & Decker Mfg. Co., 1974 OK 55, 523 P.2d at 615.
  77. Kirkland, 521 P.2d at 1361; see Okla. Stat. Title 12, §95.
  78. Okla. Stat. Title 12, §100.
  79. 1991 OK 83, 825 P.2d 1273.
  80. Id. at 1276-79.
  81. See e.g., Huff v. Fiberboard Corp., 836 F.2d 473 (10th Cir. 1987); Williams v. Borden Inc., 637 F.2d 731 (10th Cir. 1980); Daugherty v. Farmers Cooperative Ass’n., 1984 OK 72, 689 P.2d 947.
  82. 1984 OK 72, 689 P.2d 947.
  83. Id. at 951; see also Huff v. Fiberboard Corp., 836 F.2d 473, 479 (10th Cir. 1987).
  84. 836 F.2d 473 (10th Cir. 1987).
  85. Okla. Stat. Title 12, §1053.
  86. Huff, 836 F.2d at 475-480.
  87. Okla. Stat. Title 12, §109-113.
  88. Loyal Order Of Moose, Lodge 1785 v. Cavaness, 1978 OK 70, 563 P.2d 143, 147.
  89. 1994 OK 65, 877 P.2d 45, 50.
  90. 911 F. Supp. 490 (W.D. Okla. 1995).
  91. Id. at 493-94; but see Durham v. Herbert Olbrich GMBH & Co., 404 F.3d 1249 (10th Cir. 2005) (holding manufacturing machinery was not an “improvement of real property” and therefore the defendant could not escape a claim for product liability by claiming the action was barred by Okla. Stat. Title 12, §109).
  92. Kirkland, 521 P.2d at 1366.
  93. “Defense” here is used in the broad sense of the word, indicating matters of proof that either serve as affirmative defenses or serve to rebut the plaintiff’s prima facie case.
  94. See supra note 42 (cases cited therein).
  95. See supra note 43 (cases cited therein).
  96. 1976 OK 106, 555 P.2d 48.
  97. Id. at 56.
  98. Id. The court, perhaps realizing the inconsistency with Kirkland, noted that while drunkenness could be misuse of a product, the facts in the present case did not establish such misuse. See also, Black v. M&W Gear Co., 269 F.3d 1220, 1235 (10th Cir. 2001) (holding that evidence that plaintiff’s alcohol consumption might have caused the accident is irrelevant because it did not rebut plaintiff’s evidence that a defective product caused plaintiff’s injuries); Prince v. B.F. Asher Co. Inc., 2004 OK CIV APP 39, 90 P.3d 1020 (summary judgment for defendant on wrongful death claim where medical inhaler only became dangerous after extracting and ingesting an ingredient therefrom).
  99. Id.; see also, McMurray v. Deere & Co., 858 F.2d 1436 (10th Cir. 1988) (party injured when bypassing a neutral start switch was carelessly using product for a proper purpose).
  100. See e.g., Farrell v. Klein Tools Inc., 866 F.2d 1294, 1296 (10th Cir. 1989); Stuckey v. Young Exploration Co., 586 P.2d 726, 730 (Okla. 1978); Stewart v. Scott-Kitz Miller Co., 1981 OK CIV APP 3, 626 P.2d 329; Basford v. Gray Manufacturing Co., 2000 OK CIV APP 106, 11 P.3d 1281, 1293.
  101. Okla. Stat. Title 47, §12-420 (“[T]he use or nonuse of seat belts shall be submitted into evidence in any civil suit in Oklahoma unless the plaintiff in such suit is a child under sixteen (16) years of age.”).
  102. Okla. Stat. Title 23, §§12, 13, 14. Okla. Stat. Title 23, §11 has since been repealed and now Okla. Stat. Title 23, §§12, 13, 14 govern contributory negligence and comparative negligence.
  103. Kirkland, 521 P.2d at 1367. The court noted that the referenced statute applies to “negligent actions” and not product liability actions.
  104. Black v. M&W Gear Co., 269 F.3d 1220, 1234 (10th Cir. 2001) (“In Oklahoma, use of a product `for a proper purpose, but in a careless manner’ is merely contributory negligence, which is not a defense to a products liability suit.”); McMurray, 858 F.2d at 1439; Saupitty v. Yazoo Mfg., 726 F.2d 657, 660 (10th Cir. 1984); Bingham v. Hollingsworth Mfg., 695 F.2d 445, 454 (10th Cir. 1982); Hogue v. A.B. Chance Co., 1979 OK 2, 592 P.2d 973, 975; Fields v. Volkswagen of America Inc., 1976 OK 106, 555 P.2d 48, 55.
  105. Holt v. Deere & Co., 24 F.3d 1289, 1295 (10th Cir. 1994).
  106. Hogue, 592 P.2d at 975.
  107. Smith v. FMC Corp., 754 F.2d 873, 876 (10th Cir. 1985). See also, Holt v. Deere & Co., 24 F.3d 1289, 1292 (10th Cir. 1994); Bingham v. Hollingsworth Mfg., 695 F.2d 445, 452 (10th Cir. 1972); Barber v. General Electric Co., 648 F.2d 1272, 1277 (10th Cir. 1981).
  108. 754 F.2d 873 (10th Cir. 1985).
  109. Id. at 877; McMurray v. Deere & Co., 858 F.2d 1436, 1440 (10th Cir. 1988).
  110. Holt, 24 F.3d at 1293.
  111. Id.
  112. 555 P.2d 91 (Okla. Ct. App. 1976).
  113. Id. at 94. In Hawkins, there was a three year lapse from the time of sale to the date of injury. See also Hurd v. American Hoist & Derrick Co., 734 F.2d 495 (10th Cir. 1984) (30 year lapse of time does not preclude finding of defectiveness at time of sale).
  114. See e.g., Sterner Aero AB v. Page Airmotive Inc., 449 F.2d 709, 714 (10th Cir. 1974); Hawkins v. Larrance Tank Corp., 555 P.2d 91, 94-95 (Okla. Ct. App. 1976).
  115. Sterner Aero AB v. Page Airmotive Inc., 449 F.2d 709, 714 (10th Cir. 1974).
  116. Hawkins, 555 P.2d at 94-95.
  117. Braden v. Hendricks, 1985 OK 14, 695 P.2d 1343, 1350.
  118. O’Banion v. Owens-Corning Fiberglass Corp., 968 F.2d 1011, 1016 (10th Cir. 1992). See also, Smith v. FMC Corp., 754 F.2d 873, 877 (10th Cir. 1985); Robinson v. Audi NSU Auto Union Aktiengesellschaft, 739 F.2d 1481, 1485 (10th Cir. 1984); Smith v. Minster Mach. Co., 669 F.2d 628, 633 (10th Cir. 1982).
  119. Attocknie v. Carpenter Mfg., 1995 OK CIV APP 54, 901 P.2d 221, 228; Edwards v. Basel Pharm., 933 P.2d 298, 301 (Okla. 1997). Issues concerning federal preemption as affecting a state common law product liability claim are discussed in Johnson v. G.M. Corp., 889 F.Supp. 451 (W.D. Okla. 1995) and Bokis v. American Medical Systems Inc., 875 F.Supp. 748 (W.D. Okla. 1995).
  120. 544 F.2d 442 (10th Cir. 1976).
  121. Id. at 447.
  122. Obanion at 968 F.2d 1011, 1016 (10th Cir. 1992); Smith, 669 F.2d at 634.
  123. See infra “Tort Reform” discussion in Section 7 and accompanying endnotes.
  124. Saupitty v. Yazoo Mfg., 726 F.2d 657, 659 (10th Cir. 1984).
  125. McClaran v. Union Carbide Corp, 26 Fed. App’x 869 (10th Cir. 2002); Hurd v. American Hoist & Derrick Co., 734 F.2d 495, 499 (10th Cir. 1984); Mayberry v. Akron Rubber Mach. Corp., 483 F.Supp. 407, 412 (N.D. Okla. 1979); Dutsch v. Sea Ray Boats Inc., 1992 OK 155, 845 P.2d 187, 191- 92; Manora v. Watts Regulator Co., 1989 OK 152, 784 P.2d 1056, 1059; Messler v. Simmons Gun Specialities Inc., 1984 OK 35, 687 P.2d 121, 125; Stuckey v. Young Exploration Co., 1978 OK 128, 586 P.2d 726, 730; Cunningham v. Charles Pfizer & Co., 1974 OK 146, 532 P.2d 1377, 1379; Hawkins v. Larrance Tank Corp., 555 P.2d 91, 94 (Okla. Ct. App. 1976).
  126. 726 F.2d 657, 659 (10th Cir. 1984).
  127. Id. at 659.
  128. Akin v. Ashland Chemical Co., 156 F.3d 1030, 1037 (10th Cir. 1998); see also Ingram v. Novartis Pharms. Corp., 888 F. Supp. 2d. 1241 (W.D. Okla. 2012).
  129. 1992 OK 97, 833 P.2d 284.
  130. Id. at 287.
  131. 1993 OK 70, 881 P.2d 64, 67.
  132. Id.
  133. Woulfe v. Eli Lilly Co., 965 F. Supp. 1478, 1482 (E.D. Okla 1997). Exceptions to the rule are discussed in Edwards v. Basel Pharmaceuticals, 933 P.2d 298, 300-03 (Okla. 1997); Tansy v. Dacomed Corp., 1994 OK 146, 890 P.2d 881, 886.
  134. Duane, 1992 OK 97, 833 P.2d at 287.
  135. Stafford v. Wyeth, 411 F. Supp. 2d 1318, 1320-21 (W.D. Okla. 2006).
  136. Id.
  137. Id.
  138. Mayberry v. Akron Rubber Machinery Corp., 483 F. Supp. 407,413 (N.D. Okla. 1979); Graves v. Superior Welding Inc., 1995 OK 14, 893 P.2d 500, 503-04; Travelers Indemnity Co. v. Hans Lingl Anlagenbau Und Verfahrenstechnik GMBH & Co. KG, 189 Fed. App’x 782 (10th Cir. 2006).
  139. See infra “Tort Reform” discussion in Section 7 and accompanying endnotes.
  140. 1994 OK 146, 890 P.2d 881.
  141. Id. at 885.
  142. Id. at 886; Littlebear v. Advanced Bionics LLC, 896 F. Supp. 2d 1085 (N.D. Okla. 2012); Reed v. Smith & Nephew Inc., 527 F. Supp. 2d 1136 (W.D. Okla. 2007).
  143. Okla. Stat. Title 76, §57.1 (this statute does not provide a defense for manufacturer’s defect or breach of warranty suits).
  144. 487 U.S. 500, 507-508 (1988).
  145. 936 F. Supp. 821 (W.D. Okla. 1996).
  146. Id. at 830.
  147. 552 U.S. 312 (2008).
  148. 552 U.S. at 330.
  149. Compare Riegel v. Medtronic, 552 U.S. 312 (2008) (preemption of state common law claims for certain medical devices) with Moody v. Ford Motor Co., 506 F. Supp. 2d 823, 830-31 (N.D. Okla. 2007) (finding compliance with a governmental standard for the minimum strength of a roof was insufficient to establish an absolute defense to a claim of products liability).
  150. Moody v. Ford Motor Co., 506 F. Supp. 2d 823, 830-31 (N.D. Okla. 2007) (finding compliance with a governmental standard for the minimum strength of a roof was insufficient to establish an absolute defense to a claim of products liability).
  151. Wyeth v. Levine, 555 U.S. 555, 570-571 (2009).
  152. Id. at 570-71.
  153. Id. at 581.
  154. 2013 OK H.B. 3365(1)(A) and (C).
  155. Id.
  156. Id. at (1)(D).
  157. This principle is codified in Okla. Stat. Title 23, §61.
  158. The elements that may be considered by the jury in fixing an amount to be awarded to an adult for personal injuries are enumerated in OUJI – Civ. No. 4.1.
  159. The elements that may be considered by the jury in fixing an amount to be awarded to a minor child for personal injuries are the same as set out in endnote 142 above, except for loss of earnings, which are not considered. OUJI – Civ. No. 4.2.
  160. In a derivative action brought by the parent or guardian of a minor child who has suffered personal injuries, the jury is allowed to consider the elements set out in OUJI – Civ. 4.3.
  161. In order for a plaintiff to recover on a claim of loss of spousal consortium, the jury must make findings as set out in OUJI – Civ. 4.5. The measure of damages for loss of spousal consortium is the amount of money which will reasonably and fairly compensate the plaintiff for the value of the loss of consortium he or she has sustained, and for the value of the loss of consortium he or she is reasonably certain to sustain in the future. Any award to the plaintiff will be reduced by the court in proportion to the percentage of negligence the jury attaches to the injured spouse. OUJI – Civ. 4.6. Children may also have a cause of action for loss of parental consortium, which is defined as the love, care, companionship and guidance given by a parent to a minor child. For a child to recover on a loss of parental consortium claim, the jury must make findings set out in OUJI – Civ. No. 4.7. The measure of damages for loss of parental consortium is based upon the amount of money which will reasonably and fairly compensate the child for the loss of the value of the parental consortium that he or she has lost, and for the value of the loss of parental consortium he or she is reasonably certain to sustain until he or she reaches the age of eighteen. Any award to the child will be reduced by the court in proportion to the percentage of negligence the jury attaches to the injured parent. OUJI – Civ. No. 4.8.
  162. An action for wrongful death is derivative, brought in the name of the decedent. Elements that may be considered by the jury in determining the amount of damages are described in OUJI – Civ. No. 8.1. Damage items which may be considered as a result of the wrongful death of a minor child are enumerated in OUJI –Civ. No. 8.2.
  163. Okla. Stat. Title 12, §§1053-1055; Okla. Stat. Title 84, §213.
  164. The personal representative may recover damages the decedent might have otherwise sustained had he or she lived. Okla. Stat. Title 12, §1053(a).
  165. See infra “Tort Reform” discussion in Section 7 and accompanying endnotes.
  166. 1983 OK 28, 661 P.2d 515.
  167. Okla. Stat. Title 23, §9.1.
  168. Thiry, 661 P.2d at 518.
  169. Id. at 517-18; see also, Johnson v. General Motors Corp., 889 F. Supp. 451, 454 (W.D. Okla. 1995).
  170. Okla. Stat. Title 23, §9.1.
  171. Okla. Stat. Title 23, §9.1.
  172. Id. For an absence of such a finding on the record, the court in Shuman v. Laverne Farmers Cooperative, 1991 OK CIV APP 2, 809 P.2d 76, 79 reduced the punitive damage award to equal the compensatory damages awarded.
  173. 891 F.2d 1445 (10th Cir. 1989). The court rejected the argument that a defendant’s resistance in producing material in discovery constitutes an implied admission of punitive guilt, and reasoned that such evidence, if admissible, is relevant to liability, not damages.
  174. Okla. Stat. Title 23, §61.2 (there is no limit on economic loss and the “cap” is lifted if the judge and jury find by clear and convincing evidence that the defendant’s acts or failures to act were in reckless disregard for the rights of others; grossly negligent; fraudulent; or intentional or with malice).
  175. Okla. Stat. Title. 23, §15.
  176. Okla. Stat. Title 12A, §1-304.
  177. Okla. Stat. Title 76, §57.1 (does not provide a defense for manufacturer’s defect or breach of warranty suits).
  178. 2013 OK H.B. 3375. This bill was enacted on April 28, 2014, and amends Okla. Stat. Title 12, §3226(A)(2)(a) by adding the following language: “Subject to subsection B of this section, in any action in which physical or mental injury is claimed, the party making the claim shall provide to the other parties a release or authorization allowing the parties to obtain relevant medical records and bills, and, when relevant, a release or authorization for employment and scholastic records.”
  179. The Legislature revived the “affidavit of merit” requirement that was struck down in Wall, but provided an exemption for indigent plaintiffs. See Okla. Stat. Title 12, §19.1. The future application of this statute remains uncertain.
  180. Okla. Stat. Title 76, §57.2(E)(1-6).
  181. Okla. Stat. Title 76, §57.2(E)(1).
  182. Okla. Stat. Title 76, §57.2(E)(2).
  183. Okla. Stat. Title 76, §57.2(E)(4).
  184. Okla. Stat. Title 76, §57.2(F).
  185. Okla. Stat. Title 76, §57.2(G).
  186. 2013 OK H.B. 3365(2).

