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Archive for September, 2015

Georgia And California Increase Scrutiny Of Employee Loyalty And No-Rehire Provisions As Restraints Of Trade

Posted on: September 2nd, 2015

By: Mike Wolak

Restrictive covenants typically involve the “big three”: agreements not to compete, not to solicit the Company’s customers, and not to raid the Company’s staff upon separation from employment.  As a result, the language of the “big three” must be given careful thought when drafting the employee’s agreement.  Recent state and federal appellate opinions in Georgia and California make clear, however, that employee agreements and settlement agreements are being scrutinized more closely, such that even the more standard “loyalty” and “no-employment” provisions are being construed as restrictive covenants to determine whether they constitute unenforceable restraints of trade. 

For instance, in Early v. MiMedx Group, Inc., 768 S.E.2d 823 (Ga. Ct. App. 2015), the Georgia Court of Appeals invalidated a loyalty provision of a consulting agreement requiring the employee to “devote her full working time (not less than forty (40) hours per week) to [the] performance of [her] duties.”  Analyzing this provision as a restrictive covenant, the Court of Appeals held that the provision constituted an illegal restraint of trade, rather than a mere loyalty provision, because it prohibited the employee from performing any kind of work during the term of the agreement other than for MiMedx.  Indeed, MiMedx admitted during oral argument that the provision prohibits Early from “babysitting on the weekends or working in a bookstore,” even though such work is not related in any way to the type of enterprise in which MiMedx is engaged.  The Court of Appeals held that the loyalty provision contained “no limitation at all concerning either scope or territory,” which is required of restrictive covenants in Georgia.  Unfortunately for MiMedx, the consulting agreement was entered into prior to enactment of Georgia’s Restrictive Covenant Act, which applies to all agreements entered into on or after May 11, 2011 and is more favorable to restrictive covenants than Georgia’s common law.  Under the new law, this particular provision could likely be “blue-penciled” or judicially modified if it does not “promote or protect the purpose or subject matter of the agreement or relationship.”

Similarly, in Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the Ninth Circuit Court of Appeals held that the district court abused its discretion by categorically excluding a standard “no-employment” provision in a settlement agreement from the ambit of California’s non-competition/restraint on trade statute (Cal. Bus. & Prof. Code § 16600) on the sole ground that the provision did not constitute a covenant not to compete.  The Ninth Circuit concluded that nothing in Section 16600 or any California decisions explicitly limit the statute’s reach to traditional non-compete clauses or render the statute inapplicable to other contractual restraints on professional practice.  Accordingly, the Court remanded for a determination whether the “no-employment” provision – in which the former employee waived all rights to future employment with the Company “or at any facility that [the Company] may own or with which it may contract in the future” – constitutes a “restraint of a substantial character” under Section 16600.   

The MiMedx and Golden decisions are a strong reminder that employers should, in addition to ensuring their standard “big three” restrictive covenants comply with applicable state law, also carefully examine their employment, consulting, and severance agreements to ensure that loyalty, best efforts, no-rehire, and other similar provisions comply with the applicable restrictive covenant law and are not considered an unenforceable restraint on trade.   In doing so, employers should keep in mind that restrictive covenant laws vary widely by state, thus requiring drafting of applicable provisions on a state-by-state basis.  Additionally, restrictive covenant law is evolving in many states, requiring agreements to be updated regularly to ensure compliance with existing law. 



Taser Drones for Police Officers – Now a Reality?

Posted on: September 1st, 2015

By: Wayne Melnick

In the past, I blogged a series of articles regarding the possible legal and insurance ramifications of law enforcement drone usage. For quick reference you can find the blogs here and here.

In the latest twist on law enforcement drone use, despite all the recent publicity regarding the militarization of local police departments, North Dakota has become the first state to legalize (or at least authorize) its police to equip drones with “less lethal” force.  Although the bill was originally drafted to ban all weapons on police drones, following amendment in committee, North Dakota HB1328 came out of committee limiting the prohibition to only “lethal” weapons.  That omission, whether intentional or not, allows for “less lethal” or “less than lethal” weapons to be used on drones. Less lethal force has traditionally included Tasers, stinger balls, bean bags, rubber bullets and even flash bang “grenades.” Understand, of course, that having the authority to use such technology does not mean that it is going to actually be used; at least not immediately.

The potential insurance and legal risks associated with local police forces arming drones with less than lethal force is potentially staggering – especially in light of the fact that there are no standards associated with the use of less than lethal force in such situations. We will continue to monitor this situation to see if any other states follow suit in allowing drones to be armed in this manner – and whether any police force actually utilizes this technology.

For now, it is incumbent upon insurers and police departments to review their risk associated with such a use of “less lethal” drones and whether the policies and coverage in place are sufficient for this brave new frontier of law enforcement.