Chris Pearson is a partner at the Law Firm of Germer, Beaman & Brown in Austin, Texas. He is licensed in Oklahoma and Texas and regularly defends automobile and heavy truck manufacturers in product liability litigation.

Tom Wolfe is a trial attorney at the firm of Phillips Murrah P.C. whose practice is focused on complex business cases, including product liability, oil and gas, mass tort and class action defense. He served on the board of directors and as chair of the Trial Practice Section of the Oklahoma Association of Defense Counsel. He is Master of the William J. Holloway, Jr. American Inn of Court. He co-authored the OBJ articles, “Kirkland v. General Motors Co. and Beyond: An Overview of Twenty Years of Oklahoma Product Liability Law” and “An Overview of Oklahoma Product Liability Law,” the latter of which won the Oklahoma Bar Association Golden Quill Award.

Lyndon Whitmire is a trial attorney and Litigation Practice Group Leader at the firm of Phillips Murrah P.C. He represents clients in a wide range of complex litigation matters, including product liability, commercial litigation, class actions, various UCC and consumer protection related disputes, first and third party insurance disputes, general tort and personal injury claims, intellectual property and appellate advocacy. He co-authored the OBJ article, “An Overview of Oklahoma Product Liability Law,” which won the Oklahoma Bar Association Golden Quill Award. Other distinctions include recipient of the International Academy of Trial Lawyers Award.

Cody J. Cooper is a litigation associate at the firm of Phillips Murrah P.C. He represents clients in a wide range of civil complex litigation matters. His practice concentrates on intellectual property, product liability and commercial litigation. He graduated from OU College of Law with honors. While in law school, he served as the managing editor of the American Indian Law Review. He has published articles on both “E-Discovery” and “Bring Your Own Device Policies” in the workplace.

With the correct tools, financially stressed firms can avoid bankruptcy

From NewsOK / by Paula Burkes
Published: May 19, 2015
Click to see full story – With the correct tools, financially stressed firms can avoid bankruptcy

Click to see Stephen W. Elliott’s attorney profile

Oklahoma bankruptcy litigator Stephen Elliott, an attorney with Phillips Murrah, talks about dealing with market vulnerability and how to avoid bankruptcy.


Stephen W. Elliott is a director and shareholder of the firm. He represents creditors and debtors in out-of court workouts, litigation and bankruptcy in addition to representing clients in general litigation matters.

Stephen W. Elliott, a director at Phillips Murrah, represents creditors and debtors in out-of court workouts, litigation and bankruptcy in addition to representing clients in general litigation matters.

Q: There’s a lot of talk about low oil prices and how it may affect the business community in Oklahoma. Do you foresee trouble?

A: While Oklahoma’s economy is more diversified than it was during past downturns in the oil and gas industry, it’s hard to imagine current prices won’t adversely impact the Oklahoma business community. Oil and gas is still the dominant industry driving the Oklahoma economy. When the oil and gas industry suffers, we all suffer. For example, some oil and gas companies have reportedly reduced their capital expenditure budgets, reported substantial losses, and are selling off assets. Service and drilling companies have announced major layoffs. Among other things, with increased unemployment, mortgage foreclosures are likely to increase. With a materially increased number of foreclosures, real estate values typically drop. If oil prices don’t rebound soon, fallout seems inevitable. How bad the fallout may be depends largely on how debtors and creditors choose to address the current circumstances. In many instances, working together is likely to yield better results for both groups.

Q: If a company is experiencing financial stress, how can they avoid bankruptcy, and what is a “workout?”

A: In my experience, candid communication is often the key to avoiding bankruptcy and resolving financial issues through a workout. If a company is having trouble meeting its obligations, creditors want to know why, what is being done to address the situation and, ultimately, what their overall prospects for recovery are, both outside and through bankruptcy. A workout is an out-of-court process through which the parties try to reach an agreement to modify the terms of their original transaction. Workouts may involve debt forgiveness, and frequently involve changes in amortization, changes in interest rate, and changes in principal or interest payment due dates. The ultimate goal of the workout is to reach an agreement that puts the relationship on a footing consistent with existing financial conditions without the costs, delays and potential uncertainties frequently inherent in bankruptcy. If the workout would be as or more beneficial to both parties than a bankruptcy would be, bankruptcy can often be avoided.

Q: What is the best course of action when considering restructuring?

A: Accept the reality of the situation quickly and address it rapidly. To do so, the company must know its current revenue and expenses, be able to credibly project future revenue and expenses, and reasonably quantify the current and estimated future value of its assets. Once the company has that information, a pragmatic approach to dealing with its liabilities can be formulated. Denial or inaction can result in a needless loss of value and potentially impair the reorganization alternatives that may have otherwise been available. Communication is also very important, and generally the earlier the better. The failure to communicate will often result in creditors assuming the worst and taking collections actions they might not have taken if the debtor had simply communicated appropriately. Once those collection actions have begun, the prospects of avoiding bankruptcy are frequently reduced.

Q: Under what circumstances is bankruptcy preferable?

A: The potential benefits of bankruptcy are wide-ranging. For example, the debtor and its assets are protected by the automatic stay, which stops collection efforts outside of bankruptcy court, and keeps a debtor and its assets from being picked apart piecemeal. Bankruptcy also provides the possibility of being able to rapidly sell assets free and clear of liens and over creditors’ objections, which under some circumstances may be the only way to realize fair value of certain types of assets. Bankruptcy also provides the opportunity to bind creditors involuntarily to reorganization plans through which obligations are restructured and debt is discharged. This can be critical if efforts to put a workout together failed because some creditors refused or because there are too many creditors to deal with through a workout. Court supervision of the debtor, its property, and its actions, and ready access to a judge, also tends to be viewed by most as a benefit of bankruptcy.

Read the Q&A at NewsOK here.

Technology: E-Discovery Under Rule 26

Published 3/16/2013 in The Oklahoma Bar Journal, Vol. 84, No. 8
By Cody Cooper

Cody J. Cooper is an attorney in the Litigation Department of Phillips Murrah P.C. His primary practice areas are commercial litigation, class actions, complex torts and intellectual property. A Norman native, he graduated with honors from OU College of Law in 2012 and received his bachelor’s degree in management information systems and finance. He served as the managing editor of the OU American Indian Law Review.

Cody J. Cooper is an attorney in the Litigation Department of Phillips Murrah P.C. His primary practice areas are commercial litigation, class actions, complex torts and intellectual property. A Norman native, he graduated with honors from OU College of Law in 2012 and received his bachelor’s degree in management information systems and finance. He served as the managing editor of the OU American Indian Law Review.

Under Rule 26(f) of the Federal Rules of Civil Procedure (FRCP), opposing parties must now discuss e-discovery at least 21 days before a scheduling conference is heard or a scheduling order is due under Rule 16.1 Rule 26(f) also applies to “all sorts of discoverable information, but can be particularly important with regard to electronically stored information.”2 This varies greatly from the current Oklahoma requirement under 3226(f), which states that “[a]t any time after commencement of an action, the court may direct the attorneys for the parties to appear for a conference on the subject of discovery.”3 While Oklahoma statutes state that a discovery conference is discretionary, it is mandatory under the federal rules. Additionally, both sides are required to discuss the form or forms in which discovery will take place, what information will be within the scope of the suit, issues about claims of privilege, and e-discovery.

The advisory committee notes for the 2006 amendment to FRCP 26 state, “[w]hen a case involves discovery of electronically stored information, the issues to be addressed during the Rule 26(f) conference depend on the nature and extent of the contemplated discovery and of the parties’ information systems. It may be important for the parties to discuss those systems, and accordingly important for counsel to become familiar with those systems before the conference. With that information, the parties can develop a discovery plan that takes into account the capabilities of their computer systems. In appropriate cases identification of, and early discovery from, individuals with special knowledge of a party’s computer systems may be helpful.”5 The practical implications of this note are clear. The committee expects both sides’ counsel to cooperate with each other and have a full understanding of their respective client’s data when they go to the conference.

As the advisory committee notes make clear, it is each attorney’s job to become familiar with their client’s information systems. Indeed, in the discovery conference, counsel is often required to exercise this working knowledge by discussing what data is in each system and the respective retention policy for that system. This means that counsel must become intimately familiar with a client’s data creation and storage and be able to be conversant in the same. This could require looking at a map of each client’s database for his or her company or going through each application your client is using and discussing where the data is stored for each application.

Furthermore, the volume and dynamic nature of electronically stored information may further complicate preservation obligations. “The ordinary operation of computers involves both the automatic creation and the automatic deletion or overwriting of certain information. Failure to address preservation issues early in the litigation increases uncertainty and raises a risk of disputes.”6 Again, this means that attorneys must be forthright in the information they possess, and both sides need to cooperate in the discovery conference or risk potential adverse actions (sanctions, etc.). The discussion between attorneys needs to be open and honest, and both sides need to focus on “the balance between the competing needs to preserve relevant evidence and to continue routine operations critical to ongoing activities.”7

Additionally, courts should be hesitant to provide one side an overly burdensome or broad preservation order for fear that “[a] blanket preservation order may be prohibitively expensive and unduly burdensome for parties dependent on computer systems for their day-to-day operations.”8 In fact, the advisory committee for the Federal Rules of Civil Procedure states that “[a] preservation order entered over objections should be narrowly tailored. Ex parte preservation orders should issue only in exceptional circumstances.”9 Ultimately, the parties need to take all of these considerations into account and try to reach a reasonable agreement.

ESI AND E-DISCOVERY

Before delving into a brief overview of what I believe are some of the most important aspects of e-discovery, remember that parties to litigation can always agree to produce discovery in paper format, not electronic. However, this doesn’t mean you can avoid electronic discovery (e-discovery). As any attorney knows, discovery is a critical process of litigation that is often tedious, time-consuming and incredibly expensive. While traditional document discovery requires combing through thousands upon thousands of pages of paper (many times much more), e-discovery could exponentially increase that amount to stratospheric numbers in the millions, tens of millions, or even hundreds of millions. Breaking it down to its most rudimentary thought, e-discovery is simply the discovery of electronically stored information. While seemingly simple, the actual process of e-discovery, as well as the potential adverse effects, is far from it.

For as long as computers have been around, data has been stored. Whether in the form of a paper punch card, a floppy disk, a zip disk, a hard drive, or in the ever-present cloud, people have been storing computer-generated data. Since its invention, the entrepreneurial race has been creating larger and faster electronic storage in paradoxically smaller packages. Some industry experts believe Moore’s law equally applies to the development of electronic storage as it does to processors. Moore’s law, in an over-simplified nutshell, is the idea that every 18 months the number of transistors on an integrated circuit doubles. This is thought to be equally true of the amount of storage space that can fit in an identical space, meaning more storage in a smaller area. With the exponential increase in storage availability comes a number of hidden costs and dangers, particularly when it comes to e-discovery.10

WHAT IS ESI?

ESI is an acronym used to describe “Electronically Stored Information.” ESI encompasses all data that is stored electronically. I emphasize these words not for dramatic effect, but to call your attention to the broad scope of ESI. Say, for instance, you have a contract that your client and another party have signed. Clearly this physical paper copy isn’t ESI. But, if you decide to scan that document and send it to yourself in an email, voilà, you’ve got ESI. Some of the types of ESI most people are probably aware of are application data (Word documents, Excel sheets, PowerPoint projects), messaging systems (emails, instant messages, voice mail, electronic calendaring) and databases. But ESI also includes things that you might not be aware of. For example, your computer and most applications generate data every time you perform an action like clicking on specific data, making revisions to a document, searching for a specific website, watching a YouTube video or listening to a song. These examples, however, are far from an exhaustive list. Since attorneys are responsible for producing and requesting discovery, it is critical that any attorney dealing with e-discovery have a general knowledge of the types of information that could potentially be subject to discovery.

It is equally important that attorneys have a working understanding of the types of electronic information you might want to request or you may need to produce because of the possible ramifications for failing to do so. Your clients will rely on you to know what to request, and it is incumbent on each attorney to recognize the different types of data to adequately draft and respond to discovery.

Now that we have a working understanding of what ESI is, we need to look at one of the most important things about ESI and that is how ESI is stored. Other than knowing what ESI to look for, the second most important thing an attorney needs to know is where to look for ESI. While ESI storage may seem common sense, it’s helpful, nonetheless, to provide a refresher (or introduction depending on the reader) to the places information can be stored.

There are three primary ways ESI can be stored: online, nearline, or offline.11 First, ESI can be stored online. This simply means that information is stored at a readily accessible location and requires no human intervention (think hard drive on your computer or a cloud accessible to anyone upon immediate request). Near-line storage can be summed up as direct access removable storage (think flash drives, portable hard drives or CDs/DVDs). Offline storage is most commonly backup tapes. These are just magnetic tapes, similar to cassette tapes, or for those of you young enough to have no idea what a cassette tape is, just imagine a spool of plastic ribbon encased in a plastic casing that is capable of storing information on it. Storage location can be incredibly important because, while producing data from readily accessible records like the hard drive from a computer or a USB drive is relatively simple, the costs and difficulty can potentially increase exponentially when backup tapes are involved. The difficulty can increase because of the amount of information that can be stored on backup tapes. Because the information is historical, those working with it are likely unfamiliar with what is stored on the tapes. This increase in costs can lead to fights between the sides as to who should bear the burden of producing the requested data.

PRESERVATION OF DATA

Aside from combing through the data you plan to produce or receive from the opposing side, preserving the right data and eventually producing it is likely the most onerous part of e-discovery. Preservation of data has many important questions that are too technical to be discussed in their entirety within this article, but this should provide a brief overview. However, it is important to recognize that there are many more complex questions that will arise throughout the ongoing preservation of data for purposes of litigation. The first thing to think about when you are faced with the question of preserving data for ongoing or pending litigation is, when does your obligation to preserve begin? Typically your obligation begins when you reasonably anticipate the evidence will be relevant to future litigation.12 If you are the requesting party, you can avoid a potential dispute as to when your opponent should have anticipated the data being relevant to litigation by drafting a litigation hold letter and sending it to your opponent. At its most rudimentary level, this letter tells your opponent the locations and types of data you might request so that they are put on notice to not destroy the information.13 Second, you should determine what is your client’s data retention policy? A retention policy is a set of official guidelines or rules governing storage and destruction of documents or ESI.14 In Arthur Anderson LLP v. United States, the United States Supreme Court recognized there is nothing wrong with data retention policies that call for destruction of documents so long as the destruction does not occur at a time when a legal duty to preserve that evidence has arisen.15 The burden to preserve is not unilateral to defendants, “plaintiffs also have a duty to suspend regular destruction under records-retention policies once they plan to file suit.”16 Understanding your client’s data retention policy is important because it is the duty of each attorney to ensure that their client preserves all relevant data throughout litigation.

“The obligation to preserve evidence arises when a party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.”17 The duty to preserve evidence is one that is placed on counsel.18 In addition to implementing a “litigation hold” on the destruction of relevant information, counsel is responsible for ensuring that a client actually does implement such hold and continues to implement the hold throughout litigation.19 “To do this, counsel must become fully familiar with the client’s document retention policies, as well as the client’s data retention architecture.”20 This means that counsel is required to become intimately familiar with her client’s data and procedures. After you have an understanding of what data your client has and their retention policy, it is counsel’s responsibility to locate relevant data and ensure the client preserves that data. This means you have to preserve data that could potentially be subject to discovery, even if it is not specifically requested.21

PRODUCING AND REVIEWING DATA

Once data has been preserved, the big question then becomes how to review and eventually produce the data. Reviewing data for privilege presents a potentially massive undertaking for counsel, depending on the volume and sensitivity of the information being produced. For particularly large cases, counsel will likely have to request large extensions in production deadlines and may even have to increase the number of attorneys reviewing the data. Parties have the ability to stipulate that any production of privileged data to the other is deemed to not be a waiver of any such privilege; but again, this topic is more detailed than this article intends to cover. Under the FRCP (Rule 34), the requesting party can request a specific format, and the producing party can respond by complying or objecting. But if they object, they must provide an alternative format.

The Oklahoma statutes, however, do not address production of data in specific formats, and the parties are left to decide and then ask the court to referee when they can’t agree. Much of the data production argument will involve production in native or non-native format. Native format means the format in which the information is naturally kept. Native format is important because it contains metadata, which means that native format contains “hidden” information such as, among other things, who created the data, when the data was created, and what application created the data. Metadata can best be understood as “data about data” that can’t be seen just by looking at an individual record. Think of it as looking in your iTunes music library at your favorite song: you can see the artist and album, but you can’t see what year it was created or the producer of the music. Metadata would allow you to see those things. Producing documents with metadata also raises a number of issues.

When a party receives a request for electronic data, the party and counsel “are under a duty to make a reasonable search for all relevant, non-privileged documents and ESI within the scope of the particular request (assuming the request is well-framed).”22 Finding this data can present difficulty depending on the number of records available. Keyword searches are primarily how data is chosen, and they “work best when the legal inquiry is focused on finding particular documents and when the use of language is relatively predictable.”23 Fashioning too broad of a keyword search will likely result in a dispute between the parties as well as the potential to return significantly more documents than desired. Too narrow, and the potentially helpful documents could be left out. Too broad and a party could be buried in information. The difference between a good search and a bad search can be the difference of finding (or disclosing) the smoking gun and being lost in a forest of useless information.

POTENTIAL ADVERSE EFFECT

Under both FRCP 37 and 12 O.S. 3037, the court has broad discretion to punish parties for failing to comply with discovery. Default judgment or dismissal, sanctions, and adverse inferences are the primary concerns with failing to cooperate with e-discovery. In one of the five Zubulake cases, UBS failed to comply with preservation instructions and repeated orders by the court. The court then threatened them with an adverse inference at trial.24 The court followed through with its threat and permitted the jury to make an adverse inference with respect to emails deleted and irretrievably lost when UBS’s backup tapes were recycled.25 In the end, the Zubulake jury rendered a judgment against UBS for more than $29 million.26 In Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co. Inc., a Florida court issued an adverse inference against Morgan Stanley for “overwriting emails, failing to timely process hundreds of backup tapes, and failing to produce relevant emails and their attachments.”27 Morgan Stanley had judgment entered against it for $1.45 billion based largely on the instruction given, but that judgment was subsequently successfully appealed.28

These two cases are a subset of cases imposing harsh penalties on parties that purposefully fail to comply with courts and opposing counsel during e-discovery. Sometimes there is little an attorney can do to ensure a client complies with what is expected of them, but it is important that counsel communicate the potential weighty risks a client, and their counsel, could be faced with in the event that they aren’t complicit.

CONCLUSION

E-discovery is an ever-increasing and necessary part of litigation. Society’s increasing reliance upon computers for both personal and business activities means that electronic data will continue to increase every day. This presents a challenging problem for lawyers and their clients. While this mountain of data can be used both as a sword and as a shield, even the most experienced lawyer needs to tread the waters carefully. It is important to keep in mind your ethical obligations to your clients, courts and opposing parties, and focus on a fair and reasonable resolution for all discovery disputes. Depending on the nature of your case, often times it is cheaper to agree with opposing counsel to simply conduct discovery in paper form rather than incurring the excess expense of producing massive amounts of data; but regardless, you will likely be required to deal with esi and e-discovery in some form or fashion. Ultimately, this decision will have to be something each attorney will decide based on their belief of what is best for their client.