Georgia Utility Update – September 2015

Posted on: September 1st, 2015

By: Bobby Baker

What the Southern Company Acquisition of AGLR Really Means

          The announcement last month of Southern Company’s acquisition of Atlanta Gas Light Resources (“AGLR”) is more significant than two very large utility companies merging. This transaction will have long term impacts on Georgia ratepayers and the utility industry. First, ratepayers should anticipate applications for significant rate increases to be filed in 2016 by Georgia Power and Atlanta Gas Light Company (AGLC’s last rate case was in 2010) . Second, the purchase of AGLR signals Southern Company’s plans to rely on natural gas for its generation needs for the long term. Finally, say good-bye to more expensive nuclear development, although Vogtle Units 3 and 4 will be completed.

          Mergers aren’t cheap and Southern Company (“SoCo”) is going to be borrowing a lot of money to purchase AGLR. In order to keep its bankers and stockholders happy SoCo is going to be looking to its subsidiaries, both Georgia Power and soon Atlanta Gas Light Company (“AGLC”) to increase their revenues. In addition to the SoCo/AGLR merger, Georgia Power is planning on spending $6.9 billion in capital projects through 2017 that includes $1.643 billion for Vogtle 3 & 4, and $5.6 billion in new financing. Georgia Power ratepayers will see a slight reduction in their fuel costs in the current fuel cost recovery case, but they shouldn’t be lulled into complacency expecting the same when the Company files its 2016 rate case. Expect AGLC to file a rate case after the merger is completed.

          When you spend $8 billion to buy a natural gas company with extensive transmission and storage assets in your service territory it’s hard to justify building anything but natural gas powered generation. Georgia Power gets 35+% of its electric generation from natural gas units today and that percentage is going to increase. Very low gas prices and large gas reserves make the decision to build combined cycle natural gas fired units the logical choice when new generation is needed.

          The merger also signals the end of Southern Company’s plans to build more nuclear units. It’s kind of hard to justify building over-priced nuclear units when you just bought a natural gas utility, natural gas prices are really low and you have large generation reserves. The nuclear Renaissance didn’t last too long for SoCo and what anti-nuclear and conservation groups have been trying to do for years will be accomplished by one business transaction; stop more nukes from being built.

Integrated Resource Planning Workshop Scheduled for October 20-21

          In a surprise move last month the Georgia Public Service Commission approved plans to conduct a pre-Integrated Resource Planning (“IRP”) workshop at which the Commission will examine issues related to the value of renewable and distributed energy resources. The nine issues to be considered were presented for the first time in the Commission’s Order.

          The Notice of Inquiry indicated that the goal of the workshop was to “narrow the issues to be addressed in the IRP.” Issues such as the quantifiable benefits and costs of renewable resources, the current method for valuing distributed generation and the impact of distributed generation on base-load generation will be considered in the workshop. Initial comments are due at the Commission by September 11 and the workshop will be conducted on October 20 and possibly the 21st.

Georgia PSC Rubber-Stamps Approval of the Latest Vogtle Expenditures

         The August 26th Order issued by the Georgia Public Service Commission in the 12th semi-annual construction monitoring review approved Georgia Power’s latest expenditures of $169 million and did little else. The Vogtle Project is currently 39 months behind schedule and the Company itself expressed grave concerns about their Contractor’s performance. The highly touted $4 billion in project benefits to consumers has been reduced to a mere $208 million according to the PSC Staff’s expert witness, and the remaining positive benefits would go negative if the $522 million in Production Tax Credits are lost for Unit 4. Furthermore, the 39 month delay will mean an additional $319.00 or $6.26 a month rate increase for the average residential customer who uses 1,000 kilowatt hours per month beginning April 2016 and continuing to June 2020.

         Georgia Power Company filed its 13th Semi-annual Vogtle Construction Monitoring Report on August 28 and the initial hearing is scheduled for some time in October 2015.

FDA Approves First Drug Made by 3D Printing

Posted on: September 1st, 2015

By: Mike Bruyere

Additive manufacturing, or 3D printing, reached a significant milestone this month when the FDA approved the production of an epilepsy medication that will be marketed under the name Spritam.  The new drug, developed by Aprecia, controls seizures brought on by epilepsy, and is the first drug produced by a 3D printer to receive the FDA’s imprimatur.

3D printing was invented over thirty years ago by a brilliant engineer, Chuck Hull. At its most fundamental level, 3D printing began as the modification of an ink printer to utilize various materials as the “ink” or powder to build vertical levels of a design. In successive passes of the build process, the printing jet is slightly raised and the printed material is added onto the previous layers.

3D printing enables medical providers to rapidly produce devices like customized artificial limbs, dental devices, and exterior bracing (such as braces used to treat scoliosis).  Accordingly, the availability of high-quality and low-cost devices is spreading geographically and throughout the health care industry. 3D printing applications are currently in use or development for pumps, stents, coils, surgical guides and a host of orthopedic applications.

As with myriad other applications in the life sciences industry, 3D printing of medicines brings the manufacturing process much closer to the patient, but it also raises potential issues concerning who is considered the actual manufacturer of the drug from a products liability standpoint.  For example, is Aprecia considered the manufacturer, or are other entities involved in the design, testing, manufacturing (such as the manufacture of the 3D printer), and distribution of the drug also at risk?  Additionally, while life sciences advances such as Spritam hold the promise of lower health care costs and more readily available drugs, the implications for misuse of this technology, particularly in the area of illegal designer drugs, cannot be understated.