FOOTNOTES

  1. Fed. R. Civ. P. 26(f) (2012).
  2. Fed. R. Civ. P. 26(f) (2006 committee notes).
  3. 12 O.S. 3236(f) (2012).
  4. Fed. R. Civ. P. 26(f) (2006 committee notes).
  5. Id.
  6. Id.
  7. Id.
  8. Id.
  9. Id.
  10. Much of this paper is derived from secondary sources discussing e-discovery and its seminal cases. With that said, any attorney looking to educate themselves on e-discovery and digital evidence would be best served by obtaining a copy of West’s Nutshell Series for Electronic Discovery and Digital Evidence written by Shira A. Scheindlin and Daniel J. Carpa. The commentary for the 2006 amendments to the Federal Rules of Civil Procedure is also helpful when reviewing Rule 26(f).
  11. Shira A. Scheindlin & Daniel J. Capra, Electronic Discovery and Digital Evidence 14-16 (West 2009).
  12. See Andrew R. Lee, Keep or Toss? Document Retention Policies in the Digital Era, 55 La. B.J. 240, 244 (2008).
  13. See generally Bradley C. Nahrstadt, What’s the Deal with Litigation Hold Letters? (With Forms): Hold on a minute: How do these things really work?, 18 No. 6 Prac. Litigator 23 (2007); Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003); Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004).
  14. Id. at 33.
  15. See Arthur Anderson LLP v. United States, 544 U.S. 696, 704 (2005).
  16. Scheindlin & Capra, supra note 11, at 35.
  17. Id. at 36.
  18. Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 431-32 (S.D.N.Y. 2004).
  19. See id. at 432.
  20. Id.
  21. Lee, Supra Note 3, at 240.
  22. Scheindlin & Capra, supra note 11, at 137.
  23. Id. at 137-38.
  24. See generally Zubulake, 229 F.R.D. 422.
  25. Id. at 437.
  26. Nahrstadt, 18 No. 6 Prac. Litigator at 24.
  27. Id. at 25
  28. Id.

 

NewsOK Q&A: Laptop losses, misdirected faxes and phishing scams can lead to health information breaches

From NewsOK / by Paula Burkes
Published: May 1, 2015
Click to see full story – Laptop losses, misdirected faxes and phishing scams can lead to health information breaches

Click to see Mary Holloway Richard’s attorney profile

Phillips Murrah’s Mary Holloway Richard provides medical providers tips for minimizing risk and damages related to health information breaches.

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

Q: What do you recommend to hospitals, physicians and other providers to minimize the risk of a breach of confidential patient information and to lessen the degree of harm in the event of a breach?

A: I recommend creation in advance of a response process to enable a rapid, sensible response. The goals in such a plan (“Incident Response Plan” or “IRP”) are to demonstrate compliance with HIPAA (Health Insurance Portability and Accountability Act) and HITECH (Health Information Technology for Economic and Clinical Health) regulations and to mitigate any harm that may result from the breach.

Q: What specific steps should be taken to prepare for a breach?

A: The first step is to create an IRP that includes all appropriate parties and to appoint someone in the practice or facility who is knowledgeable about HIPAA and HITECH requirements. The second step is to make certain that the process created is a quick, sensible one. In addition, information technology (IT) components, such as encryption throughout the process, are imperative. The safe harbor provision of the breach notification rule establishes a certain standard of encryption and relieves the provider from breach notification responsibilities if the protected patient information has been properly encrypted. Most breaches result from lost IT assets such as phones, laptops and iPads. Fourth, the IRP must be supported by sufficient employee and staff training. I also recommend that you adequately document that this training took place. Finally, insurance should be in place to provide for risk transfer as needed. Cyberliability is a continually developing area along with a range of products that foresee types of breaches and predict costs that may be incurred.

Q: How do such losses occur?

A: Along with loss of IT assets, misdirected faxes, disposal of nonshredded records, inappropriate disposal or destruction of paper, such as placing material in a dumpster without shredding and mailing patient information to incorrect address. Intentional loss or compromise of data can occur through a combination of IT and social engineering, such as where a person is tricked into clicking on a hyperlink or revealing a password. This occurs with Spear phishing or false emails inserting malware in a system and is very difficult to control. In the case of Cryptolocker, the perpetrator makes a threat and requires payment to restore prevention. This also is called ransomware and can make the system and information completely inaccessible to everyone in your organization, effectively stymieing patient care and business operations.

Affordable Care Act changes affect physicians

Gavel to Gavel, appears in The Journal Record.
Originally published in The Journal Record on Apr. 22, 2015.
View G. Calvin Sharpe’s attorney profile here.


GCS 300w_web

G. Calvin Sharpe is a trial attorney who represents a diverse list of business clients in matters relating to medical malpractice, medical devices, medical licensure boards,products liability, insurance and commercial litigation.

The Affordable Care Act brought fundamental changes to the American health care system.

One called evidenced-based care significantly affects how physicians are paid. I’ve represented many providers in malpractice actions and before professional licensure boards, but now I must also be as proficient in regulatory law.

The ACA’s value-based care replaces traditional fee for service. In the traditional model, a patient visit is followed by a bill paid by the patient or insurer, and providers are rewarded for a higher-volume practice. One of the stated goals of the ACA is to eliminate care and decision making that could be financially motivated.

The value-based pay-for-performance compensation model that reimburses physicians based upon achievement of measurable objectives or metrics is replacing that traditional model. Evidenced-based guidelines focus on outcomes and will seek to eliminate unnecessary procedures, and compensation will be based upon performance.

Examples would be patient readmission following hospital discharge and so-called never events, defined by the National Quality Form’s list of Serious Reportable Events as events that should never have happened.

Changes in evidenced-based care practice guidelines and how medical malpractice claims are brought generally attempt to measure a provider’s performance against a legal standard. This means the performance is evaluated according to that of a prudent professional in the same or similar circumstances.

Read the entire column here.

Possible summer effect on gas prices

Jim Roth’s Friday column, Earth Business, appears in The Journal Record.
Originally published in The Journal Record on Apr. 17, 2015.
View Jim Roth’s attorney profile here.


Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Most consumers have assumed for years that gasoline prices will increase in the summer. New research from the Center for Economic Analysis suggests that this perception is false, and that Midwestern gasoline prices do not tend to increase in the summertime when motorist hit the highways.

The center has studied weekly gas prices since 1995 to isolate summertime gasoline prices. They utilized data for two gasoline formulations, including the price of conventional regular unleaded and reformulated regular unleaded.

In the late summer of 2014 gasoline prices started to drop, and they kept dropping, to lows not seen since early 2009. Economists now expect these suppressed prices to remain through 2015.

Both AAA ad GasBuddy.com recently released statements saying the national average price for a gallon of gas is expected to be $2.35 from Memorial Day through Labor Day, during the summer driving season. The Energy Information Administration projection put summer gasoline prices at $2.45 per gallon.

The latest AAA Fuel Gauge Report indicated the national average price for regular unleaded gasoline has fallen for 24 of the past 30 days, after reaching a peak-to-date price for 2015 of $2.46 per gallon on March 7.

See the rest of the column here:

Resolution of the “sustainable growth rate” issue

By Mary Holloway Richard.  View her attorney profile here.


medicare

Senate Passes the bill repealing Medicare’s sustainable growth rate (“SGR”) formula just in time to avoid the looming cuts (21%) to physician payments.

(See HERE our ongoing coverage leading up to this.)

Congressional members are purportedly patting themselves on the back as the bill goes to the President who has given assurances that he will sign it.

In the past weeks we have discussed possible amendments, but none of the amendments are included in the final legislation approved by the Senate.  The bill extends the Children’s Health Insurance Program (“CHIP”) for two years.  The bill also provides physician incentives sure to impact both reimbursement and physician contracting include incentives to shift more patients to risk-based payment models.  For physicians who are successful in this effort, as interpreted by CMS, the reimbursement will increase in 2019.

Approximately one-third of the cost of this package is offset by financial cuts to providers and increased costs to wealthier Medicare patients.  The bill also includes additional funding for community health centers and a six-month delay in the enforcement of the payment policy for short inpatient stays known as the “two midnights” rule.

Mary Holloway Richard is recognized as one of the pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

Director and bankruptcy leader Tim Kline featured in The Oklahoman Q&A

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Click to see this on NewsOK.com

Although Phillips Murrah Director Tim Kline will recoil at the use of this descriptor, I (Marketing Director, Dave Rhea) am going to be so bold and reckless as to say he is legendary. As I listened to him review some of the highlights of his personal history, I felt like I was in the room with a great Oklahoma oral historian.

I found myself thinking on a couple of occasions, “too bad Tim doesn’t have a radio show.” But I guess he’s a little busy being one of the state’s preeminent bankruptcy attorneys. Oh well, I think he could have given Paul Harvey a run for him money.

Business reporter Paula Burkes, from The Oklahoman, was kind enough to stop by the firm recently to talk to Tim for one of the newspaper’s Executive Q&A features. It published Sunday, April 12 and gave people a glimpse into the storied life of a lawyer who has been practicing bankruptcy law since those infamous Penn Square days:


 

The morning of the 1982 Penn Square Bank collapse, Phillips Murrah Director Tim Kline — then a young general litigation attorney — was asked by his firm to call on Oklahoma City oilman Carl Swan, who was a director of the bank.

“It was the Monday following the July 4th weekend, and I was supposed to be off,” said Kline, who remembers he wasn’t too happy about the assignment.

In their meeting, Kline asked Swan if the bank was OK and Swan, in his notorious gruff manner, reported that it was; that the Federal Deposit Insurance Corporation agreed to capitalize millions more and give the bank more time, he said.

But when Kline arrived home and flipped on his TV, he learned the FDIC had pulled the plug on Penn Square Bank.

The infamous bankruptcy is what sparked a nearly 33-year career in bankruptcy law for Kline, whose late father and former Assistant U.S. Attorney David A. Kline Jr. served 14 years as a bankruptcy judge.

At the time of the collapse, Kline was helping his dad teach a bankruptcy law course at Oklahoma City University — largely on the 1978 Bankruptcy Reform Act, which the senior Kline had helped promote.

Tim Kline never intended to go into bankruptcy law but, following the oil bust, circumstances unfolded that way, he said. With so much demand for bankruptcy work, his dad left the bench and they formed Kline & Kline in February 1983, where they worked together for more than 25 years.

Kline in 2011 joined Phillips Murrah, where he continues to specialize in bankruptcy law.

From his offices on the 13th floor of the Corporate Tower, Kline, 65, sat down recently to talk about his life and career. This is an edited transcript:

Q: Tell us about your roots.

A: Of course, my father was an attorney and my mother was a homemaker. I’m the middle child of their three children. My brother is six years older and my sister is eight years younger. My father used to joke that he managed to raise three only children. But we were, and still are, close. In fact, we three and our mother, 94, all live within walking distance from one another on several hundred acres we bought in 1981 in the Jones Public Schools District in eastern Oklahoma County, 10 miles east of I-35, where we have dogs, chickens and horses. My brother-in-law raises cattle. When I was a bachelor, my home was like an overgrown cabin. But since Alyssa and I married, we’ve reinvented it three times. It’s three-storied and our second story overlooks a lake.

Q: Where did you go to school?

A: In elementary school, I was a Mayfair Chipmunk. We lived near 50th and May when Mayfair was a brand-new neighborhood. In the sixth- and seventh-grades, I attended Casady, after my brother was recruited there to play baseball. Once he graduated and went to OU on a baseball scholarship — and I lost my ride to school — I transferred to Putnam City, where I graduated. Growing up, I played baseball, football and basketball, but my siblings were far better athletes. My sister went to OCU on a tennis scholarship. I was into politics. At 7, I remember sitting up and crying when Adlai Stevenson lost; in 1960, I got to hear JFK speak in the municipal auditorium; and before I could vote, I was the Ward 1 campaign chairman for Eugene McCarthy. I also enjoyed speech, debate and plays. My favorite role was the lead my sophomore year in “Look Heavenward Angel.”

Q: What were some of your first jobs and first cars?

A: As a youth, I worked at the municipal ball park. My sophomore year in high school, I threw the first papers of the now-defunct Oklahoma Journal. By the summer of my senior year, I graduated to writing obits and writing some Friday night football stories. My freshman year of college, I was awarded a scholarship to UCO. My father told me if I took it, he’d get me a car, though it wasn’t a very nice car. It was a used light blue Ford Fairlane. When I was a junior, and doing well in school at OU, he bought me a purple Plymouth Road Runner.

Q: Did you always plan on being an attorney?

A: There was a time I considered becoming a philosophy teacher. At OU, I studied under the legendary J. Clayton Feaver and considered getting a Ph.D. in philosophy. I’d earned a graduate minor in it, along with a bachelor’s and master’s in polisci. But instead, I wound up taking the law school entrance exam. I like the problem solving in law, and helping people where they have a practical need. During law school, I interned with the U.S. Attorneys office and worked at the Redlands Racket Club and OKC Tennis Center. I got to play tennis with Colin Robertson. Before my father and I opened our own firm, I clerked for over three years for U.S. federal judge Luther Bohanon. He liked having me in the courtroom with him, so I got to see a lot of good lawyers at work in big trials. I worked the next three years for the firm of Jimmy Linn, a west Texas litigator who was a heavy hitter on the national level.

Q: What do you like about practicing bankruptcy law?

A: My work is really about avoiding bankruptcy as such. Whether I represent the debtor, creditor or a trustee, I try to bring together parties who are in financial stress and help them clarify what common interests are involved and how to maximize financial recovery. My goal is to do the most for the most people in the most efficient manner possible. Of course, like in all things in life, it takes two to tango. Sometimes, people aren’t cooperative and we have to go to a Plan B scenario and invoke legal remedies and be as confrontational as necessary. I’m as nice as the other side will allow.

Q: How did you meet your wife?

A: Alyssa is a native Canadian. We met at Christmastime 1976, when I went to British Columbia to visit relatives and friends, but then she was only a punk teenager. Her family and I kept in touch over the years and in the summer of ’85, she called to say she and her folks were going to Seattle and would I like to meet them there. She was 23; I was 36. I spent a couple days in Seattle, but had to fly back to Albuquerque for a big case. Three weeks later, I flew to British Columbia, where we wed and spent our honeymoon. She was shocked that it was 100 degrees in Oklahoma City, when our flight arrived home at 11 p.m. on Sept. 1. The next morning, she joked about getting an annulment. But this August, we will have been married 30 years. Alyssa earned an education degree at UCO and taught elementary school, before she had our daughters whom she home schools. After the girls were born, Alyssa’s parents moved to Oklahoma City. We’ve lost her mother, but her father lives in a retirement community. He’s 94 and was over for Easter.

You can view the whole story here: http://newsok.com/executive-qa-penn-square-bank-collapse-sparks-counselors-career-in-bankruptcy-law/article/5409410

 

(UPDATE) What does all of the talk in the media about the “SGR” mean for physicians?

By Mary Holloway Richard. View her attorney profile here.


Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

(Updated 4/14/15)

What does all of the talk in the media about the “SGR” mean for physicians?

One of the important issues identified in the health care industry “crisis” and reform is the cost of providing services.  Focus has been on shifting payment from charges for visits and procedures to reimbursement according to certain metrics such as outcome and quality.  In addition, a ceiling on physician reimbursement has been much debated.  The Affordable Care Act (“ACA”) included the Medicare sustainable growth rate (“SGR”) formula for doing just that, although the SGR was actually created as part of the 1997 deficit reduction law designed to contain federal spending  by tying physician payments to an economic metric or growth target.

On Tuesday, March 24, 2015, Democrats and Republicans revealed the result of their negotiation and cooperation to offer an alternative to Medicare’s SGR formula.  The proposal calls for repeal of the SGR formula.  House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA) have arrived at this compromise to strengthen the financial picture for Medicare and to end the continuing threat of payment cuts to physicians.  According to the Association of American Medical Colleges, although medical school applications are up slightly since 2011, the United States faces a physician shortage of between 46,000 and 90,000 by 2015.  www.aamc.org/newsroom/aamcstat/,a=427828.  The economic incentives to the professional are an integral component in stabilizing the health care system in this country.  The House overwhelmingly approved the proposal on Thursday, March 26, 2015.

What does the SGR mean to physicians?  There is still great divergence between the Boehner (repeal Washington’s most famous gimmick) and Pelosi (Medicare payments for doctor services to seniors facilitating continuation of physician-patient relationship) perspectives.

What does the bipartisan proposal mean to physicians?  This will halt the cut that was to be implemented on April 1, 2015.  When the ACA was signed five years ago, that seemed like a long time away but was nonetheless worrisome.  It puts in place a 21.2% reduction in Medicare payments making it virtually impossible for many providers to support the operations of their practices or clinics.

This proposal is very similar to the one proposed in 2014 , and it includes a system of rewarding physicians based upon quality standards rather than output or number of services provided and fosters a focus on coordination of care, prevention and quality and key cost containment strategies.  All of these elements are part of a new accountability that is the cornerstone for allowing payment increases for doctors for the next five years during this period of transition.  In addition, if approved by the Senate, the bipartisan proposal would extend the Children’s Health Insurance Program (“CHIP”) with full funding through September 30, 2017.  It also provides for $7.2 billion funding for community health centers.  The cost of the House package is $200 billion

On Friday, March 27, 2015, the Senate adjourned without approving the Doc fix.  It apparently will take up the issue upon its return in mid-April.  In the meantime, CMS is poised to delay processing provider claims as of April 1, 2015, when the 21.2% cut was to go into effect.  However, CMS is warning that the cut will go into effect if the Senate fails to pass an SGR fix by April 15.  One complication may exist in the form of legislation introduced by a bipartisan Senate team, Senators Cardin (D-MD) and Collins (R-ME), to permanently repeal the caps on how much the program spends on rehabilitation therapy.  This unresolved issue may arise as an amendment to the legislation to be considered after the break and provides a reminder of how single issues or senators can ultimately frustrate the passage of legislation that has support from both parties.  Others in the Senate are critical that spending cuts will offset only a portion of the costs.  Conservatives have characterized this element of the plan as irresponsible.  The AARP is focused on increased costs to Medicare beneficiaries and will continue to lobby for changes to lower these costs.

Democrats may want amendments to extend the CHIP program four years, to remove the Hyde Amendment (abortion-related language), and to repeal the Medicare therapy cap.  Any amendments would, of course, send the legislation back through the House, and this appears to be an unattractive alternative to all concerned because of the remarkable support for this resolution from both parties.  A perhaps more significant complication is presented by the report issued last week by the Office of the Actuary of the Centers for Medicare and Medicaid Services (CMS) indicating that physician payments in which the 0.5% increases in Medicare payments over the next four years would come to a halt in 2020.  In that year a two-tiered system is phased in which is designed to encourage physicians to shift greater numbers of patients into risk-based models.  For physicians continuing to work within the traditional payment system, but who are scoring well on the quality metrics, remuneration will be awarded from a separate appropriation.  After 2024, the alternative payment track would increase annually by 0.75% which will be three times greater than the rates of other physicians. CMS is predicting that 2024 is the time when there will be a shortfall and payments will lag behind inflation.

On the one hand, Congress is fed up with required annual intervention for the past seventeen years to avoid scheduled cuts to physicians.  On the other hand, Congress is forced to rely on estimates to predict costs which places the federal government at risk of future payments not keeping up with the either the chosen formulae or with inflation.

(UPDATE) A look at the controversial Affordable Care Act on its fifth anniversary

By Mary Holloway Richard. View her attorney profile here.


Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

Mary Richard is recognized as one of pioneers in health care law in Oklahoma. She has represented institutional and non-institutional providers of health services, as well as patients and their families. She also has significant experience in representing providers in regulatory matters.

(Updated 4/7/15)
President Obama has taken the occasion of the fifth anniversary of the signing of the Affordable Care Act (“ACA”) to characterize continued activities on the Hill to repeal it as renegade special interest activities. The ACA continues to be a subject of debate both in terms of its accomplishments—how many are newly covered and how much will be saved—and in terms of its public support.

While the Associated Press reported on March 23, 2015, that public support was down 5% since its passage, as one who daily writes and advises health care clients on matters related to the ACA, I can say with certainty that the depth and breadth of increased regulation spawned by the ACA are changing the nature of the system.

Those changes include responsive movement toward integrated health systems, mergers and affiliations; transition from quantity- to quality-based reimbursement; the relaxation of HIPAA standards in some respects and its tightening in others in the context of EHR transformation; and increased direct and indirect costs to employers as a result of new responsibilities.

Nearly fifty changes have been made to the ACA as of March 2, 2015, and this suggests a continuing need for providers, employers and business owners to remain informed and responsive to the moving regulatory compliance target.

On Monday, March 30 the Supreme Court rejected a new challenge to the Affordable Care Act (“ACA”)  that targeted the Independent Payment Advisory Board (“IPAB”), a 15-member government panel which has been characterized as a “death panel” because of its intended role in cutting Medicare costs.   The IPAB was to convene when the target growth rate for Medicare (3.03%) is exceeded.  However, the growth rate is 1.15% according to CMS, and so the administration has not nominated any panel members.  In declining to take up the case, the Supreme Court left undisturbed the 9th US Circuit Court of Appeals in San Francisco dismissal of the lawsuit. The proponents of the ACA are calling this a win.  Coons v. Lew, No. 14-525.   Certiorari was denied by the United States Supreme Court on March 30, 2015.

Best, worst states to be a doctor

South Carolina tops the list, Rhode Island finishes lastshutterstock_156022646

WalletHub released its list of the best and worst states for physicians based on several metrics, including wages and job opportunities.

For the report, all of the states and Washington, D.C., were rated on 12 metrics sorted into two categories:

  • Environment, or risks of the job, such as state medical board penalties, malpractice payouts, and costs of malpractice insurance; and
  • Job opportunity and competition.

Data for the report were taken from Citizen.org, Diederich Healthcare, HHS, the Missouri Economic Research & Information Center, the U.S. Bureau of Labor Statistics, and the U.S. Census Bureau.

Based on those categories, WalletHub identified the five best states for doctors as:

      1. South Carolina
      2. Minnesota
      3. Texas
      4. Mississippi
      5. Kansas

Meanwhile, the five worst states for doctors were:

      1. Rhode Island
      2. New Jersey
      3. Oregon
      4. New York
      5. Maine

View on Advisory.com.

 

SCOTUS reverses lower court decision, Medicaid providers can’t bring injunction against Idaho officials

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United States Supreme Court Building

SCOTUS reverses a lower court decision in Armstrong v. Exceptional Child Center, Inc.:

Idaho residential care facilities sued the state for failure to implement higher reimbursement rates required by Medicaid which the Idaho legislature had not sufficiently funded.  The federal district court and the Ninth Circuit Court of Appeals sided with the facilities ruling that Idaho’s Medicaid rates were insufficient to support the federal requirements that payments had to be at such a level to provide for quality care and adequate access to services.  In Armstrong v. Exceptional Child Center Inc., the United States Supreme Court reversed the lower court ruling and held that the Supremacy Clause does not confer a private right of action and so Medicaid providers cannot sue for an injunction requiring the state to comply with the reimbursement rate provision of the federal Medicaid Act.  42 U.S.C. §1396a(a)(30)(A)

View on SCOTUSBLOG

Eminent domain raises questions when used on behalf of the private sector

Jennifer Berry Photo

Jennifer Ivester Berry is an attorney with a solid reputation in guiding real estate transactions with a focus on development, financing and energy. She represents individuals, and privately-held and public companies in connection with a wide range of commercial real property matters.

Q&A from NewsOK: Phillips Murrah attorney Jennifer Ivester Berry discusses the what, when, how and why of eminent domain.

View Jennifer Ivester Berry’s attorney profile page here.

By Paula Burkes – Published: March 25, 2015
View the article at NewsOK.com here.

Q: What is eminent domain?

A: Eminent domain, condemnation, taking power — these words sound ominous and forceful, as if the party on the receiving end has no choice but to succumb to the directive of the imposing party and give up something for nothing. However, stop for a moment and remember that with most constitutionally created powers come some series of checks and balances. Eminent domain, in its most simplistic form, is the power to acquire private property for a public use, provided that the property owner receives just compensation. Some of the most recognizable uses of the eminent domain power are for the establishment of roadways, hospitals, railroads and utilities. In more recent years, the use of eminent domain for purposes of economic development has sparked a public policy debate that will no doubt continue for years to come.

Q: When can eminent domain be used?

A: The power of eminent domain originates from the state’s constitution, and the Oklahoma Legislature enacts statutes that set out the manner, purpose and through whom such power may be exercised — a system of checks and balances. For example, municipalities are granted a general power of condemnation under the state statutes, so long as the taking is for a public use and the property owner is adequately compensated. There are certain circumstances and uses that the Legislature has identified as being for the benefit of the public and thus created specific statutes covering them, for example, the removal of dilapidated buildings, the improvement of water and sewer systems, and urban renewal. The Legislature also conferred the power of eminent domain on utility companies, public enterprises and common carriers. Private individuals or companies also may utilize the power of eminent domain for agricultural, mining and sanitary purposes, as well as for establishing private roadways where access in an issue.

Q: How does eminent domain work?

A: The party seeking to condemn property will usually have attempted to negotiate with the landowner to acquire the property. That said, if a municipality or utility company is dealing with numerous parcels of land with countless owners, using the condemnation proceeding can simplify the process and avoid negotiations that may or may not be successful. Once the condemnation proceeding is filed, the court appoints three individuals (commissioners) who will examine, evaluate and inspect the property. The commissioners are instructed to return an award to the court that reflects the fair market value of the property taken, as well as any injury to any part of the property not taken. The award is payable to the landowner even if the landowner owner contests the award. If, as a result of a contest, a jury finds the fair market value of the property to be an amount in excess of 10 percent of the commissioners’ award, the landowner may be entitled to reasonable attorneys and expert fees.

Q: Why do we need eminent domain?

A: Using eminent domain to obtain property for roadways and utilities is rarely a source of contention, even if ultimate ownership of such property is by a private party. The more controversial issue is whether the government can use its eminent domain power to aid a private party. The U.S. Supreme Court has blessed the use of eminent domain as a governmental incentive for economic development. However, numerous states, including Oklahoma, have taken a more narrow view and require that the use of eminent domain power for economic development must involve the removal, elimination or prevention of blight. Proponents of this power, whether the broader or more narrow application of it, argue that without it being available as an incentive for private development, economic development would be stifled significantly. Others, however, feel that failure to value individual property rights actually dissuades potential residents and business from moving into a community and as such cripples any potential for economic growth. One thing is clear, eminent domain will continue to be used for economic development and as such continue to be a debatable issue in the private sector.

 

Avoiding the b-word: The many faces of financial restructuring

Clay Ketter’s guest column, Gavel to Gavel, originally published in The Journal Record  on Mar. 11, 2015.
View Clay Ketter’s attorney profile here.


Clayton D. Ketter is a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

Clayton D. Ketter is a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

The current price of crude oil is sure to make people use language that is inappropriate in polite conversation. As news of idled rigs, layoffs and credit defaults becomes a daily occurrence, the use of the b-word is sure to come up more and more. Of course, I’m referring to that nasty little 10-letter word, bankruptcy.

The stigma that once surrounded a bankruptcy filing has subsided as multiple high-profile companies such as American Airlines, General Motors and the Los Angeles Dodgers have entered the bankruptcy process and emerged as stronger, more viable businesses. Despite these successes, one group that has been gradually shunning the use of the b-word is, surprisingly, bankruptcy attorneys. Yes, the people most familiar with the ins and outs of the Bankruptcy Code, rather than announce themselves as bankruptcy experts, are instead asking to be referred to as financial restructuring specialists. This is particularly true for those attorneys that focus on businesses, as opposed to individuals, facing financial difficulties.

At first glance, it would appear that a rebranding effort is the motivation for this shift. Bankruptcy may suggest failure, death, layoffs and closings. Financial restructuring, comparatively, signifies repair and rebirth of a business. Although marketing has played a part, it fails to explain the whole story. The use of the phrase “financial restructuring” reflects the reality that debtors and creditors facing financial stress have many options at their disposal, not just bankruptcy.

Workouts, divestitures, mergers and asset sales are just some of the tools that a financial restructuring professional may utilize to assist debtors and creditors in resolving financial difficulties. Options also include a bankruptcy filing, whether it be a Chapter 11 reorganization or a Chapter 7 liquidation. However, a bankruptcy filing is not always the right choice. Depending on the circumstances, it often makes sense to avoid the time and expense of a formal proceeding, and instead resolve matters out of court. The title of financial restructuring attorney reflects the fact that multiple options are available to address and repair economic trouble, not just bankruptcy.

Should crude oil prices remain depressed, we are certain to see the b-word used more frequently. However, it’s important to remember that, depending on the circumstances, a more conservative approach may be better.

NewsOK Q&A: Health care data hacking likely to require new state laws

From NewsOK / by Paula Burkes
Published: March 9, 2015
Click to see full story – Across the U.S., more state laws are likely for mandated encryption of health data

Phillips Murrah’s Joshua Edwards discusses health care data hacking

Hacking may bring more state laws, encryption of health data

Josh_Edwards-copy-300x300

Josh Edwards is a Director at Phillips Murrah law firm.

Q: How serious of a problem are health care data hacks for insurance companies, employer health plans and others in the health care industry?

A: Last month Anthem Inc., the second-largest health insurer in the U.S., announced hackers had stolen personal information, including names, dates of birth, member ID/Social Security numbers, addresses, phone numbers, email addresses and employment information of up to 80 million individuals covered under its health plans. The Anthem breach alone affects one out of every four Americans. This data can be sold on the black market and then used by identity thieves to commit financial crimes, as well as fraudulently obtain medical services and prescriptions. The FBI previously warned insurers and other companies in the health care industry that their data security systems lagged behind those of the financial and retail sectors and that they were particularly susceptible to cyberattacks given the value of such data to cybercriminals.

Q: What federal and state laws govern the security of health care data and a company’s obligations after discovery of a breach?

A: The primary federal law is the Health Insurance Portability and Accountability Act (HIPAA), which was amended in 2009 by the Health Information Technology for Economic and Clinical Health Act specifically to address electronic transmission and storage of protected health information (PHI). HIPAA governs the privacy and security of an individual’s PHI and requires certain kinds of technological safeguards to protect against unauthorized use and disclosure. In addition to HIPAA, earlier this year New Jersey passed a law requiring health insurers to encrypt all electronically-stored personally identifiable information of New Jersey residents, and it seems likely we will see similar laws passed by other states as well. HIPAA also requires a company to notify affected individuals after discovering a breach of PHI. Forty-seven states also have their own breach notification laws, each of which have their own unique content and timing requirements.

Q: How does an insurer’s data breach impact employers who use the insurer for their health plans?

A: Events such as the Anthem breach affect not only the insurer, but also companies that partner with the insurer to provide health coverage to their employees. For companies with a fully-insured health plan, the insurer will be a “covered entity” under HIPAA and have primary responsibility for protection of PHI and compliance with the breach notification requirements. However, for self-insured health plans, an insurer serving as a third-party administrator will be considered a “business associate” under HIPAA, meaning primary responsibility for protecting PHI and notifying affected individuals and government agencies would fall to the employer. Regardless, employers should have a plan to address such concerns and keep employees informed.

Q: What should insurers and employers do upon discovery of a breach of health care data?

A: After a breach, both insurers and employers should review their contracts, including any business associate agreements, to determine their relative responsibilities as well as any indemnification rights and obligations. It’s also essential for both parties to know their duties under HIPAA and state breach notification laws so that compliant and timely notifications can be crafted and delivered to affected individuals and applicable federal and state agencies. Finally, a plan should be implemented for keeping affected individuals informed of the ongoing investigation, as well as strategies for protecting against identity theft and credit monitoring options that may be available.

 

Overcome obstacles to profiting from expiring patents

patent-stamp

Patent maintenance fees have led patent holders to abandon an increasing number of patents.

The recent increases in patent maintenance fees has led many patent holders to abandon an increasing number of patents because the cost of maintaining a large portfolio is becoming too high. Selling patents that are about to lapse is one option, however, doing so presents two primary concerns: lack of investment in expiring patents and litigation pricing, according to News 9.

U.S. patents must be renewed three times during their lifetime. Maintenance fees are due after the issue date of the patent every 3.5 years, 7.5 years and 11.5 years. Maintenance fees escalate at each renewal portion. Small entities are entitled to a 50 percent discount on maintenance fees and micro entities receive 75 percent off patent maintenance. These fees can be paid up to six months prior to their due date. Patents are not abandoned until a six-month grace period ends at years 4, 8 and 12 respectively. Patents can be renewed during their grace period for $160.

Most buyers will not pay a significant price for patents that are nearing their expiration date, for the same reason we are less likely to buy products in the store that are close to their “sell by” date. Also, in many circumstances, buyers may decide to enforce the patent, sometimes resulting in costs to the patent holder, making selling a patent for a lower five figure price undesirable.

To overcome transaction costs of selling patents for a low sale price, the patent holder must lower the transaction cost. This can be done by using the same negotiated patent purchase agreement for repeated transactions. Once the first transaction is completed, the patent holder and buyer can use the same patent purchase agreement for future transactions.

The second concern is primarily driven by the sale price of the patent. Most companies would be comfortable in selling the patent if the sale price of the patent significantly exceeded the cost of responding to discovery. In many respects, discovery issues in patent litigation are no different from discovery issues that arise in all other cases.

While it may not be realistic to sell a single patent nearing expiration for significant revenue, selling groups of these patents can generate significant revenues and responding to discovery for those few patents is manageable.

By selling groups of patents to the same buyer throughout the year, a patent owner can virtually eliminate the transaction costs while generating six figure annual revenue from patent assets that would otherwise soon become worthless.

Wind gets caught in political volley

Jim Roth’s Friday column, Earth Business, appears in The Journal Record.
Originally published in The Journal Record on Feb. 13, 2015.
View Jim Roth’s attorney profile here.


Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Oklahoma’s cleanest and cheapest form of electricity comes from its own wind projects. Although our utilities don’t operate under a mandate, or what’s known as a renewable energy portfolio standard, like many states, we have a goal calling for 15-percent renewable energy by 2015. According to the Corporation Commission, our state enjoyed 18.42 percent of its energy from eligible renewable energy resources in 2013. That trend continues. With the American portfolio of renewable energy growing and utility portfolios further diversifying, wind energy produced 14 percent of American electricity in 2013 and early 2014. Turbine technology is improving; wind is more available to generate electricity than ever. We’re on the map as the sixth-largest state for wind power. The future of renewables here seems very promising.

Yet a few case studies address what can happen when political winds change and politicians begin to push policies choosing coal at the expense of wind development.

Investments in the Australian market for renewable energy face a very stark contrast from where the country was headed, due in large part to the changing political winds. The Australian Renewable Energy Target is a key policy established in 2001 designed to ensure that 20 percent of the country’s electricity comes from renewable resources by 2020. Since the RET legislation in 2001, pro-renewable energy activist groups across Australia have raised substantial investments and awareness for the benefits of renewable energy. However, the fate of Australia’s RET has been placed in jeopardy by political leaders.

Reports show that investment in large-scale renewable energy projects have plummeted over the past year. While investment in global renewable energy is up by 16 percent, Australian numbers have dropped by 88 percent. Australia Prime Minister Tony Abbott and his pro-coal agenda have created serious ambiguity in federal government’s position on renewable energy policy and investors are leery. Many investors and developers are considering either downscaling or leaving Australia altogether. The downward trajectory will undoubtedly continue for years to come. Many Australian developers are looking to invest in the United States and other global renewable energy markets. A spokesperson for General Electric, an investor in renewable energy projects in Australia, said future investment will only occur once investor confidence in the policy environment is restored.

This sounds good for America and perhaps for Oklahoma, but only if our state and country continue to welcome and nurture this growing industry. It’s arguable that similar anti-renewable efforts in some states may damage the overall contributions to America’s growing portfolio of renewable energy resources. A reversal of policies could have the same chill on investments, steering billions of dollars to neighboring states or regions, as is happening with Kansas.

In 2009, Kansas legislators passed an RPS requiring state utilities to capture 20 percent of their electricity from renewables. Legislative efforts and debates last year failed to repeal this law, but newly re-elected Gov. Sam Brownback is beginning to sound more like Abbott than a governor of a wind-rich state, with no coal industry to speak of. Recent legislation proposed by state Rep. Ken Corbet, R-Topeka, seeks to reduce the RPS to 10 percent in 2015 and repeal the RPS statute by July 1, 2016.

Let’s hope that Oklahoma’s political leaders don’t forsake our state’s clean energy promise by following the lead of Kansas or Australia, or even fostering an anti-investment environment such that our state faces the same loss or potential loss beginning to appear elsewhere. Stay tuned to this legislative session.

Online Evidence: Digital discovery during divorce

This Gavel to Gavel legal column was originally published in The Journal Record on Jan 28, 2015.
By Nicholle Jones Edwards. View her attorney profile here.


Nicholle Jones Edwards

Nicholle Jones Edwards

“Fantastic advances in the field of electronic communication constitute a greater danger to the privacy of the individual,” Supreme Court Justice Earl Warren prophetically stated in 1963.

Today, people use email, text messaging and social networking sites more than ever. Digital activities of a couple going through a divorce can become valuable evidence when determining issues such as parental fitness, financial support or the division of assets and debt. A history of social media use can be a virtual character witness – for good or ill.

It should also be no surprise that public posts on sites like Facebook, Instagram and Twitter can be examined by attorneys involved in the discovery process. However, texts and so-called private messages on social networking platforms can also be obtained by attorneys and become evidence in a divorce.

Deleting posts, messages and/or texts can also invite trouble. Procedurally, a divorce begins with a Petition for Dissolution of Marriage, which includes an Automatic Temporary Injunction.

The injunction includes the following language that specifically prohibits either party from deleting social media information, text messages or emails during the divorce process: “Intentionally or knowingly damaging or destroying the tangible property of the parties, or of either of them, specifically including but not limited to, any electronically stored materials, electronic communications, social network data, financial records, and any document that represents or embodies anything of value.”

For those inclined to delete embarrassing messages or image transmissions, the best policy is to talk to their attorney about it so preparations can be made to address the matter.

Some general guidelines for communicating digitally during a divorce: If you want to communicate in a way that is truly private, talk in person. One-on-one verbal communication in a private location is the only real private way to interact.

Be aware that many digital devices and social media sites use geographical data. When you post or tweet, be aware that you may also be publishing your location. To avoid this, turn off the geolocation option on your sites and mobile devices.

When you email, text or post messages to social networks, assume that all of those messages will be seen by the judge. Especially refrain from sending or posting anything that is motivated by frustration or anger.

SCOTUS order to stay executions doesn’t change anything

shutterstock_lethal-injectionThe Supreme Court of the United States stay order blocking three pending executions in Oklahoma, handed down Jan. 28, doesn’t actually change anything, said Phillip Murrah Director and one of the firm’s founders, Robert N. Sheets.

While there is much interest and coverage of the motion, no decision has been made that will change how death sentences are carried out – other than a mandate to remain in place for the time being.

While the occurrence is quite interesting, it is simply an order to halt executions until the highest court of the land has a chance to hear arguments and make a decision.

From The Supreme Court of the United States on Jan 28, 2015: Application (14A796) granted by the Court. Respondents’ application for stays of execution of sentences of death presented to Justice Sotomayor and by her referred to the Court is granted and it is hereby ordered that petitioners’ executions using midazolam are stayed pending final disposition of this case.

Wednesday’s order doesn’t address the death penalty. The State of Oklahoma is still able to execute condemned prisoners by any other means previously deemed constitutional, Sheets noted. The Stay also doesn’t make a determination about the controversial decision to use the drug midazolam as lethal injection agent during the execution process. It doesn’t determine anything about constituent ingredients. It doesn’t address process or propriety. It doesn’t make any kind of judgment, one way or the other.

What happened here in Oklahoma is simple – Oklahoma attorney general Scott Pruitt asked earlier this week for the stay, according to a report by The Associated Press:

“Rather than stop the executions himself, Oklahoma Attorney General Scott Pruitt took the unusual step of asking the justices for a stay. Oklahoma wants the right to resume executions if it finds a different suitable drug.  Pruitt said in a statement: “It is important that we act in order to best serve the interests of the victims of these horrific crimes and the state’s obligation to ensure justice in each and every case. The families of the victims in these three cases have waited a combined 48 years for the sentences of these heinous crimes to be carried out.”

The United State Supreme Court, defense attorneys for the condemned inmates and the Oklahoma Attorney General agreed that the state should wait on these executions until final disposition of the case. The executions are put on hold until the Court can hear Richard E. Glossip v. Kevin J. Gross.  Richard Glossip was the next inmate scheduled to be put to death

SCOTUS scrutiny: The drug and how it is administered

The Supreme Court will hear Glossip v. Gross in April and issue a decision in the summer. The focus of the case is the drug, midazolam, and whether it causes pain and suffering in the inmate. The drug is part of a drug combination used in the state’s lethal injection process. Last year, Oklahoma received worldwide attention after an execution using the same drug when terribly wrong.

During the execution process, midazolam (Midazolam Hydrochloride) is administered to the inmate, first, as a sedative. That injection, according to The New York Times, “was to be followed by injections of vecuronium bromide, a paralyzing agent that stops breathing, and then potassium chloride, which stops the heart.”

Phillips Murrah attorney, Mary Holloway Richard, a pioneer in healthcare law who has practiced in the area of clinical research and regulatory law for many years, said that the drug, itself, isn’t necessarily the problem. Rather, how and under what conditions it’s administered could be more at issue.

“To eliminate some of the mystique, this is the drug commonly known, and used, as Versed,” she clarified. “This drug is used in many venues and even for many different types of patients, including pediatric patients.”

A significant issue is raised by the exact recipe of the drug combination and the amount of Versed used, she added. “I keep seeing that it must be titrated properly.”

In other words, the dosage amount and duration of administration is very important to successful effect. Oklahoma has a three-drug protocol.

Also implicated is the manner in which the drug is administered. After the Clayton Lockett execution problems, Oklahoma released a report identifying insufficient training of those administering the drug and communication between prison and support staff, as well as a lack of contingency planning on the part of the Department of Public Safety.  The report also points to difficulties in starting the IV in Mr. Lockett.

More info: http://www.deathpenaltyinfo.org/state-lethal-injection

 

The Evolution of Energy Density

Jim Roth’s Friday column, Earth Business, appears in The Journal Record.
Originally published in The Journal Record on Jan 23, 2015.
View Jim Roth’s attorney profile here.

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Laying down the scientific groundwork, energy density is the amount of energy stored in a system or region of space per unit volume. For purposes of conducting measurements, it is only the useful, extractable energy that is measured.

During the 20th century, developing and developed countries observed a major technological advance and improvement in the quality of life that was fueled by fossil fuels. According to the World Bank, 100 percent of Americans have electricity, unlike nearly 1.4 billion people in the nonurban communities of Africa and Asia that lack electricity. Unfortunately, as the population growth of those communities rises, so too does the number of people without electricity. Furthermore, over the last 50 years, there has been no reduction in the energy consumption gap between developing and developed countries. As it is apparent, new ideas for access to basic energy services are apparent and necessary in order to reduce the number of nonurban communities lacking power.

Energy density plays a major role in the evolution and comparison of various fueling sources that may be capitalized upon for purposes of producing electricity within all communities and markets. Evaluating transportation fuels is a great means of understanding the importance of energy density as it applies to nearly all countries. Considering strictly fuel for transportation, energy density, in addition to the cost, weight and size of energy storage are also important characteristics that are considered. Some fuels that require large, heavy, or expensive storage may reduce their attractiveness from a cost and efficiency standpoint. In this circumstance, gasoline and diesel fuels have been superior to liquefied natural gas, or LNG, and compressed natural gas, or CNG, based on their larger energy densities per unit volume.

Lower prices at the pump are certainly attractive to the consumer, but so too are the reduced costs in renewable energy. At the rate that the price per barrel of Brent crude is falling, the crossover point where fossil fuels cease to be cost-competitive could occur soon, making the cost to refine crude oil into gasoline well below its marginal production cost. As a result, many have been turning to electric-powered vehicles as their primary source of transportation. However, the lower energy density per unit volume in the lithium ion batteries of these vehicles results in a limited driving range relative to gasoline-powered vehicles. Looking outside of the transportation lens, from an energy density standpoint, gasoline and diesel fuel may be the short-term answer for low-cost energy production in developing countries. However, with advancements in the development of renewables, they are the low-cost, long-term answer.

So lots of evolution and flux occurring, but one sure way to lower your costs is to lower your density if at all possible. That’s easier said than done here in America.

Healthcare cost-cutting trend ties money to results

By Mary Holloway Richard, Of Counsel

healthcare-shutterstock-02The trend toward decreasing costs in healthcare has seized upon value-based care – tying physician compensation to performance and outcome measures. These measures are also being used in contract negotiations with third party payors and healthcare plans.

Counsel for institutional and non-institutional providers are at the table providing advice about a number of important contractual terms and their ramifications including appropriate and measurable metrics for calculating bonuses and penalties and, if shared savings are at issue, how they should be split. For those who have been involved in negotiations of traditional fee-for-service contracts, this will seem like a fundamental change. It may also seem like a change that narrows the potential for disputes.

However, numerous issues will continue to be important to providers. For example:

  • Are the metrics used as incentives or penalties?
  • Are the selected benchmarks easily measurable and attainable?
  • Do they raise regulatory issues such as potentially impacting volume in an unacceptable way or spawn any other results that could be construed to be anticompetitive?

While these questions have yet to be answered by Oklahoma courts, we can look to decisions from other states and consider ourselves forewarned as to the nuances and potential pitfalls in negotiating and drafting these terms.

2015: The future for hospitals

By Mary Holloway Richard, Of Counsel

doctorIn a recent article in Modern Healthcare, Beth Kutscher identifies a rosier outlook for propriety hospitals than for not-for-profit facilities.

Some of those proprietaries are investor-owned chains, and an important part of their secret of financial health is their access to and reliance upon greater options for marketing services, economies of scale, and other cost saving programs.

Financially positive trends have come on the wings of the Affordable Care Act’s elevated patient volumes, better payor mix and declining expenses associated with bad debts. The proprietaries are concerned with stock prices and earnings and, like a family preparing for continued hard times, they actively pursue all possible ways to decrease expenses, including refinancing higher interest debt.

In largely rural states like Oklahoma, efforts to keep community hospitals alive include shopping for buyers and affiliating with stable hospital systems. However, rural hospitals owned by proprietaries, and even hospitals owned by not-for profit systems, are being taken off the block awaiting a more attractive market.

It is true that we witnessed the acquisition by Community Health Systems, one of the largest publicly-traded companies in the country, of Health Management Associates last year. But even so, CHS may now be eschewing large acquisitions and mergers in favor of other alternatives for financial stabilization.

In healthcare as in other industries, the proprietary sector offers important motivation for the not-for-profits.

Eyes on the contango play of 2015

Jim Roth’s Friday column, Earth Business, appears in The Journal Record.
Originally published in The Journal Record on Jan 16, 2015.
View Jim Roth’s attorney profile here.

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

Jim Roth is a Director and Chair of the firm’s Clean Energy Practice.

The plummet of the price per barrel of Brent crude oil has shocked nearly every major domestic and international producer. However, in the case of some energy companies and investors, buying and selling physical barrels of oil highlight a fantastic moneymaking opportunity. In technical terms, this opportunity is referred to as contango.

A contango play exists when the current price of a commodity, in this case oil, is lower than the price for delivery of that commodity. Many traders capitalize on this opportunity by buying oil now at cheaper rates, storing it and then selling it in the future when prices increase in accordance with demand. Contango plays are generally driven by a commodity’s production surpassing its demand, ultimately creating a surplus in that commodity’s market. During a contango play, typically traders and integrated oil companies, along with shipping and storage companies, have the greatest ability to profit.

The last time the entire international market for oil fell into a contango play was during the fourth fiscal quarter of 2009, when markets were slowly re-emerging from the 2008-2009 U.S. financial crisis. According to ship brokers, during that time, traders were storing 100 million barrels at sea. Currently, there is a race for storage amongst traders, particularly at Cushing, the world’s largest commercial tank hub. According to analysts at Goldman Sachs, a big increase in storage capacity in recent years means the oil market will be able to run a surplus for quite some time, resulting in lower consumer prices.

As it relates to storage, usage of natural gas storage is increasing year after year. Storage facilities play a critical role in ensuring that excess supply of natural gas delivered during summer months is available during the winter months when demand increases. Additionally, natural gas storage serves as insurance against any unforeseen occurrences that may affect production or delivery. In addition to the aforementioned scenarios, in cases of a contango play, natural gas storage is necessary to major traders wanting to capitalize on the financial opportunity.

With levels of natural gas storage fluctuating depending on the season, the overall amount of natural gas available in storage facilities is a supply-side factor that has the potential of affecting prices. Ultimately, natural gas in storage facilities assists the market in adapting to sudden shifts in supply and demand, helping to accommodate stable production rates and helping to support pipeline operations and hub services.

Keep your eye on contango in 2015 – it’s coming to a storage facility near you.

Tips for bands: What to consider when hiring a manager

By Juston R. Givens, Director

We’ve all heard stories about the wild lifestyle of a modern musician – days on the road, nights of debauchery, money, fun and more money. But more often than not, we also hear stories of the flip side of stardom, when young bands get stifled because of poor business decisions and bad professional relationships.

small ampFor a band in its early stages, deciding on who to trust and how to make wise choices on the “business” side of show business is critical. Enter the band’s manager: the person who oversees the operations side of the effort. The manager helps assemble a team which can include the road manager, merchandise manager, publicist – and even the band’s attorney.

But how does a band know the difference between a manager who could take them places vs. one who could stall their career before it even begins?

Band managers have incredible influence on the success, direction and partnerships of the band’s business, so finding, retaining and empowering a manager is critical. Here are some issues for a band to consider when hiring a manager:

  • Who’s in charge?
    Remember, your manager works for the band, not the other way around. Even though they may have more industry experience and better contacts, ultimately decisions need to be made with the band’s best interest in mind.
  • Legal advice
    Your manager may be great at managing the operations and logistics of the band, but that doesn’t not make him an attorney. Get good legal advice about any contract your band signs to ensure there is an absolute understanding of the agreement.
  • The Yoko Rule
    When deciding on a manager, beware of bringing in relatives to fill that role (or any other important decision-making function in the band). It’s a common mistake, especially among younger artists. Pitfalls can include a lack of experience in the industry, unrealistic expectations for what the band can and can’t do, and conflicts with members of the band who aren’t related to them. Also, if a relative is your manager and doing a poor job, it’s harder to fire them. So don’t hire them in the first place.

Management agreement red flags

When signing a management agreement, a band ought to keep in mind the ramifications, short- and long-term, that document will have. It’s this moment, more than any other, when a fledgling artist can sacrifice future success because of early, naive decisions.

  1. First and foremost, don’t give away the future just because you can’t imagine it (whether it has great or middling success) or that it just seems too far away. Don’t begin by handing over rights to a manager without an exchange that also has long-term benefits, such as a substantial investment or significant opportunity.
  2. Also when looking at an agreement – and this is where good legal counsel is valuable – make sure you and your band know exactly what the agreement contains and what it means. The more details the better, especially in terms of the manager’s and the band’s expectations and who has decision-making authority over specific areas. You also want to avoid open-ended contracts. Just with typical employment, your manager should have a set period to accomplish certain goals and then be evaluated on their performance.
  3. Finally, to ensure the artistic integrity of everyone in the band, make sure that when you sign a management deal, signing as a band doesn’t prevent individuals from pursuing other projects as a solo artist or upon leaving the group.

Not every band’s story has to be an E! True Hollywood story. With the right forethought in who helps the band in its journey, a band can have a long and healthy career and – possibly – a very happy ending.

In the wake of Ferguson

By Cody Cooper, Associate/Litigation  and Robert N. Sheets, Director/Litigation

shutterstock_213974782-1Guest Column in The Journal Record, Published Dec. 3, 2014

By now, everyone is familiar with the situation in Ferguson, Missouri – the tragic loss of life, conflicting eyewitness accounts, and a decision not to indict the officer. Without offering an opinion as to the outcome, this article is intended to educate about Oklahoma’s grand jury process.

It is important to remember that a grand jury does not determine guilt or innocence. Rather, it is a tool used by prosecutors to analyze evidence and determine whether probable cause exists to charge a person with a crime. This differs from the standard required at a trial, which is that the defendant be guilty beyond a reasonable doubt.

During this process, the district attorney must choose to present the evidence to either a judge or a grand jury. Usually, the prosecutor will simply file the charges for a standard preliminary hearing. In the case of Ferguson, however, the district attorney chose to use the grand jury process.

A grand jury is comprised of 12 people who review evidence presented by the prosecution to determine whether probable cause exists to file charges. It is a fairly informal process where grand jury members, prosecutors, and any witnesses are, typically, the only individuals present. Usually no judge is present, and typically the defendant does not participate. Prosecutors present evidence to support criminal allegations and make a suggestion to the grand jury.

Evidence includes presenting witnesses and documents. Typically, prosecutors act in an advocate role to persuade the grand jury to indict. At the end of the prosecutors’ presentation of evidence, the grand jury members make their decision.

The Ferguson grand jury contained several idiosyncrasies:

  • Prosecutors presented all of the evidence to the grand jury rather than only presenting evidence suggesting culpability.
  • Prosecutors apparently made no recommendation to indict the officer. Instead, they left it up to the grand jury to determine the appropriate action.
  • The defendant was allowed to testify before the grand jury. Although these methods are not improper or illegal, they certainly aren’t typical.

Ultimately, the grand jury process is afforded wide investigatory powers. That the procedure in Ferguson departed from what is considered normal practice does not mean the ultimate decision was correct or incorrect.

PM Director Bob Sheets discusses fracking ban on NPR

Phillips Murrah Director Robert N. Sheets participated in a broadcast interview with StateImpact Oklahoma / KGOU reporter Joe Wertz regarding using local referendums to ban hydraulic fracturing.

This interview was broadcast in early November, 2014 and can be seen in its entirety at the StateImpact Oklahoma website.

To listen, click on the player below:

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Excerpt:

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Bob Sheets

Property Rights

In Oklahoma, local officials have the authority to regulate and restrict oil and gas activity within city limits, an ordinance that enforced a fracking ban would likely draw an immediate legal challenge, says Robert Sheets, a land-use and natural resources attorney at the Phillips Murrah law firm in Oklahoma City.

“That’s what the cities are going to have to look at: Are they taking a property right from an individual by saying, ‘You cannot drill, you cannot frack on this property.’”

The energy industry has deep roots in Oklahoma, and many of the property laws themselves were written with oil and gas interests in mind. Sheets says the justification for an outright ban would have to be steep and defendable in court, especially if royalty owners argue that fracking is necessary to produce their oil and gas property.

“You’re probably going to end up with that rational basis test,” Sheets says. “Is there a rational basis for what they’re doing?”

Bob is a commercial litigator, director and one of the firm’s founders. He represents construction and energy industry clients in a broad range of real estate, land use and business litigation matters. You can view his attorney profile page HERE.

About StateImpact: StateImpact seeks to inform and engage local communities with broadcast and online news focused on how state government decisions affect your lives.

 

Brown: Producing for Oklahoma

Guest article originally published in The Journal Record on Oct. 24, 2014.
Click to see Elizabeth K. Brown’s attorney profile


 

Elizabeth K. Brown’s practice is focused at a strategic level on serving her clients as outside counsel where she assists privately held companies in managing the many legal issues that arise in running a business.

Elizabeth K. Brown’s practice is focused at a strategic level on serving her clients as outside counsel where she assists privately held companies in managing the many legal issues that arise in running a business.

A vibrant and growing oil and natural gas industry is paying dividends for Oklahoma, the most recent example being the increased payments to the state’s General Revenue Fund from taxes on the oil and natural gas industry.

Gross collections to the General Revenue Fund increased during the third quarter, up by almost 10 percent from the previous year. A significant portion of that increase came from the state’s gross production tax on oil and natural gas production, which saw a 33.4-percent growth compared with the year before.

The General Revenue Fund is the key indicator of state government’s fiscal status and the predominant funding source for the annual state budget. Collections, reported by the Office of Management and Enterprise Services, are revenues that remain for the appropriated state budget after rebates, refunds and mandatory apportionments.

The growth of receipts from the state’s gross production tax is an important benchmark because Oklahoma’s oil and natural gas industry remains a critical component of the fiscal stability for both state and local governments. The Oklahoma Energy Resources Board’s May 2012 Oklahoma’s Oil and Natural Gas Industry Economic Impact and Jobs Report shows the industry, as a whole, accounts for approximately 25 percent of all taxes paid in the state.

The greatest single benefactor of direct apportionments of gross production tax revenues is the state’s education system. Data from the most recent OERB report released in September shows the oil and natural gas industry accounted for more than $325 million to local school districts across the state. Another $150 million was allocated to the Oklahoma Student Aid Revolving Fund, the Higher Education Capital Fund and the Common Education Technology Fund.

To put that in perspective, take the northern Oklahoma community of Alva. In the heart of the Mississippi Lime, the Class 2A school district received $3.7 million in state funding for the 2012-13 school year. Of that, $2.1 million came directly from the oil and natural gas industry.

This state’s oil and natural gas industry is producing for Oklahoma. A growing oil and natural gas industry means increased funding for Oklahoma’s students and ensures future generations can continue producing for Oklahoma.

Responding to Ebola

By Mary Holloway Richard, Of Counsel/Litigation

Guest Column in The Journal Record, Published Oct. 15, 2014

shutterstock_210544051-1Incidence of Ebola on American soil allows for review of legal underpinnings of the public health response to “catastrophic health emergencies.” This term means, for our purposes, occurrence of imminent threat of an illness or health condition that is believed to be caused by the appearance of an infectious agent that poses a high probability of a large number of deaths in the affected population or widespread exposure to the infectious or toxic agent that poses a significant risk of substantial future harm to a large number of people in the affected population (63 O.S. §6104).

The federal government’s rapid response derives its power from the Commerce Clause of the U.S. Constitution (42 U.S.C.A. §264, Section 361 of the Public Health Service Act). The secretary of the Department of Health and Human Services is authorized to take measures to prevent the spread of threat of disease from other countries to the U.S. and between states. Borders are being monitored more stringently. States and tribes have the political power to detail those within their borders in an effort to contain such a threat. Police power functions include isolation-quarantine, access to and use of private health information, closure, lockdown, curfews, and appropriation and destruction of property, including pets and other animals. Those powers are derived from the state’s right to take action against individuals for the good of the people at large.

Oklahoma State Health Department regulations provide for isolation and quarantine including proper due process for affected people (OAC 310:521-7-6). On Oct. 10, the Centers for Medicare and Medicaid Services issued a memorandum to state survey agency directors (the state Department of Health in Oklahoma) to strongly urge hospitals to fully implement recent Centers for Disease Control policies for Ebola, including hospital evaluation and preparedness checklists and algorithms to evaluate patients returning from countries affected by the disease.

Emerging legal issues include privacy rights, provider and volunteer liability, due process and Fourth Amendment protections for mandatory testing and screening of citizens, licensure and scope of practice issues for noninstitutional health services providers giving aid, myriad informed consent, right to refuse treatment, and social distancing and remote handling of citizens including the effect of Americans with Disabilities Act protections.

Phillips Murrah adds health services attorney

Mary Holloway Richard, Phillips Murrah attorney

Mary Holloway Richard

OKLAHOMA CITY – Mary Holloway Richard has joined Phillips Murrah’s Healthcare team as an of counsel attorney.

Richard represents both institutional and non-institutional providers of health services, as well as patients and their families. Her career has included work at hospitals, outpatient clinics, behavioral health facilities, and rehabilitation facilities and clinics.

Prior to joining Phillips Murrah, Richard served as in-house counsel for Integris Health.